<PAGE> 1
NATIONWIDE(R) VLI
SEPARATE ACCOUNT
SEMI-ANNUAL REPORT
JUNE 30, 1997
INVESTMENT/LIFE(R)
VAN KAMPEN AMERICAN CAPITAL/
NATIONWIDE LIFE INSURANCE COMPANY
VLO-185-X (6/97)
<PAGE> 2
[NATIONWIDE LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215-2220
[PHOTO]
PRESIDENT'S MESSAGE
We are pleased to present the 1997 semi-annual report of the Nationwide VLI
Separate Account.
Our Enterprise Vision statement states: "We exist to serve our customers."
Everything we do is focused on you, our customer, and on your needs.
We recognize that your expectations have changed and your standards for value
and service are higher than ever before. You are being asked to take more
responsibility for your own financial future, as employers and government
programs provide fewer guarantees.
We know that you expect service and products customized to fit your needs -
including financial advice - and you expect to receive service at any time,
anywhere and any way you choose.
We are responding to your changing needs and expectations with innovative
product offerings, continuing investment in the training and professional
development of our people, and our investment in technology to enable us to
serve you faster, better and more cost effectively.
Equity investments produced solid gains for the first half of 1997 with the Dow
Jones Industrial Average breaking the 8,000 mark on July 16. The U.S. economy,
in its seventh year of expansion, is growing vigorously and corporate profits
are better than anticipated.
Interest rates and inflation are still at very low levels. However, the risk of
a temporary spike remains as the Federal Reserve might be forced to raise
interest rates in order to keep our economy on an inflation-free growth path.
Even such policy actions are not expected to end the prosperous times which we
now enjoy. In the long run, equity valuations will reflect these excellent
economic conditions.
Thank you for giving Nationwide Life Insurance Company the opportunity to meet
your investment needs.
/s/ Joseph J. Gasper
Joseph J. Gasper, President
3
<PAGE> 3
<TABLE>
<CAPTION>
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
JUNE 30, 1997
(UNAUDITED)
ASSETS:
<S> <C>
Investments in Van Kampen American Capital Life
Investment Trust, at market value:
Asset Allocation Fund
2,074,097 shares (cost $23,639,475) ................ $ 24,889,166
Domestic Income Fund
242,549 shares (cost $1,975,871) ................... 2,025,282
Emerging Growth Fund
104,076 shares (cost $1,427,196) ................... 1,545,534
Enterprise Fund
1,724,979 shares (cost $24,889,950) ................ 32,464,108
Global Equity Fund
104,769 shares (cost $1,246,590) ................... 1,418,572
Government Fund
5,375,250 shares (cost $47,336,579) ................ 46,442,160
Money Market Fund
8,281,064 shares (cost $8,281,064) ................. 8,281,064
Real Estate Securities Fund
35,041 shares (cost $512,007) ...................... 549,088
------------
Total assets .................................... 117,614,974
ACCOUNTS PAYABLE ............................................ 164,628
-------------
CONTRACT OWNER'S EQUITY ..................................... $ 117,450,346
=============
</TABLE>
4
<PAGE> 4
<TABLE>
<CAPTION>
Contract owners' equity represented by: UNITS UNIT VALUE
-------- ----------
Single Premium contracts issued prior to April 16, 1990
(policy years 1 through 10):
<S> <C> <C> <C>
Asset Allocation Fund.............................................. 387,464 $ 26.093000 $ 10,110,098
Domestic Income Fund............................................... 35,802 18.953993 678,591
Emerging Growth Fund............................................... 20,923 14.571650 304,883
Enterprise Fund.................................................... 232,317 32.474276 7,544,326
Global Equity Fund................................................. 17,472 13.864158 242,235
Government Fund.................................................... 642,994 19.664658 12,644,257
Money Market Fund.................................................. 178,429 16.626479 2,966,646
Real Estate Securities Fund........................................ 9,164 15.913476 145,831
Single Premium contracts issued prior to April 16, 1990
Reduced ARF (policy year 11 and thereafter):
Asset Allocation Fund............................................... 551,781 26.230119 14,473,281
Domestic Income Fund................................................ 62,342 19.053600 1,187,840
Emerging Growth Fund................................................ 83,884 14.648309 1,228,759
Enterprise Fund..................................................... 749,963 32.644956 24,482,509
Global Equity Fund.................................................. 83,639 13.936995 1,165,676
Government Fund..................................................... 1,704,005 19.768804 33,686,141
Money Market Fund................................................... 309,827 16.713873 5,178,409
Real Estate Securities Fund......................................... 25,168 15.997032 402,613
Single Premium contracts issued on or after April 16, 1990:
Asset Allocation Fund................................................ 5,430 22.383804 121,544
Domestic Income Fund................................................. 8,327 18.706191 155,766
Emerging Growth Fund................................................. 592 14.470445 8,567
Enterprise Fund...................................................... 6,411 30.521305 195,672
Global Equity Fund................................................... 625 13.767875 8,605
Government Fund...................................................... 2,840 14.883977 42,270
Money Market Fund.................................................... 10,223 12.275602 125,493
Multiple Premium Contracts and Flexible Premium Contracts:
Asset Allocation Fund................................................ 7,723 20.215362 156,123
Enterprise Fund...................................................... 7,402 26.237613 194,211
========= ========= =============
$ 117,450,346
=============
</TABLE>
See accompanying notes to financial statements.
================================================================================
5
<PAGE> 5
<TABLE>
<CAPTION>
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997, 1996 AND 1995
(UNAUDITED)
1997 1996 1995
---------- ---------- ----------
INVESTMENT ACTIVITY:
<S> <C> <C> <C>
Reinvested dividends ........................................... $ 1,786,969 2,059,904 2,288,735
Mortality and expense charges (note 3) ......................... (254,157) (566,377) (554,381)
---------- ---------- ----------
Net investment activity ..................................... 1,532,812 1,493,527 1,734,354
---------- ---------- ----------
Proceeds from mutual fund shares sold .......................... 16,577,761 12,481,254 11,514,858
Cost of mutual funds sold ...................................... (15,653,071) (11,685,540) (10,795,244)
---------- ---------- ----------
Realized gain (loss) on investments ......................... 924,690 795,714 719,614
Change in unrealized gain (loss) on investments ................ 5,132,330 (576,404) 10,877,942
---------- ----------- ----------
Net gain (loss) on investments .............................. 6,057,020 219,310 11,597,556
---------- ----------- ----------
Reinvested capital gains ....................................... 890,649 1,397,354 274,305
---------- ----------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ...................... 8,480,481 3,110,191 13,606,215
---------- ----------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners -
net of transfers between funds .............................. (64,839) 40,033 36,002
Surrenders ..................................................... (9,899,337) (7,029,982) (4,224,999)
Death benefits ................................................. (861,880) (515,238) (550,901)
Policy loans (net of repayments) (note 5) ...................... 1,989,629 1,606,123 (216,017)
Deductions for surrender charges (note 2d) ..................... (6,591) (10,602) (130,691)
Redemptions to pay cost of insurance charges
and administration charges (notes 2b and 2c) ................ (687,968) (776,048) (947,288)
---------- ----------- ----------
Net increase (decrease) in equity transactions ........... (9,530,986) (6,685,714) (6,033,894)
---------- ----------- ----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............................. (1,050,505) (3,575,523) 7,572,321
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....................... 118,500,851 121,702,511 112,992,212
---------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ............................. $ 117,450,346 118,126,988 120,564,533
============= =========== ===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
6
<PAGE> 6
================================================================================
NATIONWIDE VLI SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 AND 1995
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VLI Separate Account (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
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.
The Company offers modified single premium, multiple payment and
flexible premium variable life insurance contracts through the Account.
The primary distribution for the contracts is through the brokerage
community; however, other distributors may be utilized.
(b) The Contracts
Prior to December 31, 1990, only contracts without a front-end sales
charge, but with a contingent deferred sales charge and certain other
fees, were offered for purchase. Beginning December 31, 1990, contracts
with a front-end sales charge, 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 funds:
Funds of the Van Kampen American Capital Life Investment Trust (Van
Kampen American Capital LIT);
Van Kampen American Capital LIT - Asset Allocation Fund
Van Kampen American Capital LIT - Domestic Income Fund
Van Kampen American Capital LIT - Emerging Growth Fund
Van Kampen American Capital LIT - Enterprise Fund
Van Kampen American Capital LIT - Global Equity Fund
Van Kampen American Capital LIT - Government Fund
Van Kampen American Capital LIT - Money Market Fund
Van Kampen American Capital LIT - Real Estate Securities Fund
At June 30, 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 benefits, 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 June 30, 1997. Fund purchases and sales
are accounted for on the trade date (date the order to buy or sell is
executed). The cost of investments sold is determined on a specific
identification basis, and dividends (which include capital gain
distributions) are accrued as of the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company, which is taxed as a life insurance company
under the provisions of the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
7
<PAGE> 7
(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 year presentation.
(2) POLICY CHARGES
(a) Deductions from Premiums
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 single premium contracts, the Company deducts an annual
administrative charge which is determined as follows:
Contracts issued prior to April 16, 1990:
Purchase payments totalling less than $25,000 - $10/month
Purchase payments totalling $25,000 or more - none
Contracts issued on or after April 16, 1990:
Purchase payments totalling less than $25,000 - $90/year ($65/year
in New York)
Purchase payments totalling $25,000 or more - $50/year
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.
The above charges are assessed against each contract by liquidating
units.
(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 single premium contracts, the charge is determined based upon a
specified percentage of the original purchase payment. For single
premium contracts issued prior to April 16, 1990, the charge is 8% in
the first year and declines to 0% after the ninth year. For single
premium contracts issued on or after April 16, 1990, the charge is 8.5%
in the first year and declines to 0% after the ninth year.
For multiple payment contracts and flexible premium contracts, the
amount charged is 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, with
certain exceptions, declining to 0% after the ninth year.
The Company may waive the surrender charge for certain contracts in
which the sales expenses normally associated with the distribution of a
contract are not incurred.
8
<PAGE> 8
(3) ASSET CHARGES
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. For contracts
issued prior to April 16, 1990, the charge is equal to an annual rate of
.95% during the first ten policy years, and .50% thereafter. A reduction of
charges on these contracts is possible in policy years six through ten for
those contracts achieving certain investment performance criteria; for
contracts issued on or after April 16, 1990, the charge is equal to an
annual rate of 1.30% during the first ten policy years, and 1.00%
thereafter.
For multiple payment contracts and flexible premium contracts, the Company
deducts a charge equal to an annual rate of .80%, with certain exceptions,
to cover mortality and expense risk charges related to operations.
The above charges are assessed through the daily unit value calculation.
(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.
(5) POLICY LOANS (NET OF REPAYMENTS)
Contract provisions allow contract owners to borrow up to 90% (50% during
first year of single premium contracts) of a policy's cash surrender value.
For single premium contracts issued prior to April 16, 1990, 6.5% interest
is due and payable annually in advance. For single premium contracts issued
on or after April 16, 1990, multiple payment contracts and flexible premium
contracts, 6% interest is due and payable in advance on the policy
anniversary when there is a loan outstanding on the policy.
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.
================================================================================
9
<PAGE> 9
Bulk Rate
U.S. Postage
PAID
Columbus, Ohio
Permit No. 521
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220
Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company
