<PAGE> 1
As filed with the Securities and Exchange Commission.
`33 Act Registration No. 2-51911
`40 Act Registration No. 811-2804
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 44 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 45
NATIONWIDE DC VARIABLE ACCOUNT
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
DENNIS W. CLICK, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in respect of
the Prospectus, Statement of Additional Information, and the Financial
Statements.
It is proposed that this filing will become effective (check appropriate space):
immediately upon filing pursuant to paragraph (b) of Rule 485
- -------
X on May 1, 1998, pursuant to paragraph (b) of Rule 485
- -------
60 days after filing pursuant to paragraph (a)(1) of Rule 485
- -------
on (date), pursuant to paragraph (a)(1) of Rule 485
- -------
================================================================================
<PAGE> 2
NATIONWIDE DC VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page................................................ 3
Item 2. Definitions .............................................. 5
Item 3. Synopsis or Highlights ................................... 18
Item 4. Condensed Financial Information .......................... 19
Item 5. General Description of Registrant, Depositor,
and Portfolio Companies................................... 27
Item 6. Deductions and Expenses .................................. 28
Item 7. General Description of Variable Annuity Contracts......... 30
Item 8. Annuity Period ........................................... 34
Item 9. Death Benefit ............................................ 35
Item 10. Purchases and Contract Value ............................. 32
Item 11. Redemptions .............................................. 33
Item 12. Taxes .................................................... 39
Item 13. Legal Proceedings ........................................ 40
Item 14. Table of Contents of the Statement of Additional
Information............................................... 41
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page ............................................... 50
Item 16. Table of Contents ........................................ 50
Item 17. General Information and History .......................... 50
Item 18. Services ................................................. 50
Item 19. Purchase of Securities Being Offered ..................... 51
Item 20. Underwriters ............................................. 51
Item 21. Calculation of Performance ............................... 51
Item 22. Annuity Payments ......................................... 57
Item 23. Financial Statements ..................................... 58
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits ........................ 114
Item 25. Directors and Officers of the Depositor .................. 116
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant .................................. 118
Item 27. Number of Contract Owners ................................ 128
Item 28. Indemnification .......................................... 128
Item 29. Principal Underwriters ................................... 128
Item 30. Location of Accounts and Records ......................... 130
Item 31. Management Services ...................................... 130
Item 32. Undertakings ............................................. 130
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P. O. Box 16766
One Nationwide Plaza
Columbus, Ohio 43216
1-800-545-4730 (TTY: 1-800-848-0833)
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS
ISSUED BY THE NATIONWIDE DC VARIABLE ACCOUNT OF
NATIONWIDE LIFE INSURANCE COMPANY
The Group Flexible Fund Retirement Contracts (the "Contract" or "Contracts")
described in this prospectus are designed for use in connection with
supplemental deferred compensation plans for employees of tax exempt entities.
Contracts may be issued either as Allocated Contracts or Unallocated Contracts.
Such Plans will generally qualify for favorable tax treatment under Sections
401, 403(b) or 457 of the Internal Revenue Code ("Code"), but may also include
other non-qualified deferred compensation plans.
Contracts will be issued only to fund deferred compensation Plans sponsored by
employers who are exempt from taxation. The employees are generally not subject
to tax until Distributions are received from the Plan. Purchase Payments made at
any time by or on behalf of any Participant must be at least $20 per month.
Rights and privileges under the Contracts may be exercised by the Contract Owner
to the extent such rights are not specifically reserved in the Plan for
Participants as a group or as individuals. The Contract Owner may not take any
action inconsistent with the rights of the Plan's Participants. The Participants
in such Plans have a contractual claim against the Contract Owner for the
benefits promised by such Plans.
Purchase Payments are allocated to the Nationwide DC Variable Account (the
"Variable Account"), a separate account of Nationwide Life Insurance Company
(the "Company"). The Variable Account is divided into Sub-Accounts, each of
which invests in shares of the Underlying Mutual Fund options described below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
AIM Weingarten Fund - Institutional Class Fidelity Puritan Fund
- ----------------------------------------------------------------------------------------------------------------------------
AIM Constellation Fund - Institutional Class INVESCO Industrial Income Fund (formerly "Financial
Industrial Income Fund, Inc.")
- ----------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth Janus Fund
- ----------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century International Growth Janus Twenty Fund
- ----------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Select Janus Worldwide Fund
- ----------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra MAS Funds Fixed Income Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Davis New York Venture Fund, Inc. MFS(R)Growth Opportunities Fund - Class A (formerly "MFS(R)
Capital Development Fund")
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus Cash Management - Class A MFS(R)High Income Fund - Class A
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus S&P 500 Index Fund Massachusetts Investors Growth Stock Fund - Class A
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus Third Century Fund, Inc. Nationwide(R) Bond Fund
- ----------------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund (formerly Evergreen Total Nationwide(R) Fund
Return Fund)
- ----------------------------------------------------------------------------------------------------------------------------
Federated GNMA Trust - Institutional Shares Nationwide(R)Growth Fund
- ----------------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Nationwide(R) Money Market Fund
Years: Institutional Shares
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager(TM) Nationwide Asset Allocation Trust - The Aggressive Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund Nationwide Asset Allocation Trust - The Conservative
Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio Nationwide Asset Allocation Trust - The Moderate Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio Nationwide Asset Allocation Trust - The Moderately
Aggressive Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Trust - The Moderately
Conservative Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Nationwide Separate Account Trust - Nationwide Small Company SEI Index Funds - S & P 500 Index Portfolio
Fund
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. Seligman Growth Fund, Inc. - Class A
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Trust Strong Common Stock Fund, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Manhattan Fund, Inc. Templeton Foreign Fund - Class 1
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Fund, Inc. Templeton Global Smaller Companies Growth Fund - Class 1
- ----------------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A T. Rowe Price International Stock Fund(R)
- ----------------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A Warburg Pincus Emerging Growth Fund
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOT AVAILABLE FOR NEW PLANS ESTABLISHED ON OR AFTER JUNE 30, 1998:
- --------------------------------------------------------------------------------
Fidelity Contrafund
- --------------------------------------------------------------------------------
NOT AVAILABLE FOR NEW CONTRACTS ISSUED ON OR AFTER OCTOBER 1, 1997:
- --------------------------------------------------------------------------------
Fidelity Magellan(R) Fund
- --------------------------------------------------------------------------------
NOT AVAILABLE TO CONTRACT OWNERS ON OR AFTER JANUARY 1, 1994:
- --------------------------------------------------------------------------------
The Bond Fund of America (R), Inc. The Income Fund of America (R), Inc.
- --------------------------------------------------------------------------------
The Growth Fund of America (R), Inc.
- --------------------------------------------------------------------------------
NOT AVAILABLE FOR NEW CONTRACTS ISSUED ON OR AFTER AUGUST 1, 1993:
- --------------------------------------------------------------------------------
Delaware Group Decatur Fund, Inc. - Decatur Income Fund
- --------------------------------------------------------------------------------
NOT AVAILABLE FOR NEW CONTRACTS ISSUED ON OR AFTER JANUARY 1, 1987:
- --------------------------------------------------------------------------------
Fidelity Capital & Income Fund (formerly "Fidelity High Income Fund")
- --------------------------------------------------------------------------------
This prospectus provides you with the basic information you should know about
the Contracts issued by the Variable Account before investing. You should read
it and keep it for future reference. A Statement of Additional Information dated
May 1, 1998 containing further information about the Contracts and the Variable
Account has been filed with the Securities and Exchange Commission ("SEC"). You
can obtain a copy without charge from the Company by calling the number listed
above, or writing P. O. Box 16766, One Nationwide Plaza, Columbus, Ohio 43216.
PLEASE NOTE THAT NOT ALL BENEFITS DESCRIBED IN THIS PROSPECTUS MAY BE AVAILABLE
IN EVERY STATE JURISDICTION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SEC MAINTAINS A WEB SITE, WWW.SEC.GOV, THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION AS WELL AS MATERIAL INCORPORATED BY REFERENCE RELATING TO
THIS PROSPECTUS.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1998, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 39 OF THIS PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
<PAGE> 5
GLOSSARY OF TERMS
ACCUMULATION UNIT- A statistical index measuring the net investment results of
each Sub-Account. It is the unit of measurement used to determine the Contract
Value and each Participant Account value.
ALLOCATED CONTRACT- A Contract under which individual accounts are maintained by
the Company on behalf of each Participant.
BENEFICIARY- The person named on the application to receive certain benefits
under the Contract upon the death of the designated annuitant. The Beneficiary
can be changed by the Contract Owner as set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
CONTINGENT BENEFICIARY- The person named on the application to be the alternate
Beneficiary if the named Beneficiary is not living at the time of the death of
the designated annuitant.
CONTRACT- The Group Flexible Fund Retirement Contract issued by the Company to
the Contract Owner under which the Company invests Purchase Payments made by the
Contract Owner and assists the Contract Owner in making Retirement Income
Payments at specified dates.
CONTRACT ANNIVERSARY- An anniversary of the date of issue of the Contract.
CONTRACT DATE- The date of issue shown on the Contract.
CONTRACT OWNER- The employer or other entity to which the Contract is issued.
CONTRACT VALUE- The sum of the value of all Accumulation Units attributable to
the Contract plus any amount held under the Contract in the General Account.
CONTRACT YEAR- Each period starting with either: (1) the Contract Date; or (2) a
Contract Anniversary. The Contract Year ends immediately prior to the next
Contract Anniversary.
DISTRIBUTION- Any payment by the Company of part or all of the Contract Value
under the Contract.
DISTRIBUTION PERIOD- The period during which payments are distributed from a
Participant Account.
GENERAL ACCOUNT- All assets of the Company other than those of the Variable
Account or in other separate accounts that have been or may be established by
the Company.
GROUP FIXED CONTRACT- The Company's Group Fixed Fund Retirement Contract or
Group Fixed Tax Deferred Annuity Contract.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INITIAL TRANSFER- The initial amount transferred by the Owner from an investment
product offered by a provider other than the Company. An Initial Transfer will
be the initial Purchase Payment under a Contract.
NET ASSET VALUE- The worth of one share of an Underlying Mutual Fund at the end
of a market day or at the close of the New York Stock Exchange. Net Asset Value
is computed by adding the value of all portfolio holdings plus other assets,
deducting liabilities and then dividing the result by the number of shares
outstanding.
OPTIONAL RETIREMENT INCOME FORMS- The method for making annuity payments.
Several forms are available under the Contract.
PARTICIPANT- An eligible employee, member, or other person who is entitled to
benefits under the Plan. Such persons are determined and reported to the Company
by the Contract Owner.
PARTICIPANT ACCOUNT- An account established by the Company for each Participant
in which all financial transactions occurring with respect to a Participant
under this Contract, other than the purchase and payment of an annuity made from
the General Account, are recorded.
PARTICIPANT ACCOUNT MAINTENANCE CHARGE- The maximum Participant Account
Maintenance Charge per Participant is $50. This charge is subject to negotiation
between the Contract Owner and the Company.
<PAGE> 6
PARTICIPANT ACCOUNT YEAR- For each Participant, the Participant Account Year is
each one year period starting with either the Participant Effective Date or a
Participant Anniversary.
PARTICIPANT ANNIVERSARY- An anniversary of the Participant Effective Date.
PARTICIPANT EFFECTIVE DATE- For each Participant, the Participant Effective Date
is the first date Accumulation Units are credited to the Participant's Account
on behalf of such Participant under the Contract.
PLAN- A retirement plan which receives favorable tax treatment under the Code.
The Plan document is referred to in the Contract as the Plan.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers among the Sub-Accounts.
RETIREMENT COMMENCEMENT DATE- The date upon which Retirement Income Payments
commence.
RETIREMENT INCOME PAYMENTS- Periodic Distributions from a Participant Account
made by the Company to the Contract Owner during the Distribution Period.
RETIRED PARTICIPANT- A Participant for whom payments under an Optional
Retirement Income Form are being made.
SUB-ACCOUNT- A separate and distinct division of the Variable Account, to which
specific Underlying Mutual Fund shares are allocated and for which Accumulation
Units are separately maintained.
UNALLOCATED CONTRACT- A Contract under which a single account is maintained by
the Company on behalf of a Plan.
UNDERLYING MUTUAL FUND- The registered open-end management investment company,
specified in the Contract application, in which the assets of a Sub-Account of
the Variable Account will be invested.
VALUATION DATE- Each day the New York Stock Exchange and the Home Office are
open for business or any other day during which there is a sufficient degree of
trading of the Variable Account's Underlying Mutual Fund shares that the current
Variable Account Contract Value might be materially affected.
VALUATION PERIOD- The period of time commencing at the close of business of the
New York Stock Exchange and ending at the close of business for the next
succeeding Valuation Date.
VARIABLE ACCOUNT- Nationwide DC Variable Account, a segregated investment
account established by the Company in which amounts equivalent to the Company's
obligations under the Contract are held for all Participants, and for those
Participants during retirement who have annuitized.
VARIABLE ACCOUNT ANNUAL EXPENSE FEE- A charge made for various risks assumed by
the Company and for administration of the Variable Account. This charge cannot
exceed an amount equal to 0.95% on an annual basis of the average account value.
<PAGE> 7
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF TERMS.....................................................................................................3
SUMMARY OF CONTRACT EXPENSES..........................................................................................6
UNDERLYING MUTUAL FUND ANNUAL EXPENSES................................................................................7
SYNOPSIS.............................................................................................................16
CONDENSED FINANCIAL INFORMATION......................................................................................17
NATIONWIDE LIFE INSURANCE COMPANY....................................................................................25
NATIONWIDE ADVISORY SERVICES, INC....................................................................................25
THE VARIABLE ACCOUNT.................................................................................................25
Voting Rights...............................................................................................25
PERIODIC REPORTS.....................................................................................................25
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS........................................................................26
Contingent Deferred Sales Charge............................................................................26
Participant Account Maintenance Charge......................................................................26
Variable Account Annual Expense Fee.........................................................................27
Premium Taxes and Other Expenses............................................................................27
Experience Credits..........................................................................................27
DESCRIPTION OF THE CONTRACTS.........................................................................................28
A. General................................................................................................28
Purpose of the Contracts...............................................................................28
Modification of the Contract...........................................................................28
Contract Rights and Privileges and Assignments.........................................................29
Exchange Privilege.....................................................................................29
Suspension and Termination.............................................................................29
B. Participant Account Values.............................................................................30
Application of Purchase Payments.......................................................................30
Additional Purchase Payments Prior to Commencement of Annuity Payment..................................30
Crediting Accumulation Units...........................................................................30
Variable Account Accumulation Unit Value...............................................................30
Allocation of Purchase Payments........................................................................31
Valuation of an Account................................................................................31
C. Redemption of Participant Accounts ....................................................................31
D. Distribution of Participant Accounts (Retirement Period)...............................................32
Retirement Income Payments.............................................................................32
Election of Income Form and Date.......................................................................32
Allocation of Retirement Income........................................................................32
Fixed Dollar Annuity...................................................................................32
Minimum Payment........................................................................................32
Death Benefit Before Retirement........................................................................32
Optional Retirement Income Forms.......................................................................33
Death of Retired Participant...........................................................................33
Withdrawal.............................................................................................33
Frequency of Payment...................................................................................33
Determination of Payments Under Options A1 & A2........................................................34
Determination of Payments Under Options B1 & B2........................................................34
Determination of Amount of Variable Monthly Payments For First Year....................................34
Determination of Amount of Variable Monthly Payments For the Second and Subsequent Years...............34
Alternate Assumed Investment Rate......................................................................34
GENERAL INFORMATION..................................................................................................35
Substitution of Securities..................................................................................35
Performance Advertising.....................................................................................35
Contract Owner Inquiries....................................................................................35
Net Investment Factor.......................................................................................36
Valuation of Assets.........................................................................................37
Federal Tax Status..........................................................................................37
Contracts Issued Under the New York Model Plan..............................................................38
YEAR 2000 COMPLIANCE ISSUES..........................................................................................38
LEGAL PROCEEDINGS....................................................................................................38
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.............................................................39
APPENDIX.............................................................................................................40
</TABLE>
<PAGE> 8
SUMMARY OF CONTRACT EXPENSES
PARTICIPANT TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge(1) ...........5.00%
(as a percentage of Purchase Payments)
MAXIMUM PARTICIPANT ACCOUNT MAINTENANCE CHARGE(2) ..............$50
MAXIMUM VARIABLE ACCOUNT ANNUAL EXPENSE FEE(3)..................0.95% per annum
(as a percentage of average account value)
1 Imposed only when applicable (see "Contingent Deferred Sales Charge").
2 The Participant Account Maintenance Charge is subject to negotiation (see
"Participant Account Maintenance Charge").
3 The Variable Account Annual Expense Fee is subject to negotiation (see
"Variable Account Annual Expense Fee"). The maximum fee does not include
any expenses or premium taxes which may be imposed by the state in which
the Contract is issued. The Variable Account Annual Expense Fee does not
include deductions for management fees and other expenses made by the
Underlying Mutual Funds (see Underlying Mutual Funds Annual Expenses).
<PAGE> 9
The purpose of the Summary of Contract Expenses and Example is to assist the
Participant in understanding the various costs and expenses that a Participant
will bear directly or indirectly when investing in the Contract. The Tables
reflect expenses of the Variable Account as well as the Underlying Mutual Fund
investment options. For a more detailed explanation of these expenses, see
"Charges and Other Deductions."
For more and complete information regarding expenses paid out of the assets of a
particular Underlying Mutual Fund, see the Underlying Mutual Fund's prospectus.
In addition to the expenses shown above, deductions for premium taxes may also
be applicable, depending upon the jurisdiction in which the Contract is sold
(see "Premium Taxes").
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(1)
(AFTER EXPENSE REIMBURSEMENT)
(as a percentage of Underlying Mutual Fund average net assets)
<TABLE>
<CAPTION>
=============================================================================================================
Management Other 12b-1 Total Fund
Fees Expenses Fees Annual Expenses
=============================================================================================================
<S> <C> <C> <C> <C>
AIM Constellation Fund - Institutional 0.61% 0.05% 0.00% 0.66%
Class
- -------------------------------------------------------------------------------------------------------------
AIM Weingarten Fund - Institutional Class 0.61% 0.04% 0.00% 0.65%
- -------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth 1.00% 0.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century 1.38% 0.00% 0.00% 1.38%
International Growth
- -------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Select 1.00% 0.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 1.00% 0.00% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------
The Bond Fund of AmericaSM, Inc. 0.33% 0.10% 0.25% 0.68%
- -------------------------------------------------------------------------------------------------------------
Davis New York Venture Fund, Inc. 0.57% 0.12% 0.20% 0.89%
- -------------------------------------------------------------------------------------------------------------
Delaware Group Decatur Fund, Inc.-Decatur 0.49% 0.19% 0.00% 0.68%
Income Fund
- -------------------------------------------------------------------------------------------------------------
Dreyfus Cash Management - Class A 0.20% 0.00% 0.00% 0.20%
- -------------------------------------------------------------------------------------------------------------
Dreyfus S&P 500 Index Fund 0.25% 0.25% 0.00% 0.50%
- -------------------------------------------------------------------------------------------------------------
Dreyfus Third Century Fund, Inc. 0.75% 0.28% 0.00% 1.03%
- -------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 0.98% 0.29% 0.00% 1.27%
- -------------------------------------------------------------------------------------------------------------
Federated GNMA Trust-Institutional Shares 0.40% 0.20% 0.00% 0.60%
- -------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities 0.39% 0.15% 0.00% 0.54%
Fund: 2-5 Years - Institutional Shares
- -------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager(TM) 0.55% 0.24% 0.00% 0.79%
- -------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 0.59% 0.26% 0.00% 0.85%
- -------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 0.48% 0.22% 0.00% 0.70%
- -------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 0.47% 0.23% 0.00% 0.70%
- -------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio 0.50% 0.23% 0.00% 0.73%
- -------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 0.45% 0.21% 0.00% 0.66%
- -------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 0.56% 0.29% 0.00% 0.85%
- -------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 0.45% 0.22% 0.00% 0.67%
- -------------------------------------------------------------------------------------------------------------
The Growth Fund of America(R), Inc. 0.36% 0.10% 0.24% 0.70%
- -------------------------------------------------------------------------------------------------------------
The Income Fund of America(R), Inc. 0.28% 0.07% 0.24% 0.59%
- -------------------------------------------------------------------------------------------------------------
INVESCO Industrial Income Fund, Inc. 0.48% 0.22% 0.25% 0.95%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
=============================================================================================================
Management Other 12b-1 Total Fund
Fees Expenses Fees Annual Expenses
=============================================================================================================
<S> <C> <C> <C> <C>
Janus Fund 0.65% 0.21% 0.00% 0.86%
- -------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 0.66% 0.25% 0.00% 0.91%
- -------------------------------------------------------------------------------------------------------------
Janus Worldwide Fund 0.65% 0.30% 0.00% 0.95%
- -------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 0.37% 0.11% 0.00% 0.48%
- -------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund 0.30% 0.21% 0.21% 0.72%
- - Class A
- -------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund - Class A 0.42% 0.26% 0.16% 0.84%
- -------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - Class A 0.48% 0.28% 0.30% 1.06%
- -------------------------------------------------------------------------------------------------------------
Nationwide(R)Bond Fund 0.50% 0.22% 0.00% 0.72%
- -------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 0.50% 0.10% 0.00% 0.60%
- -------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 0.50% 0.14% 0.00% 0.64%
- -------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 0.45% 0.14% 0.00% 0.59%
- -------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Small Company Fund 1.00% 0.11% 0.00% 1.11%
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. 0.70% 0.10% 0.00% 0.80%
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Trust 0.84% 0.04% 0.00% 0.88%
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman Manhattan Fund, Inc. 0.79% 0.19% 0.00% 0.98%
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Fund, Inc. 0.72% 0.09% 0.00% 0.81%
- -------------------------------------------------------------------------------------------------------------
NPMP - The Aggressive Portfolio 0.50% 0.00% 0.00% 0.50%
- -------------------------------------------------------------------------------------------------------------
NPMP - The Conservative Portfolio 0.50% 0.00% 0.00% 0.50%
- -------------------------------------------------------------------------------------------------------------
NPMP - The Moderate Portfolio 0.50% 0.00% 0.00% 0.50%
- -------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Aggressive Portfolio 0.50% 0.00% 0.00% 0.50%
- -------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Conservative 0.50% 0.00% 0.00% 0.50%
Portfolio
- -------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 0.56% 0.19% 0.25% 1.00%
- -------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 0.49% 0.28% 0.25% 1.02%
- -------------------------------------------------------------------------------------------------------------
SEI Index Funds -S&P 500 Index Portfolio 0.19% 0.06% 0.00% 0.25%
- -------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 0.70% 0.23% 0.23% 1.16%
- -------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 1.00% 0.17% 0.00% 1.17%
- -------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 0.67% 0.18% 0.00% 0.85%
- -------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 0.61% 0.22% 0.25% 1.08%
- -------------------------------------------------------------------------------------------------------------
Templeton Global Smaller Companies Growth 0.75% 0.30% 0.25% 1.30%
Fund - Class I
- -------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Growth Fund 0.90% 0.31% 0.00% 1.21%
- -------------------------------------------------------------------------------------------------------------
<FN>
(1) The Mutual Fund expenses shown above are assessed at the Underlying Mutual
Fund level and are not direct charges against Variable Account assets or
reductions from Contract Values. These Underlying Mutual Fund expenses are
taken into consideration in computing each Underlying Mutual Fund's Net
Asset Value, which is the share price used to calculate the Variable
Account's unit value. There are no front-end load fees (sales charges) at
the Underlying Mutual Fund level. The following funds are subject to fee
waivers or expense reimbursement arrangements:
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
=====================================================================================================================
FUND EXPENSES WITHOUT
REIMBURSEMENT OR WAIVER
=====================================================================================================================
<S> <C>
Federated GNMA Trust - Institutional Shares Absent the waiver of fees by the Fund's investment advisor,
Management Fees, Other Expenses, and Total Portfolio Expenses
would have been 0.40%, 0.40%, and 0.80% of average net assets,
respectively.
- ------------------------------------------------------ --------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years Absent the waiver of fees by the Fund's investment advisor,
- - Institutional Shares Management Fees, Other Expenses, and Total Portfolio Expenses
would have been 0.40%, 0.40%, and 0.80% of average net assets,
respectively.
- ------------------------------------------------------ --------------------------------------------------------------
INVESCO Industrial Income Fund, Inc. Absent the waiver of fees by the Fund's investment advisor,
Management Fees, Other Expenses, 12b-1 Fees, and Total
Portfolio Expenses would have been 0.51%, 0.22%, 0.25% and
0.98% of average net assets, respectively.
- ------------------------------------------------------ --------------------------------------------------------------
Janus Fund Absent the waiver of fees by the Fund's investment advisor,
Management Fees, Other Expenses, and Total Portfolio Expenses
would have been 0.65%, 0.22%, and 0.87% of average net assets,
respectively.
- ------------------------------------------------------ --------------------------------------------------------------
Janus Twenty Absent the waiver of fees by the Fund's investment advisor,
Management Fees, Other Expenses, and Total Portfolio Expenses
would have been 0.66%, 0.27%, and 0.93% of average net assets,
respectively.
- ------------------------------------------------------ --------------------------------------------------------------
Janus Worldwide Fund Absent the waiver of fees by the Fund's investment advisor,
Management Fees, Other Expenses, and Total Portfolio Expenses
would have been 0.65%, 0.31%, and 0.96% of average net assets,
respectively.
- ------------------------------------------------------ --------------------------------------------------------------
Nationwide(R)Money Market Fund Absent the waiver of fees by the Fund's investment advisor,
Management Fees, Other Expenses, and Total Portfolio Expenses
would have been 0.50%, 0.14%, and 0.64% of average net assets,
respectively.
- ------------------------------------------------------ --------------------------------------------------------------
SEI Index Funds - S & P 500 Index Portfolio Absent the waiver of fees by the Fund's investment advisor,
Management Fees, Other Expenses, and Total Portfolio Expenses
would have been 0.25%, 0.30%, and 0.55% of average net assets,
respectively.
- ------------------------------------------------------ --------------------------------------------------------------
Warburg Pincus Emerging Growth Fund Absent the waiver of fees by the Fund's investment advisor,
Management Fees, Other Expenses, and Total Portfolio Expenses
would have been 0.90%, 0.32%, and 1.22% of average net assets,
respectively.
- ------------------------------------------------------ --------------------------------------------------------------
</TABLE>
The information relating to the Underlying Mutual Fund expenses was provided by
the Underlying Mutual Fund and was not independently verified by the Company.
<PAGE> 12
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under the Contract assuming a maximum Variable Account annual expense rate of
0.95% of average account value, a $1000 initial Purchase Payment and a 5% annual
return on assets.
<TABLE>
<CAPTION>
==================================
If you surrender your Contract at
the end of the applicable time
period
==================================
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ------------------------------------------------------------------------------==================================
<S> <C> <C> <C> <C>
AIM Constellation Fund - Institutional Class 67 103 141 248
- ----------------------------------------------------------------------------------------------------------------
AIM Weingarten Fund - Institutional Class 67 102 140 247
- ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth 71 114 159 285
- ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century International Growth 75 126 179 326
- ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Select 71 114 159 285
- ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 71 114 159 285
- ----------------------------------------------------------------------------------------------------------------
The Bond Fund of AmericaSM, Inc. 67 103 142 250
- ----------------------------------------------------------------------------------------------------------------
Davis New York Venture Fund, Inc. 69 110 153 273
- ----------------------------------------------------------------------------------------------------------------
Delaware Group Decatur Fund, Inc.-Decatur Income Fund 67 103 142 250
- ----------------------------------------------------------------------------------------------------------------
Dreyfus Cash Management - Class A 62 88 116 195
- ----------------------------------------------------------------------------------------------------------------
Dreyfus S&P 500 Index Fund 65 98 132 230
- ----------------------------------------------------------------------------------------------------------------
Dreyfus Third Century Fund, Inc. 71 115 161 289
- ----------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 73 120 169 306
- ----------------------------------------------------------------------------------------------------------------
Federated GNMA Trust-Institutional Shares 66 101 138 241
- ----------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years - Institutional Shares 66 99 134 234
- ----------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager(TM) 68 107 148 262
- ----------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 69 109 151 269
- ----------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 67 104 143 252
- ----------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 67 104 143 252
- ----------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio 68 105 145 256
- ----------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 67 103 141 248
- ----------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 69 109 151 269
- ----------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 67 103 141 249
- ----------------------------------------------------------------------------------------------------------------
The Growth Fund of America(R)Inc. 67 104 143 252
- ----------------------------------------------------------------------------------------------------------------
The Income Fund of America(R)Inc. 66 100 137 240
- ----------------------------------------------------------------------------------------------------------------
INVESCO Industrial Income Fund, Inc. 70 112 156 280
- ----------------------------------------------------------------------------------------------------------------
Janus Fund 69 109 152 270
- ----------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 70 111 154 275
- ----------------------------------------------------------------------------------------------------------------
Janus Worldwide Fund 70 112 156 280
- ----------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 65 97 131 227
- ----------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 68 105 144 254
- ----------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund - Class A 69 108 151 268
- ----------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - Class A 71 115 162 292
- ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Bond Fund 68 105 144 254
- ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 66 101 138 241
- ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 67 102 140 245
- ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 66 100 137 240
- ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. 68 107 148 263
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
==================================
If you surrender your Contract at
the end of the applicable time
period
==================================
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ------------------------------------------------------------------------------==================================
<S> <C> <C> <C> <C>
Neuberger & Berman Guardian Trust 69 110 153 272
- ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Manhattan Fund, Inc. 70 113 158 283
- ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Fund, Inc. 69 108 149 264
- ----------------------------------------------------------------------------------------------------------------
NPMP - The Aggressive Portfolio 65 98 132 230
- ----------------------------------------------------------------------------------------------------------------
NPMP - The Conservative Portfolio 65 98 132 230
- ----------------------------------------------------------------------------------------------------------------
NPMP - The Moderate Portfolio 65 98 132 230
- ----------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Aggressive Portfolio 65 98 132 230
- ----------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Conservative Portfolio 65 98 132 230
- ----------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Small Company Fund 72 117 165 297
- ----------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 71 114 159 285
- ----------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 71 114 160 287
- ----------------------------------------------------------------------------------------------------------------
SEI Index Funds-S&P 500 Index Portfolio 63 90 118 201
- ----------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 72 119 168 303
- ----------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 72 119 168 304
- ----------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 69 109 151 269
- ----------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 71 115 162 291
- ----------------------------------------------------------------------------------------------------------------
Templeton Global Smaller Companies Growth Fund - Class I 74 123 175 317
- ----------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Growth Fund 73 120 170 308
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
<PAGE> 14
EXAMPLE
(CONTINUED)
The following chart depicts the dollar amount of expenses that would be incurred
under the Contract assuming a maximum Variable Account annual expense rate of
0.95% of average account value, a $1000 initial Purchase Payment and a 5% annual
return on assets.
<TABLE>
<CAPTION>
==================================
If you do not surrender your
Contract at the end of the
applicable time period
==================================
1 Yr. 3 Yrs. 5 Yrs. 0 Yrs.
- -----------------------------------------------------------------------------===================================
<S> <C> <C> <C> <C>
AIM Constellation Fund - Institutional Class 17 53 91 198
- ----------------------------------------------------------------------------------------------------------------
AIM Weingarten Fund - Institutional Class 17 52 90 197
- ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth 21 64 109 235
- ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century International Growth 25 76 129 276
- ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Select 21 64 109 235
- ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 21 64 109 235
- ----------------------------------------------------------------------------------------------------------------
The Bond Fund of AmericaSM, Inc. 17 53 92 200
- ----------------------------------------------------------------------------------------------------------------
Davis New York Venture Fund, Inc. 19 60 103 223
- ----------------------------------------------------------------------------------------------------------------
Delaware Group Decatur Fund, Inc.-Decatur Income Fund 17 53 92 200
- ----------------------------------------------------------------------------------------------------------------
Dreyfus Cash Management - Class A 12 38 66 145
- ----------------------------------------------------------------------------------------------------------------
Dreyfus S&P 500 Index Fund 15 48 82 180
- ----------------------------------------------------------------------------------------------------------------
Dreyfus Third Century Fund, Inc. 21 65 111 239
- ----------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 23 70 119 256
- ----------------------------------------------------------------------------------------------------------------
Federated GNMA Trust-Institutional Shares 16 51 88 191
- ----------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years - Institutional Shares 16 49 84 184
- ----------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager(TM) 18 57 98 212
- ----------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 19 59 101 219
- ----------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 17 54 93 202
- ----------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 17 54 93 202
- ----------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio 18 55 95 206
- ----------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 17 53 91 198
- ----------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 19 59 101 219
- ----------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 17 53 91 199
- ----------------------------------------------------------------------------------------------------------------
The Growth Fund of America(R)Inc. 17 54 93 202
- ----------------------------------------------------------------------------------------------------------------
The Income Fund of America(R)Inc. 16 50 87 190
- ----------------------------------------------------------------------------------------------------------------
INVESCO Industrial Income Fund, Inc. 20 62 106 230
- ----------------------------------------------------------------------------------------------------------------
Janus Fund 19 59 102 220
- ----------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 20 61 104 225
- ----------------------------------------------------------------------------------------------------------------
Janus Worldwide Fund 20 62 106 230
- ----------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 15 47 81 177
- ----------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 18 55 94 204
- ----------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund - Class A 19 58 101 218
- ----------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - Class A 21 65 112 242
- ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Bond Fund 18 55 94 204
- ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 16 51 88 191
- ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 17 52 90 195
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
=================================
If you do not surrender your
Contract at the end of the
applicable time period
=================================
1 Yr. 3 Yrs. 5 Yrs. 0 Yrs.
- -----------------------------------------------------------------------------==================================
<S> <C> <C> <C> <C>
Nationwide(R)Money Market Fund 16 50 87 190
- ---------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. 18 57 98 213
- ---------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Trust 19 60 103 222
- ---------------------------------------------------------------------------------------------------------------
Neuberger & Berman Manhattan Fund, Inc. 20 63 108 233
- ---------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Fund, Inc. 19 58 99 214
- ---------------------------------------------------------------------------------------------------------------
Nationwide Professionally Managed Portfolios - The Aggressive Portfolio 15 48 82 180
- ---------------------------------------------------------------------------------------------------------------
Nationwide Professionally Managed Portfolios - The Conservative Portfolio 15 48 82 180
- ---------------------------------------------------------------------------------------------------------------
Nationwide Professionally Managed Portfolios - The Moderate Portfolio 15 48 82 180
- ---------------------------------------------------------------------------------------------------------------
Nationwide Professionally Managed Portfolios - The Moderately Aggressive 15 48 82 180
Portfolio
- ---------------------------------------------------------------------------------------------------------------
Nationwide Professionally Managed Portfolios - The Moderately Conservative 15 48 82 180
Portfolio
- ---------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Small Company Fund 22 67 115 247
- ---------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 21 64 109 235
- ---------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 21 64 110 237
- ---------------------------------------------------------------------------------------------------------------
SEI Index Funds-S&P 500 Index Portfolio 13 40 68 151
- ---------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 22 69 118 253
- ---------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 22 69 118 254
- ---------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 19 59 101 219
- ---------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 21 65 112 241
- ---------------------------------------------------------------------------------------------------------------
Templeton Global Smaller Companies Growth Fund - Class I 24 73 125 267
- ---------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Growth Fund 23 70 120 258
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
<PAGE> 16
EXAMPLE
(CONTINUED)
The following chart depicts the dollar amount of expenses that would be incurred
under the Contract assuming a maximum Variable Account annual expense rate of
0.95% of average account value, a $1000 initial Purchase Payment and a 5% annual
return on assets.
<TABLE>
<CAPTION>
==================================
If you annuitize your Contract at
the end of the applicable time
period
==================================
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- -----------------------------------------------------------------------------===================================
<S> <C> <C> <C> <C>
AIM Constellation Fund - Institutional Class 17 53 91 198
- ----------------------------------------------------------------------------------------------------------------
AIM Weingarten Fund - Institutional Class 17 52 90 197
- ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth 21 64 109 235
- ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century International Growth 25 76 129 276
- ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Select 21 64 109 235
- ----------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 21 64 109 235
- ----------------------------------------------------------------------------------------------------------------
The Bond Fund of AmericaSM, Inc. 17 53 92 200
- ----------------------------------------------------------------------------------------------------------------
Davis New York Venture Fund, Inc. 19 60 103 223
- ----------------------------------------------------------------------------------------------------------------
Delaware Group Decatur Fund, Inc.-Decatur Income Fund 17 53 92 200
- ----------------------------------------------------------------------------------------------------------------
Dreyfus Cash Management - Class A 12 38 66 145
- ----------------------------------------------------------------------------------------------------------------
Dreyfus S&P 500 Index Fund 15 48 82 180
- ----------------------------------------------------------------------------------------------------------------
Dreyfus Third Century Fund, Inc. 21 65 111 239
- ----------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 23 70 119 256
- ----------------------------------------------------------------------------------------------------------------
Federated GNMA Trust-Institutional Shares 16 51 88 191
- ----------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years - Institutional Shares 16 49 84 184
- ----------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager(TM) 18 57 98 212
- ----------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 19 59 101 219
- ----------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 17 54 93 202
- ----------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 17 54 93 202
- ----------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio 18 55 95 206
- ----------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 17 53 91 198
- ----------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 19 59 101 219
- ----------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 17 53 91 199
- ----------------------------------------------------------------------------------------------------------------
The Growth Fund of America(R)Inc. 17 54 93 202
- ----------------------------------------------------------------------------------------------------------------
The Income Fund of America(R)Inc. 16 50 87 190
- ----------------------------------------------------------------------------------------------------------------
INVESCO Industrial Income Fund, Inc. 20 62 106 230
- ----------------------------------------------------------------------------------------------------------------
Janus Fund 19 59 102 220
- ----------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 20 61 104 225
- ----------------------------------------------------------------------------------------------------------------
Janus Worldwide Fund 20 62 106 230
- ----------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 15 47 81 177
- ----------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 18 55 94 204
- ----------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund - Class A 19 58 101 218
- ----------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - Class A 21 65 112 242
- ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Bond Fund 18 55 94 204
- ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 16 51 88 191
- ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 17 52 90 195
- ----------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 16 50 87 190
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
==================================
If you annuitize your Contract at
the end of the applicable time
period
==================================
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ------------------------------------------------------------------------------==================================
<S> <C> <C> <C> <C>
Neuberger & Berman Guardian Fund, Inc. 18 57 98 213
- -----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Trust 19 60 103 222
- -----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Manhattan Fund, Inc. 20 63 108 233
- -----------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Fund, Inc. 19 58 99 214
- -----------------------------------------------------------------------------------------------------------------
NPMP - The Aggressive Portfolio 15 48 82 180
- -----------------------------------------------------------------------------------------------------------------
NPMP - The Conservative Portfolio 15 48 82 180
- -----------------------------------------------------------------------------------------------------------------
NPMP - The Moderate Portfolio 15 48 82 180
- -----------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Aggressive Portfolio 15 48 82 180
- -----------------------------------------------------------------------------------------------------------------
NPMP - The Moderately Conservative Portfolio 15 48 82 180
- -----------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Small Company Fund 22 67 115 247
- -----------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 21 64 109 235
- -----------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 21 64 110 237
- -----------------------------------------------------------------------------------------------------------------
SEI Index Funds-S&P 500 Index Portfolio 13 40 68 151
- -----------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 22 69 118 253
- -----------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 22 69 118 254
- -----------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 19 59 101 219
- -----------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 21 65 112 241
- -----------------------------------------------------------------------------------------------------------------
Templeton Global Smaller Companies Growth Fund - Class I 24 73 125 267
- -----------------------------------------------------------------------------------------------------------------
Warburg Pincus Emerging Growth Fund 23 70 120 258
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
<PAGE> 18
SYNOPSIS
The Contracts described in this prospectus are designed for use in connection
with supplemental deferred compensation Plans for employees of tax exempt
entities. The Plans generally will qualify for favorable tax treatment under
Section 401, 403(b), or 457 of the Code, but may also include other
non-qualified deferred compensation plans. Contracts will be issued only to
employers who are exempt from taxation to fund deferred compensation plans. The
employees generally are not subject to federal income tax on amounts deferred
under such plans until Distributions are received from the Plan. Purchase
Payments made at any time by or on behalf of any Participant must be at least
$20 per month.
Purchase Payments under the Contracts are placed in the Variable Account. The
Variable Account is a unit investment trust with Sub-Accounts having distinct
unit values, each reflecting investment results of a different Underlying Mutual
Fund. Amounts equivalent to the obligations of the Company under each
Sub-Account will be invested in the specified Underlying Mutual Fund (see
"Appendix of Participating Underlying Mutual Funds").
The Company does not deduct a sales charge from Purchase Payments made to these
Contracts. However, if any part of such Contracts is withdrawn, the Company
will, with certain exceptions, deduct from the Contract Value, a Contingent
Deferred Sales Charge ("CDSC") equal to not more than 5% of the lesser of the
total of all Purchase Payments made prior to the date of the request for
surrender, or the amount surrendered. This charge, when applicable, is imposed
to permit the Company to recover sales expenses which have been advanced by the
Company (see "Contingent Deferred Sales Charge").
Under certain Contracts, the Company may assess a Participant Account
Maintenance Charge. Under no circumstances will a Participant Account
Maintenance Charge be assessed unless the charge is specifically negotiated and
agreed upon by the Contract Owner and the Company. The maximum amount which may
be assessed is $50 (see "Participant Account Maintenance Charge").
A Variable Account Annual Expense Fee is assessed in connection with the
Company's contractual promise to accept various risks and administrative
expenses associated with the issuance of the Contracts. This fee is subject to
negotiation and may vary from one Plan to another reflecting the unique
characteristics of different Plans when considered as a whole. This charge is
calculated as a percentage of assets and is deducted on each Valuation Date from
amounts held in the Variable Account. The maximum fee which may be assessed by
the Company is 0.95% per annum of the average account value (see "Variable
Account Annual Expense Fee"). In addition, the Underlying Mutual Funds make
certain deductions from their assets (see Underlying Mutual Fund Annual
Expenses).
The CDSC, Participant Account Maintenance Charge and Variable Account Annual
Expense Fee, when negotiated, may be decreased upon notice to the Contract Owner
(see "Modification of the Contract").
Taxation of the Contracts will depend on the type of Contract issued (see
"Federal Tax Status"). Any applicable premium taxes will be charged against the
Contracts. If any premium taxes are payable at the time Purchase Payments are
made, the premium tax deduction will be made prior to allocation to any
Underlying Mutual Fund (see "Premium Taxes").
<PAGE> 19
CONDENSED FINANCIAL INFORMATION
The value of an Accumulation Unit is determined on the basis of changes in the
per share value of the Underlying Mutual Funds and the assessment of a Variable
Account Annual Expense Fee which may vary from plan to plan (for more
information on the calculation of Accumulation Unit values, see "Variable
Account Accumulation Unit Value" and "Net Investment Factor"). Please refer to
Appendix B for information regarding each class of Accumulation Units.
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of the
State of Ohio in March, 1929. The Company is a member of the Nationwide
Insurance Enterprise, with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43215. The Company offers a complete line of life insurance, annuities and
retirement products. It is admitted to do business in all states, the District
of Columbia, the Virgin Islands, and Puerto Rico.
NATIONWIDE ADVISORY SERVICES, INC.
The Contracts are distributed by the General Distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a
wholly owned subsidiary of Nationwide Life Insurance Company.
THE VARIABLE ACCOUNT
The Nationwide DC Variable Account ("Variable Account") was established by the
Company on July 10, 1974 pursuant to Ohio law. The Variable Account is
registered with the SEC as a unit investment trust pursuant to the provisions of
the Investment Company Act of 1940 ("1940 Act"). Such registration does not
involve supervision of the management of the Variable Account or the Company by
the SEC.
The net Purchase Payments applied to the Variable Account are invested in shares
of the Underlying Mutual Funds available under the terms of the Contract. The
Variable Account is divided into Sub-Accounts, each of which represents a
separate Underlying Mutual Fund (see the "Appendix" for a description of the
investment objective of each Underlying Mutual Fund).
Each Sub-Account is administered and accounted for as a part of the separate
account, but the income, capital gains or losses of each Sub-Account are
credited to or charged against the assets held for that Sub-Account in
accordance with the terms of each Contract, without regard to other income,
capital gains or losses of any other Sub-Account, or arising out of any other
business the Company may conduct. The assets within each Sub-Account are not
chargeable with liabilities arising out of the business conducted by any other
Sub-Account, nor will the Variable Account as a whole be chargeable with
liabilities arising out of any other business the Company may conduct.
VOTING RIGHTS
The Variable Account will be owner of record of all Underlying Mutual Fund
shares purchased by the respective account until such Underlying Mutual Fund
shares are sold, but all securities will be held for the benefit of the Contract
Owners. In accordance with its view of applicable law, the Company will vote the
shares of the Underlying Mutual Funds at regular and special meetings of the
shareholders. These shares will be voted in accordance with instructions
received from Contract Owners. The Company will mail to each Contract Owner at
its last known address all periodic reports and proxy material of the applicable
Underlying Mutual Fund(s), and a form with which to give voting instructions.
Any Underlying Mutual Fund shares as to which no timely instructions are
received will be voted by the Company in the same proportion as the instructions
received from all persons furnishing timely instructions. A Contract Owner's
voting rights may decrease with the cancellation of Accumulation Units to make
annuity payments.
PERIODIC REPORTS
The Company will, semi-annually, provide to each Participant, a Statement of
Assets, Liabilities and Contract Owners' Equity and a Statement of Operations
and Changes in Contract Owners' Equity of the Variable Account. Each Participant
and Retired Participant will also be informed, periodically, of the number of
Accumulation Units credited to his or her account as well as the total account
value.
The current prospectus of the Variable Account will be made available to
Participants through the Contract Owner. The Contract Owner may, under the terms
of the Plan, have an obligation to furnish additional information to
Participants, such as: a notice of any changes in the Plan or tax status of the
Plan, and the financial condition of the Contract Owner as it relates to
obligations under the Plan.
<PAGE> 20
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS
Charges associated with Contracts described in this prospectus may vary from one
Plan to another, depending on the nature of the Plan and the particular needs
and preferences of Contract Owners. Generally, all charges are negotiable; this
allows the Company and Contract Owners flexibility in "custom designing" a
charge structure that is consistent with the expectations and preferences of
Contract Owners, as well as the expenses (which will vary from Plan to Plan) and
profitability aims of the Company.
With respect to any existing Contract which may be re-negotiated, however, the
Company will not negotiate for, or impose, aggregate Contract charges greater
than those in effect prior to re-negotiation. In other words, charges under any
existing Contract which is re-negotiated may be lowered, but under no
circumstances will they be raised.
CONTINGENT DEFERRED SALES CHARGE
No deduction for a sales charge is made from the Purchase Payments for these
Contracts. However, the CDSC, when it is applicable, will be used to cover
expenses relating to the sale of the Contracts, including commissions paid to
sales personnel, the costs of preparation of sales literature, and other
promotional activity.
If part or all of the Contract Value representing Participant Accounts that have
been established under the Contract and held in the Variable Account for less
than 16 years is surrendered, a CDSC, when it is applicable, will be assessed by
the Company. This charge will not exceed the lesser of:
(1) 5% of the total of all Purchase Payments received on behalf of the
surrendering Participant or the withdrawing Contract Owner prior to the
date of the request for surrender; or
(2) 5% of the amount surrendered.
The cumulative sum of all such charges, per Participant, shall never exceed 5%
(or such lesser percentage, if applicable) of the total Purchase Payments made
on behalf of such Participant for the 16 years prior to the date the surrender
is requested.
When a CDSC of less than 5% is negotiated and assessed, the reduced charge may
reflect actual variations in expenses, usually resulting from reduced marketing
expenses.
No CDSC will be imposed on Contract Value that is paid under:
- any life income payment option;
- designated period payment options of 5 or more years for a Participant
who has a minimum of 5 Participant Account Years prior to the time the
benefit payments are to commence; and
- a one-sum or periodic payment payable because of a Participant's death.
PARTICIPANT ACCOUNT MAINTENANCE CHARGE
A Participant Account Maintenance Charge, if assessed, will help the Company to
offset administrative expenses, and the Charge will not exceed the Company's
actual administrative expenses under the Contracts.
The Company will not assess a Participant Account Maintenance Charge unless the
charge is negotiated and contractually agreed upon between the Contract Owner
and the Company. Generally, Contract Owners negotiating for a Participant
Account Maintenance Charge, or a higher Participant Account Maintenance Charge,
will do so with the expectation of having the Company lower other fees
associated with the Contract. Conversely, the absence of a Participant Account
Maintenance Charge may be expected to increase other charges. The maximum amount
which may be assessed is $50. If a Participant Account Maintenance Charge is
negotiated, the Company will assess each Participant Account the negotiated
amount at the beginning of each Participant Account Year for the preceding
Participant Account Year, during both the accumulation and annuity periods.
The Participant Account Maintenance Charge is made by canceling a number of
Accumulation Units during both the accumulation and annuity periods, equal in
value to the applicable Participant Account Maintenance Charge. If a Participant
Account includes more than one Sub-Account, the deduction will be allocated
among Sub-Accounts on the basis of relative values at the time the deduction is
made.
<PAGE> 21
If a Participant Account Maintenance Charge is negotiated, the Company will
assess the Participant Account Maintenance Charge on the date (other than a
Participant Anniversary) that amounts held in respect of a Participant are fully
withdrawn from the Variable Account. In such case, the amount of the Participant
Account Maintenance Charge will be 1/12 of the applicable Participant Account
Maintenance Charge, multiplied by the number of whole or partial calendar months
which have elapsed between the Participant Anniversary (or the Participant
Effective Date during the first Participant Account Year) and the date of full
withdrawal.
For those Plans which provide this Contract and certain other investment options
(such as the Company's Group Fixed Fund Retirement Contract), the Participant
Account Maintenance Charge under this Contract may be reduced so that the total
of the Participant Account Maintenance Charges and any similar administrative
charges imposed under other investment options available under the Plan will not
exceed the Participant Account Maintenance Charge assessed under this Contract.
In this event, such charge will be allocated among the Sub-Accounts and amounts
held in such other investment options available under the Plan on the basis of
the relative values of the Participant's Accounts at the time the deduction is
made.
THE PARTICIPANT ACCOUNT MAINTENANCE CHARGE WILL NOT BE ASSESSED UNLESS
NEGOTIATED BETWEEN THE CONTRACT OWNER AND THE COMPANY.
VARIABLE ACCOUNT ANNUAL EXPENSE FEE ("VARIABLE ACCOUNT FEE")
Under the terms of the Contracts, the Company assumes various risks and incurs
administrative expenses associated with the issuance of the Contracts. For the
Company's contractual promise to accept these risks and expenses, the Contracts
provide for the deduction of a Variable Account Fee, which is calculated as a
percentage of assets and deducted on each Valuation Date from amounts held in
the Variable Account. On an annual basis, the maximum Variable Account Fee is
0.95% of the average account value.
As with all other charges, this fee is subject to negotiation and may vary from
one Plan to another reflecting the unique characteristics of different Plans
when considered as a whole. In negotiating the amount of the fee, the Company
may consider factors which may reduce expenses incurred by the Company. These
factors might include, but are not limited to: (1) the size of the Plan; (2) the
number of eligible employees; (3) the number of Plan Participants; (4)
demographics of Plan Participants; (5) general economic conditions; (6) the
varying costs associated with the inclusion of Underlying Mutual 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; (9) any recovery of any credits on Initial
Transfers; and (10) any other factors which the Company deems relevant.
PREMIUM TAXES AND OTHER EXPENSES
The Company will charge against Purchase Payments or the Contract Value the
amount of any premium taxes levied by a state or any other governmental entity
upon Purchase Payments received by the Company. Premium tax rates currently
range from 0% to 3.5% per annum. This range is subject to change. The Company is
currently not deducting such taxes but reserves the right to do so when such
taxes are incurred. The method used to recoup premium tax expense will be
determined by the Company at its sole discretion and in compliance with state
law.
There are deductions and expenses paid out of the assets of the Underlying
Mutual Funds (see "Underlying Mutual Fund Annual Expenses") that are more fully
described in the prospectuses for the Underlying Mutual Funds.
EXPERIENCE CREDITS
The Contracts may either be participating or non-participating, depending upon
the state of issue. A participating Contract provides the right to participate
in the distribution of surplus of the Company. In the event that the Participant
Account Maintenance Charge and the Variable Account Annual Expense Fee collected
under this Contract accrue to the Company in excess of an amount deemed
necessary at the sole discretion of the Company's Board of Directors, such
excess may be allocated to the Contract by purchasing additional Accumulation
Units and crediting such additional units to the Participant Accounts. There
have not been any experience credits to date. The Company cannot offer any
assurance that there will be any experience credits on participating Contracts
in the future. With respect to non-participating Contracts, there is no right to
participate in the distribution of surplus.
<PAGE> 22
DESCRIPTION OF THE CONTRACTS
A. GENERAL
PURPOSE OF THE CONTRACTS
The Contracts described in this prospectus are Group Flexible Fund
Retirement Contracts designed to fund certain Plans generally established
under either Section 401, 403(b) or 457 of the Code (although they may
include certain other non-qualified deferred compensation plans) for
employees of states and their political subdivisions and certain other
organizations exempt from taxation.
For Section 457 Plans established for the benefit of any organization that
is exempt from the federal income tax, other than a governmental unit, all
amounts of compensation deferred under the Plan, all property and rights
purchased with such amounts, and all income attributable to such amounts,
property, or rights, remain (until made available to a Participant or other
Beneficiary) solely the property and the rights of the Contract Owner
(without being restricted to the provision of benefits under the Plan),
subject only to the claims of the Contract Owner's general creditors.
For Section 457 Plans established by a state, a political subdivision of a
state, or any agency or instrumentality of a state or political subdivision
of a state after August 20, 1996, the assets and income of the Plan must be
held in trust for the exclusive benefit of the Participants and the
Beneficiaries of the Plan. For this purpose, custodial accounts and certain
annuity contracts are treated as trusts. Section 457 Plans that were in
existence on August 20, 1996 may be amended to satisfy the trust and
exclusive benefit requirements any time prior to January 1, 1999, and must
be amended not later than that date to continue to receive favorable tax
treatment. Until the effective date of such amendment, such Plans may
continue to qualify for favorable tax treatment by satisfying the
requirements set forth above for other tax exempt organizations.
A single group Contract is issued to the Contract Owner, covering all
present and future participating employees. The Company will issue a
certificate to the Contract Owner for delivery to each Retired Participant
or other person for whom an Optional Retirement Income Form is purchased,
setting forth in substance the benefits to which such person is entitled.
In addition, if any applicable law requires, the Company will issue a
descriptive certificate to the Contract Owner for delivery to any such
person required by law to receive such certificate, setting forth in
substance the benefits to which such person is entitled. For purposes of
determining benefits payable under the Plan, an individual accumulation
account is established for each Participant. The frequency of Purchase
Payments is normally monthly, but may be adjusted to fit the payroll
practices of the Contract Owner. Purchase Payments made at any time by or
on behalf of any Participant must be at least $20 per month.
The basic objectives of the Contracts are to provide each Participant with
an initial Retirement Income Payment, which will tend to reflect the
changes which have occurred in the cost of living during pre-retirement
years (without the necessity of increased Purchase Payments to keep pace
with any increase in the cost of living which might occur during those
years), and to provide subsequent Retirement Income Payments which will
tend to vary with the cost of living changes during the lifetime of the
retiree. The Company seeks to accomplish these objectives by applying
purchase rates contained in the Contract to the amounts accumulated through
investment in Underlying Mutual Funds. Notwithstanding the foregoing, there
is no assurance that these objectives will be attained. Historically, the
value of a diversified portfolio of common stocks held for an extended
period of time has tended to rise during periods of inflation. There has,
however, been no exact correlation, and for some periods, the prices of
securities have declined while the cost of living was rising.
MODIFICATION OF THE CONTRACT
The CDSC, Participant Account Maintenance Charge and Variable Account
Annual Expense Fee, when negotiated, may be decreased upon notice to the
Contract Owner.
Other than as set forth above, the Company reserves the right to change all
other provisions of the Contract by giving notice to the Owner not less
than 90 days before the effective date of the change.
<PAGE> 23
CONTRACT RIGHTS AND PRIVILEGES AND ASSIGNMENTS
The Contract belongs to the Contract Owner provided, however, that under
Code Section 457 Plans, the Contract Owner must hold the Contract for the
exclusive benefit of the Plan's Participants and Beneficiaries. All
contractual rights and privileges may be exercised by the Contract Owner,
subject to any rights specifically reserved in the Plan for Participants as
a group or as individuals. With respect to 457 Plans, the Contract Owner
may not take any action inconsistent with the rights of such 457 Plan's
Participants. The Contract may not be assigned.
EXCHANGE PRIVILEGE
The Company will permit the Contract Owner or the Participant, if the Plan
so provides, to exchange amounts among the Sub-Accounts as frequently as
permitted by the Plan, subject to the limits and rules set by each
Underlying Mutual Fund. For those Contracts where the Contract Owner has
elected an exchange privilege, there will be no charge for exchanges among
the Sub-Accounts.
The Company will also permit the Participant to exchange amounts among the
Sub-Accounts by telephone or the internet, if forms are executed by the
Contract Owner agreeing with certain restrictions applicable to these
privileges. Telephone and internet exchange requests must be received by
the Company prior to the close of the New York Stock Exchange in order to
receive that day's closing Sub-Account price. The Company will employ
reasonable procedures to confirm that instructions communicated by
telephone and the internet are genuine. Such procedures may include any or
all of the following: requesting identifying information, such as name,
contract number, Social Security Number, and/or personal identification
number; tape recording all telephone transactions and providing written
confirmation thereof to the Contract Owner or Participant and any agent of
record, at the last address of record; or any other procedures that the
Company deems reasonable. Failure to follow reasonable procedures may
result in the Company's liability for any losses due to unauthorized or
fraudulent transfers. However, any losses incurred pursuant to actions
taken by the Company in reliance on telephone or internet instructions
reasonably believed to be genuine shall be borne by the Participant. If the
Participant is unable to execute an exchange request by telephone or the
internet (for example, during times of unusual market activity), the
Participant may consider placing the exchange order by mail. The Company
may withdraw the telephone exchange privilege and the internet exchange
privilege upon a thirty (30) day written notice to Contract Owners and
Participants.
On the date the Company receives an exchange request in good order, which
includes all of the information necessary for processing the request, the
Company will transfer the amount to be converted. Such transfers will be
based on the Accumulation Unit values of the affected Sub-Accounts if
received at the Home Office prior to the close of the New York Stock
Exchange on a day on which the New York Stock Exchange is open for
business. If the exchange request is received after the close of the New
York Stock Exchange, the transfer will be based on the next business day
which the New York Stock Exchange is open.
For those Plans funded by this Contract and the Company's Group Fixed Fund
Retirement Contract, the Contract Owner, or the Participant if the Plan so
provides, may exchange Accumulation Units between any Sub-Account and the
Group Fixed Fund Retirement Contract. Exchanges from the deposit fund to
any Sub-Account will be subject to the limitations of the Group Fixed Fund
Retirement Contract. Exchanges will be effective when received in good
order at the Home Office.
SUSPENSION AND TERMINATION
The Contract may be suspended at the option of the Company upon written
notice to the Contract Owner if: (a) the Contract Owner has failed to remit
to the Company any Purchase Payment specified in the Plan; or (b) if the
Company does not accept an amendment to the Plan, filed with the Company by
the Contract Owner, which in the Company's opinion would adversely affect
its financial experience with respect to the Contract. The Contract Owner
may suspend the Contract upon 90 days written notice to the Company.
Suspension of the Contract will become effective as of the ninety-first
(91st) day following receipt of written notice by the Company. Suspension
of the Contract means that no further Purchase Payments will be accepted by
the Company except by mutual consent, and all other terms of the Contract
will continue to apply. After suspension of the Contract has become
effective, the Contract Owner may, upon 30 days written notice, terminate
the Contract. Upon termination of the Contract, the Company will pay to the
Contract Owner the value of the Contract, subject to applicable charges, in
accordance with the terms of the Contract (see "Redemption of Participant
Accounts"). Upon such termination by the Contract Owner, payment of
Contract Values will be subject to any applicable CDSC.
<PAGE> 24
B. PARTICIPANT ACCOUNT VALUES
APPLICATION OF PURCHASE PAYMENTS
The Company will receive Purchase Payments from the Contract Owner in
accordance with the requirements of the Plan. Net Purchase Payments
received on behalf of Participants will be applied by the Company to
purchase Accumulation Units of Sub-Accounts in accordance with the
instructions of the Contract Owner. Purchase Payments made at any time by
or on behalf of each Participant must be at least $20 per month. Purchase
Payments must be no less than monthly, unless agreed to by the Company.
An initial Purchase Payment will be priced not later than 2 business days
after receipt of an order to purchase, if the application of the
Participant and all information necessary for processing the purchase order
are complete. The Company may retain the Purchase Payment for up to 5
business days while attempting to complete an incomplete application. If
the application cannot be made complete within 5 business days, the
Participant will be informed of the reasons for the delay and the Purchase
Payment will be returned immediately unless the Participant consents to the
Company retaining the Purchase Payment until the application is made
complete. Upon completion of such incomplete application, the Purchase
Payment will be priced within 2 business days.
Purchase Payments will not be priced on days when the New York Stock
Exchange is not open for business.
When permissible under state insurance law, the Company may credit up to 8%
of an Initial Transfer into the Contract. This credit will reimburse the
Contract Owner for any exit penalty associated with an investment product
offered by a provider other than the Company. The Company will recover this
credit by reducing service agent and/or broker compensation or through the
negotiation of an increased Participant Account Maintenance Charge or
Variable Account Annual Expense Fee.
ADDITIONAL PURCHASE PAYMENT PRIOR TO COMMENCEMENT OF ANNUITY PAYMENTS
The Contract Owner will have the right to make one additional Purchase
Payment in respect to a Participant for the purpose of increasing
Retirement Income Payments. Notice of such payment shall be given to the
Company at the time the notice to distribute is given, and such additional
Purchase Payment must be made no later than the last business day prior to
the date upon which Retirement Income Payments are to commence. Any such
additional Purchase Payment will be subject to any applicable premium
taxes. The annuity rates provided under this Contract at the time of issue
will be applicable to the entire value, including any such additional
Purchase Payment, of such account which does not exceed five times the
Purchase Payment allocated to such account prior to the date notice to
distribute is given. Any excess amount may be applied at annuity rates then
offered by the Company for contracts of the same type as this Contract.
CREDITING ACCUMULATION UNITS
When a Purchase Payment is received by the Company, the net Purchase
Payment for each Sub-Account is applied separately to provide Accumulation
Units (calculated daily) which are credited to a Participant Account in
accordance with the instructions of the Contract Owner. The number of
Accumulation Units credited to each Participant Account for each
Sub-Account is determined by dividing the net Purchase Payment allocated to
that Sub-Account for that Participant by the value of the Accumulation Unit
for that Sub-Account next computed following receipt of the Purchase
Payment by the Company. The net Purchase Payment for each Participant is
the total Purchase Payment for that Participant less any premium taxes then
payable.
VARIABLE ACCOUNT ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Sub-Account was established at
$1.00 as of the date Underlying Mutual Fund shares were available for
purchase for that Sub-Account. The value of Accumulation Units for any
Sub-Account for any subsequent business day is determined by multiplying
the value for the preceding business day by the net investment factor for
that Sub-Account for the period since that day (see the section entitled
"Net Investment Factor"). A business day is any day on which the New York
Stock Exchange is open for trading or any other day during which there is a
sufficient degree of trading of the Underlying Mutual Fund shares that the
current Variable Account Contract Value might be materially affected.
Accumulation Units are calculated on a daily basis.
<PAGE> 25
ALLOCATION OF PURCHASE PAYMENTS
The Contract Owner or Participant must specify the proportion of the
Purchase Payments to be applied to provide benefits under any Sub-Account.
The Company will permit the Contract Owner, or the Participant if the Plan
so permits, to change the allocation percentages among Sub-Accounts for
subsequent Purchase Payments, provided that no change may be made which
would result in an amount less than 1% of the payment being allocated to
any Sub-Account for any Participant. The Company will permit such
allocation changes as frequently as permitted by the Plan. A change in
allocation percentages will not affect Accumulation Units of any
Sub-Account resulting from Purchase Payments made before the change.
VALUATION OF AN ACCOUNT
The sum of the value of all Accumulation Units credited to the Participant
Account is the Participant Account value. Purchase Payments are allocated
among the Sub-Accounts in accordance with the instructions of the Contract
Owner.
The value of a Participant's Account on any day can be determined by
multiplying the total number of Accumulation Units credited to the account
for each Sub-Account by the current Accumulation Unit value for that
Sub-Account in respect of the Participant. Each Participant (or the
Contract Owner) will be advised periodically of the number of Accumulation
Units credited to his or her account for each Sub-Account, the current
Accumulation Unit values, and the total value of his or her account. Such
reports to Participants are for informational purposes only and should not
be interpreted to mean that a Participant has any rights with respect to
his or her account beyond that provided by the Contract Owner in accordance
with the terms of the Plan.
The Participant and Contract Owner should review the information in these
reports carefully. All errors or corrections must be reported to the
Company immediately to assure proper crediting to the Contract. The Company
will assume all transactions are accurate unless the Participant or the
Contract Owner notifies the Company otherwise within 30 days after receipt
of the report.
The principal underwriter and distributor of the Contracts is Nationwide
Advisory Services, Inc. ("NAS"), located at Three Nationwide Plaza,
Columbus, Ohio, 43215.
C. REDEMPTION OF PARTICIPANT ACCOUNTS
The Contract Owner's right to redeem Participant Accounts, either fully or
partially, will be governed by the terms of the Plan which the Contract is
issued to fund. It should be recognized that the value of the investment on
redemption can be more or less than its cost. All such payments will be
made by the Company to the Contract Owner, after the assessment of any
applicable CDSC. It is the Contract Owner's obligation to distribute such
payments to a Participant. The Company may undertake the obligation on
behalf of the Contract Owner to distribute such payments, less the CDSC, if
any, directly to a Participant by agreement with the Contract Owner. To the
extent permitted by the Plan, a Participant Account may be redeemed fully
or partially at any time prior to the date Retirement Income Payments
commence for the Participant under either Option B1 or B2, subject to the
CDSC. No partial redemption will directly affect future requirements to
make Purchase Payments. If the Contract is terminated by the Contract
Owner, all Participant Accounts in the Variable Account will be redeemed to
the extent permitted by the Plan.
A request for a partial redemption of a Participant Account containing more
than one Sub-Account must specify the allocation of the partial redemption
among the Sub-Accounts. However, if no such direction is contained in the
request for a redemption, the Company may pro-rate the redemption among the
applicable Sub-Accounts. Upon receipt at the Home Office of a written
request for a full or partial redemption of a Participant Account, the
Company will determine the value of the number of Accumulation Units
redeemed, less any applicable CDSC, at the Accumulation Unit value next
computed following receipt of such written request by the Company. Payment
of any such amount will be made to the Contract Owner within 7 days of the
date the request is received by the Company. Payment of redemption values
may be suspended when redemption of the Underlying Mutual Fund shares is
suspended: (i) during any period in which the New York Stock Exchange is
closed; or (ii) in the event that the SEC may by order direct for the
protection of Contract Owners or Participants. Instead of a lump sum
Distribution of a full or partial redemption, the Contract Owner, or
Participant if permitted by the Plan, may elect to have that amount paid in
installments under Option A1 or A2, subject to the minimums applicable to
these options.
<PAGE> 26
D. DISTRIBUTION OF PARTICIPANT ACCOUNTS (RETIREMENT PERIOD)
RETIREMENT INCOME PAYMENTS
The period during which a Participant Account is paid out in periodic
installments is known as the Distribution Period. Because periodic
Distributions will normally be made after the Participant retires, the
Distribution Period is also called the retirement period. All such periodic
Distributions will be made by the Company to the Contract Owner. It is the
Contract Owner's obligation to pay such amounts to a Participant. The
Company may undertake the obligation on behalf of the Contract Owner to pay
such amounts directly to a Participant by agreement with the Contract
Owner. Retirement Income Payments under Options B1 and B2 are determined on
the basis of: (i) the mortality tables specified in the Contract; (ii) the
adjusted age of the Retired Participant; (iii) the type of Retirement
Income Payment option(s) selected; and (iv) in the case of variable
payments, the investment performance of the Sub-Accounts elected. While the
Company may be obligated to make variable Retirement Income Payments under
the Contract, the amount of each such payment is not guaranteed. The dollar
amount of variable payments will reflect investment gains and losses, and
investment income of the Sub-Accounts on which they are based, but they
will not be affected by adverse mortality experience or by an increase in
the Company's expenses above the amount provided for in the Contracts.
ELECTION OF INCOME FORM AND DATE
The Contracts provide for Retirement Income Payments to begin on the date
and under the retirement options elected in accordance with the Plan. At
least one month prior to a Participant's Retirement Commencement Date, the
Contract Owner may, by written election to the Company at its Home Office,
elect any one of the retirement income options described in the "Optional
Retirement Income Forms" section. The Plan may restrict changes in election
of retirement income options.
ALLOCATION OF RETIREMENT INCOME
At retirement, Accumulation Units in a Participant's Account may be used to
purchase a Fixed Dollar Annuity for the Participant. For Participants
electing Options A1 or A2 as described in the "Optional Retirement Income
Forms" section, Accumulation Units in a Participant's Account of any
Sub-Account will be used to provide variable Retirement Income Payments as
described further in this prospectus.
FIXED DOLLAR ANNUITY
A fixed dollar annuity is an annuity with payments which are guaranteed as
to dollar amount during the retirement period. The first fixed dollar
payment will be determined by applying the value of the General Account
Contract Value to the applicable Annuity Table in accordance with the
Optional Retirement Income Form elected. This will be done at the
retirement date. Fixed dollar annuity payments after the first will not be
less than the first fixed dollar annuity payment. The availability of fixed
dollar annuity contracts under a particular Plan is subject to the election
of the Contract Owner.
MINIMUM PAYMENT
If the present value of the Participant's accrued benefit at the time of
retirement is less than $3,500, the Company will have the right to make a
lump sum Distribution to such Retired Participant.
DEATH BENEFIT BEFORE RETIREMENT
In the event a Participant dies before his or her retirement income
commences, a death benefit equal to the value of such Participant Account
will be paid as provided by the Plan upon: (1) the Company's receipt of
verification and proof of death; and (2) the Company's verification of
Beneficiary designations. If the Plan so provides, a Beneficiary may elect
either to receive the value in a lump sum or to apply it under any of the
Optional Retirement Income Forms contained in the Contract (subject to the
minimums applicable to such optional forms). Monthly payments due under
such options may be fixed, variable, or a combination of fixed and
variable.
<PAGE> 27
OPTIONAL RETIREMENT INCOME FORMS
The availability of the following Optional Retirement Income Forms is
subject to the election of the Contract Owner.
OPTION A1- Payments for a Designated Period. Payments will be made
monthly for any specified number of years not to exceed 30. The amount
of each variable payment will be determined by multiplying (a) by (b)
where: (a) is the Accumulation Unit value for the date the payment is
made; and (b) is the number of Accumulation Units applied under this
option divided by the number of payments selected. Exchanges between
the investment options are permitted subject to limitations outlined in
the Company's Group Fixed Fund Retirement Contract. A period certain
payment period of less than 5 years for a Participant who has less than
a minimum of 5 Participant Account Years would result in imposition of
the applicable CDSC.
OPTION A2 - Payments of a Designated Amount. Payments will be made
monthly in equal installments (not less than $25 per month) until the
amount applied, adjusted each Valuation Date for investment results, is
exhausted. The final installment will be the sum remaining with the
Company. Exchanges between the investment options are permitted subject
to limitations outlined in the Company's Group Fixed Fund Retirement
Contract.
OPTION B1- Life Income with Payment Certain. Payments will be made at
least on an annual basis during the lifetime of a Participant. A period
certain of 60, 120, 180, 240, 300 or 360 months may be chosen. If the
Participant dies prior to the end of such period certain, payments will
continue to the designated Beneficiary for the remainder of the
selected period certain.
OPTION B2 - Joint and Survivor Life Income. Payments will be made
monthly during the joint lifetime of an individual and another named
individual. Payments will continue to be made as long as either is
living. This option will permit the choice of 100%, 75%, 66 2/3% or 50%
of the original payment amount to be paid to the Beneficiary. Payments
will stop with the last payment due prior to the death of the
Beneficiary. If the Beneficiary predeceases the designated annuitant,
then payments continue at 100% to the designated annuitant.
OTHER FORMS AND BENEFIT PAYMENTS- With the consent of the Company, the
amount due upon Distribution may be applied on any other mutually
agreeable basis.
Exchanges processed while Participants are receiving payments pursuant to
Option A1 may change the number of Accumulation Units remaining. In this
event, the payment amount must be recalculated.
DEATH OF RETIRED PARTICIPANT
If any Retired Participant dies while receiving payments, any death benefit
payable will be determined in accordance with the retirement income form
elected. Calculation of the present value of any remaining payments certain
for purposes of making a lump sum payment will be based on the same assumed
investment rate used by the Company in determining the payments certain
prior to the death of the Retired Participant.
WITHDRAWAL
If permitted by the Plan, any amount remaining under Option A1 or A2 may be
withdrawn, or if that amount is at least $5,000, it may be applied under
either Option B1 or B2, subject to the minimum payment requirements
described previously. Unless prohibited by the Plan, a Beneficiary
receiving payments certain under Option B1 after the death of a Retired
Participant may elect at any time to receive the present value at the
current dollar amount of the remaining number of payments certain in a
single payment, calculated on the basis of the assumed investment rate used
in computing the amount of the previous payments.
FREQUENCY OF PAYMENT
At the election of the Retired Participant, and with the consent of the
Contract Owner, payments made under any option may be made annually,
semi-annually, or quarterly instead of monthly. Any change in frequency of
payments must be on the anniversary of the commencement of Retirement
Income Payments.
<PAGE> 28
DETERMINATION OF PAYMENTS UNDER OPTIONS A1 AND A2
Monthly payments under Options A1 and A2 will be determined in the manner
set forth in the description of the options. As each payment is made under
either of these options, a number of Accumulation Units equal in value to
the payment will be canceled.
DETERMINATION OF PAYMENTS UNDER OPTIONS B1 AND B2
Variable monthly payments under Options B1 and B2 will be determined
annually and will remain level throughout the year. Each year, as of the
anniversary of the commencement of Retirement Income Payments, a new
variable monthly payment will be determined and that new payment will
remain level for that year. An adjusted age is used to determine the amount
of monthly payment for each year. Such adjusted age may not be the same as
the actual age of the Retired Participant.
DETERMINATION OF AMOUNT OF VARIABLE MONTHLY PAYMENTS FOR FIRST YEAR
In determining the amount of Retirement Income Payments under Options B1
and B2, the value held on behalf of a Participant is determined by
multiplying the number of Accumulation Units in each Sub-Account for that
account by the Accumulation Unit value for that Sub-Account on the last
business day of the second calendar week immediately preceding the date on
which the first payment is due.
The first year variable monthly payment for each Sub-Account is determined
by dividing the value of the Accumulation Units of that Sub-Account in the
Participant Account by the amount required to provide $1 per month (the
purchase rate).
Once the first year's variable monthly payment amount has been determined
for a Participant, the Company will deduct the annual premium from the
Participant Account. This deduction is made by canceling a number of
Accumulation Units in the Participant Account equal in value to the annual
premium. The allocation of the annual premium between Sub-Accounts will be
in such relationship as the monthly payments from each Sub-Accounts have to
each other.
The annual premium is calculated so that if there are no partial
redemptions (and therefore no Underlying Mutual Fund dividends have been
taken in cash), the payee will receive level annual payments if the net
investment factor, on an annual basis, is equal to the assumed investment
rate plus an amount equal to the annual Participant Account Maintenance
Charge. Payments for subsequent years will be smaller than, equal to, or
greater than the payments received during the initial year, depending on
whether the actual net investment result on an annual basis of a
Sub-Account is smaller than, equal to, or greater than the assumed
investment rate.
DETERMINATION OF AMOUNT OF VARIABLE MONTHLY PAYMENTS FOR THE SECOND AND
SUBSEQUENT YEARS
As of the first anniversary of the commencement of Retirement Income
Payments, the second year variable monthly payments will be determined in
exactly the same manner as for the first year, using the purchase rates in
the Contract for the Retired Participant's age as then determined under the
terms of the Contract. As in the first year, an annual premium will be
deducted and transferred to the General Account from which the Company will
make the Retirement Income Payments. Subsequent annual determinations will
be made in the same manner.
Upon the death of any Retired Participant, the Participant Account will be
reduced by the number of Accumulation Units not required to provide further
payments during the remainder of a period certain, if any, or to a
contingent Retired Participant. Any Accumulation Units so canceled will
either remain in the Variable Account or be transferred to the General
Account, depending on the Company's obligation.
ALTERNATE ASSUMED INVESTMENT RATE
The Contracts include purchase rates based on a 3.5% rate per annum. If not
prohibited by the laws and regulations of the state in which this Contract
is issued, a Contract Owner may elect on the Contract Date to have all
variable benefits payable for all Participants determined at an assumed
investment rate of 5% per annum. The assumed investment rate basis in the
Contract is used merely to determine each periodic monthly payment from
investment experience of any of the Sub-Accounts. The choice of the assumed
investment rate affects the pattern of Retirement Income Payments. A higher
assumed investment rate will produce a higher initial payment, but a more
slowly rising Sub-Account of subsequent payments (or a more
<PAGE> 29
rapidly falling Sub-Account of subsequent payments) than a lower assumed
investment rate. Although a higher initial payment would be received under
a higher assumed investment rate, there is a point in time after which
payments under a lower assumed investment rate would be greater, assuming
payment continues after that point in time.
The objective of a variable retirement contract is to provide level
payments during periods when the economy is relatively stable and to
reflect as increased payments only the excess of investment results flowing
from inflation or an increase in productivity. The achievement of this
objective will depend in part upon the validity of the assumption that the
net investment result, on an annual basis, of a Sub-Account equals the
assumed investment rate during periods of stable prices.
GENERAL INFORMATION
SUBSTITUTION OF SECURITIES
If the shares of any Underlying Mutual Fund should no longer be available
for investment by the Variable Account or if, in the judgment of the
Company's management, further investment in such Underlying Mutual Fund
shares should become inappropriate in view of the purposes of the Contract,
the Company may substitute shares of another Underlying Mutual Fund for
Underlying Mutual Fund shares already purchased or to be purchased in the
future by Purchase Payments under the Contract. No substitution of
securities in any Sub-Accounts may take place without prior approval of the
SEC, and under such requirements as it may impose.
PERFORMANCE ADVERTISING
A "yield" and "effective yield" may be advertised for the Nationwide Money
Market Fund Sub-Account, the Dreyfus Cash Management Fund - Class A
Sub-Account and the Nationwide Separate Account Trust Money Market Fund
Sub-Account. "Yield" is a measure of the net dividend and interest income
earned over a specific seven-day period (which period will be stated in the
advertisement) expressed as a percentage of the offering price of the
Sub-Account units. Yield is an annualized figure, which means that it is
assumed that the Sub-Account generates the same level of net income each
week over a 52-week period. The "effective yield" is calculated similarly
but includes the effect of assumed compounding calculated under rules
prescribed by the SEC. The effective yield will be slightly higher than
yield due to this compounding effect.
The Company may, from time to time, advertise several types of historical
performance of the Sub-Accounts. The Company may advertise for the
Sub-Account's standardized "average annual total return," calculated in a
manner prescribed by the SEC, and nonstandardized "total return." "Average
annual total return" illustrates the percentage rate of return of a
hypothetical initial investment of $1,000 for the most recent one, five and
ten year periods, or for a period covering the time the Underlying Mutual
Fund option has been available in the Variable Account if the Underlying
Mutual Fund option has not been available for the prescribed periods. THIS
CALCULATION REFLECTS THE DEDUCTION OF ALL APPLICABLE CHARGES MADE TO THE
CONTRACTS EXCEPT FOR PREMIUM TAXES, WHICH MAY BE IMPOSED BY CERTAIN STATES.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," illustrates the percentage rate of return of a
hypothetical initial investment of $10,000 for the most recent one, five
and ten year periods, or for a period covering the time the Underlying
Mutual Fund option has been in existence. For those Underlying Mutual Fund
options which have not been held as Sub-Accounts for one of the prescribed
periods, the nonstandardized total return illustrations will show the
investment performance such Underlying Mutual Fund options would have
achieved (reduced by the same charges except the CDSC) had such Underlying
Mutual Fund options been available in the Variable Account for the periods
quoted. THE CDSC IS NOT REFLECTED BECAUSE THE CONTRACTS ARE DESIGNED FOR
LONG TERM INVESTMENT. THE CDSC, IF REFLECTED WOULD DECREASE THE LEVEL OF
PERFORMANCE SHOWN. AN INITIAL INVESTMENT OF $10,000 IS ASSUMED BECAUSE THAT
AMOUNT MORE CLOSELY APPROXIMATES THE SIZE OF A TYPICAL CONTRACT THAN DOES
THE $1,000 ASSUMPTION USED IN CALCULATING THE STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN QUOTATIONS.
<PAGE> 30
The standardized average annual total return and nonstandardized total
return quotations are calculated as described in this section using
Underlying Mutual Fund performance for the period ended December 31, 1997.
However, the Company generally provides performance quotations on a more
frequent basis, the results of which could reflect better or worse results.
The quotations and other comparative material advertised by the Company are
based upon historical earnings and are not intended to represent or
guarantee future results. A Contract Owner's or Participant's Account Value
at redemption may be more or less than the original cost.
The Company may also advertise the performance of the Sub-Accounts of the
Variable Account relative to the performance of other variable annuity
sub-accounts or mutual funds with similar or different objectives, or the
investment industry as a whole.
The Sub-Accounts may also be compared to certain market indexes, which may
include, but are not limited to: S&P 500; Shearson/Lehman Intermediate
Government/Corporate Bond Index; Shearson/Lehman Long-Term
Government/Corporate Bond Index; Donoghue Money Fund Average; U.S. Treasury
Note Index; and Dow Jones Industrial Average.
Normally these rankings and ratings are published by independent tracking
services and publications of general interest including, but not limited
to: Lipper Analytical Services, Inc., CDA/Wiesenberger, Morningstar,
Donoghue's, magazines such as Money, Forbes, Kiplinger's Personal Finance
Magazine, Financial World, Consumer Reports, Business Week, Time, Newsweek,
U.S. News and World Report, National Underwriter; rating services such as
LIMRA, Value, Best's Agent Guide, Western Annuity Guide, Comparative
Annuity Reports; and other publications such as the Wall Street Journal,
Barron's, Investor's Daily, and Standard & Poor's Outlook. In addition,
Variable Annuity Research & Data Service (The VARDS Report) is an
independent rating service that ranks over 500 variable annuity funds based
upon total return performance. These rating services and publications rank
the performance of the Underlying Mutual Funds against all mutual funds
over specified periods and against mutual funds in specified categories.
The rankings may or may not include the effects of sales or other charges.
The Company is also ranked and rated by independent financial rating
services, among which are Moody's, Standard & Poor's and A.M. Best Company.
The purpose of these ratings is to reflect the financial strength or
claims-paying ability of the Company. The ratings are not intended to
reflect the investment experience or financial strength of the Variable
Account. The Company may advertise these ratings from time to time. In
addition, the Company may include in certain advertisements, endorsements
in the form of a list of organizations, individuals or other parties which
recommend the Company or the Contract. Furthermore, the Company may
occasionally include in advertisements comparisons of currently taxable and
tax deferred investment programs, based on selected tax brackets, or
discussions of alternative investment vehicles and general economic
conditions.
The Statement of Additional Information contains more detailed information
about performance calculations, including actual examples for each type of
performance advertised.
CONTRACT OWNER INQUIRIES
Contract Owner and Participant inquiries may be directed to the Company by
writing Nationwide Life Insurance Company, P.O. Box 16766, One Nationwide
Plaza, Columbus, Ohio 43216, or calling 1-800-545-4730 (TTY:
1-800-848-0833).
<PAGE> 31
NET INVESTMENT FACTOR
The net investment factor for any Valuation Period is determined by
dividing (a) by (b), and then subtracting (c) where:
(a) is the net of:
(1) the Net Asset Value per share of the Underlying Mutual Fund held
in the Sub-Account determined at the end of the current Valuation
Period; and
(2) the per share amount of any income or capital gains distributions
made by the Underlying Mutual Fund held in the Sub-Account if the
ex-dividend date occurs during the current Valuation Period;
(b) is the Net Asset Value per share of the Underlying Mutual Fund held in
the Sub-Account determined as of the end of the immediately preceding
Valuation Period.
(c) is a factor representing the Variable Account Annual Expense Fee. Such
factor is equal to a maximum annual rate of 0.95% of the average
Variable Account value.
The net investment factor may be greater or less than one; therefore, the
value of an Accumulation Unit may increase or decrease. It should be noted
that changes in the net investment factor may not be directly proportional
to changes in the Net Asset Value of Underlying Mutual Fund shares because
of the deduction for the Variable Account Annual Expense Fee and the effect
of the various purchase and sale transactions on any particular day.
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be purchased and
valued at their Net Asset Value (daily bid price exclusive of any sales
charges). An Underlying Mutual Fund's Net Asset Value per share is
determined by dividing the value of the total assets of the Underlying
Mutual Fund, less liabilities, by the number of shares outstanding, with no
charge for sales expense.
FEDERAL TAX STATUS
The following description of the federal tax status of these Contracts is
not exhaustive, and special rules are provided with respect to situations
not discussed herein. For complete information, consult a qualified tax
adviser. The Company does not make any guarantee regarding the tax status
of any Contract or any transaction involving the Contracts. The Contracts
are treated as a trust for purposes of the Code under rules similar to the
rules under Section 401(f) of the Code.
For federal income tax purposes, the operations of the Variable Account
form a part of the Company's operations. Under existing federal income tax
law, no taxes are payable by the Company on the investment income of the
Variable Account to the extent it is credited to the Contract Owners under
the Contracts. The Company is taxed as a life insurance company under Part
One, Subchapter L, of the Code.
Income and capital gains of the Variable Account would normally be taxable
to Contract Owners whether or not taken by the Contract Owners in cash.
However, the Contracts are issued only to organizations exempt from federal
income tax.
The amounts received by the Participant under the Plan normally represent
the accumulation of Purchase Payments which were not previously included in
the Participant's gross income, and therefore any such amounts should be
included in gross income of a Participant or Beneficiary when such amounts
are received.
It is the responsibility of each Contract Owner to determine that its Plan
is established and administered in accordance with the applicable
provisions of the Code.
<PAGE> 32
CONTRACTS ISSUED UNDER THE NEW YORK MODEL PLAN
The following Contract amendments are required by the Rules and Regulations
of the New York State Deferred Compensation Board in order to market the
Contracts to governmental employers for use in funding public employee
deferred compensation plans in the State of New York.
Throughout the prospectus, references to "annuity" payments are modified to
"benefit" payments.
The "Suspension and Termination" provisions are amended to permit a
Participant to "freeze" his or her account and maintain the account on
deposit with the Company notwithstanding the Contract Owner's termination
of its contractual relationship with the Company. The assets of the Plan
are part of the general assets of the Contract Owner, provided however that
the Contract Owner must hold all such Plan assets for the exclusive benefit
of the Plan's Participants and Beneficiaries. All references throughout the
prospectus to Optional Retirement Income Forms A1, A2, B1 and B2 shall mean
Option 1, Option 2, Option 3 and Option 4, respectively. All references to
"Contingent Deferred Sales Charge" and "CDSC" are deleted.
YEAR 2000 COMPLIANCE ISSUES
The Company has developed a plan to address issues related to the Year
2000. The problem relates to many existing computer programs using only two
digits to identify a year in the date field. These programs were designed
and developed without considering the impact of the upcoming change in the
century. If not corrected, many computer applications could fail or create
erroneous results by or at the Year 2000. The Company has been evaluating
its exposure to the Year 2000 issue through a review of all of its
operating systems as well as dependencies on the systems of others since
1996. The Company expects all system changes and replacements needed to
achieve Year 2000 compliance to be completed by the end of 1998. Compliance
testing will be completed in the first quarter of 1999. The Company charges
all costs associated with these system changes as the costs are incurred.
Operating expenses in 1997 include approximately $45 million on technology
projects, which includes costs related to Year 2000 and the development of
a new policy administration system for traditional life insurance products
and other system enhancements. The Company anticipates spending a
comparable amount in 1998 on technology projects, including Year 2000
initiatives. These expenses do not have an effect on the assets of the
Variable Account and are not charged through to the Contract Owner.
LEGAL PROCEEDINGS
The Company is a party to litigation and arbitration proceedings in the
ordinary course of its business, none of which is expected to have a
material adverse effect on the Company.
The General Distributor, Nationwide Advisory Services, Inc. is not engaged
in any litigation of any material nature.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance
pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements. In February 1997, Nationwide Life
Insurance Company was named as a defendant in a lawsuit filed in New York
Supreme Court related to the sale of whole life policies on a "vanishing
premium" basis (John H. Snyder v. Nationwide Life Insurance Co.). The
plaintiff in such lawsuit seeks to represent a national class of Nationwide
Life policyholders and claims unspecified compensatory and punitive
damages. This lawsuit has not been certified as a class action. In April,
1997, a motion to dismiss the Snyder complaint in its entirety was filed by
the defendants, and the plaintiff has opposed such motion.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced an action against Nationwide Life Insurance Company and
the American Century group of defendants (Robert Young and David D. Distad
v. Nationwide Life Insurance Company et al.). In this action, plaintiffs
seek to represent a class of variable life insurance contract owners and
variable annuity contract owners whom they claim were allegedly misled when
purchasing these variable contracts into believing that some portion of
their premiums were invested in a publicly traded mutual fund when, in
fact, the premium monies were invested in a mutual fund whose shares may
only be purchased by insurance companies. The complaint seeks unspecified
compensatory, treble
<PAGE> 33
and punitive damages. In January 1998, both Nationwide Life Insurance
Company and American Century filed motions to dismiss the entire complaint.
Plaintiffs' counsel have opposed these motions and the federal court in
Texas heard arguments on the motions to dismiss in April, 1998. This
lawsuit is in an early stage and has not been certified as a class action.
Nationwide Life Insurance Company intends to defend this case vigorously.
There can be no assurance that any litigation relating to pricing and sales
practices will not have a material adverse effect on the Company in the
future.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History..............................................1
Services.....................................................................1
Purchase of Securities Being Offered.........................................2
Underwriters.................................................................2
Calculation of Performance...................................................2
Annuity Payments.............................................................8
Financial Statements.........................................................9
<PAGE> 34
APPENDIX
PARTICIPATING UNDERLYING MUTUAL FUNDS
(THE COMPANY MAY LIMIT THE NUMBER OF UNDERLYING MUTUAL FUNDS SELECTED BY THE
CONTRACT OWNER, AND ALL UNDERLYING MUTUAL FUNDS MAY NOT BE AVAILABLE UNDER YOUR
PLAN.)
A SUMMARY OF INVESTMENT OBJECTIVES IS CONTAINED IN THE DESCRIPTIONS OF EACH
UNDERLYING MUTUAL FUND BELOW. MORE DETAILED INFORMATION MAY BE FOUND IN THE
CURRENT PROSPECTUS FOR EACH UNDERLYING MUTUAL FUND. SUCH A PROSPECTUS FOR THE
UNDERLYING MUTUAL FUNDS BEING CONSIDERED SHOULD ACCOMPANY THE PROSPECTUS AND
SHOULD BE READ IN CONJUNCTION HEREWITH. A COPY OF EACH PROSPECTUS MAY BE
OBTAINED WITHOUT CHARGE FROM NATIONWIDE LIFE INSURANCE COMPANY.
THE FOLLOWING FUNDS ARE AVAILABLE ONLY FOR DEFERRED COMPENSATION CONTRACTS.
AIM WEINGARTEN FUND - INSTITUTIONAL CLASS
The investment objective of the Fund is to provide growth of capital through
investments primarily in common stocks of leading U.S. companies considered by
management to have strong earnings momentum. AIM Advisers, Inc. serves as the
Fund's investment adviser.
AIM CONSTELLATION FUND - INSTITUTIONAL CLASS
The investment objective of the Fund is to provide capital appreciation
primarily through investments in common stocks with emphasis on medium-sized and
smaller emerging growth companies. AIM Advisers, Inc. serves as the Fund's
investment adviser
AMERICAN CENTURY: TWENTIETH CENTURY GROWTH
The investment objective of the Fund is capital growth through investment in
securities which the management considers to have better-than-average prospects
for appreciation. It is management's intention that the portfolio will generally
consist of common stocks of large, established companies. American Century
Investment Management, Inc. serves as the Fund's investment adviser.
AMERICAN CENTURY: TWENTIETH CENTURY INTERNATIONAL GROWTH
The investment objective of the Fund is capital growth by investing in an
international portfolio of common stocks, primarily in developed markets; stocks
considered by the investment manager to have prospects for appreciation. The
Fund will invest primarily in common stocks (defined to include depository
receipts for common stocks) and other equity equivalents of such companies.
American Century Investment Management, Inc. serves as the Fund's investment
adviser.
AMERICAN CENTURY: TWENTIETH CENTURY SELECT
The investment objective of the Fund is capital growth by investing primarily in
common stocks that are considered by management to have better-than-average
prospects for appreciation. Common stocks chosen must have a record of paying or
having committed themselves to the payment of regular cash dividends, but growth
is the primary consideration, and the dividends may not be significant. American
Century Investment Management, Inc. serves as the Fund's investment adviser.
AMERICAN CENTURY: TWENTIETH CENTURY ULTRA
The investment objective of the Fund is capital growth by investing primarily in
common stocks that are considered by management to have better-than-average
prospects for appreciation. It is management's intention that the portfolio will
generally consist of common stocks of medium-sized and smaller companies.
American Century Investment Management, Inc. serves as the Fund's investment
adviser.
DAVIS NEW YORK VENTURE FUND, INC.
The investment objective of the Fund is growth of capital. It invests primarily
in common stocks, and securities convertible into common stocks. The Fund
invests in securities subject to the risk of price fluctuations reflecting both
market evaluations of the business involved and general changes in the equity
markets. It invests in securities of foreign issuers, which involve special risk
factors, and may hedge currency fluctuation risks related thereto. Davis
Selected Advisers, L.P., serves as the Fund's investment adviser.
<PAGE> 35
DREYFUS CASH MANAGEMENT - CLASS A
The investment objective of the Fund is to provide investor with as high a level
of current income as is consistent with the preservation of capital and the
maintenance of liquidity. The Dreyfus Corporation serves as the Fund's
investment adviser.
DREYFUS S&P 500 INDEX FUND
The Fund's objective is to provide investment results that correspond to the
price and yield performance of publicly-traded common stocks in the aggregate,
as represented by the Standard & Poor's 500 Composite Stock Price Index.
The Dreyfus Corporation serves as the Fund's investment adviser.
DREYFUS THIRD CENTURY FUND, INC.
The Fund's primary goal is to provide capital growth through equity investment
in companies that, in the opinion of the Fund's management, not only meet
traditional investment standards, but which also show evidence that they conduct
their business in a manner that contributes to the enhancement of the quality of
life in America. Current income is secondary to the primary goal. The Dreyfus
Corporation serves as the Fund's investment adviser.
EVERGREEN INCOME AND GROWTH FUND (FORMERLY EVERGREEN TOTAL RETURN FUND)
The investment objective of the Fund is current income and capital appreciation.
The Fund invests primarily in common and preferred stocks, securities
convertible into or exchangeable for common stocks, and fixed income securities.
The Fund's objective is to maximize the "total return" on its portfolio of
investments. Evergreen Asset Management Corp.
serves as the Fund's investment adviser.
FEDERATED GNMA TRUST-INSTITUTIONAL SHARES
The investment objective of the Fund is current income. The Fund pursues this
investment objective by investing primarily in instruments issued or guaranteed
by the Government National Mortgage Association ("GNMA"). Federated Management
serves as the Fund's investment adviser.
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS - INSTITUTIONAL SHARES
The investment objective of the Fund is current income. The Fund pursues this
investment objective by investing in U.S. Government Securities with remaining
maturities of five years or less. Federated Management serves as the Fund's
investment adviser.
FIDELITY ASSET MANAGERTM
The investment objective of the Fund is a high total return with reduced risk
over the long term by allocating its assets among domestic and foreign stocks,
bonds, and short-term instruments. Fidelity Management & Research Company serves
as the Fund's investment adviser.
FIDELITY EQUITY-INCOME FUND
The investment objective of the Fund is to obtain reasonable income from a
portfolio consisting primarily of income-producing equity securities. The Fund
seeks a yield which exceeds the composite yield on the securities comprising the
Standard & Poor's Composite Index of 500 Stocks. In pursuing this objective, the
Fund will also consider the potential for capital appreciation. Fidelity
Management & Research Company serves as the Fund's investment adviser.
FIDELITY GROWTH & INCOME PORTFOLIO
The investment objective of the Fund is long term capital growth, current
income, and growth of income consistent with reasonable investment risk.
Fidelity Management & Research Company serves as the Fund's investment adviser.
FIDELITY OTC PORTFOLIO
The investment objective of the Fund is to seek capital appreciation by
investing primarily in securities traded on the over-the counter (OTC)
securities market. Securities traded on the OTC include, among others,
industrial corporations, financial services institutions, public utilities, and
transportation companies, common and preferred stocks, securities convertible
into common stock, warrants and similar rights, and debt securities, and
obligations of the federal government. The fund does not place any weight on
dividend and interest income unless it believes this income will have a
favorable influence on the market value of a security. Fidelity Management &
Research Company serves as the Fund's investment adviser.
<PAGE> 36
FIDELITY PURITAN FUND
The investment objective of the Fund seeks to obtain as much income as possible,
consistent with the preservation and conservation of capital, by investing in a
broadly diversified portfolio of securities, including common stocks, preferred
stocks, and bonds. While emphasis on income is an important objective, this does
not preclude growth in capital since some securities offering a better than
average yield may also possess some growth possibilities. Fidelity Management &
Research Company serves as the Fund's investment adviser.
INVESCO INDUSTRIAL INCOME FUND, INC. (FORMERLY "FINANCIAL INDUSTRIAL INCOME
FUND, INC.")
The investment objective of the Fund is to seek the best possible current income
while following sound investment practices by investing in securities which will
provide a relatively high yield and stable return and which, over a period of
years, may also provide capital appreciation. Capital growth potential is a
secondary factor in the selection of portfolio securities of the Fund. The Fund
invests in common stocks, as well as convertible bond and preferred stocks.
INVESCO Funds Group, Inc. serves as the Fund's investment adviser.
JANUS FUND
The Janus Fund is a diversified fund that seeks long-term growth of capital by
investing primarily in common stocks of a large number of issuers of any size.
Janus Capital's fundamental analysis and selection process focuses on stocks
with earnings growth potential that may not be recognized by the market. Such
securities are selected solely for their capital growth potential; investment
income is not a consideration. Janus Capital Corporation serves as the Fund's
investment adviser.
JANUS TWENTY FUND
The investment objective of the Fund is growth of capital in a manner consistent
with the preservation of capital. Under normal conditions, the Fund will
concentrate its investments in a core position of 20-30 common stocks. However,
the percentage of the Fund's assets invested in common stocks will vary,
depending upon its investment adviser's opinion of prevailing market, financial
and economic conditions. Consequently, the Fund may at times hold substantial
positions in cash, or interest-bearing securities. Janus Capital Corporation
serves as the Fund's investment adviser.
JANUS WORLDWIDE FUND
The investment objective of the Fund is long-term growth of capital in a manner
consistent with preservation of capital. The objective is pursued primarily
through investments in common stocks of foreign and domestic issuers. The Fund
may invest on a worldwide basis in companies and organizations of any size,
regardless of country of organization or place of principal business activity.
The Fund normally invests in issuers from at least five different countries.
Janus Capital Corporation serves as the Fund's investment adviser.
MAS FUNDS FIXED INCOME PORTFOLIO
The investment objective of the Fund is to achieve above-average total return
over a market cycle of three to five years, consistent with reasonable risk, by
investing in a diversified portfolio of U.S. Government securities, corporate
bonds (including bonds rated below investment grade commonly referred to as
"junk bonds"), foreign fixed-income securities and mortgage-backed securities of
domestic issuers and other fixed-income securities. The portfolio's average
weighted maturity will ordinarily be greater than five years. Miller Anderson &
Sherrerd, L.L.P. serves as the Fund's investment adviser.
MFS(R) GROWTH OPPORTUNITIES FUND - CLASS A (FORMERLY "MFS(R) CAPITAL DEVELOPMENT
FUND")
The investment objective of the Fund is growth of capital. Dividend income, if
any, is incidental to the objective of capital growth. To achieve this
objective, a flexible approach toward types of companies as well as types of
securities is maintained by the Fund, depending upon the economic environment
and the relative attractiveness of the various securities markets. Massachusetts
Financial Services Company serves as the Fund's investment adviser.
MFS(R) HIGH INCOME FUND - CLASS A
The investment objective of the Fund is high current income by investing
primarily in a professionally managed diversified portfolio of fixed income
securities, some of which may involve equity features. Securities offering the
high current income sought by this Fund are ordinarily in the lower rating
categories of recognized rating agencies or are unrated and generally involve
greater volatility of price and risk of principal and income than securities in
the high rating categories. Capital growth, if any, is a consideration
incidental to the investment objective of high current income. Massachusetts
Financial Services Company serves as the Fund's investment adviser.
<PAGE> 37
MASSACHUSETTS INVESTORS GROWTH STOCK FUND - CLASS A
The investment objective of the Fund is long-term growth of capital and future
income rather that current income. Massachusetts Financial Services Company
serves as the Fund's investment adviser.
NATIONWIDE(R) BOND FUND
The investment objective of the Fund is to generate a high level of income,
consistent with capital preservation, through investments in high-quality bonds
and other fixed income securities. Through investment in long-term income
obligations, including corporate debt securities, United States and Canadian
Government obligations and commercial paper, this Fund seeks to serve those who
are less willing to accept the risk associated with stocks. Nationwide Advisory
Services, Inc. serves as the Fund's investment adviser.
NATIONWIDE(R) FUND
The investment objective of the Fund is to obtain a total return from a flexible
combination of current income and capital appreciation. Primary emphasis is
given to common stocks, but investments may also include convertible issues,
bonds and money market instruments. Nationwide Advisory Services, Inc. serves as
the Fund's investment adviser.
NATIONWIDE(R) GROWTH FUND
The investment objective of the Fund is to achieve long-term capital
appreciation without emphasis on current return. Major emphasis in the selection
of securities is placed on companies which have capable management, and are in
fields where social and economic trends, technological developments, and new
processes or products indicate a potential for greater than average growth.
Nationwide Advisory Services, Inc. serves as the Fund's investment adviser.
NATIONWIDE(R) MONEY MARKET FUND
The investment objective of the Fund is to provide as high a level of current
income as is consistent with the preservation of capital and maintenance of
liquidity, through investment in a diversified portfolio of high quality money
market instruments maturing in 397 days or less. These instruments include, but
are not limited to, U.S. Government and Agency obligations, obligations of large
commercial and foreign banks, certificates of deposit of large savings
associations, taxable or partly taxable obligations of state, county and local
governments, highly rated commercial paper, highly rated corporate obligations,
and repurchase agreements in any of the above. Nationwide Advisory Services,
Inc. serves as the Fund's investment adviser.
NATIONWIDE SEPARATE ACCOUNT TRUST - NATIONWIDE SMALL COMPANY FUND
The investment objective of the Fund is long-term growth of capital by investing
primarily in equity securities of domestic and foreign companies with market
capitalizations of less than $1 billion at the time of purchase. The
subadvisers, Dreyfus Corporation, Neuberger & Berman, L.P., Pictet International
Management Limited with Van Eck Associates Corporation, Strong Capital
Management, Inc. and Warburg Pincus Asset Management, Inc., were chosen because
they utilize a number of different investment styles when investing in small
company stocks. By utilizing different investment styles, the Fund's adviser,
Nationwide Advisory Services, Inc., hopes to increase prospects for investment
return and to reduce market risk and volatility.
NEUBERGER & BERMAN GUARDIAN FUND, INC.
The Fund seeks capital appreciation through investments generally in
dividend-paying issues of established companies that its investment officers
believe are well managed. The emphasis of the Fund's investments is on common
stock. The Fund diversifies its holdings among different industries and
different companies in light of conditions prevailing at any given time. Current
income is a secondary objective. Neuberger&Berman Management Incorporated serves
as the Fund's investment adviser.
NEUBERGER & BERMAN GUARDIAN TRUST
The investment objective of the Fund is capital appreciation and, secondarily,
current income. The Fund seeks growth and income by investing primarily in
stocks of established, high quality companies that are not well followed on Wall
Street or are temporarily out of favor. Neuberger & Berman Management
Incorporated serves as the Fund's investment adviser.
<PAGE> 38
NEUBERGER & BERMAN MANHATTAN FUND, INC.
The Fund seeks capital appreciation without regard to income. It invests,
through its corresponding Portfolio, in securities believed to have the maximum
potential for long-term capital appreciation. It does not seek to invest in
securities that pay dividends or interest, and any such income is incidental.
The Portfolio expects to be almost fully invested in common stocks, often of
companies that may be temporarily out of favor in the market. Its aggressive
growth investment program involves greater risks and share price volatility than
programs that invest in more conservative securities. Neuberger&Berman
Management Incorporated serves as the Fund's investment adviser.
NEUBERGER & BERMAN PARTNERS FUND, INC.
The Fund seeks capital growth by investing in securities solely on the basis of
management's evaluation of their investment merit and potential for growth using
a value-oriented approach to the selection of individual securities. The Fund's
management believes that the Fund is an attractive investment vehicle for
conservative investors who are interested in long-term appreciation from stock
investments, but who have a low tolerance for risk. Neuberger&Berman Management
Incorporated serves as the Fund's investment adviser.
NATIONWIDE PROFESSIONALLY MANAGED PORTFOLIOS ("NPMP")
NPMP consists of five separate nondiversified funds each of which is a
separately managed nondiversified portfolio with its own investment objective
and policies. The objective of each of the Portfolios which is fundamental, is
to maximize total investment return (i.e. capital growth and income) subject to
investment restrictions and asset allocation policies. The Portfolios will
maximize total investment return as is specifically detailed in the following
objectives which are non-fundamental and can be changed without approval of a
Portfolio's shareholders.
NPMP - THE AGGRESSIVE PORTFOLIO
The investment objective of this Fund is to provide growth of capital
by investing in underlying funds which invest primarily in equity
securities ("Equity Funds"). This Fund is generally appropriate for
investors seeking higher returns over an investment time horizon of at
least 15 years and having a higher tolerance for market fluctuations.
Nationwide Advisory Services, Inc. ("NAS") serves as the Fund's
investment adviser.
NPMP - THE MODERATELY AGGRESSIVE PORTFOLIO
The investment objective of this Fund is to provide growth of capital
by investing primarily in Equity Funds. However, the Fund attempts to
reduce its volatility by also investing in the Nationwide Contract and
Proprietary Funds which also invest primarily in fixed income
securities ("Bond Funds"). This Fund is generally appropriate for
moderate investors seeking high returns over an investment time horizon
of 15 years or for more aggressive investors with an investment time
horizon of 10 to 15 years. NAS serves as the Fund's investment adviser.
NPMP - THE MODERATE PORTFOLIO
The investment objective of this Fund is to provide growth of capital
by investing primarily in Equity Funds, but will also invest a
significant percentage of its assets in the Nationwide Contract and in
Bond Funds. This Fund is generally appropriate for moderate investors
seeking moderate returns over an investment time horizon of between 10
and 15 years; conservative investors with an investment time horizon of
at least 15 years or more; and more aggressive investors with an
investment time horizon of 5 to 10 years. NAS serves as the Fund's
investment adviser.
NPMP - THE MODERATELY CONSERVATIVE PORTFOLIO
The investment objective of this Fund is to provide primarily income
and, secondarily, long term growth of capital. This Fund will seek to
meet its objectives by generally investing half of its assets in Equity
Funds with the remainder in the Nationwide Contract and Bond Funds.
This Fund is generally appropriate for moderate investors seeking lower
fluctuations in principal combined with some of the upside potential of
equity investments over an investment time horizon of between 5 and 10
years. This Fund is also generally appropriate for conservative
investors with an investment time horizon of between 10 and 15 years
and more aggressive investors with an investment time horizon of less
than 5 years. NAS serves as the Fund's investment adviser.
<PAGE> 39
NPMP - THE CONSERVATIVE PORTFOLIO
The investment objective of this Fund is to provide primarily income
and, secondarily, long term growth of capital. This Fund will seek to
meet its objectives by primarily investing in a combination of the
Nationwide Contract and Bond Funds, with a smaller investment in Equity
Funds. This Fund is generally appropriate for investors seeking low
fluctuations in principal over an investment time horizon of less than
5 years, as well as more conservative investors with an investment time
horizon of between 5 and 10 years. NAS serves as the Fund's investment
adviser.
PUTNAM INVESTORS FUND - CLASS A
The investment objective of the Fund is long-term growth of capital and any
increased income resulting from such growth. The Fund is designed for investors
seeking long-term growth of capital from a portfolio consisting primarily of
common stocks. The Fund's management emphasizes investment in quality growth
stocks. Putnam Investment Management, Inc.
serves as the Fund's investment adviser.
PUTNAM VOYAGER FUND - CLASS A
The investment objective of the Fund is capital appreciation. The Fund invests
primarily in common stocks believed by the Fund's Investment Manager, Putnam
Management, to have potential for capital appreciation significantly greater
than the market average. The Fund is designed for investors willing to assume
above-average risk in return for above-average capital growth potential. Putnam
Investment Management, Inc. serves as the Fund's investment adviser.
SEI INDEX FUNDS - S&P 500 INDEX PORTFOLIO
The S&P 500 Index Portfolio seeks to provide investment results that correspond
to the aggregate price and dividend performance of the securities in the
Standard & Poor's 500 Composite Stock Price Index which is comprised of 500
selected common stocks, most of which are listed on the New York Stock Exchange.
The investment objective is a fundamental policy of the portfolio. There can be
no assurance that the Portfolio will achieve its investment objective. SEI Fund
Management serves as the Fund's investment adviser.
SELIGMAN GROWTH FUND, INC. - CLASS A
The investment objective of the Fund is longer-term growth in capital value and
an increase in future income. Fund assets have been invested primarily in common
stocks with the inherent investment risks tempered by portfolio diversification.
J. & W. Seligman & Co., Incorporated serves as the Fund's investment adviser.
STRONG COMMON STOCK FUND, INC.
The Strong Common Stock Fund seeks capital growth. It seeks to attain this
objective by investing in a diversified portfolio of equity securities which, in
the opinion of the Fund's investment Adviser, possess the potential for price
appreciation. Strong Capital Management, Inc. serves as the Fund's investment
adviser.
TEMPLETON FOREIGN FUND - CLASS I
The investment objective of the Fund is long-term capital growth through a
flexible policy of investing in stocks and debt obligations of companies and
governments outside the United States. Any income realized will be incidental.
Templeton Investment Counsel, Inc. serves as the Fund's investment adviser.
TEMPLETON GLOBAL SMALLER COMPANIES GROWTH FUND - CLASS I
The investment objective of the Fund is long-term capital growth, primarily
through investment in common stocks and all types of common stock equivalents,
including rights, warrants and preferred stock, of companies of various nations
throughout the world. Templeton Investment Counsel, Inc. serves as the Fund's
investment adviser.
T. ROWE PRICE INTERNATIONAL STOCK FUND(R)
The Fund's objective is long-term growth of capital through investments
primarily in common stocks of established, non-U.S. companies. T. Rowe Price
Associates, Inc. serves as the Fund's investment adviser.
WARBURG PINCUS EMERGING GROWTH FUND
The investment objective of the Fund is maximum capital appreciation by
investing in equity securities of small-to-medium sized companies in the United
States with emerging or renewed growth potential. Warburg Pincus Asset
Management, Inc. serves as the Fund's investment adviser.
<PAGE> 40
THE FOLLOWING UNDERLYING MUTUAL FUND IS NOT AVAILABLE TO NEW PLANS ESTABLISHED
ON OR AFTER JUNE 30, 1998:
FIDELITY CONTRAFUND
The investment objective of the Fund is capital appreciation by investing in
securities that its manager believes are undervalued due to an overly
pessimistic appraisal by the public. Although the Fund will usually be invested
primarily in common stocks and securities convertible into common stock, the
percentage of its assets invested in other securities may vary. Fidelity
Management & Research Company serves as the Fund's investment adviser.
THE FOLLOWING UNDERLYING MUTUAL FUND IS NOT AVAILABLE TO NEW CONTRACTS ISSUED ON
OR AFTER OCTOBER 1, 1997:
FIDELITY MAGELLAN(R) FUND
The investment objective of the Fund is capital appreciation by investing
primarily in common stock and securities convertible into common stock. The Fund
may also invest in foreign securities, which involves additional risks. The Fund
may also invest in stock index futures and options both of which can be volatile
investments. Fidelity Management & Research Company serves as the Fund's
investment adviser.
THE FOLLOWING UNDERLYING MUTUAL FUNDS MAY NOT BE AVAILABLE TO ALL CONTRACT
OWNERS ON OR AFTER JANUARY 1, 1994:
THE BOND FUND OF AMERICASM, INC.
The Fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital. The Fund invests
substantially all of its assets in marketable corporate debt securities, U.S.
Government securities, mortgage-related securities, other asset-backed
securities and cash or money market instruments. Normally, at least 65% of the
Fund's assets will be invested in bonds.
THE GROWTH FUND OF AMERICA(R), INC.
The investment objective of the Fund is growth of capital. The realization of
current income will not be a consideration. The Fund seeks to achieve its
objective by investing in a diversified portfolio consisting primarily of common
stocks. However, assets may also be held in securities convertible into common
stocks, cash or cash equivalents, straight debt securities (including U.S.
Government securities), or nonconvertible preferred stocks. The Fund will
maintain at least 65% of the value of its total assets in growth-type securities
under normal market conditions.
THE INCOME FUND OF AMERICA(R), INC.
The investment objective is to emphasize current income while secondarily
striving to attain capital growth. The Fund believes that a portfolio with
relatively high current income can also generate growth of capital.
THE FOLLOWING UNDERLYING MUTUAL FUND IS NOT AVAILABLE FOR NEW CONTRACTS ISSUED
ON OR AFTER AUGUST 1, 1993:
DELAWARE GROUP DECATUR FUND, INC.-DECATUR INCOME FUND
The investment Objective of the Fund is to achieve the highest possible current
income by investing primarily in common stocks that provide the potential for
income and capital appreciation without undue risk to principal.
THE FOLLOWING UNDERLYING MUTUAL FUND IS NOT AVAILABLE FOR NEW CONTRACTS ISSUED
ON OR AFTER JANUARY 1, 1987:
FIDELITY CAPITAL & INCOME FUND (FORMERLY "FIDELITY HIGH INCOME FUND")
The investment objective of the Fund is to seek to provide a combination of
income and capital growth by investing primarily in debt instruments and common
and preferred stocks, with a focus on lower-quality debt securities and
securities of companies with uncertain financial positions.
Effective on and after May 1, 1991, the Company shall no longer permit Contract
Owners or Participants to make additional Purchase Payments or to exchange
Contract Values into the Fidelity Capital & Income Fund Sub-Account. However,
Contract Values held in the Fidelity Capital & Income Fund Sub-Account as of May
1, 1991 may continue to be invested in that Sub-Account. Unless the Company is
notified otherwise, any Purchase Payments or exchanges which the Contract Owner
or Participants directs the Company to invest in the Fidelity
<PAGE> 41
Capital & Income Fund Sub-Account on and after May 1, 1991 shall instead be
automatically invested in the Nationwide Money Market Fund Sub-Account.
The Company has determined that further investment in the Fidelity Capital &
Income Fund Sub-Account is not in the best interests of the Contract Owners and
Participants in view of the Fund's adoption, effective for shares purchased on
and after February 1, 1991, of a redemption fee equal to 1.5% of the Net Asset
Value of any Fund shares redeemed which are held less than twelve months. Any
redemption fees which the Fund may assess against Fund shares held by the
Company in the Variable Account which were purchased from February 1, 1991 to
May 1, 1991 shall be paid by the Company from surplus and shall not be paid,
directly or indirectly, by Contract Owners, Participants or the Variable
Account.
<PAGE> 42
APPENDIX B
The information shown below illustrates different Accumulation Unit values for
each tier (current as of December 31 of the preceding year.) Additional
information is maintained in the Statement of Additional Information for this
prospectus. A Statement of Additional Information, as well as specific
information concerning the Accumulation Unit values for any particular Plan,
may be obtained by calling 1-800-545-4730 or by writing to P.O. Box 16766,
Columbus, Ohio 43216.
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES (FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT THE
PERIOD)
TIER I
VARIABLE ACCOUNT ANNUAL EXPENSE FEE......................................0.95%
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
AIM 2.055366 2.309709 4,142,513 1997
Constellation Fund - 1.776138 2.055366 6,309,167 1996
Institutional Class 1.316836 1.776138 3,214,050 1995
1.305850 1.316836 1,607,538 1994
1.120568 1.305850 1,341,351 1993
1.000000 1.120568 0 1992
AIM 1.627524 2.038970 0 1997
Weingarten Fund - 1.389659 1.627524 1,300,655 1996
Institutional Class 1.035886 1.389659 1,097,067 1995
1.044414 1.035886 870,956 1994
1.034606 1.044414 936,998 1993
1.000000 1.034606 0 1992
American Century: 4.562802 5.842997 23,886,079 1997
Twentieth Century 4.005400 4.562802 12,224,812 1996
Growth 3.359891 4.005400 37,335,163 1995
3.443124 3.359891 41,134,943 1994
3.350122 3.443124 51,977,134 1993
3.533694 3.350122 58,356,370 1992
2.110582 3.533694 53,923,483 1991
2.216085 2.110582 67,311,152 1990
1.562983 2.216085 49,896,477 1989
1.536055 1.562983 51,598,758 1988
American Century: 1.572461 2.058976 1,111,408 1997
Twentieth Century 1.331631 1.572461 41,014 1996
Select 1.095899 1.331631 1,254,199 1995
1.202996 1.095899 194,231 1994
1.059075 1.202996 386,750 1993
1.118927 1.059075 383,487 1992
1.000000 1.118927 2,950 1991
American Century: 2.069865 2.524538 132,438,228 1997
Twentieth Century 1.835553 2.069865 70,399,683 1996
Ultra 1.345904 1.835553 105,140,475 1995
1.409710 1.345904 88,713,416 1994
1.168340 1.409710 68,551,255 1993
1.164722 1.168340 33,483,411 1992
1.000000 1.164722 11,412 1991
</TABLE>
<PAGE> 43
CONDENSED FINANCIAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
The Bond Fund 2.155739 2.332586 5,345,075 1997
of America(SM), Inc. 2.039710 2.155739 3,518,054 1996
1.741422 2.039710 7,434,474 1995
1.850918 1.741422 7,880,903 1994
1.637181 1.850918 8,560,956 1993
1.484255 1.637181 6,077,266 1992
1.238222 1.484255 5,128,071 1991
1.208717 1.238222 5,102,901 1990
1.109668 1.208717 3,105,875 1989
1.011923 1.109668 1,113,940 1988
Davis New York 1.686019 2.232520 199,664 1997
Venture 1.345221 1.686019 1,180,098 1996
Fund, Inc. 0.966146 1.345221 1,771,764 1995
0.994508 0.966146 720,917 1994
1.000000 0.994508 5,626 1993
Delaware Group 2.280210 2.935219 96,261 1997
Decatur Fund, Inc. - 1.910384 2.280210 78,578 1996
Decatur Income Fund 1.449372 1.910384 100,636 1995
Institutional Class 1.473401 1.449372 104,006 1994
1.289480 1.473401 281,500 1993
1.196471 1.289480 162,528 1992
0.991871 1.196471 106,856 1991
1.142606 0.991871 16,158 1990
1.000000 1.142606 0 1989
Dreyfus 1.159356 1.212149 231,535 1997
Cash 1.110383 1.159356 618,162 1996
Management* - Class 1.057458 1.110383 2,561,760 1995
A 1.025704 1.057458 2,324,960 1994
1.003770 1.025704 25,763 1993
1.000000 1.003770 0 1992
Dreyfus 2.756438 3.532278 10,221,038 1997
Third Century 2.238323 2.756438 3,824,949 1996
Fund, Inc. 1.663803 2.238323 6,501,520 1995
1.814915 1.663803 6,965,653 1994
1.740666 1.814915 8,765,880 1993
1.723855 1.740666 9,137,872 1992
1.259983 1.723855 5,165,976 1991
1.228377 1.259983 4,118,236 1990
1.057519 1.228377 1,659,197 1989
0.866121 1.057519 618,691 1988
Deryfus S&P 500 Index 1.000000 1.217658 15,653,811 1997
Fund
Evergreen 1.947502 2.422617 1,909,226 1997
Income and Growth 1.741651 1.947502 1,146,375 1996
Fund (formerly 1.419467 1.741651 3,257,653 1995
Evergreen Total 1.531292 1.419467 4,439,096 1994
Return Fund) 1.368966 1.531292 7,948,202 1993
1.256090 1.368966 6,846,744 1992
1.031024 1.256090 7,328,719 1991
1.110904 1.031024 13,632,891 1990
0.959913 1.110904 10,256,138 1989
0.837244 0.959913 5,595,414 1988
</TABLE>
*The 7-day yield on the Dreyfus Cash Management - Class A as of December
31, 1997 was 3.83%.
<PAGE> 44
CONDENSED FINANCIAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
Federated GNMA 1.292380 1.393241 688,011 1997
Trust- Institutional 1.243001 1.292380 548,815 1996
Shares 1.081229 1.243001 508,686 1995
1.119643 1.081229 422,171 1994
1.061001 1.119643 497,960 1993
1.000000 1.061001 305,851 1992
Federated U.S. 1.144380 1.214470 2,077,904 1997
Government 1.115461 1.144380 1,214,422 1996
Securities 0.991595 1.115461 1,877,483 1995
Fund: 2-5 Years - 1.020623 0.991595 1,280,899 1994
Institutional Shares 1.000000 1.020623 696,793 1993
Fidelity Asset 1.252704 1.517270 4,375,583 1997
Manager(TM) 1.121926 1.252704 2,611,685 1996
0.958564 1.121926 5,838,128 1995
1.036089 0.958564 3,916,306 1994
1.000000 1.036089 79,714 1993
Fidelity Capital 4.096488 4.654233 294,820 1997
& Income Fund 3.712491 4.096488 125,230 1996
3.210584 3.712491 463,343 1995
3.397953 3.210584 561,985 1994
2.746533 3.397953 925,953 1993
2.165417 2.746533 1,032,492 1992
1.684020 2.165417 1,471,867 1991
1.768220 1.684020 4,160,164 1990
1.843890 1.768220 4,943,976 1989
1.653959 1.843890 4,248,205 1988
Fidelity 2.059778 2.509557 99,795,570 1997
Contrafund 1.705419 2.059778 56,288,590 1996
1.263308 1.705419 62,585,233 1995
1.289799 1.263308 40,927,857 1994
1.072342 1.289799 14,514,807 1993
1.000000 1.072342 186,872 1992
Fidelity 5.359692 6.900916 42,604,023 1997
Equity-Income 4.471070 5.359692 18,493,235 1996
Fund 3.424310 4.471070 35,553,370 1995
3.448520 3.424310 34,056,352 1994
2.869860 3.448520 41,743,016 1993
2.526472 2.869860 36,410,831 1992
1.971024 2.526472 40,239,204 1991
2.314450 1.971024 65,533,870 1990
1.968876 2.314450 62,489,636 1989
1.622650 1.968876 66,300,418 1988
Fidelity 2.001775 2.581177 3,435,213 1997
Growth & 1.683805 2.001775 4,201,944 1996
Income Portfolio 1.255568 1.683805 4,155,413 1995
1.239420 1.255568 2,808,994 1994
1.046808 1.239420 1,219,293 1993
1.000000 1.046808 85,896 1992
</TABLE>
<PAGE> 45
CONDENSED FINANCIAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
Fidelity Magellan(R) 1.913110 2.398961 95,356,893 1997
Fund 1.729361 1.913110 56,756,036 1996
1.275955 1.729361 92,049,788 1995
1.311856 1.275955 68,044,510 1994
1.062405 1.311856 43,203,753 1993
1.000000 1.062405 10,591,374 1992
Fidelity OTC Portfolio 1.494616 1.627259 0 1997
1.219506 1.494616 0 1996
1.000000 1.219506 64,305 1995
Fidelity Puritan Fund 1.285134 1.557502 0 1997
1.126715 1.285134 0 1996
1.000000 1.126715 0 1995
The Growth 2.691979 3.382686 4,016,452 1997
Fund of 2.366626 2.691979 2,478,693 1996
America(R), Inc. 1.840658 2.366626 6,716,573 1995
1.857739 1.840658 5,646,915 1994
1.638011 1.857739 5,353,392 1993
1.539692 1.638011 3,840,212 1992
1.144684 1.539692 1,551,711 1991
1.205372 1.144684 105,320 1990
1.000000 1.205372 0 1989
The Income 2.160929 2.614863 7,017,085 1997
Fund of 1.893327 2.160929 5,291,391 1996
America(R), Inc. 1.480756 1.893327 8,645,811 1995
1.533299 1.480756 7,829,528 1994
1.357846 1.533299 7,258,704 1993
1.223786 1.357846 3,016,773 1992
0.998504 1.223786 631,336 1991
1.000000 0.998504 0 1990
INVESCO 1.678513 2.102364 10,884,376 1997
Industrial 1.451889 1.678513 7,428,110 1996
Income Fund, Inc. 1.151056 1.451889 10,632,818 1995
1.208959 1.151056 8,239,738 1994
1.045472 1.208959 3,039,640 1993
1.000000 1.045472 17,289 1992
Janus Fund 1.603290 1.948907 33,709,518 1997
1.353271 1.603290 15,851,766 1996
1.055481 1.353271 13,522,743 1995
1.077425 1.055481 7,345,306 1994
1.000000 1.077425 2,969,768 1993
Janus Twenty 1.671698 2.147649 7,662 1997
Fund 1.320040 1.671698 149,425 1996
0.978264 1.320040 31,831 1995
1.058801 0.978264 11,285 1994
1.000000 1.058801 0 1993
</TABLE>
<PAGE> 46
CONDENSED FINANCIAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
MAS Funds Fixed 1.229760 1.335173 1,990,827 1997
Income Portfolio 1.156444 1.229760 718,247 1996
0.980782 1.156444 366,064 1995
1.000000 0.980782 31,751 1994
Massachusetts 10.880822 15.968069 450,089 1997
Investors Growth 8.942612 10.880822 164,786 1996
Stock Fund - 7.034148 8.942612 551,377 1995
Class A 7.613442 7.034148 604,020 1994
6.714892 7.613442 891,831 1993
6.368639 6.714892 914,534 1992
4.352449 6.368639 1,056,566 1991
4.612779 4.352449 1,577,501 1990
3.430876 4.612779 1,393,742 1989
3.326929 3.430876 2,091,280 1988
MFS(R) Growth 7.380232 9.012670 3,078,940 1997
Opportunities 6.114190 7.380232 843,158 1996
Fund - Class A 4.589533 6.114190 3,824,999 1995
4.834037 4.589533 4,635,532 1994
4.200054 4.834037 9,303,110 1993
3.936838 4.200054 10,600,796 1992
3.246855 3.936838 13,413,614 1991
3.427388 3.246855 23,047,089 1990
2.692907 3.427388 24,300,466 1989
2.493461 2.692907 28,164,998 1988
MFS(R) High 5.518160 6.168371 633,922 1997
Income 4.949752 5.518160 164,395 1996
Fund - 4.265493 4.949752 806,763 1995
Class A 4.422523 4.265493 877,250 1994
3.739642 4.422523 1,068,154 1993
3.225557 3.739642 1,036,507 1992
2.186959 3.225557 1,186,991 1991
2.651605 2.186959 2,159,639 1990
2.731036 2.651605 2,739,257 1989
2.453867 2.731036 2,747,679 1988
</TABLE>
<PAGE> 47
CONDENSED FINANCIAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
Nationwide(R) 2.001472 2.166981 51,355 1997
Bond Fund 1.991196 2.001472 26,395 1996
1.619166 1.991196 92,001 1995
1.778765 1.619166 51,492 1994
1.621957 1.778765 148,222 1993
1.516560 1.621957 197,350 1992
1.309926 1.516560 363,511 1991
1.222004 1.309926 420,858 1990
1.114209 1.222004 314,062 1989
1.039905 1.114209 188,045 1988
Nationwide(R) 14.964379 20.697282 3,635,254 1997
Fund 12.191058 14.964379 1,316,219 1996
9.468045 12.191058 2,905,460 1995
9.502760 9.468045 3,036,527 1994
8.985447 9.502760 3,690,273 1993
8.810680 8.985447 4,218,392 1992
6.830443 8.810680 3,906,633 1991
6.875188 6.830443 3,792,110 1990
5.187286 6.875188 2,756,965 1989
4.485232 5.187286 3,174,211 1988
Nationwide(R) 3.083008 3.854877 2,582,538 1997
Growth Fund 2.667201 3.083008 1,156,065 1996
2.092009 2.667201 3,668,270 1995
2.081399 2.092009 3,759,425 1994
1.887524 2.081399 5,928,120 1993
1.792687 1.887524 5,747,753 1992
1.330199 1.792687 5,108,711 1991
1.452973 1.330199 7,279,598 1990
1.276112 1.452973 4,762,338 1989
1.051373 1.276112 1,947,635 1988
Nationwide(R) 2.884848 3.003821 18,830,414 1997
Money Market 2.774433 2.884848 7,935,176 1996
Fund* 2.654661 2.774433 20,350,850 1995
2.583387 2.654661 18,028,497 1994
2.542721 2.583387 20,122,594 1993
2.487178 2.542721 22,067,362 1992
2.377082 2.487178 33,612,374 1991
2.224557 2.377082 48,721,235 1990
2.062504 2.224557 43,599,432 1989
1.944054 2.062504 39,596,561 1988
Neuberger & Berman 1.365700 1.595471 614,486 1997
Guardian Fund, Inc. 1.169665 1.365700 0 1996
1.000000 1.696655 0 1995
</TABLE>
*The 7-day yield on the Nationwide Money Market Fund as of December 31,
1997 was 4.23%.
<PAGE> 48
CONDENSED FINANCIAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
Neuberger & 2.458922 3.146989 39,662 1997
Berman Manhattan 2.259932 2.458922 119,922 1996
Fund, Inc. 1.741549 2.259932 394,751 1995
1.823796 1.741549 406,054 1994
1.673695 1.823796 317,549 1993
1.434738 1.673695 56,526 1992
1.106565 1.434738 7,124 1991
1.214940 1.106565 0 1990
1.000000 1.214940 0 1989
Neuberger & Berman 1.139543 1.458745 1,370,455 1997
Partners Fund, Inc. 1.000000 1.139543 0 1996
** ** ** 1995
Putnam 13.594501 18.110411 2,476,574 1997
Investors 11.305164 13.594501 713,005 1996
Fund - 8.297318 11.305164 3,422,356 1995
Class A 8.652501 8.297318 3,674,131 1994
7.410567 8.652501 4,311,483 1993
6.934213 7.410567 4,294,647 1992
5.445269 6.934213 4,745,398 1991
5.654203 5.445269 6,112,297 1990
4.262206 5.654203 5,893,052 1989
4.003173 4.262206 9,986,301 1988
Putnam Voyager 3.074879 3.837109 35,911,119 1997
Fund - Class A 2.752130 3.074879 18,151,250 1996
1.982311 2.752130 21,036,155 1995
1.992379 1.982311 14,803,070 1994
1.698751 1.992379 11,820,145 1993
1.563079 1.698751 7,640,204 1992
1.049811 1.563079 4,622,048 1991
1.000000 1.049811 290,518 1990
SEI Index 2.962497 3.905079 3,892,401 1997
Funds - S&P 500 2.439184 2.962497 524,069 1996
Index Portfolio 1.792835 2.439184 1,072,618 1995
1.792223 1.792835 722,997 1994
1.647325 1.792223 509,498 1993
1.548965 1.647325 257,368 1992
1.203412 1.548965 121,485 1991
1.254560 1.203412 509 1990
1.000000 1.254560 0 1989
</TABLE>
** Unit information is not available for the year 1995.
<PAGE> 49
CONDENSED FINANCIAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
Seligman 10.720312 12.541848 227,045 1997
Growth 8.934609 10.720312 105,249 1996
Fund, Inc. - 7.020585 8.934609 277,527 1995
Class A 7.370495 7.020585 299,685 1994
6.989639 7.370495 513,220 1993
6.340967 6.989639 555,163 1992
4.611005 6.340967 685,494 1991
4.910683 4.611005 977,515 1990
3.714452 4.910683 916,525 1989
3.491789 3.714452 1,189,216 1988
Strong 1.569484 1.928035 0 1997
Common Stock 1.315349 1.569484 2,665,795 1996
Fund, Inc. 1.002820 1.315349 1,353,697 1995
1.017301 1.002820 742,264 1994
1.000000 1.017301 16,364 1993
T. Rowe Price 1.812062 1.843420 16,365,466 1997
International 1.577274 1.812062 8,220,403 1996
Stock Fund(R) 1.429428 1.577274 22,425,072 1995
1.454045 1.429428 18,673,315 1994
1.047655 1.454045 11,658,962 1993
1.095728 1.047655 4,370,293 1992
0.954695 1.095728 2,239,924 1991
1.000000 0.954695 441,232 1990
Templeton 1.774294 1.874393 43,044,777 1997
Foreign 1.518092 1.774294 27,327,650 1996
Fund - Class I 1.378759 1.518092 32,915,364 1995
1.387073 1.378759 25,358,639 1994
1.023491 1.387073 6,636,629 1993
1.000000 1.023491 0 1992
Templeton 1.802963 1.912073 0 1997
Smaller Companies 1.490946 1.802963 524,340 1996
Growth Fund - Class I 1.279328 1.490946 382,441 1995
1.353616 1.279328 225,110 1994
1.036433 1.353616 117,690 1993
1.000000 1.036433 0 1992
</TABLE>
Accumulation Unit Value information is not available for American Century:
Twentieth Century Growth Fund, Janus Worldwide Fund, NPMP - The Aggressive
Portfolio, NPMP - The Moderartely Aggressive Portfolio, NPMP - The Moderate
Portfolio, NPMP - The Moderately Conservative Portfolio, NPMP - The
Conservative Portfolio, Natiowide Separate Account Trust - Nationwide Small
Company Fund, Neuberger & Berman Guardian Trust, and Warburg Pincus Emerging
Growth Fund, as these funds were first available in January 1998.
<PAGE> 50
TIER II
VARIABLE ACCOUNT ANNUAL EXPENSE FEE.......................................0.90%
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
American Century: 4.005400 5.846396 3,903,936 1997
Twentieth Century 4.555161 4.563176 4,398,109 1996
Growth Fund
American Century: 2.070035 2.526007 19,732,726 1997
Twentieth Century
Ultra Fund 1.835553 2.070035 18,056,950 1996
The Bond Fund 2.155938 2.333980 844,897 1997
of America(SM), Inc. 2.128763 2.155938 1,040,496 1996
Davis New York 1.686157 2.233818 199,664 1997
Venture 1.580715 1.686157 133,664 1996
Delaware Group 2.280397 2.936925 15,400 1997
Decatur Fund, Inc. - 2.186556 2.280397 13,782 1996
Dreyfus 1.159453 1.212863 231,535 1997
Cash Management 1.151569 1.159453 377,565 1996
Dreyfus S&P 500 Index
Fund 1.000000 1.218064 3,436,138 1997
Dreyfus 2.756663 3.534332 1,286,026 1997
Third Century 2.699982 2.756663 967,536 1996
Evergreen 1.947661 2.424026 388,299 1997
Income and Growth 1.875063 1.947661 470,751 1996
Fund (formerly
"Evergreen Total Return
Fund")
Federated U.S. 1.144477 1.215186 323,646 1997
Government 1.140767 1.144477 342,284 1996
Fidelity Asset 1.252806 1.518153 633,745 1997
Manager(TM) 1.214007 1.252806 671,795 1996
Fidelity Capital 4.096833 4.656974 36,724 1997
& Income Fund 4.015008 4.096833 77,649 1996
Fidelity 2.059947 2.511017 15,968,503 1997
Contrafund 1.953469 2.059947 13,231,488 1996
Fidelity 5.360130 6.904928 7,169,293 1997
Equity-Income 5.110007 5.360130 6,443,316 1996
Fidelity Magellan(R) 1.913267 2.400356 11,589,048 1997
Fund 1.831563 1.913267 11,002,403 1996
The Growth 2.692199 3.384653 650,012 1997
Fund of America 2.519027 2.692199 553,730 1996
The Income 2.161106 2.616384 1,325,543 1997
Fund of America 2.072384 2.161106 1,137,681 1996
INVESCO 1.678650 2.103587 1,917,268 1997
Industrial 1.613178 1.678650 1,639,958 1996
Janus Fund 1.603421 1.950041 5,595,764 1997
1.550403 1.603421 4,109,624 1996
MAS Funds Fixed 1.229861 1.335950 296,496 1997
Income Portfolio 1.215745 1.229861 193,871 1996
MFS(R) Growth 7.380837 9.017913 317,319 1997
Opportunities 7.065737 7.380837 361,634 1996
MFS(R) High 5.518624 6.172004 25,730 1997
Income 5.541012 5.518624 41,389 1996
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
Massachusetts 10.881713 15.977352 19,733 1997
Investors Growth 1.991196 10.881713 13,452 1996
Stock Fund - Class A 10.489691
Nationwide(R) 14.965604 20.709316 509,179 1997
Fund 14.282052 14.965604 336,341 1996
Nationwide(R) 3.083261 3.857119 357,289 1997
Growth Fund 2.916856 3.083261 386,199 1996
Nationwide(R) 2.885091 3.005590 6,441,740 1997
Money Market 2.867462 2.885091 6,749,071 1996
Putnam 13.595614 18.120944 133,581 1997
Investors 13.246208 13.595614 153,709 1996
Putnam Voyager 3.075131 3.839341 5,930,438 1997
Fund - Class A 3.055821 3.075131 5,117,342 1996
SEI Index 2.962740 3.907349 52,580 1997
Funds - S&P 500 2.823355 2.962740 71,085 1996
Seligman 10.721190 12.549144 10,649 1997
Growth Fund, Inc. 10.356946 10.721190 17,582 1996
T. Rowe Price 1.812210 1.844492 1,859,628 1997
International Stock 1.7255780 1.812210 1,718,457 1996
Fund
Templeton 1.774439 1.875484 7,960,130 1997
Foreign Fund 1.678650 1.774439 6,594,135 1996
</TABLE>
*The 7-day yield on the Nationwide Money Market Fund as of December 31,
1997 was 4.23%.
** Unit information is not available for the year 1995.
Accumulation Unit Value information is not available for American Century:
Twentieth Century Growth Fund, Janus Worldwide Fund, NPMP - The Aggressive
Portfolio, NPMP - The Moderartely Aggressive Portfolio, NPMP - The Moderate
Portfolio, NPMP - The Moderately Conservative Portfolio, NPMP - The
Conservative Portfolio, Natiowide Separate Account Trust - Nationwide Small
Company Fund, Neuberger & Berman Guardian Trust, and Warburg Pincus Emerging
Growth Fund, as these funds were first available in January 1998.
<PAGE> 52
TIER III
VARIABLE ACCOUNT ANNUAL EXPENSE FEE....................................0.80%
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
American Century: 4.563925 5.853199 1,540,193 1997
Twentieth Century 4.555198 4.563925 1,586,526 1996
Growth Fund
American Century: 2.070374 2.528946 11,990,091 1997
Twentieth Century Ultra 2.055822 2.070374 9,866,856 1996
Fund
The Bond Fund 2.156336 2.336766 379,522 1997
of America(SM), Inc. 2.128822 2.156336 281,942 1996
Delaware Group 2.280770 2.940341 6,036 1997
Decatur Income Fund, 2.186573 2.280770 5,492 1996
Inc. -
Dreyfus 2.757115 3.538445 912,241 1997
Third Century 2.700004 2.757115 603,861 1996
Dreyfus S&P 500 Index 1.000000 1.218878 2,297,690 1997
Fund
Evergreen 1.947980 2.426846 79,190 1997
Income and Growth 1.875078 1.947980 78,598 1996
Fund (formerly
"Evergreen Total Return
Fund")
Federated U.S. 1.144669 1.216616 188,738 1997
Government 1.140779 1.144669 104,682 1996
Fidelity Asset 1.253012 1.519919 299,273 1997
Manager(TM) 1.214017 1.253012 269,853 1996
Fidelity Capital 4.097522 4.662457 22,232 1997
& Income Fund 4.015052 4.097522 23,351 1996
Fidelity 2.060284 2.513939 9,637,261 1997
Contrafund 1.953485 2.060284 7,230,068 1996
Fidelity 5.361008 6.912960 3,057,190 1997
Equity-Income 5.110048 5.361008 2,555,440 1996
Fidelity Magellan(R) 1.913580 2.403149 6,180,393 1997
Fund 1.831578 1.913580 5,622,628 1996
The Growth 2.692640 3.388591 496,036 1997
Fund of America 2.519048 2.692640 441,833 1996
The Income 2.161460 2.619427 490,571 1997
Fund of America 2.072401 2.161460 367,278 1996
INVESCO 1.678925 2.106034 473,406 1997
Industrial 1.613191 1.678925 309,576 1996
Janus Fund 1.603684 1.952310 2,423,723 1997
1.550416 1.603684 1,634,700 1996
MAS Funds Fixed 1.230062 1.337506 248,580 1997
Income Portfolio 1.215755 1.230062 87,227 1996
MFS(R) Growth 7.382046 9.028407 178,707 1997
Opportunities 7.065795 7.382046 181,406 1996
MFS(R) High 5.519552 6.179271 6,564 1997
Income 5.410180 5.519552 6,455 1996
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
Massachusetts 10.883496 15.995935 12,152 1997
Investors Growth 10.489775 10.883496 11,971 1996
Stock Fund - Class A
Nationwide(R) 14.968055 20.733404 329,293 1997
Fund 14.282168 14.968055 195,684 1996
Nationwide(R) 3.083766 3.861607 93,047 1997
Growth Fund 2.916880 3.083766 96,156 1996
Nationwide(R) 2.885576 3.009129 909,979 1997
Money Market 2.867493 2.885576 901,408 1996
Putnam 13.597842 18.142029 39,280 1997
Investors 13.246316 13.597842 38,905 1996
Putnam Voyager 3.075635 3.843809 3,166,939 1997
Fund - Class A 3.055846 3.075635 2,559,117 1996
Seligman 10.722947 12.563748 2,475 1997
Growth 10.357031 10.722947 2,396 1996
T. Rowe Price 1.812507 1.846640 1,036,525 1997
International Stock 1.725811 1.812507 931,357 1996
Fund
Templeton 1.774730 1.877667 2,623,603 1997
Foreign 1.678664 1.774730 2,061,896 1996
</TABLE>
*The 7-day yield on the Nationwide Money Market Fund as of December 31,
1997 was 4.23%.
** Unit information is not available for the year 1995.
Accumulation Unit Value information is not available for American Century:
Twentieth Century Growth Fund, Janus Worldwide Fund, NPMP - The Aggressive
Portfolio, NPMP - The Moderartely Aggressive Portfolio, NPMP - The Moderate
Portfolio, NPMP - The Moderately Conservative Portfolio, NPMP - The
Conservative Portfolio, Natiowide Separate Account Trust - Nationwide Small
Company Fund, Neuberger & Berman Guardian Trust, and Warburg Pincus Emerging
Growth Fund, as these funds were first available in January 1998.
<PAGE> 54
TIER IV
VARIABLE ACCOUNT ANNUAL EXPENSE FEE.......................................0.70%
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C> <C>
American Century: 4.564673 5.860011 758,360 1997
Twentieth Century 4.555235 4.564673 735,112 1996
Growth Fund
American Century: 1.573105 2.064969 1,088,027 1997
Twentieth Century 1.528629 1.573105 949,150 1996
Select Fund
American Century: 2.070713 2.531889 4,964,637 1997
Twentieth Centuy Ultra 2.055839 2.070713 3,956,021 1996
Fund
The Bond Fund 2.156734 2.339554 55,496 1997
of America(SM), Inc. 2.128881 2.156734 46,844 1996
Dreyfus S&P 500 Index 1.000000 1.219691 1,092,654 1997
Fund
Dreyfus 2.757567 3.542562 428,452 1997
Third Century 2.700026 2.757567 244,163 1996
Evergreen 1.948299 2.429669 21,853 1997
Income and Growth 1.875094 1.948299 27,416 1996
Fund (formerly
"Evergreen Total Return
Fund")
Federated U.S. 1.144861 1.218047 114,003 1997
Government 1.140792 1.144861 104,637 1996
Fidelity Asset 1.253217 1.521688 538,872 1997
Manager(TM) 1.214027 1.253217 456,745 1996
Fidelity Capital 4.098210 4.667941 22,307 1997
& Income Fund 4.015097 4.098210 22,770 1996
Fidelity 2.060621 2.516865 4,750,222 1997
Contrafund 1.953501 2.060621 3,683,606 1996
Fidelity 5.361886 6.921001 2,389,431 1997
Equity-Income 5.110090 5.361886 1,989,159 1996
Fidelity Magellan(R) 1.913894 2.405944 3,706,622 1997
Fund 1.831593 1.913894 3,295,811 1996
The Growth 2.693087 3.392534 170,540 1997
Fund of America 2.519069 2.693081 158,421 1996
The Income 2.161814 2.622475 294,406 1997
Fund of America 2.072418 2.161814 246,997 1996
INVESCO 1.679200 2.108484 473,795 1997
Industrial 1.613204 1.679200 346,238 1996
Janus Fund 1.603947 1.954582 2,404,760 1997
1.550428 1.603947 1,696,374 1996
MAS Funds Fixed 1.230264 1.339063 91,023 1997
Income Portfolio 1.215765 1.230264 27,573 1996
MFS(R) Growth 7.383255 9.038914 5,735 1997
Opportunities 7.065853 7.383255 7,294 1996
MFS(R) High 5.520479 6.186539 105 1997
Income 5.410240 5.520479 130 1996
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
Massachusetts 10.885279 16.014540 285 1997
Investors Growth 10.489862 10.885279 280 1996
Stock Fund - Class A
Nationwide(R) 14.970505 20.757521 142,531 1997
Fund 14.282285 14.970505 54,398 1996
Nationwide(R) 3.084270 3.866100 339,294 1997
Growth Fund 2.916904 3.084270 286,704 1996
Nationwide(R) 2.886060 3.012668 985,611 1997
Money Market 2.867525 2.886060 1,141,686 1996
Putnam 13.600069 18.163138 4,776 1997
Investors 13.246425 13.600069 4,735 1996
Putnam Voyager 3.076140 3.848283 2,223,516 1997
Fund - Class A 3.055871 3.076140 1,979,411 1996
Seligman 10.724703 12.578369 684 1997
Growth 10.357115 10.724703 684 1996
T. Rowe Price 1.812803 1.848790 783,958 1997
International Stock 1.725825 1.812803 881,585 1996
Fund
Templeton 1.775020 1.879853 1,763,615 1997
Foreign 1.678677 1.775020 1,461,504 1996
</TABLE>
*The 7-day yield on the Nationwide Money Market Fund as of December 31,
1997 was 4.23%.
** Unit information is not available for the year 1995.
Accumulation Unit Value information is not available for American Century:
Twentieth Century Growth Fund, Janus Worldwide Fund, NPMP - The Aggressive
Portfolio, NPMP - The Moderartely Aggressive Portfolio, NPMP - The Moderate
Portfolio, NPMP - The Moderately Conservative Portfolio, NPMP - The
Conservative Portfolio, Natiowide Separate Account Trust - Nationwide Small
Company Fund, Neuberger & Berman Guardian Trust, and Warburg Pincus Emerging
Growth Fund, as these funds were first available in January 1998.
<PAGE> 56
TIER V
VARIABLE ACCOUNT ANNUAL EXPENSE FEE......................................0.65%
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
AIM Equity Funds, Inc. - 2.057438 2.318983 2,389,104 1997
AIM Constellation Fund 1.897355 2.057438 1,258,757 1996
- - Institutional Class
American Century: 4.567407 5.866443 6,244,941 1997
Twentieth Century 4.139808 4.567401 6,000,935 1996
Growth Fund
American Century: 2.071951 2.534668 19,414,868 1997
Twentieth Centuy Ultra 1.858002 2.071951 16,258,739 1996
Fund
The Bond Fund 2.158056 2.342166 736,645 1997
of America(SM), Inc. 2.057925 2.158056 471,875 1996
Dreyfus 2.759214 3.546449 2,302,999 1997
Third Century 2.421004 2.759214 1,592,562 1996
Evergreen 1.949465 2.432337 433,149 1997
Income and Growth 1.797507 1.949465 494,994 1996
Fund (formerly
"Evergreen Total Return
Fund")
Fidelity Capital 4.100654 4.673077 70,677 1997
& Income Fund 3.891882 4.100654 84,610 1996
Fidelity 2.061853 2.519627 3,990,922 1997
Contrafund 1.834521 2.061853 1,600,079 1996
Fidelity 5.365090 6.928596 7,574,670 1997
Equity-Income 4.792632 5.365090 6,613,425 1996
Fidelity Growth & 2.003791 2.591531 3,435,213 1997
Income Portfolio 1.788691 2.003791 1,071,573 1996
Fidelity Magellan(R) 1.915038 2.408585 16,840,881 1997
Fund 1.732300 1.915038 15,847,180 1996
MFS(R) Growth 7.387670 9.048839 1,999,203 1997
Opportunities 6.482021 7.387670 2,053,995 1996
MFS(R) High 5.523771 6.193345 500,487 1997
Income 5.237254 5.523771 466,255 1996
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
<S> <C> <C> <C> <C>
Massachusetts 10.891785 16.032114 271,730 1997
Investors Growth 9.620839 10.891785 270,135 1996
Stock Fund - Class A
Nationwide Bond 2.003508 2.175755 51,355 1997
Fund 1.902228 2.003508 53,369 1996
Nationwide(R) 14.979448 20.780295 721,864 1997
Fund 13.293866 14.979448 408,411 1996
Nationwide(R) 3.086114 3.870345 658,443 1997
Growth Fund 2.801588 3.086114 517,548 1996
Nationwide(R) 2.887782 3.015983 3,131,282 1997
Money Market 2.848502 2.887782 3,694,679 1996
Neuberger & Berman 1.367075 1.601873 614,486 1997
Guardian Fund 1.203016 1.367075 109,076 1996
Putnam 13.608194 18.183069 1,771,233 1997
Investors Fund 12.172007 13.608194 1,571,300 1996
Putnam Voyager 3.077980 3.852510 1,528,999 1997
Fund - Class A 2.937103 3.077980 990,216 1996
SEI Index Funds - 2.965481 3.920739 3,689,771 1997
S&P 500 Index 2.610748 2.965481 724,558 1996
Portfolio
Seligman 10.731114 12.592179 113,689 1997
Growth Fund 9.693645 10.731114 121,166 1996
T. Rowe Price 1.813888 1.850821 4,875,751 1997
International Stock 1.686337 1.813888 5,512,814 1996
Fund
Templeton 1.776082 1.881918 1,092,861 1997
Foreign Fund 1.628310 1.776082 168,098 1996
</TABLE>
*The 7-day yield on the Nationwide Money Market Fund as of December 31,
1997 was 4.23%.
** Unit information is not available for the year 1995.
Accumulation Unit Value information is not available for American Century:
Twentieth Century Growth Fund, Janus Worldwide Fund, NPMP - The Aggressive
Portfolio, NPMP - The Moderartely Aggressive Portfolio, NPMP - The Moderate
Portfolio, NPMP - The Moderately Conservative Portfolio, NPMP - The
Conservative Portfolio, Natiowide Separate Account Trust - Nationwide Small
Company Fund, Neuberger & Berman Guardian Trust, and Warburg Pincus Emerging
Growth Fund, as these funds were first available in January 1998.
<PAGE> 58
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS ISSUED
BY THE NATIONWIDE DC VARIABLE ACCOUNT OF
NATIONWIDE LIFE INSURANCE COMPANY
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the prospectus
and should be read in conjunction with the prospectus dated May 1, 1998. The
prospectus may be obtained from Nationwide Life Insurance Company, P.O. Box
16766, One Nationwide Plaza, Columbus, Ohio 43216, or by calling 1-800-545-4730
(TTY: 1-800-848-0833).
TABLE OF CONTENTS
PAGE
General Information and History............................................. 1
Services.................................................................... 1
Purchase of Securities Being Offered........................................ 2
Underwriters................................................................ 2
Calculation of Performance.................................................. 2
Annuity Payments............................................................ 8
Financial Statements........................................................ 9
GENERAL INFORMATION AND HISTORY
The Nationwide DC Variable Account ("Variable Account") is a separate investment
account of Nationwide Life Insurance Company ("Company"). The Company is a
member of the Nationwide Insurance Enterprise and all of the Company's common
stock is owned by Nationwide Financial Services, Inc. ("NFS"), a holding
company. NFS has two classes of common stock outstanding with different voting
rights enabling Nationwide Corporation (the holder of all of the outstanding
Class B Common Stock) to control NFS. Nationwide Corporation is a holding
company as well. All of its common stock is held by Nationwide Mutual Insurance
Company (95.2%) and Nationwide Mutual Fire Insurance Company (4.8%), the
ultimate controlling persons of Nationwide Insurance Enterprise.
SERVICES
The Company, which has responsibility for administration of the Contracts and
the Variable Account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each Contract Owner
and the number and type of Contract issued to each Contract Owner and records
with respect to the Contract Value of each Contract.
All assets of the Variable Account are held in custody for safekeeping by the
Company. The assets of each Sub-Account will be kept physically segregated and
held separate and apart from assets of other Sub-Accounts and from assets of any
other firm, person, or corporation. The Company will maintain a record of all
purchases and redemption of shares of the Underlying Mutual Fund held in each
Sub-Account.
The Company, or affiliates of the Company, may have entered into agreements with
either the investment adviser or distributor of the Underlying Mutual Funds. The
agreements relate to administrative services furnished by the Company or an
affiliate of the Company and provide for an annual fee based on the average
aggregate net assets of the Variable Account (and other separate accounts of the
Company or life insurance company subsidiaries of the Company) invested in
particular Underlying Mutual Funds. These fees in no way affect the Net Asset
Value of the Underlying Mutual Funds or fees paid by the Contract Owner.
The audited financial statements have been included herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants, Two
Nationwide Plaza, Columbus, Ohio 43215, and upon the authority of said firm as
experts in accounting and auditing.
<PAGE> 59
PURCHASE OF SECURITIES BEING OFFERED
The Contracts will be sold by licensed insurance agents in the states where the
Contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc.
For those Plans which provide this Contract and the Company's Group Fixed Fund
Retirement Contract, the Contract Owner, or the Participant if the Plan so
provides, may exchange Accumulation Units between any Sub-Account and the
deposit fund of the Group Fixed Fund Retirement Contract. Exchanges from the
deposit fund to any Sub-Account will be subject to the limitations of the Group
Fixed Fund Retirement Contract. Exchanges will be effective when received in
good order at the Home Office.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by Nationwide
Advisory Services, Inc. ("NAS"), One Nationwide Plaza, Columbus, Ohio 43215, a
wholly owned subsidiary of the Company. During the fiscal years ended December
31, 1997, 1996, and 1995, no underwriting commissions were paid by the Company
to NAS.
CALCULATION OF PERFORMANCE
Any current yield quotations of the Nationwide Money Market Fund, the Dreyfus
Cash Management Fund - Class A, and the Nationwide Separate Account Trust- Money
Market Fund subject to Rule 482 of the Securities Act of 1933, will consist of a
seven calendar day historical yield, carried at least to the nearest hundredth
of a percent. The yield will be calculated by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one Accumulation Unit at the beginning of the base
period, subtracting a hypothetical charge reflecting deductions from Contract
Owner accounts, and dividing the net change in account value by the value of the
account at the beginning of the period to obtain a base period return, and
multiplying the base period return by (365/7) or (366/7) in a leap year. At
December 31, 1997, the Nationwide Money Market Fund, the Dreyfus Cash Management
Fund - Class A, and NSAT-Money Market Fund seven-day current yield was 4.23%,
3.83%, and 4.40%, respectively. The Nationwide Money Market Fund, the Dreyfus
Cash Management Fund - Class A, and NSAT Money Market Fund seven-day effective
yield is computed similarly but includes the effect of assumed compounding on an
annualized basis of the current yield quotations of the Underlying Mutual Fund,
and at December 31, 1997 were 4.32%, 3.90% and 4.50%, respectively.
The Nationwide Money Market Fund, the Dreyfus Cash Management Fund, Nationwide
Separate Account Trust- Money Market Fund Sub-Account yield and effective yield
will fluctuate daily. Actual yields will depend on factors such as the type of
instruments in the Underlying Mutual Funds' portfolios, portfolio quality and
average maturity, changes in interest rates, and the Underlying Mutual Funds'
expenses. Although each Sub-Account determines its yield on the basis of a seven
calendar day period, it may use a different time period on occasion. The yield
quotes may reflect the expense limitation described under "Investment Manager
and Other Services" in the Underlying Mutual Funds' Statement of Additional
Information. There is no assurance that the yields quoted on any given occasion
will remain in effect for any period of time and there is no guarantee that the
Net Asset Values will remain constant. It should be noted that a Contract
Owner's investment in the Nationwide Money Market Fund Sub-Account, the Dreyfus
Cash Management Fund - Class A Sub-Account, Nationwide Separate Account Trust
Money Market Fund Sub-Account are not guaranteed or insured. Yields of other
money market funds may not be comparable if a different base period or another
method of calculation is used.
The Company may, from time to time, advertise several types of historical
performance of the Sub-Accounts. The Company may advertise for the Sub-Account's
standardized "average annual total return," calculated in a manner prescribed by
the SEC, and nonstandardized "total return." "Average annual total return"
illustrates the percentage rate of return of a hypothetical initial investment
of $1,000 for the most recent one, five and ten year periods, or for a period
covering the time the Underlying Mutual Fund option has been available in the
Variable Account if the Underlying Mutual Fund option has not been available for
the prescribed periods. THIS CALCULATION REFLECTS THE DEDUCTION OF ALL
APPLICABLE CHARGES MADE TO THE CONTRACTS EXCEPT FOR PREMIUM TAXES, WHICH MAY BE
IMPOSED BY CERTAIN STATES.
<PAGE> 60
Nonstandardized "total return," calculated similar to standardized "average
annual total return," illustrates the percentage rate of return of a
hypothetical initial investment of $10,000 for the most recent one, five and ten
year periods, or for a period covering the time the Underlying Mutual Fund
option has been in existence. For those Underlying Mutual Fund options which
have not been held as Sub-Accounts for one of prescribed periods, the
nonstandardized total return illustrations will show the investment performance
such Underlying Mutual Fund options would have achieved (reduced by the same
charges except the Participant Account Maintenance Charge and CDSC) had such
Underlying Mutual Fund options been available in the Variable Account for the
periods quoted. THE CDSC IS NOT REFLECTED BECAUSE THE CONTRACTS ARE DESIGNED FOR
LONG TERM INVESTMENT. THE CDSC, IF REFLECTED, WOULD DECREASE THE LEVEL OF
PERFORMANCE SHOWN. AN INITIAL INVESTMENT OF $10,000 IS ASSUMED BECAUSE THAT
AMOUNT MORE CLOSELY APPROXIMATES THE SIZE OF A TYPICAL CONTRACT THAN DOES THE
$1,000 ASSUMPTION USED IN CALCULATING THE STANDARDIZED AVERAGE ANNUAL TOTAL
RETURN QUOTATIONS.
The standardized average annual return and nonstandardized total return
quotations reflected below are calculated as described in this section using
Underlying Mutual Fund performance for the period ended December 31, 1997.
However, the Company generally provides performance quotations on a more
frequent basis, the results of which could reflect better or worse results than
shown below. The quotations and other comparative material advertised by the
Company are based upon historical earnings and are not intended to represent or
guarantee future results. A Contract Owner's Contract Value at redemption may be
more or less than the original cost.
<TABLE>
SERIES PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
MONEY MARKET
<CAPTION>
============================================================================================================================
CURRENT YIELD EFFECTIVE YIELD
SERIES OPTIONS PERIOD ENDING 12/31/97 PERIOD ENDING 12/31/97
============================================================================================================================
<S> <C> <C>
Dreyfus Cash Management - Class A 3.83% 3.90%
- ----------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund 4.23% 4.32%
- ----------------------------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust- 4.40% 4.50%
- ----------------------------------------------------------------------------------------------------------------------------
Money Market Fund
</TABLE>
<TABLE>
NATIONWIDE DC VARIABLE ACCOUNT
SERIES PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
OTHER THAN MONEY MARKET
<CAPTION>
==============================================================================================================
10 YEARS OR
DATE FUND
AVAILABLE IN
VARIABLE
1 YEAR 3 YEARS 5 YEARS ACCOUNT
SERIES OPTIONS TO 12/31/97 TO 12/31/97 TO 12/31/97 TO 12/31/97
==============================================================================================================
<S> <C> <C> <C> <C>
AIM Constellation Fund - Institutional Class 5.87% 18.23% 13.78% 18.65%
- --------------------------------------------------------------------------------------------------------------
AIM Weingarten Fund - Institutional Class 18.78% 23.04% 12.55% 14.82%
- --------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth 21.56% 17.76% 9.67% 13.21%
- --------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Select 24.44% 20.99% 12.25% 12.36%
- --------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 15.47% 21.01% 14.89% 19.91%
- --------------------------------------------------------------------------------------------------------------
The Bond Fund of America, Inc.SM 1.70% 7.47% 5.18% 7.36%
- --------------------------------------------------------------------------------------------------------------
Davis New York Venture Fund, Inc. 25.91% 30.08% 19.37% 19.12%
- --------------------------------------------------------------------------------------------------------------
Delaware Group Decatur Fund, Inc.-Decatur Income Fund 22.23% 24.24% 16.09% 12.70%
- --------------------------------------------------------------------------------------------------------------
Dreyfus S&P 500 Index Fund 25.33% 27.13% 16.72% 13.11%
- --------------------------------------------------------------------------------------------------------------
Dreyfus Third Century Fund, Inc. 21.65% 26.31% 13.22% 14.02%
- --------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 17.90% 17.01% 10.07% 9.93%
- --------------------------------------------------------------------------------------------------------------
Federated GNMA Trust-Institutional Shares 1.30% 5.99% 3.32% 6.39%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
==============================================================================================================
10 YEARS OR
DATE FUND
AVAILABLE IN
VARIABLE
1 YEAR 3 YEARS 5 YEARS ACCOUNT
SERIES OPTIONS TO 12/31/97 TO 12/31/97 TO 12/31/97 TO 12/31/97
==============================================================================================================
<S> <C> <C> <C> <C>
Federated U.S. Government Securities Fund: 2-5 Years -0.38% 4.08% 2.45% 5.02%
- - Institutional Shares
- --------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager(TM) 14.62% 13.95% 10.39% 11.37%
- --------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 7.12% 10.49% 9.18% 9.57%
- --------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 15.34% 23.45% 16.82% 21.07%
- --------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 22.26% 24.03% 17.47% 14.46%
- --------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio 22.44% 24.90% 18.09% 17.70%
- --------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 18.90% 21.09% 15.97% 16.83%
- --------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 2.37% 19.95% 11.69% 15.86%
- --------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 14.69% 15.96% 13.28% 12.83%
- --------------------------------------------------------------------------------------------------------------
The Growth Fund of America(R), Inc. 19.16% 20.10% 13.76% 14.52%
- --------------------------------------------------------------------------------------------------------------
The Income Fund of America(R), Inc. 14.51% 18.45% 12.09% 11.88%
- --------------------------------------------------------------------------------------------------------------
INVESCO Industrial Income Fund, Inc. 18.75% 19.84% 13.12% 14.82%
- --------------------------------------------------------------------------------------------------------------
Janus Fund 15.06% 20.31% 12.81% 16.30%
- --------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 21.97% 27.79% 13.78% 19.15%
- --------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 2.07% 8.09% 5.41% 7.54%
- --------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 40.25% 29.19% 17.07% 15.89%
- --------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund - Class A 15.62% 22.94% 14.67% 12.52%
- --------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - Class A 5.28% 10.40% 8.54% 8.23%
- --------------------------------------------------------------------------------------------------------------
Nationwide(R)Bond Fund 1.77% 7.46% 3.72% 6.21%
- --------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 31.81% 27.54% 16.29% 15.48%
- --------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 18.54% 20.21% 13.47% 12.73%
- --------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. 10.32% 18.93% 13.21% 15.40%
- --------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Fund, Inc. 21.51% 26.95% 17.51% 14.97%
- --------------------------------------------------------------------------------------------------------------
Neuberger & Berman Manhattan Fund, Inc. 21.48% 19.39% 11.48% 14.10%
- --------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 26.72% 27.52% 17.82% 15.19%
- --------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 18.29% 22.34% 15.95% 16.95%
- --------------------------------------------------------------------------------------------------------------
SEI Index Funds-S&P 500 Index Portfolio 25.32% 27.43% 17.04% 15.53%
- --------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 10.49% 18.95% 10.38% 12.51%
- --------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 16.35% 22.03% 16.95% 19.18%
- --------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) -4.77% 6.02% 10.18% 8.30%
- --------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I -0.86% 8.01% 11.08% 10.30%
- --------------------------------------------------------------------------------------------------------------
Templeton Global Smaller Companies Growth Fund, Inc. -0.45% 11.72% 11.21% 11.77%
- - Class I
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 62
NATIONWIDE DC VARIABLE ACCOUNT
SERIES PERFORMANCE SUMMARY
NON-STANDARDIZED AVERAGE TOTAL ANNUAL RETURN
(The total return figures shown below do not reflect the deduction of the
Participant Account Maintenance Charge or any applicable Contingent Deferred
Sales Charges)
<TABLE>
<CAPTION>
============================================================================================================================
10 YEARS
TO 12/31/97
1 YEAR 3 YEARS 5 YEARS OR LIFE OF
SERIES OPTIONS TO 12/31/97 TO 12/31/97 TO 12/31/97 FUND
============================================================================================================================
<S> <C> <C> <C> <C>
AIM Constellation Fund - Institutional Class 12.37% 20.60% 15.56% 19.51%
- ----------------------------------------------------------------------------------------------------------------------------
AIM Weingarten Fund - Institutional Class 25.28% 25.32% 14.53% 15.84%
- ----------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Growth 28.06% 20.26% 11.77% 14.29%
- ----------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Select 30.94% 23.39% 14.22% 13.50%
- ----------------------------------------------------------------------------------------------------------------------------
American Century: Twentieth Century Ultra 21.97% 23.33% 16.66% 20.74%
- ----------------------------------------------------------------------------------------------------------------------------
The Bond Fund of America, Inc.SM 8.20% 10.23% 7.34% 8.71%
- ----------------------------------------------------------------------------------------------------------------------------
Davis New York Venture Fund, Inc. 32.41% 32.21% 21.07% 20.04%
- ----------------------------------------------------------------------------------------------------------------------------
Delaware Group Decatur Fund, Inc.-Decatur Income Fund 28.73% 26.52% 17.88% 13.89%
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus S&P 500 Index Fund 31.83% 29.33% 18.54% 14.60%
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus Third Century Fund, Inc. 28.15% 28.52% 15.20% 15.09%
- ----------------------------------------------------------------------------------------------------------------------------
Evergreen Income and Growth Fund 24.40% 19.51% 12.09% 11.21%
- ----------------------------------------------------------------------------------------------------------------------------
Federated GNMA Trust-Institutional Shares 7.80% 8.82% 5.60% 7.78%
- ----------------------------------------------------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years 6.12% 6.99% 4.76% 6.51%
- - Institutional Shares
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager(TM) 21.12% 16.54% 12.33% 12.63%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Capital & Income Fund 13.62% 13.18% 11.13% 10.90%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund 21.84% 25.71% 18.54% 21.86%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Fund 28.76% 26.31% 19.18% 15.58%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio 28.94% 27.15% 19.78% 18.65%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Magellan(R)Fund 25.40% 23.42% 17.69% 17.76%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity OTC Portfolio 8.87% 22.25% 13.62% 16.80%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Puritan Fund 21.19% 18.48% 15.09% 13.96%
- ----------------------------------------------------------------------------------------------------------------------------
The Growth Fund of America(R), Inc. 25.66% 22.49% 15.61% 15.55%
- ----------------------------------------------------------------------------------------------------------------------------
The Income Fund of America(R), Inc. 21.01% 20.87% 14.00% 13.05%
- ----------------------------------------------------------------------------------------------------------------------------
INVESCO Industrial Income Fund, Inc. 25.25% 22.24% 15.00% 15.83%
- ----------------------------------------------------------------------------------------------------------------------------
Janus Fund 21.56% 22.68% 14.71% 17.22%
- ----------------------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 28.47% 29.97% 15.76% 19.99%
- ----------------------------------------------------------------------------------------------------------------------------
MAS Funds Fixed Income Portfolio 8.57% 10.83% 7.56% 8.88%
- ----------------------------------------------------------------------------------------------------------------------------
Massachusetts Investors Growth Stock Fund - Class A 46.75% 31.43% 18.92% 16.98%
- ----------------------------------------------------------------------------------------------------------------------------
MFS(R)Growth Opportunities Fund - Class A 22.12% 25.23% 16.50% 13.71%
- ----------------------------------------------------------------------------------------------------------------------------
MFS(R)High Income Fund - Class A 11.78% 13.08% 10.53% 9.66%
- ----------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Bond Fund 8.27% 10.20% 5.97% 7.62%
- ----------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund 38.31% 29.78% 18.16% 16.52%
- ----------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund 25.04% 22.60% 15.35% 13.87%
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Guardian Fund, Inc. 16.82% 21.31% 15.05% 16.37%
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Fund, Inc. 28.01% 29.15% 19.26% 16.08%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
============================================================================================================================
10 YEARS
TO 12/31/97
1 YEAR 3 YEARS 5 YEARS OR LIFE OF
SERIES OPTIONS TO 12/31/97 TO 12/31/97 TO 12/31/97 FUND
============================================================================================================================
<S> <C> <C> <C> <C>
Neuberger & Berman Manhattan Fund, Inc. 27.98% 21.80% 13.46% 15.13%
- ----------------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund - Class A 33.22% 29.72% 19.57% 16.29%
- ----------------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund - Class A 24.79% 24.63% 17.70% 17.92%
- ----------------------------------------------------------------------------------------------------------------------------
SEI Index Funds-S&P 500 Index Portfolio 31.82% 29.63% 18.84% 16.58%
- ----------------------------------------------------------------------------------------------------------------------------
Seligman Growth Fund, Inc. - Class A 16.99% 21.34% 12.40% 13.64%
- ----------------------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 22.85% 24.35% 18.64% 20.26%
- ----------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Stock Fund(R) 1.73% 8.85% 11.96% 9.57%
- ----------------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class I 5.64% 10.78% 12.86% 11.45%
- ----------------------------------------------------------------------------------------------------------------------------
Templeton Global Smaller Companies Growth Fund, Inc. 6.05% 14.33% 13.03% 12.88%
- - Class I
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 64
NATIONWIDE DC VARIABLE ACCOUNT
SERIES PERFORMANCE SUMMARY
STANDARDIZED AVERAGE TOTAL ANNUAL RETURN
THE FOLLOWING FUNDS ARE IN CONJUNCTION WITH CONTRACTS ISSUED PURSUANT TO SECTION
403(B) OF THE CODE ("TAX-SHELTERED ANNUITY CONTRACTS"):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
10 YEARS
OR DATE FUND
AVAILABLE IN
VARIABLE
YEAR ENDED 3 YEARS 5 YEARS ACCOUNT TO
SERIES OPTIONS 12/31/97 TO 12/31/97 TO 12/31/97 12/31/97
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - American 8.21% 12.62% 8.14% 9.54%
Century VP Balanced
- ----------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American -10.39% 2.80% 2.54% 6.30%
Century VP Capital Appreciation
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible 20.72% 24.49% NA 19.42%
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 25.20% 27.18% 16.76% 14.53%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager Portfolio 13.01% 13.66% 9.91% 11.53%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Overseas Portfolio 4.00% 7.61% 11.24% 7.19%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity Income Portfolio 20.40% 22.02% 17.31% 14.53%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 15.81% 20.72% 15.12% 15.05%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 10.05% 13.72% 10.96% 10.43%
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 21.29% 19.29% 10.36% 12.72%
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Limited Maturity Bond -0.77% 3.33% 2.31% 4.54%
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Portfolio 23.51% 28.99% NA 25.29%
- ----------------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 26.72% 26.36% 15.93% 16.60%
- ----------------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 2.13% 6.61% 4.15% 6.86%
- ----------------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund -2.24% 1.29% 1.14% 2.97%
- ----------------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 21.71% 23.23% 14.98% 13.38%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NATIONWIDE DC VARIABLE ACCOUNT
SERIES PERFORMANCE SUMMARY
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
THE FOLLOWING FUNDS ARE IN CONJUNCTION WITH CONTRACTS ISSUED PURSUANT TO SECTION
403(B) OF THE CODE ("TAX-SHELTERED ANNUITY CONTRACTS"):
(The total return figures shown below do not reflect the deduction of the
Participant Account Maintenance Charge or any applicable Contingent Deferred
Sales Charge)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED 3 YEARS 5 YEARS 10 YEARS
SERIES OPTIONS 12/31/97 TO 12/31/97 TO 12/31/97 TO 12/31/97
OR LIFE OF
FUND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century Variable Portfolios, Inc. - American 14.71% 15.22% 10.21% 9.98%
Century VP Balanced
- ----------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American -4.17% 5.65% 4.75% 7.66%
Century VP Capital Appreciation
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible 27.22% 26.75% NA 20.09%
- ----------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 31.70% 29.38% 18.57% 14.75%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager Portfolio 19.51% 16.27% 11.88% 11.80%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity Overseas Portfolio 10.50% 10.42% 13.02% 8.58%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity Income Portfolio 26.90% 24.34% 19.01% 15.65%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
10 YEARS
TO 12/31/97
YEAR ENDED 3 YEARS 5 YEARS OR LIFE OF
SERIES OPTIONS 12/31/97 TO 12/31/97 TO 12/31/97 FUND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Growth Portfolio 22.31% 23.06% 16.89% 16.09%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 16.55% 16.29% 12.86% 11.74%
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 27.79% 21.70% 12.40% 13.80%
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Limited Maturity Bond 5.73% 6.28% 4.63% 6.05%
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Partners Portfolio 30.01% 31.15% NA 26.06%
- ----------------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 33.22% 28.62% 17.79% 17.04%
- ----------------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 8.63% 9.41% 6.37% 8.22%
- ----------------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 4.26% 4.34% 3.53% 4.61%
- ----------------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 28.21% 25.54% 16.83% 14.54%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUITY PAYMENTS
See "Distribution of Participant Accounts (Retirement Period)" in the
prospectus.
<PAGE> 66
<PAGE> 1
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide DC Variable Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide DC Variable Account as of December 31,
1997, and the related statements of operations and changes in contract owners'
equity for each of the years in the two year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide DC Variable
Account as of December 31, 1997, and the results of its operations and its
changes in contract owners' equity for each of the years in the two year period
then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1998
<PAGE> 2
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<TABLE>
<S> <C>
Assets:
Investments at market value:
AIM Equity Funds, Inc. - AIM Constellation Fund - Institutional Class (AIMCon)
353,123 shares (cost $9,814,177) ............................................ $ 9,590,833
American Century: Twentieth Century Growth Fund (ACTCGro)
5,820,537 shares (cost $124,391,823) ........................................ 139,751,098
American Century: Twentieth Century Select Fund (ACTCSel)
53,889 shares (cost $2,029,743) ............................................. 2,295,131
American Century: Twentieth Century Ultra Fund (ACTCUltra)
12,261,059 shares (cost $324,921,418) ....................................... 334,726,919
The Bond Fund of America(SM), Inc. (BdFdAm)
891,354 shares (cost $12,244,809) ........................................... 12,478,950
Davis New York Venture Fund, Inc. - Class A (DNYVenFd)
19,577 shares (cost $453,076) ............................................... 437,146
Delaware Group Decatur Fund, Inc. -
Decatur Income Fund Institutional Class (DeDecInc)
14,039 shares (cost $255,992) ................................................ 282,599
Dreyfus Cash Management - Class A (DryCsMgt)
280,979 shares (cost $280,979) .............................................. 280,979
Dreyfus S&P 500 Index Fund (Dry500Ix)
1,018,745 shares (cost $28,751,343) ......................................... 29,237,968
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
3,439,808 shares (cost $31,837,262) ......................................... 36,152,385
Evergreen Income and Growth Fund - Class Y (EvIncGro)
193,507 shares (cost $3,789,466) ............................................ 4,630,612
The Institutional Shares of Federated GNMA Trust (FedGNMA)
84,604 shares (cost $945,490) ............................................... 958,562
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares (FedUSGvt)
237,513 shares (cost $2,498,293) ............................................. 2,524,767
Fidelity Asset Manager(TM) (FidAsMgr)
361,947 shares (cost $6,132,945) ............................................ 6,641,734
Fidelity Capital & Income Fund (FidCapInc)
137,300 shares (cost $1,223,378) ............................................ 1,374,369
Fidelity Contrafund (FidContr)
5,374,235 shares (cost $216,052,916) ........................................ 250,600,591
Fidelity Equity-Income Fund (FidEqInc)
5,615,995 shares (cost $209,919,501) ........................................ 294,334,304
Fidelity Growth & Income Portfolio (FidGrInc)
233,635 shares (cost $8,374,913) ............................................ 8,901,489
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Fidelity Magellan(R) Fund (FidMgln)
2,403,663 shares (cost $189,857,516) ........................................ 228,996,978
The Growth Fund of America(R), Inc. (GroFdAm)
723,811 shares (cost $12,215,214) ........................................... 13,593,179
The Income Fund of America(R), Inc. (IncFdAm)
1,032,931 shares (cost $16,631,222) ......................................... 18,355,189
INVESCO Industrial Income Fund, Inc. (InvIndInc)
1,534,974 shares (cost $20,422,144) ......................................... 22,886,469
Janus Fund (JanFund)
2,639,870 shares (cost $65,892,003) ......................................... 65,732,768
Janus Twenty Fund (Jan20Fd)
531 shares (cost $18,331) ................................................... 16,459
MAS Funds - Fixed Income Portfolio (MASFIP)
223,094 shares (cost $2,666,574) ............................................ 2,659,279
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
1,999,018 shares (cost $23,875,723) ......................................... 27,826,327
MFS(R) High Income Fund - Class A (MFSHiInc)
709,914 shares (cost $3,798,950) ............................................ 3,925,825
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
580,079 shares (cost $6,431,749) ............................................ 7,204,580
Nationwide(R) Bond Fund (NWBdFd)
11,726 shares (cost $107,869) ............................................... 111,750
Nationwide(R) Fund (NWFund)
2,844,581 shares (cost $58,840,651) ......................................... 75,352,944
Nationwide(R) Growth Fund (NWGroFd)
681,066 shares (cost $8,684,403) ............................................ 9,970,810
Nationwide(R) Money Market Fund (NWMyMkt)
45,685,723 shares (cost $45,685,723) ........................................ 45,685,723
Neuberger & Berman Guardian Fund (NBGuard)
37,973 shares (cost $1,101,956) ............................................. 983,491
Neuberger & Berman Manhattan Fund (NBManhFd)
11,339 shares (cost $134,200) ............................................... 124,843
Neuberger & Berman Partners Fund (NBPartFd)
76,015 shares (cost $2,209,884) ............................................. 1,999,193
Putnam Investors Fund - Class A (PutInvFd)
4,002,278 shares (cost $35,706,575) ......................................... 44,985,604
Putnam Voyager Fund - Class A (PutVoyFd)
7,238,618 shares (cost $117,476,335) ........................................ 137,895,671
SEI Index Funds - S&P 500 Index Portfolio (SEI500Ix)
497,766 shares (cost $14,146,931) ........................................... 15,256,513
Seligman Growth Fund, Inc. - Class A (SelGroFd)
469,336 shares (cost $2,521,649) ............................................ 2,853,565
T. Rowe Price International Funds, Inc. - International Stock Fund(R) (TRIntStk)
2,251,952 shares (cost $31,779,749) ......................................... 30,221,189
</TABLE>
(Continued)
<PAGE> 4
<TABLE>
<S> <C>
Templeton Foreign Fund - Class I (TemForFd)
8,112,299 shares (cost $81,035,996) ......................................... 80,717,371
American Century VP - American Century VP Balanced (ACVPBal)
830 shares (cost $6,031) .................................................... 6,842
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
8,162 shares (cost $83,823) ................................................. 79,009
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
357 shares (cost $8,306) .................................................... 8,913
Dreyfus Stock Index Fund (DryStkIx)
1,782 shares (cost $34,903) ................................................. 45,889
Fidelity VIP Fund II - Asset Manager Portfolio (FidVIPAM)
2,097 shares (cost $32,469) ................................................. 37,762
Fidelity VIP Fund - Equity-Income Portfolio (FidVIPEI)
6,960 shares (cost $137,259) ................................................ 168,985
Fidelity VIP Fund - Growth Portfolio (FidVIPGr)
3,591 shares (cost $105,209) ................................................ 133,242
Fidelity VIP Fund - High Income Portfolio (FidVIPHI)
3,346 shares (cost $40,631) ................................................. 45,435
Fidelity VIP - Overseas Portfolio (FidVIPOv)
8,313 shares (cost $145,630) ................................................ 159,604
Nationwide SAT - Government Bond Fund (NSATGvtBd)
1,299 shares (cost $14,382) ................................................. 14,783
Nationwide SAT - Money Market Fund (NSATMyMkt)
8,360 shares (cost $8,360) .................................................. 8,360
Nationwide SAT - Total Return Fund (NSATTotRe)
7,892 shares (cost $110,139) ................................................ 129,267
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
925 shares (cost $24,005) ................................................... 28,236
Neuberger & Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat)
598 shares (cost $8,207) .................................................... 8,440
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
1,429 shares (cost $21,046) ................................................. 29,435
--------------
Total investments ........................................................ 1,973,460,358
Accounts receivable ............................................................... 10,966,077
--------------
Total assets ............................................................. 1,984,426,435
Accounts payable ..................................................................... 10,325,466
--------------
Contract owners' equity (note 4) ..................................................... $1,974,100,969
==============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL AIMCon
---------------------------------- ----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................... $ 20,895,878 19,852,186 -- --
Mortality and expense charges (note 2) ............. (8,777,426) (7,324,869) (83,193) (53,871)
Administration charge (note 2)
Tier I ......................................... (4,398,894) (3,675,030) (55,661) (44,853)
Tier II ........................................ (1,173,353) (1,000,535) -- --
Tier III ....................................... (388,328) (279,498) -- --
Tier IV ........................................ (149,483) (128,485) -- --
Tier V ......................................... (420,645) (361,137) (6,404) (1,210)
--------------- --------------- --------------- ---------------
Net investment activity .......................... 5,587,749 7,082,632 (145,258) (99,934)
Proceeds from mutual fund shares sold .............. 357,793,032 426,930,903 18,815,677 1,188,174
Cost of mutual fund shares sold .................... (303,606,933) (365,983,789) (15,735,318) (823,994)
--------------- --------------- --------------- ---------------
Realized gain (loss) on investments .............. 54,186,099 60,947,114 3,080,359 364,180
Change in unrealized gain (loss) on investments .... 102,369,350 33,461,531 (1,523,649) 713,388
--------------- --------------- --------------- ---------------
Net gain (loss) on investments ................... 156,555,449 94,408,645 1,556,710 1,077,568
--------------- --------------- --------------- ---------------
Reinvested capital gains ........................... 184,171,649 91,935,777 657,567 508,345
--------------- --------------- --------------- ---------------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 346,314,847 193,427,054 2,069,019 1,485,979
--------------- --------------- --------------- ---------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................. 453,926,543 391,105,511 7,859,657 6,347,755
Transfers between funds ............................ -- -- (1,122,286) 3,672,192
Redemptions ........................................ (251,618,723) (384,960,385) (14,772,202) (1,656,333)
Annual contract maintenance charge (note 2) ........ (2,992) (109,548) -- --
Contingent deferred sales charges (note 2) ......... (14,054) (4,539) (695) (313)
Adjustments to maintain reserves ................... (293,934) (130,864) (797) (415)
--------------- --------------- --------------- ---------------
Net equity transactions ........................ 201,996,840 5,900,175 (8,036,323) 8,362,886
Net change in contract owners' equity .............. 548,311,687 199,327,229 (5,967,304) 9,848,865
Contract owners' equity beginning of period ........ 1,425,789,282 1,226,462,053 15,557,461 5,708,596
--------------- --------------- --------------- ---------------
Contract owners' equity end of period .............. $ 1,974,100,969 1,425,789,282 9,590,157 15,557,461
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
AIMWein ACTCGro
---------------------------------- ----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................... -- 14,997 -- 964,074
Mortality and expense charges (note 2) ............. (9,318) (9,300) (642,882) (736,946)
Administration charge (note 2)
Tier I ......................................... (8,386) (8,370) (271,869) (308,479)
Tier II ........................................ -- -- (93,304) (126,718)
Tier III ....................................... -- -- (26,285) (23,471)
Tier IV ........................................ -- -- (7,827) (9,068)
Tier V ......................................... -- -- (48,240) (52,202)
--------------- --------------- --------------- ---------------
Net investment activity .......................... (17,704) (2,673) (1,090,407) (292,810)
Proceeds from mutual fund shares sold .............. 2,988,919 362,431 16,716,393 58,779,225
Cost of mutual fund shares sold .................... (2,485,069) (306,808) (16,558,938) (63,406,533)
--------------- --------------- --------------- ---------------
Realized gain (loss) on investments .............. 503,850 55,623 157,455 (4,627,308)
Change in unrealized gain (loss) on investments .... (68,071) 26,347 10,717,229 21,683,917
--------------- --------------- --------------- ---------------
Net gain (loss) on investments ................... 435,779 81,970 10,874,684 17,056,609
--------------- --------------- --------------- ---------------
Reinvested capital gains ........................... 57 223,451 20,522,141 1,295,969
--------------- --------------- --------------- ---------------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 418,132 302,748 30,306,418 18,059,768
--------------- --------------- --------------- ---------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................. 430,962 537,314 14,467,218 17,388,418
Transfers between funds ............................ (191,388) (70,108) (6,426,109) (21,672,216)
Redemptions ........................................ (2,774,113) (177,736) (12,448,292) (49,435,421)
Annual contract maintenance charge (note 2) ........ -- -- (4) (25,093)
Contingent deferred sales charges (note 2) ......... -- -- (700) (325)
Adjustments to maintain reserves ................... (440) 80 3,742 (3,642)
--------------- --------------- --------------- ---------------
Net equity transactions ........................ (2,534,979) 289,550 (4,404,145) (53,748,279)
Net change in contract owners' equity .............. (2,116,847) 592,298 25,902,273 (35,688,511)
Contract owners' equity beginning of period ........ 2,116,847 1,524,549 113,853,751 149,542,262
--------------- --------------- --------------- ---------------
Contract owners' equity end of period .............. -- 2,116,847 139,756,024 113,853,751
=============== =============== =============== ===============
</TABLE>
(Continued)
<PAGE> 6
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ACTCSel ACTCUltra
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. $ 8,911 11,951 127,927 --
Mortality and expense charges (note 2) ........... (9,710) (9,312) (1,509,815) (1,223,060)
Administration charge (note 2)
Tier I ....................................... (226) (231) (776,590) (620,290)
Tier II ...................................... -- -- (199,798) (159,009)
Tier III ..................................... -- -- (80,544) (62,126)
Tier IV ...................................... (3,783) (3,622) (21,246) (19,777)
Tier V ....................................... -- -- (62,951) (54,629)
------------ ------------ ------------ ------------
Net investment activity ........................ (4,808) (1,214) (2,523,017) (2,138,891)
Proceeds from mutual fund shares sold ............ 105,754 573,132 42,925,473 45,912,843
Cost of mutual fund shares sold .................. (82,007) (503,535) (28,943,858) (33,382,579)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............ 23,747 69,597 13,981,615 12,530,264
Change in unrealized gain (loss) on investments .. 123,754 41,842 (23,440,931) 2,813,597
------------ ------------ ------------ ------------
Net gain (loss) on investments ................. 147,501 111,439 (9,459,316) 15,343,861
------------ ------------ ------------ ------------
Reinvested capital gains ......................... 357,648 136,147 68,012,104 14,628,040
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 500,341 246,372 56,029,771 27,833,010
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 237,869 144,642 76,463,255 77,539,281
Transfers between funds .......................... 72,140 (297,684) (3,905,194) (4,202,211)
Redemptions ...................................... (73,384) (204,280) (39,257,098) (48,772,720)
Annual contract maintenance charge (note 2) ...... -- -- (24) (36)
Contingent deferred sales charges (note 2) ....... -- -- (1,699) (1,200)
Adjustments to maintain reserves ................. (255) (1,008) (69,090) 16,497
------------ ------------ ------------ ------------
Net equity transactions ...................... 236,370 (358,330) 33,230,150 24,579,611
Net change in contract owners' equity ............ 736,711 (111,958) 89,259,921 52,412,621
Contract owners' equity beginning of period ...... 1,558,172 1,670,130 245,403,535 192,990,914
------------ ------------ ------------ ------------
Contract owners' equity end of period ............ $ 2,294,883 1,558,172 334,663,456 245,403,535
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
BdFdAm DNYVenFd
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. 831,172 1,046,187 2,454 21,123
Mortality and expense charges (note 2) ........... (59,085) (73,390) (20,053) (17,262)
Administration charge (note 2)
Tier I ....................................... (33,669) (41,477) (16,533) (5,711)
Tier II ...................................... (8,744) (13,677) (1,346) (8,733)
Tier III ..................................... (2,293) (2,065) -- --
Tier IV ...................................... (201) (214) -- --
Tier V ....................................... (1,926) (1,870) -- --
------------ ------------ ------------ ------------
Net investment activity ........................ 725,254 913,494 (35,478) (10,583)
Proceeds from mutual fund shares sold ............ 5,280,682 8,814,167 8,604,728 3,456,609
Cost of mutual fund shares sold .................. (5,010,122) (8,967,702) (7,453,575) (2,805,367)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............ 270,560 (153,535) 1,151,153 651,242
Change in unrealized gain (loss) on investments .. (62,236) (20,855) (200,770) 14,694
------------ ------------ ------------ ------------
Net gain (loss) on investments ................. 208,324 (174,390) 950,383 665,936
------------ ------------ ------------ ------------
Reinvested capital gains ......................... -- -- 10,430 82,146
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 933,578 739,104 925,335 737,499
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 2,017,698 3,181,588 4,085,503 1,804,566
Transfers between funds .......................... (215,164) (1,049,358) 2,267,457 784,377
Redemptions ...................................... (1,811,719) (6,476,871) (9,056,278) (3,494,975)
Annual contract maintenance charge (note 2) ...... (8) (2,955) -- --
Contingent deferred sales charges (note 2) ....... -- -- -- --
Adjustments to maintain reserves ................. (783) (1,103) 8,950 165
------------ ------------ ------------ ------------
Net equity transactions ...................... (9,976) (4,348,699) (2,694,368) (905,867)
Net change in contract owners' equity ............ 923,602 (3,609,595) (1,769,033) (168,368)
Contract owners' equity beginning of period ...... 11,554,576 15,164,171 2,215,046 2,383,414
------------ ------------ ------------ ------------
Contract owners' equity end of period ............ 12,478,178 11,554,576 446,013 2,215,046
============ ============ ============ ============
</TABLE>
<PAGE> 7
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
DeDecInc DryCsMgt
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. $ 7,552 7,849 54,849 136,743
Mortality and expense charges (note 2) ........... (1,261) (1,071) (5,071) (13,528)
Administration charge (note 2)
Tier I ....................................... (889) (785) (3,079) (2,135)
Tier II ...................................... (157) (111) (1,320) (8,925)
Tier III ..................................... (46) (37) -- --
Tier IV ...................................... -- -- -- --
Tier V ....................................... -- -- -- --
----------- ----------- ----------- -----------
Net investment activity ........................ 5,199 5,845 45,379 112,155
Proceeds from mutual fund shares sold ............ 32,460 37,688 6,117,696 6,819,165
Cost of mutual fund shares sold .................. (26,970) (35,438) (6,117,696) (6,819,165)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ............ 5,490 2,250 -- --
Change in unrealized gain (loss) on investments .. 14,342 821 -- --
----------- ----------- ----------- -----------
Net gain (loss) on investments ................. 19,832 3,071 -- --
----------- ----------- ----------- -----------
Reinvested capital gains ......................... 37,091 28,159 -- --
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 62,122 37,075 45,379 112,155
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 30,795 32,196 662,604 534,980
Transfers between funds .......................... (2,219) (18,353) (165,420) 345,922
Redemptions ...................................... (31,221) (19,904) (1,416,011) (2,682,910)
Annual contract maintenance charge (note 2) ...... -- (4) -- --
Contingent deferred sales charges (note 2) ....... -- -- -- --
Adjustments to maintain reserves ................. -- (135) (171) (243)
----------- ----------- ----------- -----------
Net equity transactions ...................... (2,645) (6,200) (918,998) (1,802,251)
Net change in contract owners' equity .............. 59,477 30,875 (873,619) (1,690,096)
Contract owners' equity beginning of period ........ 223,128 192,253 1,154,439 2,844,535
----------- ----------- ----------- -----------
Contract owners' equity end of period .............. $ 282,605 223,128 280,820 1,154,439
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Dry500Ix Dry3dCen
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. 284,069 -- 62,610 42,627
Mortality and expense charges (note 2) ........... (35,171) -- (145,644) (95,294)
Administration charge (note 2)
Tier I ....................................... (14,618) -- (65,097) (45,192)
Tier II ...................................... (9,421) -- (16,969) (12,596)
Tier III ..................................... (3,048) -- (7,994) (3,757)
Tier IV ...................................... (830) -- (2,467) (940)
Tier V ....................................... -- -- (9,783) (6,217)
----------- ----------- ----------- -----------
Net investment activity ........................ 220,981 -- (185,344) (121,369)
Proceeds from mutual fund shares sold ............ 2,486,482 -- 3,259,863 6,090,694
Cost of mutual fund shares sold .................. (2,245,649) -- (2,727,200) (5,350,324)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ............ 240,833 -- 532,663 740,370
Change in unrealized gain (loss) on investments .. 486,625 -- 3,474,496 41,428
----------- ----------- ----------- -----------
Net gain (loss) on investments ................. 727,458 -- 4,007,159 781,798
----------- ----------- ----------- -----------
Reinvested capital gains ......................... 433,206 -- 2,817,470 2,973,237
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 1,381,645 -- 6,639,285 3,633,666
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 8,226,484 -- 9,162,128 4,244,258
Transfers between funds .......................... 10,392,894 -- 2,904,857 2,628,824
Redemptions ...................................... (763,066) -- (2,496,781) (5,116,680)
Annual contract maintenance charge (note 2) ...... -- -- -- --
Contingent deferred sales charges (note 2) ....... -- -- -- --
Adjustments to maintain reserves ................. (170,387) -- (3,144) 265
----------- ----------- ----------- -----------
Net equity transactions ...................... 17,685,925 -- 9,567,060 1,756,667
Net change in contract owners' equity .............. 19,067,570 -- 16,206,345 5,390,333
Contract owners' equity beginning of period ........ -- -- 19,942,835 14,552,502
----------- ----------- ----------- -----------
Contract owners' equity end of period .............. 19,067,570 -- 36,149,180 19,942,835
=========== =========== =========== ===========
</TABLE>
(Continued)
<PAGE> 8
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
EvIncGro FedGNMA
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ 204,120 267,495 49,431 44,688
Mortality and expense charges (note 2) ............... (21,764) (28,011) (3,754) (3,329)
Administration charge (note 2)
Tier I ........................................... (9,480) (10,537) (3,378) (2,996)
Tier II .......................................... (4,090) (6,618) -- --
Tier III ......................................... (587) (499) -- --
Tier IV .......................................... (102) (224) -- --
Tier V ........................................... (1,465) (1,992) -- --
---------- ---------- ---------- ----------
Net investment activity ............................ 166,632 219,614 42,299 38,363
Proceeds from mutual fund shares sold ................ 847,065 2,360,157 440,928 203,672
Cost of mutual fund shares sold ...................... (754,439) (2,355,105) (428,095) (209,513)
---------- ---------- ---------- ----------
Realized gain (loss) on investments ................ 92,626 5,052 12,833 (5,841)
Change in unrealized gain (loss) on investments ...... 409,277 329,828 493 (5,208)
---------- ---------- ---------- ----------
Net gain (loss) on investments ..................... 501,903 334,880 13,326 (11,049)
---------- ---------- ---------- ----------
Reinvested capital gains ............................. 285,501 -- -- --
---------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 954,036 554,494 55,625 27,314
---------- ---------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 314,114 537,355 97,632 152,176
Transfers between funds .............................. (630,620) (879,504) 396,046 (7,769)
Redemptions .......................................... (327,850) (1,565,234) (299,846) (94,659)
Annual contract maintenance charge (note 2) .......... -- -- -- --
Contingent deferred sales charges (note 2) ........... -- -- (165) (11)
Adjustments to maintain reserves ..................... 44 120 (5) (70)
---------- ---------- ---------- ----------
Net equity transactions .......................... (644,312) (1,907,263) 193,662 49,667
Net change in contract owners' equity .................. 309,724 (1,352,769) 249,287 76,981
Contract owners' equity beginning of period ............ 4,320,926 5,673,695 709,278 632,297
---------- ---------- ---------- ----------
Contract owners' equity end of period .................. $4,630,650 4,320,926 958,565 709,278
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
FedUSGvt FidAsMgr
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. 122,936 109,980 200,644 228,299
Mortality and expense charges (note 2) ............... (11,028) (11,497) (29,750) (34,006)
Administration charge (note 2)
Tier I ........................................... (6,630) (4,151) (17,550) (14,080)
Tier II .......................................... (1,877) (1,950) (3,833) (10,889)
Tier III ......................................... (400) (395) (1,227) (919)
Tier IV .......................................... (259) (317) (1,365) (1,288)
Tier V ........................................... -- (899) -- --
---------- ---------- ---------- ----------
Net investment activity ............................ 102,742 90,771 146,919 167,117
Proceeds from mutual fund shares sold ................ 1,662,873 1,653,358 1,776,704 4,210,588
Cost of mutual fund shares sold ...................... (1,668,080) (1,626,128) (1,379,459) (3,630,222)
---------- ---------- ---------- ----------
Realized gain (loss) on investments ................ (5,207) 27,230 397,245 580,366
Change in unrealized gain (loss) on investments ...... 33,840 (66,217) 219,715 (264,491)
---------- ---------- ---------- ----------
Net gain (loss) on investments ..................... 28,633 (38,987) 616,960 315,875
---------- ---------- ---------- ----------
Reinvested capital gains ............................. -- -- 370,511 221,907
---------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 131,375 51,784 1,134,390 704,899
---------- ---------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 665,677 966,775 1,689,785 2,180,472
Transfers between funds .............................. 36,017 (704,468) (77,999) (890,070)
Redemptions .......................................... (329,946) (386,399) (1,129,423) (3,521,012)
Annual contract maintenance charge (note 2) .......... -- -- -- --
Contingent deferred sales charges (note 2) ........... -- -- (42) --
Adjustments to maintain reserves ..................... (158) (286) 2,277 (410)
---------- ---------- ---------- ----------
Net equity transactions .......................... 371,590 (124,378) 484,598 (2,231,020)
Net change in contract owners' equity .................. 502,965 (72,594) 1,618,988 (1,526,121)
Contract owners' equity beginning of period ............ 2,021,665 2,094,259 5,023,827 6,549,948
---------- ---------- ---------- ----------
Contract owners' equity end of period .................. 2,524,630 2,021,665 6,642,815 5,023,827
========== ========== ========== ==========
</TABLE>
<PAGE> 9
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FidCapInc FidContr
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. $ 94,905 117,308 1,712,764 1,545,421
Mortality and expense charges (note 2) ............ (6,810) (7,639) (1,095,804) (734,971)
Administration charge (note 2)
Tier I ........................................ (2,241) (2,409) (644,732) (432,587)
Tier II ....................................... (657) (1,277) (155,250) (119,426)
Tier III ...................................... (831) (316) (60,205) (37,618)
Tier IV ....................................... (170) (207) (19,745) (14,872)
Tier V ........................................ (506) (697) (10,700) (1,548)
------------ ------------ ------------ ------------
Net investment activity ......................... 83,690 104,763 (273,672) 204,399
Proceeds from mutual fund shares sold ............. 181,090 500,552 24,431,745 26,450,915
Cost of mutual fund shares sold ................... (133,415) (364,126) (15,172,449) (20,427,691)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............. 47,675 136,426 9,259,296 6,023,224
Change in unrealized gain (loss) on investments ... 43,602 (106,075) 11,711,270 9,814,737
------------ ------------ ------------ ------------
Net gain (loss) on investments .................. 91,277 30,351 20,970,566 15,837,961
------------ ------------ ------------ ------------
Reinvested capital gains .......................... -- -- 21,858,485 11,581,370
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ............ 174,967 135,114 42,555,379 27,623,730
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................. -- (23) 71,455,791 55,820,118
Transfers between funds ........................... (47,356) (62,523) 2,764,788 13,444,223
Redemptions ....................................... (120,296) (425,397) (35,148,446) (34,561,066)
Annual contract maintenance charge (note 2) ....... -- -- (12) --
Contingent deferred sales charges (note 2) ........ -- -- -- (16)
Adjustments to maintain reserves .................. (69) (257) (25,659) (77,234)
------------ ------------ ------------ ------------
Net equity transactions ....................... (167,721) (488,200) 39,046,462 34,626,025
Net change in contract owners' equity ............. 7,246 (353,086) 81,601,841 62,249,755
Contract owners' equity beginning of period ....... 1,367,071 1,720,157 168,983,800 106,734,045
------------ ------------ ------------ ------------
Contract owners' equity end of period ............. $ 1,374,317 1,367,071 250,585,641 168,983,800
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FidEqInc FidGrInc
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. 4,846,247 4,458,988 171,835 120,582
Mortality and expense charges (note 2) ............ (1,228,965) (951,325) (72,380) (34,818)
Administration charge (note 2)
Tier I ........................................ (555,462) (427,937) (39,476) (31,336)
Tier II ....................................... (182,609) (124,216) -- --
Tier III ...................................... (56,191) (40,047) -- --
Tier IV ....................................... (27,411) (23,180) -- --
Tier V ........................................ (66,404) (58,763) (8,555) --
------------ ------------ ------------ ------------
Net investment activity ......................... 2,729,205 2,833,520 51,424 54,428
Proceeds from mutual fund shares sold ............. 7,591,614 32,470,928 15,556,109 3,117,754
Cost of mutual fund shares sold ................... (4,094,211) (18,103,159) (12,289,818) (2,524,726)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............. 3,497,403 14,367,769 3,266,291 593,028
Change in unrealized gain (loss) on investments ... 43,670,084 6,810,967 (795,078) 345,172
------------ ------------ ------------ ------------
Net gain (loss) on investments .................. 47,167,487 21,178,736 2,471,213 938,200
------------ ------------ ------------ ------------
Reinvested capital gains .......................... 10,700,332 8,080,048 617,392 306,623
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ............ 60,597,024 32,092,304 3,140,029 1,299,251
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................. 49,555,826 37,796,687 8,903,236 4,132,838
Transfers between funds ........................... 7,627,274 6,082,051 1,906,025 1,663,942
Redemptions ....................................... (16,944,810) (41,406,202) (15,606,356) (3,534,384)
Annual contract maintenance charge (note 2) ....... -- (17,665) -- --
Contingent deferred sales charges (note 2) ........ (2,187) (190) -- --
Adjustments to maintain reserves .................. (2,091) (6,538) 973 2
------------ ------------ ------------ ------------
Net equity transactions ....................... 40,234,012 2,448,143 (4,796,122) 2,262,398
Net change in contract owners' equity ............. 100,831,036 34,540,447 (1,656,093) 3,561,649
Contract owners' equity beginning of period ....... 193,502,053 158,961,606 10,558,554 6,996,905
------------ ------------ ------------ ------------
Contract owners' equity end of period ............. 294,333,089 193,502,053 8,902,461 10,558,554
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 10
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FidMgIn FidOTC
------------------------------- ------------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. $ 2,776,362 2,347,353 -- --
Mortality and expense charges (note 2) ............ (1,029,833) (928,190) -- --
Administration charge (note 2)
Tier I ........................................ (554,264) (489,031) -- --
Tier II ....................................... (107,173) (84,316) -- --
Tier III ...................................... (39,771) (34,922) -- --
Tier IV ....................................... (15,441) (14,932) -- --
Tier V ........................................ (52,539) (55,169) -- --
------------- ------------- ------------- -------------
Net investment activity ......................... 977,341 740,793 -- --
Proceeds from mutual fund shares sold ............. 17,843,381 25,879,725 -- 78,420
Cost of mutual fund shares sold ................... (14,477,806) (22,802,539) -- (80,480)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ............. 3,365,575 3,077,186 -- (2,060)
Change in unrealized gain (loss) on investments ... 29,086,622 (11,383,877) -- 2,064
------------- ------------- ------------- -------------
Net gain (loss) on investments .................. 32,452,197 (8,306,691) -- 4
------------- ------------- ------------- -------------
Reinvested capital gains .......................... 11,739,123 25,354,072 -- --
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ............ 45,168,661 17,788,174 -- 4
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................. 41,946,309 53,096,333 -- --
Transfers between funds ........................... (12,805,250) (32,238,041) -- --
Redemptions ....................................... (22,357,376) (20,782,223) -- (78,420)
Annual contract maintenance charge (note 2) ....... -- -- -- --
Contingent deferred sales charges (note 2) ........ (1,445) (808) -- --
Adjustments to maintain reserves .................. (7,838) (4,540) -- (4)
------------- ------------- ------------- -------------
Net equity transactions ....................... 6,774,400 70,721 -- (78,424)
Net change in contract owners' equity ............. 51,943,061 17,858,895 -- (78,420)
Contract owners' equity beginning of period ....... 177,046,208 159,187,313 -- 78,420
------------- ------------- ------------- -------------
Contract owners' equity end of period ............. $ 228,989,269 177,046,208 -- --
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
GroFdAm IncFdAm
------------------------------- -------------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. 83,852 85,990 802,807 1,014,512
Mortality and expense charges (note 2) ............ (57,706) (76,212) (86,189) (93,298)
Administration charge (note 2)
Tier I ........................................ (34,281) (54,923) (55,580) (67,682)
Tier II ....................................... (7,916) (5,621) (12,467) (8,905)
Tier III ...................................... (4,327) (3,446) (3,364) (2,368)
Tier IV ....................................... (1,003) (967) (1,297) (1,207)
Tier V ........................................ -- -- -- --
------------- ------------- ------------- -------------
Net investment activity ......................... (21,381) (55,179) 643,910 841,052
Proceeds from mutual fund shares sold ............. 1,428,368 11,929,973 3,825,869 7,389,650
Cost of mutual fund shares sold ................... (1,129,814) (9,375,437) (2,940,941) (6,503,900)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ............. 298,554 2,554,536 884,928 885,750
Change in unrealized gain (loss) on investments ... 937,071 (1,344,244) 357,933 (190,102)
------------- ------------- ------------- -------------
Net gain (loss) on investments .................. 1,235,625 1,210,292 1,242,861 695,648
------------- ------------- ------------- -------------
Reinvested capital gains .......................... 1,328,724 672,289 1,368,961 952,784
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ............ 2,542,968 1,827,402 3,255,732 2,489,484
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................. 2,447,734 3,842,164 3,463,650 4,244,393
Transfers between funds ........................... (330,586) (522,247) (263,093) (1,138,464)
Redemptions ....................................... (846,573) (11,256,013) (3,321,842) (6,743,100)
Annual contract maintenance charge (note 2) ....... -- (6,535) -- --
Contingent deferred sales charges (note 2) ........ -- -- -- --
Adjustments to maintain reserves .................. (854) (708) 170 (872)
------------- ------------- ------------- -------------
Net equity transactions ....................... 1,269,721 (7,943,339) (121,115) (3,638,043)
Net change in contract owners' equity ............. 3,812,689 (6,115,937) 3,134,617 (1,148,559)
Contract owners' equity beginning of period ....... 9,779,679 15,895,616 15,220,788 16,369,347
------------- ------------- ------------- -------------
Contract owners' equity end of period ............. 13,592,368 9,779,679 18,355,405 15,220,788
============= ============= ============= =============
</TABLE>
<PAGE> 11
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
InvIndInc JanFund
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. $ 503,142 519,784 504,628 310,689
Mortality and expense charges (note 2) ............ (102,486) (87,753) (263,647) (147,723)
Administration charge (note 2)
Tier I ........................................ (68,066) (58,875) (155,821) (90,100)
Tier II ....................................... (15,321) (13,634) (40,695) (19,019)
Tier III ...................................... (2,187) (1,437) (12,305) (7,216)
Tier IV ....................................... (1,625) (1,159) (7,654) (4,725)
Tier V ........................................ -- -- -- --
------------ ------------ ------------ ------------
Net investment activity ......................... 313,457 356,926 24,506 41,906
Proceeds from mutual fund shares sold ............. 2,918,824 6,354,821 1,817,544 5,274,235
Cost of mutual fund shares sold ................... (2,133,346) (5,655,544) (1,287,899) (4,248,259)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............. 785,478 699,277 529,645 1,025,976
Change in unrealized gain (loss) on investments ... 1,085,683 234,134 (1,083,219) (822,680)
------------ ------------ ------------ ------------
Net gain (loss) on investments .................. 1,871,161 933,411 (553,574) 203,296
------------ ------------ ------------ ------------
Reinvested capital gains .......................... 2,264,235 1,190,695 10,329,860 4,343,103
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ............ 4,448,853 2,481,032 9,800,792 4,588,305
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................. 5,518,647 5,610,132 22,193,127 13,945,193
Transfers between funds ........................... (42,962) (563,565) 385,853 6,909,943
Redemptions ....................................... (3,356,403) (6,639,034) (3,993,919) (6,395,457)
Annual contract maintenance charge (note 2) ....... -- (2,841) -- --
Contingent deferred sales charges (note 2) ........ -- -- -- --
Adjustments to maintain reserves .................. (284) (1,143) (6,804) (1,049)
------------ ------------ ------------ ------------
Net equity transactions ....................... 2,118,998 (1,596,451) 18,578,257 14,458,630
Net change in contract owners' equity ............. 6,567,851 884,581 28,379,049 19,046,935
Contract owners' equity beginning of period ....... 16,322,252 15,437,671 37,346,871 18,299,936
------------ ------------ ------------ ------------
Contract owners' equity end of period ............. $ 22,890,103 16,322,252 65,725,920 37,346,871
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Jan20Fd MASFIP
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. 45 1,383 131,839 57,963
Mortality and expense charges (note 2) ............ (643) (664) (9,679) (4,231)
Administration charge (note 2)
Tier I ........................................ (578) (598) (5,793) (2,507)
Tier II ....................................... -- -- (1,213) (652)
Tier III ...................................... -- -- (733) (262)
Tier IV ....................................... -- -- (202) (77)
Tier V ........................................ -- -- -- --
------------ ------------ ------------ ------------
Net investment activity ......................... (1,176) 121 114,219 50,234
Proceeds from mutual fund shares sold ............. 571,046 178,295 1,183,622 558,613
Cost of mutual fund shares sold ................... (609,105) (153,190) (1,164,040) (557,602)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............. (38,059) 25,105 19,582 1,011
Change in unrealized gain (loss) on investments ... 33,644 (36,405) (6,279) (3,811)
------------ ------------ ------------ ------------
Net gain (loss) on investments .................. (4,415) (11,300) 13,303 (2,800)
------------ ------------ ------------ ------------
Reinvested capital gains .......................... 2,061 40,485 34,732 12,299
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ............ (3,530) 29,306 162,254 59,733
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................. 215,002 264,436 892,120 819,228
Transfers between funds ........................... 124,576 60,880 562,385 112,068
Redemptions ....................................... (569,390) (146,847) (220,277) (151,855)
Annual contract maintenance charge (note 2) ....... -- -- -- --
Contingent deferred sales charges (note 2) ........ -- -- -- --
Adjustments to maintain reserves .................. 4 -- (131) (209)
------------ ------------ ------------ ------------
Net equity transactions ....................... (229,808) 178,469 1,234,097 779,232
Net change in contract owners' equity ............. (233,338) 207,775 1,396,351 838,965
Contract owners' equity beginning of period ....... 249,793 42,018 1,262,922 423,957
------------ ------------ ------------ ------------
Contract owners' equity end of period ............. 16,455 249,793 2,659,273 1,262,922
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 12
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
MFSGrOpp MFSHiInc
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. $ -- -- 312,636 337,552
Mortality and expense charges (note 2) ............ (134,126) (140,948) (18,058) (23,190)
Administration charge (note 2)
Tier I ........................................ (22,570) (27,772) (2,559) (4,661)
Tier II ....................................... (11,636) (10,430) (655) (908)
Tier III ...................................... (5,520) (4,357) (418) (119)
Tier IV ....................................... (108) (145) (1) (2)
Tier V ........................................ (25,510) (26,829) (4,109) (5,002)
------------ ------------ ------------ ------------
Net investment activity ......................... (199,470) (210,481) 286,836 303,670
Proceeds from mutual fund shares sold ............. 4,369,685 3,751,453 2,220,329 1,645,150
Cost of mutual fund shares sold ................... (3,326,454) (3,254,502) (2,126,593) (1,605,880)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............. 1,043,231 496,951 93,736 39,270
Change in unrealized gain (loss) on investments ... 846,207 1,417,206 19,624 79,309
------------ ------------ ------------ ------------
Net gain (loss) on investments .................. 1,889,438 1,914,157 113,360 118,579
------------ ------------ ------------ ------------
Reinvested capital gains .......................... 3,444,649 2,751,576 -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ............ 5,134,617 4,455,252 400,196 422,249
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................. 1,426,143 1,180,246 610,811 352,677
Transfers between funds ........................... (942,811) (773,129) (123,874) (369,285)
Redemptions ....................................... (3,228,399) (2,771,393) (708,681) (651,164)
Annual contract maintenance charge (note 2) ....... -- (27) -- --
Contingent deferred sales charges (note 2) ........ -- -- -- --
Adjustments to maintain reserves .................. (21,750) (18,619) (2,782) (353)
------------ ------------ ------------ ------------
Net equity transactions ....................... (2,766,817) (2,382,922) (224,526) (668,125)
Net change in contract owners' equity ............. 2,367,800 2,072,330 175,670 (245,876)
Contract owners' equity beginning of period ....... 25,459,101 23,386,771 3,747,401 3,993,277
------------ ------------ ------------ ------------
Contract owners' equity end of period ............. $ 27,826,901 25,459,101 3,923,071 3,747,401
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MFSGrStk NWBdFd
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. 3,241 -- 8,172 11,782
Mortality and expense charges (note 2) ............ (30,470) (30,903) (641) (1,101)
Administration charge (note 2)
Tier I ........................................ (8,816) (7,969) (76) (213)
Tier II ....................................... (1,116) (2,829) -- --
Tier III ...................................... (501) (410) -- --
Tier IV ....................................... (8) (7) -- --
Tier V ........................................ (5,527) (5,343) (167) (259)
------------ ------------ ------------ ------------
Net investment activity ......................... (43,197) (47,461) 7,288 10,209
Proceeds from mutual fund shares sold ............. 806,782 1,529,884 78,071 136,724
Cost of mutual fund shares sold ................... (796,449) (1,482,189) (82,229) (134,113)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............. 10,333 47,695 (4,158) 2,611
Change in unrealized gain (loss) on investments ... 1,199,210 (205,079) 6,157 (10,029)
------------ ------------ ------------ ------------
Net gain (loss) on investments .................. 1,209,543 (157,384) 1,999 (7,418)
------------ ------------ ------------ ------------
Reinvested capital gains .......................... 1,104,545 1,217,085 -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ............ 2,270,891 1,012,240 9,287 2,791
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................. 560,733 492,179 22,759 62,411
Transfers between funds ........................... 54,405 (274,332) (33,788) (43,758)
Redemptions ....................................... (695,501) (1,144,387) (46,264) (44,847)
Annual contract maintenance charge (note 2) ....... (486) (519) -- --
Contingent deferred sales charges (note 2) ........ (456) (128) -- --
Adjustments to maintain reserves .................. 451 (830) (12) (35)
------------ ------------ ------------ ------------
Net equity transactions ....................... (80,854) (928,017) (57,305) (26,229)
Net change in contract owners' equity ............. 2,190,037 84,223 (48,018) (23,438)
Contract owners' equity beginning of period ....... 5,014,974 4,930,751 159,754 183,192
------------ ------------ ------------ ------------
Contract owners' equity end of period ............. 7,205,011 5,014,974 111,736 159,754
============ ============ ============ ============
</TABLE>
<PAGE> 13
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
NWMyMkt NBGuard
<TABLE>
<CAPTION>
NWFund NWGroFd
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. $ 690,370 609,726 68,821 98,234
Mortality and expense charges (note 2) ............ (266,484) (191,658) (44,059) (50,111)
Administration charge (note 2)
Tier I ........................................ (123,555) (96,358) (17,354) (20,206)
Tier II ....................................... (35,569) (27,976) (5,594) (9,047)
Tier III ...................................... (14,919) (7,436) (1,245) (972)
Tier IV ....................................... (3,750) (1,643) (2,168) (2,176)
Tier V ........................................ (15,150) (9,936) (3,087) (2,787)
------------ ------------ ------------ ------------
Net investment activity ......................... 230,943 274,719 (4,686) 12,935
Proceeds from mutual fund shares sold ............. 3,524,263 14,865,042 888,498 4,378,762
Cost of mutual fund shares sold ................... (2,432,914) (11,883,176) (640,663) (3,358,066)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............. 1,091,349 2,981,866 247,835 1,020,696
Change in unrealized gain (loss) on investments ... 11,194,545 1,906,009 428,346 (277,957)
------------ ------------ ------------ ------------
Net gain (loss) on investments .................. 12,285,894 4,887,875 676,181 742,739
------------ ------------ ------------ ------------
Reinvested capital gains .......................... 3,686,826 2,216,305 1,209,332 534,447
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ............ 16,203,663 7,378,899 1,880,827 1,290,121
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................. 15,483,476 5,277,378 1,294,729 1,185,223
Transfers between funds ........................... 13,256,766 (2,809,029) (227,077) (1,384,376)
Redemptions ....................................... (4,206,078) (10,666,892) (510,560) (3,340,229)
Annual contract maintenance charge (note 2) ....... (1,088) (3,430) -- (951)
Contingent deferred sales charges (note 2) ........ (897) (1,525) -- --
Adjustments to maintain reserves .................. 433 (4,940) 95 (883)
------------ ------------ ------------ ------------
Net equity transactions ....................... 24,532,612 (8,208,438) 557,187 (3,541,216)
Net change in contract owners' equity ............. 40,736,275 (829,539) 2,438,014 (2,251,095)
Contract owners' equity beginning of period ....... 34,591,092 35,420,631 7,532,918 9,784,013
------------ ------------ ------------ ------------
Contract owners' equity end of period ............. $ 75,327,367 34,591,092 9,970,932 7,532,918
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NWMyMkt NBGuard
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .............................. 2,956,768 2,752,685 4,553 818
Mortality and expense charges (note 2) ............ (298,652) (305,814) (3,053) (199)
Administration charge (note 2)
Tier I ........................................ (99,691) (113,053) -- --
Tier II ....................................... (78,281) (71,393) -- --
Tier III ...................................... (9,259) (7,717) -- --
Tier IV ....................................... (6,949) (7,408) -- --
Tier V ........................................ (17,169) (17,873) (916) (60)
------------ ------------ ------------ ------------
Net investment activity ......................... 2,446,767 2,229,427 584 559
Proceeds from mutual fund shares sold ............. 90,261,974 49,156,048 453,514 48,535
Cost of mutual fund shares sold ................... (90,261,974) (49,156,048) (414,080) (46,031)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............. -- -- 39,434 2,504
Change in unrealized gain (loss) on investments ... -- -- (121,548) 3,082
------------ ------------ ------------ ------------
Net gain (loss) on investments .................. -- -- (82,114) 5,586
------------ ------------ ------------ ------------
Reinvested capital gains .......................... -- -- 128,744 6,718
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ............ 2,446,767 2,229,427 47,214 12,863
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................. 9,680,836 9,722,355 620,995 51,062
Transfers between funds ........................... (8,123,293) 10,132,289 226,325 90,814
Redemptions ....................................... (6,330,019) (19,598,410) (60,295) (5,488)
Annual contract maintenance charge (note 2) ....... (15) (7,285) -- --
Contingent deferred sales charges (note 2) ........ (2,230) -- -- --
Adjustments to maintain reserves .................. 25,609 (11,502) 838 1
------------ ------------ ------------ ------------
Net equity transactions ....................... (4,749,112) 237,447 787,863 136,389
Net change in contract owners' equity ............. (2,302,345) 2,466,874 835,077 149,252
Contract owners' equity beginning of period ....... 58,928,944 56,462,070 149,252 --
------------ ------------ ------------ ------------
Contract owners' equity end of period ............. 56,626,599 58,928,944 984,329 149,252
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 14
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NBManhFd NBPartFd
------------------------ ----------------------------
1997 1996 1997 1996
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ -- -- 11,614 --
Mortality and expense charges (note 2) ............... (810) (1,891) (4,937) --
Administration charge (note 2)
Tier I ........................................... (729) (1,702) (4,443) --
Tier II .......................................... -- -- -- --
Tier III ......................................... -- -- -- --
Tier IV .......................................... -- -- -- --
Tier V ........................................... -- -- -- --
-------- -------- ---------- ----------
Net investment activity ............................ (1,539) (3,593) 2,234 --
Proceeds from mutual fund shares sold ................ 223,724 683,440 359,092 --
Cost of mutual fund shares sold ...................... (233,494) (603,228) (298,999) --
-------- -------- ---------- ----------
Realized gain (loss) on investments ................ (9,770) 80,212 60,093 --
Change in unrealized gain (loss) on investments ...... 14,259 (84,746) (210,691) --
-------- -------- ---------- ----------
Net gain (loss) on investments ..................... 4,489 (4,534) (150,598) --
-------- -------- ---------- ----------
Reinvested capital gains ............................. 31,773 36,716 356,973 --
-------- -------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 34,723 28,589 208,609 --
-------- -------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 19,016 54,284 350,067 --
Transfers between funds .............................. (53,207) (158,418) 1,620,917 --
Redemptions .......................................... (170,571) (521,670) (180,319) --
Annual contract maintenance charge (note 2) .......... -- -- -- --
Contingent deferred sales charges (note 2) ........... -- -- (81) --
Adjustments to maintain reserves ..................... (24) (16) (49) --
-------- -------- ---------- ----------
Net equity transactions .......................... (204,786) (625,820) 1,790,535 --
Net change in contract owners' equity ................ (170,063) (597,231) 1,999,144 --
Contract owners' equity beginning of period .......... 294,879 892,110 -- --
-------- -------- ---------- ----------
Contract owners' equity end of period ................ 124,816 294,879 1,999,144 --
======== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
PutInvFd PutVoyFd
------------------------------ -------------------------------
1997 1996 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. 151,621 177,791 -- --
Mortality and expense charges (note 2) ............... (195,092) (215,499) (555,728) (405,453)
Administration charge (note 2)
Tier I ........................................... (40,182) (66,267) (309,069) (249,379)
Tier II .......................................... (9,409) (14,602) (83,941) (47,574)
Tier III ......................................... (2,362) (1,673) (30,283) (20,916)
Tier IV .......................................... (153) (181) (14,092) (11,410)
Tier V ........................................... (40,310) (36,112) (6,508) (1,654)
----------- ----------- ------------ -----------
Net investment activity ............................ (135,887) (156,543) (999,621) (736,386)
Proceeds from mutual fund shares sold ................ 4,687,426 16,120,252 3,521,888 29,750,407
Cost of mutual fund shares sold ...................... (3,887,599) (13,829,607) (2,454,300) (19,681,984)
----------- ----------- ------------ -----------
Realized gain (loss) on investments ................ 799,827 2,290,645 1,067,588 10,068,423
Change in unrealized gain (loss) on investments ...... 6,208,349 929,669 16,465,312 (7,567,617)
----------- ----------- ------------ -----------
Net gain (loss) on investments ..................... 7,008,176 3,220,314 17,532,900 2,500,806
----------- ----------- ------------ -----------
Reinvested capital gains ............................. 3,906,053 3,852,133 8,147,769 6,131,999
----------- ----------- ------------ -----------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 10,778,342 6,915,904 24,681,048 7,896,419
----------- ----------- ------------ -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 4,228,718 3,828,208 40,104,364 35,639,746
Transfers between funds .............................. 483,737 588,152 (7,100,256) 20,472,847
Redemptions .......................................... (4,259,983) (16,253,501) (8,346,447) (33,323,584)
Annual contract maintenance charge (note 2) .......... (897) (8,554) -- (20,997)
Contingent deferred sales charges (note 2) ........... (3,177) (13) -- --
Adjustments to maintain reserves ..................... (1,786) (1,802) (16,760) (1,550)
----------- ----------- ------------ -----------
Net equity transactions .......................... 446,612 (11,847,510) 24,640,901 22,766,462
Net change in contract owners' equity ................ 11,224,954 (4,931,606) 49,321,949 30,662,881
Contract owners' equity beginning of period .......... 33,758,690 38,690,296 88,557,114 57,894,233
----------- ----------- ------------ -----------
Contract owners' equity end of period ................ 44,983,644 33,758,690 137,879,063 88,557,114
=========== =========== ============ ===========
</TABLE>
<PAGE> 15
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
SEI500Ix SelGroFd
----------------------------- ----------------------------
1997 1996 1997 1996
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ 150,459 79,126 -- --
Mortality and expense charges (note 2) ............... (54,468) (20,251) (13,883) (14,589)
Administration charge (note 2)
Tier I ........................................... (10,682) (4,799) (5,127) (5,044)
Tier II .......................................... (712) (9,796) (533) (721)
Tier III ......................................... -- -- (319) (80)
Tier IV .......................................... -- -- (16) (17)
Tier V ........................................... (12,513) (802) (2,084) (2,372)
----------- ---------- ---------- ----------
Net investment activity ............................ 72,084 43,478 (21,962) (22,823)
Proceeds from mutual fund shares sold ................ 8,384,055 4,023,809 421,999 595,006
Cost of mutual fund shares sold ...................... (6,905,964) (3,238,353) (373,415) (641,612)
----------- ---------- ---------- ----------
Realized gain (loss) on investments ................ 1,478,091 785,456 48,584 (46,606)
Change in unrealized gain (loss) on investments ...... 859,863 (107,235) 75,942 315,182
----------- ---------- ---------- ----------
Net gain (loss) on investments ..................... 2,337,954 678,221 124,526 268,576
----------- ---------- ---------- ----------
Reinvested capital gains ............................. 101,303 51,614 331,508 207,272
----------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 2,511,341 773,313 434,072 453,025
----------- ---------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 9,263,710 2,458,442 172,142 245,420
Transfers between funds .............................. 5,120,331 1,885,669 (199,396) (168,392)
Redemptions .......................................... (5,549,796) (3,820,927) (202,858) (358,902)
Annual contract maintenance charge (note 2) .......... -- -- (395) (417)
Contingent deferred sales charges (note 2) ........... -- -- (79) --
Adjustments to maintain reserves ..................... 626 (988) (18) (253)
----------- ---------- ---------- ----------
Net equity transactions .......................... 8,834,871 522,196 (230,604) (282,544)
Net change in contract owners' equity ................ 11,346,212 1,295,509 203,468 170,481
Contract owners' equity beginning of period .......... 3,911,822 2,616,313 2,650,076 2,479,595
----------- ---------- ---------- ----------
Contract owners' equity end of period ................ $15,258,034 3,911,822 2,853,544 2,650,076
=========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
StComStk TRIntStk
---------------------------- ------------------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. 700 15,873 429,540 421,885
Mortality and expense charges (note 2) ............... (27,052) (15,027) (170,837) (207,424)
Administration charge (note 2)
Tier I ........................................... (24,346) (13,525) (72,216) (82,097)
Tier II .......................................... -- -- (16,170) (37,048)
Tier III ......................................... -- -- (5,875) (3,990)
Tier IV .......................................... -- -- (3,180) (2,932)
Tier V ........................................... -- -- (15,793) (16,774)
---------- ---------- ----------- -----------
Net investment activity ............................ (50,698) (12,679) 145,469 71,620
Proceeds from mutual fund shares sold ................ 9,411,196 314,741 21,375,609 28,109,045
Cost of mutual fund shares sold ...................... (8,332,762) (259,999) (18,182,586) (25,136,622)
---------- ---------- ----------- -----------
Realized gain (loss) on investments ................ 1,078,434 54,742 3,193,023 2,972,423
Change in unrealized gain (loss) on investments ...... (44,067) (56,531) (3,881,061) 1,623,911
---------- ---------- ----------- -----------
Net gain (loss) on investments ..................... 1,034,367 (1,789) (688,038) 4,596,334
---------- ---------- ----------- -----------
Reinvested capital gains ............................. 121,492 558,161 1,181,235 468,761
---------- ---------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 1,105,161 543,693 638,666 5,136,715
---------- ---------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 3,697,972 1,777,857 10,867,253 13,680,176
Transfers between funds .............................. 658,529 374,549 (6,714,250) 2,973,100
Redemptions .......................................... (9,645,678) (292,697) (5,866,407) (25,855,536)
Annual contract maintenance charge (note 2) .......... -- -- -- (12,178)
Contingent deferred sales charges (note 2) ........... -- -- -- --
Adjustments to maintain reserves ..................... 93 (63) (6,971) 3,183
---------- ---------- ----------- -----------
Net equity transactions .......................... (5,289,084) 1,859,646 (1,720,375) (9,211,255)
Net change in contract owners' equity ................ (4,183,923) 2,403,339 (1,081,709) (4,074,540)
Contract owners' equity beginning of period .......... 4,183,923 1,780,584 31,295,943 35,370,483
---------- ---------- ----------- -----------
Contract owners' equity end of period ................ -- 4,183,923 30,214,234 31,295,943
========== ========== =========== ===========
</TABLE>
(Continued)
<PAGE> 16
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TemForFd TemGISmCo
------------------------------ --------------------------
1997 1996 1997 1996
----------- ----------- ---------- --------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ 2,501,840 1,851,490 9,088 13,353
Mortality and expense charges (note 2) ............... (409,635) (317,757) (4,075) (3,928)
Administration charge (note 2)
Tier I ........................................... (250,509) (208,994) (3,668) (3,535)
Tier II .......................................... (65,577) (41,919) -- --
Tier III ......................................... (15,289) (10,927) -- --
Tier IV .......................................... (6,430) (5,788) -- --
Tier V ........................................... (2,329) (138) -- --
----------- ----------- ---------- --------
Net investment activity ............................ 1,752,071 1,265,967 1,345 5,890
Proceeds from mutual fund shares sold ................ 15,858,573 10,763,918 1,438,698 314,361
Cost of mutual fund shares sold ...................... (14,325,078) (10,261,033) (1,386,525) (310,261)
----------- ----------- ---------- --------
Realized gain (loss) on investments ................ 1,533,495 502,885 52,173 4,100
Change in unrealized gain (loss) on investments ...... (5,986,071) 6,814,567 (7,129) 52,775
----------- ----------- ---------- --------
Net gain (loss) on investments ..................... (4,452,576) 7,317,452 45,044 56,875
----------- ----------- ---------- --------
Reinvested capital gains ............................. 6,603,142 1,162,755 38,267 84,857
----------- ----------- ---------- --------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 3,902,637 9,746,174 84,656 147,622
----------- ----------- ---------- --------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 22,039,949 19,435,223 232,849 250,169
Transfers between funds .............................. (1,002,242) (2,100,929) (115,482) 176,387
Redemptions .......................................... (10,962,908) (10,304,746) (1,147,196) (193,568)
Annual contract maintenance charge (note 2) .......... -- -- -- --
Contingent deferred sales charges (note 2) ........... (201) (10) -- --
Adjustments to maintain reserves ..................... 1,523 (4,024) (193) (5,443)
----------- ----------- ---------- --------
Net equity transactions .......................... 10,076,121 7,025,514 (1,030,022) 227,545
Net change in contract owners' equity ................ 13,978,758 16,771,688 (945,366) 375,167
Contract owners' equity beginning of period .......... 66,740,239 49,968,551 945,366 570,199
----------- ----------- ---------- --------
Contract owners' equity end of period ................ $80,718,997 66,740,239 -- 945,366
=========== =========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
ACVPBal ACVPCapAp
-------------------- ----------------------
1997 1996 1997 1996
------ ------ ------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. 51 51 -- --
Mortality and expense charges (note 2) ............... (27) (14) (383) (512)
Administration charge (note 2)
Tier I ........................................... (25) (13) (345) (461)
Tier II .......................................... -- -- -- --
Tier III ......................................... -- -- -- --
Tier IV .......................................... -- -- -- --
Tier V ........................................... -- -- -- --
------ ------ ------- -------
Net investment activity ............................ (1) 24 (728) (973)
Proceeds from mutual fund shares sold ................ -- -- 47,270 34,506
Cost of mutual fund shares sold ...................... -- -- (47,990) (26,357)
------ ------ ------- -------
Realized gain (loss) on investments ................ -- -- (720) 8,149
Change in unrealized gain (loss) on investments ...... 529 234 (3,222) (22,116)
------ ------ ------- -------
Net gain (loss) on investments ..................... 529 234 (3,942) (13,967)
------ ------ ------- -------
Reinvested capital gains ............................. 203 64 1,834 11,221
------ ------ ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 731 322 (2,836) (3,719)
------ ------ ------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 2,004 2,004 32,191 34,289
Transfers between funds .............................. -- -- (33,826) --
Redemptions .......................................... -- -- (1,115) (33,937)
Annual contract maintenance charge (note 2) .......... -- -- (12) (21)
Contingent deferred sales charges (note 2) ........... -- -- -- --
Adjustments to maintain reserves ..................... -- (1) (439) (6)
------ ------ ------- -------
Net equity transactions .......................... 2,004 2,003 (3,201) 325
Net change in contract owners' equity ................ 2,735 2,325 (6,037) (3,394)
Contract owners' equity beginning of period .......... 4,106 1,781 84,604 87,998
------ ------ ------- -------
Contract owners' equity end of period ................ 6,841 4,106 78,567 84,604
====== ====== ======= =======
</TABLE>
<PAGE> 17
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
DrySRGro DryStkIx
----------------------- ----------------------
1997 1996 1997 1996
------ --------- ------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ 32 -- 593 317
Mortality and expense charges (note 2) ............... (21) -- (186) (68)
Administration charge (note 2)
Tier I ........................................... (19) -- (167) (62)
Tier II .......................................... -- -- -- --
Tier III ......................................... -- -- -- --
Tier IV .......................................... -- -- -- --
Tier V ........................................... -- -- -- --
------ --------- ------- -------
Net investment activity ............................ (8) -- 240 187
Proceeds from mutual fund shares sold ................ -- -- 21 --
Cost of mutual fund shares sold ...................... -- -- (10) --
------ --------- ------- -------
Realized gain (loss) on investments ................ -- -- 11 --
Change in unrealized gain (loss) on investments ...... 607 -- 8,203 2,006
------ --------- ------- -------
Net gain (loss) on investments ..................... 607 -- 8,214 2,006
------ --------- ------- -------
Reinvested capital gains ............................. 251 -- 1,314 382
------ --------- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 850 -- 9,768 2,575
------ --------- ------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 5,227 -- 8,847 15,048
Transfers between funds .............................. 2,835 -- 16 2,746
Redemptions .......................................... -- -- -- --
Annual contract maintenance charge (note 2) .......... -- -- -- --
Contingent deferred sales charges (note 2) ........... -- -- -- --
Adjustments to maintain reserves ..................... 1 -- (3) (2)
------ --------- ------- -------
Net equity transactions .......................... 8,063 -- 8,860 17,792
Net change in contract owners' equity ................ 8,913 -- 18,628 20,367
Contract owners' equity beginning of period .......... -- -- 27,259 6,892
------ --------- ------- -------
Contract owners' equity end of period ................ $8,913 -- 45,887 27,259
====== ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FidVIPAM FidVIPEI
---------------------- -----------------------
1997 1996 1997 1996
------- ------- -------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. 832 443 1,638 81
Mortality and expense charges (note 2) ............... (152) (84) (656) (328)
Administration charge (note 2)
Tier I ........................................... (137) (76) (591) (296)
Tier II .......................................... -- -- -- --
Tier III ......................................... -- -- -- --
Tier IV .......................................... -- -- -- --
Tier V ........................................... -- -- -- --
------- ------- -------- -------
Net investment activity ............................ 543 283 391 (543)
Proceeds from mutual fund shares sold ................ -- -- 881 9,407
Cost of mutual fund shares sold ...................... -- -- (609) (7,567)
------- ------- -------- -------
Realized gain (loss) on investments ................ -- -- 272 1,840
Change in unrealized gain (loss) on investments ...... 2,692 1,605 21,307 4,892
------- ------- -------- -------
Net gain (loss) on investments ..................... 2,692 1,605 21,579 6,732
------- ------- -------- -------
Reinvested capital gains ............................. 2,086 365 8,234 2,320
------- ------- -------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 5,321 2,253 30,204 8,509
------- ------- -------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 9,177 9,305 46,876 43,516
Transfers between funds .............................. 95 -- 67 (1,480)
Redemptions .......................................... -- -- (143) (7,854)
Annual contract maintenance charge (note 2) .......... -- -- -- --
Contingent deferred sales charges (note 2) ........... -- -- -- --
Adjustments to maintain reserves ..................... -- -- (21) 8
------- ------- -------- -------
Net equity transactions .......................... 9,272 9,305 46,779 34,190
Net change in contract owners' equity ................ 14,593 11,558 76,983 42,699
Contract owners' equity beginning of period .......... 23,167 11,609 91,971 49,272
------- ------- -------- -------
Contract owners' equity end of period ................ 37,760 23,167 168,954 91,971
======= ======= ======== =======
</TABLE>
(Continued)
<PAGE> 18
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FidVIPGr FidVIPHI
------------------------ ----------------------
1997 1996 1997 1996
--------- ------- ------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ 565 117 1,817 1,014
Mortality and expense charges (note 2) ............... (540) (297) (173) (75)
Administration charge (note 2)
Tier I ........................................... (486) (267) (156) (67)
Tier II .......................................... -- -- -- --
Tier III ......................................... -- -- -- --
Tier IV .......................................... -- -- -- --
Tier V ........................................... -- -- -- --
--------- ------- ------- -------
Net investment activity ............................ (461) (447) 1,488 872
Proceeds from mutual fund shares sold ................ 2,530 779 20 5,916
Cost of mutual fund shares sold ...................... (1,696) (541) (17) (5,666)
--------- ------- ------- -------
Realized gain (loss) on investments ................ 834 238 3 250
Change in unrealized gain (loss) on investments ...... 17,902 4,310 3,589 488
--------- ------- ------- -------
Net gain (loss) on investments ..................... 18,736 4,548 3,592 738
--------- ------- ------- -------
Reinvested capital gains ............................. 2,531 2,957 225 198
--------- ------- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 20,806 7,058 5,305 1,808
--------- ------- ------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 33,185 34,041 16,116 16,228
Transfers between funds .............................. (1,451) -- -- --
Redemptions .......................................... (284) (485) -- (6,450)
Annual contract maintenance charge (note 2) .......... -- -- -- --
Contingent deferred sales charges (note 2) ........... -- -- -- --
Adjustments to maintain reserves ..................... 3 1 (2) (2)
--------- ------- ------- -------
Net equity transactions .......................... 31,453 33,557 16,114 9,776
Net change in contract owners' equity ................ 52,259 40,615 21,419 11,584
Contract owners' equity beginning of period .......... 80,978 40,363 24,013 12,429
--------- ------- ------- -------
Contract owners' equity end of period ................ $ 133,237 80,978 45,432 24,013
========= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FidVIPOv NSATGvtBd
------------------------ ----------------------
1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. 1,845 741 825 681
Mortality and expense charges (note 2) ............... (679) (391) (67) (52)
Administration charge (note 2)
Tier I ........................................... (611) (352) (60) (47)
Tier II .......................................... -- -- -- --
Tier III ......................................... -- -- -- --
Tier IV .......................................... -- -- -- --
Tier V ........................................... -- -- -- --
-------- -------- ------- -------
Net investment activity ............................ 555 (2) 698 582
Proceeds from mutual fund shares sold ................ 1,605 7,065 2,513 --
Cost of mutual fund shares sold ...................... (1,311) (6,626) (2,354) --
-------- -------- ------- -------
Realized gain (loss) on investments ................ 294 439 159 --
Change in unrealized gain (loss) on investments ...... 2,792 7,875 270 (246)
-------- -------- ------- -------
Net gain (loss) on investments ..................... 3,086 8,314 429 (246)
-------- -------- ------- -------
Reinvested capital gains ............................. 7,326 815 -- --
-------- -------- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 10,967 9,127 1,127 336
-------- -------- ------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 37,048 41,252 3,575 3,305
Transfers between funds .............................. 9,863 (5,162) -- --
Redemptions .......................................... (581) (296) (2,506) --
Annual contract maintenance charge (note 2) .......... -- -- (32) (17)
Contingent deferred sales charges (note 2) ........... -- -- -- --
Adjustments to maintain reserves ..................... 2 (8) (1) (1)
-------- -------- ------- -------
Net equity transactions .......................... 46,332 35,786 1,036 3,287
Net change in contract owners' equity ................ 57,299 44,913 2,163 3,623
Contract owners' equity beginning of period .......... 102,297 57,384 12,618 8,995
-------- -------- ------- -------
Contract owners' equity end of period ................ 159,596 102,297 14,781 12,618
======== ======== ======= =======
</TABLE>
<PAGE> 19
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NSATMyMkt NSATTotRe
----------------------- -----------------------
1997 1996 1997 1996
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ................................. $ 1,378 1,371 1,290 733
Mortality and expense charges (note 2) ............... (135) (138) (444) (179)
Administration charge (note 2)
Tier I ........................................... (121) (124) (399) (161)
Tier II .......................................... -- -- -- --
Tier III ......................................... -- -- -- --
Tier IV .......................................... -- -- -- --
Tier V ........................................... -- -- -- --
-------- ------- -------- -------
Net investment activity ............................ 1,122 1,109 447 393
Proceeds from mutual fund shares sold ................ 37,780 2,529 374 3,134
Cost of mutual fund shares sold ...................... (37,780) (2,529) (234) (2,334)
-------- ------- -------- -------
Realized gain (loss) on investments ................ -- -- 140 800
Change in unrealized gain (loss) on investments ...... -- -- 13,515 3,998
-------- ------- -------- -------
Net gain (loss) on investments ..................... -- -- 13,655 4,798
-------- ------- -------- -------
Reinvested capital gains ............................. -- -- 4,114 1,755
-------- ------- -------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 1,122 1,109 18,216 6,946
-------- ------- -------- -------
Equity transactions:
Purchase payments received from
contract owners .................................... 8,580 15,079 27,743 18,485
Transfers between funds .............................. (15,000) 2,672 36,972 1,224
Redemptions .......................................... (22,757) -- (149) (3,122)
Annual contract maintenance charge (note 2) .......... (5) -- (4) (4)
Contingent deferred sales charges (note 2) ........... -- -- -- --
Adjustments to maintain reserves ..................... (7) 4 11 (1)
-------- ------- -------- -------
Net equity transactions .......................... (29,189) 17,755 64,573 16,582
Net change in contract owners' equity ................ (28,067) 18,864 82,789 23,528
Contract owners' equity beginning of period .......... 36,420 17,556 46,482 22,954
-------- ------- -------- -------
Contract owners' equity end of period ................ $ 8,353 36,420 129,271 46,482
======== ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
NBAMTGro NBAMTLMat
---------------------- ---------------------
1997 1996 1997 1996
------- ------- ------ ------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ................................. -- 16 441 294
Mortality and expense charges (note 2) ............... (114) (209) (44) (23)
Administration charge (note 2)
Tier I ........................................... (103) (188) (40) (21)
Tier II .......................................... -- -- -- --
Tier III ......................................... -- -- -- --
Tier IV .......................................... -- -- -- --
Tier V ........................................... -- -- -- --
------- ------- ------ ------
Net investment activity ............................ (217) (381) 357 250
Proceeds from mutual fund shares sold ................ 289 34,734 3,118 --
Cost of mutual fund shares sold ...................... (224) (30,072) (3,150) --
------- ------- ------ ------
Realized gain (loss) on investments ................ 65 4,662 (32) --
Change in unrealized gain (loss) on investments ...... 3,892 (5,353) 176 (67)
------- ------- ------ ------
Net gain (loss) on investments ..................... 3,957 (691) 144 (67)
------- ------- ------ ------
Reinvested capital gains ............................. 1,560 3,808 -- --
------- ------- ------ ------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 5,300 2,736 501 183
------- ------- ------ ------
Equity transactions:
Purchase payments received from
contract owners .................................... 6,212 8,488 4,298 3,443
Transfers between funds .............................. -- -- (3,114) --
Redemptions .......................................... (143) (34,697) -- --
Annual contract maintenance charge (note 2) .......... (10) (19) -- --
Contingent deferred sales charges (note 2) ........... -- -- -- --
Adjustments to maintain reserves ..................... 1 -- -- --
------- ------- ------ ------
Net equity transactions .......................... 6,060 (26,228) 1,184 3,443
Net change in contract owners' equity ................ 11,360 (23,492) 1,685 3,626
Contract owners' equity beginning of period .......... 16,877 40,369 6,755 3,129
------- ------- ------ ------
Contract owners' equity end of period ................ 28,237 16,877 8,440 6,755
======= ======= ====== ======
</TABLE>
(Continued)
<PAGE> 20
NATIONWIDE DC VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NBAMTPart
-----------------------
1997 1996
-------- -------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................. $ 47 26
Mortality and expense charges (note 2) ............... (104) (55)
Administration charge (note 2)
Tier I ........................................... (93) (49)
Tier II .......................................... -- --
Tier III ......................................... -- --
Tier IV .......................................... -- --
Tier V ........................................... -- --
-------- -------
Net investment activity ............................ (150) (78)
Proceeds from mutual fund shares sold ................ 346 472
Cost of mutual fund shares sold ...................... (161) (327)
-------- -------
Realized gain (loss) on investments ................ 185 145
Change in unrealized gain (loss) on investments ...... 4,404 2,418
-------- -------
Net gain (loss) on investments ..................... 4,589 2,563
-------- -------
Reinvested capital gains ............................. 729 324
-------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 5,168 2,809
-------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................................... 6,119 4,697
Transfers between funds .............................. 3,543 --
Redemptions .......................................... (167) (471)
Annual contract maintenance charge (note 2) .......... -- --
Contingent deferred sales charges (note 2) ........... -- --
Adjustments to maintain reserves ..................... (2) (2)
-------- -------
Net equity transactions .......................... 9,493 4,224
Net change in contract owners' equity ................ 14,661 7,033
Contract owners' equity beginning of period .......... 14,770 7,737
-------- -------
Contract owners' equity end of period ................ $ 29,431 14,770
======== =======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 21
NATIONWIDE DC VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
Nationwide DC Variable Account (the Account) was established by
resolution of the Board of Directors of Nationwide Life Insurance
Company (the Company) on July 10, 1974. The Account has been registered
as a unit investment trust under the Investment Company Act of 1940.
The Company offers group flexible fund retirement contracts through the
Account. The primary distribution for the contracts is through an
affiliated sales organization; however, other distributors may be
utilized.
(b) The Contracts
Participants in group flexible fund contracts may be invested in any of
the following funds:
AIM Equity Funds, Inc. - AIM Constellation Fund - Institutional
Class (AIMCon)
AIM Equity Funds, Inc. - AIM Weingarten Fund - Institutional Class
(AIMWein)
American Century: Twentieth Century Growth Fund (ACTCGro)
American Century: Twentieth Century Select Fund (ACTCSel)
American Century: Twentieth Century Ultra Fund (ACTCUltra)
The Bond Fund of America(SM), Inc. (BdFdAm)
(only available for certain contracts issued beginning January
1, 1994)
Davis New York Venture Fund, Inc. - Class A (DNYVenFd)
Delaware Group Decatur Fund, Inc. - Decatur Income Fund
Institutional Class (DeDecInc)
(not available for contracts issued on or after August 1,
1993)
Dreyfus Cash Management - Class A (DryCsMgt)
Dreyfus S&P 500 Index Fund (Dry500Ix)
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
Evergreen Income and Growth Fund - Class Y (EvIncGro)
(formerly The Evergreen Total Return Fund - Class Y)
The Institutional Shares of Federated GNMA Trust (FedGNMA)
Federated U.S. Government Securities Fund: 2-5 Years -
Institutional Shares (FedUSGvt)
Fidelity Asset Manager(TM) (FidAsMgr)
Fidelity Capital & Income Fund (FidCapInc)
(not available for contracts issued on or after January 1, 1987)
Fidelity Contrafund (FidContr)
Fidelity Equity-Income Fund (FidEqInc)
Fidelity Growth & Income Portfolio (FidGrInc)
Fidelity Magellan(R) Fund (FidMgln)
<PAGE> 22
Fidelity OTC Portfolio (FidOTC)
Fidelity Puritan(R) Fund (FidPurtn)
The Growth Fund of America(R), Inc. (GroFdAm)
(only available for certain contracts issued beginning January
1, 1994)
The Income Fund of America(R), Inc. (IncFdAm)
(only available for certain contracts issued beginning January
1, 1994)
INVESCO Industrial Income Fund, Inc. (InvIndInc)
Janus Fund (JanFund)
Janus Twenty Fund (Jan20Fd)
MAS Funds - Fixed Income Portfolio (MASFIP)
MFS(R) Growth Opportunities Fund - Class A (MFSGrOpp)
MFS(R) High Income Fund - Class A (MFSHiInc)
Massachusetts Investors Growth Stock Fund - Class A (MFSGrStk)
Nationwide(R) Bond Fund (NWBdFd) (managed for a fee by an
affiliated investment advisor)
Nationwide(R) Fund (NWFund) (managed for a fee by an affiliated
investment advisor)
Nationwide(R) Growth Fund (NWGroFd) (managed for a fee by an
affiliated investment advisor)
Nationwide(R) Money Market Fund (NWMyMkt) (managed for a fee by an
affiliated investment advisor)
Neuberger & Berman Guardian Fund (NBGuard)
Neuberger & Berman Manhattan Fund (NBManhFd)
Neuberger & Berman Partners Fund (NBPartFd)
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)
Strong Common Stock Fund, Inc. (StComStk)
T. Rowe Price International Funds, Inc. - International Stock
Fund(R) (TRIntStk)
Templeton Foreign Fund - Class I (TemForFd)
Templeton Global Smaller Companies Fund, Inc. - Class I
(TemGlSmCo)
The following funds are available for investment only by Plans
established under Internal Revenue Code (IRC) Section 403(b).
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP) (formerly TCI Portfolios, Inc.);
American Century VP - American Century VP Balanced (ACVPBal)
(formerly TCI Portfolios - TCI Balanced)
American Century VP - American Century VP Capital
Appreciation (ACVPCapAp) (formerly TCI Portfolios -
TCI Growth)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
<PAGE> 23
Portfolios of the Fidelity Variable Insurance Products Fund I & II
(Fidelity VIP);
Fidelity VIP - Asset Manager Portfolio (FidVIPAM)
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
Fidelity VIP - Growth Portfolio (FidVIPGr)
Fidelity VIP - High Income Portfolio (FidVIPHI)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger & Berman AMT);
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
Neuberger & Berman AMT - Limited Maturity Bond Portfolio
(NBAMTLMat)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
All of the above funds were being utilized as of December 31, 1997,
except AIM Equity Funds, Inc. - AIM Weingarten Fund - Institutional
Class (AIMWein), Fidelity OTC Portfolio (FidOTC), Fidelity Puritan(R)
Fund (FidPurtn), Nationwide SAT - Capital Appreciation Fund
(NSATCapAp), Strong Common Stock Fund, Inc. (StComStk) and Templeton
Global Smaller Companies Fund, Inc. - Class I (TemGlSmCo)
The contract owners' equity is affected by the investment results of
each fund, equity transactions by contract owners and certain expenses
(see note 2). The accompanying financial statements include only
contract owners' purchase payments pertaining to the variable portions
of their contracts and exclude any purchase payments for fixed dollar
benefits, the latter being included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1997. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company, which is taxed as a life insurance company
under the IRC. The assets in this account are held pursuant to
contracts with entities which are exempt from Federal income tax.
Because of this exemption, no taxes need be provided for investment
income or realized and unrealized capital gains. Annuity payouts and
withdrawal payments are taxable as wages when received by the
participants.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Reclassifications
Certain 1996 amounts have been reclassified to conform with the current
year presentation.
<PAGE> 24
(2) EXPENSES
Net purchase payments received for contracts issued before July 1, 1980,
represent contributions by the contract owners less a sales charge by the
Company of not more than 5%, to cover sales expenses. The Company does not
deduct a sales charge from purchase payments for contracts issued after
July 1, 1980. However, if any part of the contract value representing
participant accounts that have been established under the contracts and
held in the Account for less than sixteen (16) years is surrendered, the
Company will, with certain exceptions, assess a contingent deferred sales
charge. This charge will be equal to not more than 5% of the lesser of all
purchase payments received on behalf of the surrendering participant or
contract owner prior to the date of the request for surrender, or the
amount surrendered. Sales charges or contingent deferred sales charges of
less than 5% reflect actual variations in expense (usually reduced agents'
commissions). No sales charges are deducted on redemptions used to purchase
units in the fixed investment options of the Company. Sales charges may be
reduced or eliminated upon negotiated conversion of the contracts to other
investment programs offered by the Company or its affiliates.
The following contract charges are deducted by the Company on contracts
issued before July 1, 1980: (a) an annual contract maintenance charge of $8
assessed by surrendering units; (b) a charge for mortality and expense risk
assessed through the daily unit value calculation equal to an annual rate
of 0.95%; and (c) a charge on complete redemption, equal to the lesser of
$8 or 2% of the value of the account, except when such redemption occurs
within 31 days of the anniversary date of the contract.
For contracts issued beginning July 1, 1980 through April 30, 1991,
contract charges include: (a) an annual contract maintenance charge of $12
or $15, based upon administrative services provided, assessed by
surrendering units; and (b) a charge for mortality and expense risk
assessed through the daily unit value calculation equal to an annual rate
of 0.95%.
For contracts issued on or after May 1, 1991, contract charges include a
mortality risk charge, an expense risk charge and an administration charge
assessed through the daily unit value calculation equal to an annual rate
of 0.35%, 0.15% and 0.45% respectively. Beginning November 1, 1996, the
administration charge was based upon the aggregate balance of assets held
under the contract by each contract owner 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 implemented on November 1, 1996 was based on the
June 30, 1996 asset balance. Thereafter, the administrative charge will be
determined using the December 31 asset balance and is effective at the next
expense tier on the following May 1.
Contract owners may negotiate an exchange privilege with the Company. The
exchange privilege provides for transfers of units among the various
investment options for each participant's account. The number of transfers
allowed, and any administrative charges associated therewith, are subject
to negotiation between the contract owner and the Company.
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
<PAGE> 25
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL
TIER I (JUNE 30, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
---------------------------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
AIM Equity Funds, Inc. - AIM Constellation
Fund - Institutional Class ............ 1,753,409 $ 2.309709 $ 4,049,865 12%
American Century: Twentieth Century
Growth Fund ........................... 10,995,755 5.842997 64,248,163 28%
American Century: Twentieth Century
Select Fund ........................... 23,381 2.058976 48,141 31%
American Century: Twentieth Century
Ultra Fund ............................ 73,545,284 2.524538 185,667,864 22%
The Bond Fund of America(SM), Inc. ....... 3,207,320 2.332586 7,481,350 8%
Delaware Group Decatur Fund, Inc. -
Decatur Income Fund Institutional Class 74,563 2.935219 218,859 29%
Dreyfus S&P 500 Index Fund ............... 8,503,701 1.217658 10,354,600 22%(a)
The Dreyfus Third Century Fund, Inc. ..... 5,074,527 3.532278 17,924,640 28%
Evergreen Income and Growth Fund -
Class Y ............................... 914,194 2.422617 2,214,742 24%
The Institutional Shares of Federated
GNMA Trust ............................ 688,011 1.393241 958,565 8%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ...... 1,373,391 1.214470 1,667,942 6%
Fidelity Asset Manager(TM) ............... 2,796,412 1.517270 4,242,912 21%
Fidelity Capital & Income Fund ........... 102,795 4.654233 478,432 14%
Fidelity Contrafund ...................... 62,958,434 2.509557 157,997,779 22%
Fidelity Equity-Income Fund .............. 21,606,856 6.900916 149,107,098 29%
Fidelity Magellan(R) Fund ................ 55,482,152 2.398961 133,099,519 25%
The Growth Fund of America(R), Inc. ...... 2,642,923 3.382686 8,940,179 26%
The Income Fund of America(R), Inc. ...... 4,752,235 2.614863 12,426,443 21%
INVESCO Industrial Income Fund, Inc ...... 7,749,404 2.102364 16,292,068 25%
Janus Fund ............................... 22,289,770 1.948907 43,440,689 22%
Janus Twenty Fund ........................ 7,662 2.147649 16,455 28%
MAS Funds - Fixed Income Portfolio ....... 1,341,493 1.335173 1,791,125 9%
MFS(R) Growth Opportunities Fund -
Class A ............................... 513,453 9.012670 4,627,582 22%
MFS(R) High Income Fund - Class A ........ 81,409 6.168371 502,161 12%
Massachusetts Investors Growth Stock
Fund - Class A ........................ 142,697 15.968069 2,278,596 47%
Nationwide(R) Fund ....................... 1,840,610 20.697282 38,095,624 38%
Nationwide(R) Growth Fund ................ 1,084,820 3.854877 4,181,848 25%
Nationwide(R) Money Market Fund .......... 7,176,896 3.003821 21,558,111 4%
Neuberger & Berman Manhattan Fund ........ 39,662 3.146989 124,816 28%
Neuberger & Berman Partners Fund ......... 1,370,455 1.458745 1,999,144 28%
Putnam Investors Fund - Class A .......... 508,161 18.110411 9,203,005 33%
Putnam Voyager Fund - Class A ............ 22,283,254 3.837109 85,503,274 25%
</TABLE>
(Continued)
<PAGE> 26
<TABLE>
<S> <C> <C> <C> <C>
SEI Index Funds - S&P 500 Index Portfolio 150,050 3.905079 585,957 32%
Seligman Growth Fund, Inc - Class A. ..... 93,124 12.541848 1,167,947 17%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ........... 7,561,237 1.843420 13,938,536 2%
Templeton Foreign Fund - Class I ......... 28,352,933 1.874393 53,144,539 6%
American Century VP - American Century
VP Balanced ........................... 4,531 1.509759 6,841 15%
American Century VP - American Century
VP Capital Appreciation ............... 50,033 1.570313 78,567 (4)%
The Dreyfus Socially Responsible
Growth Fund, Inc. ..................... 4,478 1.990292 8,913 27%
Dreyfus Stock Index Fund ................. 21,714 2.113257 45,887 32%
Fidelity VIP - Asset Manager Portfolio ... 25,131 1.502515 37,760 20%
Fidelity VIP - Equity-Income Portfolio ... 90,224 1.872610 168,954 27%
Fidelity VIP - Growth Portfolio .......... 70,171 1.898743 133,237 22%
Fidelity VIP - High Income Portfolio ..... 29,112 1.560592 45,432 17%
Fidelity VIP - Overseas Portfolio ........ 125,065 1.276107 159,596 11%
Nationwide SAT - Government Bond Fund .... 8,433 1.752816 14,781 9%
Nationwide SAT - Money Market Fund ....... 6,361 1.313205 8,353 4%
Nationwide SAT - Total Return Fund ....... 42,827 3.018448 129,271 28%
Neuberger & Berman AMT -
Growth Portfolio ...................... 12,306 2.294545 28,237 28%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio ....... 7,063 1.194950 8,440 6%
Neuberger & Berman AMT -
Partners Portfolio .................... 13,504 2.179432 29,431 30%
========== ========= --------------
Sub-Total Tier I (June 30, 1996) ....... $1,060,482,270
==============
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
ANNUAL
TIER II (JUNE 30, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
----------------------------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ........................... 3,903,936 $ 5.846396 $ 22,823,956 28%
American Century: Twentieth Century
Ultra Fund ............................ 19,732,726 2.526007 49,845,004 22%
The Bond Fund of America(SM), Inc. ....... 844,897 2.333980 1,971,973 8%
Davis New York Venture Fund, Inc. -
Class A ............................... 199,664 2.233818 446,013 32%
Delaware Group Decatur Fund, Inc. -
Decatur Income Fund Institutional Class 15,400 2.936925 45,229 29%
Dreyfus Cash Management - Class A ........ 231,535 1.212863 280,820 5%
Dreyfus S&P 500 Index Fund ............... 3,436,138 1.218064 4,185,436 22%(a)
The Dreyfus Third Century Fund, Inc. ..... 1,286,026 3.534332 4,545,243 28%
Evergreen Income and Growth Fund -
Class Y ............................... 388,299 2.424026 941,247 24%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ...... 323,646 1.215186 393,290 6%
Fidelity Asset Manager(TM) ............... 633,745 1.518153 962,122 21%
Fidelity Capital & Income Fund ........... 36,724 4.656974 171,023 14%
Fidelity Contrafund ...................... 15,968,503 2.511017 40,097,182 22%
Fidelity Equity-Income Fund .............. 7,169,293 6.904928 49,503,452 29%
Fidelity Magellan(R) Fund ................ 11,589,048 2.400356 27,817,841 25%
The Growth Fund of America(R), Inc. ...... 650,012 3.384653 2,200,065 26%
The Income Fund of America(R), Inc. ...... 1,325,543 2.616384 3,468,129 21%
INVESCO Industrial Income Fund, Inc ...... 1,917,268 2.103587 4,033,140 25%
Janus Fund ............................... 5,595,764 1.950041 10,911,969 22%
MAS Funds - Fixed Income Portfolio ....... 296,496 1.335950 396,104 9%
MFS(R) Growth Opportunities Fund -
Class A ............................... 317,319 9.017913 2,861,555 22%
MFS(R) High Income Fund - Class A ........ 25,730 6.172004 158,806 12%
Massachusetts Investors Growth Stock
Fund - Class A ........................ 19,733 15.977352 315,281 47%
Nationwide(R) Fund ....................... 509,179 20.709316 10,544,749 38%
Nationwide(R) Growth Fund ................ 357,289 3.857119 1,378,106 25%
Nationwide(R) Money Market Fund .......... 6,441,740 3.005590 19,361,229 4%
Putnam Investors Fund - Class A .......... 133,581 18.120944 2,420,614 33%
Putnam Voyager Fund - Class A ............ 5,930,438 3.839341 22,768,974 25%
SEI Index Funds - S&P 500 Index Portfolio 52,580 3.907349 205,448 32%
Seligman Growth Fund, Inc - Class A. ..... 10,649 12.549144 133,636 17%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ........... 1,859,628 1.844492 3,430,069 2%
Templeton Foreign Fund - Class I ......... 7,960,130 1.875484 14,929,096 6%
========== ========= ------------
Sub-Total Tier II (June 30, 1996) ...... $303,546,801
============
</TABLE>
(Continued)
<PAGE> 28
<TABLE>
<CAPTION>
ANNUAL
TIER II (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
--------------------------------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ........................... 337,408 $ 5.844955 $1,972,135 28%
American Century: Twentieth Century
Ultra Fund ............................ 2,468,617 2.525385 6,234,208 22%
The Bond Fund of America(SM), Inc. ....... 110,244 2.333393 257,243 8%
Delaware Group Decatur Fund, Inc.-
Decatur Income Fund Institutional Class 262 2.936202 769 29%
Dreyfus S&P 500 Index Fund ............... 287,240 1.218064 349,877 22%(a)
The Dreyfus Third Century Fund, Inc. ..... 196,674 3.533462 694,940 28%
Evergreen Income and Growth Fund -
Class Y ............................... 62,878 2.423429 152,380 24%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ...... 76,514 1.214882 92,955 6%
Fidelity Asset Manager(TM) ............... 45,091 1.517779 68,438 21%
Fidelity Capital & Income Fund ........... 386 4.655810 1,797 14%
Fidelity Contrafund ...................... 2,303,992 2.510398 5,783,937 22%
Fidelity Equity-Income Fund .............. 617,355 6.903229 4,261,743 29%
Fidelity Magellan(R) Fund ................ 1,313,023 2.399765 3,150,947 25%
The Growth Fund of America(R), Inc. ...... 50,498 3.383820 170,876 26%
The Income Fund of America(R), Inc. ...... 129,547 2.615739 338,861 21%
INVESCO Industrial Income Fund, Inc ...... 264,870 2.103069 557,040 25%
Janus Fund ............................... 820,870 1.949561 1,600,336 22%
MAS Funds - Fixed Income Portfolio ....... 10,073 1.335621 13,454 9%
MFS(R) Growth Opportunities Fund -
Class A ............................... 28,071 9.015691 253,079 22%
MFS(R) High Income Fund - Class A ........ 2,719 6.170461 16,777 12%
Massachusetts Investors Growth Stock
Fund - Class A ........................ 3,342 15.973419 53,383 47%
Nationwide(R) Fund ....................... 74,871 20.704221 1,550,146 38%
Nationwide(R) Growth Fund ................ 26,821 3.856169 103,426 25%
Nationwide(R) Money Market Fund .......... 116,705 3.004839 350,680 4%
Putnam Investors Fund - Class A .......... 10,065 18.116482 182,342 33%
Putnam Voyager Fund - Class A ............ 682,444 3.838394 2,619,489 25%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ........... 233,087 1.844038 429,821 2%
Templeton Foreign Fund - Class I ......... 1,104,154 1.875022 2,070,313 6%
========== ========== -----------
Sub-Total Tier II (December 31, 1996) .. $33,331,392
===========
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
ANNUAL
TIER III (JUNE 30, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
------------------------------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ........................... 1,540,193 $ 5.853199 $ 9,015,056 28%
American Century: Twentieth Century
Ultra Fund ............................ 11,990,091 2.528946 30,322,293 22%
The Bond Fund of America(SM), Inc. ......... 379,522 2.336766 886,854 8%
Delaware Group Decatur Fund, Inc. -
Decatur Income Fund Institutional Class 6,036 2.940341 17,748 29%
Dreyfus S&P 500 Index Fund ............... 2,297,690 1.218878 2,800,604 22%(a)
The Dreyfus Third Century Fund, Inc. ..... 912,241 3.538445 3,227,915 28%
Evergreen Income and Growth Fund -
Class Y ............................... 79,190 2.426846 192,182 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ...... 188,738 1.216616 229,622 6%
Fidelity Asset Manager(TM) ................. 299,273 1.519919 454,871 21%
Fidelity Capital & Income Fund ........... 22,232 4.662457 103,656 14%
Fidelity Contrafund ...................... 9,637,261 2.513939 24,227,486 22%
Fidelity Equity-Income Fund .............. 3,057,190 6.912960 21,134,232 29%
Fidelity Magellan(R) Fund ................ 6,180,393 2.403149 14,852,405 26%
The Growth Fund of America(R), Inc. ...... 496,036 3.388591 1,680,863 26%
The Income Fund of America(R), Inc. ...... 490,571 2.619427 1,285,015 21%
INVESCO Industrial Income Fund, Inc ...... 473,406 2.106034 997,009 25%
Janus Fund ............................... 2,423,723 1.952310 4,731,859 22%
MAS Funds - Fixed Income Portfolio ....... 248,580 1.337506 332,477 9%
MFS(R) Growth Opportunities Fund -
Class A ............................... 178,707 9.028407 1,613,440 22%
MFS(R) High Income Fund - Class A ........ 6,564 6.179271 40,561 12%
Massachusetts Investors Growth Stock
Fund - Class A ........................ 12,152 15.995935 194,383 47%
Nationwide(R) Fund ....................... 329,293 20.733404 6,827,365 39%
Nationwide(R) Growth Fund ................ 93,047 3.861607 359,311 25%
Nationwide(R) Money Market Fund .......... 909,979 3.009129 2,738,244 4%
Putnam Investors Fund - Class A .......... 39,280 18.142029 712,619 33%
Putnam Voyager Fund - Class A ............ 3,166,939 3.843809 12,173,109 25%
Seligman Growth Fund, Inc - Class A ...... 2,475 12.563748 31,095 17%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ........... 1,036,525 1.846640 1,914,089 2%
Templeton Foreign Fund - Class I ......... 2,623,603 1.877667 4,926,253 6%
========== ========== ------------
Sub-Total Tier III (June 30, 1996) ..... $148,022,616
============
</TABLE>
(Continued)
<PAGE> 30
<TABLE>
<CAPTION>
ANNUAL
TIER III (DECEMBER 31, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
---------------------------------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ........................... 105,486 $ 5.850316 $ 617,126 28%
American Century: Twentieth Century
Ultra Fund ............................ 322,005 2.527701 813,932 22%
The Bond Fund of America(SM), Inc. ......... 10,951 2.335593 25,577 8%
Dreyfus S&P 500 Index Fund ............... 36,388 1.218878 44,353 22%(a)
The Dreyfus Third Century Fund, Inc. ..... 20,119 3.536702 71,155 28%
Evergreen Income and Growth Fund -
Class Y ............................... 9,663 2.425651 23,439 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ...... 1,612 1.216009 1,960 6%
Fidelity Asset Manager(TM) ................. 62,190 1.519171 94,477 21%
Fidelity Capital & Income Fund ........... 39,699 4.660128 185,002 14%
Fidelity Contrafund ...................... 186,236 2.512701 467,955 22%
Fidelity Equity-Income Fund .............. 189,228 6.909557 1,307,482 29%
Fidelity Magellan(R) Fund ................ 244,774 2.401965 587,939 26%
The Growth Fund of America(R), Inc. ...... 6,443 3.386923 21,822 26%
The Income Fund of America(R), Inc. ...... 24,783 2.618138 64,885 21%
INVESCO Industrial Income Fund, Inc ...... 5,633 2.104998 11,857 25%
Janus Fund ............................... 174,631 1.951349 340,766 22%
MAS Funds - Fixed Income Portfolio ....... 3,162 1.336847 4,227 9%
MFS(R) Growth Opportunities Fund -
Class A ............................... 36,452 9.023960 328,941 22%
MFS(R) High Income Fund - Class A ........ 16,908 6.176184 104,427 12%
Massachusetts Investors Growth Stock
Fund - Class A ........................ 150 15.988060 2,398 47%
Nationwide(R) Fund ....................... 16,906 20.723203 350,346 38%
Nationwide(R) Growth Fund ................ 22,824 3.859705 88,094 25%
Nationwide(R) Money Market Fund .......... 68,201 3.007626 205,123 4%
Putnam Investors Fund - Class A .......... 9,478 18.133095 171,865 33%
Putnam Voyager Fund - Class A ............ 95,529 3.841914 367,014 25%
Seligman Growth Fund, Inc - Class A ...... 6,424 12.557561 80,670 17%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ........... 15,280 1.845731 28,203 2%
Templeton Foreign Fund - Class I ......... 147,481 1.876743 276,784 6%
======== ========= ----------
Sub-Total Tier III (December 31, 1996) . $6,687,819
==========
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
ANNUAL
TIER IV (JUNE 30, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
----------------------------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
American Century: Twentieth Century
Growth Fund ........................... 758,360 $ 5.860011 $ 4,443,998 28%
American Century: Twentieth Century
Select Fund ........................... 1,088,027 2.064969 2,246,742 31%
American Century: Twentieth Century
Ultra Fund ............................ 4,964,637 2.531889 12,569,910 22%
The Bond Fund of America(SM), Inc. ......... 55,496 2.339554 129,836 8%
Dreyfus S&P 500 Index Fund ............... 1,092,654 1.219691 1,332,700 22%(a)
The Dreyfus Third Century Fund, Inc. ..... 428,452 3.542562 1,517,818 28%
Evergreen Income and Growth Fund -
Class Y ............................... 21,853 2.429669 53,096 25%
Federated U.S. Government Securities Fund:
2-5 Years - Institutional Shares ...... 114,003 1.218047 138,861 6%
Fidelity Asset Manager(TM) ................. 538,872 1.521688 819,995 21%
Fidelity Capital & Income Fund ........... 22,307 4.667941 104,128 14%
Fidelity Contrafund ...................... 4,750,222 2.516865 11,955,667 22%
Fidelity Equity-Income Fund .............. 2,389,431 6.921001 16,537,254 29%
Fidelity Magellan(R) Fund ................ 3,706,622 2.405944 8,917,925 26%
The Growth Fund of America(R), Inc. ...... 170,540 3.392534 578,563 26%
The Income Fund of America(R), Inc. ...... 294,406 2.622475 772,072 21%
INVESCO Industrial Income Fund, Inc ...... 473,795 2.108484 998,989 26%
Janus Fund ............................... 2,404,760 1.954582 4,700,301 22%
MAS Funds - Fixed Income Portfolio ....... 91,023 1.339063 121,886 9%
MFS(R) Growth Opportunities Fund -
Class A ............................... 5,735 9.038914 51,838 22%
MFS(R) High Income Fund - Class A ........ 105 6.186539 650 12%
Massachusetts Investors Growth Stock
Fund - Class A ........................ 285 16.014540 4,564 47%
Nationwide(R) Fund ....................... 142,531 20.757521 2,958,590 39%
Nationwide(R) Growth Fund ................ 339,294 3.866100 1,311,745 25%
Nationwide(R) Money Market Fund .......... 985,611 3.012668 2,969,319 4%
Putnam Investors Fund - Class A .......... 4,776 18.163138 86,747 34%
Putnam Voyager Fund - Class A ............ 2,223,516 3.848283 8,556,719 25%
Seligman Growth Fund, Inc - Class A ...... 684 12.578369 8,604 17%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ........... 783,958 1.848790 1,449,374 2%
Templeton Foreign Fund - Class I ......... 1,763,615 1.879853 3,315,337 6%
========== ========== -----------
Sub-Total Tier IV (June 30, 1996) ...... $88,653,228
===========
</TABLE>
(Continued)
<PAGE> 32
<TABLE>
<CAPTION>
ANNUAL
TIER V (JUNE 30, 1996, SEE NOTE 2) UNITS UNIT VALUE RETURN
---------------------------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
AIM Equity Funds, Inc. - AIM Constellation
Fund - Institutional Class ............ 2,389,104 $ 2.318983 $ 5,540,292 13%
American Century: Twentieth Century
Growth Fund ........................... 6,244,941 5.866443 36,635,590 28%
American Century: Twentieth Century
Ultra Fund ............................ 19,414,868 2.534668 49,210,245 22%
The Bond Fund of America(SM), Inc. ......... 736,645 2.342166 1,725,345 9%
The Dreyfus Third Century Fund, Inc. ..... 2,302,999 3.546449 8,167,469 29%
Evergreen Income and Growth Fund -
Class Y ............................... 433,149 2.432337 1,053,564 25%
Fidelity Capital & Income Fund ........... 70,677 4.673077 330,279 14%
Fidelity Contrafund ...................... 3,990,922 2.519627 10,055,635 22%
Fidelity Equity-Income Fund .............. 7,574,670 6.928596 52,481,828 29%
Fidelity Growth & Income Portfolio ....... 3,435,213 2.591531 8,902,461 29%
Fidelity Magellan(R) Fund ................ 16,840,881 2.408585 40,562,693 26%
MFS(R) Growth Opportunities Fund -
Class A ............................... 1,999,203 9.048839 18,090,466 22%
MFS(R) High Income Fund - Class A ........ 500,487 6.193345 3,099,689 12%
Massachusetts Investors Growth Stock
Fund - Class A ........................ 271,730 16.032114 4,356,406 47%
Nationwide(R) Bond Fund .................. 51,355 2.175755 111,736 9%
Nationwide(R) Fund ....................... 721,864 20.780295 15,000,547 39%
Nationwide(R) Growth Fund ................ 658,443 3.870345 2,548,402 25%
Nationwide(R) Money Market Fund .......... 3,131,282 3.015983 9,443,893 4%
Neuberger & Berman Guardian Fund ......... 614,486 1.601873 984,329 17%
Putnam Investors Fund - Class A .......... 1,771,233 18.183069 32,206,452 34%
Putnam Voyager Fund - Class A ............ 1,528,999 3.852510 5,890,484 25%
SEI Index Funds - S&P 500 Index Portfolio 3,689,771 3.920739 14,466,629 32%
Seligman Growth Fund, Inc - Class A ...... 113,689 12.592179 1,431,592 17%
T. Rowe Price International Funds, Inc. -
International Stock Fund(R) ........... 4,875,751 1.850821 9,024,142 2%
Templeton Foreign Fund - Class I ......... 1,092,861 1.881918 2,056,675 6%
========== ========== -----------
Sub-Total Tier V (June 30, 1996) ....... 333,376,843
==============
Total Contract Owners' Equity ........ $1,974,100,969
==============
</TABLE>
(a) This investment option was not being utilized for the entire period.
<PAGE> 67
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1997 and
1996, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 30, 1998
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars)
<TABLE>
<CAPTION>
December 31,
-----------------------------------
ASSETS 1997 1996
------
----------------- ---------------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $13,204.1 $12,304.6
Equity securities 80.4 59.1
Mortgage loans on real estate, net 5,181.6 5,272.1
Real estate, net 311.4 265.8
Policy loans 415.3 371.8
Other long-term investments 25.2 28.7
Short-term investments 358.4 4.8
---------- ---------
19,576.4 18,306.9
---------- ---------
Cash 175.6 43.8
Accrued investment income 210.5 210.2
Deferred policy acquisition costs 1,665.4 1,366.5
Investment in subsidiaries classified as discontinued operations - 485.7
Other assets 438.4 426.5
Assets held in Separate Accounts 37,724.4 26,926.7
---------- ---------
$59,790.7 $47,766.3
========== =========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims $18,702.8 $17,600.6
Other liabilities 885.6 1,101.1
Liabilities related to Separate Accounts 37,724.4 26,926.7
---------- ---------
57,312.8 45,628.4
---------- ---------
Commitments and contingencies (notes 7 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 914.7 527.9
Retained earnings 1,312.3 1,432.6
Unrealized gains on securities available-for-sale, net 247.1 173.6
---------- ---------
2,477.9 2,137.9
---------- ---------
$59,790.7 $47,766.3
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1997 1996 1995
------------- ------------- --------------
<S> <C> <C> <C>
Revenues:
Investment product and universal life insurance product policy charges $ 545.2 $ 400.9 $ 286.6
Traditional life insurance premiums 205.4 198.6 199.1
Net investment income 1,409.2 1,357.8 1,294.0
Realized gains (losses) on investments 11.1 (0.3) (1.7)
Other 46.5 35.9 20.7
---------- ---------- ----------
2,217.4 1,992.9 1,798.7
---------- ---------- ----------
Benefits and expenses:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Other benefits and claims 178.2 178.3 165.2
Policyholder dividends on participating policies 40.6 41.0 39.9
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Other operating expenses 384.9 342.4 273.0
---------- ---------- ----------
1,787.5 1,677.4 1,511.1
---------- ---------- ----------
Income from continuing operations before federal income tax expense 429.9 315.5 287.6
Federal income tax expense 150.2 110.9 99.8
---------- ---------- ----------
Income from continuing operations 279.7 204.6 187.8
Income from discontinued operations (less federal income tax expense
of $4.5 and $7.4 in 1996 and 1995, respectively) - 11.3 24.7
---------- ---------- ----------
Net income $ 279.7 $ 215.9 $ 212.5
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
(in millions of dollars)
<TABLE>
<CAPTION>
Unrealized
gains
(losses)
Additional on securities Total
Common paid-in Retained available- shareholder's
stock capital earnings for-sale, net equity
----------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1994 $3.8 $ 606.2 $1,378.2 $(119.7) $1,868.5
Capital contribution - 51.0 - (4.1) 46.9
Net income - - 212.5 - 212.5
Dividends to shareholder - - (7.5) - (7.5)
Unrealized gains on securities available-
for-sale, net - - - 508.1 508.1
-------- -------- -------- -------- ---------
December 31, 1995 3.8 657.2 1,583.2 384.3 2628.5
Net income - - 215.9 - 215.9
Dividends to shareholder - (129.3) (366.5) (39.8) (535.6)
Unrealized losses on securities available-
for-sale, net - - - (170.9) (170.9)
-------- -------- -------- -------- ---------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Capital contribution - 836.8 - - 836.8
Net income - - 279.7 - 279.7
Dividends to shareholder - (450.0) (400.0) - (850.0)
Unrealized gains on securities available-
for-sale, net - - - 73.5 73.5
-------- -------- -------- -------- ---------
December 31, 1997 $3.8 $ 914.7 $1,312.3 $ 247.1 $2,477.9
======== ======== ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1997 1996 1995
------------------------------ ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 279.7 $ 215.9 $ 212.5
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Capitalization of deferred policy acquisition costs (487.9) (422.6) (321.3)
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Amortization and depreciation (2.0) 7.0 10.2
Realized (gains) losses on invested assets, net (11.1) (0.3) 3.3
(Increase) decrease in accrued investment income (0.3) 2.8 (16.9)
(Increase) decrease in other assets (12.7) (38.9) 39.9
(Decrease) increase in policy liabilities (23.1) (151.0) 123.9
Increase in other liabilities 230.6 191.4 27.0
Other, net (10.9) (61.7) 1.8
----------- --------- --------
Net cash provided by operating activities 1,146.1 858.3 1,113.4
----------- --------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 993.4 1,162.8 634.6
Proceeds from sale of securities available-for-sale 574.5 299.6 107.3
Proceeds from maturity of fixed maturity securities held-to-maturity - - 564.4
Proceeds from repayments of mortgage loans on real estate 437.3 309.0 207.8
Proceeds from sale of real estate 34.8 18.5 48.3
Proceeds from repayments of policy loans and sale of other invested assets 22.7 22.8 53.6
Cost of securities available-for-sale acquired (2,828.1) (1,573.6) (1,942.4)
Cost of fixed maturity securities held-to-maturity acquired - - (593.6)
Cost of mortgage loans on real estate acquired (752.2) (972.8) (796.0)
Cost of real estate acquired (24.9) (7.9) (10.9)
Policy loans issued and other invested assets acquired (62.5) (57.7) (75.9)
Short-term investments, net (354.8) 28.0 77.8
----------- --------- --------
Net cash used in investing activities (1,959.8) (771.3) (1,725.0)
----------- --------- --------
Cash flows from financing activities:
Proceeds from capital contributions 836.8 - -
Cash dividends paid - (50.0) (7.5)
Increase in investment product and universal life insurance
product account balances 2,488.5 1,781.8 1,883.7
Decrease in investment product and universal life insurance
product account balances (2,379.8) (1,784.5) (1,258.7)
----------- --------- --------
Net cash provided by (used in) financing activities 945.5 (52.7) 617.5
----------- --------- --------
Net increase in cash 131.8 34.3 5.9
Cash, beginning of year 43.8 9.5 3.6
----------- --------- --------
Cash, end of year $ 175.6 $ 43.8 $ 9.5
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
wholly owned by Nationwide Corporation (Nationwide Corp.). On that
date, Nationwide Corp. contributed the outstanding shares of NLIC's
common stock to Nationwide Financial Services, Inc. (NFS), a holding
company formed by Nationwide Corp. in November 1996 for NLIC and the
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. On March 11
1997, NFS completed an initial public offering of its Class A common
stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of certain subsidiaries that do not offer or
distribute long-term savings or retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to two affiliates effective January 1, 1996. These subsidiaries,
through December 31, 1996, and all accident and health and group life
insurance business have been accounted for as discontinued operations
for all periods presented. See notes 11 and 15. Additionally, NLIC paid
$900.0 million of dividends, $50.0 million to Nationwide Corp. on
December 31, 1996 and $850.0 million to NFS, which then made an
equivalent dividend to Nationwide Corp., on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc.,
Nationwide Investment Services Corporation and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
The Company is a leading provider of long-term savings and retirement
products. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) CONSOLIDATION POLICY
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are
classified and reported as discontinued operations are not
consolidated but rather are reported as "Investment in
subsidiaries classified as discontinued operations" in the
accompanying consolidated balance sheets and "Income from
discontinued operations" in the accompanying consolidated
statements of income. All significant intercompany balances and
transactions have been eliminated.
(b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1997 or 1996.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities. Universal life insurance products
include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during
the period. Policy benefits and claims that are charged to expense
include interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
(d) DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(b). For traditional life insurance products, these deferred
policy acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits.
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $365.5 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the Separate Accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) FUTURE POLICY BENEFITS
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
Future policy benefits for traditional life insurance policies
have been calculated using a net level premium method based on
estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the
time the policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 4.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) PARTICIPATING BUSINESS
Participating business represents approximately 50% in 1997 (52%
in 1996 and 54% in 1995) of the Company's life insurance in force,
77% in 1997 (78% in 1996 and 79% in 1995) of the number of life
insurance policies in force, and 27% in 1997 (40% in 1996 and 47%
in 1995) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) FEDERAL INCOME TAX
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 11 and 15.
(j) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130 - REPORTING
COMPREHENSIVE INCOME was issued in June 1997 and is effective for
fiscal years beginning after December 15, 1997. The statement
establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.
Comprehensive income includes all changes in equity during a
period except those resulting from investments by shareholders and
distributions to shareholders and includes net income.
Comprehensive income would be reported in addition to earnings
amounts currently presented. The Company will adopt the statement
and begin reporting comprehensive income in the first quarter of
1998.
(k) RECLASSIFICATION
Certain items in the 1996 and 1995 consolidated financial
statements have been reclassified to conform to the 1997
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) INVESTMENTS
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1997 and
1996 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 305.1 $ 8.6 $ - $ 313.7
Obligations of states and political subdivisions 1.6 - - 1.6
Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8
Corporate securities 8,698.7 355.5 (11.5) 9,042.7
Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3
------------ --------- --------- -----------
Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1
Equity securities 67.8 12.9 (0.3) 80.4
------------ --------- --------- -----------
$ 12,800.7 $ 498.3 $ (14.5) $ 13,284.5
============ ========= ========= ===========
December 31, 1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 275.7 $ 4.8 $ (1.3) $ 279.2
Obligations of states and political subdivisions 6.2 0.5 - 6.7
Debt securities issued by foreign governments 100.7 2.1 (0.9) 101.9
Corporate securities 7,999.3 285.9 (33.7) 8,251.5
Mortgage-backed securities 3,589.0 91.4 (15.1) 3,665.3
------------ --------- --------- -----------
Total fixed maturity securities 11,970.9 384.7 (51.0) 12,304.6
Equity securities 43.9 15.6 (0.4) 59.1
------------ --------- --------- -----------
$ 12,014.8 $ 400.3 $ (51.4) $ 12,363.7
============ ========= ========= ===========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1997, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions of dollars) cost fair value
-------------- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 419.2 $ 422.1
Due after one year through five years 4,573.5 4,708.4
Due after five years through ten years 2,772.6 2,879.7
Due after ten years 1,333.4 1,443.6
----------- -----------
9,098.7 9,453.8
Mortgage-backed securities 3,634.2 3,750.3
----------- -----------
$ 12,732.9 $ 13,204.1
=========== ===========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- ----------
<S> <C> <C>
Gross unrealized gains $ 483.8 $349.0
Adjustment to deferred policy acquisition costs (103.7) (81.9)
Deferred federal income tax (133.0) (93.5)
-------- -------
$ 247.1 $173.6
======== =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------- -----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $137.5 $(289.2) $876.3
Equity securities (2.7) 8.9 -
Fixed maturity securities held-to-maturity - - 75.6
------- ------- -------
$134.8 $(280.3) $ 951.9
======= ======= =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1997,
1996 and 1995 were $574.5 million, $299.6 million and $107.3 million,
respectively. During 1997, gross gains of $9.9 million ($6.6 million
and $4.8 million in 1996 and 1995, respectively) and gross losses of
$18.0 million ($6.9 million and $2.1 million in 1996 and 1995,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25.4 million to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of $3.5
million.
As permitted by the Financial Accounting Standards Board's Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November
1995, the Company transferred nearly all of its fixed maturity
securities previously classified as held-to-maturity to
available-for-sale. As of December 14, 1995, the date of transfer, the
fixed maturity securities had amortized cost of $3.32 billion,
resulting in a gross unrealized gain of $155.9 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million ($51.8 million as
of December 31, 1996), which includes $3.9 million ($41.7 million as of
December 31, 1996) of impaired mortgage loans on real estate for which
the related valuation allowance was $0.1 million ($8.5 million as of
December 31, 1996) and $16.0 million ($10.1 million as of December 31,
1996) of impaired mortgage loans on real estate for which there was no
valuation allowance. During 1997, the average recorded investment in
impaired mortgage loans on real estate was approximately $31.8 million
($39.7 million in 1996) and interest income recognized on those loans
was $1.0 million ($2.1 million in 1996), which is equal to interest
income recognized using a cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
------------- -------------
<S> <C> <C>
Allowance, beginning of year $51.0 $49.1
(Reductions) additions charged to operations (1.2) 4.5
Direct write-downs charged against the allowance (7.3) (2.6)
------ ------
Allowance, end of year $42.5 $51.0
====== ======
</TABLE>
Real estate is presented at cost less accumulated depreciation of $45.1
million as of December 31, 1997 ($30.3 million as of December 31, 1996)
and valuation allowances of $11.1 million as of December 31, 1997
($15.2 million as of December 31, 1996).
Investments that were non-income producing for the twelve month period
preceding December 31, 1997 amounted to $19.4 million ($26.8 million
for 1996) and consisted of $3.0 million ($0.2 million in 1996) in
securities available-for-sale, $16.4 million ($20.6 million in 1996) in
real estate and none ($5.9 million in 1996) in other long-term
investments.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 911.6 $ 917.1 $ 685.8
Equity securities 0.8 1.3 1.3
Fixed maturity securities held-to-maturity - - 201.8
Mortgage loans on real estate 457.7 432.8 395.5
Real estate 42.9 44.3 38.3
Short-term investments 22.7 4.2 10.6
Other 21.0 4.0 7.2
-------- -------- --------
Total investment income 1,456.7 1,403.7 1,340.5
Less investment expenses 47.5 45.9 46.5
-------- -------- --------
Net investment income $1,409.2 $1,357.8 $1,294.0
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 3.6 $(3.5) $ 4.2
Equity securities 2.7 3.2 3.4
Mortgage loans on real estate 1.6 (4.1) (7.1)
Real estate and other 3.2 4.1 (2.2)
------ ------ ------
$11.1 $(0.3) $(1.7)
====== ====== ======
</TABLE>
Fixed maturity securities with an amortized cost of $6.2 million as
of December 31, 1997 and 1996 were on deposit with various
regulatory agencies as required by law.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts
represents approximately 86% and 87% of the total liability for future
policy benefits as of December 31, 1997 and 1996, respectively. The
average interest rate credited on investment product policies was
approximately 6.1%, 6.3% and 6.6% for the years ended December 31,
1997, 1996 and 1995, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
INTEREST RATES: Interest rates vary by issue year and were 6.9%
and 6.6% in 1997 and 1996, respectively. Interest rates have
generally ranged from 6.0% to 10.5% for previous issue years.
WITHDRAWALS: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on published
tables, modified for the Company's actual experience.
The Company has entered into a reinsurance contract to cede a portion
of its general account individual annuity business to The Franklin Life
Insurance Company (Franklin). Total recoveries due from Franklin were
$220.2 million and $240.5 million as of December 31, 1997 and 1996,
respectively. The contract is immaterial to the Company's results of
operations. The ceding of risk does not discharge the original insurer
from its primary obligation to the policyholder. Under the terms of the
contract, Franklin has established a trust as collateral for the
recoveries. The trust assets are invested in investment grade
securities, the market value of which must at all times be greater than
or equal to 102% of the reinsured reserves.
The Company has reinsurance agreements with certain affiliates as
described in note 11. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(5) FEDERAL INCOME TAX
The Company's current federal income tax liability was $60.1 million
and $30.2 million as of December 31, 1997 and 1996, respectively.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $200.1 $183.0
Liabilities in Separate Accounts 242.0 188.4
Mortgage loans on real estate and real estate 19.0 23.4
Other assets and other liabilities 59.2 53.7
------- ------
Total gross deferred tax assets 520.3 448.5
Less valuation allowance (7.0) (7.0)
------- ------
Net deferred tax assets 513.3 441.5
------- ------
Deferred tax liabilities:
Deferred policy acquisition costs 480.5 399.3
Fixed maturity securities 193.3 133.2
Deferred tax on realized investment gains 40.1 37.6
Equity securities and other long-term investments 7.5 8.2
Other 22.2 25.4
------- ------
Total gross deferred tax liabilities 743.6 603.7
------- ------
Net deferred tax liability $230.3 $162.2
======= ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1997, 1996 and 1995.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Currently payable $121.7 $116.5 $88.7
Deferred tax expense (benefit) 28.5 (5.6) 11.1
------ ------ ------
$150.2 $110.9 $99.8
====== ====== ======
</TABLE>
Total federal income tax expense for the years ended December 31, 1997,
1996 and 1995 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
(in millions of dollars) Amount % Amount % Amount %
---------------------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $150.5 35.0 $110.4 35.0 $100.6 35.0
Tax exempt interest and dividends
received deduction - 0.0 (0.2) (0.1) - 0.0
Other, net (0.3) (0.1) 0.7 0.3 (0.8) (0.3)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $150.2 34.9 $110.9 35.2 $ 99.8 34.7
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $91.8 million, $115.8 million and
$51.8 million during the years ended December 31, 1997, 1996 and 1995,
respectively.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
FIXED MATURITY AND EQUITY SECURITIES: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
MORTGAGE LOANS ON REAL ESTATE, NET: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
POLICY LOANS, SHORT-TERM INVESTMENTS AND CASH: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand, which includes certain surrender
charges.
INVESTMENT CONTRACTS: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 13.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $13,204.1 $13,204.1 $12,304.6 $12,304.6
Equity securities 80.4 80.4 59.1 59.1
Mortgage loans on real estate, net 5,181.6 5,509.7 5,272.1 5,397.9
Policy loans 415.3 415.3 371.8 371.8
Short-term investments 358.4 358.4 4.8 4.8
Cash 175.6 175.6 43.8 43.8
Assets held in Separate Accounts 37,724.4 37,724.4 26,926.7 26,926.7
Liabilities:
Investment contracts 14,708.2 14,322.1 13,914.4 13,484.5
Policy reserves on life insurance contracts 3,345.4 3,182.4 3,392.8 3,197.5
Liabilities related to Separate Accounts 37,724.4 36,747.0 26,926.7 26,164.2
</TABLE>
(7) RISK DISCLOSURES
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduce demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
CREDIT RISK: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $341.4 million
extending into 1998 were outstanding as of December 31, 1997. The
Company also had $63.9 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1997.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 20% (21% in 1996) in any geographic area and no more than 2% (2%
in 1996) with any one borrower as of December 31, 1997. As of December
31, 1997, 46% (44% in 1996) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1997 and 1996. See note 4.
(8) PENSION PLAN
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. Benefits are based upon the highest average annual
salary of a specified number of consecutive years of the last ten years
of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan (the Retirement Plan). Immediately prior to the merger,
the plans were amended to provide consistent benefits for service after
January 1, 1996. These amendments had no significant impact on the
accumulated benefit obligation or projected benefit obligation as of
December 31, 1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1997, 1996 and 1995 were $7.5 million, $7.4
million and $10.5 million, respectively.
The Company had no net accrued pension expense as of December 31, 1997
($1.1 million as of December 31, 1996).
The net periodic pension cost for the Retirement Plan as a whole for
the years ended December 31, 1997 and 1996 and for the Nationwide
Insurance Companies and Affiliates Retirement Plan as a whole for the
year ended December 31, 1995 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 77.3 $ 75.5 $ 64.5
Interest cost on projected benefit obligation 118.6 105.5 95.3
Actual return on plan assets (328.0) (210.6) (249.3)
Net amortization and deferral 196.4 101.8 143.4
-------- -------- --------
$ 64.3 $ 72.2 $ 53.9
======== ======== ========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average discount rate 6.50% 6.00% 7.50%
Rate of increase in future compensation levels 4.75% 4.25% 6.25%
Expected long-term rate of return on plan assets 7.25% 6.75% 8.75%
</TABLE>
Information regarding the funded status of the Retirement Plan as a
whole as of December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,547.5 $1,338.6
Nonvested 13.5 11.1
-------- ---------
$1,561.0 $1,349.7
======== =========
Net accrued pension expense:
Projected benefit obligation for services rendered to date $2,033.8 $1,847.8
Plan assets at fair value 2,212.9 1,947.9
--------- ---------
Plan assets in excess of projected benefit obligation 179.1 100.1
Unrecognized prior service cost 34.7 37.9
Unrecognized net gains (330.7) (202.0)
Unrecognized net asset at transition 33.3 37.2
--------- ---------
$ (83.6) $ (26.8)
========= =========
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Weighted average discount rate 6.00% 6.50%
Rate of increase in future compensation levels 4.25% 4.75%
</TABLE>
Assets of the Retirement Plan are invested in group annuity contracts
of NLIC and Employers Life Insurance Company of Wausau (ELICW).
(9) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1997 and 1996 was $36.5 million and $34.9 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1997, 1996 and
1995 was $3.0 million, $3.3 million and $3.1 million, respectively.
Information regarding the funded status of the plan as a whole as of
December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 93.3 $ 93.0
Fully eligible, active plan participants 31.6 23.7
Other active plan participants 113.0 84.0
-------- --------
Accumulated postretirement benefit obligation 237.9 200.7
Plan assets at fair value 69.2 63.0
-------- --------
Plan assets less than accumulated postretirement benefit obligation (168.7) (137.7)
Unrecognized transition obligation of affiliates 1.5 1.7
Unrecognized net losses (gains) 1.6 (23.2)
-------- --------
$(165.6) $(159.2)
======== ========
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Service cost (benefits attributed to employee
service during the year) $ 7.0 $ 6.5 $ 6.2
Interest cost on accumulated postretirement
benefit obligation 14.0 13.7 14.2
Actual return on plan assets (3.6) (4.3) (2.7)
Amortization of unrecognized transition
obligation of affiliates 0.2 0.2 3.0
Net amortization and deferral (0.5) 1.8 (1.6)
------- ------ ------
$17.1 $17.9 $19.1
======= ====== ======
</TABLE>
Actuarial assumptions used for the measurement of the APBO and the
NPPBC for 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
APBO:
Discount rate 6.70% 7.25% 6.75%
Assumed health care cost trend rate:
Initial rate 12.13% 11.00% 11.00%
Ultimate rate 6.12% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
NPPBC:
Discount rate 7.25% 6.65% 8.00%
Long term rate of return on plan
assets, net of tax 5.89% 4.80% 8.00%
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 10.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the plan as a whole, a one percentage point increase in the assumed
health care cost trend rate would increase the APBO as of December 31,
1997 by $0.4 million and have no impact on the NPPBC for the year ended
December 31, 1997.
(10) SHAREHOLDER'S EQUITY, REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS
AND DIVIDEND RESTRICTIONS
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The statutory capital and surplus of NLIC as of December 31, 1997, 1996
and 1995 was $1.13 billion, $1.00 billion and $1.36 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1997, 1996 and 1995 was $111.7 million, $73.2 million and
$86.5 million, respectively.
As a result of the $850.0 million dividend paid on February 24, 1997,
any dividend paid by NLIC during the twelve-month period immediately
following the $850.0 million dividend would be an extraordinary
dividend under Ohio insurance laws. Accordingly, no such dividend could
be paid without prior regulatory approval. The Company has no reason to
believe that any reasonably foreseeable dividend to be paid by NLIC
would not receive the required approval.
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(11) TRANSACTIONS WITH AFFILIATES
As part of the restructuring described in note 1, NLIC paid a dividend
valued at $485.7 million to Nationwide Corp. on January 1, 1997
consisting of the outstanding shares of common stock of ELICW, National
Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC).
Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid
an equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. The Company
recognized a gain of $14.4 million on the transfer of securities.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1997, 1996 and 1995, the
Company made lease payments to NMIC and its subsidiaries of $8.4
million, $9.1 million and $9.0 million, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $85.8 million, $101.6 million and $107.1
million in 1997, 1996 and 1995, respectively. The allocations are based
on techniques and procedures in accordance with insurance regulatory
guidelines. Measures used to allocate expenses among companies include
individual employee estimates of time spent, special cost studies,
salary expense, commissions expense and other methods agreed to by the
participating companies that are within industry guidelines and
practices. The Company believes these allocation methods are
reasonable. In addition, the Company does not believe that expenses
recognized under the inter-company agreements are materially different
than expenses that would have been recognized had the Company operated
on a stand alone basis. Amounts payable to NMIC from the Company under
the cost sharing agreement were $20.5 million and $15.1 million as of
December 31, 1997 and 1996, respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1997 and
1996 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance agreements exist between NLIC and,
respectively, NMIC and ELICW whereby all of NLIC's accident and health
and group life insurance business is ceded on a modified coinsurance
basis. NLIC entered into the reinsurance agreements during 1996 because
the accident and health and group life insurance business was unrelated
to the Company's long-term savings and retirement products.
Accordingly, the accident and health and group life insurance business
has been accounted for as discontinued operations for all periods
presented. Under modified coinsurance agreements, invested assets are
retained by the ceding company and investment earnings are paid to the
reinsurer. Under the terms of the Company's agreements, the investment
risk associated with changes in interest rates is borne by ELICW or
NMIC, as the case may be. Risk of asset default is retained by the
Company, although a fee is paid by ELICW or NMIC, as the case may be,
to the Company for the Company's retention of such risk. The agreements
will remain in force until all policy obligations are settled. However,
with respect to the agreement between NLIC and NMIC, either party may
terminate the contract on January 1 of any year with prior notice. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. The Company believes that the terms of
the modified coinsurance agreements are consistent in all material
respects with what the Company could have obtained with unaffiliated
parties. Amounts ceded to NMIC and ELICW for the years ended December
31, 1997 and 1996 were:
<TABLE>
<CAPTION>
1997 1996
---------------------------- ----------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW
-------------- ------------- ----------------------------
<S> <C> <C> <C> <C>
Premiums $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other revenue $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and other expenses $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $211.0 million and $4.8 million as of
December 31, 1997 and 1996, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
On March 1, 1995, Nationwide Corp. contributed all of the outstanding
shares of common stock of Farmland Life Insurance Company (Farmland) to
NLIC. Farmland merged into WCLIC effective June 30, 1995. The
contribution resulted in a direct increase to consolidated
shareholder's equity of $46.9 million. As discussed in note 15, WCLIC
is accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1997 were $66.1
million, $76.9 million and $57.3 million, respectively.
(12) BANK LINES OF CREDIT
In August 1996, NLIC, along with NMIC, entered into a $600.0 million
revolving credit facility which provides for a $600.0 million loan over
a five year term on a fully revolving basis with a group of national
financial institutions. The credit facility provides for several and
not joint liability with respect to any amount drawn by either NLIC or
NMIC. NLIC and NMIC pay facility and usage fees to the financial
institutions to maintain the revolving credit facility. All previously
existing line of credit agreements were canceled. In September 1997,
the credit agreement was amended to include NFS as a party to and
borrower under the agreement.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(13) CONTINGENCIES
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to
be material to the Company's financial position or results of
operations.
(14) SEGMENT INFORMATION
The Company has three product segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by the Company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Fixed Annuities segment also includes the
fixed option under the Company's variable annuity contracts. The Life
Insurance segment consists of insurance products that provide a death
benefit and may also allow the customer to build cash value on a
tax-deferred basis. In addition, the Company reports corporate expenses
and investments, and the related investment income supporting capital
not specifically allocated to its product segments in a Corporate and
Other segment. In addition, all realized gains and losses and
investment management fees and other revenue earned from mutual funds,
other than the portion allocated to the variable annuities and life
insurance segments, are reported in the Corporate and Other segment.
The following table summarizes revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1997, 1996 and 1995 and assets as of December 31, 1997,
1996 and 1995, by segment.
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 404.0 $ 284.6 $ 189.1
Fixed Annuities 1,141.4 1,092.6 1,052.0
Life Insurance 473.1 435.6 409.1
Corporate and Other 198.9 180.1 148.5
----------- ---------- ----------
$ 2,217.4 $ 1,992.9 $ 1,798.7
=========== ========== ==========
Income from continuing operations before federal income tax
expense:
Variable Annuities $ 150.9 $ 90.3 $ 50.8
Fixed Annuities 169.5 135.4 137.0
Life Insurance 70.9 67.2 67.6
Corporate and Other 38.6 22.6 32.2
----------- ---------- ----------
$ 429.9 $ 315.5 $ 287.6
=========== ========== ==========
Assets:
Variable Annuities $ 35,278.7 $ 25,069.7 $ 17,333.0
Fixed Annuities 14,436.3 13,994.7 13,250.4
Life Insurance 3,901.4 3,353.3 3,027.4
Corporate and Other 6,174.3 5,348.6 4,896.8
----------- ---------- ----------
$ 59,790.7 $ 47,766.3 $ 38,507.6
=========== ========== ==========
</TABLE>
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(15) DISCONTINUED OPERATIONS
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. Prior to the
contribution by Nationwide Corp. of the outstanding common stock of
NLIC to NFS, NLIC effected certain transactions with respect to certain
subsidiaries and lines of business that were unrelated to long-term
savings and retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend
payable to Nationwide Corp. on January 1, 1997 consisting of the
outstanding shares of common stock of three subsidiaries: ELICW, NCC
and WCLIC. ELICW writes group accident and health and group life
insurance business and maintains it offices in Wausau, Wisconsin. NCC
is a property and casualty company with offices in Scottsdale, Arizona
that serves as a fronting company for a property and casualty
subsidiary of NMIC. WCLIC writes high dollar term life insurance
policies and is located in San Francisco, California. ELICW, NCC and
WCLIC have been accounted for as discontinued operations in the
accompanying consolidated financial statements through December 31,
1996. The Company did not recognize any gain or loss on the disposal of
these subsidiaries.
Also, during 1996, NLIC entered into two reinsurance agreements whereby
all of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 11 for a
complete discussion of the reinsurance agreements. The Company has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated
companies. NLIC's accident and health and group life insurance business
is accounted for as discontinued operations for all periods presented.
The Company did not recognize any gain or loss on the disposal of the
accident and health and group life insurance business. The assets,
liabilities, results of operations and activities of discontinued
operations are distinguished physically, operationally and for
financial reporting purposes from the remaining assets, liabilities,
results of operations and activities of the Company.
A summary of the results of operations of discontinued operations for
the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- ------------
<S> <C> <C> <C>
Revenues $ - $ 668.9 $ 776.9
Net income $ - $ 11.3 $ 24.7
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
Assets, consisting primarily of investments $247.3 $3,288.5 $3,206.7
Liabilities, consisting primarily of policy benefits and claims $247.3 $2,802.8 $2,700.0
</TABLE>
<PAGE> 68
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Page
<S> <C>
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Financial statements included in Prospectus.
(Part A):
Condensed Financial Information. 19
(2) Financial statements included in Part B: Those financial
statements required by Item 23 to be included in Part B
have been incorporated therein by reference to the
Prospectus (Part A).
Nationwide DC Variable Account:
Independent Auditors' Report. 58
Statement of Assets, Liabilities and Contract Owners'
Equity as of December 31, 1997 59
Statements of Operations and Changes in Contract Owners'
Equity for the years ended December 31, 1997 and 1996. 62
Notes to Financial Statements. 78
Nationwide Life Insurance Company:
Independent Auditors' Report. 90
Consolidated Balance Sheets as of December
31, 1997 and 1996. 91
Consolidated Statements of Income for the
years ended December 31, 1997, 1996 and
1995. 92
Consolidated Statements of Shareholder's
Equity for the years ended December 31,
1997, 1996 and 1995. 93
Consolidated Statements of Cash Flows for
the years ended December 31, 1997, 1996
and 1995. 94
Notes to Consolidated Financial Statements. 95
Schedule I - Consolidated Summary of Investments -
Other Than Investments in Related Parties 146
Schedule III - Supplementary Insurance Information 147
Schedule IV - Reinsurance 148
Schedule V - Valuation and Qualifying Accounts 149
</TABLE>
<PAGE> 69
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of
Directors authorizing the establishment of
the Registrant - Filed previously with Registration
Statement (File No. 2-51911) and is hereby
incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution of contracts
between the Registrant and Principal
Underwriter - Filed previously with Registration
Statement (File No. 2-51911) and is hereby
incorporated by reference.
(4) The form of the variable annuity contract - Filed
previously with Registration Statement (File No.
2-51911) and is hereby incorporated by reference.
(5) Variable Annuity Application - Filed previously
with Registration Statement (File No. 2-51911) and
is hereby incorporated by reference.
(6) Articles of Incorporation of Depositor - Filed
previously with Registration Statement (File No.
2-51911) and is hereby incorporated by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with
Registration Statement (File No. 2-51911) and is
hereby incorporated by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
<PAGE> 70
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
C. Ray Noecker Director
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operations
Columbus, OH 43215
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
<PAGE> 73
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C>
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance corporations
worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Inactive
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Georgia, Inc. Georgia Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Local Recording Agent (P&C)
Companies Annuity Agency of Texas, Texas Group and Variable Contract Agent
Inc.
Cooperative Service Company Nebraska Insurance Agency
Countrywide Services Corporation Delaware Products Liability, Investigative and Claims
Management Services
EMPLOYERS INSURANCE OF WAUSAU A Wisconsin Mutual Insurance Company
Mutual Company
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C>
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Life Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
Gates McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Commercial Health and Medicare Supplement
Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Key Health Plan, Inc. California Pre-paid Health Plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and Operates a Recreational Ski Facility
** National Casualty Company Wisconsin Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C>
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Community Urban Ohio Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds, and
other evidences of indebtedness,
securities, and contracts of other persons,
associations, corporations, domestic or
foreign and to form or acquire the control
of other corporations
Nationwide/Dispatch LLC Ohio Engaged in related Arena development Activity
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust
Nationwide Financial Services, Inc. Delaware Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds, and
other evidences of indebtedness,
securities, and contracts of other persons,
associations, corporations, domestic or
foreign and to form or acquire the control
of other corporations
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Global Holdings, Inc. Ohio Holding Company for Enterprise International
Operations
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Enterprise Ohio Performs shares services functions for the
Services, Ltd. Enterprise
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investing Foundation III Ohio Investment Company
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C>
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Systems, Inc. Ohio Offers Preferred Provider Organization and
Other Related Products and Services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
Nationwide Properties, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming, Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura Insurance
Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C>
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred Compensation
Agency, Inc. Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred Compensation
Plans for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record keeping
and consulting and compensation consulting
Physicians Plus Insurance Corporation Wisconsin Health Maintenance Organization
Prevea Health Insurance Plan, Inc. Wisconsin Health Maintenance Organization
Public Employees Benefit Services Delaware Markets and Administers Deferred Compensation
Corporation Plans for Public Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines Insurance Company
Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
TIG Countrywide Insurance Group California Independent Agency Personal Lines Underwriter
Wausau (Bermuda) Ltd. Bermuda Rent-a-captive Reinsurer
Wausau Business Insurance Company Wisconsin Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus Lines
Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
(SEE ATTACHED CHART) UNLESS
STATE OTHERWISE INDICATED
OF ORGANIZATION
COMPANY PRINCIPAL BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide DCVA II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-A Separate Account
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-B Separate Account
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance Policies
Account-C Separate Account
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
</TABLE>
<PAGE> 79
<TABLE>
<S> <C> <C> <C>
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance Policies
Account
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
------------------------------------------
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |
| |========================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| KEY HEALTH PLAN, INC. | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 1,000 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
| 80% $1,828,478 | |100% $18,683,300| |100% $176,763,000| || | |
- --------------------------- --------------------------- ---------------------------- || ---------------------------
| ||
--------------------------------------------------------------------- ||
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU BUSINESS | | | COMPANIES AGENCY | | | COUNTRYWIDE SERVICES | | || | |
| INSURANCE COMPANY | | | OF KENTUCKY, INC. | | | CORPORATION | | || | |
|Common Stock: 10,900,000 | | |Common Stock: 1,000 | | |Common Stock: 100 Shares | | || | COMPANIES |
|------------ Shares | | |------------ Shares | | |------------ | | || | AGENCY OF |
| |---|---| | |---| | | ||==| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | || | |
| ---- | | | ---- | | | ---- | | || | |
|WSC-100% $33,800,000| | |WSC-100% $1,000 | | |WSC-100% $145,852 | | || | |
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU UNDERWRITERS | | | COMPANIES AGENCY | | | WAUSAU GENERAL | | || | |
| INSURANCE COMPANY | | | OF MASSACHUSETTS, INC. | | | INSURANCE COMPANY | | || | |
|Common Stock: 8,750 | | |Common Stock: 1,000 | | |Common Stock: 200,000 | | || | COMPANIES ANNUITY |
|------------ Shares | | |------------ Shares | | |------------ Shares | | || | AGENCY OF |
| |---|---| | |---| | | ====| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | | |
| ---- | | | ---- | | | ---- | | | |
|WSC-100% $69,560,006| | |WSC-100% $1,000 | | |WSC-100% $39,000,000 | | | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| GREATER LA CROSSE | | | COMPANIES AGENCY | | | WAUSAU INTERNATIONAL | | | AMERICAN MARINE |
| HEALTH PLANS, INC. | | | OF NEW YORK, INC. | | | UNDERWRITERS | | | UNDERWRITERS, INC. |
|Common Stock: 3,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 20 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |---|---| | |---| | |------| |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-33.3% $1,461,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | AGENCY, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | |
| Cost | | | Cost | | | Cost | | Cost |
| ---- | | | ---- | | | ---- | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | |WSC-100% $10,000 |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | PENSION ASSOCIATES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | OF WAUSAU, INC. |
| | | | | | | CORPORATION | |Common Stock: 1,000 |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | |------------ Shares |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |
| |-------| | |---|Preferred Stock: 11,540 | | |
| | | | | | |--------------- Shares | |Companies Cost |
| | | | | | | | |Agency, Inc. ---- |
| Cost | | | Cost | | | Cost | |(Wisconsin)-100% $10,000 |
| ---- | | | ---- | | | ---- | | |
|WSC-100% $1,000 | | |WSC-100% $1,000 | | |WSC-33-1/3% $6,215,459| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| |
| --------------------------- | ----------------------------
| | WAUSAU | | | PREVEA HEALTH |
| | (BERMUDA) LTD. | | | INSURANCE PLAN, INC. |
| | Common Stock: 120,000 | | |Common Stock: 3,000 Shares|
| | ------------- Shares | | |------------ |
----| | ----| |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| WSC-100% $5,000,000| |WSC-33-1/3% $500,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 10,330 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-18.6% $88,320 | || | | Cost | | Cost |
|Fire-18.6% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-6.8% $100,000 | || | | | | | |
|Fire-6.8% $100,000 | || | | | | | |
- -------------------------------- || | -------------------------------- | --------------------------------
|| | |
- -------------------------------- || | -------------------------------- | --------------------------------
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY | | | NECKURA |
| INSURANCE COMPANY | || | | AND CASUALTY | | | INSURANCE COMPANY |
|Guaranty Fund | || | | INSURANCE COMPANY | | | |
|------------ |========= |----|Common Stock: 60,000 | |--------|Common Stock: 6,000 |
|Certificate |-------- | |------------ Shares | | |------------ Shares |
|----------- Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | | |
- -------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | | COMPANY OF WINCONSIN | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | (COLONIAL) | | | |
|------------ | ------| |----|Common Stock: 1,750 | |--------|Common Stock: 4,000 |
| Cost | | | |------------ Shares | | |------------ Shares |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | |
- -------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |-------- |----|------------ Shares | ---- |--------|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
| | | | | | | | |
| | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares |------------ | | Common Stock: 100,000 | | | |Common Stock: 1 Share |
| | | | ------------ Shares | ---| |--------|------------ |
| Cost | | | | | | | Cost |
|Casualty-99.9% ---- | | | Cost | | | | ---- |
|Other Capital: $26,714,335 | | | ---- | | | |Neckura-100% DM 51,639 |
|------------- | | | SIC-100% $6,000,000 | | | | |
|Casualty-Ptd. $ 713,576 | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |------------- |------------ Shares |----- ---------|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
| | | | | | |
| | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
- -------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1,500 Shares |
| | |------------ |----------------- |------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
- -------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| FIRE INSURANCE COMPANY |
| (FIRE) |
| |
| |
-----------------------------------------------------------------------------
|
- --------------- --------------------------------------------------
| |
- ----------------------------------------------------------------------------------------------------------------- |
| | | |
| -------------------------------- | -------------------------------- ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | CORPORATION |
| | | | | REDEVELOPMENT | | |
| | | | | CORPORATION | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | |------------ ------- |
|-----|------------ Shares | |----|------------ | |$13,642,432 100% |
| | Cost | | | Cost | | Shares Cost |
| | ---- | | | ---- | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | |Casualty 12,992,922 $751,352,485|
| | | | | | |Fire 649,510 24,007,936|
| | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE | | | INSURANCE |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. |
| | | | | |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 |
| |------------ Shares | | |------------ Shares |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | LONE STAR | | | NATIONWIDE CASH |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY |
| | | | |Common Stock: 100 Shares |
------|Common Stock: 1,000 | |----|------------ |
| |------------ Shares | | | Cost |
| | Cost | | | ---- |
| | ---- | | |Casualty-90% $9,000 |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 |
| -------------------------------- | --------------------------------
| || |
| -------------------------------- | --------------------------------
| | COLONIAL COUNTY MUTUAL | | | CALIFORNIA CASH |
| | INSURANCE COMPANY | | | MANAGEMENT |
| | | | | (Inactive) |
| |Surplus Debentures | | | |
| |------------------ | |----| |
| | Cost | | | |
| | ---- | | | |
| |Colonial $500,000 | | |Casualty-100% |
| |Lone Star 150,000 | | | |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | THE BEAK AND |
| | INSURANCE COMPANY | | | WIRE CORPORATION |
| |Common Stock 12,500 | | | |
-----|------------ Shares | | |Common Stock: 750 Shares |
| | | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $1,419,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE/DISPATCH LLC |
| | ENTERPRISE SERVICES, LTD. | | | |
| | | | | |
| |Single Member Limited | | | |
- - - |Liability Company | - - -| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- | |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
Limited Liability Company -- Dotted Line
December 31, 1997
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
(Left Side)
------------------------------------------------
| EMPLOYERS INSURANCE |
| OF WAUSAU |==========================================
| A MUTUAL COMPANY |
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
| | |
--------------------------- --------------------------- ---------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
--------------------------- --------------------------- ---------------------------
| ||
--------------------------- | --------------------------- --------------------------- || --------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $58,070,003 | | | NW Life -100% $5,996,261 | || | NFIDAI -100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -100% $10,100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life -100% $529,728 | | | COMMON LAW TRUST | || | NFIDAI -100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| PROPERTIES, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ - -| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE | | | NATIONWIDE | ||
| PROPERTIES, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: - -| | | ||
| ------ | | |==||
| | | | ||
| | | | ||
| NW Life -97.6% | | | ||
| NW Mutual -2.4% | | COMMON LAW TRUST | ||
--------------------------- --------------------------- ||
||
--------------------------- ||
| NATIONWIDE | ||
| SEPARATE ACCOUNT | ||
| TRUST | ||
| | ||
| |__||
| |
| |
| |
| COMMON LAW TRUST |
---------------------------
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| INSURANCE COMPANY |==========================================
| (CASUALTY) |
------------------------------------------------
|
| ----------------------------------------------------------
| |
---------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
---------------------------------------
|-----------------------------------------------------------------
--------------------------- |
| NATIONWIDE FINANCIAL | |
| SERVICES, INC. (NFS) | |
| | |
| Common Stock: Control | |
| ------------ ------- | |
| | |
| | |
| Class A Public--100% | |
| Class B NW Corp--100% | |
--------------------------- |
| |
---------------------------------------------------------------------- |
| | | |
--------------------------- --------------------------- --------------------------- | -------------------------
| IRVIN L. SCHWARTZ | | PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | | NATIONWIDE GLOBAL |
| & ASSOCIATES | | SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | | HOLDINGS, INC. |
| | | (PEBSCO) | | (NEA) | | | |
| Common Stock: Control | | Common Stock: 236,494 |==|| | Common Stock: 500 |= || | | Common Stock: 1 Share |
| ------------ ------- | | ------------ Shares | || | ------------ Shares | || |--| ------------ |
| | | | || | | || | | |
| | | | || | | || | | Cost |
| Class A Other -100% | | | || | | || | | ---- |
| Class B NFS -100% | | NFS -100% | || | NFS -100% | || | | NW Corp-100% $7,000,00 |
- ---------------------------- ---------------------------- || ---------------------------- || | --------------------------
--------------------------- || --------------------------- || |
| PEBSCO OF | || | NEA VALUEBUILDER | || | --------------------------
| ALABAMA | || | INVESTOR SERVICES | || | | MRM INVESTMENT, INC. |
| | || | OF ALABAMA, INC. | || | | |
| Common Stock: 100,000 | || | Common Stock: 500 | || | | |
| ------------ Shares |--|| | ------------ Shares |--|| __ | Common Stock: 1 Share |
| | || | | || | ----------- |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | Cost |
| PEBSCO -100% $1,000 | || | NEA -100% $5,000 | || | ---- |
--------------------------- || --------------------------- || | NW Corp.-100% $7,000,000|
|| || --------------------------
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ARKANSAS | || | INVESTOR SERVICES | ||
| | || | OF ARIZONA, INC. | ||
| Common Stock: 50,000 | || | Common Stock: 100 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO -100% $500 | || | NEA -100% $1,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF MASSACHUSETTS | || | NEA VALUEBUILDER | ||
| INSURANCE AGENCY, INC. | || | INVESTOR SERVICES | ||
| | || | OF MONTANA, INC. | ||
| Common Stock: 1,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO -100% $1,000 | || | NEA -100% $500 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| MONTANA | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF NEVADA, INC. | || | OF OHIO, INC. |
| Common Stock: 500 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $500 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| NEW MEXICO | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF WYOMING, INC. | || | OF OKLAHOMA, INC. |
| Common Stock: 1,000 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $1,000 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || --------------------------
| | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| | || | SERVICES INSURANCE | || | INVESTOR SERVICES |
| PEBSCO OF | || | AGENCY, INC. | || | OF TEXAS, INC. |
| TEXAS, INC. | || | Common Stock: 100 | || | |
| |==|| | ------------ Shares |--||=== | |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA -100% $1,000 | | |
--------------------------- --------------------------- --------------------------
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | HEALTH PLANS, INC. (NHP) |
| | | | | |
| Common Stock: 254 | | Common Stock: 250,000 | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| | NW CORP. -100% $25,683,532 | | | NW CORP. -100% $126,509,480 | | | NW CORP. -100% $14,603,732 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| --------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | WAUSAU PREFERRED | | | NATIONWIDE MANAGEMENT |
| | OF NEW YORK, INC. | | | HEALTH INSURANCE CO. | | | SYSTEMS, INC. |
| | | | | | | | |
| | Common Stock: 3 | | | Common Stock: 200 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NHP Cost |
| | ---- | | ---- | | | ---- |
| | GATES -100% $106,947 | | ELIOW -100% $57,413,193 | | | Inc. -100% $25,149 |
| ----------------------------- ------------------------------ | ------------------------------
| |
| ----------------------------- | ------------------------------
| | GATES, MCDONALD & COMPANY | | | NATIONWIDE |
| | OF NEVADA | | | AGENCY, INC. |
| | | | | |
| | Common Stock: 40 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares |
| | | | |
| | Cost | | Cost |
| | ---- | | NHP ---- |
| | Gates -100% $93,750 | | Inc. -99% $116,077 |
| ----------------------------- ------------------------------
|
| -----------------------------
| | GATESMCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| Gates -100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1997
Page 2
</TABLE>
<PAGE> 86
ITEM 27. NUMBER OF CONTRACT OWNERS
The number of Contract Owners of Contracts as of January 31, 1998 was
3,590.
ITEM 28. INDEMNIFICATION
Provision is made in the Company's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation Law of
the State of Ohio, for indemnification by the Company of any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative by reason of the fact
that such person is or was a director, officer or employee of the
Company, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding, to the
extent and under the circumstances permitted by the General Corporation
Law of the State of Ohio.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Act") may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as principal
underwriter and general distributor for the Nationwide
Multi-Flex Variable Account, Nationwide DC Variable Account,
Nationwide DCVA II, Nationwide Variable Account-II,
Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide
Variable Account-9, Nationwide VA Separate Account-A,
Nationwide VA Separate Account-B, Nationwide VA Separate
Account-C, Nationwide VL Separate Account-A, Nationwide VL
Separate Account-B, Nationwide VL Separate Account-C
Nationwide VLI Separate Account-2, Nationwide VLI Separate
Account-3, Nationwide VLI Separate Account-4, NACo Variable
Account and Nationwide Variable Account, all of which are
separate investment accounts of the Company or its
affiliates.
NAS also acts as principal underwriter for Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, Nationwide Asset
Allocation Trust and Nationwide Investing Foundation II, and
Nationwide Investing Foundation III which are open-end
management investment companies.
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
Dimon R. McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and
Columbus, OH 43215 Chief Executive Officer--Nationwide
Insurance Enterprise and Director
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, OH 43215
<PAGE> 87
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President - Chief Investment
One Nationwide Plaza Officer and Director
Columbus, OH 43215
Elizabeth A. Davin Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
Dennis W. Click Secretary
One Nationwide Plaza
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
Columbus, OH 43215
Edwin P. Mc Causland Senior Vice President-Fixed Income
One Nationwide Plaza Securities
Columbus, OH 43215
William G. Goslee
One Nationwide Plaza Vice President
Columbus, OH 43215
Charles Bath
One Nationwide Plaza Vice President - Investments
Columbus, OH 43215
Joseph P. Rath Vice President - Compliance
One Nationwide Plaza
Columbus, OH 43215
Christopher A. Cray Treasurer
One Nationwide Plaza
Columbus, OH 43215
David E. Simaitis Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
Patricia J. Smith Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Advisory
Services,
Inc.
</TABLE>
<PAGE> 88
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
ITEM 31. MANAGEMENT SERVICES
Not Applicable
ITEM 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) File a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never
more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;
(b) Include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant
can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to
send for a Statement of Additional Information; and
(c) Deliver any Statement of Additional Information and any
financial statements required to be made available under this
Form promptly upon written or oral request.
(d) Represent that any contract offered by the prospectus and
which is issued pursuant to Section 403(b) of the Code, is
issued by the Registrant in reliance upon, and in compliance
with, the Securities and Exchange Commission's no-action
letter to the American Council of Life Insurance (publicly
available November 28, 1988) which permits withdrawal
restrictions to the extent necessary to comply with IRC
Section 403(b)(11).
The Depositor hereby represents:
(a) That the fees and charges deducted under the Contract in the
aggregate are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by
the Company.
<PAGE> 89
OFFERED BY
NATIONWIDE
LIFE INSURANCE COMPANY
Group
Flexible Fund
Retirement
Contracts
PROSPECTUS
MAY 1, 1998
<PAGE> 90
NATIONWIDE LIFE INSURANCE COMPANY
GROUP FLEXIBLE FUND RETIREMENT CONTRACTS
ISSUED THROUGH THE NATIONWIDE DC VARIABLE ACCOUNT
(Supplement Dated May 1, 1998 to Prospectus Dated May 1, 1998)
THIS SUPPLEMENT UPDATES CERTAIN INFORMATION CONTAINED IN THE PROSPECTUS AND
SHOULD BE KEPT FOR FUTURE REFERENCE. THIS SUPPLEMENT IS FOR USE ONLY WITH
CONTRACTS ISSUED PURSUANT TO SECTION 403(b) OF THE CODE ("TAX-SHELTERED ANNUITY
CONTRACTS").
1. The section entitled "SUMMARY OF CONTRACT EXPENSES" in the prospectus is
amended by including the following Underlying Mutual Fund options available
only for Tax-Sheltered Annuity Contracts.
<TABLE>
<CAPTION>
SUMMARY OF CONTRACT EXPENSES
<S> <C>
PARTICIPANT TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge..................... 5%
(as a percentage of Purchase Payments)
ANNUAL CONTRACT MAINTENANCE CHARGE(1)................................. $15
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Fee............................... 0.50%
Administration Charge........................................ 0.45%
Total Variable Account Annual Expenses....................... 0.95%
</TABLE>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(2)
(as a percentage of Underlying Mutual Fund average net assets)
<TABLE>
<CAPTION>
----------------------------------------------------
Management Fees Other Total Underlying
Expenses Mutual Fund
Expenses
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century Variable Portfolios, Inc. - American 1.00% 0.00% 1.00%
Century VP Balanced
- -------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American 1.00% 0.00% 1.00%
Century VP Capital Appreciation
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund, Inc. 0.75% 0.01% 0.76%
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 0.25% 0.03% 0.28%
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity Income Portfolio(4) 0.50% 0.07% 0.57%
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(4) 0.60% 0.07% 0.67%
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio(3) 0.59% 0.12% 0.71%
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(4) 0.75% 0.15% 0.90%
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio(4) 0.55% 0.09% 0.64%
- -------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth Portfolio 0.83% 0.07% 0.90%
- -------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Limited Maturity Bond Portfolio 0.65% 0.12% 0.77%
- -------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Partners Portfolio 0.80% 0.06% 0.86%
- -------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 0.60% 0.09% 0.69%
- -------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 0.50% 0.08% 0.58%
- -------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 0.40% 0.08% 0.48%
- -------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 0.60% 0.07% 0.67%
- -------------------------------------------------------------------------------------------------------------------
<FN>
1 The Annual Contract Maintenance Charge will also be assessed on the date that
amounts held with respect to a Participant are fully withdrawn from the
Contract.
2 The Underlying Mutual Fund expenses shown above are assessed at the
Underlying Mutual Fund level and are not direct charges against Variable
Account assets or reductions from Contract Values. These Underlying Mutual
Fund expenses are taken into consideration in computing each Underlying
Mutual Fund's Net Asset Value, which is the share price used to calculate the
Variable Account's unit value. None of the above Underlying Mutual Fund
options are subject to 12b-1 fees.
3 The Fidelity VIP High Income Portfolio may invest in lower quality debt
securities commonly referred to as junk bonds.
4 The investment advisers for the indicated Underlying Mutual Funds have
voluntarily agreed to reimburse a portion of the management fees and/or other
expenses resulting in a reduction of total expenses. Absent any partial
reimbursement, "Management Fees" and "Other Expenses" would have been 0.50%
and 0.08% for Fidelity VIP Equity Income Portfolio, 0.60% and 0.09% for
Fidelity VIP Growth Portfolio, 0.75% and 0.17% for Fidelity VIP Overseas
Portfolio, 0.55% and 0.10% for Fidelity VIP II Asset Manager Portfolio.
</TABLE>
<PAGE> 91
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment and 5% annual
return on assets.
<TABLE>
<CAPTION>
-------------------------------------------------------
If you surrender your Contract
at the end of the applicable time period
-------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. 71 114 159 285
- - American Century VP Balanced
- -----------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. 71 114 159 285
- - American Century VP Capital Appreciation
- -----------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund, 68 106 146 259
Inc.
- -----------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 63 91 120 204
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Equity Income Portfolio 66 100 136 238
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 67 103 141 249
- -----------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 68 104 144 253
-- --- --- ---
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 70 110 154 274
- -----------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 67 102 140 245
- -----------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth Portfolio 70 110 154 274
- -----------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Limited Maturity 68 106 147 260
Bond Portfolio
- -----------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Partners Portfolio 69 109 152 270
- -----------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 67 104 142 251
- -----------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 66 100 137 239
- -----------------------------------------------------------------------------------------------------
NSAT Money Market Fund 65 97 131 227
- -----------------------------------------------------------------------------------------------------
NSAT Total Return Fund 67 103 141 249
- -----------------------------------------------------------------------------------------------------
</TABLE>
(continued on next page)
<PAGE> 92
EXAMPLE (continued)
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment and 5% annual
return on assets.
<TABLE>
<CAPTION>
-------------------------------------------------------
If you do not surrender your Contract
at the end of the applicable time period
-------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. 21 64 109 235
- - American Century VP Balanced
- -----------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. 21 64 109 235
- - American Century VP Capital Appreciation
- -----------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund, 18 56 96 209
Inc.
- -----------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 13 41 70 154
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Equity Income Portfolio 16 50 86 188
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 17 53 91 199
- -----------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 18 54 94 203
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 20 64 104 224
- -----------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 17 52 90 195
- -----------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth Portfolio 20 60 104 224
- -----------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Limited Maturity 18 56 97 210
Bond Portfolio
- -----------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Partners Portfolio 19 59 102 220
- -----------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 17 54 92 201
- -----------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 16 50 87 189
- -----------------------------------------------------------------------------------------------------
NSAT Money Market Fund 15 47 81 177
- -----------------------------------------------------------------------------------------------------
NSAT Total Return Fund 17 53 91 199
- -----------------------------------------------------------------------------------------------------
</TABLE>
(continued on next page)
<PAGE> 93
EXAMPLE (continued)
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 initial Purchase Payment and 5% annual
return on assets.
<TABLE>
<CAPTION>
-------------------------------------------------------
If you annuitize your Contract
at the end of the applicable time period
-------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. 21 64 109 235
- - American Century VP Balanced
- -----------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. 21 64 109 235
- - American Century VP Capital Appreciation
- -----------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund, 18 56 96 209
Inc.
- -----------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 13 41 70 154
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Equity Income Portfolio 16 50 86 188
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 17 53 91 199
- -----------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 18 54 94 203
- -----------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 20 60 104 224
- -----------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 17 52 90 195
- -----------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth Portfolio 20 60 104 224
- -----------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Limited Maturity 18 56 97 210
Bond Portfolio
- -----------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Partners Portfolio 19 59 102 220
- -----------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 17 54 92 201
- -----------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 16 50 87 189
- -----------------------------------------------------------------------------------------------------
NSAT Money Market Fund 15 47 81 177
- -----------------------------------------------------------------------------------------------------
NSAT Total Return Fund 17 53 91 199
</TABLE>
The Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.
The purpose of the Summary of Contract Expenses and Example is to assist the
Participant in understanding the various costs and expenses that a Participant
will bear directly or indirectly when investing in the Contract. The table
reflects expenses of the Variable Account as well as the Underlying Mutual Fund
investment options. For a more detailed explanation of these expenses, see
"Variable Account Charges and Other Deductions" in the prospectus. In addition
to the expenses shown above, deductions for premium taxes may also be
applicable, depending upon the jurisdiction in which the Contract is sold (see
"Premium Taxes" in the prospectus).
<PAGE> 94
2. The section entitled "CONDENSED FINANCIAL INFORMATION" in the prospectus is
amended by adding the following information about the Underlying Mutual Fund
options available for Tax-Sheltered Annuity Contracts.
<TABLE>
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values (For an Accumulation Unit outstanding throughout the period)
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUMULATION UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
========================================================================================================================
<S> <C> <C> <C> <C>
American Century 1.316124 1.509759 4,531 1997
----------------------------------------------------------------------------------------------
Variable Portfolios, 1.184177 1.316124 3,120 1996
----------------------------------------------------------------------------------------------
Inc. - American 0.986992 1.184177 1,504 1995
Century VP 1.000000 0.986992 0 1994
----------------------------------------------------------------------------------------------
Balanced
========================================================================================================================
American Century 1.638699 1.570313 50,033 1997
----------------------------------------------------------------------------------------------
Variable Portfolios 1.729155 1.638699 51,629 1996
----------------------------------------------------------------------------------------------
Inc. - American 1.331537 1.729155 50,891 1995
----------------------------------------------------------------------------------------------
Century VP 1.360119 1.331537 38,898 1994
----------------------------------------------------------------------------------------------
Capital 1.244720 1.360119 33,128 1993
----------------------------------------------------------------------------------------------
Appreciation 1.273681 1.244720 21,051 1992
----------------------------------------------------------------------------------------------
0.906306 1.273681 10,348 1991
----------------------------------------------------------------------------------------------
1.000000 0.906306 4,711 1990
========================================================================================================================
Dreyfus Stock 1.604580 2.113257 21,714 1997
----------------------------------------------------------------------------------------------
Index 1.322035 1.604580 16,988 1996
----------------------- ---------------------- ------------------------- ---------------------
Fund 0.975745 1.322035 5,213 1995
----------------------------------------------------------------------------------------------
1.000000 0.975745 782 1994
========================================================================================================================
Dreyfus Socially 1.564429 1.990292 4,478 1997
----------------------------------------------------------------------------------------------
Responsible 1.302837 1.564429 0 1996
----------------------------------------------------------------------------------------------
Growth Fund 0.977428 1.302837 0 1995
----------------------------------------------------------------------------------------------
1.000000 0.977428 0 1994
========================================================================================================================
Fidelity VIP 1.552351 1.898743 70,171 1997
----------------------------------------------------------------------------------------------
Growth Portfolio 1.366323 1.552351 52,165 1996
----------------------------------------------------------------------------------------------
1.018963 1.366323 29,541 1995
----------------------------------------------------------------------------------------------
1.000000 1.018963 7,026 1994
========================================================================================================================
Fidelity VIP 1.475687 1.872610 90,224 1997
----------------------------------------------------------------------------------------------
Equity Income 1.303642 1.475687 62,324 1996
----------------------------------------------------------------------------------------------
Portfolio 0.974175 1.303642 37,796 1995
----------------------------------------------------------------------------------------------
1.000000 0.974175 5,699 1994
========================================================================================================================
Fidelity VIP 1.338939 1.560592 29,112 1997
----------------------------------------------------------------------------------------------
High Income 1.185437 1.338939 17,934 1996
----------------------------------------------------------------------------------------------
Portfolio 0.992271 1.185437 10,485 1995
----------------------------------------------------------------------------------------------
1.000000 0.992271 1,484 1994
========================================================================================================================
Fidelity VIP 1.154842 1.276107 125,065 1997
----------------------------------------------------------------------------------------------
Overseas Portfolio 1.029809 1.154842 88,581 1996
----------------------------------------------------------------------------------------------
0.947883 1.029809 55,723 1995
----------------------------------------------------------------------------------------------
1.000000 0.947883 10,984 1994
========================================================================================================================
</TABLE>
<PAGE> 95
<TABLE>
CONDENSED FINANCIAL INFORMATION, Continued
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUM. UNITS
AT BEGINNING AT END OUTSTANDING AT THE END
FUND OF PERIOD OF PERIOD OF THE PERIOD YEAR
========================================================================================================================
<S> <C> <C> <C> <C>
Fidelity VIP II 1.257222 1.502515 25,131 1997
----------------------------------------------------------------------------------------------
Asset Manager 1.107535 1.257222 18,427 1996
----------------------------------------------------------------------------------------------
Portfolio 0.955979 1.107535 10,482 1995
----------------------------------------------------------------------------------------------
1.000000 0.955979 2,037 1994
========================================================================================================================
Neuberger & 1.795607 2.294545 12,306 1997
----------------------------------------------------------------------------------------------
Berman 1.661013 1.795607 9,399 1996
----------------------------------------------------------------------------------------------
Growth Portfolio 1.272940 1.661013 24,304 1995
----------------------------------------------------------------------------------------------
1.352530 1.272940 17,238 1994
----------------------------------------------------------------------------------------------
1.278609 1.352530 12,520 1993
----------------------------------------------------------------------------------------------
1.178398 1.278609 8,757 1992
----------------------------------------------------------------------------------------------
0.917001 1.178398 4,358 1991
----------------------------------------------------------------------------------------------
1.000000 0.917001 0 1990
========================================================================================================================
Neuberger & 1.130160 1.194950 7,063 1997
----------------------------------------------------------------------------------------------
Berman 1.093904 1.130160 5,977 1996
----------------------------------------------------------------------------------------------
Limited Maturity 0.995462 1.093904 2,860 1995
----------------------------------------------------------------------------------------------
Bond Portfolio 1.000000 0.995462 597 1994
========================================================================================================================
Neuberger & 1.676351 2.179432 13,504 1997
----------------------------------------------------------------------------------------------
Berman 1.306186 1.676351 8,811 1996
----------------------------------------------------------------------------------------------
Partners Portfolio 0.966223 1.306186 5,923 1995
----------------------------------------------------------------------------------------------
1.000000 0.966223 3,237 1994
========================================================================================================================
NSAT Government 1.613565 1.752816 8,433 1997
----------------------------------------------------------------------------------------------
Bond Fund 1.574158 1.613565 7,820 1996
----------------------------------------------------------------------------------------------
1.338281 1.574158 5,714 1995
----------------------------------------------------------------------------------------------
1.396125 1.338281 971 1994
----------------------------------------------------------------------------------------------
1.286974 1.396125 632 1993
----------------------------------------------------------------------------------------------
1.204500 1.286974 1,660 1992
----------------------------------------------------------------------------------------------
1.041986 1.204500 527 1991
----------------------------------------------------------------------------------------------
1.000000 1.041986 0 1990
========================================================================================================================
NSAT Capital 1.509879 2.011485 0 1997
----------------------------------------------------------------------------------------------
Appreciation Fund 1.208468 1.509879 0 1996
----------------------------------------------------------------------------------------------
1.000000 1.208468 0 1995
========================================================================================================================
NSAT Money 1.259556 1.313205 6,361 1997
----------------------------------------------------------------------------------------------
Market Fund 1.209790 1.259556 28,915 1996
----------------------------------------------------------------------------------------------
1.155984 1.209790 14,512 1995
----------------------------------------------------------------------------------------------
1.123427 1.155984 2,543 1994
----------------------------------------------------------------------------------------------
1.103814 1.123427 0 1993
----------------------------------------------------------------------------------------------
1.077714 1.103814 0 1992
----------------------------------------------------------------------------------------------
1.028111 1.077714 0 1991
----------------------------------------------------------------------------------------------
1.000000 1.028111 0 1990
========================================================================================================================
</TABLE>
<PAGE> 96
<TABLE>
CONDENSED FINANCIAL INFORMATION, Continued
<CAPTION>
ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE ACCUM. UNITS
AT BEGINNING AT END OUTSTANDING AT THE
FUND OF PERIOD OF PERIOD END OF THE PERIOD YEAR
========================================================================================================================
<S> <C> <C> <C> <C>
NSAT Total 2.354356 3.018448 42,827 1997
----------------------------------------------------------------------------------------------
Return Fund 1.950853 2.354356 19,743 1996
----------------------------------------------------------------------------------------------
(formerly 1.525590 1.950853 11,766 1995
----------------------------------------------------------------------------------------------
"Common 1.523742 1.525590 3,996 1994
----------------------------------------------------------------------------------------------
Stock Fund") 1.386859 1.523742 845 1993
----------------------------------------------------------------------------------------------
1.294230 1.386859 500 1992
----------------------------------------------------------------------------------------------
0.943464 1.294230 69 1991
----------------------------------------------------------------------------------------------
1.000000 0.943464 0 1990
========================================================================================================================
</TABLE>
<PAGE> 97
3. The section entitled "PARTICIPANT ACCOUNT MAINTENANCE CHARGE" in the
prospectus is amended by adding the following paragraph:
For Tax-Sheltered Annuity Contracts, the Company will make a maximum charge
of $15 per Participant per year to reimburse the Company for certain
administrative expenses relating to the maintenance of individual
Participant records and the mailing of periodic statements to Participants.
The Contract Maintenance Charges, which are guaranteed never to increase,
are designed only to help the Company offset such administrative expenses,
and such charges will not exceed the Company's actual administration
expenses under the Contracts.
4. The section entitled "DESCRIPTION OF THE CONTRACTS" in the prospectus is
amended by adding the following new section:
PARTICIPANT RIGHTS UNDER TAX-SHELTERED ANNUITY CONTRACTS
Participant rights under the Contract are set forth in the Plan, if any,
and are described more fully in the Certificate of Participation issued to
each Participant by the Company and which describes the rights and benefits
to which the Participant is entitled under the Contract. The term Contract
Owner, as used throughout the Contract, refers to the purchaser and the
holder of the Contract. However, the Contract Owner's rights are limited by
the Plan, if any, the Code and applicable regulations. Participant Accounts
held under the Contract shall be non-forfeitable at all times. No amounts
payable under the Contract with respect to a Participant may be sold,
assigned, discounted, or pledged as collateral for a loan or as a security
for the performance of an obligation or for any other purpose to any person
other than the Company. In addition, to the extent permitted by law, no
such sum shall in any way be subject to legal process requiring the payment
of any claim against the payee. The Company will accept direction only from
the Participant except as otherwise specifically provided in the Plan, if
any. The Company shall be entitled to rely on any action taken or omitted
by the Participant, pursuant to the terms of the Contract.
5. The section entitled "SUSPENSION AND TERMINATION" in the prospectus is
amended by deleting the last two sentences of that section.
6. The section entitled "APPLICATION OF PURCHASE PAYMENTS" in the prospectus
is amended by adding the following paragraph at the end:
With respect to Tax-Sheltered Annuity Contracts, Purchase Payments for each
Participant may not exceed the Contract's allowable portion of the lesser
of the maximum exclusion allowance under Code Section 403(b), or the
elective deferral limits set forth in Code Section 402(g), except for
amounts eligible for rollover, transfer or exchange treatment under the
Code. In no event may the Purchase Payments exceed the limits described in
Code Section 415. The amount of the Purchase Payments and earnings thereon
in excess of the limits set forth in Code Section 402(g) ("excess
deferrals") shall be returned in accordance with that section to the
Participant upon written request, without application of the Contingent
Deferred Sales Charge, if any, and in accordance with the Plan, if any. The
Company may change the required minimum annual Purchase Payment to any
amount which does not violate the applicable provisions of the Code.
7. The section entitled "REDEMPTION OF PARTICIPANT ACCOUNTS (TERMINATION)" in
the prospectus is amended by adding the following paragraph at the end:
With respect to Tax-Sheltered Annuity Contracts, Section 403(b)(11) of the
Code prohibits redemptions of Purchase Payments made pursuant to a salary
reduction agreement (within the meaning of 402(g)(3)(C) of the Code) before
the person reaches age 59 1/2, separates from service, dies, becomes
disabled (within the meaning of Code Section 72(m)(7)), or faces a
financial hardship as defined by the Plan, or, if no Plan is specified, as
used in Section 403(b)(11)(B) of the Code and applicable regulations. This
prohibition applies to Purchase Payments made in years beginning after
December 31, 1988, to earnings on those Purchase Payments, and to earnings
on amounts held as of December 31, 1988. Hardship redemptions are limited
to the amount of Purchase Payments attributable to Participant elective
contributions and earnings on Purchase Payments held as of December 31,
1988, and may be subject to a 10% tax penalty. The value of contracts
issued pursuant to Section 403(b) may be transferred to other contracts of
other carriers. However, the exchange, under Section 1035 of the Code, of a
contract which had an accumulated value prior to
<PAGE> 98
January 1, 1989, for a new contract may subject the pre-1989 value to the
limits of Section 403(b)(11). The Company issues this Contract in reliance
upon, and in compliance with, a Securities and Exchange Commission
industry-wide no-action letter (publicly available November 28, 1988) which
permits withdrawal restrictions to the extent necessary to comply with
Section 403(b)(11).
8. The section entitled "DISTRIBUTION OF PARTICIPANT ACCOUNTS (RETIREMENT
PERIOD)" in the prospectus is amended by Including the following section:
REQUIRED DISTRIBUTION FOR TAX-SHELTERED ANNUITY CONTRACTS
The entire interest of a Participant under a Contract issued pursuant to
Code Section 403(b) accruing after December 31, 1986, will, notwithstanding
anything else contained herein, be distributed to the Participant under the
Optional Retirement Income Form selected over-
A. the life of the Participant or the lives of the Participant and the
Participant's designated Beneficiary; or
B. a period not extending beyond the life expectancy of the
Participant or the life expectancy of the Participant and the
Participant's designated Beneficiary.
If the Participant's entire interest is to be distributed in equal or
substantially equal payments over a period described in A or B, such
payments will commence no later than the first day of April following the
calendar year In which the Participant attains age 70 1/2 (the Required
Beginning Date). In the case of a governmental plan or church plan (as
defined in Code Section 89(i)(4)), the Required Beginning Date will be the
later of the dates determined under the preceding sentence or April 1 of
the calendar year following the calendar year in which the Participant
retires.
Payments commencing on the Required Beginning Date will not be
less than the lesser of the quotient obtained by dividing the entire
interest of the Participant by the life expectancy of the Participant, or
the joint and last survivor expectancy of the Participant and the
Participant's designated Beneficiary (whichever is applicable). Life
expectancy and joint and last survivor expectancy are computed by the use
of return multiples contained in Section 1.72-9 of the Treasury
Regulations. All Optional Retirement Income Forms described in the
prospectus must comply with the minimum Distribution and incidental death
benefit provision of Code Section 401(a)(9) and applicable regulations.
9. The section entitled "DEATH BENEFIT BEFORE RETIREMENT" in the prospectus is
deleted in its entirety and replaced with the following:
DEATH BENEFIT BEFORE RETIREMENT
If the Participant dies before his or her retirement income commences,
generally the entire Participant Account Value must be distributed within
five years after the Participant's death. There are two exceptions: (1) if
payments are to be made to the Participant's designated Beneficiary and the
Distributions begin within one year of the Participant's death, payments
may be extended over the life (or a period not exceeding the life
expectancy) of the Beneficiary; and (2) if the Beneficiary is the surviving
spouse and the Distributions begin by the time the Participant would have
reached age 70 1/2, payments may be made over the life (or a period not
exceeding life expectancy) of the surviving spouse.
10. References throughout the Prospectus to the "GROUP FIXED FUND RETIREMENT
CONTRACT" are hereby changed to "GROUP FIXED TAX DEFERRED ANNUITY
CONTRACT."
11. The Appendix of Participating Underlying Mutual Funds in the prospectus is
amended in its entirety by the following Underlying Mutual Funds. These
Underlying Mutual Funds are available only to serve as the Underlying
investment for variable annuity and variable life contracts issued through
separate accounts of life Insurance companies which may or may not be
affiliated. A full description of the Underlying Mutual Funds, their
investment policies and restrictions, risks, charges and expenses and all
other aspects of their operation is contained in the prospectuses of the
Underlying Mutual Funds, which should be read in conjunction with this
prospectus before investing.
<PAGE> 99
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN
CENTURYSM FAMILY OF INVESTMENTS
American Century Variable Products, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end management investment
company, designed only to provide investment vehicles for variable annuity
and variable life insurance products of insurance companies. American
Century Variable Portfolios, Inc. is managed by American Century Investment
Management, Inc.
-AMERICAN CENTURY VP BALANCED
Investment Objective: Capital growth and current income. The Fund will
seek to achieve its objective by maintaining approximately 60% of the
assets of the Fund in common stocks (including securities convertible
into common stocks and other equity equivalents) that are considered by
management to have better-than-average prospects for appreciation and
approximately 40% in fixed income senior securities. There can be no
assurance that the Fund will achieve its investment objective.
-AMERICAN CENTURY VP CAPITAL APPRECIATION
Investment Objective: Capital growth. The Fund will seek to achieve its
objective by investing in common stocks (including securities
convertible into common stocks and other equity equivalents) that meet
certain fundamental and technical standards of selection and have, in
the opinion of the Fund's investment manager, better than average
potential for appreciation. The Fund tries to stay fully invested in
such securities, regardless of the movement of stock prices generally.
The Fund may invest in cash and cash equivalents temporarily or when it
is unable to find common stocks meeting its criteria of selection. It
may purchase securities only of companies that have a record of at
least three years continuous operation. There can be no assurance that
the Fund will achieve its investment objective
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified,
management investment company. It was incorporated under Maryland law on
January 24, 1989, and commenced operations on September 29, 1989. The
Dreyfus Corporation ("Dreyfus") serves as the Fund's manager, while Mellon
Equity Associates, an affiliate of Dreyfus, serves as the Fund's index
manager.
Investment Objective: To provide investment results that correspond to
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with
Standard & Poor's Corporation.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end,
diversified, management investment company. It was incorporated under
Maryland law on July 20, 1992, and commenced operations on October 7, 1993.
The Dreyfus Corporation serves as the Fund's investment adviser and
provides day-to-day management of the Fund's portfolio.
Investment Objective: The Fund's primary goal is to provide capital
growth through equity investment in companies that, in the opinion of
the Fund's management, not only meet traditional investment standards
but which also show evidence that they conduct their business in a
manner that contributes to the enhancement of the quality of life in
America. Current income is secondary to the primary goal.
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND ("VIP")
The Fund is an open-end, diversified, management investment company
organized as a Massachusetts business trust on November 13, 1981. The
Fund's shares are purchased by insurance companies to fund benefits under
variable insurance and annuity policies. Fidelity Management & Research
Company ("FMR") is the Fund's manager.
<PAGE> 100
-VIP EQUITY-INCOME PORTFOLIO
Investment Objective: To seek reasonable income by investing primarily
in income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's goal is
to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's 500 Composite Stock Price Index.
-VIP GROWTH PORTFOLIO
Investment Objective: Seeks to achieve capital appreciation. This
Portfolio will invest in the securities of both well-known and
established companies, and smaller, less well-known companies which may
have a narrow product line or whose securities are thinly traded. These
latter securities will often involve greater risk than may be found in
ordinary investment security. FMR's analysis and expertise plays an
integral role in the selection of securities and, therefore, the
performance of the portfolio. Many securities which FMR believes would
have the greatest potential may be regarded as speculative, and
investment in the Portfolio may involve greater risk than is inherent
in other underlying mutual funds. It is also important to point out
that the Portfolio makes most sense for you if you can afford to ride
out changes in the stock market, because it invests primarily in common
stocks. FMR also can make temporary investments in securities such as
investment-grade bonds, high quality preferred stocks and short-term
notes, for defensive purposes when it believes market conditions
warrant.
-VIP HIGH INCOME PORTFOLIO
Investment Objective: Seeks to obtain a high level of current income by
investing primarily in high-risk, lower-rated, high-yielding, fixed
income securities, while also considering growth capital. The Portfolio
manager will seek high current income normally by investing the
Portfolio's assets as follows:
- at least 65% in income-producing debt securities and preferred
stocks, including convertible securities
- up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired as part
of a unit combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated
or that are unrated. Lower-rated securities are usually defined as Ba
or lower by Moody's; BB or lower by Standard & Poor's and may be deemed
to be of a speculative nature. The Portfolio may also purchase
lower-quality bonds such as those rated Ca3 by Moody's or C- by
Standard & Poor's which provide poor protection for payment of
principal and interest (commonly referred to as "junk bonds"). For a
further discussion of lower-rated securities, please see the "Risks of
Lower-Rated Debt Securities" section of the Portfolio's prospectus.
-VIP OVERSEAS PORTFOLIO
Investment Objective: To seek long term growth of capital primarily
through investments in foreign securities. The Overseas Portfolio
provides a means for investors to diversify their own portfolios by
participating in companies and economics outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II ("VIP II")
The Variable Insurance Products Fund II is an open-end, diversified, management
investment company organized as a Massachusetts business trust on March 21,
1988. The Fund's shares are purchased by insurance companies to fund benefits
under variable insurance and annuity policies. Fidelity Management & Research
Company ("FMR") is the Fund's manager.
-VIP II ASSET MANAGER PORTFOLIO
Investment Objective: To seek high total return with reduced risk over
the long-term by allocating its assets among domestic and foreign
stocks, bonds and short-term fixed income instruments.
<PAGE> 101
NATIONWIDE SEPARATE ACCOUNT TRUST (NSAT)
Nationwide Separate Account Trust (NSAT) is a diversified and open-end
management investment company created under the laws of Massachusetts. The NSAT
offers shares in the four separate mutual funds listed below, each with its own
investment objectives. Currently, shares of the NSAT will be sold only to life
insurance company separate accounts to fund the benefits under variable life
insurance policies or variable annuity contracts issued by life insurance
companies. The assets of the NSAT are managed by Nationwide Advisory Services,
Inc., One Nationwide Plaza, Columbus, Ohio 43215, a wholly-owned subsidiary of
Nationwide Life Insurance Company.
-CAPITAL APPRECIATION FUND
Investment Objective: The Fund is designed for investors who are
interested in long-term growth. The Fund seeks to meet its objective
primarily through a diversified portfolio of the common stock of
companies which the investment manager determines have a
better-than-average potential for sustained capital growth over the
long term.
-GOVERNMENT BOND FUND
Investment Objective: To provide as high a level of income as is
consistent with the preservation of capital. It seeks to achieve its
objective by investing in a diversified portfolio of securities issued
or backed by the U.S. Government, its agencies or instrumentalities.
-MONEY MARKET FUND
Investment Objective: To seek as high a level of income as is
considered consistent with the preservation of capital and liquidity by
investing primarily in money market instruments.
-TOTAL RETURN FUND
Investment Objective: To obtain a reasonable long-term total return
(i.e., earnings growth plus potential dividend yield) on invested
capital from a flexible combination of current return and capital gains
through investments in common stocks, convertible issues, money market
instruments and bonds with a primary emphasis on common stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger & Berman Advisers Management Trust is an open-end diversified
management investment company established as a Massachusetts business trust on
December 14, 1983. Shares of the Trust are offered in connection with a certain
variable annuity contracts and variable life insurance policies issued through
life insurance company separate accounts and are also offered directly to
qualified pension and retirement plans outside of the separate account context.
The investment adviser is Neuberger & Berman management Incorporated.
-GROWTH PORTFOLIO
Investment Objective: The Portfolio seeks capital growth through
investments in common stocks of companies that the investment adviser
believes will have above average earnings or otherwise provide
investors with above average potential for capital appreciation. To
maximize this potential, the investment adviser may utilize, from time
to time, securities convertible into common stocks, warrants and
options to purchase such stocks.
-LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide the high level of current income,
consistent with low risk to principal and liquidity. As a secondary
objective, it also seeks to enhance its total return through capital
appreciation when market factors, such as falling interest rates and
rising bond prices, indicate that capital appreciation may be available
without significant risk to principal. It seeks to achieve its
objectives through investments in a diversified portfolio of limited
maturity debt securities.
<PAGE> 102
-PARTNERS PORTFOLIO
Investment Objective: To seek capital growth. This Portfolio will seek
to achieve its objective by investing primarily in the common stock of
established companies. Its investment program seeks securities believed
to be undervalued based on fundamentals such as low price-to-earnings
ratios, consistent cash flows, and support from asset values. The
objective of the Partners Portfolio is not fundamental and can be
changed by the Trustees of the Trust without shareholder approval.
Shareholders will, however, receive at least 30 days prior notice
thereof. There is no assurance the investment objective will be met.
12. The section entitled "FEDERAL TAX STATUS" in the prospectus is amended by
adding the following paragraphs at the end: Recent changes to the Code
permit the rollover of most Distributions from qualified Plans to other
qualified Plans, Individual Retirement Accounts, or Individual Retirement
Annuities. Most Distributions from Tax Sheltered Annuities may be rolled
over to other Tax Sheltered Annuities, Individual Retirement Accounts or
Individual Retirement Annuities. Distributions which may not be rolled over
are those which are:
1. one of series of substantially equal annual (or more frequent)
payments made: a) over the life (or life expectancy) of the
employee, b) the joint lives (or joint life expectancies) of the
employee and the employee's designated Beneficiary, or c) for a
specified period of ten years or more; and
2. a required minimum Distribution
Any Distribution eligible for rollover will be subject to federal tax
withholding at a 20 percent rate unless the Distribution is transferred
directly to a Qualified Plan, Individual Retirement Account, or Individual
Retirement Annuity.
You should consult your financial or tax consultant to discuss in detail
your particular tax situation and the use of the Contracts.
<PAGE> 103
INDEPENDENT AUDITORS' CONSENT AND REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide DC Variable Account:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated January 30, 1998, included the related financial statement
schedules as of December 31, 1997, and for each of the years in the three-year
period ended December 31, 1997, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 29, 1998
<PAGE> 104
<PAGE> 1
SCHEDULE I
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
(in millions of dollars)
As of December 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------- ------------- -------------- ---------------
Column A Column B Column C Column D
- ----------------------------------------------------------------------------- ------------- -------------- ---------------
Amount at
which shown
in the
Market consolidated
Type of Investment Cost value balance sheet
- ----------------------------------------------------------------------------- ------------- -------------- ---------------
Fixed maturity securities available-for-sale:
Bonds:
<S> <C> <C> <C>
U.S. Government and government agencies and authorities $ 3,859.7 $ 3,981.7 $ 3,981.7
States, municipalities and political subdivisions 1.6 1.6 1.6
Foreign governments 93.3 95.8 95.8
Public utilities 1,555.3 1,609.8 1,609.8
All other corporate 7,223.0 7,515.2 7,515.2
---------- ---------- ----------
Total fixed maturity securities available-for-sale 12,732.9 13,204.1 13,204.1
---------- ---------- ----------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 67.8 78.0 78.0
Non-redeemable preferred stock - 2.4 2.4
---------- ---------- ----------
Total equity securities available-for-sale 67.8 80.4 80.4
---------- ---------- ----------
Mortgage loans on real estate, net 5,228.1 5,181.6 (1)
Real estate, net:
Investment properties 254.9 235.7 (1)
Acquired in satisfaction of debt 82.6 75.7 (1)
Policy loans 415.3 415.3
Other long-term investments 27.9 25.2 (2)
Short-term investments 358.4 358.4
---------- ----------
Total investments $19,167.9 $19,576.4
========== ==========
</TABLE>
- ----------
(1) Difference from Column B is primarily due to valuation allowances due to
impairments on mortgage loans on real estate and due to accumulated
depreciation and valuation allowances due to impairments on real estate.
See note 3 to the consolidated financial statements.
(2) Difference from Column B is primarily due to operating gains (losses) of
investments in limited partnerships.
See accompanying independent auditors' report.
<PAGE> 2
SCHEDULE III
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(in millions of dollars)
As of December 31, 1997, 1996 and 1995 and for each of the years then ended
<TABLE>
<CAPTION>
- -------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- -------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------
Deferred Future policy Other policy
policy benefits, losses, Unearned claims and
acquisition claims and premiums benefits payable Premium
Segment costs loss expenses (1) (1) revenue
- ------------------------------- ------------------ -------------------- ------------------- ------------------ ---------------
1997: Variable Annuities $1,018.4 $ - $ -
Fixed Annuities 277.9 14,103.1 27.3
Life Insurance 472.9 2,683.4 178.1
Corporate and Other (103.8) 1,916.3 -
-------- ------------- ---------
Total $1,665.4 $18,702.8 $ 205.4
======== ============= =========
1996: Variable Annuities $ 792.1 $ - $ -
Fixed Annuities 242.0 13,388.9 24.0
Life Insurance 414.4 2,391.5 174.6
Corporate and Other (82.0) 1,820.2 -
-------- ------------- ---------
Total $1,366.5 $17,600.6 $ 198.6
======== ============= =========
1995: Variable Annuities $ 569.8 $ - $ -
Fixed Annuities 220.7 12,759.3 32.8
Life Insurance 366.9 2,282.6 166.3
Corporate and Other (136.9) 1,730.0 -
-------- ------------- ---------
Total $1,020.5 $ 16,771.9 $ 199.1
======== ============= =========
- ---------------------------------------------------- -------------------- ------------------- ------------------ ---------------
Column A Column G Column H Column I Column J Column K
- ---------------------------------------------------- -------------------- ------------------- ------------------ ----------------
Net investment Benefits, claims, Amortization Other
income losses and of deferred policy operating Premiums
Segment (2) settlement expenses acquisition costs expenses written
(2)
- ---------------------------------------------------- -------------------- ------------------- ------------------ ---------------
<C> <C> <C> <C> <C>
1997: Variable Annuities $ (26.8) $ 5.9 $ 87.8 $ 159.4
Fixed Annuities 1,098.2 846.7 39.8 85.4
Life Insurance 189.1 227.5 39.6 94.5
Corporate and Other 148.7 114.7 - 45.6
-------- ---------- ------- -------
Total $1,409.2 $ 1,194.8 $ 167.2 $ 384.9
======== ========== ======= =======
1996: Variable Annuities $ (21.4) $ 4.6 $ 57.4 $ 132.3
Fixed Annuities 1,050.6 838.5 38.6 79.7
Life Insurance 174.0 211.4 37.4 79.0
Corporate and Other 154.6 106.1 - 51.4
-------- ---------- ------- -------
Total $1,357.8 $ 1,160.6 $ 133.4 $ 342.4
======== ========== ======= =======
1995: Variable Annuities $ (17.6) $ 2.9 $ 26.3 $ 109.1
Fixed Annuities 1,002.7 805.0 29.5 80.3
Life Insurance 171.2 202.0 31.0 68.8
Corporate and Other 137.7 105.6 (4.1) 14.8
-------- ---------- ------- -------
Total $1,294.0 $ 1,115.5 $ 82.7 $ 273.0
======== ========== ======= =======
</TABLE>
- ----------
(1) Unearned premiums and other policy claims and benefits payable are included
in Column C amounts.
(2) Allocations of net investment income and certain operating expenses are
based on a number of assumptions and estimates, and reported operating
results would change by segment if different methods were applied.
See accompanying independent auditors' report.
<PAGE> 3
SCHEDULE IV
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
REINSURANCE
(in millions of dollars)
As of December 31, 1997, 1996 and 1995 and for each of the years then ended
<TABLE>
<CAPTION>
- ----------------------------------------------- --------------- -------------- ------------- ------------- ------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------------------- --------------- -------------- ------------- ------------- ------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed
amount companies companies amount to net
--------------- -------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
1997:
Life insurance in force $ 52,648.4 $13,678.7 $ 289.7 $ 39,259.4 0.7%
=========== ========= ======== =========== =======
Premiums:
Life insurance $ 235.9 $ 32.7 $ 2.2 $ 205.4 1.1%
Accident and health insurance 261.2 272.6 11.4 - N/A
----------- ---------- --------- ----------- -------
Total $ 497.1 $ 305.3 $ 13.6 $ 205.4 6.6%
=========== ========= ========= =========== =======
1996:
Life insurance in force $47,150.6 $11,164.6 $ 288.6 $ 36,274.6 0.8%
=========== ========= ======== =========== =======
Premiums:
Life insurance $ 225.6 $ 29.3 $ 2.3 $ 198.6 1.2%
Accident and health insurance 291.9 305.8 13.9 - N/A
----------- --------- -------- ----------- -------
Total $ 517.5 $ 335.1 $ 16.2 $ 198.6 8.2%
=========== ========= ======== =========== =======
1995:
Life Insurance in force $41,087.9 $ 8,935.7 $ 391.2 $ 32,543.4 1.2%
=========== ========= ======== =========== =======
Premiums:
Life insurance $ 221.3 $ 24.4 $ 2.2 $ 199.1 1.1%
Accident and health insurance 298.0 313.0 15.0 - N/A
----------- --------- -------- ----------- -------
Total $ 519.3 $ 337.4 $ 17.2 $ 199.1 8.6%
=========== ========= ======== =========== =======
</TABLE>
- ----------
Note: The life insurance caption represents principally premiums from
traditional life insurance and life-contingent immediate annuities and
excludes deposits on investment products and universal life insurance
products.
See accompanying independent auditors' report.
<PAGE> 4
SCHEDULE V
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(in millions of dollars)
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------- ------------- -------------
Column A Column B Column C Column D Column E
- --------------------------------------------------- ----------------------------------------------- ------------- -------------
Balance at Charged to Charged to Balance at
beginning costs and other Deductions end of
Description of period expenses accounts (1) period
- --------------------------------------------------- -------------------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1997:
Valuation allowances - fixed maturity securities $ - $ 16.2 $ - $ 16.2 $ -
Valuation allowances - mortgage loans on real estate 51.0 (1.2) - 7.3 42.5
Valuation allowances - real estate 15.2 (4.1) - - 11.1
-------- ------ ------- ------- -------
Total $ 66.2 $ 10.9 $ - $ 23.5 $ 53.6
======== ====== ======= ======= =======
1996:
Valuation allowances - mortgage loans on real estate $ 49.1 $ 4.5 $ - $ 2.6 $ 51.0
Valuation allowances - real estate 25.8 (10.6) - - 15.2
-------- ------ ------- ------- -------
Total $ 74.9 $ (6.1) $ - $ 2.6 $ 66.2
======== ====== ======= ======= =======
1995:
Valuation allowances - fixed maturity securities $ - $ 8.9 $ - $ 8.9 $ -
Valuation allowances - mortgage loans on real estate 46.4 7.4 - 4.7 49.1
Valuation allowances - real estate 27.3 (1.5) - - 25.8
-------- ------ ------- ------- -------
Total $ 73.7 $ 14.8 $ - $ 13.6 $ 74.9
======== ====== ======= ======= =======
</TABLE>
- ----------
(1) Amounts represent direct write-downs charged against the valuation
allowance.
See accompanying independent auditors' report.
<PAGE> 105
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company
Act of 1940, the Registrant, NATIONWIDE DC VARIABLE ACCOUNT, certifies that it
meets the requirements of Securities Act Rule 485 for effectiveness of the
Post-Effective Amendment and has caused this Post-Effective Amendment to be
signed on its behalf in the City of Columbus, and State of Ohio, on this 29th
day of April, 1998.
NATIONWIDE DC VARIABLE ACCOUNT
----------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
----------------------------------------
(Depositor)
By /s/ JOSEPH P. RATH
----------------------------------------
Joseph P. Rath
Vice President - Product and Market Compliance
As required by the Securities Act of 1933, this Post-Effective
Amendment has been signed by the following persons in the capacities indicated
on the 29th day of April, 1998.
SIGNATURE TITLE
LEWIS J. ALPHIN Director
- --------------------------
Lewis J. Alphin
A. I. BELL Director
- --------------------------
A. I. Bell
KEITH W. ECKEL Director
- --------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- --------------------------
Willard J. Engel
FRED C. FINNEY Director
- --------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- --------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President and Chief
- --------------------------
Joseph J. Gasper Operating Office and Director
DIMON R. McFERSON Chairman and Chief Executive Officer
- --------------------------
Dimon R. McFerson Nationwide Insurance Enterprise and Director
DAVID O. MILLER Chairman of the Board and Director
- --------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- -------------------------- --------
Yvonne L. Montgomery
- --------------------
C. RAY NOECKER Director
- --------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- --------------------------
Robert A. Oakley Chief Financial Officer
JAMES F. PATTERSON Director By /s/JOSEPH P. RATH
- -------------------------- --------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- --------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- --------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- --------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- --------------------------
Harold W. Weihl
