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[NATIONWIDE LOGO]
NATIONWIDE(R)
VA SEPARATE ACCOUNT-C
(FORMERLY FINANCIAL HORIZONS VA SEPARATE ACCOUNT-3)
ANNUAL REPORT
TO
CONTRACT OWNERS
DECEMBER 31, 1995
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 43216
[PRESIDENT'S PHOTO]
PRESIDENT'S MESSAGE
Nationwide Life and Annuity Insurance Company is pleased to bring you the 1995
annual report of the Nationwide VA Separate Account-C.
Both equity and fixed income investments turned in a stellar performance during
1995. The major market indices ended the year fully one-third or more higher
than their levels at the beginning of the year. These results equate directly to
the returns enjoyed by our variable annuity participants and contract owners.
Low interest rates and modest inflation should provide a continued favorable
environment for stocks and fixed income investments during 1996. Slowing levels
of economic activity and uncertainty about corporate profits may, however,
dampen a repeat of the strong 1995 market performance. The diverse offering of
investment options within your contract should enable you to take advantage of
changing market conditions.
The year 1995 was a record-setting sales year for our variable investment
products. For this we thank you, our valued customer, for your confidence in the
Nationwide Insurance Enterprise and in our products. Please do not hesitate to
let us know how we can better serve your financial planning and retirement
needs.
/s/ Peter F. Frenzer
------------------------------
Peter F. Frenzer, President
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CONTENTS
<TABLE>
<S> <C>
HOW TO READ THE ANNUAL REPORT ........................................... 4
Explanation on how to read and understand
the various financial reports
A FEW WORDS ABOUT OUR FUNDS ............................................. 6
FUND PERFORMANCES ....................................................... 12
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY ............ 14
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY .............................................. 16
NOTES TO FINANCIAL STATEMENTS ........................................... 17
SCHEDULES OF CHANGES IN UNIT VALUE ...................................... 19
INDEPENDENT AUDITORS' REPORT ............................................ 21
</TABLE>
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 ANNUAL REPORT
This 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 10.
The Annual Report has three major financial sections.
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
This statement, found on page 14, 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 December 31, 1995. 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 15.
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
These statements, found on page 16, 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 18
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 period will equal the Contract
owners' equity at the beginning of the next period.
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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 Annual Report, the Notes to Financial
Statements beginning on page 17 will also help explain and clarify the various
statements and schedules.
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A FEW WORDS ABOUT OUR FUNDS
[FIDELITY INVESTMENTS(R) LOGO]
VARIABLE INSURANCE PRODUCTS FUND
EQUITY-INCOME PORTFOLIO
OBJECTIVE - To seek reasonable income by investing primarily in income-producing
equity securities.
AN INTERVIEW WITH BETTINA DOULTON, PORTFOLIO MANAGER
Q. HOW DID THE FUND PERFORM, BETTINA?
A. Compared to its peers, the fund did very well over the past 12 months.
However, it slightly trailed the performance of the Standard & Poor's Composite
Index for the 12-month period. The index had a total return of 37.58% for the 12
months ended December 31, 1995. The stock market rally in 1995 was narrow - led
by the technology and finance sectors, as well as large-cap and blue-chip stocks
- - and many funds did not beat the performance of the index during the past 12
months.
Q. WHAT HELPED THE FUND'S PERFORMANCE?
A. The fund's performance came from a number of sectors, including finance and
telephone utilities, as well as from some of the larger holdings, including the
fund's largest investment, Philip Morris. This company's business was propelled
by gains in market share for its Marlboro brand domestically, and by increased
volumes and profits in its international tobacco business.
Q. LET'S TAKE A LOOK AT YOUR INVESTMENTS IN THE FINANCE SECTOR. WHICH STOCKS
HAVE TURNED OUT WELL?
A. The fund's finance investments are fairly diverse. I pick the stocks for the
fund one-by-one, but many of the top performers over the past 12 months came
from this sector. Among them, Citicorp benefited from growth in its emerging
market credit card business. Fannie Mae - the Federal National Mortgage
Association - was helped by improved business conditions, a strong supply of
mortgages and widening spreads, such that profit growth was solid. And American
Express, having restructured in order to reduce costs, posted strong and
consistent earnings growth from improved marketing of its existing and new
credit card products. Beyond that, some of the fund's insurance stocks - GenRe,
American International Group, Aetna and CIGNA - contributed well to the fund's
return.
Q. HOW ABOUT TELEPHONE UTILITIES?
A. I've owned several of the regional Bell operating companies, such as
Ameritech, BellSouth, Bell Atlantic, NYNEX and SBC Communications. The
regulatory environment is improving on a state-by-state basis, allowing these
companies to focus more on profitability and competitiveness. They've also been
able to improve revenues by offering value-added services, such as call waiting
and caller identification, cellular services, and additional access lines for
computer modem use.
Q. WHICH STOCKS DIDN'T TURN OUT AS WELL AS YOU WOULD HAVE LIKED?
A. A couple of areas were disappointing. First, Wal-Mart struggled as it went
through a major transition. It was upgrading and expanding its older, most
profitable stores, converting them into so-called super centers - general
merchandise stores with grocery stores attached. The negative impact on the
company's profits associated with this process - as well as the difficult retail
environment - was worse and more prolonged than anticipated. Second, despite
better managing their account bases and internal operations, WMX Technologies
and Browning-Ferris Industries - broadly based pollution control companies -
were hurt by the weakening economy, such that the pace of revenue and profit
growth was not as strong as expected.
Q. GENERAL ELECTRIC WAS ONE OF THE FUND'S TOP FIVE STOCKS AT THE END OF THE
PERIOD. WHY WAS IT ATTRACTIVE TO YOU?
A. GE offered a diverse business portfolio, shareholder-oriented management and
a consistent earnings history, qualities that appeared attractive given the
economic climate. I felt the same way about Emerson Electric and Allied Signal.
These companies - through geographical expansion and improvements in
productivity - were able to sustain consistent earnings and free cash flow. I
believed the economy was weakening to an extent that the relative performance
expected from these companies would be rewarded.
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EQUITY-INCOME PORTFOLIO (CONT'D)
Q. DOES THAT MEAN YOUR OUTLOOK IS COLORED BY CONCERNS FOR THE ECONOMY?
A. Yes it does. Economic indicators point out that the economy is slowing. Wages
have been stagnant and consumers' disposable income is down. Interest rates will
have to decline, in part so that capital will flow back into the developing
economies, believed to be a prime driver for future global economic growth
including U.S. exports. As it stands at the end of 1995, economies outside of
the U.S. also have slowed, leading me to believe that demand for U.S. exports
will wane. Given this backdrop, I have concerns about corporate profitability in
1996 and think it will be a tough investing environment. As a result, I'll be
looking for companies with aspects to their business that will enable them to
sustain good earnings growth despite a weakening economy.
OVERSEAS PORTFOLIO
OBJECTIVE - To seek long term growth of capital primarily through investments in
foreign securities.
AN INTERVIEW WITH JOHN HICKLING,
PORTFOLIO MANAGER
Q. JOHN, HOW HAS THE FUND PERFORMED?
A. For the 12 months ended December 31, 1995, the fund's performance slightly
trailed that of the Morgan Stanley EAFE Index - a broad measure of stocks in
Europe, Australia and the Far East. The index had a total return of 11.21% for
the 12-month period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S
PERFORMANCE?
A. I think the main factor was that I thought the effects of slowing economic
growth on earnings estimates would have an impact on stock prices somewhat
before their effect was really felt. For example, I avoided cyclical stocks -
those that tend to rise and fall with the economy, such as paper and forest
product companies - but they didn't start to come down until the fourth quarter.
Instead, I focused the fund on what I would call defensive stocks. These
investments included Unilever, a consumer nondurable stock that tends to post
solid earnings regardless of the economic climate; and financial investments
such as ING Groep, which generally benefit from the interest rate declines we've
seen during the year. These stocks helped the fund, but not until the fourth
quarter.
Q. LET'S TAKE A CLOSER LOOK AT HOW YOU POSITIONED THE FUND DURING THE PAST YEAR.
A. Most of 1995 was frustrating because, historically, markets around the world
have shown a higher correlation to the U.S. market than we've seen this year. In
addition, foreign stock market performance generally did not coincide with the
strong performance seen in many bond markets. The slowdown experienced by many
economies led to lower interest rates, an environment that generally is
supportive for stock markets as well. That's because lower rates can reduce
companies' borrowing costs and make alternatives to stock investing less
attractive. Furthermore, the good performance in several foreign markets was
narrow, driven by the strength of only a few stocks. Looking specifically at the
fund, more investments were in Japan than elsewhere - 21.2% at the end of the
period - although the fund held less there than is included in the EAFE index.
This is a market that struggled through most of the year, although it rebounded
in the fourth quarter. The Japanese banking sector performed well through the
first part of the year and in the fourth quarter. However, the fund didn't
participate, because its Japanese investments were focused on exporters;
companies with electronics or technology-oriented businesses, such as Matsushita
Electric, Hitachi and Omron; retailers such as Ito-Yodako; and financial stocks
such as Nomura Securities. In the second half of the year, though, some of these
stocks rebounded, because the yen started to weaken versus the dollar, making
these companies' products less expensive abroad.
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OVERSEAS PORTFOLIO (CONT'D)
Q. YOU ALSO INVESTED A FAIR AMOUNT IN THE UNITED KINGDOM...
A. That's right, 12.8%, about as much as is included in the EAFE index. This has
been one of the best performing markets outside of the U.S., led, for the most
part, by financial stocks including Barclays and National Westminster Bank. In
the early part of 1995, a number of consumer non-durable stocks helped the fund,
including brewers Bass and Whitbread.
Q. LET'S TURN TO EMERGING MARKETS...
A. At the end of last year, when emerging markets dropped sharply after Mexico's
devaluation of the peso, I had minimal investments in emerging markets. I
started adding some emerging market stocks in May, including Mexican banks as
well as invesments in Brazil, Chile and Southeast Asia. One stock that turned in
a very good performance was Sampoerna, an Indonesian cigarette company. One of
the main reasons I own this stock and Matahari, an Indonesian retailer, is that
the standard of living for many Indonesians is on the rise. With wages and
disposable income growing, demand for items such as cigarettes, beer, toothpaste
and clothing has been increasing. The fund's investments in Unilever and Nestle
also gave it some exposure to this growth in consumer nondurable spending in
emerging markets.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. At the end of the year, overseas markets started to catch up to the U.S.
market. Investors have started to become more actively interested in
opportunities abroad, attracted by, among other things, cheap stock valuations.
Prospects for foreign markets seem to be improving, in absolute terms and
relative to the U.S. After the mixed performance we've seen from international
markets over the past few years, a contrarian investor might become more
interested in foreign markets from a risk/reward perspective. Foreign markets
could outperform the domestic market for the first time in a long time.
[NATIONWIDE LOGO]
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
Short-term interest rates rose during the first half of 1995. The Federal
Reserve increased rates due to both an expanding economy and concern about
inflation. By July 1995, the scenario had changed. Expansion and inflation
concerns had diminished leading to a reduction in the Fed Funds rate to the
current rate of 5.50% from 6.00%. The Federal Reserve reduced the Fed Funds by
25 basis points in both July and December of 1995. In the near future, the
Federal Reserve may decide to lower rates again if economic indicators point to
a slowing economy.
The Separate Account Money Market Fund continues to invest in only the highest
rated money market instruments. An internal credit review is completed on every
company that the Fund invests in. The Fund's yield remains competitive with the
other funds included in Donoghue's Taxable First Tier Money Market Group.
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.
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TOTAL RETURN FUND (CONT'D)
NARRATIVE BY JOHN M. SCHAFFNER, FUND MANAGER
In 1995, the stock market was led upward for the first three quarters by
exceptional strength in the technology sector. In the final quarter, technology
stocks were weak but the market as a whole continued upwards, as leadership
shifted to blue chip stocks.
The Total Return Fund's performance in 1995 was influenced significantly by
strength in energy stocks, where the Fund, with about 14% of assets, is
overweighted. Financial stocks, where the Fund has a weighting of about 11%,
also recorded strong year over year performance as did telecommunications, where
the Fund's asset weighting is about 10%. Several of the stocks the Fund
categorizes as conglomerates, such as Eastman Kodak, Honeywell, Rockwell
International and EG&G also performed well. Holdings in chemicals, especially
specialty chemicals, lagged the market, as did the Fund's holdings in the auto
industry and machinery and capital goods.
The Fund is currently shifting its emphasis in the financial sector. Weightings
in commercial banks are being reduced in favor of increased holdings of
insurance stocks. Bank stocks in general are selling at multiples of book, close
to recent premiums paid in takeovers. In addition, most banks are not positioned
as well as insurance companies to take advantage of future asset accumulation as
the population ages and saves more for retirement. The Fund has also increased
its exposure to technology on recent weakness in this sector, buying IBM and
adding to Intel. The policy to control exposure to this sector, outlined in the
previous report, remains in effect. The Fund's technology holdings are only in
the strongest companies, with reasonable valuations and good capital gain
potential, with a limited commitment of total assets.
[THE ONE GROUP LOGO]
REPORT FROM THE INVESTMENT ADVISOR
We are pleased to present this report for The One Group Mutual Funds. 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 and the fund's performance for the year ended December 31,
1995.
A STELLAR YEAR FOR INVESTORS
Neither stock nor bond investors had much to complain about in 1995. Modest
economic growth coupled with declining interest rates and steady inflation
provided the backdrop for one of the most successful years in the history of the
stock and bond markets.
We are pleased to report that The One Group equity and fixed-income funds
provided attractive returns during the period. In fact, most of our funds
surpassed their average, historical returns.
AN ABOUT-FACE IN THE BOND MARKET
Rebounding from a disastrous 1994, the bond market in 1995 generated returns
that rivaled those of stocks. The 30-year Treasury bond, for example, generated
returns of 34.15% for the year and 11.95% for the six months ended December 31,
according to Ryan Labs Inc. Other fixed-income securities followed suit, posting
returns that exceeded their historical averages.
The bond market rally began early in the year. As the economy slowed to a more
sustainable growth level with minimal inflation, the Federal Reserve ended the
series of interest rate increases it had implemented during 1994 and early 1995.
Several months later, when it appeared that growth may have been slowing a bit
too much, the Fed attempted to jump-start the sluggish economy by cutting
interest rates twice - once in July and once in December. This action caused
bond yields to fall and bond prices to rise.
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REPORT FROM THE INVESTMENT ADVISOR (CONT'D)
The yield on the five-year Treasury fell from 7.83% on December 31, 1994, to
5.97% on June 30, 1995, and to 5.38% on December 31, 1995. The 30-year Treasury
yield fell from 7.88% on December 31, 1994, to 6.62% on June 30, 1995, and to
5.95% on December 31, 1995.
EQUITIES SOAR TO RECORD HIGHS
In the 1995 stock market, bigger was better. Bolstered by modest economic growth
and strong profits, large, multi-national companies offered the best returns.
The Dow Jones Industrial Average, for example, soared to two milestone levels
within nine months - 4,000 in February and 5,000 in November. The S&P 500 Index
also posted spectacular gains. For the six-month period ended December 31, 1995,
the S&P 500 returned 14.44%, while its one-year performance reached 37.58%.
While they lagged their larger counterparts, small company stocks nevertheless
posted historically attractive returns. As measured by the Russell 2000,
small-company stocks returned 11.40% for the six-month period and 26.21% for the
year.
KEEPING PERFORMANCE IN PERSPECTIVE
While The One Group Funds participated nicely in the market rallies during the
past year, few of our funds outperformed their benchmark indexes. It's important
to remember that the widely-publicized performance of market indexes typically
is not indicative of the performance of specific mutual funds. Except for our
designated "index" funds, the composition of The One Group Funds differs
significantly from the broad-based market indexes.
On the equity side, for example, the S&P 500 is comprised primarily of stocks of
large corporations with a bias toward growth-oriented issues. Most stock funds
have holdings in medium- and small-company stocks, which did not experience the
same level of results as their larger counterparts. Neither did value stocks,
which, in general, underperformed their growth-oriented peers. Consequently,
investors with exposure to various types of stocks should compare each component
of their portfolio to the most-appropriate benchmark index.
On the fixed-income side, investors may choose from bonds with short-,
intermediate- or long-term maturities with different degrees of quality and
risk. When selecting an appropriate performance benchmark, all of these
characteristics must be considered to obtain an accurate evaluation. During
1995, bond funds with greater duration, or interest-rate risk exposure,
performed the best. The One Group fixed-income funds typically maintain a
relatively conservative risk posture, which makes them less-sensitive to
interest rate swings. While this may inhibit the funds' price appreciation when
interest rates fall, it protects against price depreciation when interest rates
increase.
OUR THANKS TO YOU
Thank you for continuing to invest with The One Group Family of Mutual Funds. We
appreciate your support and confidence as we strive to help you reach your
financial goals.
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FUND PERFORMANCES
TOTAL RETURN: ASSUMING CONTRACT NOT SURRENDERED** (NON-STANDARDIZED)
APPROXIMATE PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS
AND INCOME DIVIDENDS REINVESTED
<TABLE>
<CAPTION>
NON-ANNUALIZED PERCENT CHANGE*** ANNUALIZED PERCENT CHANGE***
INCEPTION 1 YR. TO 5 YR. TO INCEPTION TO 5 YR. TO INCEPTION TO
FUNDS++ DATE*+ 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FIDELITY VIP FUND
Equity-Income Portfolio 10/09/86 33.34% 146.28% 181.59% 19.75% 11.87%
Overseas Portfolio 01/28/87 8.26% 38.52% 67.05% 6.73% 5.92%
NATIONWIDE SEPARATE ACCOUNT TRUST
Money Market Fund 11/10/81 4.29% 15.61% 124.86% 2.94% 5.90%
Total Return Fund 11/08/82 27.42% 103.11% 421.74% 15.22% 13.39%
THE ONE GROUP INVESTMENT TRUST
Asset Allocation Fund 08/01/94 19.13% NA* 16.97% NA* 11.71%
Government Bond Fund 08/01/94 15.18% NA* 13.58% NA* 9.42%
Large Company Growth Fund 08/01/94 22.52% NA* 22.56% NA* 15.46%
Small Company Growth Fund 08/01/94 22.04% NA* 17.80% NA* 12.27%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* 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.
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TOTAL RETURN: ASSUMING CONTRACT SURRENDERED (STANDARDIZED)
APPROXIMATE PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS
AND INCOME DIVIDENDS REINVESTED
<TABLE>
<CAPTION>
INCEPTION 1 YR. TO 5 YR. TO 10 YR. TO INCEPTION TO
FUNDS++ DATE* 12/31/95 12/31/95 12/31/95 12/31/95
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIDELITY VIP FUND
Equity-Income Portfolio 10/09/86 24.94% 17.36% NA* 9.02%
Overseas Portfolio 01/28/87 -0.14% 3.52% NA* 3.04%
NATIONWIDE SEPARATE ACCOUNT TRUST
Money Market Fund 11/10/81 -4.11% -0.42% 1.81% 3.75%
Total Return Fund 11/08/82 19.02% 12.73% 8.79% 11.58%
THE ONE GROUP INVESTMENT TRUST
Asset Allocation Fund 08/01/94 10.73% NA* NA* 3.51%
Government Bond Fund 08/01/94 6.78% NA* NA* 1.22%
Large Company Growth Fund 08/01/94 14.12% NA* NA* 7.30%
Small Company Growth Fund 08/01/94 13.64% NA* NA* 4.02%
- ---------------------------------------------------------------------------------------------
</TABLE>
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.
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NATIONWIDE VA SEPARATE ACCOUNT-C
(FORMERLY FINANCIAL HORIZONS VA SEPARATE ACCOUNT-3)
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Fidelity VIP - Equity-Income Portfolio (FidEqInc)
595,979 shares (cost $10,348,478) ...................... $11,484,519
Fidelity VIP - Overseas Portfolio (FidOSeas)
162,695 shares (cost $2,630,997) ....................... 2,773,943
Nationwide SAT - Money Market Fund (NWMyMkt)
2,309,532 shares (cost $2,309,532) ..................... 2,309,532
Nationwide SAT - Total Return Fund (NWTotRet)
545,112 shares (cost $6,122,780) ....................... 6,290,587
One Group - Asset Allocation Fund (OGAstAll)
445,192 shares (cost $4,682,887) ....................... 5,003,964
One Group - Government Bond Fund (OGGvtBd)
867,830 shares (cost $8,804,383) ....................... 9,094,859
One Group - Large Company Growth Fund (OGLgCoGr)
1,341,642 shares (cost $14,834,361) .................... 16,260,700
One Group - Small Company Growth Fund (OGSmCoGr)
585,757 shares (cost $6,640,360) ....................... 6,747,926
-----------
Total investments .................................... 59,966,030
Accounts receivable .......................................... 21,896
-----------
Total assets ......................................... 59,987,926
===========
CONTRACT OWNERS' EQUITY ...................................... $59,987,926
===========
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Units Unit Value
------- ----------
<S> <C> <C> <C>
Contract owners' equity represented by:
Fidelity VIP - Equity-Income Portfolio:
Tax qualified .......................... 324,280 $13.510928 $ 4,381,324
Non-tax qualified ...................... 525,735 13.510928 7,103,168
Fidelity VIP - Overseas Portfolio:
Tax qualified .......................... 87,650 10.330773 905,492
Non-tax qualified ...................... 180,868 10.330773 1,868,506
Nationwide SAT - Money Market Fund:
Tax qualified .......................... 99,809 10.569801 1,054,961
Non-tax qualified ...................... 120,754 10.569801 1,276,346
Nationwide SAT - Total Return Fund:
Tax qualified .......................... 188,348 12.445719 2,344,126
Non-tax qualified ...................... 317,092 12.445719 3,946,438
One Group - Asset Allocation Fund:
Tax qualified .......................... 149,620 11.697239 1,750,141
Non-tax qualified ...................... 178,905 11.697239 2,092,695
Initial Funding by Depositor (note 1a).. 97,500 11.909104 1,161,138
One Group - Government Bond Fund:
Tax qualified .......................... 139,391 11.358330 1,583,249
Non-tax qualified ...................... 152,273 11.358330 1,729,567
Initial Funding by Depositor (note 1a).. 500,000 11.564087 5,782,044
One Group - Large Company Growth Fund:
Tax qualified .......................... 388,897 12.255940 4,766,298
Non-tax qualified ...................... 632,427 12.255940 7,750,987
Initial Funding by Depositor (note 1a).. 300,000 12.477892 3,743,368
One Group - Small Company Growth Fund:
Tax qualified .......................... 182,690 11.819338 2,159,275
Non-tax qualified ...................... 385,700 11.819338 4,558,719
Initial Funding by Depositor (note 1a).. 2,500 12.033480 30,084
======= ========== -----------
$59,987,926
===========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 16
NATIONWIDE VA SEPARATE ACCOUNT-C
(FORMERLY FINANCIAL HORIZONS VA SEPARATE ACCOUNT-3)
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEAR ENDED DECEMBER 31, 1995 AND FOR THE PERIOD AUGUST 17, 1994
(COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
1995 1994
------------ ----------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends ................ $ 2,002,557 189,360
------------ ----------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares ...... 1,251,516 227,439
Cost of mutual fund shares sold ...................... (1,229,073) (229,947)
------------ ----------
Realized gain (loss) on investments .................. 22,443 (2,508)
Change in unrealized gain (loss) on investments ...... 3,901,932 (309,680)
------------ ----------
Net gain (loss) on investments ..................... 3,924,375 (312,188)
------------ ----------
Net investment activity ....................... 5,926,932 (122,828)
------------ ----------
EQUITY TRANSACTIONS:
Purchase payments received from contract
owners (note 1a) ..................................... 39,177,663 15,808,617
Redemptions ........................................... (462,025) (10,793)
Adjustments to maintain reserves ...................... 521 218
------------ ----------
Net equity transactions ....................... 38,716,159 15,798,042
------------ ----------
EXPENSES (NOTE 2):
Contract charges ...................................... (294,299) (16,244)
Contingent deferred sales charges ..................... (19,836) --
------------ ----------
Total expenses ................................ (314,135) (16,244)
------------ ----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................... 44,328,956 15,658,970
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ............. 15,658,970 --
------------ ----------
CONTRACT OWNERS' EQUITY END OF PERIOD ................... $ 59,987,926 15,658,970
============ ==========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 17
NATIONWIDE VA SEPARATE ACCOUNT-C
(FORMERLY FINANCIAL HORIZONS VA SEPARATE ACCOUNT-3)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(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, 300,000 shares of the One Group-Large Company Growth
Fund and 2,500 shares of the One Group-Small 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, 300,000 units of the One
Group-Large Company Growth Fund and 2,500 units of the One Group-Small 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 (FidEqInc)
Fidelity VIP - Overseas Portfolio (FidOSeas)
Funds of the Nationwide Separate Account Trust (Nationwide SAT) (managed for a
fee by an affiliated investment advisor);
Nationwide SAT- Money Market Fund (NWMyMkt)
Nationwide SAT- Total Return Fund (NWTotRet)
Funds of The One Group Investment Trust (One Group);
One Group - Asset Allocation Fund (OGAstAll)
One Group - Government Bond Fund (OGGvtBd)
One Group - Large Company Growth Fund (OGLgCoGr)
One Group - Small Company Growth Fund (OGSmCoGr)
At December 31, 1995, 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.
17
<PAGE> 18
(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, 1995. 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.
(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:
- 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.
18
<PAGE> 19
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
YEAR ENDED DECEMBER 31, 1995 AND FOR THE PERIOD AUGUST 17, 1994
(COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
FidEqInc FidOSeas NWMyMkt NWTotRet OGAstAll OGGvtBd
-------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $10.132457 9.542958 10.135415 9.767528 9.819156 9.861504
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .792320 .072990 .569798 .967739 .579713 .822180
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.740385 .842800 .000000 1.856379 1.438638 .813939
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.154234) (.127975) (.135412) (.145927) (.140268) (.139293)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.510928 10.330773 10.569801 12.445719 11.697239 11.358330
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 33% 8% 4% 27% 19% 15%
=======================================================================================================================
1994
Beginning unit value** $10.000000 10.000000 10.000000 10.000000 10.000000 10.000000
- -----------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .118045 .000000 .191073 .373048 .057220 .220096
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .064681 (.408918) .000000 (.556634) (.189436) (.310075)
- -----------------------------------------------------------------------------------------------------------------------
Contract charges (.050269) (.048124) (.055658) (.048886) (.048628) (.048517)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.132457 9.542958 10.135415 9.767528 9.819156 9.861504
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 1% (5)% 1% (2)% (2)% (1)%
=======================================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** August 17, 1994 - Commencement of operations.
19
<PAGE> 20
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
YEAR ENDED DECEMBER 31, 1995 AND FOR THE PERIOD AUGUST 17, 1994
(COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
OGLgCoGr OGSmCoGr OGAstAll+ OGGvtBd+ OGLgCoGr+ OGSmCoGr+
-------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $10.003154 9.652463 9.867500 9.910061 10.052392 9.700000
- --------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .267432 .502502 .588453 .833693 .271374 .511358
- --------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.131887 1.808029 1.453151 .820333 2.154126 1.822122
- --------------------------------------------------------------------------------------------------------------
Contract charges (.146533) (.143656) .000000 .000000 .000000 .000000
- --------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $12.255940 11.819338 11.909104 11.564087 12.477892 12.033480
- --------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 23% 22% 21% 17% 24% 24%
==============================================================================================================
1994
Beginning unit value** $10.000000 10.000000 10.000000 10.000000 10.000000 10.000000
- --------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and
dividends .062315 .000000 .057500 .220976 .062570 .000000
- --------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.009786) (.299205) (.190000) (.310915) (.010178) (.300000)
- --------------------------------------------------------------------------------------------------------------
Contract charges (.049375) (.048332) .000000 .000000 .000000 .000000
- --------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.003154 9.652463 9.867500 9.910061 10.052392 9.700000
- --------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in
unit value* 0% (3)% (1)% (1)% 1% (3)%
==============================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as contract charges do not
include the annual contract maintenance charge discussed in note 2.
** August 17, 1994 - Commencement of operations.
+ For Depositor, see note 1a.
See note 3.
20
<PAGE> 21
Independent Auditors' Report
The Board of Directors and Contract Owners of
Nationwide VA Separate Account-C (formerly Financial Horizons VA Separate
Account-3)
Nationwide Life and Annuity Insurance Company (formerly Financial Horizons
Life Insurance Company):
We have audited the accompanying statement of assets, liabilities and contract
owners' equity of Nationwide VA Separate Account-C (formerly Financial Horizons
VA Separate Account-3) as of December 31, 1995 and the related statements of
operations and changes in contract owners' equity and schedules of changes in
unit value for the year then ended and the period August 17, 1994 (commencement
of operations) through December 31, 1994. 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 included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and 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-C as of December 31, 1995 and the
results of its operations and its changes in contract owners' equity and the
schedules of changes in unit value for the year then ended and the period August
17, 1994 (commencement of operations) through December 31, 1994 in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1996
21
<PAGE> 22
[THIS PAGE LEFT BLANK INTENTIONALLY]
22
<PAGE> 23
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 March 31, 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.
23
<PAGE> 24
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220
Bulk Rate
U.S. Postage
PAID
Columbus,Ohio
Permit No. 521
Nationwide(R) is a registered federal service mark of
Nationwide Mutual Insurance Company
