<PAGE> 1
[NATIONWIDE LOGO]
NATIONWIDE(R)
VA SEPARATE ACCOUNT-C
ANNUAL REPORT
TO
CONTRACT OWNERS
DECEMBER 31, 1998
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
<PAGE> 2
[NATIONWIDE LOGO]
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215-2220
[PHOTO OF JOSEPH J. GASPER]
PRESIDENT'S MESSAGE
We at Nationwide Life and Annuity Insurance Company are pleased to bring you the
1998 annual report of the Nationwide VA Separate Account-C.
Equity markets again defied the odds in 1998 to tally a fourth straight year of
double-digit gains, as measured by the major indices. This surprise came
following the breathtaking correction during the third quarter that gave us a
broad double-digit retreat. Fixed income investments also provided respectable
returns in 1998, supported by the continued low inflationary environment and
favorable Federal Reserve actions.
The performance of the American economy continues strong into 1999. However, we
believe the persisting slump in Asia and recent difficulties in Latin America
will inevitably take their toll and dampen growth in the United States. This
moderation, we think, will be healthy for our economy and get us back to a more
sustainable growth level. We look for interest rates to continue within the
range of the recent past, and we expect inflation to remain subdued. Moreover,
we remain optimistic about long-term prospects for U.S. business activity;
holders of financial assets should continue to profit from the anticipated
favorable investment climate.
We are pleased you have chosen our Company to provide the investment products
and services to help you meet your retirement savings and financial planning
goals.
/s/ JOSEPH J. GASPER
---------------------------
Joseph J. Gasper, President
February 16, 1999
3
<PAGE> 3
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
4,698,474 shares (cost $100,352,362)..................................................... $ 119,435,202
Fidelity VIP - Overseas Portfolio (FidVIPOv)
948,326 shares (cost $17,563,972)........................................................ 19,013,936
Nationwide SAT - Money Market Fund (NSATMyMkt)
9,721,545 shares (cost $9,721,545)....................................................... 9,721,545
Nationwide SAT - Total Return Fund (NSATTotRe)
4,346,223 shares (cost $65,918,788)...................................................... 79,970,511
One Group - Asset Allocation Fund (OGAstAll)
6,806,570 shares (cost $91,697,265)...................................................... 103,051,463
One Group - Equity Index Fund (OGEqIx)
1,249,094 shares (cost $12,445,896)...................................................... 13,702,564
One Group - Government Bond Fund (OGGvtBd)
3,969,880 shares (cost $41,485,994)...................................................... 42,239,520
One Group - Growth Opportunities Fund (OGGrOpp)
5,003,408 shares (cost $71,154,099)...................................................... 92,663,114
One Group - Large Company Growth Fund (OGLgCoGr)
8,934,545 shares (cost $146,873,116)..................................................... 202,188,741
-------------
Total investments................................................................... 681,986,596
Accounts receivable................................................................................ 15,346
-------------
Total assets........................................................................ 682,001,942
Accounts payable ....................................................................................... --
-------------
Contract owners' equity................................................................................. $ 682,001,942
=============
</TABLE>
4
<PAGE> 4
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN(b)
-------- --------- ---------
<S> <C> <C> <C> <C>
Fidelity VIP - Equity-Income Portfolio:
Tax qualified............................ 1,945,917 $21.229680 $41,311,195 10%
Non-tax qualified........................ 3,679,860 21.229680 78,124,373 10%
Fidelity VIP - Overseas Portfolio:
Tax qualified............................ 360,308 14.144224 5,096,277 11%
Non-tax qualified........................ 983,989 14.144224 13,917,761 11%
Nationwide SAT - Money Market Fund:
Tax qualified............................ 318,412 11.836880 3,769,005 4%
Non-tax qualified........................ 503,644 11.836880 5,961,574 4%
Nationwide SAT - Total Return Fund:
Tax qualified............................ 1,225,858 22.281011 27,313,356 17%
Non-tax qualified........................ 2,363,345 22.281011 52,657,716 17%
One Group - Asset Allocation Fund:
Tax qualified............................ 1,717,800 18.423578 31,648,022 18%
Non-tax qualified........................ 3,772,445 18.423578 69,501,935 18%
Initial Funding by Depositor (note 1a) 97,500 19.509120 1,902,139 19%
One Group - Equity Index Fund:
Tax qualified............................ 252,427 10.955610 2,765,492 10%(a)
Non-tax qualified........................ 746,119 10.955610 8,174,189 10%(a)
Initial Funding by Depositor (note 1a)... 250,000 11.051791 2,762,948 11%(a)
One Group - Government Bond Fund:
Tax qualified............................ 955,478 13.199019 12,611,372 6%
Non-tax qualified........................ 1,715,256 13.199019 22,639,697 6%
Initial Funding by Depositor (note 1a)... 500,000 13.977022 6,988,511 7%
One Group - Growth Opportunities Fund:
Tax qualified............................ 1,184,086 23.685874 28,046,112 37%
Non-tax qualified........................ 2,725,495 23.685874 64,555,731 37%
Initial Funding by Depositor (note 1a)... 2,500 25.081612 62,704 39%
One Group - Large Company Growth Fund:
Tax qualified............................ 2,360,235 25.623274 60,476,948 39%
Non-tax qualified........................ 5,213,039 25.623274 133,575,127 39%
Initial Funding by Depositor (note 1a)... 300,000 27.132525 8,139,758 41%
========= ========= ------------
$682,001,942
============
</TABLE>
(a) This investment option was not being utilized for the entire period.
Accordingly, the annual return was computed for such period as the
investment option was utilized.
(b) The annual return does not include contract charges satisfied by
surrendering units.
See accompanying notes to financial statements.
================================================================================
5
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NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
TOTAL FIDVIPEI
------------------------------ ------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 6,907,178 4,265,024 1,240,121 715,785
Mortality, expense and administration
charges (note 2) .............................. (6,556,701) (3,381,832) (1,374,929) (831,713)
------------- ------------- ------------- -------------
Net investment activity ..................... 350,477 883,192 (134,808) (115,928)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ........... 19,122,996 11,087,093 1,736,107 833,449
Cost of mutual fund shares sold ................. (16,568,897) (10,118,939) (1,159,168) (586,402)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 2,554,099 968,154 576,939 247,047
Change in unrealized gain (loss) on investments 77,317,019 35,424,272 4,686,743 10,419,343
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 79,871,118 36,392,426 5,263,682 10,666,390
------------- ------------- ------------- -------------
Reinvested capital gains ........................ 28,599,549 17,620,814 4,413,373 3,598,807
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 108,821,144 54,896,432 9,542,247 14,149,269
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................... 222,935,462 164,145,907 30,085,527 33,139,661
Transfers between funds ......................... -- -- (996,269) 1,982,841
Redemptions ..................................... (25,865,354) (9,912,134) (5,624,154) (2,166,009)
Contingent deferred sales charges (note 2) ...... (753,231) (345,222) (149,745) (82,994)
Adjustments to maintain reserves ................ 1,451 2,745 (7,404) 2,207
------------- ------------- ------------- -------------
Net equity transactions ................... 196,318,328 153,891,296 23,307,955 32,875,706
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 305,139,472 208,787,728 32,850,202 47,024,975
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 376,862,470 168,074,742 86,585,366 39,560,391
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 682,001,942 376,862,470 119,435,568 86,585,366
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
FIDVIPOV NSATMYMKT
------------------------------ ----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 294,761 140,536 480,416 410,915
Mortality, expense and administration
charges (note 2) .............................. (228,517) (155,335) (122,603) (104,872)
------------- ------------- ------------- -------------
Net investment activity ..................... 66,244 (14,799) 357,813 306,043
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ........... 1,146,502 296,780 8,738,658 7,532,542
Cost of mutual fund shares sold ................. (950,918) (247,708) (8,738,658) (7,532,542)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 195,584 49,072 -- --
Change in unrealized gain (loss) on investments 503,877 230,256 -- --
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 699,461 279,328 -- --
------------- ------------- ------------- -------------
Reinvested capital gains ........................ 868,768 557,884 -- --
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,634,473 822,413 357,813 306,043
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................... 3,919,692 6,345,492 6,090,757 12,257,596
Transfers between funds ......................... (647,967) 555,514 (5,087,475) (7,836,939)
Redemptions ..................................... (950,606) (287,407) (416,008) (1,106,114)
Contingent deferred sales charges (note 2) ...... (34,219) (11,122) (14,645) (12,456)
Adjustments to maintain reserves ................ 71 210 294 853
------------- ------------- ------------- -------------
Net equity transactions ................... 2,286,971 6,602,687 572,923 3,302,940
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 3,921,444 7,425,100 930,736 3,608,983
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 15,092,594 7,667,494 8,799,843 5,190,860
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. 19,014,038 15,092,594 9,730,579 8,799,843
============= ============= ============= =============
</TABLE>
6
<PAGE> 6
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
NSATTOTRE OGASTALL
------------------------------ ------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 714,940 581,993 1,900,182 851,407
Mortality, expense and administration
charges (note 2) .............................. (878,488) (486,093) (900,997) (327,460)
------------ ------------ ------------ ------------
Net investment activity ..................... (163,548) 95,900 999,185 523,947
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ........... 1,676,825 1,234,589 267,312 230,267
Cost of mutual fund shares sold ................. (1,050,209) (782,774) (195,743) (180,939)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............. 626,616 451,815 71,569 49,328
Change in unrealized gain (loss) on investments . 6,183,757 6,133,091 9,178,113 1,354,415
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 6,810,373 6,584,906 9,249,682 1,403,743
------------ ------------ ------------ ------------
Reinvested capital gains ........................ 3,111,349 1,667,393 1,265,780 2,977,924
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 9,758,174 8,348,199 11,514,647 4,905,614
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................... 20,869,076 23,481,911 52,234,693 21,558,362
Transfers between funds ......................... 86,250 990,636 1,921,949 739,176
Redemptions ..................................... (3,156,765) (1,737,301) (3,341,994) (662,596)
Contingent deferred sales charges (note 2) ...... (89,208) (60,534) (92,789) (23,352)
Adjustments to maintain reserves ................ (98) 5,636 (900) 7
------------ ------------ ------------ ------------
Net equity transactions ................... 17,709,255 22,680,348 50,720,959 21,611,597
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 27,467,429 31,028,547 62,235,606 26,517,211
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 52,503,643 21,475,096 40,816,490 14,299,279
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 79,971,072 52,503,643 103,052,096 40,816,490
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
OGEQIX OGGVTBD
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 69,595 -- 1,741,737 1,067,051
Mortality, expense and administration
charges (note 2) .............................. (39,561) -- (314,513) (149,083)
------------ ------------ ------------ ------------
Net investment activity ..................... 30,034 -- 1,427,224 917,968
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ........... 534,659 -- 2,245,378 475,970
Cost of mutual fund shares sold ................. (564,922) -- (2,196,128) (475,470)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ............. (30,263) -- 49,250 500
Change in unrealized gain (loss) on investments . 1,256,668 -- 201,662 586,023
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 1,226,405 -- 250,912 586,523
------------ ------------ ------------ ------------
Reinvested capital gains ........................ -- -- 105,068 41,992
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,256,439 -- 1,783,204 1,546,483
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................... 12,077,730 -- 17,834,339 6,064,947
Transfers between funds ......................... 398,461 -- 1,944,922 493,915
Redemptions ..................................... (28,766) -- (1,686,406) (359,045)
Contingent deferred sales charges (note 2) ...... (1,300) -- (31,392) (9,910)
Adjustments to maintain reserves ................ 65 -- 8,956 43
------------ ------------ ------------ ------------
Net equity transactions ................... 12,446,190 -- 18,070,419 6,189,950
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 13,702,629 -- 19,853,623 7,736,433
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... -- -- 22,385,957 14,649,524
------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. 13,702,629 -- 42,239,580 22,385,957
============ ============ ============ ============
</TABLE>
(Continued)
7
<PAGE> 7
NATIONWIDE VA SEPARATE ACCOUNT-C
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
OGGROPP OGLGCOGR
------------------------------ ------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ -- -- 465,426 497,337
Mortality, expense and administration
charges (note 2) .............................. (870,837) (471,076) (1,826,256) (856,200)
-------------- -------------- -------------- --------------
Net investment activity ..................... (870,837) (471,076) (1,360,830) (358,863)
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ........... 1,692,146 238,598 1,085,409 244,898
Cost of mutual fund shares sold ................. (1,119,894) (172,586) (593,257) (140,518)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ............. 572,252 66,012 492,152 104,380
Change in unrealized gain (loss) on investments . 17,992,207 3,478,714 37,313,992 13,222,430
-------------- -------------- -------------- --------------
Net gain (loss) on investments .............. 18,564,459 3,544,726 37,806,144 13,326,810
-------------- -------------- -------------- --------------
Reinvested capital gains ........................ 5,435,045 4,836,828 13,400,166 3,939,986
-------------- -------------- -------------- --------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 23,128,667 7,910,478 49,845,480 16,907,933
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................... 22,224,086 20,472,239 57,599,562 40,825,699
Transfers between funds ......................... (171,521) 1,411,094 2,551,650 1,663,763
Redemptions ..................................... (3,230,769) (1,253,599) (7,429,886) (2,340,063)
Contingent deferred sales charges (note 2) ...... (105,798) (54,360) (234,135) (90,494)
Adjustments to maintain reserves ................ 1,416 (3,179) (949) (3,032)
-------------- -------------- -------------- --------------
Net equity transactions ................... 18,717,414 20,572,195 52,486,242 40,055,873
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 41,846,081 28,482,673 102,331,722 56,963,806
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 50,818,466 22,335,793 99,860,111 42,896,305
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 92,664,547 50,818,466 202,191,833 99,860,111
============== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
================================================================================
8
<PAGE> 8
================================================================================
NATIONWIDE VA SEPARATE ACCOUNT-C
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
Nationwide VA Separate Account-C (the Account) was established pursuant
to a resolution of the Board of Directors of Nationwide Life and
Annuity 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.
On May 1, 1998, the Company (Depositor) transferred to the Account,
250,000 shares of the One Group - Equity Index Fund, for which the
Account was credited with 250,000 units of the foregoing One Group
Fund. The value of the units purchased by the Company on May 1, 1998
was $2,500,000.
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 - Equity Index Fund (OGEqIx)
One Group - Government Bond Fund (OGGvtBd)
One Group - Growth Opportunities Fund (OGGrOpp)
One Group - Large Company Growth Fund (OGLgCoGr)
At December 31, 1998, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain contract expenses (see note 2). The accompanying financial
statements include only contract owners' purchase payments pertaining
to the variable portions of their contracts and exclude any purchase
payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
9
<PAGE> 9
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are available as investment options in variable life insurance policies
or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or
retirement plans.
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds
may be similar to, and may in fact be modeled after, publicly traded
mutual funds, the underlying mutual funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any
corresponding underlying mutual funds may differ substantially.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1998. 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 Company deducts 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) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
================================================================================
10
<PAGE> 10
================================================================================
Independent Auditors' Report
----------------------------
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of Nationwide VA Separate Account-C:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VA Separate Account-C as of December 31,
1998, and the related statements of operations and changes in contract owners'
equity for each of the years in the two year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 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, 1998, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide VA Separate
Account-C as of December 31, 1998, and the results of its operations and its
changes in contract owners' equity for each of the years in the two year period
then ended in conformity with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 5, 1999
================================================================================
11
<PAGE> 11
<TABLE>
<S> <C>
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
</TABLE>
