<PAGE> 1
[NATIONWIDE(R) LOGO]
NATIONWIDE(R)
VARIABLE
ACCOUNT-5
SEMI-ANNUAL REPORT
TO
CONTRACT OWNERS
JUNE 30, 2000
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
APO-2750-M (06/00)
<PAGE> 2
[NATIONWIDE(R) LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215-2220
[PRESIDENT'S PICTURE]
PRESIDENT'S MESSAGE
We at Nationwide Life Insurance Company are pleased to bring you the 2000
semi-annual report of the Nationwide Variable Account-5.
During the first half of 2000 fixed income and equity markets took a hiatus from
their recent advances. It appears the Federal Reserve's interest rate hikers are
accomplishing the intended purpose. Recent economic statistics show some
moderation in the areas of home and vehicles sales because of the higher
interest costs. And, there are other favorable indications that the Fed may yet
"glide" the economy to a soft landing. Inflation remains low. Sustained
increases in worker productivity continue to dampen pricing pressures of an
increasingly tight labor pool. Corporate profitability growth remains viable. An
improving global economy bodes well for U.S. exporting businesses. While all
this provides a positive backdrop, we expect the markets will continue jittery
and volatile during the second half of the year as uncertainty over further Fed
actions persists. However, we believe patient investors in financial assets will
be amply rewarded when we move beyond this temporary respite.
Nationwide Life was a forerunner in the variable annuity and variable life
insurance business. We continue to develop new and innovative investment
products to better meet your financial planning and retirement needs. And, we
are equally committed to providing you, our valued customer, the exceptional
level of customer service you expect and deserve.
/S/ Joseph J. Gasper
Joseph J. Gasper, President
August 16, 2000
2
<PAGE> 3
HOW TO READ THE SEMI-ANNUAL REPORT
This semi-annual report is a presentation of the variable account as a whole and
only describes the underlying contracts and products of the variable account in
general terms. Please note the variable account may have more than one variable
product available. Such products may have different under- lying mutual funds
available than those available in your contract. Therefore, not all funds listed
in this report may be available in your contract. Please refer to your most
recent account statement for specific information about your investment in the
Nationwide Variable Account-5. Rules and regulations of the United States
Securities and Exchange Commission and recognized conventions of Generally
Accepted Accounting Principals prescribe the format and content of this report.
We also invite you to call our service center at 1-800-321-9332 if you have
questions about your account, or you may access your account using our voice
response unit. And, please visit our web-site at www.nwservicecenter.com for
additional information about your contract and to learn more about other
products and services offered by Nationwide Financial.
THE ANNUAL REPORT HAS FOUR MAJOR FINANCIAL SECTIONS:
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT
OWNER'S EQUITY
This statement begins on page 4 and lists all of the underlying mutual funds of
the variable account, the number of shares owned, the amount paid for the shares
and their market value as of the close of business on June 30, 2000. The mutual
funds are listed in alphabetical order. The market value of the assets changes
as the underlying mutual funds change in value. As contract owners make exchange
transactions between the funds, the number of shares increases or decreases
accordingly. When money is deposited or withdrawn by a contract owner, shares
are correspondingly purchased or redeemed. The total market value of the funds
is equal to the TOTAL INVESTMENTS of the variable account.
ACCOUNTS RECEIVABLE, if applicable, represents an asset of the variable account
for money market fund shares purchased by contract owners and reinvested
dividend shares added to contract owners' accounts, but not yet added to Total
investments. Total investments plus Accounts receivable equal TOTAL ASSETS of
the variable account.
ACCOUNTS PAYABLE, if applicable, is a liability of the variable account for
money market fund shares redeemed by contract owners' but not yet deducted from
Total investments.
Total assets minus Accounts payable equals CONTRACT OWNERS' EQUITY. A summary of
Contract owners' equity by funds series may be found on page 5. This summary
also includes investment return for the reporting period for each fund series.
STATEMENTS OF OPERATIONS AND STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY
These statements begin on page 6 and present the financial activity of each
underlying mutual fund sub-account of the variable account, for the periods
indicated.
The INVESTMENT ACTIVITY section shows income to the variable account for
reinvested dividends and capital gain distributions paid by the underlying
mutual funds. Also shown are the mortality, expense and administration charges
which are assessed through the daily unit value calculation and which represent
an expense to the variable account and its contract owners. This section also
shows the realized gain or loss as mutual fund shares are sold, and the change
in unrealized gain or loss, which represents the changes in market value of the
underlying fund shares.
The EQUITY TRANSACTIONS section illustrates the receipt of purchase payments, as
new contracts are sold or additional payments made to existing contracts. Also
presented are deductions from the variable account when the contract owners
withdraw money.
The sum of the above two sections represents the NET CHANGE IN CONTRACT OWNERS'
EQUITY which when added to the beginning Contract owners' equity equals Contract
owners' equity at the end of the reporting period.
NOTES TO FINANCIAL STATEMENTS, beginning on page 9, provide further disclosures
about the variable account and its underlying contract provisions.
3
<PAGE> 4
NATIONWIDE VARIABLE ACCOUNT-5
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
American Century VP - American Century VP Advantage (ACVPAdv)
65,037 shares (cost $415,983) ......................................... $ 392,821
American Century VP - American Century VP Balanced (ACVPBal)
192 shares (cost $1,452) .............................................. 1,451
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
99,923 shares (cost $1,091,775) ....................................... 1,697,692
Dreyfus Stock Index Fund (DryStkIx)
76,609 shares (cost $2,179,777) ....................................... 2,912,661
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
161,930 shares (cost $3,556,660) ...................................... 3,709,806
Nationwide SAT - Government Bond Fund (NSATGvtBd)
54,952 shares (cost $617,106) ......................................... 598,432
Nationwide SAT - Money Market Fund (NSATMyMkt)
305,175 shares (cost $305,175) ........................................ 305,175
Nationwide SAT - Total Return Fund (NSATTotRe)
122,136 shares (cost $1,863,318) ...................................... 2,368,215
Neuberger Berman AMT - Balanced Portfolio (NBAMTBal)
58,117 shares (cost $1,003,401) ....................................... 1,160,601
-----------
Total investments .................................................. 13,146,854
Accounts receivable ......................................................... 67
-----------
Total assets ....................................................... 13,146,921
ACCOUNTS PAYABLE ............................................................... 3,554
-----------
CONTRACT OWNERS' EQUITY ........................................................ $13,143,367
===========
</TABLE>
4
<PAGE> 5
<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 ........................... 11,077 $21.214730 $ 234,996 3%
Non-tax qualified ....................... 7,034 21.214730 149,224 3%
American Century VP - American Century
VP Balanced:
Tax qualified ........................... 136 10.639973 1,447 1%
American Century VP - American Century
VP Capital Appreciation:
Tax qualified ........................... 55,813 27.124399 1,513,894 17%
Non-tax qualified ....................... 6,549 27.124399 177,638 17%
Dreyfus Stock Index Fund:
Tax qualified ........................... 76,217 32.615212 2,485,835 (1)%
Non-tax qualified ....................... 13,088 32.615212 426,868 (1)%
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ........................... 140,211 22.981645 3,222,279 (3)%
Non-tax qualified ....................... 20,545 22.981645 472,158 (3)%
Nationwide SAT - Government Bond Fund:
Tax qualified ........................... 6,737 34.879444 234,983 3%
Non-tax qualified ....................... 9,652 34.892329 336,781 3%
Nationwide SAT - Money Market Fund:
Tax qualified ........................... 13,155 23.198381 305,175 2%
Nationwide SAT - Total Return Fund:
Tax qualified ........................... 19,266 100.328103 1,932,921 3%
Non-tax qualified ....................... 4,467 97.442368 435,275 3%
Neuberger Berman AMT - Balanced Portfolio:
Tax qualified ........................... 35,184 29.352154 1,032,726 10%
Non-tax qualified ....................... 2,788 29.352154 81,834 10%
======= ==========
Reserves for annuity contracts in payout phase:
Tax qualified ........................... 99,333
------------
$ 13,143,367
============
</TABLE>
* The period return does not include contract charges satisfied by surrendering
units.
See accompanying notes to financial statements.
5
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT-5
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY
STATEMENTS OF OPERATIONS
SIX MONTH PERIODS ENDED JUNE 30,2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Total ACVPAdv ACVPBal
--------------------------- -------------------- ---------------
2000 1999 2000 1999 2000 1999
------------ ----------- -------- -------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... $ 153,428 160,269 11,021 12,293 56 -
Mortality, expense and administration
charges (note 2) ............................. (89,477) (93,429) (2,784) (2,780) (11) -
------------ ----------- -------- -------- ------- ----
Net investment activity ...................... 63,951 66,840 8,237 9,513 45 -
------------ ----------- -------- -------- ------- ----
Proceeds from mutual fund shares sold .......... 2,915,190 1,643,484 192,787 32,323 826 -
Cost of mutual fund shares sold ................ (2,137,459) (1,277,506) (170,235) (27,728) (796) -
------------ ----------- -------- -------- ------- ----
Realized gain (loss) on investments .......... 777,731 365,978 22,552 4,595 30 -
Change in unrealized gain (loss) on investments (1,180,155) 649,449 (84,743) (30,488) (84) -
------------ ----------- -------- -------- ------- ----
Net gain (loss) on investments ............... (402,424) 1,015,427 (62,191) (25,893) (54) -
------------ ----------- -------- -------- ------- ----
Reinvested capital gains ....................... 550,253 232,785 68,704 29,181 35 -
------------ ----------- -------- -------- ------- ----
Net increase (decrease) in contract owners'
equity resulting from operations ........ 211,780 1,315,052 14,750 12,801 26 -
------------ ----------- -------- -------- ------- ----
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 792,023 886,270 43,363 18,326 - -
Transfers between funds ........................ - - 12,607 9,684 - -
Redemptions .................................... (2,477,285) (1,287,811) (187,029) (22,132) (767) -
Annuity benefits ............................... (6,954) (5,909) (298) - - -
Annual contract maintenance charge (note 2) .... (9,401) (10,645) (208) (235) (21) -
Contingent deferred sales charges (note 2) ..... (36,876) (29,017) (3,143) (582) (26) -
Adjustments to maintain reserves ............... (4,196) 389 (8,598) (14) 11,068 -
------------ ----------- -------- -------- ------- ----
Net equity transactions ................... (1,742,689) (446,723) (143,306) 5,047 10,254 -
------------ ----------- -------- -------- ------- ----
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ (1,530,909) 868,329 (128,556) 17,848 10,280 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 14,674,276 13,767,254 512,779 409,569 2,243 -
------------ ----------- -------- -------- ------- ----
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 13,143,367 14,635,583 384,223 427,417 12,523 -
============ =========== ======== ======== ======= ====
ACVPCapAp
------------------------
2000 1999
---------- ----------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... - -
Mortality, expense and administration
charges (note 2) ............................. (10,584) (6,775)
---------- ----------
Net investment activity ...................... (10,584) (6,775)
---------- ----------
Proceeds from mutual fund shares sold .......... 191,212 197,119
Cost of mutual fund shares sold ................ (131,766) (236,846)
---------- ----------
Realized gain (loss) on investments .......... 59,446 (39,727)
Change in unrealized gain (loss) on investments 132,534 197,359
---------- ----------
Net gain (loss) on investments ............... 191,980 157,632
---------- ----------
Reinvested capital gains ....................... 47,256 -
---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 228,652 150,857
---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 96,632 84,345
Transfers between funds ........................ 135,043 (40,511)
Redemptions .................................... (169,439) (160,814)
Annuity benefits ............................... (2,111) (642)
Annual contract maintenance charge (note 2) .... (880) (971)
Contingent deferred sales charges (note 2) ..... (3,319) (3,778)
Adjustments to maintain reserves ............... 31,779 67
---------- ----------
Net equity transactions ................... 87,705 (122,304)
---------- ----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 316,357 28,553
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 1,413,040 1,018,635
---------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ 1,729,397 1,047,188
========== ==========
</TABLE>
6
<PAGE> 7
NATIONWIDE VARIABLE ACCOUNT-5
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
SIX MONTH PERIODS ENDED JUNE 30,2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
DryStkIx FidVIPEI NSATGvtBd
------------------------- ------------------------ --------------------
2000 1999 2000 1999 2000 1999
----------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... $ 13,874 15,315 75,054 74,877 17,857 17,968
Mortality, expense and administration
charges (note 2) ............................. (19,404) (17,817) (27,014) (33,646) (3,783) (4,522)
----------- ---------- ---------- ---------- -------- --------
Net investment activity ...................... (5,530) (2,502) 48,040 41,231 14,074 13,446
----------- ---------- ---------- ---------- -------- --------
Proceeds from mutual fund shares sold .......... 508,708 260,240 958,796 504,937 86,904 101,368
Cost of mutual fund shares sold ................ (249,148) (115,629) (752,839) (303,378) (84,771) (94,049)
----------- ---------- ---------- ---------- -------- --------
Realized gain (loss) on investments .......... 259,560 144,611 205,957 201,559 2,133 7,319
Change in unrealized gain (loss) on investments (297,839) 143,551 (696,735) 177,887 2,939 (40,703)
----------- ---------- ---------- ---------- -------- --------
Net gain (loss) on investments ............... (38,279) 288,162 (490,778) 379,446 5,072 (33,384)
----------- ---------- ---------- ---------- -------- --------
Reinvested capital gains ....................... 3,265 12,368 282,762 165,518 -- --
----------- ---------- ---------- ---------- -------- --------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (40,544) 298,028 (159,976) 586,195 19,146 (19,938)
----------- ---------- ---------- ---------- -------- --------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 227,677 201,950 150,629 244,842 15,946 34,294
Transfers between funds ........................ 76,052 175,440 (208,178) (141,709) 7,024 (49,431)
Redemptions .................................... (489,441) (230,003) (750,281) (390,676) (73,488) (30,793)
Annuity benefits ............................... 106 -- (910) (1,256) (1,380) (1,836)
Annual contract maintenance charge (note 2) .... (1,888) (1,719) (3,071) (3,824) (265) (335)
Contingent deferred sales charges (note 2) ..... (6,744) (4,633) (9,962) (7,872) (678) (627)
Adjustments to maintain reserves ............... 33,875 22 (13,041) 118 (21,850) 36
----------- ---------- ---------- ---------- -------- --------
Net equity transactions ................... (160,363) 141,057 (834,814) (300,377) (74,691) (48,692)
----------- ---------- ---------- ---------- -------- --------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ (200,907) 439,085 (994,790) 285,818 (55,545) (68,630)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 3,147,402 2,437,149 4,692,366 5,039,709 632,227 730,195
----------- ---------- ---------- ---------- -------- --------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 2,946,495 2,876,234 3,697,576 5,325,527 576,682 661,565
=========== ========== ========== ========== ======== ========
NSATMyMkt
--------------------
2000 1999
-------- --------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... 10,398 12,538
Mortality, expense and administration
charges (note 2) ............................. (2,454) (3,577)
-------- --------
Net investment activity ...................... 7,944 8,961
-------- --------
Proceeds from mutual fund shares sold .......... 337,029 189,534
Cost of mutual fund shares sold ................ (337,029) (189,534)
-------- --------
Realized gain (loss) on investments .......... -- --
Change in unrealized gain (loss) on investments -- --
-------- --------
Net gain (loss) on investments ............... -- --
-------- --------
Reinvested capital gains ....................... -- --
-------- --------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 7,944 8,961
-------- --------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 112,569 80,428
Transfers between funds ........................ (52,544) 65,181
Redemptions .................................... (275,756) (122,016)
Annuity benefits ............................... -- --
Annual contract maintenance charge (note 2) .... (582) (542)
Contingent deferred sales charges (note 2) ..... (3,536) (1,098)
Adjustments to maintain reserves ............... 4 (15)
-------- --------
Net equity transactions ................... (219,845) 21,938
-------- --------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ (211,901) 30,899
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 517,079 494,091
-------- --------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ 305,178 524,990
======== ========
</TABLE>
(Continued)
7
<PAGE> 8
NATIONWIDE VARIABLE ACCOUNT-5
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
SIX MONTH PERIODS ENDED JUNE 30,2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
NSATTotRe NBAMTBal
------------------------- ----------------------
2000 1999 2000 1999
----------- ---------- ---------- --------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... $ 6,449 10,756 18,719 16,522
Mortality, expense and administration
charges (note 2) ............................. (15,982) (17,913) (7,461) (6,399)
----------- ---------- ---------- --------
Net investment activity ...................... (9,533) (7,157) 11,258 10,123
----------- ---------- ---------- --------
Proceeds from mutual fund shares sold .......... 491,904 120,432 147,024 237,531
Cost of mutual fund shares sold ................ (291,251) (61,335) (119,624) (249,007)
----------- ---------- ---------- --------
Realized gain (loss) on investments .......... 200,653 59,097 27,400 (11,476)
Change in unrealized gain (loss) on investments (136,729) 214,908 (99,498) (13,065)
----------- ---------- ---------- --------
Net gain (loss) on investments ............... 63,924 274,005 (72,098) (24,541)
----------- ---------- ---------- --------
Reinvested capital gains ....................... -- 1,240 148,231 24,478
----------- ---------- ---------- --------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 54,391 268,088 87,391 10,060
----------- ---------- ---------- --------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 89,982 120,210 55,225 101,876
Transfers between funds ........................ (60,451) (18,926) 90,447 272
Redemptions .................................... (405,564) (104,465) (125,520) (226,912)
Annuity benefits ............................... -- -- (2,361) (2,175)
Annual contract maintenance charge (note 2) .... (1,702) (1,974) (784) (1,044)
Contingent deferred sales charges (note 2) ..... (7,130) (3,825) (2,338) (6,603)
Adjustments to maintain reserves ............... 92 55 (37,525) 119
----------- ---------- ---------- --------
Net equity transactions ................... (384,773) (8,925) (22,856) (134,467)
----------- ---------- ---------- --------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ (330,382) 259,163 64,535 (124,407)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 2,698,650 2,658,532 1,058,490 979,374
----------- ---------- ---------- --------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 2,368,268 2,917,695 1,123,025 854,967
=========== ========== ========== ========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
NATIONWIDE VARIABLE ACCOUNT-5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(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);
American Century VP - American Century VP Advantage (ACVPAdv)
American Century VP - American Century VP Balanced (ACVPBal)
American Century VP - American Century VP Capital Appreciation
(ACVPCapAp)
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, 2000, 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.
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are available as investment options in variable life insurance policies
or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or
retirement plans.
(Continued)
9
<PAGE> 10
NATIONWIDE VARIABLE ACCOUNT-5
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds
may be similar to, and may in fact be modeled after, publicly traded
mutual funds, the underlying mutual funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any
corresponding underlying mutual funds may differ substantially.
(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, 2000. 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.
(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) Calculation of Annuity Reserves
Annuity reserves are computed for contracts in the variable payout
stage according to industry standard mortality tables. The assumed
investment return is 3.5 percent unless the annuitant elects otherwise,
in which case the rate may vary from 3.5 percent to 7 percent, as
regulated by the laws of the respective states. The mortality risk is
fully borne by the Company and may result in additional amounts being
transferred into the Account by the Company to cover greater longevity
of annuitants than expected. Conversely, if reserves exceed amounts
required, transfers may be made to the Company.
(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 up to $30, dependent upon contract type and
issue date, 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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Bulk Rate
NATIONWIDE LIFE INSURANCE COMPANY U.S. Postage
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220 PAID
Columbus, Ohio
Permit No. 521
Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company
