N-30D 1 dn30d.htm NATIONWIDE VA SEPARATE ACCOUNT C Nationwide VA Separate Account C

NATIONWIDE

VA SEPARATE

ACCOUNT-C

Annual Report

to

Contract Owners

December 31, 2010

LOGO

NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY

HOME OFFICE: COLUMBUS, OHIO

Report of Independent Registered Public Accounting Firm

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 (comprised of the sub-accounts listed in note 1(b) (collectively, “the Accounts”)) as of December 31, 2010, and the related statements of operations for the year then ended, the statements of changes in contract owners’ equity for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Accounts’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights 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, 2010, by correspondence with the transfer agents of the underlying mutual funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Accounts as of December 31, 2010, the results of their operations for the year then ended, the changes in contract owners’ equity for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ KPMG LLP

Columbus, Ohio

March 9, 2011

 

2

NATIONWIDE VA SEPARATE ACCOUNT-C

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS’ EQUITY

December 31, 2010

 

Assets:

   

Investments at fair value:

   

Insurance Trust - Insurance Trust Diversified Mid Cap Growth Portfolio 1 (OGGO)

   

2,095,339 shares (cost $34,887,774)

    $ 35,432,181   

Insurance Trust - Insurance Trust Mid Cap Value Portfolio 1 (JPMMV1)

   

360,165 shares (cost $1,635,104)

      2,449,122   

JPMorgan Insurance Trust Core Bond Portfolio 1 (OGBDP)

   

5,634,202 shares (cost $58,643,216)

      65,018,689   

JPMorgan Insurance Trust Equity Index Portfolio 1 (OGEI)

   

2,437,963 shares (cost $23,982,934)

      26,646,938   

JPMorgan Insurance Trust Intrepid Growth Portfolio - Class 1 (OGLG)

   

1,678,989 shares (cost $22,219,441)

      25,369,527   

JPMorgan Insurance Trust Intrepid Mid Cap Portfolio 1 (OGDMP)

   

1,036,217 shares (cost $17,444,948)

      16,185,714   

JPMorgan Insurance Trust U.S. Equity Portfolio 1 (OGDEP)

   

1,572,166 shares (cost $22,660,372)

      24,667,283   

NVIT Fund - Class I (TRF)

   

717,966 shares (cost $7,183,643)

      6,540,669   

NVIT Money Market Fund - Class I (SAM)

   

13,895,584 shares (cost $13,895,584)

      13,895,584   

Equity-Income Portfolio - Initial Class (FEIP)

   

687,401 shares (cost $15,978,839)

      13,074,358   

VIP Fund - Overseas Portfolio - Initial Class (FOP)

   

236,778 shares (cost $4,687,863)

      3,970,760   
        

Total Investments

    $ 233,250,825   

Accounts Receivable

      23,927   
        
   $ 233,274,752   
        

Contract Owners’ Equity:

   

Accumulation units

      232,853,317   

Contracts in payout (annuitization) period (note 1f)

      421,435   
        

Total Contract Owners’ Equity (note 5)

    $ 233,274,752   
        

See accompanying notes to financial statements.

 

3

NATIONWIDE VA SEPARATE ACCOUNT-C

STATEMENT OF OPERATIONS

Year Ended December 31, 2010

 

Investment Activity:    Total     OGGO     JPMMV1     OGAA     OGBDP     OGEI     OGLG     OGDMP  

Reinvested dividends

    $ 4,847,975        -            41,361        -            3,010,641        652,905        271,461        262,347   

Mortality and expense risk charges (note 2)

      (3,390,670 )      (464,003 )      (37,435 )      (120,581 )      (971,876 )      (368,130 )      (347,866 )      (235,543 ) 
                                                                

Net investment income (loss)

      1,457,305        (464,003 )      3,926        (120,581 )      2,038,765        284,775        (76,405 )      26,804   
                                                                

Realized gain (loss) on investments

      634,774        253,437        594,062        (1,937,183 )      1,075,607        2,090,368        (454,727 )      (2,270,377 ) 

Change in unrealized gain (loss) on investments

      28,169,928        7,647,337        (26,926 )      3,636,248        2,741,015        848,244        3,882,172        5,136,021   
                                                                

Net gain (loss) on investments

      28,804,702        7,900,774        567,136        1,699,065        3,816,622        2,938,612        3,427,445        2,865,644   
                                                                

Reinvested capital gains

      7,061        -            -            -            -            -            -            -       
                                                                

Net increase (decrease) in contract owners’ equity resulting from operations

    $ 30,269,068        7,436,771        571,062        1,578,484        5,855,387        3,223,387        3,351,040        2,892,448   
                                                                
Investment Activity:    OGDEP     TRF     SAM     FEIP     FOP                    

Reinvested dividends

    $ 269,288        64,879        26        223,283        51,784         

Mortality and expense risk charges (note 2)

      (361,037 )      (85,945 )      (181,143 )      (168,157 )      (48,954 )       
                                              

Net investment income (loss)

      (91,749 )      (21,066 )      (181,117 )      55,126        2,830         
                                              

Realized gain (loss) on investments

      2,316,850        (311,184 )      -            (672,367 )      (49,712 )       

Change in unrealized gain (loss) on investments

      621,750        1,042,824        -            2,188,270        452,973         
                                              

Net gain (loss) on investments

      2,938,600        731,640        -            1,515,903        403,261         
                                              

Reinvested capital gains

      -            -            -            -            7,061         
                                              

Net increase (decrease) in contract owners’ equity resulting from operations

    $ 2,846,851        710,574        (181,117 )      1,571,029        413,152         
                                              

See accompanying notes to financial statements.

 

4

NATIONWIDE VA SEPARATE ACCOUNT-C

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY

Years Ended December 31, 2010 and 2009

 

     Total     OGGO     JPMMV1     OGAA  
     2010     2009     2010     2009     2010     2009     2010     2009  

Investment activity:

                 

Net investment income (loss)

    $ 1,457,305        7,531,998        (464,003 )      (468,852 )      3,926        (27,370 )      (120,581 )      779,839   

Realized gain (loss) on investments

      634,774        (17,305,344 )      253,437        (2,839,334 )      594,062        71,766        (1,937,183 )      (1,719,252 ) 

Change in unrealized gain (loss) on investments

      28,169,928        68,517,242        7,647,337        15,776,133        (26,926 )      840,943        3,636,248        6,902,728   

Reinvested capital gains

      7,061        950,838        -            -            -            -            -            -       
                                                                

Net increase (decrease) in contract owners’ equity resulting from operations

      30,269,068        59,694,734        7,436,771        12,467,947        571,062        885,339        1,578,484        5,963,315   
                                                                

Equity transactions:

                 

Purchase payments received from contract owners (note 3)

      1,791,161        2,596,976        175,686        260,264        45,218        5,083        76,493        524,093   

Transfers between funds

      -            -            (1,002,859 )      1,221,916        175,935        2,949,388        (28,369,436 )      320,786   

Redemptions (note 3)

      (100,220,119 )      (87,222,381 )      (10,684,240 )      (8,771,087 )      (1,840,215 )      (403,088 )      (4,679,460 )      (7,222,273 ) 

Annuity benefits

      (50,947 )      (38,937 )      (3,368 )      (2,905 )      -            -            (1,527 )      (3,921 ) 

Contingent deferred sales charges (note 2)

      (50,716 )      (89,815 )      (5,730 )      (8,948 )      (776 )      (209 )      (2,378 )      (7,017 ) 

Adjustments to maintain reserves

      47,347        80,707        9,432        10,713        18,754        42,630        (7,952 )      12,561   
                                                                

Net equity transactions

      (98,483,274 )      (84,673,450 )      (11,511,079 )      (7,290,047 )      (1,601,084 )      2,593,804        (32,984,260 )      (6,375,771 ) 
                                                                

Net change in contract owners’ equity

      (68,214,206 )      (24,978,716 )      (4,074,308 )      5,177,900        (1,030,022 )      3,479,143        (31,405,776 )      (412,456 ) 

Contract owners’ equity beginning of period

      301,488,958        326,467,674        39,513,274        34,335,374        3,479,143        -            31,405,776        31,818,232   
                                                                

Contract owners’ equity end of period

    $ 233,274,752        301,488,958        35,438,966        39,513,274        2,449,121        3,479,143        -            31,405,776   
                                                                

CHANGES IN UNITS:

                 

Beginning units

      19,398,871        24,434,503        1,218,063        1,494,033        265,766        -            1,490,471        1,855,296   

Units purchased

      3,425,488        5,828,795        40,853        114,408        34,518        308,167        19,076        93,843   

Units redeemed

      (9,183,478 )      (10,864,427 )      (378,108 )      (390,378 )      (146,748 )      (42,401 )      (1,509,547 )      (458,668 ) 
                                                                

Ending units

      13,640,881        19,398,871        880,808        1,218,063        153,536        265,766        -            1,490,471   
                                                                

(Continued)

 

5

NATIONWIDE VA SEPARATE ACCOUNT-C

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY

Years Ended December 31, 2010 and 2009

 

     OGBDP     OGEI     OGLG     OGDMP  
     2010     2009     2010     2009     2010     2009     2010     2009  

Investment activity:

                 

Net investment income (loss)

    $ 2,038,765        2,583,010        284,775        395,806        (76,405 )      (140,004 )      26,804        54,930   

Realized gain (loss) on investments

      1,075,607        (1,817,356 )      2,090,368        237,206        (454,727 )      (1,911,970 )      (2,270,377 )      (2,205,379 ) 

Change in unrealized gain (loss) on investments

      2,741,015        4,999,021        848,244        6,136,637        3,882,172        9,987,305        5,136,021        8,066,684   

Reinvested capital gains

      -            -            -            -            -            -            -            -       
                                                                

Net increase (decrease) in contract owners’ equity resulting from operations

      5,855,387        5,764,675        3,223,387        6,769,649        3,351,040        7,935,331        2,892,448        5,916,235   
                                                                

Equity transactions:

                 

Purchase payments received from contract owners (note 3)

      462,184        383,119        223,846        255,200        136,127        252,696        97,946        205,925   

Transfers between funds

      9,886,242        46,112,860        1,720,059        2,476,908        (468,557 )      540,895        (1,192,945 )      1,212,550   

Redemptions (note 3)

      (30,766,832 )      (22,229,717 )      (11,153,686 )      (9,047,920 )      (8,147,348 )      (6,527,431 )      (6,944,756 )      (6,180,260 ) 

Annuity benefits

      (426 )      -            (8,389 )      (6,372 )      (1,097 )      (827 )      (176 )      -       

Contingent deferred sales charges (note 2)

      (18,099 )      (23,436 )      (5,608 )      (10,574 )      (3,358 )      (6,554 )      (3,698 )      (7,745 ) 

Adjustments to maintain reserves

      1,366        213        6,824        1,629        2,194        15,342        9,962        (970 ) 
                                                                

Net equity transactions

      (20,435,565 )      24,243,039        (9,216,954 )      (6,331,129 )      (8,482,039 )      (5,725,879 )      (8,033,667 )      (4,770,500 ) 
                                                                

Net change in contract owners’ equity

      (14,580,178 )      30,007,714        (5,993,567 )      438,520        (5,130,999 )      2,209,452        (5,141,219 )      1,145,735   

Contract owners’ equity beginning of period

      79,599,429        49,591,715        32,642,419        32,203,899        30,500,648        28,291,196        21,327,004        20,181,269   
                                                                

Contract owners’ equity end of period

    $ 65,019,251        79,599,429        26,648,852        32,642,419        25,369,649        30,500,648        16,185,785        21,327,004   
                                                                

CHANGES IN UNITS:

                 

Beginning units

      4,940,336        3,330,953        3,243,540        3,994,505        1,758,741        2,162,700        1,391,178        1,762,714   

Units purchased

      725,540        3,665,241        337,719        485,051        60,195        131,327        58,701        216,756   

Units redeemed

      (1,923,561 )      (2,055,858 )      (1,238,303 )      (1,236,016 )      (542,479 )      (535,286 )      (555,222 )      (588,292 ) 
                                                                

Ending units

      3,742,315        4,940,336        2,342,956        3,243,540        1,276,457        1,758,741        894,657        1,391,178   
                                                                

(Continued)

 

6

NATIONWIDE VA SEPARATE ACCOUNT-C

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY

Years Ended December 31, 2010 and 2009

 

     OGDEP     TRF     SAM     FEIP  
     2010     2009     2010     2009     2010     2009     2010     2009  

Investment activity:

                 

Net investment income (loss)

    $ (91,749 )      478,100        (21,066 )      1,962        (181,117 )      (69,973 )      55,126        116,419   

Realized gain (loss) on investments

      2,316,850        27,267        (311,184 )      (1,048,412 )      -            -            (672,367 )      (1,201,400 ) 

Change in unrealized gain (loss) on investments

      621,750        8,348,632        1,042,824        2,491,698        -            -            2,188,270        4,183,350   

Reinvested capital gains

      -            -            -            -            -            -            -            -       
                                                                

Net increase (decrease) in contract owners’ equity resulting from operations

      2,846,851        8,853,999        710,574        1,445,248        (181,117 )      (69,973 )      1,571,029        3,098,369   
                                                                

Equity transactions:

                 

Purchase payments received from contract owners (note 3)

      205,602        277,179        66,575        57,461        202,449        93,734        70,112        95,467   

Transfers between funds

      (398,575 )      1,582,274        (21,626 )      (81,144 )      19,164,581        2,993,782        350,790        (113,359 ) 

Redemptions (note 3)

      (11,665,207 )      (9,847,112 )      (1,456,199 )      (1,312,856 )      (9,519,471 )      (5,720,204 )      (2,810,409 )      (1,999,741 ) 

Annuity benefits

      (205 )      -            (9,892 )      (7,824 )      (3,145 )      -            (13,524 )      (9,987 ) 

Contingent deferred sales charges (note 2)

      (6,606 )      (12,185 )      (99 )      (344 )      (3,819 )      (3,301 )      (384 )      (1,689 ) 

Adjustments to maintain reserves

      (4,903 )      (666 )      3,077        10,181        2,063        1,479        3,873        19,866   
                                                                

Net equity transactions

      (11,869,894 )      (8,000,510 )      (1,418,164 )      (1,334,526 )      9,842,658        (2,634,510 )      (2,399,542 )      (2,009,443 ) 
                                                                

Net change in contract owners’ equity

      (9,023,043 )      853,489        (707,590 )      110,722        9,661,541        (2,704,483 )      (828,513 )      1,088,926   

Contract owners’ equity beginning of period

      33,690,512        32,837,023        7,250,196        7,139,474        4,242,102        6,946,585        13,905,374        12,816,448   
                                                                

Contract owners’ equity end of period

    $ 24,667,469        33,690,512        6,542,606        7,250,196        13,903,643        4,242,102        13,076,861        13,905,374   
                                                                

CHANGES IN UNITS:

                 

Beginning units

      3,613,930        4,647,556        357,289        438,466        304,817        492,866        588,109        697,200   

Units purchased

      159,102        463,458        20,967        18,017        1,928,619        276,136        23,925        13,091   

Units redeemed

      (1,413,267 )      (1,497,084 )      (90,791 )      (99,194 )      (1,221,708 )      (464,185 )      (125,776 )      (122,182 ) 
                                                                

Ending units

      2,359,765        3,613,930        287,465        357,289        1,011,728        304,817        486,258        588,109   
                                                                

(Continued)

 

7

NATIONWIDE VA SEPARATE ACCOUNT-C

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY

Years Ended December 31, 2010 and 2009

 

     FOP     OGGB     OGMVP  
     2010     2009     2010     2009     2010      2009  

Investment activity:

              

Net investment income (loss)

    $ 2,830        29,373        -            3,733,901        -             64,857   

Realized gain (loss) on investments

      (49,712 )      (35,167 )      -            (1,516,680 )      -             (3,346,633 ) 

Change in unrealized gain (loss) on investments

      452,973        781,068        -            (3,115,509 )      -             3,118,552   

Reinvested capital gains

      7,061        11,306        -            939,532        -             -       
                                                 

Net increase (decrease) in contract owners’ equity resulting from operations

      413,152        786,580        -            41,244        -             (163,224 ) 
                                                 

Equity transactions:

              

Purchase payments received from contract owners (note 3)

      29,499        27,625        (576 )      155,596        -             3,534   

Transfers between funds

      155,815        (47,566 )      576        (56,024,302 )      -             (3,144,988 ) 

Redemptions (note 3)

      (552,296 )      (421,950 )      -            (7,230,050 )      -             (308,692 ) 

Annuity benefits

      (9,198 )      (7,101 )      -            -            -             -       

Contingent deferred sales charges (note 2)

      (161 )      (47 )      -            (6,894 )      -             (872 ) 

Adjustments to maintain reserves

      2,657        6,995        -            3,424        -             (42,690 ) 
                                                 

Net equity transactions

      (373,684 )      (442,044 )      -            (63,102,226 )      -             (3,493,708 ) 
                                                 

Net change in contract owners’ equity

      39,468        344,536        -            (63,060,982 )      -             (3,656,932 ) 

Contract owners’ equity beginning of period

      3,933,081        3,588,545        -            63,060,982        -             3,656,932   
                                                 

Contract owners’ equity end of period

    $ 3,972,549        3,933,081        -            -            -             -       
                                                 

CHANGES IN UNITS:

              

Beginning units

      226,631        258,046        -            3,028,799        -             271,369   

Units purchased

      16,245        3,965        28        38,339        -             996   

Units redeemed

      (37,940 )      (35,380 )      (28 )      (3,067,138 )      -             (272,365 ) 
                                                 

Ending units

      204,936        226,631        -            -            -             -       
                                                 

See accompanying notes to financial statements.

 

8

NATIONWIDE VA SEPARATE ACCOUNT-C NOTES TO FINANCIAL STATEMENTS December 31, 2010

(1) Background and 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 is registered as a unit investment trust under the Investment Company Act of 1940.

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:

J.P. MORGAN INVESTMENT MANAGEMENT INC.

Insurance Trust - Insurance Trust Diversified Mid Cap Growth Portfolio 1 (OGGO)

Insurance Trust - Insurance Trust Mid Cap Value Portfolio 1 (JPMMV1)

JPMorgan Insurance Trust Balanced Portfolio 1 (OGAA)*

JPMorgan Insurance Trust Core Bond Portfolio 1 (OGBDP)

JPMorgan Insurance Trust Equity Index Portfolio 1 (OGEI)

JPMorgan Insurance Trust Intrepid Growth Portfolio - Class 1 (OGLG)

JPMorgan Insurance Trust Intrepid Mid Cap Portfolio 1 (OGDMP)

JPMorgan Insurance Trust U.S. Equity Portfolio 1 (OGDEP)

NATIONWIDE FUNDS GROUP

NVIT Fund - Class I (TRF)

NVIT Money Market Fund - Class I (SAM)

PORTFOLIOS OF THE FIDELITY(R) VARIABLE INSURANCE PRODUCTS

Equity-Income Portfolio - Initial Class (FEIP)

VIP Fund - Overseas Portfolio - Initial Class (FOP)

 

  * At December 31, 2010, contract owners were not invested in this fund.

The contract owners’ equity is affected by the investment results of each fund, equity transactions by contract owners and certain contract expenses (see note 2). The accompanying financial statements include only contract owners’ purchase payments pertaining to the variable portions of their contracts and exclude any purchase payments for fixed dollar benefits, the latter being included in the accounts of the Company.

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.

A purchase payment could be presented as a negative equity transaction in the Statements of Changes in Contract Owners’ Equity if a prior period purchase payment is refunded to a contract owner due to a contract cancellation during the free look period, and/or if a gain is realized by the contract owner during the free look period.

The Company allocates purchase payments to sub-accounts and/or the fixed account as instructed by the contract owner. Shares of the sub-accounts are purchased at Net Asset Value, then converted into accumulation units. Certain transactions may be subject to conditions imposed by the underlying mutual funds, as well as those set forth in the contract.

(c) Security Valuation, Transactions and Related Investment Income

Investments in underlying mutual funds are valued at the closing net asset value per share at December 31, 2010 of such funds, which represents fair value. The cost of investments sold is determined on a first in - first out basis. Investment transactions are accounted for on the trade date (date the order to buy or sell is executed), and dividends and capital gain distributions are accrued as of the ex-dividend date and are reinvested in the underlying mutual funds.

(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 generally 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 U.S. generally accepted accounting principles may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(f) Calculation of Annuity Reserves

At each financial reporting date, the separate account financial statement includes an aggregate amount of net assets allocated to future contract benefits for the contracts in the payout (annuitization) period. The payout (annuitization) period begins when amounts accumulated under the contract (the contract value) are applied according to payment method selected by the contract holder.

Annuity reserves are computed for contracts in the variable payout stage according to industry standard mortality tables. The assumed investment return is 3.5% unless the annuitant elects otherwise, in which case the rate may vary from 3.5% to 7.0%, as regulated by the laws of the respective states. The mortality risk is fully borne by the Company and may result in additional amounts being transferred into the Account by the Company to cover greater longevity of annuitants than expected. Conversely, if reserves exceed amounts required, transfers may be made to the Company.

(Continued)

 

9

NATIONWIDE VA SEPARATE ACCOUNT-C NOTES TO FINANCIAL STATEMENTS December 31, 2010

(g) Recently Issued Accounting Standards

In September 2006, the FASB issued FASB ASC 820, Fair Value Measurements and Disclosures (SFAS No. 157, Fair Value Measurements). FASB ASC 820 provides enhanced guidance for using fair value to measure assets and liabilities and requires new disclosures about fair value measurements and also provides guidance regarding the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. For assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to initial recognition, the reporting entity shall disclose information that enables financial statement users to assess the inputs used to develop those measurements. FASB ASC 820 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances.

FASB ASC 820 was effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, with early adoption permitted. The Account adopted FASB ASC 820 effective January 1, 2008. The adoption of FASB ASC 820 did not have a material impact on the Account’s financial position or results of operations.

In September 2009 the FASB issued ASU 2009-12, which amends FASB ASC 820, Fair Value Measurements and Disclosures. This guidance applies to reporting entities that hold an investment that is required or permitted to be measured or disclosed at fair value on a recurring or nonrecurring basis if the investment does not have a readily determinable fair value and the investee has attributes of an investment company. For these investments, this update allows, as a practical expedient, the use of net asset value (NAV) as the basis to estimate fair value as long as it is not probable, as of the measurement date that the investment will be sold and NAV is not the value that will be used in the sale. The NAVs must be calculated consistent with the American Institute of Certified Public Accountants Audit and Accounting Guide, Investment Companies, which generally requires these investments to be measured at fair value. Additionally, the guidance provided updated disclosures for investments within its scope and noted that if the investor can redeem the investment with the investee on the measurement date at NAV, the investment should likely be classified as Level 2 in the fair value hierarchy. Investments that cannot be redeemed with the investee at NAV would generally be classified as Level 3 in the fair value hierarchy. If the investment is not redeemable with the investee on the measurement date, but will be at a future date, the length of time until the investment is redeemable should be considered in determining classification as Level 2 or 3. This guidance is effective for interim and annual periods ending after December 15, 2009 with early adoption permitted. The Account adopted this guidance effective the period ending December 31, 2009. The adoption of this guidance did not have a material impact on the financial statements of the Account.

In January 2010, the FASB issued ASU 2010-06, which amends FASB ASC 820, Fair Value Measurement and Disclosures. This guidance requires new disclosures and provides amendments to clarify existing disclosures. The new requirements include disclosing transfers in and out of Levels 1 and 2 fair value measurements, the reasons for the transfers, and further disaggregating activity in Level 3 fair value measurements. The clarification of existing disclosure guidance includes further disaggregation of fair value measurement disclosures for each class of assets and liabilities and providing disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the new disclosures regarding the activity in Level 3 measurements, which shall be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company adopted this guidance effective January 1, 2010, except for the new disclosure regarding the activity in Level 3 measurements, which the Company will adopt for the fiscal period beginning January 1, 2011.

(h) Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued with the SEC.

(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 redeemed, the Company will, with certain exceptions, deduct from a contract owners’ contract value a contingent deferred sales charge not to exceed 7% of the purchase payments redeemed. This charge declines 1% per year. After the purchase payment has been held in the contract for 7 years, the charge is 0%. No sales charges are deducted on redemptions used to purchase units in the fixed investment options of the Company. The Company deducts a mortality and expense risk charge assessed through a reduction of the unit value equal to an annualized rate of 1.30%.

(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, postage, fund transfer agency and various other record keeping and customer service functions. These fees are paid to an affiliate of the Company.

Contract owners may, with certain restrictions, transfer their assets between the Account and a fixed dollar contract (fixed account) maintained in the accounts of the Company. The fixed account assets are not reflected in the accompanying financial statements. In addition, the Account portion of contract owner loans is transferred to the accounts of the Company for administration and collection. Loan repayments are transferred to the Account at the direction of the contract owner. For the years ended December 31, 2010 and 2009, total transfers to the Account from the fixed account were $877,580 and $562,551, respectively, and total transfers from the Account to the fixed account were $7,605,733 and $11,575,606, respectively. Transfers from the Account to the fixed account are included in redemptions, and transfers to the Account from the fixed account are included in purchase payments received from contract owners, as applicable, on the accompanying Statements of Changes in Contract Owners’ Equity.

For guaranteed minimum death benefits, the Company contributed $151,120 and $899,500 to the account in the form of additional premium to contract owner accounts for the years ended December 31, 2010 and 2009, respectively. These amounts are included in purchase payments received from contract owners and are credited at time of annuitant death.

(4) Fair Value Measurement

FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market particip ants at the measurement date. In determining fair value, the Account generally uses the market approach as the valuation technique due to the nature of the mutual fund investments offered in the Account. This technique maximizes the use of observable inputs and minimizes the use of unobservable inputs.

In accordance with FASB ASC 820, the Account categorized its financial instruments into a three level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety.

The Account categorizes financial assets recorded at fair value as follows:

 

  •  

Level 1 - Unadjusted quoted prices accessible in active markets for identical assets at the measurement date. The assets utilizing Level 1 valuations represent investments in publicly-traded registered mutual funds with quoted market prices.

 

  •  

Level 2 - Unadjusted quoted prices for similar assets in active markets or inputs (other than quoted prices) that are observable or that are derived principally from or corroborated by observable market data through correlation or other means. The assets utilizing Level 2 valuations represent investments in privately-traded registered mutual funds only offered through insurance products. These funds have no unfunded commitments or restrictions and the Account always has the ability to redeem its interest in the funds with the investee at NAV daily. The investment objectives of these mutual funds are described by the fund name in note 1(b) and in more detail in the applicable product prospectus.

 

  •  

Level 3 - Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. The Account invests only in funds with fair value measurements in the first two levels of the fair value hierarchy.

(Continued)

 

10

NATIONWIDE VA SEPARATE ACCOUNT-C NOTES TO FINANCIAL STATEMENTS December 31, 2010

The Account recognizes significant transfers between fair value hierarchy levels at the reporting period end. There were no significant transfers between Level 1 and 2 as of December 31, 2010.

The following table summarizes assets measured at fair value on a recurring basis as of December 31, 2010:

 

     Level 1      Level 2      Level 3      Total  

Separate Account Investments

      0       $ 233,250,825         0       $ 233,250,825   

The Account did not have any assets or liabilities reported at fair value on a nonrecurring basis required to be disclosed under FASB ASC 820.

 

     Purchases of
Investments		      Sales of
Investments		  

Insurance Trust - Insurance Trust Diversified Mid Cap Growth Portfolio 1 (OGGO)

    $ 11,849,646       $ 12,103,083   

Insurance Trust - Insurance Trust Mid Cap Value Portfolio 1 (JPMMV1)

      1,390,500         1,984,562   

JPMorgan Insurance Trust Balanced Portfolio 1 (OGAA)

      35,126,231         33,189,048   

JPMorgan Insurance Trust Core Bond Portfolio 1 (OGBDP)

      22,740,351         23,815,958   

JPMorgan Insurance Trust Equity Index Portfolio 1 (OGEI)

      8,941,781         11,032,149   

JPMorgan Insurance Trust Intrepid Growth Portfolio - Class 1 (OGLG)

      9,345,439         8,890,712   

JPMorgan Insurance Trust Intrepid Mid Cap Portfolio 1 (OGDMP)

      10,845,888         8,575,511   

JPMorgan Insurance Trust U.S. Equity Portfolio 1 (OGDEP)

      10,019,380         12,336,230   

NVIT Fund - Class I (TRF)

      2,076,818         1,765,634   

NVIT Money Market Fund - Class I (SAM)

      14,527,425         14,527,425   

Equity-Income Portfolio - Initial Class (FEIP)

      3,581,965         2,909,598   

VIP Fund - Overseas Portfolio - Initial Class (FOP)

      683,591         633,879   
                 

Total

    $ 131,129,015       $ 131,763,789   
                 

(5) Financial Highlights

The following tabular presentation is a summary of units, unit fair values and contract owners’ equity outstanding for variable annuity contracts as of the end of the periods indicated, and the contract expense rate, investment income ratio and total return for each of the periods in the five year period ended December 31, 2010.

 

11

NATIONWIDE VA SEPARATE ACCOUNT-C NOTES TO FINANCIAL  STATEMENTS December 31, 2010

 

    Contract
Expense
Rate*		     Units     Unit
Fair Value		     Contract
owners’ equity		     Investment
Income
Ratio**		     Total
Return***		    

Inception Date****

Insurance Trust - Insurance Trust Diversified Mid Cap Growth Portfolio 1  (OGGO)

2010     1.30%        880,808.00      $ 40.225052      $ 35,430,547        0.00%        24.00%     
2009     1.30%        1,218,063.00        32.439433        39,513,274        0.00%        41.18%     
2008     1.30%        1,494,033.00        22.977335        34,328,897        0.00%        -44.52%     
2007     1.30%        2,112,415.00        41.414035        87,483,629        0.00%        15.71%     
2006     1.30%        2,951,763.00        35.792211        105,650,124        0.00%        9.94%     

Insurance Trust -Insurance Trust Mid Cap Value Portfolio 1 (JPMMV1)

2010     1.30%        153,536.00        15.951445        2,449,121        1.44%        21.85%     
2009     1.30%        265,766.00        13.091003        3,479,143        0.00%        30.91%      5/15/2009

JPMorgan Insurance Trust Balanced Portfolio 1 (OGAA)

2009     1.30%        1,490,471.00        21.060941        31,390,743        3.92%        22.84%     
2008     1.30%        1,855,296.00        17.145561        31,810,091        3.91%        -25.29%     
2007     1.30%        2,672,259.00        22.950313        61,329,180        3.30%        4.75%     
2006     1.30%        3,812,974.00        21.910158        83,542,863        2.95%        9.54%     

JPMorgan Insurance Trust Core Bond Portfolio 1 (OGBDP)

2010     1.30%        3,742,315.00        17.371488        65,009,580        4.05%        7.82%     
2009     1.30%        4,940,336.00        16.112149        79,599,429        4.80%        8.22%     
2008     1.30%        3,330,953.00        14.888146        49,591,715        5.99%        -0.01%     
2007     1.30%        5,087,378.00        14.888981        75,745,874        5.09%        4.92%     
2006     1.30%        6,271,930.00        14.191198        89,006,200        3.79%        2.78%     

JPMorgan Insurance Trust Equity Index Portfolio 1 (OGEI)

2010     1.30%        2,342,956.00        11.337231        26,562,633        2.33%        12.92%     
2009     1.30%        3,243,540.00        10.039975        32,565,071        2.60%        24.79%     
2008     1.30%        3,994,505.00        8.045249        32,136,787        2.12%        -38.02%     
2007     1.30%        5,455,148.00        12.981223        70,814,493        1.60%        3.72%     
2006     1.30%        7,150,115.00        12.515227        89,485,312        1.39%        13.92%     

JPMorgan Insurance Trust Intrepid Growth Portfolio - Class 1 (OGLG)

2010     1.30%        1,276,457.00        19.871739        25,365,421        1.03%        14.59%     
2009     1.30%        1,758,741.00        17.341196        30,498,672        0.80%        32.57%     
2008     1.30%        2,162,700.00        13.080386        28,288,951        1.00%        -40.01%     
2007     1.30%        3,005,913.00        21.804355        65,541,994        0.18%        10.09%     
2006     1.30%        4,182,395.00        19.805825        82,835,783        0.08%        4.01%     

JPMorgan Insurance Trust Intrepid Mid Cap Portfolio 1 (OGDMP)

2010     1.30%        894,657.00        18.085113        16,179,973        1.47%        17.97%     
2009     1.30%        1,391,178.00        15.330188        21,327,004        1.59%        33.90%     
2008     1.30%        1,762,714.00        11.448975        20,181,269        0.59%        -39.61%     
2007     1.30%        2,340,278.00        18.959198        44,369,794        0.71%        1.52%     
2006     1.30%        2,688,784.00        18.674855        50,212,651        0.34%        12.64%     

JPMorgan Insurance Trust U.S. Equity Portfolio 1 (OGDEP)

2010     1.30%        2,359,765.00        10.450499        24,660,722        0.98%        12.10%     
2009     1.30%        3,613,930.00        9.322403        33,690,512        2.82%        31.94%     
2008     1.30%        4,647,556.00        7.065439        32,837,023        1.19%        -35.65%     
2007     1.30%        6,495,658.00        10.979465        71,318,850        1.14%        9.01%     
2006     1.30%        8,661,954.00        10.072336        87,246,111        0.84%        14.64%     

NVIT Fund - Class I (TRF)

2010     1.30%        287,465.00        22.449115        6,453,335        0.99%        11.98%     
2009     1.30%        357,289.00        20.048181        7,162,995        1.31%        24.46%     
2008     1.30%        438,466.00        16.108472        7,063,017        1.34%        -42.32%     
2007     1.30%        641,051.00        27.925531        17,901,690        1.03%        6.77%     
2006     1.30%        892,632.00        26.155466        23,347,206        1.02%        12.15%     

NVIT Money Market Fund - Class I (SAM)

2010     1.30%        1,011,728.00        13.735981        13,897,076        0.00%        -1.30%     
2009     1.30%        304,817.00        13.916881        4,242,102        0.04%        -1.26%     
2008     1.30%        492,866.00        14.094268        6,946,585        2.05%        0.73%     
2007     1.30%        468,551.00        13.992544        6,556,220        4.89%        3.42%     
2006     1.30%        381,727.00        13.529429        5,164,548        4.64%        3.18%     

(Continued)

 

12

NATIONWIDE VA SEPARATE ACCOUNT-C NOTES TO FINANCIAL STATEMENTS December 31, 2010

 

     Contract
Expense
Rate*		     Units      Unit
Fair Value		      Contract
owners’ equity		      Investment
Income
Ratio**		     Total
Return***		    

Inception
Date****

Equity - Income Portfolio - Initial Class (FEIP)

  

       
2010      1.30 %      486,258.00       $ 26.659775       $ 12,963,529         1.74 %      13.65 %   
2009      1.30 %      588,109.00         23.457056         13,795,282         2.21 %      28.52 %   
2008      1.30 %      697,200.00         18.252304         12,725,506         2.13 %      -43.40 %   
2007      1.30 %      981,193.00         32.248723         31,642,221         1.63 %      0.20 %   
2006      1.30 %      1,332,817.00         32.183235         42,894,363         3.25 %      18.64 %   

VIP Fund - Overseas Portfolio - Initial Class (FOP)

  

       
2010      1.30 %      204,936.00         18.939472         3,881,380         1.37 %      11.65 %   
2009      1.30 %      226,631.00         16.963952         3,844,558         2.05 %      24.88 %   
2008      1.30 %      258,046.00         13.583708         3,505,222         2.27 %      -44.54 %   
2007      1.30 %      346,501.00         24.491473         8,486,320         3.28 %      15.78 %   
2006      1.30 %      445,630.00         21.153611         9,426,684         0.97 %      16.55 %   

Insurance Trust - Insurance Trust Diversified Mid Cap Value Portfolio 1 (obsolete) (OGMVP)

  

  
2008      1.30 %      271,369.00         13.475864         3,656,932         1.65 %      -36.32 %   
2007      1.30 %      425,613.00         21.163352         9,007,398         1.54 %      -0.40 %   
2006      1.30 %      1,351,558.00         21.248786         28,718,967         1.06 %      15.21 %   

Insurance Trust - Insurance Trust Government Bond Portfolio 1 (obsolete) (OGGB)

  

  
2008      1.30 %      3,028,799.00         20.820458         63,060,982         5.62 %      8.60 %   
2007      1.30 %      4,632,183.00         19.171923         88,807,856         5.49 %      6.08 %   
2006      1.30 %      5,908,551.00         18.072328         106,781,272         5.39 %      2.13 %   
2010      Reserves for annuity contracts in payout phase:         421,435       
2010      Contract owners equity:       $ 233,274,752       
2009      Reserves for annuity contracts in payout phase:         380,173       
2009      Contract owners equity:       $ 301,488,958       
2008      Reserves for annuity contracts in payout phase:         334,697       
2008      Contract owners equity:       $ 326,467,674       
2007      Reserves for annuity contracts in payout phase:         610,389       
2007      Contract owners equity:       $ 639,615,908       
2006      Reserves for annuity contracts in payout phase:         632,986       
2006      Contract owners equity:       $ 804,945,070       
* This represents the contract expense rate of the variable account for the period indicated and includes only those expenses that are charged through a reduction in the unit values. Excluded are expenses of the underlying mutual funds and charges made directly to contract owners’ accounts through the redemption of units.
** This represents the ratio of dividends for the period indicated, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by average net assets. The ratios exclude those expenses, such as policy and asset charges, that result in direct reductions to the contract holder accounts through redemption of units. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest.
*** This represents the total return for the period. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Total return is not annualized if the underlying mutual fund option is initially offered, funded, or both, during the period presented.
**** This represents the date the underlying mutual fund option was initially added and funded.

 

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