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NATIONWIDE(R)
VL SEPARATE ACCOUNT-A
ANNUAL REPORT
TO
CONTRACT OWNERS
DECEMBER 31, 1997
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
FHL - 150 - M (12/97)
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[LOGO]
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215 - 2220
[PHOTO]
PRESIDENT'S MESSAGE
We at Nationwide Life and Annuity Insurance Company are pleased to
bring you the 1997 annual report of the Nationwide VL Separate
Account-A.
Equity markets ended a volatile season to record the third straight
year of gains topping the 20 percent mark. Additionally, returns on
fixed income investments were buoyed by declining inflation, steady
Federal Reserve policy and the positive outlook for lower budget
deficits.
The U.S. economy continues to be strong into 1998. However, there is
still much uncertainty about what effect the Southeast Asian crisis
will have on our economy during this year. The obvious result, we
believe, will be a slowing of economic growth due to reduced
exports, restrained pricing flexibility and lower corporate profits.
We expect the Federal Reserve will continue to stay on the sidelines
as the Southeast Asian economic turmoil plays out. At the same time,
low inflation and low interest rates should continue to provide a
healthy environment for financial assets.
We are committed to our customers as our most valuable asset. Our
commitment to you is to continue to add value to our products and
services to help you achieve your financial planning and retirement
goals. As always, we welcome and encourage your feedback.
/s/ Joseph J. Gasper
Joseph J. Gasper, President
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NATIONWIDE VL SEPARATE ACCOUNT-A
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
American Century VP - American Century VP Advantage (ACVPAdv)
65,673 shares (cost $340,971) ............................ $433,439
Fidelity VIP - Growth Portfolio (FidVIPGr)
1,145 shares (cost $29,326) .............................. 42,484
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
427 shares (cost $8,167) ................................. 9,058
Nationwide SAT - Government Bond Fund (NSATGvtBd)
1,238 shares (cost $13,601) .............................. 14,091
Nationwide SAT - Money Market Fund (NSATMyMkt)
1,125 shares (cost $1,125) ............................... 1,125
Nationwide SAT - Total Return Fund (NSATTotRe)
1,231 shares (cost $15,685) .............................. 20,160
Neuberger & Berman AMT - Balanced Portfolio (NBAMTBal)
623 shares (cost $9,748) ................................. 11,083
--------
Total investments ..................................... 531,440
Accounts receivable ............................................ 68
--------
Total assets .......................................... 531,508
ACCOUNTS PAYABLE .................................................. --
--------
CONTRACT OWNERS' EQUITY ........................................... $531,508
========
</TABLE>
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<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN
----- ---------- -------
<S> <C> <C> <C> <C>
Multiple Payment Contracts and Flexible Premium Contracts:
American Century VP -
American Century VP Advantage .................... 511 $ 15.906088 $ 8,128 12%
American Century VP -
American Century VP Advantage
Initial Funding by Depositor (note 1a) ......... 25,000 17.013707 425,343 13%
Fidelity VIP - Growth Portfolio .................... 1,734 24.509547 42,500 22%
Nationwide SAT - Capital Appreciation Fund ......... 368 24.563746 9,039 33%
Nationwide SAT - Government Bond Fund .............. 841 16.735906 14,075 9%
Nationwide SAT - Money Market Fund ................. 88 12.754301 1,122 4%
Nationwide SAT - Total Return Fund ................. 716 28.233403 20,215 28%
Neuberger & Berman AMT -
Balanced Portfolio ............................... 593 18.694343 11,086 19%
========= =============== ----------
$ 531,508
==========
</TABLE>
See accompanying notes to financial statements.
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NATIONWIDE VL SEPARATE ACCOUNT-A
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
INVESTMENT ACTIVITY:
<S> <C> <C> <C>
Reinvested dividends ................................. $ 8,040 10,646 12,757
Mortality and expense charges (note 3) ............... (795) (722) (621)
--------- --------- ---------
Net investment activity ........................... 7,245 9,924 12,136
--------- --------- ---------
Proceeds from mutual fund shares sold ................ 33,699 16,003 36,212
Cost of mutual funds sold ............................ (28,831) (14,209) (35,326)
--------- --------- ---------
Realized gain on investments ...................... 4,868 1,794 886
Change in unrealized gain on investments ............. 29,307 8,266 53,488
--------- --------- ---------
Net gain on investments ........................... 34,175 10,060 54,374
--------- --------- ---------
Reinvested capital gains ............................. 23,407 21,139 694
--------- --------- ---------
Net increase in contract owners'
equity resulting from operations ............ 64,827 41,123 67,204
--------- --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners ...... 14,070 24,097 36,589
Surrenders ........................................... (23,075) (6,042) (164)
Policy loans (net of repayments) (note 4) ............ 13,620 3,498 (23,321)
Deductions for surrender charges (note 2d) ........... (4,334) -- --
Redemptions to pay cost of insurance charges
and administration charges (notes 2b and 2c) ...... (8,935) (12,114) (12,670)
--------- --------- ---------
Net increase (decrease) in equity transactions.. (8,654) 9,439 434
--------- --------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................... 56,173 50,562 67,638
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ............. 475,335 424,773 357,135
--------- --------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ................... $ 531,508 475,335 424,773
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
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NATIONWIDE VL SEPARATE ACCOUNT-A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
Nationwide VL Separate Account-A (the Account) was established pursuant
to a resolution of the Board of Directors of Nationwide Life and
Annuity Insurance Company (the Company) on August 8, 1984. The Account
has been registered as a unit investment trust under the Investment
Company Act of 1940. On August 21, 1991, the Company (Depositor)
transferred to the Account, 50,000 shares of the American Century VP --
American Century VP Advantage fund for which the Account was credited
with 25,000 accumulation units. The value of the accumulation units
purchased by the Company on August 21, 1991 was $250,000.
The Company offers Modified Single Premium, Multiple Payment and
Flexible Premium Variable Life Insurance Policies through the Account.
The primary distribution for the contracts is through banks and other
financial institutions; however, other distributors may be utilized.
(b) The Contracts
Only contracts with a front-end sales charge, a contingent deferred
sales charge and certain other fees, have been offered for purchase.
Additionally, contracts without a front-end sales charge, but with a
contingent deferred sales charge and certain other fees, have been
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:
Portfolio of the American Century Variable Portfolios, Inc.
(American Century VP);
American Century VP - American Century VP Advantage (ACVPAdv)
Portfolio of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Growth Portfolio (FidVIPGr)
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolio of the Neuberger & Berman Advisers Management Trust
(Neuberger & Berman AMT);
Neuberger & Berman AMT - Balanced Portfolio (NBAMTBal)
At December 31, 1997, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain policy charges (see notes 2 and 3). 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 investment options, the latter being included
in the accounts of the Company.
(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, 1997. 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.
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(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company, which is taxed as a life insurance company
under the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Reclassifications
Certain 1996 and 1995 amounts have been reclassified to conform with
the current period presentation.
(2) POLICY CHARGES
(a) Deductions from Premiums
For single premium contracts, no deduction is made from any premium at
the time of payment. On multiple payment contracts and flexible premium
contracts, the Company deducts a charge for state premium taxes equal
to 2.5% of all premiums received to cover the payment of these premium
taxes. The Company also deducts a sales load from each premium payment
received not to exceed 3.5% of each premium payment. 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 by
liquidating units. 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 multiple payment contracts, the Company currently deducts a monthly
administrative charge of $5 (may deduct up to $7.50, maximum) to
recover policy maintenance, accounting, record keeping and other
administrative expenses.
For flexible premium contracts, the Company currently deducts a monthly
administrative charge of $12.50 during the first policy year and $5 per
month thereafter (may deduct up to $7.50, maximum) to recover policy
maintenance, accounting, record keeping and other administrative
expenses. Additionally, the Company deducts an increase charge of $2.04
per year per $1,000 applied to any increase in the specified amount
during the first 12 months after the increase becomes effective.
For single premium contracts, the Company deducts an annual
administrative charge which is determined as follows:
Purchase payments totaling less than $25,000 - $90/year
Purchase payments totaling $25,000 or more - $50/year
The above charges are assessed against each contract by
liquidating units.
No charges were deducted from the initial funding, or from the
earnings thereon.
(d) Surrender Charges
Policy surrenders result in a redemption of the contract value from the
Account and payment of the surrender proceeds to the contract owner or
designee. The surrender proceeds consist of the contract value, less
any outstanding policy loans, and less a surrender charge, if
applicable. The charge is determined according to contract type.
For multiple payment contracts and flexible premium contracts, the
amount charged is determined based upon a specified percentage of the
initial surrender charge, which varies by issue age, sex and rate
class. The charge is 100% of the initial surrender charge in the first
year, declining to 0% after the ninth year.
For single premium contracts, the charge is determined based upon a
specified percentage of the original purchase payment. The charge is
8.5% in the first year, and declines to 0% after the ninth year.
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(3) ASSET CHARGES
For multiple payment contracts and flexible premium contracts, the Company
deducts charges from the contract to cover mortality and expense risk
charges related to operations, and to recover policy maintenance charges.
The charge is equal to an annual rate of .80%, with certain exceptions.
For single premium contracts, the Company deducts a charge from the
contract to cover mortality and expense risk charges related to operations,
and to recover policy maintenance and premium tax charges. The charge is
equal to an annual rate of 1.30% during the first ten policy years, and
1.00% thereafter. At this time no single premium contracts are in force.
The above charges are assessed through the daily unit value calculation. No
charges are deducted from the initial funding, or from earnings thereon.
(4) POLICY LOANS (NET OF REPAYMENTS)
Contract provisions allow contract owners to borrow up to 90% of a policy's
cash surrender value. On each policy anniversary following the initial
loan, 6% interest is due and payable to the Company.
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. Loan repayments result in a transfer
of collateral, including interest, back to the Account.
(5) 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.
(6) SCHEDULE I
Schedule I presents the components of the change in the unit values, which
are the basis for contract owners' equity. This schedule is presented in
the following format:
- Beginning unit value - Jan. 1
- Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to
capital gain and dividend distributions from the underlying mutual
funds.)
- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
- Asset charges
(This amount reflects the decrease in the unit value due to the
charges discussed in note 3.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
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SCHEDULE I
NATIONWIDE VL SEPARATE ACCOUNT-A
MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
ACVPAdv ACVPAdv(+) FidVIPGr NSATCapAp NSATGvtBd
------------ ------------ ------------ ------------ ------------
1997
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $ 14.210999 15.079515 20.008196 18.410667 15.383251
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends .999595 1.062482 .738304 .749108 .983193
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) .816206 .871710 3.943560 5.577539 .496554
------------ ------------ ------------ ------------ ------------
Asset charges (.120712) .000000 (.180513) (.173568) (.127092)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 15.906088 17.013707 24.509547 24.563746 16.735906
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value* 12% 13% 22% 33% 9%
============ ============ ============ ============ ============
1996
Beginning unit value - Jan. 1 $ 13.112917 13.802855 17.583952 14.713230 14.984933
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends .945920 .998314 1.263661 .766553 .930103
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) .260998 .278346 1.312893 3.061949 (.412550)
------------ ------------ ------------ ------------ ------------
Asset charges (.108836) .000000 (.152310) (.131065) (.119235)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 14.210999 15.079515 20.008196 18.410667 15.383251
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value* 8% 9% 14% 25% 3%
============ ============ ============ ============ ============
1995
Beginning unit value - Jan. 1 $ 11.321934 11.822996 13.094007 11.465403 12.720514
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends .411556 .431938 .072389 .653781 .903001
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) 1.477165 1.547921 4.544905 2.696528 1.472503
------------ ------------ ------------ ------------ ------------
Asset charges (.097738) .000000 (.127349) (.102482) (.111085)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 13.112917 13.802855 17.583952 14.713230 14.984933
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value* 16% 17% 34% 28% 18%
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NSATMyMkt NSATTotRe NBAMTBal
------------ ------------ ------------
1997
<S> <C> <C> <C>
Beginning unit value - Jan. 1 12.214743 21.988773 15.775523
------------ ------------ ------------
Reinvested capital gains
and dividends .640005 1.284328 1.058944
------------ ------------ ------------
Unrealized gain (loss) .000000 5.164704 1.999835
------------ ------------ ------------
Asset charges (.100447) (.204402) (.139959)
------------ ------------ ------------
Ending unit value - Dec. 31 12.754301 28.233403 18.694343
------------ ------------ ------------
Percentage increase (decrease)
in unit value* 4% 28% 19%
============ ============ ============
1996
Beginning unit value - Jan. 1 11.714295 18.192762 14.878481
------------ ------------ ------------
Reinvested capital gains
and dividends .596995 1.217547 2.281380
------------ ------------ ------------
Unrealized gain (loss) .000000 2.737018 (1.262381)
------------ ------------ ------------
Asset charges (.096547) (.158554) (.121957)
------------ ------------ ------------
Ending unit value - Dec. 31 12.214743 21.988773 15.775523
------------ ------------ ------------
Percentage increase (decrease)
in unit value* 4% 21% 6%
============ ============ ============
1995
Beginning unit value - Jan. 1 11.176411 14.205723 12.118394
------------ ------------ ------------
Reinvested capital gains
and dividends .629782 1.413734 .308616
------------ ------------ ------------
Unrealized gain (loss) .000000 2.703396 2.562255
------------ ------------ ------------
Asset charges (.091898) (.130091) (.110784)
------------ ------------ ------------
Ending unit value - Dec. 31 11.714295 18.192762 14.878481
------------ ------------ ------------
Percentage increase (decrease)
in unit value* 5% 28% 23%
============ ============ ============
</TABLE>
* An annualized rate of return cannot be determined as asset charges do not
include the policy charges discussed in note 2.
+ For Depositor, see note 1a.
See note 6.
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Independent Auditors' Report
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of Nationwide VL Separate Account-A:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VL Separate Account-A as of December 31,
1997, and the related statements of operations and changes in contract owners'
equity and schedules of changes in unit value for each of the years in the three
year period then ended. These financial statements and schedules of changes in
unit value are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules of changes in unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, 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 schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of Nationwide VL Separate Account-A as of December 31, 1997, and the
results of its operations and its changes in contract owners' equity and
schedules of changes in unit value for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1998
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NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220
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