<PAGE> 1
Nationwide(R) VL
Separate Account-C
December 31, 1998
[THE BEST OF AMERICA(R) LOGO]
America's FUTURE Life Series(SM)
'98
ANNUAL REPORT
[NATIONWIDE LOGO]
Nationwide Life 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 VL 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
2
<PAGE> 3
NATIONWIDE VL SEPARATE ACCOUNT - C
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
American Century VP - American Century VP Income & Growth (ACVPIncGr)
67,771 shares (cost $405,064) ............................................. $ 459,489
American Century VP - American Century VP International (ACVPInt)
40,174 shares (cost $275,351) ............................................. 306,126
American Century VP - American Century VP Value (ACVPValue)
14,278 shares (cost $90,889) .............................................. 96,093
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
266 shares (cost $7,429) .................................................. 8,265
Dreyfus Stock Index Fund (DryStkIx)
185,783 shares (cost $5,140,294) .......................................... 6,041,674
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
8,328 shares (cost $276,608) .............................................. 300,718
Fidelity VIP - Equity-Income Portfolio - Service Class (FidVIPEI)
361 shares (cost $8,302) .................................................. 9,155
Fidelity VIP - Growth Portfolio - Service Class (FidVIPGr)
35,182 shares (cost $1,398,277) ........................................... 1,576,836
Fidelity VIP - High Income Portfolio - Service Class (FidVIPHI)
83,195 shares (cost $900,788) ............................................. 957,577
Fidelity VIP - Overseas Portfolio - Service Class (FidVIPOv)
33,371 shares (cost $619,631) ............................................. 668,429
Fidelity VIP-II - Contrafund Portfolio - Service Class (FidVIPCon)
52,010 shares (cost $1,064,968) ........................................... 1,270,081
Fidelity VIP-III - Growth Opportunities Portfolio - Service Class (FidVIPGrOp)
17,198 shares (cost $351,358) ............................................. 393,139
Morgan Stanley - Emerging Markets Debt Portfolio (VKMSEmMkt)
14,873 shares (cost $96,661) .............................................. 90,728
Nationwide SAT - Balanced Fund (NSATBal)
7,637 shares (cost $79,936) ............................................... 80,804
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
17,741 shares (cost $439,254) ............................................. 471,722
Nationwide SAT - Global Equities Fund (NSATGlobEq)
210 shares (cost $2,107) .................................................. 2,471
Nationwide SAT - Government Bond Fund (NSATGvtBd)
43,182 shares (cost $513,537) ............................................. 504,792
Nationwide SAT - High Income Bond Fund (NSATHIncBd)
14,403 shares (cost $141,675) ............................................. 144,610
Nationwide SAT - Money Market Fund (NSATMyMkt)
7,104,131 shares (cost $7,104,131) ........................................ 7,104,131
Nationwide SAT - Multi Sector Bond Fund (NSATMSecBd)
33,105 shares (cost $324,442) ............................................. 325,088
</TABLE>
(Continued)
3
<PAGE> 4
<TABLE>
<S> <C>
Nationwide SAT - Select Advisers Mid Cap Fund (NSATMidCap)
233 shares (cost $2,153) ..................................... 2,543
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
61,953 shares (cost $539,799) ................................ 587,937
Nationwide SAT - Small Company Fund (NSATSmCo)
28,600 shares (cost $412,656) ................................ 457,891
Nationwide SAT - Strategic Value Fund (NSATStrVal)
28,029 shares (cost $242,052) ................................ 283,652
Nationwide SAT - Total Return Fund (NSATTotRe)
5,619 shares (cost $97,485) .................................. 103,385
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
86,606 shares (cost $1,035,407) .............................. 1,198,625
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
66,658 shares (cost $849,195) ................................ 1,081,201
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
12,810 shares (cost $222,364) ................................ 242,488
Oppenheimer VAF - Aggressive Growth Fund (OppAggGr)
11,499 shares (cost $417,543) ................................ 515,480
Oppenheimer VAF - Growth Fund (OppGro)
3,413 shares (cost $104,659) ................................. 125,165
Oppenheimer VAF - Growth & Income Fund (OppGrInc)
13,520 shares (cost $251,274) ................................ 276,894
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
18,698 shares (cost $117,838) ................................ 133,132
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
8,993 shares (cost $84,775) .................................. 82,736
Van Kampen American Capital LIT -
Morgan Stanley Real Estate Securities Portfolio (VKMSRESec)
1,046 shares (cost $13,889) .................................. 14,397
Warburg Pincus Trust - Growth & Income Portfolio (WPGrInc)
39,914 shares (cost $423,285) ................................ 458,216
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
20,492 shares (cost $209,561) ................................ 225,209
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
18,657 shares (cost $183,538) ................................ 219,774
-----------
Total investments ......................................... 26,820,653
Accounts receivable ................................................ 78,606
-----------
Total assets .............................................. 26,899,259
ACCOUNTS RECEIVABLE ................................................... --
-----------
CONTRACT OWNERS' EQUITY (NOTE 7) ...................................... $26,899,259
===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
NATIONWIDE VL SEPARATE ACCOUNT - C
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period May 1, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
Total ACVPIncGr ACVPInt ACVPValue
----- --------- ------- ---------
<S> <C> <C>
Investment activity:
Reinvested dividends ............................... $ 167,299 2,209 - -
Mortality and expense charges (note 3) ............. (23,151) (336) (196) (77)
-------------- ------- ------- ------
Net investment activity .......................... 144,148 1,873 (196) (77)
-------------- ------- ------- ------
Proceeds from mutual fund shares sold .............. 3,278,422 18,460 - 960
Cost of mutual fund shares sold .................... (3,254,787) (16,283) - (886)
-------------- ------- ------- ------
Realized gain (loss) on investments .............. 23,635 2,177 - 74
Change in unrealized gain (loss) on investments .... 2,372,478 54,426 30,775 5,204
-------------- ------- ------- ------
Net gain (loss) on investments ................... 2,396,113 56,603 30,775 5,278
-------------- ------- ------- ------
Reinvested capital gains ........................... 23,462 - - -
-------------- ------- ------- ------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 2,563,723 58,476 30,579 5,201
-------------- ------- ------- ------
Equity transactions:
Purchase payments received from
contract owners
Transfers between funds ............................ 24,823,406 375,552 232,301 77,512
Surrenders ......................................... - 33,816 48,928 14,883
Policy loans (net of repayments) (note 5) .......... - - - -
Redemptions to pay cost of insurance ............... - - - -
charges and administration charges
(notes 2b and 2c) ................................ (487,870) (8,540) (5,673) (1,490)
-------------- ------- ------- ------
Net equity transactions ........................ 24,335,536 400,828 275,556 90,905
-------------- ------- ------- ------
Net change in contract owners' equity .............. 26,899,259 459,304 306,135 96,106
Contract owners' equity beginning of period ........ - - - -
-------------- ------- ------- ------
Contract owners' equity end of period .............. $ 26,899,259 459,304 306,135 96,106
============== ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
DrySRGro DryStkIx DryCapAp FidVIPEI
-------- -------- -------- --------
<S> <C> <C> <C>
Investment activity:
Reinvested dividends ............................... 13 16,440 1,424 -
Mortality and expense charges (note 3) ............. (5) (4,323) (168) (7)
----- --------- ------- -----
Net investment activity .......................... 8 12,117 1,256 (7)
----- --------- ------- -----
Proceeds from mutual fund shares sold .............. 403 74,709 18,997 238
Cost of mutual fund shares sold .................... (360) (68,241) (16,543) (216)
----- --------- ------- -----
Realized gain (loss) on investments .............. 43 6,468 2,454 22
Change in unrealized gain (loss) on investments .... 836 901,380 24,110 853
----- --------- ------- -----
Net gain (loss) on investments ................... 879 907,848 26,564 875
----- --------- ------- -----
Reinvested capital gains ........................... 287 4,384 - -
----- --------- ------- -----
Net increase (decrease) in contract owners'
equity resulting from operations ............. 1,174 924,349 27,820 868
----- --------- ------- -----
Equity transactions:
Purchase payments received from
contract owners
Transfers between funds ............................ 4,085 1,344,322 254,590 3,459
Surrenders ......................................... 3,639 3,839,399 26,358 5,196
Policy loans (net of repayments) (note 5) .......... - - - -
Redemptions to pay cost of insurance ............... - - - -
charges and administration charges
(notes 2b and 2c) ................................ (628) (65,383) (8,026) (369)
----- --------- ------- -----
Net equity transactions ........................ 7,096 5,118,338 272,922 8,286
----- --------- ------- -----
Net change in contract owners' equity .............. 8,270 6,042,687 300,742 9,154
Contract owners' equity beginning of period ........ - - - -
----- --------- ------- -----
Contract owners' equity end of period .............. 8,270 6,042,687 300,742 9,154
===== ========= ======= =====
</TABLE>
5
(Continued)
<PAGE> 6
NATIONWIDE VL SEPARATE ACCOUNT - C
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period May 1, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
FidVIPGr FidVIPHI FidVIPOv FidVIPCon
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ............................... $ - - - -
Mortality and expense charges (note 3) ............. (835) (736) (415) (860)
--------- ------- ------- ---------
Net investment activity .......................... (835) (736) (415) (860)
--------- ------- ------- ---------
Proceeds from mutual fund shares sold .............. 10,989 26,665 35,291 24,885
Cost of mutual fund shares sold .................... (10,235) (25,810) (31,093) (23,083)
--------- ------- ------- ---------
Realized gain (loss) on investments .............. 754 855 4,198 1,802
Change in unrealized gain (loss) on investments .... 178,559 56,789 48,798 205,114
--------- ------- ------- ---------
Net gain (loss) on investments ................... 179,313 57,644 52,996 206,916
--------- ------- ------- ---------
Reinvested capital gains ........................... - - - -
--------- ------- ------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 178,478 56,908 52,581 206,056
--------- ------- ------- ---------
Equity transactions:
Purchase payments received from
contract owners .................................. 877,191 797,529 322,715 1,010,459
Transfers between funds ............................ 536,214 126,690 302,240 83,425
Surrenders ......................................... - - - -
Policy loans (net of repayments) (note 5) .......... - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ................................ (15,006) (23,488) (9,108) (29,838)
--------- ------- ------- ---------
Net equity transactions ........................ 1,398,399 900,731 615,847 1,064,046
--------- ------- ------- ---------
Net change in contract owners' equity .............. 1,576,877 957,639 668,428 1,270,102
Contract owners' equity beginning of period ........ - - - -
--------- ------- ------- ---------
Contract owners' equity end of period .............. 1,576,877 957,639 668,428 1,270,102
========= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
FidVIPGrOp VKMSEmMkt NSATBal NSATCapAp
---------- --------- ------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ............................... - 10,770 579 864
Mortality and expense charges (note 3) ............. (220) (72) (39) (308)
------- ------ ------ -------
Net investment activity .......................... (220) 10,698 540 556
------- ------ ------ -------
Proceeds from mutual fund shares sold .............. 3,540 3,311 10,977 39,188
Cost of mutual fund shares sold .................... (3,522) (3,263) (10,455) (35,989)
------- ------ ------ -------
Realized gain (loss) on investments .............. 18 48 522 3,199
Change in unrealized gain (loss) on investments .... 41,781 (5,933) 868 32,468
------- ------ ------ -------
Net gain (loss) on investments ................... 41,799 (5,885) 1,390 35,667
------- ------ ------ -------
Reinvested capital gains ........................... - - 221 11,909
------- ------ ------ -------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 41,579 4,813 2,151 48,132
------- ------ ------ -------
Equity transactions:
Purchase payments received from
contract owners .................................. 39,353 76,358 64,453 469,254
Transfers between funds ............................ 315,460 10,866 16,856 (26,553)
Surrenders ......................................... - - - -
Policy loans (net of repayments) (note 5) .......... - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ................................ (3,286) (1,302) (2,533) (19,108)
------- ------ ------ -------
Net equity transactions ........................ 351,527 85,922 78,776 423,593
------- ------ ------ -------
Net change in contract owners' equity .............. 393,106 90,735 80,927 471,725
Contract owners' equity beginning of period ........ - - - -
------- ------ ------ -------
Contract owners' equity end of period .............. 393,106 90,735 80,927 471,725
======= ====== ====== =======
</TABLE>
6
<PAGE> 7
NATIONWIDE VL SEPARATE ACCOUNT - C
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period May 1, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
NSATGlobEq NSATGvtBd NSATHIncBd NSATMyMkt
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....................................... $ 5 7,625 1,789 116,826
Mortality and expense charges (note 3) ..................... (3) (306) (86) (10,114)
------- ------- ------- ---------
Net investment activity .................................. 2 7,319 1,703 106,712
------- ------- ------- ---------
Proceeds from mutual fund shares sold ...................... 43 1,249 17,430 2,917,122
Cost of mutual fund shares sold ............................ (37) (1,246) (16,738) (2,917,122)
------- ------- ------- ---------
Realized gain (loss) on investments ...................... 6 3 692 -
Change in unrealized gain (loss) on investments ............ 365 (8,745) 2,935 -
------- ------- ------- ---------
Net gain (loss) on investments ........................... 371 (8,742) 3,627 -
Reinvested capital gains ................................... 17 2,401 - -
------- ------- ------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ..................... 390 978 5,330 106,712
------- ------- ------- ---------
Equity transactions:
Purchase payments received from
contract owners .......................................... 259 314,799 138,276 14,686,986
Transfers between funds .................................... 1,883 195,168 3,992 (7,412,730)
Surrenders ................................................. - - - -
Policy loans (net of repayments) (note 5) .................. - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ........................................ (52) (6,117) (2,423) (200,727)
------- ------- ------- ---------
Net equity transactions ................................ 2,090 503,850 139,845 7,073,529
------- ------- ------- ---------
Net change in contract owners' equity ...................... 2,480 504,828 145,175 7,180,241
Contract owners' equity beginning of period ................ - - - -
------- ------- ------- ---------
Contract owners' equity end of period ...................... $ 2,480 504,828 145,175 7,180,241
======= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
NSATMSecBd NSATMidCap NSATSmCapV NSATSmCo
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ................................. 3,801 4 - -
Mortality and expense charges (note 3) ............... (203) (3) (251) (266)
------- ----- ------- -------
Net investment activity ............................ 3,598 1 (251) (266)
------- ----- ------- -------
Proceeds from mutual fund shares sold ................ 2,882 44 749 4,791
Cost of mutual fund shares sold ...................... (2,846) (37) (617) (4,712)
------- ----- ------- -------
Realized gain (loss) on investments ................ 36 7 132 79
Change in unrealized gain (loss) on investments ...... 646 390 48,137 45,235
------- ----- ------- -------
Net gain (loss) on investments ..................... 682 397 48,269 45,314
Reinvested capital gains ............................. 233 - - -
------- ----- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 4,513 398 48,018 45,048
------- ----- ------- -------
Equity transactions:
Purchase payments received from
contract owners .................................... 291,490 314 53,437 415,058
Transfers between funds .............................. 33,681 1,884 488,017 12,398
Surrenders ........................................... - - - -
Policy loans (net of repayments) (note 5) ............ - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) .................................. (3,898) (52) (1,592) (14,608)
------- ----- ------- -------
Net equity transactions .......................... 321,273 2,146 539,862 412,848
------- ----- ------- -------
Net change in contract owners' equity ................ 325,786 2,544 587,880 457,896
Contract owners' equity beginning of period .......... - - - -
------- ----- ------- -------
Contract owners' equity end of period ................ 325,786 2,544 587,880 457,896
======= ===== ======= =======
</TABLE>
7
(Continued)
<PAGE> 8
NATIONWIDE VL SEPARATE ACCOUNT - C
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period May 1, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
NSATStrVal NSATTotRe NBAMTGuard NBAMTMCGr
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ..................................... $ 697 262 - -
Mortality and expense charges (note 3) ................... (234) (78) (837) (620)
------------ ------- --------- ---------
Net investment activity ................................ 463 184 (837) (620)
------------ ------- --------- ---------
Proceeds from mutual fund shares sold .................... 5,193 975 7,799 4,507
Cost of mutual fund shares sold .......................... (5,131) (930) (7,186) (4,091)
------------ ------- --------- ---------
Realized gain (loss) on investments .................... 62 45 613 416
Change in unrealized gain (loss) on investments .......... 41,599 5,900 163,218 232,006
------------ ------- --------- ---------
Net gain (loss) on investments ......................... 41,661 5,945 163,831 232,422
------------ ------- --------- ---------
Reinvested capital gains ................................. - 4,010 - -
------------ ------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 42,124 10,139 162,994 231,802
------------ ------- --------- ---------
Equity transactions:
Purchase payments received from
contract owners ........................................ 158,330 79,186 795,893 440,392
Transfers between funds .................................. 87,690 15,559 253,300 417,252
Surrenders ............................................... - - - -
Policy loans (net of repayments) (note 5) ................ - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ...................................... (4,477) (1,494) (13,527) (8,273)
------------ ------- --------- ---------
Net equity transactions .............................. 241,543 93,251 1,035,666 849,371
------------ ------- --------- ---------
Net change in contract owners' equity .................... 283,667 103,390 1,198,660 1,081,173
Contract owners' equity beginning of period .............. - - - -
------------ ------- --------- ---------
Contract owners' equity end of period .................... $ 283,667 103,390 1,198,660 1,081,173
============ ======= ========= =========
</TABLE>
<TABLE>
<CAPTION>
NBAMTPart OppCapAp OppGro OppGrInc
--------- -------- ------ --------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ..................................... - - - -
Mortality and expense charges (note 3) ................... (180) (320) (101) (157)
------- ------- ------- -------
Net investment activity ................................ (180) (320) (101) (157)
------- ------- ------- -------
Proceeds from mutual fund shares sold .................... 2,278 857 28,812 906
Cost of mutual fund shares sold .......................... (2,175) (910) (30,635) (797)
------- ------- ------- -------
Realized gain (loss) on investments .................... 103 (53) (1,823) 109
Change in unrealized gain (loss) on investments .......... 20,123 97,938 20,506 25,619
------- ------- ------- -------
Net gain (loss) on investments ......................... 20,226 97,885 18,683 25,728
------- ------- ------- -------
Reinvested capital gains ................................. - - - -
------- ------- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 20,046 97,565 18,582 25,571
------- ------- ------- -------
Equity transactions:
Purchase payments received from
contract owners ........................................ 200,749 248,676 86,295 104,537
Transfers between funds .................................. 26,446 174,349 22,139 149,203
Surrenders ............................................... - - - -
Policy loans (net of repayments) (note 5) ................ - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ...................................... (4,731) (5,124) (1,833) (2,412)
------- ------- ------- -------
Net equity transactions .............................. 222,464 417,901 106,601 251,328
------- ------- ------- -------
Net change in contract owners' equity .................... 242,510 515,466 125,183 276,899
Contract owners' equity beginning of period .............. - - - -
------- ------- ------- -------
Contract owners' equity end of period .................... 242,510 515,466 125,183 276,899
======= ======= ======= =======
</TABLE>
8
<PAGE> 9
NATIONWIDE VL SEPARATE ACCOUNT - C
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period May 1, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
VEWrldEMkt VEWrldHAs VKMSRESec WPGrInc
---------- --------- --------- -------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .................................... $ - - - 2,979
Mortality and expense charges (note 3) .................. (102) (68) (2) (289)
------------ ------ ------ -------
Net investment activity ............................... (102) (68) (2) 2,690
------------ ------ ------ -------
Proceeds from mutual fund shares sold ................... 2,077 1,076 33 5,560
Cost of mutual fund shares sold ......................... (1,987) (1,070) (30) (5,306)
------------ ------ ------ -------
Realized gain (loss) on investments ................... 90 6 3 254
Change in unrealized gain (loss) on investments ......... 15,293 (2,039) 508 34,931
------------ ------ ------ -------
Net gain (loss) on investments ........................ 15,383 (2,033) 511 35,185
------------ ------ ------ -------
Reinvested capital gains ................................ - - - -
------------ ------ ------ -------
Net increase (decrease) in contract owners'
equity resulting from operations .................. 15,281 (2,101) 509 37,875
------------ ------ ------ -------
Equity transactions:
Purchase payments received from
contract owners ....................................... 87,572 75,264 311 373,642
Transfers between funds ................................. 32,251 10,866 13,626 59,416
Surrenders .............................................. - - - -
Policy loans (net of repayments) (note 5) ............... - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ..................................... (1,951) (1,280) (53) (12,701)
------------ ------ ------ -------
Net equity transactions ............................. 117,872 84,850 13,884 420,357
------------ ------ ------ -------
Net change in contract owners' equity ................... 133,153 82,749 14,393 458,232
Contract owners' equity beginning of period ............. - - - -
------------ ------ ------ -------
Contract owners' equity end of period ................... $ 133,153 82,749 14,393 458,232
============ ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
WPIntEq WPPVenCap
------- ---------
<S> <C> <C>
Investment activity:
Reinvested dividends .................................... 1,012 -
Mortality and expense charges (note 3) .................. (180) (154)
------- -------
Net investment activity ............................... 832 (154)
------- -------
Proceeds from mutual fund shares sold ................... 3,488 1,938
Cost of mutual fund shares sold ......................... (3,431) (1,774)
------- -------
Realized gain (loss) on investments ................... 57 164
Change in unrealized gain (loss) on investments ......... 15,648 36,237
------- -------
Net gain (loss) on investments ........................ 15,705 36,401
------- -------
Reinvested capital gains ................................ - -
------- -------
Net increase (decrease) in contract owners'
equity resulting from operations .................. 16,537 36,247
------- -------
Equity transactions:
Purchase payments received from
contract owners ....................................... 160,067 162,740
Transfers between funds ................................. 51,953 24,240
Surrenders .............................................. - -
Policy loans (net of repayments) (note 5) ............... - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ..................................... (3,326) (3,441)
------- -------
Net equity transactions ............................. 208,694 183,539
------- -------
Net change in contract owners' equity ................... 225,231 219,786
Contract owners' equity beginning of period ............. - -
------- -------
Contract owners' equity end of period ................... 225,231 219,786
======= =======
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 10
NATIONWIDE VL SEPARATE ACCOUNT - C
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VL 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 December 3, 1997. The
Account has been registered as a unit investment trust under the
Investment Company Act of 1940.
The Company offers Corporate Flexible Premium Variable Life Insurance
Policies through the Account.
(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 policy charges, and note 3 for asset
charges.
Contract owners may invest in the following:
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP);
American Century VP - American Century VP Income & Growth
(ACVPIncGr)
American Century VP - American Century VP International
(ACVPInt)
American Century VP - American Century VP Value
(ACVPValue)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
Portfolio of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio - Service Class
(FidVIPEI)
Fidelity VIP - Growth Portfolio - Service Class (FidVIPGr)
Fidelity VIP - High Income Portfolio - Service Class (FidVIPHI)
Fidelity VIP - Overseas Portfolio - Service Class (FidVIPOv)
Portfolio of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Contrafund Portfolio - Service Class
(FidVIPCon)
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio - Service
Class (FidVIPGrOp)
Portfolio of the Morgan Stanley Universal Funds, Inc. (Morgan
Stanley);
Morgan Stanley - Emerging Markets Debt Portfolio (VKMSEmMkt)
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Balanced Fund (NSATBal)
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Equity Income Fund (NSATEqInc)
Nationwide SAT - Global Equity Fund (NSATGlobEq)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - High Income Bond Fund (NSATHIncBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Multi Sector Bond Fund (NSATMSecBd)
Nationwide SAT - Select Advisers Mid Cap Fund (NSATMidCap)
10
<PAGE> 11
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Strategic Growth Fund (NSATStrGro)
Nationwide SAT - Strategic Value Fund (NSATStrVal)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger &Berman AMT);
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF);
Oppenheimer VAF - Capital Appreciation Fund (OppCapAp)
Oppenheimer VAF - Growth Fund (OppGro)
Oppenheimer VAF - Growth & Income Fund (OppGrInc)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT);
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
Portfolio of the Van Kampen American Capital Life Investment Trust
(Van Kampen American Capital LIT);
Van Kampen American Capital LIT - Morgan Stanley Real Estate
Securities Portfolio (VKMSRESec)
Portfolios of the Warburg Pincus Trust;
Warburg Pincus Trust - Growth & Income Portfolio (WPGrInc)
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
Warburg Pincus Trust - Post Venture Capital Portfolio
(WPPVenCap)
At December 31, 1998, contract owners have invested in all of the above
funds except for Nationwide SAT - Equity Income Fund and Nationwide SAT
- Strategic Growth 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.
(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 the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company which is taxed as a life insurance company
under the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
11
<PAGE> 12
(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) POLICY CHARGES
(a) Deductions from Premium
On corporate flexible premium contracts, the Company deducts a charge
for state premium taxes of 3.5% on all premiums received to cover the
payment of premium taxes. Additionally, the Company deducts a front-end
sales load not to exceed 5.5% from each premium payment received. The
Company may at its sole discretion reduce this sales loading.
(b) Cost of Insurance
A cost of insurance charge is assessed monthly against each contract.
The amount of the charge is based upon age, sex, rate class and net
amount at risk (death benefit less total contract value).
(c) Administrative Charges
For corporate flexible premium contracts, the Company deducts a monthly
administrative expense charge to recover policy maintenance,
accounting, record keeping and other administrative expenses. On a
current basis this charge is $5.00 per month in all policy years. On a
guaranteed basis this charge is $10.00 per month in all policy years.
The above charges are assessed against each contract by liquidating
units.
(3) ASSET CHARGES
For corporate flexible premium contracts, the Company deducts a charge from
the contract to cover mortality and expense risk charges related to
operations. This charge is guaranteed not to exceed an annual rate of .75%.
On a current basis this rate will be .40% during the first through fourth
policy years, .25% during the fifth through twentieth policy years, and
.10% thereafter.
(4) DEATH BENEFITS
Death benefits result in a redemption of the contract value from the
Account and payment of the death benefit proceeds, less any outstanding
policy loans and policy charges, to the legal beneficiary. The excess of
the death benefit proceeds over the contract value on the date of death is
paid by the Company's general account. There were no death benefits paid in
the current year.
(5) POLICY LOANS (NET OF REPAYMENTS)
Contract provisions allow contract owners to borrow 90% of a policy's cash
surrender value. Interest is charged on the outstanding loan and is due and
payable in advance on the policy anniversary.
At the time the loan is granted, the amount of the loan is transferred from
the Account to the Company's general account as collateral for the
outstanding loan. Collateral amounts in the general account are credited
with the stated rate of interest in effect at the time the loan is made,
subject to a guaranteed minimum rate. Interest credited is paid by the
Company's general account to the Account. Loan repayments result in a
transfer of collateral including interest back to the Account. There were
no policy loans in the current year.
(6) 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.
12
<PAGE> 13
(7) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1998.
<TABLE>
<CAPTION>
PERIOD
Contract owners' equity represented by: UNITS UNIT VALUE RETURN*
--------- ---------- -------
<S> <C> <C> <C> <C>
The BEST of AMERICA(R) America's FUTURE Life Series(SM):
American Century VP - American
Century VP Income & Growth 42,170 $ 10.891732 $ 459,304 9%
American Century VP - American
Century VP International 31,340 9.768200 306,135 (2)%
American Century VP - American
Century VP Value 10,252 9.374321 96,106 (6)%
The Dreyfus Socially Responsible
Growth Fund, Inc. 742 11.144998 8,270 11%
Dreyfus Stock Index Fund 547,841 11.030001 6,042,687 10%
Dreyfus VIF -
Capital Appreciation Portfolio 27,277 11.025485 300,742 10%
Fidelity VIP - Equity-Income Portfolio -
Service Class 924 9.906965 9,154 (1)%
Fidelity VIP - Growth Portfolio -
Service Class 130,876 12.048634 1,576,877 20%
Fidelity VIP - High Income Portfolio -
Service Class 106,365 9.003329 957,639 (10)%
Fidelity VIP - Overseas Portfolio -
Service Class 70,301 9.508092 668,428 (5)%
Fidelity VIP-II - Contrafund Portfolio -
Service Class 112,018 11.338370 1,270,102 13%
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class 34,950 11.247664 393,106 12%
Morgan Stanley -
Emerging Markets Debt Portfolio 13,412 6.765184 90,735 (32)%
Nationwide SAT - Balanced Fund 8,085 10.009481 80,927 0%
Nationwide SAT -
Capital Appreciation Fund 42,152 11.191056 471,725 12%
Nationwide SAT - Global Equity Fund 239 10.374941 2,480 4%
Nationwide SAT - Government Bond Fund 47,339 10.664112 504,828 7%
Nationwide SAT - High Income Bond Fund 14,446 10.049520 145,175 0%
Nationwide SAT - Money Market Fund 695,771 10.319833 7,180,241 3%
Nationwide SAT - Multi Sector Bond Fund 32,607 9.991296 325,786 0%
Nationwide SAT -
Select Advisers Mid Cap Fund 259 9.821278 2,544 (2)%
Nationwide SAT - Small Cap Value Fund 68,511 8.580808 587,880 (14)%
Nationwide SAT - Small Company Fund 50,558 9.056852 457,896 (9)%
Nationwide SAT - Strategic Value Fund 31,219 9.086371 283,667 (9)%
Nationwide SAT - Total Return Fund 10,192 10.144232 103,390 1%
</TABLE>
(Continued)
13
<PAGE> 14
<TABLE>
<S> <C> <C> <C> <C>
Neuberger & Berman AMT -
Guardian Portfolio 128,350 9.338993 1,198,660 (7)%
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio 95,708 11.296584 1,081,173 13%
Neuberger & Berman AMT -
Partners Portfolio 25,973 9.337008 242,510 (7)%
Oppenheimer VAF -
Capital Appreciation Fund 53,218 9.685930 515,466 (3)%
Oppenheimer VAF - Growth Fund 11,744 10.659314 125,183 7%
Oppenheimer VAF -
Growth & Income Fund 30,977 8.938847 276,899 (11)%
Van Eck WIT -
Worldwide Emerging Markets Fund 21,058 6.323175 133,153 (37)%
Van Eck WIT -
Worldwide Hard Assets Fund 12,094 6.842178 82,749 (32)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio 1,612 8.928571 14,393 (11)%
Warburg Pincus Trust -
Growth & Income Portfolio 46,093 9.941469 458,232 (1)%
Warburg Pincus Trust -
International Equity Portfolio 25,320 8.895388 225,231 (11)%
Warburg Pincus Trust -
Post Venture Capital Portfolio 24,245 9.065227 219,786 (9)%
-------- --------- ---------
$ 26,899,259
============
</TABLE>
* This investment option was not being utilized for the entire period.
Accordingly, the period return was computed for such period as the investment
option was utilized and does not include contract charges satisfied by
surrendering units.
14
<PAGE> 15
Independent Auditors' Report
TheBoard of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of Nationwide VL Separate Account-C:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VL Separate Account-C as of December 31,
1998, and the related statement of operations and changes in contract owners'
equity for the period May 1, 1998 (commencement of operations) through December
31, 1998. 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 audit.
We conducted our audit 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 audit provides 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 VL Separate
Account-C as of December 31, 1998, and the results of its operations and its
changes in contract owners' equity for the period May 1, 1998 (commencement of
operations) through December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Columbus, Ohio
February 5, 1999
15
<PAGE> 16
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
