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NATIONWIDE
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NATIONWIDE(R)
VA SEPARATE ACCOUNT-C
(FORMERLY FINANCIAL HORIZONS VA SEPARATE ACCOUNT-3)
SEMI-ANNUAL REPORT
TO
CONTRACT OWNERS
JUNE 30, 1996
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
FHL-474-C(6/96)
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NATIONWIDE
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
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PRESIDENT'S MESSAGE
We are pleased to present the 1996 semi-annual report of the
Nationwide VA Separate Account-C.
Equity investments provided a respectable return for the first
half of 1996 with the major market indices holding comfortably
in double digits. Fixed-income investments, however, did not
perform as well with the average bond fund showing slightly
negative performance for the period. This was due to rising
interest rates and lingering inflation fears.
The U.S. economy showed signs of increasing strength during
the first half of the year. The question remains: will growth
fall back to the perceived inflation-free path by itself or
will the Federal Reserve have to step in and enforce
moderation? Recent economic statistics, such as the July
unemployment report, point in the direction of some
moderation. Also, fierce competition in all consumer-goods
markets make inflationary price increases very difficult. One
way or the other, we expect slower economic growth in the near
future.
Financial assets will remain the preferred individual
investment option because they will continue providing
security, liquidity, and income and growth.
We appreciate your confidence in the Nationwide Insurance
Enterprise and in our life and annuity products. You have our
assurance that your personal satisfaction with our products
and service is our highest priority.
/s/ Joseph J. Gasper
Joseph J. Gasper, President
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CONTENTS
HOW TO READ THE SEMI-ANNUAL REPORT ......................... 4
Explanation on how to read and understand
the various financial reports
A FEW WORDS ABOUT OUR FUNDS ................................ 6
FUND PERFORMANCES .......................................... 10
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY 12
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY ................................. 14
NOTES TO FINANCIAL STATEMENTS .............................. 15
SCHEDULES OF CHANGES IN UNIT VALUE ......................... 17
The discussions refer to a stock market index. The Standard & Poor's 500 Index
(S&P 500) is an unmanaged index of 500 U.S. common stocks and the historical
performance assumes the reinvestment of dividends.
The performance figures quoted by the fund managers do not include the annual
mortality, expense and administration charges of the annuity contract. The
Fund's portfolio is subject to change.
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HOW TO READ THE SEMI-ANNUAL REPORT
This Semi-Annual Report is sent to all customers who own a Nationwide annuity
with all or some of the funds in the Nationwide VA Separate Account-C (the
Account). The Account is a separate account trust which offers investment
options in eight mutual funds from three mutual fund houses. An explanation of
the funds and their objectives can be found on pages 6 through 9.
The Semi-Annual Report has three major financial sections.
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
This statement, beginning on page 12, lists all the funds in the Account, the
number of shares owned, the amount paid for the shares (i.e., cost) and their
market value on June 30, 1996. The funds are presented in alphabetical order by
investment company. The market value of the assets change as the underlying
mutual fund shares change in value. As contract owners make exchanges between
the funds, the number of shares in each fund increases and decreases. When money
is deposited (withdrawn) by contract owners, shares of the mutual funds are
bought (sold) by the Account. The total market value of the funds is equal to
the Total investments.
Accounts receivable, if applicable, is an asset of the Account for money market
fund shares added to the contract owners' accounts, but not yet added to Total
investments. Total investments plus Accounts receivable equals Total assets.
Accounts payable, if applicable, is a liability of the Account for money market
fund shares deducted from the contract owners' accounts, but not yet deducted
from Total investments.
Total assets minus Accounts payable equals Contract owners' equity. For a
summary of Contract owners' equity by fund series turn to page 13.
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
These statements, found on page 14, show the activity in the Account for the
periods stated herein.
The Investment activity section shows the changes in unrealized gain (loss) of
the mutual funds in the Account, realized gain (loss) as shares of the funds are
bought (sold), and dividends and capital gains earnings from the underlying
mutual funds.
The Equity transactions section illustrates the purchase payments received by
the Account as new contracts are sold, existing contract owners deposit
additional funds, money is withdrawn, contracts are canceled and annuity
benefits are paid.
Expenses are the charges associated with the contract. Note 2 on page 16
outlines these charges.
Net change in contract owners' equity equals Investment activity plus Equity
transactions minus Expenses.
The Contract owners' equity at the beginning of the period plus the Net change
in contract owners' equity equals the Contract owners' equity at the end of the
period. Contract owners' equity at the end of the calendar year will equal the
Contract owners' equity at the beginning of the next year.
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SCHEDULES OF CHANGES IN UNIT VALUE
As a contract owner, you invest in the mutual funds offered in your annuity
contract. However, you do not buy shares of the mutual fund. Instead, the
Account buys shares of the fund and you in turn purchase units of the Account.
Except for the units surrendered for the annual contract maintenance charge, the
number of units you own will not change unless you contribute to or withdraw
money from your account. The value of your contract can change based on the
value of the units you own. For example, if you purchase 100 units at $10 per
unit, the value of your contract is $1,000. If the value of the units increases
to $12 per unit, your contract value increases to $1,200. Therefore, to
determine the value of your account, multiply the number of units of each fund
you own by the fund's unit value.
The Schedules of Changes in Unit Value show you the unit value at the beginning
of the period and at the end of the period. The percentage increase (decrease)
in unit value shows how it changed in value. This is computed by subtracting the
beginning unit value from the ending unit value and dividing the difference by
the beginning unit value. This can be used as a measure of the performance of
the funds over the periods reported herein.
As you review the following pages of the Semi-Annual Report, the Notes to
Financial Statements beginning on page 15 will also help explain and clarify the
various statements and schedules.
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A FEW WORDS ABOUT OUR FUNDS
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VARIABLE INSURANCE PRODUCTS FUND
EQUITY-INCOME PORTFOLIO
OBJECTIVE - To seek reasonable income by investing primarily in income-producing
equity securities.
AN INTERVIEW WITH ANDY OFFIT, PORTFOLIO MANAGER
Q. HOW DID THE FUND PERFORM, ANDY?
A. It's been disappointing. The fund trailed its benchmark index, The Standard
&Poor's 500 Index, which returned 10.10% for the six-month and 26.00% for the
12-month periods.
Q. WHY DID THE FUND LAG ITS BENCHMARK DURING THE PAST SIX MONTHS?
A. Simply put, the fund didn't own some of the stocks in the S&P that have
performed well during the past couple of months. That's been disappointing to me
because since I started managing the fund in March I've worked hard to implement
some investment strategies that I think will benefit the fund in the long run.
The fund was also hurt by a large investment in Philip Morris that lost value
during the period.
Q. CAN YOU EXPLAIN WHAT CHANGES YOU'VE MADE TO THE FUND SINCE YOU TOOK OVER?
A. Yes. But before I describe what's changed, I'd like to explain what stayed
the same. The fund continued to invest mainly in U.S. stocks - mostly large-cap,
growth stocks. I also began to make selective investments in mid-cap growth
stocks of companies with between $2 billion and $6 billion in market
capitalization. As for the income portion, the fund no longer owns bonds.
Instead, I've begun to accumulate a position in convertible bond securities.
Q. WHY DO YOU FIND CONVERTIBLE BONDS ATTRACTIVE?
A. First of all, I managed a convertible bond fund for three years and am very
familiar with and comfortable with convertible bonds. I believe that convertible
bonds have the potential to add value to the fund on the upside while
minimizing risk. Secondly, the fund's prospectus says that the fund should
seek a yield higher than the S&P 500, and I think that strategic investments in
convertible bonds can add a lot of yield to the fund. I also think that
convertible bonds can lower the fund's volatility since they don't necessarily
move in sync with the market. At the end of the period the fund had a 13%
position in convertible bonds.
Q. WHAT ABOUT THE FUND'S HOLDINGS IN MID-CAP STOCKS . . .
A. Although investments in mid-cap stocks is a strategy that I'm enthusiastic
about, I don't expect to make it a very large percentage of the fund's
investments. That said, I think the fund can benefit from prudent investments in
medium-sized companies that have a lot of room to grow and I think it's an area
of the market with a lot of potential. Mid-cap stocks can be more risky than
large-cap stocks, but sometimes the reward can make the risk worthwhile. At the
end of the period, the portion of the fund's investments in mid-cap stocks was
less than three percent.
Q. WHAT OTHER CHANGES HAVE YOU MADE TO THE FUND'S STRATEGY?
A. I reduced the concentration in the fund's top holdings. At the end of the
last period, the fund had 24% of its investments in the top 10 stocks. By June
30, 1996, that number was reduced to about 17%. I wanted to distribute the
fund's holdings a bit more evenly in order to help reduce volatility; I'm not
eager to have 5% or 6% of the fund's assets invested in any one stock.
Q. WHERE DID YOU FIND INVESTMENT OPPORTUNITIES DURING THE PERIOD?
A. Nearly four percent of the fund's investments are in casinos. I find gaming
and casinos an attractive place to invest because the industry continues to be
very strong despite increasing competition. Las Vegas is the top vacation
destination in the United States - beating out Disneyland and Disney World.
Families are starting to vacation in Las Vegas because of good weather,
affordable prices and the allure of the hotels - which are tourist attractions
in themselves. I think the fund's holdings in Mirage, Circus Circus and Hilton
could benefit from this trend.
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EQUITY-INCOME PORTFOLIO (CONT'D)
Q. WHAT'S BEEN MOST DISAPPOINTING DURING THE PAST SIX MONTHS?
A. That the fund hasn't performed better. I can't point toward one investment
that really hurt performance, I simply owned too many stocks that didn't go up
as much as the market, and too few stocks that did.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD, ANDY?
A. My overall outlook is positive. I'm very comfortable with the changes I've
made to the fund's investment strategy. Though the fund's performance was
disappointing during the past six months, I'm pleased with its growth stock and
convertible bond holdings and am looking forward to continuing with this
strategy during the next six months.
OVERSEAS PORTFOLIO
OBJECTIVE - To seek long term growth of capital primarily through investments in
foreign securities.
AN INTERVIEW WITH RICHARD MACE, PORTFOLIO MANAGER
Q. HOW DID THE FUND PERFORM, RICK?
A. For the six months ended June 30, 1996, the fund outperformed the Morgan
Stanley Capital International EAFE Index which tracks the performance of stocks
in Europe, Australia and the Far East. The index had a total return of 4.52% for
the six-month period.
Q. IN YOUR OPINION, WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A. In my opinion, good individual stock selection was important to the fund's
performance. Because I use a bottom-up, stock-by-stock approach to investing, I
believe stock selection plays a greater role in fund performance than country or
sector investing.
Q. JAPAN CONTINUES TO BE ONE OF THE MAJOR WEIGHTINGS OF THE FUND . . .
A. The fund's Japanese position is somewhat below the Japanese weighting of the
EAFE index, but much larger than many international funds. What made Japanese
equities so attractive was the weak yen, low interest rates, a recovering
economy and a great variety of undervalued stocks. These characteristics
benefited broadly based export companies such as Sony and Omron, retailers
such as Ito-Yokado and auto companies such as Toyota and Honda.
Q. SPECIFICALLY, WHAT IS THE ADVANTAGE OF A WEAK YEN?
A. It improves the competitiveness of Japanese companies by reducing the prices
of Japanese exports measured in foreign currencies. Additionally, reported
profits are favorably impacted by the translation of overseas earnings back into
yen. For example, when you consider a company like Canon, a 1% weakening in the
yen helps their earnings by almost 5%.
Q. TURNING TO EUROPE, WHAT'S BEEN THE STORY THERE?
A. The new investments in Europe have come mainly in French stocks and, to a
lesser extent, the United Kingdom and Germany. I believe that the aggressive
cost cutting of many European companies, the cheapness of European stocks and
the potential for a more robust European economy have provided outstanding
investment opportunities. Investors may remember the spectacular performance of
the stocks of U.S. companies in the early 1990s. This performance was driven by
cost cutting, increased corporate earnings and a strong economy. Of course,
there can be no guarantee this scenario will occur in Europe.
Q. CAN YOU GIVE EXAMPLES OF SOME COMPANIES YOU'VE LIKE IN EUROPE?
A. Sure. Veba, a German conglomerate; Pechiney, a French aluminum company;
Alcatel Alsthom Compagnie Generale d'Electricite, a French telecom company; and
Volvo, a Swedish car and truck manufacturer; all exemplify my reasons for
raising the fund's European position.
Q. WOULD YOU SAY THAT ONE OF THE FUND'S MAJOR THEMES WAS AN EMPHASIS ON
ECONOMICALLY SENSITIVE COMPANIES?
A. Definitely. Companies whose performance is influenced by the economic cycle
were very inexpensive and could benefit from any potential economic recovery in
the world's developed markets. Some companies that highlight this theme include
Veba, Pechiney, Alcatel, Honda, Scania (a Swedish truck maker) and Michelin.
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OVERSEAS PORTFOLIO (CONT'D)
Q. WERE THERE ANY DISAPPOINTMENTS?
A. Unfortunately, Deutsche Bank has not exhibited the ability to cut costs that
I had hoped it would. The stock remains at very inexpensive levels, and I am
hopeful that the bank's continued cost-cutting efforts will produce more
meaningful results.
Q. SINCE THIS IS YOUR FIRST REPORT AS MANAGER OF THE FUND, WOULD YOU MIND
SUMMARIZING YOUR INVESTMENT STYLE?
A. Sure. When I look at a stock, I attempt to establish its worth as a means of
determining what return I can expect and as a way of comparing potential rewards
and potential risks. I try to minimize surprises by thoroughly understanding
what the downside possibilities are for each stock I own. I attempt to select
stocks that I believe have two or three times as much upside potential as
downside risk. I also focus on a company's cash flow and balance sheet. I've
found that while accounting conventions vary dramatically from country to
country, the items that are most comparable are cash flow and balance sheets.
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NATIONWIDE
NATIONWIDE(R) SEPARATE ACCOUNT TRUST
MONEY MARKET FUND
OBJECTIVE - To seek as high a level of current income as is considered
consistent with the preservation of capital and liquidity by investing primarily
in money market instruments.
NARRATIVE BY KAREN MADER, FUND MANAGER
In January 1996 the Federal Reserve lowered the fed funds rate to 5.25% from
5.50% due to the perception that the economy was continuing a slow growth
pattern with low inflation. This represented the third cut in the fed funds rate
since July 1995. Since January, economic indicators have signaled a growing
economy with low unemployment. The next two FOMC meetings will be held in July
and August. At this time the Federal Reserve will decide the direction of
interest rates based on their perceptions of economic growth and inflation.
The Fund continues to invest in only the highest rated money market securities.
An internal credit review is completed on every company that the Fund invests
in.
TOTAL RETURN FUND
OBJECTIVE - To obtain a reasonable long-term total return (i.e., earnings growth
plus potential dividend yield) on invested capital from a flexible combination
of current return and capital gains through investments in common stocks,
convertible issues, money market instruments and bonds with a primary emphasis
on common stocks.
NARRATIVE BY JOHN M. SCHAFFNER, FUND MANAGER
In the first half of 1996, the Total Return Fund's performance was positively
impacted by its holdings in technology stocks, as well as strength in the
financial sector, particularly brokerage stocks. The Fund's holdings in
consumer-related issues, particularly food and drug stocks, have not kept up
with gains in the overall markets, hindering performance.
The Fund continued to shift its emphasis in the financial sector away from banks
towards insurance companies, selling First-Chicago NBD Corp. and adding holdings
in Chubb, Equitable Companies, and Allstate Corp. Telecommunications holdings
were also boosted, with additions to MCI and 360 Communications, both companies
with strong franchises and solid long term growth prospects.
Part of the Total Return Fund's investment strategy has been to look for
reasonable yields coupled with rising dividend streams in most of the stocks it
buys. However, many companies are now focused on share repurchase programs in
lieu of dividend increases. This, in addition to the strength in the market, has
resulted in both lower "reasonable" yields (at least on an absolute basis), and
a less certain outlook for rising dividends. As a result, the Fund has sold some
stocks, such as Hanson PLC, Lubrizol Corp., and Sonat, which have fairly high
yields, but unclear growth potential. The Fund has also bought some stocks with
fairly low yields, but strong growth potential. These purchases have included,
besides MCI and 360 Communications, Monsanto, Comcast Corp., and Seagram
Company.
The Fund is not abandoning its strategy of seeking reasonable and growing
yields. Indeed, the majority of the Fund's current holdings fit that
description.
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TOTAL RETURN FUND (CONT'D)
However, in the long run, reasonable and growing income depends on the quality
of the business generating it. Currently, many of the strongest and
best-positioned companies, as well as some of the most undervalued stocks, do
not follow dividend policies that strictly fit the "reasonable and growing"
description. To the extent that better quality and more undervalued
opportunities continue to exist somewhat outside of that description, the Fund
will continue to pursue them.
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REPORT FROM THE INVESTMENT ADVISOR
We are pleased to present this report for The One Group(R) Investment Trust. As
part of our continuing efforts to provide exceptional investment management and
high-quality service and communication, this report provides an overview of the
financial markets for the 6-month period ended June 30, 1996.
EQUITIES SCALE NEW HEIGHTS
The stock market soared to new heights in the first half of 1996. Despite a rise
in interest rates, the market continued to advance on the back of decent
earnings growth and strong cash flows into equity mutual funds. The S&P 1500
index, which captures the extended equity market, was up 9.9% for the first
half. The rising tide lifted boats of all capitalizations. Large, mid and small
capitalization stocks were up about the same amount. But the market did
discriminate between value and growth stocks. In an environment of high single
digit earnings growth and a slowdown from the double digit pace of 1995,
investors gravitated more to growth than to value stocks. Growth stocks tend to
have more predictable and higher average earnings growth. In the first half, for
example, Large Growth stocks as measured by the S&P 500/Barra Growth index was
up 11.6%. Large Value, as measured by the S&P 500/Barra Value index, was up a
more modest 8.6%.
MODEST GROWTH HELPS EQUITIES, HURTS BONDS
Financial market sentiment fluctuated from expecting an immediate recession at
the beginning of 1996 to the belief that the economy was caught in the mist of
an overheated expansion requiring much higher short-term rates in order to slow
it down to non-inflationary growth levels. This swing in market sentiment
clearly was observed in the bond market as heightened inflationary concerns
caused the yield on the 30-year Treasury bond to rise from a level of 5.95% at
the beginning of the year to 6.87% on June 30, 1996.
At the close of the second quarter of 1996, financial markets began to expect
that the U.S. central bank would soon begin raising short-term rates to quell
the growing inflationary pressures that had begun to surface in the labor
market. Although the Federal Reserve kept short-term rates steady, the growing
speculation focused on when - rather than if - short-term rates would be
increased. Given this scenario, investing in both equity and fixed income
securities became a bit more challenging as the prospects of higher short-term
rates cast a dark cloud upon the financial markets. In fact, the robust pace of
growth during the second quarter of 1996, along with the rising pace of labor
market costs, lead us to conclude that short-term rates have nowhere else to go
but up during the next six months.
Although we expect some investment challenges to unfold over the next year, we
believe that pursuing a long-term investment approach is likely to continue
producing favorable results. As demonstrated by movements in both the stock and
bond markets over the last several years, investing with only a short-term focus
has not always been prudent. Therefore, we encourage our investors to maintain
longer-term horizons. This type of time frame provides much better insulation
against the short-term fluctuations of our financial markets.
OUR THANKS TO YOU
The One Group(R) Investment Trust experienced significant growth during the past
6 months. While we certainly are proud of this accomplishment, we also are
grateful to all of our shareholders who helped make it possible. Thank you for
your continued support of The One Group(R) Investment Trust.
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FUND PERFORMANCES
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<CAPTION>
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TOTAL RETURN: ASSUMING CONTRACT NOT SURRENDERED** (NON-STANDARDIZED)
APPROXIMATE PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
- ------------------------------------------------------------------------------------------------------------------------------
FUNDS++ NON-ANNUALIZED PERCENT CHANGE*** ANNUALIZED PERCENT CHANGE***
INCEPTION 1 YR. TO 5 YR. TO INCEPTION TO 5 YR. TO INCEPTION TO
DATE*+ 6/30/96 6/30/96+ 6/30/96+ 6/30/96 6/30/96
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FIDELITY VIP FUND
Equity-Income Portfolio 10/09/86 20.50% 123.09% 196.16% 17.41% 11.81%
Overseas Portfolio 01/28/87 11.69% 51.59% 78.33% 8.68% 6.33%
NATIONWIDE SEPARATE ACCOUNT TRUST
Money Market Fund 11/10/81 3.96% 14.94% 129.01% 2.82% 5.82%
Total Return Fund 11/08/82 19.20% 93.22% 462.68% 14.08% 13.50%
THE ONE GROUP(R)INVESTMENT TRUST
Asset Allocation Fund 08/01/94 12.38% NA* 21.30% NA* 10.62%
Government Bond Fund 08/01/94 2.50% NA* 10.67% NA* 5.44%
Growth Opportunities Fund+++ 08/01/94 16.76% NA* 27.68% NA* 13.62%
Large Company Growth Fund 08/01/94 15.35% NA* 30.62% NA* 14.98%
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<FN>
* Performance information is not available for all or part of the period
indicated (See Fund Inception Date).
** SEC and NASD regulations require that any reporting of product performance
be accompanied by standardized data and the disclosures are on the
following page. Please review this information and a product prospectus
before investing.
*** Percent change in unit value price represents total return after the
deduction of a 1.3% annual asset fee.
+ Numbers in this column represent the total percentage change in the unit
value for the period indicated. This is not an annual return figure.
++ Funds are neither insured nor guaranteed by the U.S. Government. For the
Money Market Fund, there is no assurance that a stable $1 fund NAV (used to
calculate Unit Value) can be maintained. Figures quoted represent past
performance and returns can fluctuate.
*+ Performance for some funds reflects performance for periods before the fund
was actually available in the separate account. That hypothetical performance
is calculated by imposing contract charges on actual fund performance, to
determine how the fund would have performed if it had been available in the
separate account.
+++ Formerly Small Company Growth Fund
</TABLE>
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<TABLE>
<CAPTION>
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TOTAL RETURN: ASSUMING CONTRACT SURRENDERED (STANDARDIZED)
APPROXIMATE PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
- ------------------------------------------------------------------------------------------------------------------------------
fUNDS++ INCEPTION 1 YR. TO 5 YR. TO 10 YR. TO INCEPTION TO
DATE*+ 6/30/96 6/30/96 6/30/96 6/30/96
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIDELITY VIP FUND
Equity-Income Portfolio 10/09/86 12.10% 14.86% NA* 9.39%
Overseas Portfolio 01/28/87 3.29% 5.72% NA* 3.33%
NATIONWIDE SEPARATE ACCOUNT TRUST
Money Market Fund 11/10/81 -4.44% -0.57% 1.69% 3.81%
Total Return Fund 11/08/82 10.80% 11.41% 7.22% 11.94%
THE ONE GROUP(R)INVESTMENT TRUST
Asset Allocation Fund 08/01/94 3.98% NA* NA* 4.87%
Government Bond Fund 08/01/94 -5.87% NA* NA* -0.42%
Growth Opportunities Fund+++ 08/01/94 8.36% NA* NA* 7.95%
Large Company Growth Fund 08/01/94 6.95% NA* NA* 9.40%
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
The above illustration represents past fund performance based on a $1,000
hypothetical investment. The performance figures reflect the deduction of a
1.3% annual asset fee, a $30 annual administrative charge, and a maximum of a
6.0% contingent deferred sales charge (after one year, declining thereafter).
They also reflect the application of an annual 10% free withdrawal privilege
available after the first year. Investment principal and investment returns
are not guaranteed under these variable options. Account values at the time of
redemption may be more or less than the purchase payment, due to market
fluctuations and any specific charges that may apply. This is neither an offer
to sell nor a solicitation to buy securities. The results shown are not a
representation of future investment performance. Any comparisons should be
made only after a recognition of the differences in the investment policies
and objectives of the funds' investments. This report is authorized for
distribution to prospective investors only when preceded or accompanied by
prospectuses containing more complete information, which should be read
carefully before investing or sending money.
* Performance information is not available for all or part of the period
indicated (See Fund Inception Date).
++ Funds are neither insured nor guaranteed by the U.S. Government. For the
Money Market Fund, there is no assurance that a stable $1 fund NAV (used to
calculate Unit Value) can be maintained. Figures quoted represent past
performance and returns can fluctuate.
*+ Performance for some funds reflects performance for periods before the fund
was actually available in the separate account. That hypothetical
performance is calculated by imposing contract charges on actual fund
performance, to determine how the fund would have performed if it had been
available in the separate account.
+++ Formerly Small Company Growth Fund
</TABLE>
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NATIONWIDE VA SEPARATE ACCOUNT-C
(formerly Financial Horizons VA Separate Account-3)
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
June 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
1,289,549 shares (cost $23,747,820) .......... $ 25,120,419
Fidelity VIP - Overseas Portfolio (FidVIPOv)
284,732 shares (cost $4,746,428) ............. 5,091,017
Nationwide SAT - Money Market Fund (NSATMyMkt)
4,515,795 shares (cost $4,515,795) ........... 4,515,795
Nationwide SAT - Total Return Fund (NSATTotRe)
1,031,751 shares (cost $12,054,764) .......... 12,793,714
One Group - Asset Allocation Fund (OGAstAll)
839,222 shares (cost $9,211,383) ............. 9,709,803
One Group - Government Bond Fund (OGGvtBd)
1,269,581 shares (cost $12,914,144) .......... 12,683,118
One Group - Growth Opportunities Fund (OGGrOpp)
1,133,312 shares (cost $13,378,129) .......... 14,132,398
One Group - Large Company Growth Fund (OGLgCoGr)
2,286,803 shares (cost $26,778,246) .......... 29,545,494
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Total investments ......................... 113,591,758
Accounts receivable ................................ 4,123
-----------
Total assets .............................. 113,595,881
===========
CONTRACT OWNERS' EQUITY ............................... $113,595,881
</TABLE> ===========
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<TABLE>
<CAPTION>
Contract owners' equity represented by:
UNITS UNIT VALUE
----- ----------
<S> <C> <C> <C>
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ........................ 644,900 $ 14.209986 $ 9,164,020
Non-tax qualified .................... 1,122,915 14.209986 15,956,606
Fidelity VIP - Overseas Portfolio:
Tax qualified ........................ 141,790 11.028272 1,563,699
Non-tax qualified .................... 319,848 11.028272 3,527,371
Nationwide SAT - Money Market Fund:
Tax qualified ........................ 185,155 10.764854 1,993,167
Non-tax qualified .................... 234,657 10.764854 2,526,048
Nationwide SAT - Total Return Fund:
Tax qualified ........................ 354,628 13.422257 4,759,908
Non-tax qualified .................... 598,553 13.422257 8,033,932
One Group - Asset Allocation Fund:
Tax qualified ........................ 295,018 12.129928 3,578,547
Non-tax qualified .................... 405,558 12.129928 4,919,389
Initial Funding by Depositor (note 1a) 97,500 12.430209 1,211,945
One Group - Government Bond Fund:
Tax qualified ........................ 278,504 11.066796 3,082,147
Non-tax qualified .................... 355,170 11.066796 3,930,594
Initial Funding by Depositor (note 1a) 500,000 11.340837 5,670,419
One Group - Growth Opportunities Fund:
Tax qualified ........................ 377,733 12.767736 4,822,795
Non-tax qualified .................... 726,580 12.767736 9,276,782
Initial Funding by Depositor (note 1a) 2,500 13.083872 32,710
One Group - Large Company Growth Fund:
Tax qualified ........................ 706,871 13.061917 9,233,090
Non-tax qualified .................... 1,247,684 13.061917 16,297,145
Initial Funding by Depositor (note 1a) 300,000 13.385223 4,015,567
========= ========= -----------
$113,595,881
===========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 14
NATIONWIDE VA SEPARATE ACCOUNT-C
(formerly Financial Horizons VA Separate Account-3)
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Six Month Periods Ended June 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends .................. $ 1,514,243 447,918
----------- ---------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares ...... 2,013,673 347,181
Cost of mutual fund shares sold ...................... (1,962,902) (342,159)
----------- ---------
Realized gain (loss) on investments .................. 50,771 5,022
Change in unrealized gain (loss) on investments ...... 2,652,795 1,816,854
----------- ---------
Net gain (loss) on investments .................... 2,703,566 1,821,876
----------- ---------
Net investment activity ........................ 4,217,809 2,269,794
----------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners (note 1a) 51,543,144 10,025,183
Redemptions ............................................. (1,574,421) (170,493)
Adjustments to maintain reserves ........................ 4,865 288
----------- ---------
Net equity transactions ........................ 49,973,588 9,854,978
----------- ---------
EXPENSES (NOTE 2):
Contract charges ........................................ (501,943) (70,039)
Contingent deferred sales charges ....................... (81,499) (5,515)
----------- ---------
Total expenses ................................. (583,442) (75,554)
----------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ...................... 53,607,955 12,049,218
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ................ 59,987,926 15,658,970
----------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD ...................... $ 113,595,881 27,708,188
=========== ==========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 15
NATIONWIDE VA SEPARATE ACCOUNT-C
(formerly Financial Horizons VA Separate Account-3)
NOTES TO FINANCIAL STATEMENTS
June 30, 1996 and 1995
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
Nationwide VA Separate Account-C (formerly Financial Horizons VA Separate
Account-3) (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 July 24, 1991. The
Account has been registered as a unit investment trust under the Investment
Company Act of 1940.
On August 17, 1994, the Company (Depositor) transferred to the Account
97,500 shares of the One Group- Asset Allocation Fund, 500,000 shares of the One
Group-Government Bond Fund, 2,500 shares of the One Group-Growth Opportunities
Fund and 300,000 shares of the One Group-Large Company Growth Fund, for which
the Account was credited with 97,500 units of the One Group-Asset Allocation
Fund, 500,000 units of the One Group-Government Bond Fund, 2,500 units of the
One Group-Growth Opportunities Fund and 300,000 units of the One Group-Large
Company Growth Fund. These amounts represent the initial funding of the Account.
The value of the units purchased by the Company on August 17, 1994 was
$9,000,000.
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.
(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:
Portfolios of the Fidelity Variable Insurance Products Fund (Fidelity
VIP);
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Total Return Fund (NSATTotRe)
Funds of The One Group(R) Investment Trust (One Group);
One Group - Asset Allocation Fund (OGAstAll)
One Group - Government Bond Fund (OGGvtBd)
One Group - Growth Opportunities Fund (OGGrOpp)
(formerly One Group - Small Company Growth Fund (OGSmCoGr))
One Group - Large Company Growth Fund (OGLgCoGr)
At June 30, 1996, 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.
15
<PAGE> 16
(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, 1996. The cost of investments sold is
determined on a specific identification basis. Investment transactions are
accounted 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 provisions
of the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of such
contracts is surrendered, the Company will, with certain exceptions, deduct from
a contract owner's contract value a contingent deferred sales charge not to
exceed 7% of the lesser of purchase payments or the amount surrendered, such
charge declining 1% per year, to 0%, after the purchase payment has been held in
the contract for 84 months. No sales charges are deducted on redemptions used to
purchase units in the fixed investment options of the Company.
The following administrative charges are deducted by the Company: (a) an
annual contract maintenance charge of $30 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. No charges are deducted
from the initial funding by the Depositor, 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:
o Beginning unit value - Jan. 1
o 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.)
o Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
o 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.)
o Ending unit value - June 30
o 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.
16
<PAGE> 17
SCHEDULE I
NATIONWIDE VA SEPARATE ACCOUNT-C
(formerly Financial Horizons VA Separate Account-3)
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
Six Month Periods Ended June 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
FIDVIPEI FIDVIPOV NSATMYMKT NSATTOTRE OGASTALL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 $13.510928 10.330773 10.569801 12.445719 11.697239
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .623256 .254174 .264211 .134513 .166300
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .166584 .512580 .000000 .926517 .343604
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.090782) (.069255) (.069158) (.084492) (.077215)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - June 30 $14.209986 11.028272 10.764854 13.422257 12.129928
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 5% 7% 2% 8% 4%
===================================================================================================================================
OGGVTBD
- -----------------------------------------------------
1996
Beginning unit value - Jan. 1 11.358330
- -----------------------------------------------------
Reinvested capital gains
and dividends .312293
- ----------------------------------------------------
Unrealized gain (loss) (.531772)
- ----------------------------------------------------
Contract charges (.072055)
- ----------------------------------------------------
Ending unit value - June 30 11.066796
- ----------------------------------------------------
Percentage increase (decrease)
in unit value* (3)%
====================================================
FIDVIPEI FIDVIPOV NSATMYMKT NSATTOTRE OGASTALL
- -----------------------------------------------------------------------------------------------------------------------------------
1995
Beginning unit value - Jan. 1 $10.132457 9.542958 10.135415 9.767528 9.819156
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .652921 .072990 .286481 .150855 .180041
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.079253 .319909 .000000 1.410469 .861736
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.071718) (.061974) (.066996) (.068450) (.067247)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - June 30 $11.792913 9.873883 10.354900 11.260402 10.793686
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 16% 3% 2% 15% 10%
===================================================================================================================================
OGGVTBD
1995
Beginning unit value - Jan. 1 9.861504
- ----------------------------------------------------
Reinvested capital gains
and dividends .336982
- ----------------------------------------------------
Unrealized gain (loss) .666015
- ----------------------------------------------------
Contract charges (.067627)
- ----------------------------------------------------
Ending unit value - June 30 10.796874
- ----------------------------------------------------
Percentage increase (decrease)
in unit value* 9%
====================================================
<FN>
* This is not an annualized rate of return as it is the change for a six
month period and contract charges do not include the annual contract
maintenance charge discussed in note 2.
</TABLE>
17
<PAGE> 18
SCHEDULE I, CONTINUED
NATIONWIDE VA SEPARATE ACCOUNT-C
(formerly Financial Horizons VA Separate Account-3)
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
Six Month Periods Ended June 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
OGGROPP OGLGCOGR OGASTALL+ OGGVTBD+ OGGROPP+
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 $11.819338 12.255940 11.909104 11.564087 12.033480
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .056248 .080635 .170117 .319493 .057503
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .973259 .807701 .350988 (.542743) .992889
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.081109) (.082359) .000000 .000000 .000000
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - June 30 $12.767736 13.061917 12.430209 11.340837 13.083872
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 8% 7% 4% (2)% 9%
===================================================================================================================================
OGLGCOGR+
- ----------------------------------------------------
1996
Beginning unit value - Jan. 1 12.477892
- ----------------------------------------------------
Reinvested capital gains
and dividends .082493
- ----------------------------------------------------
Unrealized gain (loss) .824838
- ----------------------------------------------------
Contract charges .000000
- ----------------------------------------------------
Ending unit value - June 30 13.385223
- ----------------------------------------------------
Percentage increase (decrease)
in unit value* 7%
====================================================
OGGROPP OGLGCOGR OGASTALL+ OGGVTBD+ OGGROPP+
- ----------------------------------------------------------------------------------------------------------------------------------
1995
Beginning unit value - Jan. 1 $ 9.652463 10.003154 9.867500 9.910061 9.700000
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .029712 .089853 .181841 .340276 .030019
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.319289 1.300204 .868420 .670673 1.330753
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.066428) (.069709) .000000 .000000 .000000
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - June 30 $10.935036 11.323502 10.917761 10.921010 11.060772
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 13% 13% 11% 10% 14%
===================================================================================================================================
OGLGCOGR+
- ----------------------------------------------------
1995
Beginning unit value - Jan. 1 10.052392
- ----------------------------------------------------
Reinvested capital gains
and dividends .090751
- ----------------------------------------------------
Unrealized gain (loss) 1.310498
- ----------------------------------------------------
Contract charges .000000
- ----------------------------------------------------
Ending unit value - June 30 11.453641
- ----------------------------------------------------
Percentage increase (decrease)
in unit value* 14%
====================================================
<FN>
* This is not an annualized rate of return as it is the change for a six
month period and contract charges do not include the annual contract
maintenance charge discussed in note 2.
+ For Depositor, see note 1a.
</TABLE>
See note 3.
18
<PAGE> 19
This report is for the information of contract owners with funds in the
Nationwide VA Separate Account-C. It may also be used, from time to
time, as sales literature, but only when accompanied or preceded by the
current prospectus, which contains complete information about the
contracts which invest in the separate account, and their fees, charges
and expenses. If this report is used as sales literature after
September 30, 1996, it must be accompanied by the fund performance
report reflecting performances for the most recently completed calendar
quarter. Prospective investors should read the prospectus carefully
before investing.
19
<PAGE> 20
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA o 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
