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[NATIONWIDE LOGO]
NATIONWIDE(R)
VLI SEPARATE
ACCOUNT-3
Semi-Annual Report
to
Contract Owners
June 30, 1997
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
APO-2413-K (6/97)
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NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215-2220
[JOSPEH J. GASPER PHOTO]
PRESIDENT'S MESSAGE
We are pleased to present the 1997 semi-annual report of the Nationwide VLI
Separate Account-3.
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, President
Joseph J. Gasper, President
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NATIONWIDE VLI SEPARATE ACCOUNT-3
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
June 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments at market value:
American Century VP - American Century VP Advantage (ACVPAdv)
136,502 shares (cost $753,493) ........................................ $ 851,770
American Century VP - American Century VP Balanced (ACVPBal)
2,395 shares (cost $17,094) ........................................... 18,560
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
7,088 shares (cost $75,814) ........................................... 68,467
American Century VP - American Century VP International (ACVPInt)
4,034 shares (cost $23,053) ........................................... 27,634
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
1,840 shares (cost $33,558) ........................................... 43,005
Dreyfus Stock Index Fund (DryStkIx)
13,114 shares (cost $246,294) ......................................... 317,745
Dreyfus VIF - Growth and Income Portfolio (DryGroInc)
49 shares (cost $1,000) ............................................... 1,037
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
20,810 shares (cost $416,687) ......................................... 459,077
Fidelity VIP - Growth Portfolio (FidVIPGr)
11,516 shares (cost $342,979) ......................................... 393,864
Fidelity VIP - High Income Portfolio (FidVIPHI)
3,482 shares (cost $40,944) ........................................... 43,281
Fidelity VIP - Overseas Portfolio (FidVIPOv)
954 shares (cost $16,639) ............................................. 19,111
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
8,428 shares (cost $128,740) .......................................... 139,898
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
16,449 shares (cost $260,263) ......................................... 294,933
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
282,391 shares (cost $3,422,383) ...................................... 5,523,563
Nationwide SAT - Government Bond Fund (NSATGvtBd)
133,587 shares (cost $1,448,938) ...................................... 1,469,452
Nationwide SAT - Money Market Fund (NSATMyMkt)
348,259 shares (cost $348,259) ........................................ 348,259
Nationwide SAT - Small Company Fund (NSATSmCo)
3,825 shares (cost $51,430) ........................................... 57,983
Nationwide SAT - Total Return Fund (NSATTotRe)
955,549 shares (cost $10,469,554) ..................................... 15,011,681
Neuberger & Berman - Balanced Portfolio (NBAMTBal)
79,865 shares (cost $1,225,660) ....................................... 1,324,158
Neuberger & Berman - Growth Portfolio (NBAMTGro)
2,442 shares (cost $63,582) ........................................... 67,732
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Neuberger & Berman - Limited Maturity Bond Portfolio (NBAMTLMat)
705 shares (cost $9,785) .............................................. 9,600
Neuberger & Berman - Partners Portfolio (NBAMTPart)
5,235 shares (cost $80,491) ........................................... 95,127
Oppenheimer - Bond Fund (OppBdFd)
437 shares (cost $5,053) .............................................. 5,052
Oppenheimer - Global Securities Fund (OppGISec)
2,345 shares (cost $40,218) ........................................... 47,530
Oppenheimer - Multiple Strategies Fund (OppMult)
350 shares (cost $5,184) .............................................. 5,642
Strong Special Fund II, Inc. (StSpec2)
4,470 shares (cost $78,950) ........................................... 85,831
Strong VIF - Strong Discovery Fund II (StDisc2)
2,032 shares (cost $22,498) ........................................... 22,875
Strong VIF - Strong International Stock Fund II (StIntStk2)
1,347 shares (cost $15,238) ........................................... 15,771
Van Eck - Worldwide Bond Fund (VEWrldBd)
150 shares (cost $1,602) .............................................. 1,598
Van Eck - Worldwide Emerging Markets Fund (VEWrldEMkt)
821 shares (cost $11,379) ............................................. 12,555
Van Eck - Worldwide Hard Assets Fund (VEWrldHAs)
1,200 shares (cost $19,622) ........................................... 19,130
Van Kampen American Capital LIT - Real Estate Securities Fund (VKACRESec)
1,215 shares (cost $17,683) ........................................... 19,042
Warburg Pincus - International Equity Portfolio (WPIntEq)
1,884 shares (cost $21,765) ........................................... 24,865
Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr)
3,649 shares (cost $47,468) ........................................... 53,355
-----------
Total assets ....................................................... 26,899,183
Accounts payable ............................................................... 189
-----------
Contract owners' equity ........................................................ $26,898,994
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</TABLE>
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<TABLE>
<CAPTION>
Contract owners' equity represented by: UNITS UNIT VALUE
-------- ----------
<S> <C> <C> <C>
American Century VP - American Century VP Advantage ... 29,778 $ 15.099216 $ 449,624
American Century VP - American Century VP Advantage
(Depositor) (note 1a) .............................. 25,000 16.085686 402,142
American Century VP - American Century VP Balanced .... 1,167 15.886009 18,539
American Century VP -
American Century VP Capital Appreciation ........... 4,646 14.738773 68,476
American Century VP - American Century VP International 1,963 14.071418 27,622
The Dreyfus Socially Responsible Growth Fund, Inc. .... 2,144 20.067574 43,025
Dreyfus Stock Index Fund .............................. 15,818 20.087892 317,750
Dreyfus VIF - Growth and Income Portfolio ............. 96 10.866361 1,043
Fidelity VIP - Equity-Income Portfolio ................ 15,723 29.198573 459,089
Fidelity VIP - Growth Portfolio ....................... 14,363 27.422266 393,866
Fidelity VIP - High Income Portfolio .................. 1,711 25.305043 43,297
Fidelity VIP - Overseas Portfolio ..................... 1,075 17.772931 19,106
Fidelity VIP-II - Asset Manager Portfolio ............. 6,949 20.125955 139,855
Fidelity VIP-II - Contrafund Portfolio ................ 19,863 14.850339 294,972
Nationwide SAT - Capital Appreciation Fund ............ 249,352 22.151612 5,523,549
Nationwide SAT - Government Bond Fund ................. 93,256 15.757158 1,469,450
Nationwide SAT - Money Market Fund .................... 27,916 12.475345 348,262
Nationwide SAT - Small Company Fund ................... 3,832 15.127883 57,970
Nationwide SAT - Total Return Fund .................... 573,986 26.153320 15,011,640
Neuberger & Berman - Balanced Portfolio ............... 79,594 16.636349 1,324,154
Neuberger & Berman - Growth Portfolio ................. 3,358 20.170565 67,733
Neuberger & Berman - Limited Maturity Bond Portfolio .. 690 13.897471 9,589
Neuberger & Berman - Partners Portfolio ............... 4,721 20.143858 95,099
Oppenheimer - Bond Fund ............................... 313 16.155671 5,057
Oppenheimer - Global Securities Fund .................. 3,043 15.600333 47,472
Oppenheimer - Multiple Strategies Fund ................ 282 20.054867 5,655
Strong Special Fund II, Inc. .......................... 3,602 23.829097 85,832
Strong VIF - Strong Discovery Fund II ................. 1,334 17.150062 22,878
Strong VIF - Strong International Stock Fund II ....... 1,300 12.130519 15,770
Van Eck - Worldwide Bond Fund ......................... 119 13.308541 1,584
Van Eck - Worldwide Emerging Markets Fund ............. 1,017 12.335038 12,545
Van Eck - Worldwide Hard Assets Fund .................. 1,052 18.157191 19,101
Van Kampen American Capital LIT -
Real Estate Securities Fund ........................ 1,193 15.961051 19,042
Warburg Pincus - International Equity Portfolio ....... 1,862 13.354669 24,866
Warburg Pincus - Small Company Growth Portfolio ....... 3,707 14.388933 53,340
======= ========= ------
$26,898,994
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</TABLE>
See accompanying notes to financial statements.
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NATIONWIDE VLI SEPARATE ACCOUNT-3
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 1997, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................... $ 258,944 245,576 224,226
Mortality and expense charges (note 3) ............. (95,040) (75,021) (54,574)
------------ ------------ ------------
Net investment activity ......................... 163,904 170,555 169,652
------------ ------------ ------------
Proceeds from mutual fund shares sold .............. 1,163,656 857,865 998,011
Cost of mutual funds sold .......................... (946,332) (764,127) (967,008)
------------ ------------ ------------
Realized gain (loss) on investments ............. 217,324 93,738 31,003
Change in unrealized gain (loss) on investments .... 3,235,166 770,146 1,513,088
------------ ------------ ------------
Net gain (loss) on investments .................. 3,452,490 863,884 1,544,091
------------ ------------ ------------
Reinvested capital gains ........................... 179,051 214,238 5,380
------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations .......... 3,795,445 1,248,677 1,719,123
------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners -
net of transfers between funds .................. 2,250,811 2,475,606 1,918,822
Surrenders ......................................... (358,462) (185,923) (106,759)
Death benefits ..................................... (997) (967) (10,991)
Policy loans (net of repayments) (note 5) .......... (366,612) (422,352) (136,713)
Deductions for surrender charges (note 2d) ......... (91,699) (41,427) (299)
Redemptions to pay cost of insurance charges
and administration charges (notes 2b and 2c) .... (1,032,173) (1,065,013) (983,343)
------------ ------------ ------------
Net increase (decrease) in equity transactions 400,868 759,924 680,717
------------ ------------ ------------
Net change in contract owners' equity ................. 4,196,313 2,008,601 2,399,840
Contract owners' equity beginning of period ........... 22,702,681 17,904,393 12,661,113
------------ ------------ ------------
Contract owners' equity end of period ................. $ 26,898,994 19,912,994 15,060,953
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
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NATIONWIDE VLI SEPARATE ACCOUNT-3
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 VLISeparate
Account-3 (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. On August
21, 1991, the Company (Depositor) transferred to the Account 50,000
shares of American Century VP - American Century VP Advantage, for
which it 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 and Flexible Premium
Variable Life Insurance Policies through the Account. The primary
distribution for the contracts is through Company Agents; however,
other distributors may be utilized.
(b) The Contracts
Only contracts with a front-end sales load, a surrender charge and
certain other fees have been purchased. See note 2 for a discussion of
policy charges and note 3 for asset charges.
Contract owners may invest in the following funds:
Portfolios of the American Century Variable Portfolios, Inc. (American
Century VP) (formerly TCI Portfolios, Inc.);
American Century VP - American Century VP Advantage (ACVPAdv)
(formerly TCI Portfolios - TCI Advantage)
American Century VP - American Century VP Balanced (ACVPBal)
(formerly TCI Portfolios - TCI Balanced)
American Century VP - American Century VP Capital Appreciation
(ACVPCapAp) (formerly TCI Portfolios - TCI Growth)
American Century VP - American Century VP International (ACVPInt)
(formerly TCI Portfolios - TCI International)
American Century VP - American Century VP Value (ACVPValue)
(formerly TCI Portfolios - TCI Value)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
Portfolio of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Growth and Income Portfolio (DryGroInc)
<TABLE>
<CAPTION>
<S> <C>
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
Fidelity VIP - Growth Portfolio (FidVIPGr)
Fidelity VIP - High Income Portfolio (FidVIPHI)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Portfolios of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
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 - Small Company Fund (NSATSmCo)
Nationwide SAT - Total Return Fund (NSATTotRe)
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Portfolios of the Neuberger & Berman Advisers Management Trust (Neuberger & Berman);
Neuberger & Berman - Balanced Portfolio (NBAMTBal)
Neuberger & Berman - Growth Portfolio (NBAMTGro)
Neuberger & Berman - Limited Maturity Bond Portfolio (NBAMTLMat)
Neuberger & Berman - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer);
Oppenheimer - Bond Fund (OppBdFd)
Oppenheimer - Global Securities Fund (OppGlSec)
Oppenheimer - Multiple Strategies Fund (OppMult)
Strong Special Fund II, Inc. (StSpec2)
Funds of the Strong Variable Insurance Funds, Inc. (Strong VIF);
Strong VIF - Strong Discovery Fund II (StDisc2)
Strong VIF - Strong International Stock Fund II (StIntStk2)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck) (formerly Van
Eck Investment Trust);
Van Eck - Worldwide Bond Fund (VEWrldBd) (formerly Van Eck - Global Bond Fund)
Van Eck - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck - Worldwide Hard Assets Fund (VEWrldHAs) (formerly Van Eck - Gold and Natural
Resources Fund)
Fund of the Van Kampen American Capital Life Investment Trust (Van Kampen American Capital
LIT);
Van Kampen American Capital LIT - Real Estate Securities Fund (VKACRESec)
Portfolios of the Warburg Pincus Trust (Warburg Pincus);
Warburg Pincus - International Equity Portfolio (WPIntEq)
Warburg Pincus - Post Venture Capital Portfolio (WPPVenCap)
Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr)
</TABLE>
At June 30, 1997, contract owners have invested in all of the above
funds except for American Century VP - American Century VP Value and
Warburg Pincus - Post Venture Capital Portfolio. 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. 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 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.
(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.
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(2) Policy Charges
(a) Deductions from Premium
On flexible premium life insurance 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. Additionally, the Company
deducts a front-end sales load of up to 3.5% 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 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 amount of the charge is based upon a specified
percentage of the initial surrender charge which varies by issue age,
sex and rate class. For flexible premium contracts, the charge is 100%
of the initial surrender charge in the first year, declining to 30% of
the initial surrender charge in the ninth year.
No surrender charge is assessed on any contract surrendered 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. No charges were deducted from the initial
funding, or from earnings thereon.
(3) Asset Charges
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. On each policy anniversary beginning with the 10th, this charge
is reduced to 0.50% on an annual basis provided that the cash surrender
value of the contract is $25,000 or more on such anniversary. This charge
is assessed through the 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 90% of a policy's cash
surrender value. The contract is charged 6% 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 plus interest, if
any, 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 back to the Account.
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<TABLE>
<CAPTION>
<S> <C>
NATIONWIDE LIFE INSURANCE COMPANY -----------------
HOME OFFICE: ONE NATIONWIDE PLAZA - COLUMBUS, OHIO 43215-2220 Bulk Rate
U.S. Postage
P A I D
Columbus, Ohio
Permit No. 521
-----------------
</TABLE>
Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company
