<PAGE> 1
[NATIONWIDE LOGO]
NATIONWIDE(R)
VARIABLE
ACCOUNT-5
ANNUAL REPORT
TO
CONTRACT OWNERS
DECEMBER 31, 1997
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
APO - 2750 - G (12/97)
<PAGE> 2
[NATIONWIDE LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215 - 2220
[PHOTO}
PRESIDENT'S MESSAGE
We at Nationwide Life Insurance Company are pleased to bring you the
1997 annual report of the Nationwide Variable Account-5.
Equity markets ended a volatile season to record the third straight
year of gains topping the 20 percent mark. Additionally, returns on
fixed income investments were buoyed by declining inflation, steady
Federal Reserve policy and the positive outlook for lower budget
deficits.
The U.S. economy continues to be strong into 1998. However, there is
still much uncertainty about what effect the Southeast Asian crisis
will have on our economy during this year. The obvious result, we
believe, will be a slowing of economic growth due to reduced
exports, restrained pricing flexibility and lower corporate profits.
We expect the Federal Reserve will continue to stay on the sidelines
as the Southeast Asian economic turmoil plays out. At the same time,
low inflation and low interest rates should continue to provide a
healthy environment for financial assets.
We are committed to our customers as our most valuable asset. Our
commitment to you is to continue to add value to our products and
services to help you achieve your financial planning and retirement
goals. As always, we welcome and encourage your feedback.
/s/ Joseph J. Gasper
Joseph J. Gasper, President
3
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NATIONWIDE VARIABLE ACCOUNT-5
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at market value:
American Century VP - American Century VP Advantage (ACVPAdv)
44,592 shares (cost $262,016) ............................................................... $ 294,308
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
139,961 shares (cost $1,425,631) ............................................................ 1,354,827
Dreyfus Stock Index Fund (DryStkIx)
77,432 shares (cost $1,441,528) ............................................................. 1,993,868
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
214,947 shares (cost $3,821,165) ............................................................ 5,218,924
Nationwide SAT - Government Bond Fund (NSATGvtBd)
70,990 shares (cost $765,836) ............................................................... 807,868
Nationwide SAT - Money Market Fund (NSATMyMkt)
543,043 shares (cost $543,043) .............................................................. 543,043
Nationwide SAT - Total Return Fund (NSATTotRe)
165,376 shares (cost $1,982,530) ............................................................ 2,708,856
Neuberger &Berman AMT - Balanced Portfolio (NBAMTBal)
54,873 shares (cost $865,911) ............................................................... 976,741
---------
Total investments ........................................................................ 13,898,435
Accounts receivable ............................................................................... 452
---------
Total assets ............................................................................. 13,898,887
ACCOUNTS PAYABLE ..................................................................................... 12
---------
CONTRACT OWNERS' EQUITY .............................................................................. $ 13,898,875
=========
</TABLE>
4
<PAGE> 4
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN
-------- --------- -------
<S> <C> <C> <C> <C>
American Century VP - American Century
VP Advantage:
Tax qualified ............................... 11,122 $ 15.651770 $ 174,079 11%
Non-tax qualified ........................... 7,682 15.651770 120,237 11%
American Century VP - American Century
VP Capital Appreciation:
Tax qualified ............................... 80,973 14.829811 1,200,814 (5)%
Non-tax qualified ........................... 10,383 14.829811 153,978 (5)%
Dreyfus Stock Index Fund:
Tax qualified ............................... 76,005 21.913276 1,665,519 31%
Non-tax qualified ........................... 14,986 21.913276 328,392 31%
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ............................... 217,475 20.553936 4,469,967 26%
Non-tax qualified ........................... 36,442 20.553936 749,027 26%
Nationwide SAT - Government Bond Fund:
Tax qualified ............................... 15,010 32.572519 488,914 8%
Non-tax qualified ........................... 9,788 32.584532 318,937 8%
Nationwide SAT - Money Market Fund:
Tax qualified ............................... 25,727 21.120495 543,367 4%
Nationwide SAT - Total Return Fund:
Tax qualified ............................... 28,700 79.422176 2,279,416 28%
Non-tax qualified ........................... 5,568 77.137765 429,503 28%
Neuberger &Berman AMT - Balanced Portfolio:
Tax qualified ............................... 50,098 18.349145 919,255 18%
Non-tax qualified ........................... 3,132 18.349145 57,470 18%
======= ========= ------------
$ 13,898,875
============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 5
NATIONWIDE VARIABLE ACCOUNT-5
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL ACVPADV
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. $ 218,349 135,536 3,776 5,601
Mortality, expense and administration
charges (note 2) ............................... (161,659) (119,165) (3,461) (3,052)
-------------- -------------- -------------- --------------
Net investment activity ........................ 56,690 16,371 315 2,549
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............ 1,351,866 577,153 34,005 32,561
Cost of mutual fund shares sold .................. (1,072,212) (483,424) (29,706) (29,602)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ............ 279,654 93,729 4,299 2,959
Change in unrealized gain (loss) on investments .. 1,318,801 292,389 10,182 1,463
-------------- -------------- -------------- --------------
Net gain (loss) on investments ................. 1,598,455 386,118 14,481 4,422
-------------- -------------- -------------- --------------
Reinvested capital gains ......................... 552,474 462,034 13,186 10,732
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 2,207,619 864,523 27,982 17,703
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 2,627,652 2,289,111 53,205 43,264
Transfers between funds .......................... - - (5,073) (16,823)
Redemptions ...................................... (1,217,456) (520,971) (25,654) (15,884)
Annuity benefits ................................. - - - -
Annual contract maintenance charge (note 2) ...... (20,632) (17,468) (604) (508)
Contingent deferred sales charges (note 2) ....... (24,123) (18,614) (802) (585)
Adjustments to maintain reserves ................. 397 393 (2) 14
-------------- -------------- -------------- --------------
Net equity transactions ...................... 1,365,838 1,732,451 21,070 9,478
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 3,573,457 2,596,974 49,052 27,181
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 10,325,418 7,728,444 245,264 218,083
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 13,898,875 10,325,418 294,316 245,264
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
ACVPCAPAP DRYSTKIX
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. - - 26,048 17,575
Mortality, expense and administration
charges (note 2) ............................... (17,785) (18,101) (21,202) (10,803)
------------- -------------- -------------- --------------
Net investment activity ........................ (17,785) (18,101) 4,846 6,772
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............ 289,441 97,973 100,921 51,109
Cost of mutual fund shares sold .................. (272,191) (81,258) (54,820) (35,459)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ............ 17,250 16,715 46,101 15,650
Change in unrealized gain (loss) on investments .. (105,922) (229,872) 308,440 119,480
------------- -------------- -------------- --------------
Net gain (loss) on investments ................. (88,672) (213,157) 354,541 135,130
------------- -------------- -------------- --------------
Reinvested capital gains ......................... 27,829 148,311 57,613 17,163
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... (78,628) (82,947) 417,000 159,065
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 339,461 380,050 458,060 263,645
Transfers between funds .......................... (210,754) (25,024) 219,119 64,048
Redemptions ...................................... (112,721) (85,473) (143,384) (49,417)
Annuity benefits ................................. - - - -
Annual contract maintenance charge (note 2) ...... (2,670) (3,106) (2,270) (1,374)
Contingent deferred sales charges (note 2) ....... (3,425) (3,057) (2,348) (1,843)
Adjustments to maintain reserves ................. 59 112 135 32
------------- -------------- -------------- --------------
Net equity transactions ...................... 9,950 263,502 529,312 275,091
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ (68,678) 180,555 946,312 434,156
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 1,423,470 1,242,915 1,047,599 613,443
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ 1,354,792 1,423,470 1,993,911 1,047,599
============= ============== ============== ==============
</TABLE>
6
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT-5
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FIDVIPEI NSATGVTBD
------------------------------ ------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. $ 65,141 4,263 47,002 42,310
Mortality, expense and administration
charges (note 2) ............................... (60,027) (42,787) (9,873) (8,836)
-------------- -------------- -------------- --------------
Net investment activity ........................ 5,114 (38,524) 37,129 33,474
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............ 370,232 152,612 47,651 35,508
Cost of mutual fund shares sold .................. (257,251) (114,012) (45,419) (34,435)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ............ 112,981 38,600 2,232 1,073
Change in unrealized gain (loss) on investments .. 604,327 279,898 21,454 (19,438)
-------------- -------------- -------------- --------------
Net gain (loss) on investments ................. 717,308 318,498 23,686 (18,365)
-------------- -------------- -------------- --------------
Reinvested capital gains ......................... 327,513 122,194 - -
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 1,049,935 402,168 60,815 15,109
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 831,284 833,066 90,473 73,797
Transfers between funds .......................... 28,018 58,941 (7,829) (10,437)
Redemptions ...................................... (452,175) (194,878) (41,501) (27,260)
Annuity benefits ................................. - - - -
Annual contract maintenance charge (note 2) ...... (7,594) (6,323) (854) (811)
Contingent deferred sales charges (note 2) ....... (7,993) (7,367) (1,231) (626)
Adjustments to maintain reserves ................. 111 90 (28) 30
-------------- -------------- -------------- --------------
Net equity transactions ...................... 391,651 683,529 39,030 34,693
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 1,441,586 1,085,697 99,845 49,802
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 3,777,408 2,691,711 708,006 658,204
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 5,218,994 3,777,408 807,851 708,006
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NSATMYMKT NSATTOTRE
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. 24,333 17,553 36,372 31,681
Mortality, expense and administration
charges (note 2) ............................... (6,204) (4,630) (31,274) (20,949)
------------- -------------- -------------- --------------
Net investment activity ........................ 18,129 12,923 5,098 10,732
------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ............ 99,938 75,539 237,038 69,718
Cost of mutual fund shares sold .................. (99,938) (75,539) (157,833) (56,068)
------------- -------------- -------------- --------------
Realized gain (loss) on investments ............ - - 79,205 13,650
Change in unrealized gain (loss) on investments .. - - 397,111 203,778
------------- -------------- -------------- --------------
Net gain (loss) on investments ................. - - 476,316 217,428
------------- -------------- -------------- --------------
Reinvested capital gains ......................... - - 86,096 71,581
------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 18,129 12,923 567,510 299,741
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 198,357 145,576 461,131 359,715
Transfers between funds .......................... (18,500) (50,670) 42,516 17,492
Redemptions ...................................... (44,754) (27,187) (250,715) (79,840)
Annuity benefits ................................. - - - -
Annual contract maintenance charge (note 2) ...... (1,075) (649) (3,827) (3,177)
Contingent deferred sales charges (note 2) ....... (535) (335) (4,826) (3,342)
Adjustments to maintain reserves ................. 16 8 86 79
------------- -------------- -------------- --------------
Net equity transactions ...................... 133,509 66,743 244,365 290,927
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 151,638 79,666 811,875 590,668
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 391,729 312,063 1,897,044 1,306,376
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ 543,367 391,729 2,708,919 1,897,044
============= ============== ============== ==============
</TABLE>
(Continued)
7
<PAGE> 7
NATIONWIDE VARIABLE ACCOUNT-5
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NBAMTBAL
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. $ 15,677 16,553
Mortality, expense and administration
charges (note 2) ............................... (11,833) (10,007)
-------------- --------------
Net investment activity ........................ 3,844 6,546
-------------- --------------
Proceeds from mutual fund shares sold ............ 172,640 62,133
Cost of mutual fund shares sold .................. (155,054) (57,051)
-------------- --------------
Realized gain (loss) on investments ............ 17,586 5,082
Change in unrealized gain (loss) on investments .. 83,209 (62,920)
-------------- --------------
Net gain (loss) on investments ................. 100,795 (57,838)
-------------- --------------
Reinvested capital gains ......................... 40,237 92,053
-------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 144,876 40,761
-------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 195,681 189,998
Transfers between funds .......................... (47,497) (37,527)
Redemptions ...................................... (146,552) (41,032)
Annuity benefits ................................. - -
Annual contract maintenance charge (note 2) ...... (1,738) (1,520)
Contingent deferred sales charges (note 2) ....... (2,963) (1,459)
Adjustments to maintain reserves ................. 20 28
-------------- --------------
Net equity transactions ...................... (3,049) 108,488
-------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 141,827 149,249
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 834,898 685,649
-------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 976,725 834,898
============== ==============
</TABLE>
See accompanying notes to financial statements.
8
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NATIONWIDE VARIABLE ACCOUNT-5
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
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:
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP) (formerly TCI Portfolios, Inc.);
American Century VP - American Century VP Advantage (ACVPAdv)
(formerly TCI Portfolios - TCI Advantage)
American Century VP - American Century VP Capital Appreciation
(ACVPCapAp) (formerly TCI Portfolios - TCI Growth)
Dreyfus Stock Index Fund (DryStkIx)
Portfolio of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolio of the Neuberger &Berman Advisers Management Trust
(Neuberger &Berman AMT); Neuberger &Berman AMT - Balanced
Portfolio (NBAMTBal)
At December 31, 1997, 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, 1997. 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.
9
<PAGE> 9
(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.
(f) Reclassifications
Certain 1996 amounts have been reclassified to conform with the current
period presentation.
(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 contract 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) 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.
10
<PAGE> 10
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide Variable Account-5:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account-5 as of December 31,
1997, and the related statements of operations and changes in contract owners'
equity for each of the years in the two year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures include
confirmation of securities owned as of December 31, 1997, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide Variable
Account-5 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
11
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220
Bulk Rate
U.S. Postage
PAID
Columbus, Ohio
Permit No. 521
Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company
