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[NATIONWIDE LOGO]
NATIONWIDE(R)
VARIABLE
ACCOUNT-3
SEMI-ANNUAL REPORT
TO
CONTRACT OWNERS
JUNE 30, 1996
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
APO-1545-U (6/96)
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[NATIONWIDE LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
[PHOTO]
PRESIDENT'S MESSAGE
We are pleased to present the 1996 semi-annual report of the Nationwide Variable
Account-3.
Equity investments provided a respectable return for the first half of 1996 with
the major market indices holding comfortably in double digits. Fixed-income
investments, however, did not perform as well with the average bond fund showing
slightly negative performance for the period. This was due to rising interest
rates and lingering inflation fears.
The U.S. economy showed signs of increasing strength during the first half of
the year. The question remains: will growth fall back to the perceived
inflation-free path by itself or will the Federal Reserve have to step in and
enforce moderation? Recent economic statistics, such as the July unemployment
report, point in the direction of some moderation. Also, fierce competition in
all consumer-goods markets make inflationary price increases very difficult. One
way or the other, we expect slower economic growth in the near future.
Financial assets will remain the preferred individual investment option because
they will continue providing security, liquidity, and income and growth.
We appreciate your confidence in the Nationwide Insurance Enterprise and in our
life and annuity products. You have our assurance that your personal
satisfaction with our products and service is our highest priority.
/s/ Joseph J. Gasper
Joseph J. Gasper, President
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NATIONWIDE VARIABLE ACCOUNT-3
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Van Kampen American Capital LIT - Asset Allocation Fund
3,002,631 shares (cost $34,744,287) .................................. $ 36,001,549
Van Kampen American Capital LIT - Domestic Income Fund
1,501,669 shares (cost $11,771,251) .................................. 12,223,586
Van Kampen American Capital LIT - Emerging Growth Fund
212,814 shares (cost $2,711,984) ..................................... 2,913,427
Van Kampen American Capital LIT - Enterprise Fund
2,210,224 shares (cost $31,557,770) .................................. 35,429,892
Van Kampen American Capital LIT - Global Equity Fund
22,314 shares (cost $236,344) ........................................ 257,060
Van Kampen American Capital LIT - Government Fund
857,384 shares (cost $7,537,019) ..................................... 7,347,778
Van Kampen American Capital LIT - Money Market Fund
7,275,625 shares (cost $7,275,625) ................................... 7,275,625
Van Kampen American Capital LIT - Real Estate Securities Fund
5,261 shares (cost $54,726) .......................................... 61,234
-----------
Total investments .................................................. 101,510,151
Accounts receivable ........................................................ 1,058
-----------
Total assets ....................................................... 101,511,209
===========
CONTRACT OWNERS' EQUITY ....................................................... $101,511,209
===========
</TABLE>
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<TABLE>
<CAPTION>
Contract owners' equity represented by: UNITS UNIT VALUE
----- ----------
Contracts in accumulation phase:
<S> <C> <C> <C>
Van Kampen American Capital LIT -
Asset Allocation Fund:
Tax qualified ........................... 563,873 $22.206141 $ 12,521,443
Non-tax qualified ....................... 1,056,283 22.206141 23,455,969
Van Kampen American Capital LIT -
Domestic Income Fund:
Tax qualified ........................... 213,330 15.641864 3,336,879
Non-tax qualified ....................... 567,142 15.641864 8,871,158
Van Kampen American Capital LIT -
Emerging Growth Fund:
Tax qualified ........................... 69,796 13.514362 943,248
Non-tax qualified ....................... 145,786 13.514362 1,970,205
Van Kampen American Capital LIT -
Enterprise Fund:
Tax qualified ........................... 409,640 28.911348 11,843,245
Non-tax qualified ....................... 815,337 28.911348 23,572,492
Van Kampen American Capital LIT -
Global Equity Fund:
Tax qualified ........................... 7,151 11.372137 81,322
Non-tax qualified ....................... 15,451 11.372137 175,711
Van Kampen American Capital LIT -
Government Fund:
Tax qualified ........................... 159,206 14.413515 2,294,718
Non-tax qualified ....................... 348,136 14.413515 5,017,863
Van Kampen American Capital LIT -
Money Market Fund:
Tax qualified ........................... 148,716 13.961806 2,076,344
Non-tax qualified ....................... 370,573 13.961806 5,173,868
Van Kampen American Capital LIT -
Real Estate Securities Fund:
Tax qualified ........................... 1,921 11.600253 22,284
Non-tax qualified ....................... 3,355 11.600253 38,919
------- ---------
Reserves for annuity contracts in payout phase:
Non-tax qualified ....................... 115,541
------------
$101,511,209
============
</TABLE>
See accompanying notes to financial statements.
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NATIONWIDE VARIABLE ACCOUNT-3
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1996, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends ........... $ 2,350,377 952,302 746,451
------------ ------------ -----------
Gain (loss) on investments:
Proceeds from redemptions of mutual fund shares 24,687,009 23,255,744 26,321,109
Cost of mutual fund shares sold ............... (24,401,512) (23,765,214) (25,481,967)
------------ ------------ -----------
Realized gain (loss) on investments ........... 285,497 (509,470) 839,142
Change in unrealized gain (loss) on investments 3,457,357 13,849,017 (6,167,350)
------------ ------------ -----------
Net gain (loss) on investments ............. 3,742,854 13,339,547 (5,328,208)
------------ ------------ -----------
Net investment activity ................. 6,093,231 14,291,849 (4,581,757)
------------ ------------ -----------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners .. 2,953,009 1,689,821 3,844,735
Redemptions ...................................... (8,875,651) (11,442,174) (5,931,522)
Annuity benefits ................................. (7,775) (7,055) (5,062)
Adjustments to maintain reserves ................. 1,920 (3,553) (869)
------------ ------------ -----------
Net equity transactions ................. (5,928,497) (9,762,961) (2,092,718)
------------ ------------ -----------
EXPENSES (NOTE 2):
Contract charges ................................. (718,664) (696,926) (768,310)
Contingent deferred sales charges ................ (95,916) (264,767) (148,835)
------------ ------------ -----------
Total expenses .......................... (814,580) (961,693) (917,145)
------------ ------------ -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............... (649,846) 3,567,195 (7,591,620)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ......... 102,161,055 96,801,366 111,635,860
------------ ------------ -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ............... $ 101,511,209 100,368,561 104,044,240
============ ============ ===========
</TABLE>
See accompanying notes to financial statements.
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NATIONWIDE VARIABLE ACCOUNT-3
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996, 1995 AND 1994
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
Nationwide Variable Account-3 (the Account) was established pursuant to a
resolution of the Board of Directors of Nationwide Life Insurance Company (the
Company) on October 7, 1987. The Account has been 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 the brokerage community; however, other distributors may be
utilized.
(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.
Contract owners in either the accumulation or the payout phase may invest
in the following funds of the Van Kampen American Capital Life Investment Trust
(Van Kampen American Capital LIT):
Van Kampen American Capital LIT - Asset Allocation Fund
(formerly Van Kampen American Capital - Multiple Strategy Fund)
Van Kampen American Capital LIT - Domestic Income Fund
(formerly Van Kampen American Capital - Domestic Strategic Income
Fund)
Van Kampen American Capital LIT - Emerging Growth Fund
Van Kampen American Capital LIT - Enterprise Fund
(formerly Van Kampen American Capital - Common Stock 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, 1996, contract owners have invested in all of the above funds.
The contract owners' equity is affected by the investment results of each fund,
equity transactions by contract owners and certain contract expenses (see note
2). The accompanying financial statements include only contract owners' purchase
payments pertaining to the variable portions of their contracts and exclude any
purchase payments for fixed dollar benefits, the latter being included in the
accounts of the Company.
(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, 1996. The cost of investments sold is
determined on a 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.
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(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of such
contracts is surrendered, the Company will, with certain exceptions, deduct from
the contract owner's contract value a contingent deferred sales charge, not to
exceed 6% (3% after 36 months) of the lesser of the total of all purchase
payments made within 72 months prior to the date of the request for surrender,
or the amount surrendered. (For contracts issued in the State of New York, the
contingent deferred sales charge will not exceed 7% of purchase payments, such
charge declining 1% per year, to 0%, after the purchase payment has been held in
the contract for seven years.) No sales charges are deducted on redemptions used
to purchase units in the fixed investment options of the Company.
The following administrative charges are deducted by the Company: (a) an
annual contract maintenance charge of $35 ($30 for contracts issued in the State
of New York) which is satisfied by surrendering units; and (b) a mortality risk
charge, an expense risk charge and an administration charge assessed through the
daily unit value calculation equal to an annual rate of 0.80%, 0.45% and 0.05%,
respectively.
(3) 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 gains 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.)
- Contract charges
(This amount reflects the decrease in the unit value due to the
mortality risk charge, expense risk charge and administration
charge discussed in note 2.)
- Ending unit value - June 30
- Percentage increase (decrease) in unit value.
For contracts in the payout phase, an assumed investment return of 3.5%,
used in the calculation of the annuity benefit payment amount, results in a
corresponding reduction in the components of the unit values as shown in
Schedule I.
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SCHEDULE I
NATIONWIDE VARIABLE ACCOUNT-3
TAX QUALIFIED AND NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
SIX MONTH PERIODS ENDED JUNE 30, 1996, 1995 AND 1994
(UNDERLYING MUTUAL FUNDS OF VAN KAMPEN AMERICAN CAPITAL LIT)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSET DOMESTIC EMERGING GLOBAL
ALLOCATION INCOME GROWTH ENTERPRISE EQUITY
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 $21.272421 15.854864 11.635151 25.778191 10.244062
- ---------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .431719 .024061 .000000 .937529 .000000
- ---------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .643148 (.135898) 1.960172 2.375965 1.198321
- ---------------------------------------------------------------------------------------------------------------------
Contract charges (.141147) (.101163) (.080961) (.180337) (.070246)
- ---------------------------------------------------------------------------------------------------------------------
Ending unit value - June 30 $22.206141 15.641864 13.514362 28.911348 11.372137
- ---------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 4% (1)% 16% 12% 11%
=====================================================================================================================
1995
Beginning unit value - Jan. 1 $16.406732 13.235145 ** 19.065611 **
- ---------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .020462 .013461 .245406
- ---------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.850082 1.777828 3.610635
- ---------------------------------------------------------------------------------------------------------------------
Contract charges (.116000) (.091851) (.136952)
- ---------------------------------------------------------------------------------------------------------------------
Ending unit value - June 30 $19.161276 14.934583 22.784700
- ---------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 17% 13% 20%
=====================================================================================================================
1994
Beginning unit value - Jan. 1 $17.253369 14.016253 ** 19.993094 **
- ---------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .014574 .012212 .106004
- ---------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.916871) (.683550) (.982335)
- ---------------------------------------------------------------------------------------------------------------------
Contract charges (.110036) (.088916) (.128824)
- ---------------------------------------------------------------------------------------------------------------------
Ending unit value - June 30 $16.241036 13.255999 18.987939
- ---------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (6)% (5)% (5)%
=====================================================================================================================
<CAPTION>
MONEY REAL ESTATE
GOVERNMENT MARKET SECURITIES
FUND FUND FUND
<S> <C> <C> <C>
1996
Beginning unit value - Jan. 1 14.827943 13.724323 10.765351
- -------------------------------------------------------------------------------
Reinvested capital gains
and dividends .480351 .327029 .007993
- -------------------------------------------------------------------------------
Unrealized gain (loss) (.800983) .000000 .898434
- -------------------------------------------------------------------------------
Contract charges (.093796) (.089546) (.071525)
- -------------------------------------------------------------------------------
Ending unit value - June 30 14.413515 13.961806 11.600253
- -------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (3)% 2% 8%
===============================================================================
1995
Beginning unit value - Jan. 1 12.821877 13.183559 **
- -------------------------------------------------------------------------------
Reinvested capital gains
and dividends .470142 .359349
- -------------------------------------------------------------------------------
Unrealized gain (loss) .828947 .000000
- -------------------------------------------------------------------------------
Contract charges (.088697) (.086878)
- -------------------------------------------------------------------------------
Ending unit value - June 30 14.032269 13.456030
- -------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 9% 2%
===============================================================================
1994
Beginning unit value - Jan. 1 13.620968 12.879003 **
- -------------------------------------------------------------------------------
Reinvested capital gains
and dividends .401054 .193155
- -------------------------------------------------------------------------------
Unrealized gain (loss) (1.128428) .000000
- -------------------------------------------------------------------------------
Contract charges (.085342) (.083870)
- -------------------------------------------------------------------------------
Ending unit value - June 30 12.808252 12.988288
- -------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (6)% 1%
===============================================================================
<FN>
* An annualized rate of return cannot be determined as it is the change for a
six month period and contract charges do not include the annual contract
maintenance charge discussed in note 2.
** This investment option was not being utilized or was not available.
</TABLE>
See note 3.
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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
