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[NATIONWIDE LOGO]
Nationwide(R)
VA Separate Account-A
(FORMERLY FINANCIAL HORIZONS VA SEPARATE ACCOUNT-1)
ANNUAL REPORT
TO
CONTRACT OWNERS
DECEMBER 31, 1996
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
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[NATIONWIDE LOGO]
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
[PHOTO OF PRESIDENT]
PRESIDENT'S MESSAGE
On behalf of Nationwide Life and Annuity Insurance Company, we are pleased to
bring you the 1996 annual report of the Nationwide VA Separate Account-A.
The U.S. economy is enjoying the rewards of a stable political system and a
globally competitive business sector. These good times will last, although not
all years will show the stellar performance of the last two years. 1997 may be
the year in which normalcy will return.
The economic expansion has lasted six years already, and all resources are more
or less fully employed. The job market in particular is showing some strains,
and wages are rising a bit faster than before. Also, the competitive pressures
from abroad are increasing due to a sharp rise in the exchange value of our
currency. Business will be hard pressed under those conditions to continue
showing above-average profit increases. For the economy as a whole, inflation
has hit the low point in this business cycle and will slowly but surely be a
more important variable for monetary policy.
In the last few years, and especially in 1996, our economy expanded faster than
the natural rate of growth. This cannot continue without creating bottlenecks
that in turn induce price increases. Either the economy will slow under its own
weight or the Federal Reserve will have to step in. Some indicators point to a
softening of business activity. But whether this is enough will be a close call.
Again, the long-term trend is very positive for the U.S., its business activity,
and its financial markets. However, 1997 might turn out to have some more
surprises than anticipated right now.
/s/ Joseph J. Gasper
Joseph J. Gasper, President
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NATIONWIDE VA SEPARATE ACCOUNT-A
(formerly Financial Horizons VA Separate Account-1)
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments at market value:
Federated - Federated High Income Bond Fund II (FedHiInc)
5,351 shares (cost $53,470) .......................... $ 54,795
Fidelity VIP-- Equity-Income Portfolio (FidVIPEI)
2,669 shares (cost $52,321) .......................... 56,139
Fidelity VIP -- Growth Portfolio (FidVIPGr)
2,262,504 shares (cost $52,142,514) .................. 70,454,363
MFS(R) - Emerging Growth Series (MFSEmGrSe)
3,908 shares (cost $53,506) .......................... 51,742
Nationwide SAT -- Capital Appreciation Fund (NSATCapAp)
519,009 shares (cost $6,408,740) ..................... 8,449,459
Nationwide SAT -- Government Bond Fund (NSATGvtBd)
3,139,185 shares (cost $35,203,075) .................. 34,656,600
Nationwide SAT -- Money Market Fund (NSATMyMkt)
3,802,407 shares (cost $3,802,407) ................... 3,802,407
Nationwide SAT -- Total Return Fund (NSATTotRe)
4,847,223 shares (cost $50,895,999) .................. 64,322,651
Neuberger & Berman -- Balanced Portfolio (NBAMTBal)
1,569,940 shares (cost $23,770,547) .................. 24,993,442
TCI Portfolios -- TCI Advantage (TCIAdv)
2,107,066 shares (cost $11,571,020) .................. 13,253,450
------------
Total investments ................................. 220,095,048
Accounts receivable ........................................ 4,273
------------
Total assets ....................................... 220,099,321
ACCOUNTS PAYABLE .............................................. 27,251
------------
CONTRACT OWNERS' EQUITY ....................................... $220,072,070
============
</TABLE>
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<TABLE>
<CAPTION>
Contract owners' equity represented by: UNITS UNIT VALUE
--------- ------------
<S> <C> <C> <C>
Contracts in accumulation phase:
VA contracts:
Fidelity VIP -- Growth Portfolio:
Tax qualified................................ 2,179,554 $19.539984 $ 42,588,450
Non-tax qualified ........................... 1,424,891 19.539984 27,842,347
Nationwide SAT -- Capital Appreciation Fund:
Tax qualified................................ 266,039 17.979967 4,783,372
Non-tax qualified............................ 203,910 17.979967 3,666,295
Nationwide SAT -- Government Bond Fund:
Tax qualified................................ 980,638 18.176386 17,824,455
Non-tax qualified............................ 925,418 18.176386 16,820,755
Nationwide SAT -- Money Market Fund:
Tax qualified................................ 198,448 13.684658 2,715,693
Non-tax qualified............................ 77,424 13.684658 1,059,521
Nationwide SAT -- Total Return Fund:
Tax qualified................................ 1,595,854 22.903028 36,549,889
Non-tax qualified............................ 1,212,036 22.903028 27,759,294
Neuberger & Berman -- Balanced Portfolio:
Tax qualified................................ 972,426 15.011108 14,597,192
Non-tax qualified............................ 692,598 15.011108 10,396,663
TCI Portfolios -- TCI Advantage:
Tax qualified................................ 554,216 14.067634 7,796,508
Non-tax qualified............................ 361,130 14.067634 5,080,245
Initial Funding by Depositor (note 1a)....... 25,000 15.079515 376,988
VA-II Convertible contracts:
Federated -- Federated High Income Bond Fund II:
Non-tax qualified............................ 4,865 11.260755 54,784
Fidelity VIP-- Equity-Income Portfolio:
Non-tax qualified............................ 3,700 15.169422 56,127
MFS(R)Emerging Growth Series:
Non-tax qualified............................ 4,480 11.549651 51,742
--------- ---------
Reserves for annuity contracts in payout phase:
Tax qualified................................ 39,738
Non-tax qualified............................ 12,012
-------------
$ 220,072,070
=============
</TABLE>
See accompanying notes to financial statements.
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NATIONWIDE VA SEPARATE ACCOUNT-A
(formerly Financial Horizons VA Separate Account-1)
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends.................... $ 15,275,421 8,050,692 7,721,041
Mortality, expense and administration charges (note 2).... (2,743,464) (2,357,690) (2,024,513)
------------- ----------- -----------
Net investment activity................................ 12,531,957 5,693,002 5,696,528
------------- ----------- -----------
Proceeds from mutual fund shares sold..................... 21,740,726 20,313,766 19,817,630
Cost of mutual fund shares sold........................... (19,156,737) (18,563,695) (19,721,355)
------------- ----------- -----------
Realized gain (loss) on investments.................... 2,583,989 1,750,071 96,275
Change in unrealized gain (loss) on investments........... 8,279,881 31,434,577 (9,410,416)
------------- ----------- -----------
Net gain (loss) on investments......................... 10,863,870 33,184,648 (9,314,141)
------------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations................. 23,395,827 38,877,650 (3,617,613)
------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners........... 14,984,201 13,686,421 47,925,144
Redemptions............................................... (14,810,150) (16,686,757) (15,715,791)
Annuity benefits.......................................... (8,432) (3,226) -
Annual contract maintenance charge (note 2)............... (267,941) (270,240) (226,608)
Contingent deferred sales charges (note 2)................ (325,984) (413,527) (445,574)
Adjustments to maintain reserves.......................... 6,740 (2,665) (2,326)
------------- ----------- -----------
Net equity transactions............................. (421,566) (3,689,994) 31,534,845
------------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY........................ 22,974,261 35,187,656 27,917,232
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD.................. 197,097,809 161,910,153 133,992,921
------------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD........................ $ 220,072,070 197,097,809 161,910,153
============= =========== ===========
</TABLE>
See accompanying notes to financial statements.
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NATIONWIDE VA SEPARATE ACCOUNT-A
(formerly Financial Horizons VA Separate Account-1)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
Nationwide VA Separate Account-A (formerly Financial Horizons VA Separate
Account-1) (the Account) was established pursuant to a resolution of the Board
of Directors of Nationwide Life and Annuity Insurance Company (formerly
Financial Horizons Life Insurance Company) (the Company) on May 6, 1987. The
Account has been registered as a unit investment trust under the Investment
Company Act of 1940. On August 21, 1991, the Company transferred to the Account,
50,000 shares of the TCI Portfolios, Inc. - TCI Advantage fund for which the
Account was credited with 25,000 accumulation units. The value of the
accumulation units purchased by the Company on August 21, 1991 was $250,000.
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; however, other
distributors may be utilized.
(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.
With certain exceptions, contract owners in either the accumulation or the
payout phase may invest in any of the following funds:
Funds of the Federated Insurance Series (Federated);
Federated -- Federated American Leaders Fund II (FedAmLead)
Federated -- Federated High Income Bond Fund II (FedHiInc)
Portfolio of the Fidelity Variable Insurance Products Fund (Fidelity
VIP);
Fidelity VIP -- Equity - Income Portfolio (FidVIPEI)
Fidelity VIP -- Growth Portfolio (FidVIPGr)
Fidelity VIP -- Overseas Portfolio (FidVIPOv)
Funds of the MFS(R) Variable Insurance Trust (MFS(R));
MFS(R) -- Emerging Growth Series (MFSEmGrSe)
MFS(R) -- Total Return Series (MFSTotReSe)
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT -- Capital Appreciation Fund (NSATCapAp)
Nationwide SAT -- Government Bond Fund (NSATGvtBd)
Nationwide SAT -- Money Market Fund (NSATMyMkt)
Nationwide SAT -- Small Company Fund (NSATSmCo)
Nationwide SAT -- Total Return Fund (NSATTotRe)
Portfolio of the Neuberger & Berman Advisers Management Trust
(Neuberger & Berman);
Neuberger & Berman -- Balanced Portfolio (NBAMTBal)
Portfolio of the TCI Portfolios, Inc. (TCIPortfolios);
TCI Portfolios -- TCI Advantage (TCIAdv)
At December 31, 1996, contract owners have invested in all of the above
funds except the Federated Federated American Leaders Fund II, Fidelity VIP -
Overseas Portfolio, MFS(R) - Total Return Series, and Nationwide SAT Small
Company Fund. 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.
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(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, 1996. The cost of investments sold is
determined on the specific identification basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with, operations
of the Company which is taxed as a life insurance company under the 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 1995 and 1994 amounts have been reclassified to conform with the
current year 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 owners' 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) for the VA
contracts an annual contract maintenance charge of $30 which is satisfied by
surrendering units; for the VA II Convertible contracts a one-time contract
maintenance charge of up to $50, dependent upon the initial purchase payment and
contract type; and (b) for the VA contracts 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; for
the VA II Convertible contracts 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 0.15%, respectively. No charges were
deducted from the initial funding, or from earnings thereon.
(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 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.
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SCHEDULE I
NATIONWIDE VA SEPARATE ACCOUNT-A
(formerly Financial Horizons VA Separate Account-1)
VA CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
FIDVIPGR NSATCAPAP NSATGVTBD NSATMYMKT NSATTOTRE NBAMTBAL TCIADV TCIADV+
-------- --------- --------- --------- --------- -------- ------ -------
1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $17.260484 14.442619 17.796519 13.190835 19.046261 14.230121 13.047149 13.802855
- ----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.239829 .749106 1.101097 .670495 1.268988 2.180116 .939604 .998314
- ----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.283569 2.998126 (.490209) .000000 2.858575 (1.208831) .257546 .278346
- ----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.243898) (.209884) (.231021) (.176672) (.270796) (.190298) (.176665) .000000
- ----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $19.539984 17.979967 18.176386 13.684658 22.903028 15.011108 14.067634 15.079515
- ----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 13% 24% 2% 4% 20% 5% 8% 9%
==================================================================================================================================
1995
Beginning unit value - Jan. 1 $12.918431 11.311683 15.183984 12.648732 14.947703 11.649194 11.322395 11.822996
- ----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .071384 .642190 1.074443 .711093 1.480976 .296423 .410259 .431938
- ----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 4.475621 2.653706 1.754428 .000000 2.840889 2.458241 1.473947 1.547921
- ----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.204952) (.164960) (.216336) (.168990) (.223307) (.173737) (.159452) .000000
- ----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $17.260484 14.442619 17.796519 13.190835 19.046261 14.230121 13.047149 13.802855
- ----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 34% 28% 17% 4% 27% 22% 15% 17%
==================================================================================================================================
1994
Beginning unit value - Jan. 1 $13.090637 11.564256 15.897022 12.335970 14.983077 12.212412 11.353606 11.701906
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Reinvested capital gains
and dividends .787428 .182737 .997259 .475683 .756008 .476225 .298215 .309969
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Unrealized gain (loss) (.794444) (.286833) (1.509724) .000000 (.594133) (.884641) (.181444) (.188879)
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Contract charges (.165190) (.148477) (.200573) (.162921) (.197249) (.154802) (.147982) .000000
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Ending unit value - Dec. 31 $12.918431 11.311683 15.183984 12.648732 14.947703 11.649194 11.322395 11.822996
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Percentage increase (decrease)
in unit value* (1)% (2)% (4)% 3% 0% (5)% 0% 1%
==================================================================================================================================
<FN>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
+ For Depositor, see note 1a.
</TABLE>
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SCHEDULE I, CONTINUED
NATIONWIDE VA SEPARATE ACCOUNT-A
(formerly Financial Horizons VA Separate Account-1)
VA-II CONVERTIBLE CONTRACTS
SCHEDULE OF CHANGES IN UNIT VALUE
Year Ended December 31, 1996
<TABLE>
<CAPTION>
FEDHIINC FIDVIPEI MFSEMGRSE
-------- -------- ---------
1996**
<S> <C> <C> <C>
Beginning unit value - Jan. 1 $10.000000 13.462945 10.000000
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Reinvested capital gains
and dividends .927988 .620984 .097588
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Unrealized gain (loss) .479216 1.285801 1.607797
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Contract charges (.146449) (.200308) (.155734)
- ------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $11.260755 15.169422 11.549651
- ------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 13% 13% 15%
========================================================================================================================
<FN>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** No other investment options were being utilized.
</TABLE>
See note 3.
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Independent Auditors' Report
----------------------------
The Board of Directors of Nationwide Life and Annuity Insurance Company
(formerly Financial Horizons Life Insurance Company) and
Contract Owners of Nationwide VA Separate Account-A
(formerly Financial Horizons VA Separate Account-1):
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VA Separate Account-A (formerly Financial
Horizons VA Separate Account-1) as of December 31, 1996, 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 three 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 include confirmation of securities
owned as of December 31, 1996, 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 and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of Nationwide VA Separate Account-A (formerly Financial Horizons VA
Separate Account-1) as of December 31, 1996, 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 three year period then ended in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 7, 1997
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NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220
Bulk Rate
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Permit No. 521
Nationwide(R) is a registered federal service mark of Nationwide Mutual
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