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[NATIONWIDE LOGO]
NATIONWIDE(R)
VARIABLE
ACCOUNT-5
SEMI-ANNUAL REPORT
TO
CONTRACT OWNERS
JUNE 30, 1998
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
APO-2750-H(6/98)
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215-2220
[PHOTO]
PRESIDENT'S MESSAGE
We at Nationwide Life Insurance Company are pleased to present the 1998
semi-annual report of the Nationwide Variable Account-5.
The bull market continued its run in the first half of 1998. Most of the gains
came in the first quarter with more modest returns or small losses for the
second half of the period. At this writing, a market correction that began in
the second quarter continues to provide a good deal of day-to-day volatility.
Much of the capriciousness of the market is due to uncertainty about the
economic outcome in Asia. However, we think the correction will be of limited
magnitude and duration and will provide a healthy respite before further market
advances.
We believe that existing economic and market fundamentals provide an ongoing
favorable environment for financial assets. Interest rates remain low; inflation
is nearly nonexistent; corporate earnings, albeit slowing, remain positive, and
U.S. economic growth appears to be on a modest but sustainable track.
Against this backdrop, we believe our variable insurance products continue to
provide the versatile investment vehicle you need to respond to changing market
conditions. We are committed to the continual evaluation of our products and
services to ensure that we remain responsive to your long-term financial
planning and retirement-savings needs.
/s/ Joseph J. Gasper
------------------------------
Joseph J. Gasper, President
August 17, 1998
3
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NATIONWIDE VARIABLE ACCOUNT-5
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at market value:
American Century VP - American Century VP Advantage (ACVPAdv)
57,326 shares (cost $348,648) ............................................ $ 374,909
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
118,262 shares (cost $1,239,132) ......................................... 1,099,840
Dreyfus Stock Index Fund (DryStkIx)
68,635 shares (cost $1,462,611) .......................................... 2,060,415
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
203,902 shares (cost $3,924,411) ......................................... 5,132,223
Nationwide SAT - Government Bond Fund (NSATGvtBd)
63,969 shares (cost $701,329) ............................................ 735,641
Nationwide SAT - Money Market Fund (NSATMyMkt)
543,095 shares (cost $543,095) ........................................... 543,095
Nationwide SAT - Total Return Fund (NSATTotRe)
139,262 shares (cost $1,781,025) ......................................... 2,604,197
Neuberger & Berman AMT - Balanced Portfolio (NBAMTBal)
59,891 shares (cost $960,845) ............................................ 964,843
------------
Total investments ...................................................... 13,515,163
Accounts receivable .......................................................... -
------------
Total assets ........................................................... 13,515,163
ACCOUNTS PAYABLE ................................................................ 6,702
------------
CONTRACT OWNERS' EQUITY ......................................................... $ 13,508,461
============
</TABLE>
4
<PAGE> 4
<TABLE>
<CAPTION>
PERIOD
Contract owners' equity represented by: UNITS UNIT VALUE RETURN
-------- --------- -------
<S> <C> <C> <C> <C>
Contracts in accumulation phase:
American Century VP - American Century
VP Advantage:
Tax qualified ...................... 14,221 $ 17.173472 $ 244,224 10%
Non-tax qualified .................. 7,610 17.173472 130,690 10%
American Century VP - American Century
VP Capital Appreciation:
Tax qualified ...................... 63,153 14.863627 938,683 0%
Non-tax qualified .................. 10,022 14.863627 148,963 0%
Dreyfus Stock Index Fund:
Tax qualified ...................... 65,291 25.583023 1,670,341 17%
Non-tax qualified .................. 15,248 25.583023 390,090 17%
Fidelity VIP - Equity-Income
Portfolio:
Tax qualified ...................... 189,929 22.571268 4,286,938 10%
Non-tax qualified .................. 36,443 22.571268 822,565 10%
Nationwide SAT - Government Bond Fund:
Tax qualified ...................... 11,149 33.654758 375,217 3%
Non-tax qualified .................. 9,677 33.667167 325,797 3%
Nationwide SAT - Money Market Fund:
Tax qualified ...................... 25,223 21.534407 543,162 2%
Nationwide SAT - Total Return Fund:
Tax qualified ...................... 23,246 90.561482 2,105,192 14%
Non-tax qualified .................. 5,674 87.956670 499,066 14%
Neuberger &Berman AMT - Balanced
Portfolio:
Tax qualified ...................... 42,699 20.162589 860,922 10%
Non-tax qualified .................. 3,051 20.162589 61,516 10%
======= ===========
Reserves for annuity contracts in
payout phase:
Tax qualified ...................... 105,095
------------
$ 13,508,461
============
</TABLE>
See accompanying notes to financial statements.
5
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NATIONWIDE VARIABLE ACCOUNT-5
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
TOTAL ACVPADV
----------------------------- --------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 161,923 149,713 6,119 3,776
Mortality, expense and administration
charges (note 2) ............................ (87,288) (73,146) (2,102) (1,611)
------------ ------------ ------------ ------------
Net investment activity ..................... 74,635 76,567 4,017 2,165
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 3,159,973 854,978 47,499 25,566
Cost of mutual fund shares sold ............... (2,192,857) (721,154) (39,149) (22,616)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 967,116 133,824 8,350 2,950
Change in unrealized gain (loss) on investmets (236,709) 679,768 (6,030) (3,691)
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 730,407 813,592 2,320 (741)
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 489,139 408,765 23,023 13,186
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,294,181 1,298,924 29,360 14,610
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 1,450,040 1,490,731 101,813 24,351
Transfers between funds ....................... -- -- 538 (5,340)
Redemptions ................................... (2,990,566) (631,907) (48,604) (16,075)
Annuity benefits .............................. (3,593) -- -- --
Annual contract maintenance charge (note 2) ... (16,127) (12,598) (352) (394)
Contingent deferred sales charges (note 2) .... (118,083) (10,860) (2,153) (612)
Adjustments to maintain reserves .............. (6,266) 108 (9) (5)
------------ ------------ ------------ ------------
Net equity transactions ................... (1,684,595) 835,474 51,233 1,925
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... (390,414) 2,134,398 80,593 16,535
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 13,898,875 10,325,418 294,316 245,261
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 13,508,461 12,459,816 374,909 261,796
============ ============ ============ ============
<CAPTION>
ACVPCAPAP DRYSTKIX
------------------------------ --------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... -- -- 13,056 11,871
Mortality, expense and administration
charges (note 2) ............................ (7,808) (8,468) (12,841) (8,935)
------------ ------------ ------------ ------------
Net investment activity ..................... (7,808) (8,468) 215 2,936
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 394,775 225,070 489,696 45,335
Cost of mutual fund shares sold ............... (368,581) (217,380) (229,890) (26,616)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 26,194 7,690 259,806 18,719
Change in unrealized gain (loss) on investmets (68,488) (93,779) 45,463 229,727
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. (42,294) (86,089) 305,269 248,446
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 56,753 27,829 3,067 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 6,651 (66,728) 308,551 251,382
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 157,497 192,645 221,807 230,375
Transfers between funds ....................... (73,366) (191,133) 47,168 207,925
Redemptions ................................... (329,787) (60,361) (489,317) (69,110)
Annuity benefits .............................. (509) -- -- --
Annual contract maintenance charge (note 2) ... (1,782) (1,589) (2,418) (1,330)
Contingent deferred sales charges (note 2) .... (13,811) (1,814) (19,286) (683)
Adjustments to maintain reserves .............. (571) (3) 12 46
------------ ------------ ------------ ------------
Net equity transactions ................... (262,329) (62,255) (242,034) 367,223
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... (255,678) (128,983) 66,517 618,605
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 1,354,792 1,423,473 1,993,911 1,047,599
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... 1,099,114 1,294,490 2,060,428 1,666,204
============ ============ ============ ============
</TABLE>
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT-5
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
FIDVIPEI NSATGVTBD
------------------------------ -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ...................... $ 73,941 65,141 21,138 23,054
Mortality, expense and administration
charges (note 2) ........................ (33,275) (27,026) (4,873) (4,709)
----------- ----------- ----------- -----------
Net investment activity ................. 40,666 38,115 16,265 18,345
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ..... 961,165 232,470 216,941 21,619
Cost of mutual fund shares sold ........... (595,012) (170,000) (200,472) (20,870)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ..... 366,153 62,470 16,469 749
Change in unrealized gain (loss) on investm (189,946) 183,723 (7,720) (3,187)
----------- ----------- ----------- -----------
Net gain (loss) on investments .......... 176,207 246,193 8,749 (2,438)
----------- ----------- ----------- -----------
Reinvested capital gains .................. 263,143 327,513 -- --
----------- ----------- ----------- -----------
Net increase (decrease) in contract own
equity resulting from operations .... 480,016 611,821 25,014 15,907
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ......................... 420,272 486,299 70,818 49,166
Transfers between funds ................... 62,963 22,839 (13,952) (5,015)
Redemptions ............................... (1,003,729) (251,263) (147,727) (15,635)
Annuity benefits .......................... (738) -- (1,099) --
Annual contract maintenance charge (note 2) (5,880) (4,787) (712) (552)
Contingent deferred sales charges (note 2) (39,748) (3,507) (4,775) (416)
Adjustments to maintain reserves .......... (1,396) 23 (1,876) (2)
----------- ----------- ----------- -----------
Net equity transactions ............... (568,256) 249,604 (99,323) 27,546
----------- ----------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ....... (88,240) 861,425 (74,309) 43,453
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD . 5,218,994 3,777,410 807,851 708,005
----------- ----------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ....... $ 5,130,754 4,638,835 733,542 751,458
=========== =========== =========== ===========
<CAPTION>
NSATMYMKT NSATTOTRE
---------------------------- ----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ...................... 13,450 10,915 13,838 19,279
Mortality, expense and administration
charges (note 2) ........................ (3,371) (2,821) (16,991) (13,961)
----------- ----------- ----------- -----------
Net investment activity ................. 10,079 8,094 (3,153) 5,318
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ..... 159,607 69,186 608,648 113,586
Cost of mutual fund shares sold ........... (159,607) (69,186) (356,941) (81,029)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ..... -- -- 251,707 32,557
Change in unrealized gain (loss) on investm -- -- 96,845 340,071
----------- ----------- ----------- -----------
Net gain (loss) on investments .......... -- -- 348,552 372,628
----------- ----------- ----------- -----------
Reinvested capital gains .................. -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in contract own
equity resulting from operations .... 10,079 8,094 345,399 377,946
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ......................... 149,452 125,360 177,764 271,686
Transfers between funds ................... (16,602) (32,895) 7,570 45,041
Redemptions ............................... (136,394) (20,672) (607,535) (107,925)
Annuity benefits .......................... -- -- -- --
Annual contract maintenance charge (note 2) (780) (563) (3,054) (2,272)
Contingent deferred sales charges (note 2) (5,965) (27) (24,851) (1,834)
Adjustments to maintain reserves .......... 10 11 (3) 57
----------- ----------- ----------- -----------
Net equity transactions ............... (10,279) 71,214 (450,109) 204,753
----------- ----------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ....... (200) 79,308 (104,710) 582,699
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD . 543,367 391,728 2,708,919 1,897,043
----------- ----------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ....... 543,167 471,036 2,604,209 2,479,742
=========== =========== =========== ===========
</TABLE>
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NATIONWIDE VARIABLE ACCOUNT-5
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
NBAMTBAL
---------------------------
1998 1997
------------- -------------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 20,381 15,677
Mortality, expense and administration
charges (note 2) ............................ (6,027) (5,615)
--------- ---------
Net investment activity ..................... 14,354 10,062
--------- ---------
Proceeds from mutual fund shares sold ......... 281,642 122,146
Cost of mutual fund shares sold ............... (243,205) (113,457)
--------- ---------
Realized gain (loss) on investments ......... 38,437 8,689
Change in unrealized gain (loss) on investments (106,833) 26,904
--------- ---------
Net gain (loss) on investments .............. (68,396) 35,593
--------- ---------
Reinvested capital gains ...................... 143,153 40,237
--------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 89,111 85,892
--------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 150,617 110,849
Transfers between funds ....................... (14,319) (41,422)
Redemptions ................................... (227,473) (90,866)
Annuity benefits .............................. (1,247) --
Annual contract maintenance charge (note 2 .... (1,149) (1,111)
Contingent deferred sales charges (note 2) .... (7,494) (1,967)
Adjustments to maintain reserves .............. (2,433) (19)
--------- ---------
Net equity transactions ................... (103,498) (24,536)
--------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... (14,387) 61,356
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 976,725 834,899
--------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 962,338 896,255
========= =========
</TABLE>
See accompanying notes to financial statements.
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NATIONWIDE VARIABLE ACCOUNT-5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(UNAUDITED)
(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 June 30, 1998, 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 June 30, 1998. 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.
(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.
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NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220
Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company
Bulk Rate
U.S. Postage
PAID
Columbus, Ohio
Permit No. 521
