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[LOGO]
NATIONWIDE(R)
VARIABLE
ACCOUNT-5
ANNUAL REPORT
TO
CONTRACT OWNERS
DECEMBER 31, 1995
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
APO-2750-C (12/95)
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[LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216
[PRESIDENT'S PHOTO]
PRESIDENT'S MESSAGE
Nationwide Life Insurance Company is pleased to bring you the 1995 annual
report of the Nationwide Variable Account-5.
Both equity and fixed income investments turned in a stellar performance during
1995. The major market indices ended the year fully one-third or more higher
than their levels at the beginning of the year. These results equate directly
to the returns enjoyed by our variable annuity participants and contract owners.
Low interest rates and modest inflation should provide a continued favorable
environment for stocks and fixed income investments during 1996. Slowing levels
of economic activity and uncertainty about corporate profits may, however,
dampen a repeat of the strong 1995 market performance. The diverse offering of
investment options within your contract should enable you to take advantage of
changing market conditions.
The year 1995 was a record-setting sales year for our variable investment
products. For this we thank you, our valued customer, for your confidence in
the Nationwide Insurance Enterprise and in our products. Please do not hesitate
to let us know how we can better serve your financial planning and retirement
needs.
/s/ PETER F. FRENZER
Peter F. Frenzer, President
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CONTENTS
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HOW TO READ THE ANNUAL REPORT.............................................. 6
Explanation on how to read and understand
the various financial reports
A FEW WORDS ABOUT OUR FUNDS................................................ 8
Fund Objectives and Narratives
written by the fund managers*
FUND PERFORMANCES.......................................................... 14
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY............... 16
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY................................................. 18
NOTES TO FINANCIAL STATEMENTS.............................................. 19
SCHEDULES OF CHANGES IN UNIT VALUE......................................... 21
INDEPENDENT AUDITORS' REPORT............................................... 22
</TABLE>
* The discussions refer to a stock market index. The Standard & Poor's 500 Index
(S&P 500) is an unmanaged index of 500 U.S. common stocks and the historical
performance assumes the reinvestment of dividends.
The performance figures quoted by the fund managers do not include the annual
mortality, expense and administration charges of the annuity contract. The
Fund's portfolio is subject to change.
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HOW TO READ THE ANNUAL REPORT
This Annual Report is sent to all customers who own a Nationwide annuity with
all or some of the funds in the Nationwide Variable Account-5 (the Account). The
Account is a separate account trust which offers investment options in eight
mutual funds from five mutual fund houses. An explanation of the funds and their
objectives can be found on pages 8 through 13.
The Annual Report has three major financial sections.
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
This statement, found on page 16, lists all the funds in the Account, the number
of shares owned, the amount paid for the shares (i.e., cost) and their market
value on December 31, 1995. The funds are presented in alphabetical order by
investment company. The market value of the assets change as the underlying
mutual fund shares change in value. As contract owners make exchanges between
the funds, the number of shares in each fund increases and decreases. When money
is deposited (withdrawn) by contract owners, shares of the mutual funds are
bought (sold) by the Account. The total market value of the funds is equal to
the Total investments.
Accounts receivable, if applicable, is an asset of the Account for money market
fund shares added to the contract owners' accounts, but not yet added to Total
investments. Total investments plus Accounts receivable equals Total assets.
Accounts payable, if applicable, is a liability of the Account for money market
fund shares deducted from the contract owners' accounts, but not yet deducted
from Total investments.
Total assets minus Accounts payable equals Contract owners' equity. For a
summary of Contract owners' equity by fund series turn to page 17.
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
These statements, found on page 18, show the activity in the Account from
January 1 to December 31, 1995 and 1994.
The Investment activity section shows the changes in unrealized gain or loss of
the mutual funds in the Account, realized gain or loss as shares of the funds
are bought and sold, and dividends and capital gains earnings from the
underlying mutual funds.
The Equity transactions section illustrates the purchase payments received by
the Account as new contracts are sold, existing contract owners deposit
additional funds, money is withdrawn, contracts are canceled and annuity
benefits are paid.
Expenses are the charges associated with the contract. Note 2 on page 20
outlines these charges.
Net change in contract owners' equity equals Investment activity plus Equity
transactions minus Expenses.
The Contract owners' equity at the beginning of the period plus the Net change
in contract owners' equity equals the Contract owners' equity at the end of the
period. Contract owners' equity at the end of the calendar year will equal the
Contract owners' equity at the beginning of the next year.
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SCHEDULES OF CHANGES IN UNIT VALUE
As a contract owner, you invest in the mutual funds offered in your annuity
contract. However, you do not buy shares of the mutual fund. Instead, the
Account buys shares of the fund and you in turn purchase units of the Account.
Except for the units surrendered for the annual contract maintenance charge, the
number of units you own will not change unless you contribute to or withdraw
money from your account. The value of your contract can change based on the
value of the units you own. For example, if you purchase 100 units at $10 per
unit, the value of your contract is $1,000. If the value of the units increases
to $12 per unit, your contract value increases to $1,200. Therefore, to
determine the value of your account, multiply the number of units of each fund
you own by the fund's unit value.
The Schedules of Changes in Unit Value show you the unit value at the beginning
of the period and at the end of the period. The percentage increase (decrease)
in unit value shows how it changed in value. This is computed by subtracting the
beginning unit value from the ending unit value and dividing the difference by
the beginning unit value. This can be used as a measure of the performance of
the funds over the two annual periods reported.
As you review the following pages of the Annual Report, the Notes to Financial
Statements beginning on page 19 will also help explain and clarify the various
statements and schedules.
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A FEW WORDS ABOUT OUR FUNDS
[DREYFUS LOGO]
DREYFUS STOCK INDEX FUND++
OBJECTIVE - To provide investment results that correspond to the price and yield
performance of the S&P 500.+
NARRATIVE BY DREYFUS CORPORATION
The objective of the Stock Index Fund 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 Price
Index, better known as the S&P 500.
The manager generally selects stocks for the Fund's portfolio in the order of
their weightings in the S&P 500, beginning with the heaviest weighted stocks.
With respect to the Fund's assets invested in the stocks in the S&P 500, the
percentage of such assets invested in each stock is approximately the same as
the percentage it represents in the S&P 500.
The Fund will attempt to achieve a correlation between the performance of its
portfolio and that of the S&P 500 of at least 0.95, without taking into account
expenses. The Fund's ability to correlate its performance with the S&P 500 may
be affected by, among other things, changes in securities markets, the manner in
which the S&P 500 is calculated by Standard & Poor's Corporation, the timing of
purchases and redemptions, the size of the Fund's portfolio, and the size of
cash flow into and out of the Fund. There can be no assurance that the Fund's
investment objective will be achieved and an investment in the Fund involves
risks similar to those of investing in common stocks.
[FIDELITY INVESTMENTS LOGO]
VARIABLE INSURANCE PRODUCTS FUND
EQUITY-INCOME PORTFOLIO
OBJECTIVE - To seek reasonable income investing primarily in income-producing
equity securities.
AN INTERVIEW WITH BETTINA DOULTON, PORTFOLIO MANAGER
Q. HOW DID THE FUND PERFORM, BETTINA?
A. Compared to its peers, the Fund did very well over the past 12 months.
However, it slightly trailed the performance of the Standard & Poor's Composite
Index for the 12-month period. The index had a total return of 37.58% for the 12
months ended December 31, 1995. The stock market rally in 1995 was narrow -- led
by the technology and finance sectors, as well as large-cap and blue-chip stocks
- -- and many funds did not beat the performance of the index during the past 12
months.
Q. WHAT HELPED THE FUND'S PERFORMANCE?
A. The Fund's performance came from a number of sectors, including finance and
telephone utilities, as well as from some of the larger holdings, including the
Fund's largest investment, Philip Morris. This company's business was propelled
by gains in market share for its Marlboro brand domestically, and by increased
volume profits in its international tobacco business.
Q. LET'S TAKE A LOOK AT YOUR INVESTMENTS IN THE FINANCE SECTOR. WHICH STOCKS
HAVE TURNED OUT WELL?
A. The Fund's finance investments are fairly diverse. I pick the stocks for the
fund one-by-one, but many of the top performers over the past 12 months came
from this sector. Among them, Citicorp benefited from growth in its emerging
market credit card business. Fannie Mae -- the
+ "Standard & Poor's 500", "S&P 500(R)" are trademarks of the Standard &
Poor's Corporation and have been licensed for use. The fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's Corporation.
++ Formerly the Dreyfus Life and Annuity Index Fund.
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EQUITY-INCOME PORTFOLIO (CONT'D)
Federal National Mortgage Association -- was helped by improved business
conditions, a strong supply of mortgages and widening spreads, such that profit
growth was solid. And American Express, having restructured in order to reduce
costs, posted strong and consistent earnings growth from improved marketing of
its existing and new credit card products. Beyond that, some of the Fund's
insurance stocks -- GenRe, American International Group, Aetna and CIGNA --
contributed well to the Fund's return.
Q. HOW ABOUT TELEPHONE UTILITIES?
A. I've owned several of the regional Bell operating companies, such as
Ameritech, BellSouth, Bell Atlantic, NYNEX and SBC Communications. The
regulatory environment is improving on a state-by-state basis, allowing these
companies to focus more on profitability and competitiveness. They've also been
able to improve revenues by offering value-added services, such as call waiting
and caller identification, cellular services, and additional access lines for
computer modem use.
Q. WHICH STOCKS DIDN'T TURN OUT AS WELL AS YOU WOULD HAVE LIKED?
A. A couple of areas were disappointing. First, Wal-Mart struggled as it went
through a major transition. It was upgrading and expanding its older, most
profitable stores, converting them into so-called super centers -- general
merchandise stores with grocery stores attached. The negative impact on the
company's profits associated with this process -- as well as the difficult
retail environment -- was worse and more prolonged than anticipated. Second,
despite better managing their account bases and internal operations, WMX
Technologies and Browning-Ferris Industries -- broadly based pollution control
companies -- were hurt by the weakening economy, such that the pace of revenue
and profit growth was not as strong as expected.
Q. GENERAL ELECTRIC WAS ONE OF THE FUND'S TOP FIVE STOCKS AT THE END OF THE
PERIOD. WHY WAS IT ATTRACTIVE TO YOU?
A. GE offered a diverse business portfolio, shareholder-oriented management and
a consistent earnings history, qualities that appeared attractive given the
economic climate. I felt the same way about Emerson Electric and Allied Signal.
These companies -- through geographical expansion and improvements in
productivity -- were able to sustain consistent earnings and free cash flow. I
believed the economy was weakening to an extent that the relative performance
expected from these companies would be rewarded.
Q. DOES THAT MEAN YOUR OUTLOOK IS COLORED BY CONCERNS FOR THE ECONOMY?
A. Yes it does. Economic indicators point out that the economy is slowing. Wages
have been stagnant and consumers' disposable income is down. Interest rates will
have to decline, in part so that capital will flow back into the developing
economies, believed to be a prime driver for future global economic growth
including U.S. exports. As it stands at the end of 1995, economies outside of
the U.S. also have slowed, leading me to believe that demand for U.S. exports
will wane. Given this backdrop, I have concerns about corporate profitability in
1996 and think it will be a tough investing environment. As a result, I'll be
looking for companies with aspects to their business that will enable them to
sustain good earnings growth despite a weakening economy.
[NATIONWIDE FINANCIAL SERVICES LOGO]
NATIONWIDE SEPARATE ACCOUNT TRUST
GOVERNMENT BOND FUND
OBJECTIVE - To provide as high a level of income as is consistent with the
preservation of capital.
NARRATIVE BY WAYNE FRISBEE, FUND MANAGER
During 1995 those bond market investors that stayed invested during a difficult
prior year were rewarded for their patience. Long-term interest rates dropped by
approximately 190 basis points during the year resulting in significantly higher
prices for bonds and bond funds. Intermediate-term interest rates dropped by
even more than long-term rates with rates on the five-year U.S. Treasury note,
for example, falling from 7.83 percent to 5.37 percent. The Government Bond Fund
participated in this rally by maintaining market exposure as interest rates
declined during the year.
The rally in the fixed-income markets has been due to the confluence of several
factors. The most notable of these are the perception of an improving fiscal
policy in the United States, and a Federal
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GOVERNMENT BOND FUND (CONT'D)
Reserve that is given credit for engineering an economy that has continued to
expand without igniting inflation concerns. Continued reports of subdued
inflation have been interpreted both as signs of successful Federal Reserve
policy and as indications of continued value in the bond market.
The Government Bond Fund continues to be invested in sectors of the government,
agency, and mortgage-backed markets perceived to be undervalued. Approximately
one-third of portfolio assets are invested in the Collateralized Mortgage
Obligation (CMO) market. The additional yield on these conservatively-structured
investments continues to make them attractive portfolio holdings.
MONEY MARKET FUND
OBJECTIVE - To seek as high a level of current income as is considered
consistent with the preservation of capital and liquidity by investing primarily
in money market instruments.
NARRATIVE BY KAREN MADER, FUND MANAGER
Short-term interest rates rose during the first half of 1995. The Federal
Reserve increased rates due to both an expanding economy and concern about
inflation. By July 1995, the scenario had changed. Expansion and inflation
concerns had diminished leading to a reduction in the Fed Funds rate to the
current rate of 5.50% from 6.00%. The Federal Reserve reduced the Fed Funds by
25 basis points in both July and December of 1995. In the near future, the
Federal Reserve may decide to lower rates again if economic indicators point to
a slowing economy.
The Separate Account Money Market Fund continues to invest in only the highest
rated money market instruments. An internal credit review is completed on every
company that the Fund invests in. The Fund's yield remains competitive with the
other funds included in Donoghue's Taxable First Tier Money Market Group.
TOTAL RETURN FUND
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.
NARRATIVE BY JOHN M. SCHAFFNER, FUND MANAGER
In 1995, the stock market was led upward for the first three quarters by
exceptional strength in the technology sector. In the final quarter, technology
stocks were weak but the market as a whole continued upwards, as leadership
shifted to blue chip stocks.
The Total Return Fund's performance in 1995 was influenced significantly by
strength in energy stocks, where the Fund, with about 14% of assets, is
overweighted. Financial stocks, where the Fund has a weighting of about 11%,
also recorded strong year over year performance as did telecommunications, where
the Fund's asset weighting is about 10%. Several of the stocks the Fund
categorizes as conglomerates, such as Eastman Kodak, Honeywell, Rockwell
International and EG&G also performed well. Holdings in chemicals, especially
specialty chemicals, lagged the market, as did the Fund's holdings in the auto
industry and machinery and capital goods.
The Fund is currently shifting its emphasis in the financial sector. Weightings
in commercial banks are being reduced in favor of increased holdings of
insurance stocks. Bank stocks in general are selling at multiples of book, close
to recent premiums paid in takeovers. In addition, most banks are not
positioned as well as insurance companies to take advantage of future asset
accumulation as the population ages and saves more for retirement. The Fund has
also increased its exposure to technology on recent weakness in this sector,
buying IBM and adding to Intel. The policy to control exposure to this sector,
outlined in the previous report, remains in effect. The Fund's technology
holdings are only in the strongest companies, with reasonable valuations and
good capital gain potential, with a limited commitment of total assets.
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[NEUBERGER & BERMAN MANAGEMENT LOGO]
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
BALANCED PORTFOLIO
OBJECTIVE - The Portfolio seeks long-term capital growth and reasonable current
income without undue risk to principal.
NARRATIVE BY MARK GOLDSTEIN, THERESA HAVELL & THOMAS WOLFE, PORTFOLIO MANAGERS
Our portfolio blend through 1995 consisted of two basic security types: value
and growth stocks averaging in the medium-capitalization range, and short- to
intermediate-term bonds with an average overall credit quality of AA.
GROWTH PORTION
The equity portfolio benefited from a strong bull market in 1995, as many of our
highest sector weightings fully participated in the market's rise. Lower
interest rates and strong earnings results provided the major impetus for equity
markets. Among the best performing sectors were financial, technology, health
care, and certain specialty retailers. The most significant new purchase in 1995
was a major increase in the weighting of the HMO industry, as Wall Street
analysts abandoned the sector earlier in the year due to worries about more
competitive pricing and rising medical costs. As the HMO valuations fell to
historically low levels relative to its 20% industry growth rate, we added
significantly to our HMO holdings. In the fourth quarter of the year the HMO
industry provided some of the best returns in the Portfolio.
Technology, our top-performing sector through September, included major
positions in Intel, Texas Instruments, and Micron Technology. This sector
weakened during the final quarter as pricing concerns surfaced due to rising
capacity additions in the Far East. With production costs falling 25%-30% per
year, industry margins should remain stable for the foreseeable future. We have
recently added to our positions.
Overall, we are pleased with how 1995 turned out for the Portfolio, despite a
drop-off in fourth quarter performance due to weakness in technology, finance,
gaming and restaurant stocks. We hope to continue to tackle each stock
individually on a fundamental value ("bottom-up") basis, and in doing so uncover
fast-growing companies with entrepreneurial managements and pristine balance
sheets.
LIMITED MATURITY BOND PORTION
1995 produced outstanding returns in the bond portfolio, a result of a dramatic
lowering of yields as the market perceived a slowing economy and a lessening of
inflationary pressures. The Federal Reserve Board appeared to agree with the
market's view and lowered the Fed Funds rate by 25 basis points in early July
and again in December.
The duration (the measure of how bond prices respond to shifts in interest
rates, taking into account maturity, coupon, call protection and other factors)
of the portfolio was lengthened in the first half, then held steady during the
summer months as the rally subsided as market participants became concerned
about a pick-up in economic activity. However, by the end of the third quarter
inflationary expectations declined and rates resumed a downward trend. We again
extended duration in October, which greatly benefited fourth quarter
performance.
During the fourth quarter, we added investment-grade corporate bonds and
high-quality asset-backed securities to the Portfolio. This allowed us to take
advantage of slightly higher yield premiums, which were available at reasonable
prices. We believe the fundamentals of these two sectors remain solid and that
significant incremental returns will result from relatively heavy weightings. We
remained underweighted in mortgages throughout the year as the interest rate
rally resulted in their underperformance versus other sectors. We will stick to
our discipline of holding investment-grade credits and not attempting to predict
the direction of rates, as well as stressing the preservation of principal and
steady income production.
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[TWENTIETH CENTURY LOGO]
TCI ADVANTAGE
OBJECTIVE - To seek current income and capital growth.
NARRATIVE BY TWENTIETH CENTURY COMPANIES, INC.
A rising equity market accompanied by gradually declining short term interest
rates during the 12-month period that ended December 31, 1995, were good news
for investors. In that climate, TCI Advantage achieved the best calendar year
gain since its August 1, 1991, inception. The Fund trailed its benchmark blended
index fund, which posted a 21.91% return. The S&P 500 index gained 37.58%.
TCI Advantage is a well diversified, blended portfolio. Its approximate 40%
stock position is compiled using Twentieth Century's focus on companies that
exhibit accelerating earnings and revenues, and it is designed to provide
long-term opportunities for capital growth. Income is derived from an
approximate 40% stake in intermediate-term government bonds, with share price
consistency aided by a 20% weighting in money market securities. The goal is to
provide income while still providing the modest, long-term share-price growth
investors need to outpace the rate of inflation.
TCI Advantage's common stock holdings are targeted to the shares of larger
well-established companies demonstrating earnings and revenue acceleration. For
most of the year this approach proved rewarding, and shareholders benefited from
strong returns in such industries as healthcare, pharmaceuticals and technology.
Yet, as concerns about a slowing U.S. economy developed late in the period, many
investors moved to more defensively postured firms characterized by steady
(albeit unspectacular) earnings growth. Most such firms do not meet the fund's
standards for accelerating growth, but they were major components of the S&P
500's solid gains in the fourth quarter of 1995. History shows us that over time
investors will favor companies with the above-average earnings growth we seek on
your behalf.
The Federal Reserve Board raised interest rates early in the period and lowered
rates later in the year. Responding to falling interest rates, the bond market
experienced a sharp price rebound from 1994 declines, which translated into
relatively strong performance for the year. The fixed income markets especially
favored longer term bonds. TCI Advantage invests in less volatile short- and
intermediate-term bonds and money market instruments. As a result, while it
provided steady income and good performance, it did not fully share in the bond
market's appreciation.
Because it is designed for conservative investors, TCI Advantage is not likely
to match major stock indices in a year like 1995. Its portfolio design of large
company stocks, bonds and cash, however, does give it strong potential for
holding its value during down market years.
TCI Advantage continues to pursue its goal: to provide shareholders with the
opportunity to invest in a portfolio of domestic stocks with earnings and
revenue acceleration, conservative government bonds and money market securities.
We remain confident that the fund has the potential to provide investors with a
long-term rate of return that could comfortably outpace the rate of inflation.
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TCI GROWTH
OBJECTIVE - To seek capital growth by investing in common stocks (including
securities convertible into common stocks) that meet certain fundamental and
technical standards of selection and, in the opinion of the Fund's management,
have better than average potential for appreciation.
NARRATIVE BY TWENTIETH CENTURY COMPANIES, INC.
TCI Growth reported a strong gain for the 12 months ended December 31, 1995,
reflecting the year's powerful market climb. According to Lipper Analytical
Services, the average total return for funds with growth investment objectives
was 30.79% during the period. The S&P 500 index returned 37.58% for the 12
months.
TCI Growth's best gains came during the year's first three quarters. It climbed
steadily in the first half of the period and surged sharply in the third
quarter. Hot selling new technologies, the introduction of Windows 95 in August,
for example, contributed to the market's extended rally during this period. With
nearly half of its portfolio in technology stocks during the 12-month period,
the Fund made the most of this trend. Moderate holdings in international stocks
provided a positive effect on returns as well.
In the face of growing economic uncertainty late in the year, many investors
moved from technology stocks to stocks of large, more established companies with
steady earnings, which investors typically consider to be defensive. This change
in emphasis clipped Fund performance, especially in comparison with the positive
return of the S&P, which was heavily influenced by the returns of large "steady
growers" in the index.
TCI Growth, which invests in the stocks of small, medium and large companies, is
designed for investors seeking capital growth. To meet that objective the Fund
seeks to single out companies with earnings and revenue acceleration because we
have found that such an approach can provide attractive returns over the long
run.
TCI Growth's continued performance (despite the recent setback in
technology-oriented companies) reaffirms to us the potential of combining
growth-oriented stocks with a disciplined buying and selling process. We
strongly believe that this strategy has the potential to provide significant
benefits to those shareholders investing to achieve long-term financial goals.
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FUND PERFORMANCES
TOTAL RETURN: ASSUMING CONTRACT NOT SURRENDERED** (NON-STANDARDIZED)
APPROXIMATE PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND INCOME DIVIDENDS
REINVESTED
<TABLE>
<CAPTION>
NON-ANNUALIZED PERCENT CHANGE*** ANNUALIZED PERCENT CHANGE***
INCEPTION 1 YR.TO 5 YR.TO INCEPTION TO 5 YR.TO INCEPTION TO
FUNDS++ DATE*+ 12/31/95 12/31/95+ 12/31/95+ 12/31/95 12/31/95
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DREYFUS CORPORATION
Stock Index Fund 09/29/89 35.01% 96.54% 90.63% 14.47% 10.87%
FIDELITY VIP FUND
Equity-Income Portfolio 10/09/86 33.34% 146.28% 181.59% 19.75% 11.87%
NATIONWIDE SEPARATE ACCOUNT TRUST
Government Bond Fund 11/08/82 17.21% 48.39% 196.55% 8.21% 8.62%
Money Market Fund 11/10/81 4.29% 15.61% 124.86% 2.94% 5.90%
Total Return Fund 11/08/82 27.42% 103.11% 421.74% 15.22% 13.39%
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Balanced Portfolio 02/28/89 22.16% 58.10% 83.17% 9.59% 9.26%
TCI PORTFOLIOS, INC.
TCI Advantage 08/01/91 15.23% NA* 30.35% NA* 6.19%
TCI Growth 11/20/87 29.40% 87.41% 139.62% 13.39% 11.37%
</TABLE>
* Performance information is not available for all or part of the period
indicated (See Fund Inception Date).
** SEC and NASD regulations require that any performance be accompanied by
standardized data and the disclosures are on the following page. Please
review this information and a product prospectus before investing.
*** Percent change in unit value price represents total return after the
deduction of a 1.3% annual asset fee.
+ Numbers in this column represent the total percentage change in the
unit value for the period indicated. This is not an annual return figure.
++ Funds are neither insured nor guaranteed by the U.S. Government. For
the Money Market Fund, there is no assurance that a stable $1 fund NAV
(used to calculate Unit Value) can be maintained. Figures quoted
represent past performance and returns can fluctuate.
*+ Performance for some funds reflects performance for periods before the
fund was actually available in the separate account. That hypothetical
performance is calculated by imposing contract charges on actual fund
performance, to determine how the fund would have performed if it had
been available in the separate account.
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TOTAL RETURN: ASSUMING CONTRACT SURRENDERED (STANDARDIZED)
APPROXIMATE PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND INCOME DIVIDENDS
REINVESTED
<TABLE>
<CAPTION>
INCEPTION 1 YR.TO 5 YR.TO 10 YR.TO INCEPTION TO
FUNDS++ DATE*+ 12/31/95 12/31/95 12/31/95 12/31/95
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DREYFUS CORPORATION
Stock Index Fund 09/29/89 26.61% 11.80% NA* 7.61%
FIDELITY VIP FUND
Equity-Income Portfolio 10/09/86 24.94% 17.36% NA* 9.02%
NATIONWIDE SEPARATE ACCOUNT TRUST
Government Bond Fund 11/08/82 8.81% 5.26% 5.78% 6.24%
Money Market Fund 11/10/81 -4.11% -0.42% 1.81% 3.75%
Total Return Fund 11/08/82 19.02% 12.73% 8.79% 11.58%
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Balanced Portfolio 02/28/89 13.76% 6.74% NA* 6.62%
TCI PORTFOLIOS, INC.
TCI Advantage 08/01/91 6.83% NA* NA* 2.32%
TCI Growth 11/20/87 21.00% 10.77% NA* 8.65%
</TABLE>
The above illustration represents past fund performance based on a $1,000
hypothetical investment. The performance figures reflect the deduction of a 1.3%
annual asset fee, $30 annual administrative charge, and a maximum of a 6.0%
contingent deferred sales charge (after one year, declining thereafter). They
also reflect the application of an annual 10% free withdrawal privilege
available after the first year. Investment principal and investment returns are
not guaranteed under these variable options. Account values at the time of
redemption may be more or less than the purchase payment, due to market
fluctuations and any specific charges that may apply. This is neither an offer
to sell nor a solicitation to buy securities. The results shown are not a
representation of future investment performance. Any comparisons should be made
only after a recognition of the differences in the investment policies and
objectives of the funds' investments. This report is authorized for distribution
to prospective investors only when preceded or accompanied by prospectuses
containing more complete information, which should be read carefully before
investing or sending money.
* Performance information is not available for all or part of the period
indicated (See Fund Inception Date).
++ Funds are neither insured nor guaranteed by the U.S. Government. For the
Money Market Fund, there is no assurance that a stable $1 fund NAV (used to
calculate Unit Value) can be maintained. Figures quoted represent past
performance and returns can fluctuate.
*+ Performance for some funds reflects performance for periods before the fund
was actually available in the separate account. That hypothetical
performance is calculated by imposing contract charges on actual fund
performance, to determine how the fund would have performed if it had been
available in the separate account.
15
<PAGE> 15
NATIONWIDE VARIABLE ACCOUNT-5
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Dreyfus Stock Index Fund (DryStkIx)
35,664 shares (cost $489,003) ........................... $ 613,424
Fidelity VIP -- Equity-Income Portfolio (FidEqInc)
139,684 shares (cost $2,178,185) ........................ 2,691,719
Nationwide SAT -- Government Bond Fund (NWGvtBd)
57,943 shares (cost $618,211) ........................... 658,227
Nationwide SAT -- Money Market Fund (NWMyMkt)
312,031 shares (cost $312,031) .......................... 312,031
Nationwide SAT -- Total Return Fund (NWTotRet)
113,204 shares (cost $1,180,941) ........................ 1,306,378
Neuberger & Berman -- Balanced Portfolio (NBBal)
39,136 shares (cost $595,123) ........................... 685,665
TCI Portfolios -- TCI Advantage (TCIAdv)
35,232 shares (cost $197,438) ........................... 218,085
TCI Portfolios -- TCI Growth (TCIGro)
103,062 shares (cost $977,942) .......................... 1,242,932
----------
Total assets ...................................... 7,728,461
ACCOUNTS PAYABLE ........................................ 17
----------
CONTRACT OWNERS' EQUITY ................................. $7,728,444
==========
</TABLE>
16
<PAGE> 16
<TABLE>
<CAPTION>
Contract owners' equity represented by: UNITS UNIT VALUE
----- ----------
<S> <C> <C> <C>
Dreyfus Stock Index Fund:
Tax qualified ......................................... 31,487 $13.807559 $ 434,759
Non-tax qualified ..................................... 12,941 13.807559 178,684
Fidelity VIP -- Equity-Income Portfolio:
Tax qualified ......................................... 150,246 14.412060 2,165,354
Non-tax qualified ..................................... 36,522 14.412060 526,357
Nationwide SAT -- Government Bond Fund:
Tax qualified ......................................... 12,624 29.463573 371,948
Non-tax qualified ..................................... 9,712 29.474435 286,256
Nationwide SAT -- Money Market Fund:
Tax qualified ......................................... 15,599 19.595876 305,676
Non-tax qualified ..................................... 300 21.291272 6,387
Nationwide SAT -- Total Return Fund:
Tax qualified ......................................... 20,057 51.701438 1,036,976
Non-tax qualified ..................................... 5,365 50.214359 269,400
Neuberger & Berman -- Balanced Portfolio:
Tax qualified ......................................... 40,040 14.753402 590,726
Non-tax qualified ..................................... 6,434 14.753402 94,923
TCI Portfolios -- TCI Advantage:
Tax qualified ......................................... 8,377 13.035463 109,198
Non-tax qualified ..................................... 8,353 13.035463 108,885
TCI Portfolios -- TCI Growth:
Tax qualified ......................................... 62,673 16.447846 1,030,836
Non-tax qualified ..................................... 12,894 16.447846 212,079
======= ========== ----------
$7,728,444
==========
</TABLE>
See accompanying notes to financial statements.
17
<PAGE> 17
NATIONWIDE VARIABLE ACCOUNT - 5
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends $ 317,443 93,544
---------- ---------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares 1,005,681 644,960
Cost of mutual fund shares sold (961,009) (638,042)
---------- ---------
Realized gain (loss) on investments 44,672 6,918
Change in unrealized gain (loss) on investments 1,187,526 (7,940)
---------- ---------
Net gain (loss) on investments 1,232,198 (1,022)
---------- ---------
Net investment activity 1,549,641 92,522
---------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners 2,249,760 4,745,746
Redemptions (465,975) (293,339)
Adjustments to maintain reserves (76) 56
---------- ---------
Net equity transactions 1,783,709 4,452,463
---------- ---------
EXPENSES (NOTE 2):
Contract charges (92,908) (32,016)
Contingent deferred sales charges (13,677) (11,290)
---------- ---------
Total expenses (106,585) (43,306)
---------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY 3,226,765 4,501,679
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 4,501,679 --
---------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD $7,728,444 4,501,679
========== =========
</TABLE>
See accompanying notes to financial statements.
18
<PAGE> 18
NATIONWIDE VARIABLE ACCOUNT - 5
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Variable Account-5 (the Account) was established pursuant to
a resolution of the Board of Directors of Nationwide Life Insurance Company (the
Company) on November 1, 1989. The Account has been registered as a unit
investment trust under the Investment Company Act of 1940. On December 31, 1993,
the accumulation unit values for each fund sub-account of Nationwide Variable
Account-5 were established at a unit value equal to the accumulation unit values
of the corresponding fund sub-account of the Nationwide Multi-Flex Variable
Account. The first deposits were received by the Account on May 4, 1994.
The Company offers tax qualified and non-tax qualified Individual Deferred
Variable Annuity Contracts through the Account. The primary distribution for the
contracts is through banks and other financial institutions.
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees, are offered for purchase. See note
2 for a discussion of contract expenses. Contract owners in either the
accumulation or payout phase may invest in any of the following:
Dreyfus Stock Index Fund (DryStkIx)
Portfolio of the Fidelity Variable Insurance Products Fund (Fidelity VIP);
Fidelity VIP -- Equity-Income Portfolio (FidEqInc)
Funds of the Nationwide Separate Account Trust (Nationwide SAT) (managed for
a fee by an affiliated investment advisor);
Nationwide SAT -- Government Bond Fund (NWGvtBd)
Nationwide SAT -- Money Market Fund (NWMyMkt)
Nationwide SAT -- Total Return Fund (NWTotRet)
Portfolio of the Neuberger & Berman Advisers Management Trust (Neuberger &
Berman);
Neuberger & Berman -- Balanced Portfolio (NBBal)
Portfolios of the TCI Portfolios, Inc. (TCI Portfolios);
TCI Portfolios -- TCI Advantage (TCIAdv)
TCI Portfolios -- TCI Growth (TCIGro)
At December 31, 1995, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment results of
each fund, equity transactions by contract owners and certain contract 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, 1995. The cost of investments sold is
determined on a 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.
19
<PAGE> 19
(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 Internal
Revenue Code.
The Company does not provide for income taxes within the Account. Taxes are
the responsibility of the contract owner upon termination or withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(2) Expenses
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of such
contracts is surrendered, the Company will, with certain exceptions, deduct from
a contract owner's contract value a contingent deferred sales charge, not to
exceed 7% of the lesser of purchase payments or the amount surrendered, such
charge declining 1% per year, to 0%, after the purchase payment has been held in
the contract for 84 months. No sales charges are deducted on redemptions used to
purchase units in the fixed investment options of the Company.
The following administrative charges are deducted by the Company: (a) an
annual contract maintenance charge of $30, with certain exceptions, which is
satisfied by surrendering units; and (b) 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 0.80%, 0.45% and 0.05%, respectively.
(3) Schedule I
Schedule I presents the components of the change in the unit values, which
are the basis for contract owners' equity. This schedule is presented for each
series, as applicable, in the following format:
- Beginning unit value - Jan. 1
- Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to capital
gains and dividend distributions from the underlying mutual funds.)
- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
- Contract charges
(This amount reflects the decrease in the unit value due to the
mortality risk charge, expense risk charge and administration charge
discussed in note 2.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
For contracts in the payout phase, an assumed investment return of 3.5%,
used in the calculation of the annuity benefit payment amount, results in a
corresponding reduction in the components of the unit values as shown in
Schedule I.
20
<PAGE> 20
SCHEDULE I
NATIONWIDE VARIABLE ACCOUNT -5
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
NWGVTBD NWGVTBD NWMYMKT NWMYMKT NWTOTRET
DRYSTKIX FIDEQINC QUAL. NON-QUAL. QUAL. NON-QUAL. QUAL.
-------- -------- ------- --------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $10.227308 10.808255 25.138302 25.147577 18.790546 20.416267 40.575816
- -------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .366275 .845166 1.778825 1.779480 1.056381 1.147773 4.020137
- -------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.371719 2.923160 2.904595 2.905666 .000000 .000000 7.711672
- -------------------------------------------------------------------------------------------------------------------
Contract charges (.157743) (.164521) (.358149) (.358288) (.251051) (.272768) (.606187)
- -------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.807559 14.412060 29.463573 29.474435 19.595876 21.291272 51.701438
- -------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 35% 33% 17% 17% 4% 4% 27%
===================================================================================================================
1994
Beginning unit value - Jan. 1 $10.271065 10.227513 26.318797 26.328516 18.325918 ** 40.671816
- -------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .287154 .767502 1.651042 1.651652 .706658 2.052197
- -------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.197934) (.048719) (2.499476) (2.500401) .000000 (1.612762)
- -------------------------------------------------------------------------------------------------------------------
Contract charges (.132977) (.138041) (.332061) (.332190) (.242030) (.535435)
- -------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.227308 10.808255 25.138302 25.147577 18.790546 40.575816
- -------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 0% 6% (4)% (4)% 3% 0%
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
NWTOTRET
NON-QUAL. NBBAL TCIADV TCIGRO
--------- ----- ------ ------
<S> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 39.408735 12.077573 11.312248 12.711014
- -----------------------------------------------------------------------------------
Reinvested capital gains
and dividends 3.904506 .307323 .409891 .014626
- -----------------------------------------------------------------------------------
Unrealized gain (loss) 7.489864 2.548627 1.472626 3.917671
- -----------------------------------------------------------------------------------
Contract charges (.588746) (.180121) (.159302) (.195465)
- -----------------------------------------------------------------------------------
Ending unit value - Dec. 31 50.214359 14.753402 13.035463 16.447846
- -----------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 27% 22% 15% 29%
===================================================================================
1994
Beginning unit value - Jan. 1 39.501981 12.661508 11.343435 13.030369
- -----------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.993171 .493737 .297949 .001393
- -----------------------------------------------------------------------------------
Unrealized gain (loss) (1.566374) (.917170) (.181282) (.154144)
- -----------------------------------------------------------------------------------
Contract charges (.520043) (.160502) (.147854) (.166604)
- -----------------------------------------------------------------------------------
Ending unit value - Dec. 31 39.408735 12.077573 11.312248 12.711014
- -----------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 0% (5)% 0% (2)%
===================================================================================
</TABLE>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** This investment option was not being utilized.
See note 3.
21
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Contract Owners of
Nationwide Variable Account-5
Nationwide Life Insurance Company:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account-5 as of December 31,
1995, and the related statements of operations and changes in contract owners'
equity and schedules of changes in unit value for each of the years in the two
year period then ended. These financial statements and schedules of changes in
unit value are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules of changes in unit value 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 and schedules of
changes in unit value 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, 1995, by correspondence with the custodian and 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 and schedules of changes in
unit value referred to above present fairly, in all material respects, the
financial position of Nationwide Variable Account-5 as of December 31, 1995, and
the results of its operations and its changes in contract owners' equity and the
schedules of changes in unit value 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, 1996
22
<PAGE> 22
This report is for the information of contract owners with funds in the
Nationwide Variable Account-5. It may also be used, from time to time, as sales
literature, but only when accompanied or preceded by the current prospectus,
which contains complete information about the contracts which invest in the
separate account, and their fees, charges and expenses. If this report is used
as sales literature after March 31, 1996, it must be accompanied by the fund
performance report reflecting performances for the most recently completed
calendar quarter. Prospective investors should read the prospectus carefully
before investing.
23
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY --------------
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220 Bulk Rate
U.S. Postage
P A I D
Columbus, Ohio
Permit No. 521
--------------
Nationwide(R) is a registered federal service mark of
Nationwide Mutual Insurance Company
