<PAGE> 1
[NATIONWIDE LOGO]
NATIONWIDE(R)
VLI SEPARATE
ACCOUNT-3
ANNUAL REPORT
TO
CONTRACT OWNERS
DECEMBER 31, 1997
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: COLUMBUS, OHIO
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[NATIONWIDE LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215 - 2220
[PHOTO]
PRESIDENT'S MESSAGE
We at Nationwide Life Insurance Company are pleased to bring you the
1997 annual report of the Nationwide VLI Separate Account-3.
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
3
<PAGE> 3
NATIONWIDE VLI SEPARATE ACCOUNT-3
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)
129,722 shares (cost $719,633) ................................................ $ 856,167
American Century VP - American Century VP Balanced (ACVPBal)
2,433 shares (cost $17,449) ................................................... 20,045
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
7,094 shares (cost $74,200) ................................................... 68,673
American Century VP - American Century VP International (ACVPInt)
4,061 shares (cost $23,401) ................................................... 27,779
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
1,715 shares (cost $33,294) ................................................... 42,817
Dreyfus Stock Index Fund (DryStkIx)
12,831 shares (cost $258,979) ................................................. 330,411
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
374 shares (cost $10,434) ..................................................... 10,432
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
40 shares (cost $886) ......................................................... 838
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
20,469 shares (cost $416,354) ................................................. 496,978
Fidelity VIP - Growth Portfolio (FidVIPGr)
11,224 shares (cost $338,461) ................................................. 416,428
Fidelity VIP - High Income Portfolio (FidVIPHI)
4,309 shares (cost $52,212) ................................................... 58,519
Fidelity VIP - Overseas Portfolio (FidVIPOv)
905 shares (cost $16,108) ..................................................... 17,377
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
6,727 shares (cost $104,062) .................................................. 121,147
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
17,676 shares (cost $285,823) ................................................. 352,462
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
292,838 shares (cost $3,699,741) .............................................. 6,211,085
Nationwide SAT - Government Bond Fund (NSATGvtBd)
143,822 shares (cost $1,566,643) .............................................. 1,636,693
Nationwide SAT - Money Market Fund (NSATMyMkt)
352,888 shares (cost $352,888) ................................................ 352,888
Nationwide SAT - Small Company Fund (NSATSmCo)
3,833 shares (cost $53,202) ................................................... 60,756
Nationwide SAT - Total Return Fund (NSATTotRe)
994,142 shares (cost $11,255,329) ............................................. 16,284,051
Neuberger & Berman AMT - Balanced Portfolio (NBAMTBal)
78,073 shares (cost $1,203,317) ............................................... 1,389,702
</TABLE>
4
<PAGE> 4
<TABLE>
<S> <C>
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
1,895 shares (cost $50,274) ........................................................ 57,882
Neuberger & Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat)
709 shares (cost $9,831) ........................................................... 10,012
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
6,502 shares (cost $106,327) ....................................................... 133,940
Oppenheimer VAF - Bond Fund (OppBdFd)
346 shares (cost $4,044) ........................................................... 4,115
Oppenheimer VAF - Global Securities Fund (OppGISec)
2,647 shares (cost $46,783) ........................................................ 56,568
Oppenheimer VAF - Growth Fund (OppGro)
15 shares (cost $501) .............................................................. 500
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
455 shares (cost $6,950) ........................................................... 7,736
Strong Opportunity Fund II, Inc. (StOpp2)
5,303 shares (cost $97,249) ........................................................ 115,069
Strong VIF - Strong Discovery Fund II (StDisc2)
2,667 shares (cost $29,763) ........................................................ 32,090
Strong VIF - Strong International Stock Fund II (StIntStk2)
1,272 shares (cost $14,318) ........................................................ 11,855
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
146 shares (cost $1,557) ........................................................... 1,607
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
799 shares (cost $11,076) .......................................................... 8,786
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
1,025 shares (cost $16,909) ........................................................ 16,109
Van Kampen American Capital LIT -
Morgan Stanley Real Estate Securities Portfolio (MSRESec)
1,320 shares (cost $20,609) ........................................................ 20,921
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
2,296 shares (cost $27,098)......................................................... 24,081
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
3,297 shares (cost $44,877) ........................................................ 54,335
------------
Total assets .................................................................... 29,310,854
ACCOUNTS PAYABLE ............................................................................ 248
------------
CONTRACT OWNERS' EQUITY (NOTE 8) ............................................................ $ 29,310,606
============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 5
NATIONWIDE VLI SEPARATE ACCOUNT-3
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 452,251 447,134 455,368
Mortality and expense charges (note 3) ........ (208,160) (159,468) (119,641)
------------ ----------- -----------
Net investment activity .................... 244,091 287,666 335,727
------------ ----------- -----------
Proceeds from mutual fund shares sold ......... 2,224,444 1,904,080 2,252,228
Cost of mutual funds sold ..................... (1,729,172) (1,696,815) (2,113,393)
------------ ----------- -----------
Realized gain on investments ............... 495,272 207,265 138,835
Change in unrealized gain on investments ...... 4,439,699 2,051,092 2,274,433
------------ ----------- -----------
Net gain on investments .................... 4,934,971 2,258,357 2,413,268
------------ ----------- -----------
Reinvested capital gains ...................... 845,589 830,186 629,145
------------ ----------- -----------
Net increase in contract owners'
equity resulting from operations ..... 6,024,651 3,376,209 3,378,140
------------ ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners 4,453,849 4,940,306 4,661,075
Surrenders .................................... (747,816) (641,251) (427,125)
Death benefits (note 4) ....................... (28,333) (6,306) (11,836)
Policy loans (net of repayments) (note 5) ..... (891,821) (635,496) (212,115)
Deductions for surrender charges (note 2d) .... (166,341) (145,828) (71,008)
Redemptions to pay cost of insurance charges
and administration charges (notes 2b and 2c) (2,036,264) (2,089,346) (2,073,851)
------------ ----------- -----------
Net increase in equity transactions ..... 583,274 1,422,079 1,865,140
------------ ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 6,607,925 4,798,288 5,243,280
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 22,702,681 17,904,393 12,661,113
------------ ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 29,310,606 22,702,681 17,904,393
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 6
NATIONWIDE VLI SEPARATE ACCOUNT-3
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VLI Separate 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 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:
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)
Portfolios of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
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)
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
7
<PAGE> 7
Portfolio of the Morgan Stanley Universal Funds, Inc. (Morgan Stanley);
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
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)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger & Berman AMT);
Neuberger & Berman AMT - Balanced Portfolio (NBAMTBal)
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
Neuberger & Berman AMT - Limited Maturity Bond Portfolio
(NBAMTLMat)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF);
Oppenheimer VAF - Bond Fund (OppBdFd)
Oppenheimer VAF - Global Securities Fund (OppGlSec)
Oppenheimer VAF - Growth Fund (OppGro)
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
Strong Opportunity Fund II, Inc. (StOpp2) (formerly Strong Special Fund
II, Inc.)
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 WIT);
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
(formerly Van Eck WIT - Gold and Natural Resources Fund)
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 (MSRESec)
(formerly Van Kampen American Capital LIT - Real Estate
Securities Fund)
Portfolios of the Warburg Pincus Trust;
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
At December 31, 1997, contract owners have invested in all of the above
funds except for American Century VP - American Century VP Value,
Fidelity VIP-III - Growth Opportunities Portfolio, Morgan Stanley -
Emerging Markets Debt Portfolio and Warburg Pincus Trust - 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 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.
(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.
8
<PAGE> 8
(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 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.
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<PAGE> 9
(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 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.
(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.
(7) 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 charge discussed in note 3.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
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(8) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN
-------- ---------- --------
<S> <C> <C> <C> <C>
American Century VP -
American Century VP Advantage ............. 27,087 $15.906088 $ 430,848 12%
American Century VP -
American Century VP Advantage
Initial Funding by Depositor (note 1a) .. 25,000 17.013707 425,343 13%
American Century VP -
American Century VP Balanced .............. 1,192 16.822481 20,052 15%
American Century VP -
American Century VP Capital Appreciation .. 4,670 14.709822 68,695 (4)%
American Century VP -
American Century VP International ......... 1,983 13.994328 27,751 18%
The Dreyfus Socially Responsible
Growth Fund, Inc. ......................... 1,942 22.067304 42,855 27%
Dreyfus Stock Index Fund ................... 14,960 22.086039 330,407 32%
Dreyfus VIF - Capital Appreciation Portfolio 1,021 10.216196 10,431 2%(a)
Dreyfus VIF - Growth and Income Portfolio .. 73 11.514756 841 15%
Fidelity VIP - Equity-Income Portfolio ..... 15,527 32.007773 496,985 27%
Fidelity VIP - Growth Portfolio ............ 14,055 29.627929 416,421 22%
Fidelity VIP - High Income Portfolio ....... 2,126 27.535006 58,539 17%
Fidelity VIP - Overseas Portfolio .......... 1,025 16.959418 17,383 11%
Fidelity VIP-II - Asset Manager Portfolio .. 5,568 21.747656 121,091 20%
Fidelity VIP-II - Contrafund Portfolio ..... 21,431 16.448700 352,512 23%
Nationwide SAT - Capital Appreciation Fund . 252,861 24.563746 6,211,213 33%
Nationwide SAT - Government Bond Fund ...... 97,797 16.735906 1,636,721 9%
Nationwide SAT - Money Market Fund ......... 27,608 12.754301 352,121 4%
Nationwide SAT - Small Company Fund ........ 3,751 16.199871 60,766 16%
Nationwide SAT - Total Return Fund ......... 576,775 28.233403 16,284,321 28%
Neuberger & Berman AMT - Balanced Portfolio 78,124 17.788645 1,389,720 19%
Neuberger & Berman AMT - Growth Portfolio .. 2,617 22.117203 57,881 28%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio ........... 698 14.349688 10,016 6%
</TABLE>
(Continued)
11
<PAGE> 11
<TABLE>
<S> <C> <C> <C> <C>
Neuberger & Berman AMT - Partners Portfolio ... 5,889 22.746051 133,951 30%
Oppenheimer VAF - Bond Fund ................... 239 17.086434 4,084 8%
Oppenheimer VAF - Global Securities Fund ...... 3,451 16.380762 56,530 22%
Oppenheimer VAF - Growth Fund ................. 48 10.452595 502 5%(a)
Oppenheimer VAF - Multiple Strategies Fund .... 360 21.450954 7,722 16%
Strong Opportunity Fund II, Inc. .............. 4,286 26.851737 115,087 24%
Strong VIF - Strong Discovery Fund II ......... 1,759 18.249145 32,100 11%
Strong VIF - Strong International Stock Fund II 1,233 9.615755 11,856 (14)%
Van Eck WIT - Worldwide Bond Fund ............. 117 13.690999 1,602 2%
Van Eck WIT -
Worldwide Emerging Markets Fund .............. 992 8.838307 8,768 (12)%
Van Eck WIT - Worldwide Hard Assets Fund ...... 904 17.834480 16,122 (2)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio ......................... 1,156 18.130321 20,959 21%
Warburg Pincus Trust -
International Equity Portfolio ............... 2,130 11.306660 24,083 (3)%
Warburg Pincus Trust -
Small Company Growth Portfolio ............... 3,363 16.154327 54,327 15%
====== ========== ------------
$ 29,310,606
============
</TABLE>
(a) This investment option was not being utilized for the entire period.
12
<PAGE> 12
Schedule I
NATIONWIDE VLI SEPARATE ACCOUNT-3
SCHEDULES OF CHANGES IN UNIT VALUE
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
ACVPAdv ACVPAdv+ ACVPBal ACVPCapAp ACVPInt
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1997***
Beginning unit value - Jan. 1 $ 14.210999 15.079515 14.642920 15.327392 11.890858
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .999595 1.062482 .824605 .309262 .408237
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... .816206 .871710 1.481680 (.805571) 1.802759
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.120712) .000000 (.126724) (.121261) (.107526)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. $ 15.906088 17.013707 16.822481 14.709822 13.994328
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 12% 13% 15% (4)% 18%
============ ============ ============ ============ ============
1996
Beginning unit value - Jan. 1 $ 13.112917 13.802855 13.155049 16.149061 10.477472
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .945920 .998314 .622373 1.812196 .249286
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... .260998 .278346 .976138 (2.505020) 1.252389
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.108836) .000000 (.110640) (.128845) (.088289)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. $ 14.210999 15.079515 14.642920 15.327392 11.890858
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 8% 9% 11% (5)% 13%
============ ============ ============ ============ ============
1995
Beginning unit value - Jan. 1 $ 11.321934 11.822996 12.526705 15.745499 10.216142
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .411556 .431938 .187655 .000000 .000000
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 1.477165 1.547921 .482910 .457100 .294719
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.097738) .000000 (.042221) (.053538) (.033389)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. $ 13.112917 13.802855 13.155049 16.149061 10.477472
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 16% 17% 5%(b) 3%(b) 3%(b)
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
DrySRGro DryStkIx DryCapAp DryGrInc FidVIPEI
----------- ------------ ------------ ------------ ------------
<S> <S> <C> <C> <C> <C>
1997***
Beginning unit value - Jan. 1 17.319589 16.744674 10.000000 9.988034 25.185570
----------- ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .711304 .963779 .084621 .953991 2.596690
----------- ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 4.197125 4.535869 .168989 .659188 4.456322
----------- ------------ ------------ ------------ ------------
Asset charges ................ (.160714) (.158283) (.037414) (.086457) (.230809)
----------- ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. 22.067304 22.086039 10.216196 11.514756 32.007773
----------- ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 27% 32% 2%(b) 15% 27%
=========== =========== ============ =========== ============
1996
Beginning unit value - Jan. 1 14.401809 13.775382 ** ** 22.215745
----------- ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .747630 .596225 1.025291
----------- ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 2.296912 2.494042 2.132663
----------- ------------ ------------ ------------ ------------
Asset charges ................ (.126762) (.120975) (.188129)
----------- ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. 17.319588 16.744674 25.185570
----------- ------------ ------------ ----------- ------------
Percentage increase (decrease)
in unit value*(a) ............ 20% 22% 13%
=========== ============ ============ ============ ============
1995
Beginning unit value - Jan. 1 13.083801 12.456650 ** ** 19.991986
---------- ------------ ---------- ----------- -------------
Reinvested capital gains
and dividends ................ .396430 .239425 .229029
----------- ------------ --------- ----------- ------------
Unrealized gain (loss) ....... .967071 1.122261 2.063681
---------- ------------ ---------- ------------ ------------
Asset charges ................ (.45493) (.042954) (.068951)
----------- ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. 14.401809 13.775382 22.215745
---------- ------------ ------------ ------------ ------------
10%(b) 11%(b) 11%(b)
========== ============ ============ ============ ============
Percentage increase (decrease)
in unit value*(a) ............
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note
2; and
(b) This investment option was not utilized for the entire year
indicated.
** This investment option was not utilized or was not available.
*** No other investment options were being utilized.
+ For Depositor, see note 1a.
13
<PAGE> 13
Schedule I, continued
NATIONWIDE VLI SEPARATE ACCOUNT-3
SCHEDULES OF CHANGES IN UNIT VALUE
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
FidVIPGr FidVIPHI FidVIPOv FidVIPAM FidVIPCon
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1997***
Beginning unit value - Jan. 1 $ 24.186560 23.588786 15.324813 18.169993 13.356323
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .892486 1.882562 1.332926 2.219812 .411003
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 4.767095 2.267847 .436152 1.518239 2.801162
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.218212) (.204189) (.134473) (.160388) (.119788)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. $ 29.627929 27.535006 16.959418 21.747656 16.448700
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 22% 17% 11% 20% 23%
============ ============ ============ ============ ============
1996
Beginning unit value - Jan. 1 $ 21.256059 20.852993 13.645033 15.982529 11.099135
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ 1.527554 1.902180 .335875 1.051899 .104631
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 1.587071 1.012148 1.459385 1.270941 2.248711
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.184124) (.178535) (.115480) (.135376) (.096154)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. $ 24.186560 23.588786 15.324813 18.169993 13.356323
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 14% 13% 12% 14% 20%
============ ============ ============ ============ ============
1995
Beginning unit value - Jan. 1 $ 21.077777 19.897254 13.633767 15.029765 10.655665
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .000000 .000000 .000000 .000000 .143118
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... .249916 1.022818 .055055 1.003384 .336322
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.071634) (.067079) (.043789) (.050620) (.035970)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. $ 21.256059 20.852993 13.645033 15.982529 11.099135
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 1%(b) 5%(b) 0%(b) 6%(b) 4%(b)
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NSATCapAp NSATGvtBd NSATMyMkt NSATSmCo NSATTotRe
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1997***
Beginning unit value - Jan. 1 18.410667 15.383251 12.214743 13.915643 21.988773
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .749108 .983193 .640005 .442290 1.284328
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 5.577539 .496554 .000000 1.962570 5.164704
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.173568) (.127092) (.100447) (.120632) (.204402)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. 24.563746 16.735906 12.754301 16.199871 28.233403
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 33% 9% 4% 16% 28%
============ ============ ============ ============ ============
1996
Beginning unit value - Jan. 1 14.713230 14.984933 11.714295 11.420759 18.192762
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .766553 .930103 .596995 .133983 1.217547
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 3.061949 (.412550) .000000 2.463983 2.737018
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.131065) (.119235) (.096547) (.103082) (.158554)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. 18.410667 15.383251 12.214743 13.915643 21.988773
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 25% 3% 4% 22% 21%
============ ============ ============ ============ ============
1995
Beginning unit value - Jan. 1 11.465403 12.720514 11.176411 10.000000 14.205723
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .653781 .903001 .629782 .017475 1.413734
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 2.696528 1.472503 .000000 1.418968 2.703396
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.102482) (.111085) (.091898) (.015684) (.130091)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. 14.713230 14.984933 11.714295 11.420759 18.192762
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 28% 18% 5% 14%(b) 28%
============ ============ ============ ============ ============
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note
2; and
(b) This investment option was not utilized for the entire year
indicated.
** This investment option was not utilized or was not available.
*** No other investment options were being utilized.
14
<PAGE> 14
Schedule I, continued
NATIONWIDE VLI SEPARATE ACCOUNT-3
SCHEDULES OF CHANGES IN UNIT VALUE
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
NBAMTBal NBAMTGro NBAMTLMat NBAMTPart OppBdFd
------------ ------------ ------------ ------------ ------------
1997***
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $ 15.011230 17.282005 13.551318 17.469360 15.764821
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ 1.007641 1.519798 .799524 .868124 1.051063
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 1.902952 3.476793 .110278 4.571636 .400626
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.133178) (.161393) (.111432) (.163069) (.130076)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. $ 17.788645 22.117203 14.349688 22.746051 17.086434
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 19% 28% 6% 30% 8%
============ ============ ============ ============ ============
1996
Beginning unit value - Jan. 1 $ 14.157643 15.962482 13.096811 13.591346 15.164813
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ 2.170851 1.448641 1.102543 .554011 .975830
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... (1.201214) .003774 (.542247) 3.446498 (.253799)
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.116050) (.132892) (.105789) (.122495) (.122023)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. $ 15.011230 17.282005 13.551318 17.469360 15.764821
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 6% 8% 3% 29% 4%
============ ============ ============ ============ ============
1995
Beginning unit value - Jan. 1 $ 11.531273 15.674452 12.612894 12.574475 14.319149
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .293664 .000000 .000000 .000000 .451093
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 2.438125 .341270 .526078 1.059943 .442834
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.105419) (.053240) (.042161) (.043072) (.048263)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. $ 14.157643 15.962482 13.096811 13.591346 15.164813
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 23% 2%(b) 4%(b) 8%(b) 6%(b)
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
OppGISec OppGro OppMult StOpp2 StDisc2
------------ ------------ ------------ ------------ ------------
1997***
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 13.457220 10.000000 18.446363 21.575419 16.514861
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .171449 .000000 1.424675 2.199285 .000000
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 2.875192 .491618 1.740590 3.271150 1.874039
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.123099) (.039023) (.160674) (.194117) (.139755)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. 16.380762 10.452595 21.450954 26.851737 18.249145
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 22% 5%(b) 16% 24% 11%
============ ============ ============ ============ ============
1996
Beginning unit value - Jan. 1 11.542134 ** 16.100377 18.408627 16.514850
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .000000 1.226905 .866384 3.367146
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 2.014545 1.256649 2.458870 (3.238459)
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.099459) (.137568) (.158462) (.128676)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. 13.457220 18.446363 21.575419 16.514861
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 17% 15% 17% 0%
============ ============ ============ ============ ============
1995
Beginning unit value - Jan. 1 11.943012 ** 15.453572 17.177125 15.320395
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .000000 .337996 .082118 .211565
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... (.362402) .360634 1.207608 1.035469
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.038476) (.051825) (.058224) (.052579)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. 11.542134 16.100377 18.408627 16.514850
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ (3)%(b) 4%(b) 7%(b) 8%(b)
============ ============ ============ ============ ============
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note
2; and
(b) This investment option was not utilized for the entire year
indicated.
** This investment option was not utilized or was not available.
*** No other investment options were being utilized.
15
<PAGE> 15
Schedule I, continued
NATIONWIDE VLI SEPARATE ACCOUNT-3
SCHEDULES OF CHANGES IN UNIT VALUE
Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
StIntStk2 VEWrldBd VEWrldEMkt VEWrldHAs MSRESec
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1997***
Beginning unit value - Jan. 1 $ 11.208230 13.479157 10.078948 18.284590 15.045195
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .471812 .436884 .040323 .797803 2.048475
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... (1.974108) (.118284) (1.191572) (1.099846) 1.165854
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.090179) (.106758) (.089392) (.148067) (.129203)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. $ 9.615755 13.690999 8.838307 17.834480 18.130321
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ (14)% 2% (12)% (2)% 21%
============ ============ ============ ============ ============
1996
Beginning unit value - Jan. 1 $ 10.236021 13.253457 ** 15.612002 10.792212
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .051144 .361660 .331277 .289441
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... 1.009533 (.030793) 2.482492 4.059026
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.088468) (.105167) (.141181) (.095484)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. $ 11.208230 13.479157 18.284590 15.045195
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 9% 2% 17% 39%
============ ============ ============ ============ ============
1995
Beginning unit value - Jan. 1 ** $ 13.012850 ** 15.406908 10.203521
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ................ .245483 .075481 .092168
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ....... .038021 .180118 .530496
------------ ------------ ------------ ------------ ------------
Asset charges ................ (.042897) (.050505) (.033973)
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 .. $ 13.253457 15.612002 10.792212
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 2%(b) 1%(b) 6%(b)
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
WPIntEq WPSmCoGr
------------ ------------
<S> <C> <C>
1997***
Beginning unit value - Jan. 1 11.660648 14.080553
------------ ------------
Reinvested capital gains
and dividends ................ .724094 .000000
------------ ------------
Unrealized gain (loss) ....... (.979169) 2.190720
------------ ------------
Asset charges ................ (.098913) (.116946)
------------ ------------
Ending unit value - Dec. 31 .. 11.306660 16.154327
------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ (3)% 15%
============ ============
1996
Beginning unit value - Jan. 1 10.687672 12.461074
------------ ------------
Reinvested capital gains
and dividends ................ .227366 .000000
------------ ------------
Unrealized gain (loss) ....... .836487 1.727810
------------ ------------
Asset charges ................ (.090877) (.108331)
------------ ------------
Ending unit value - Dec. 31 .. 11.660648 14.080553
------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 9% 13%
============ ============
1995
Beginning unit value - Jan. 1 10.236484 10.233506
------------ ------------
Reinvested capital gains
and dividends ................ .077521 .000000
------------ ------------
Unrealized gain (loss) ....... .408042 2.264927
------------ ------------
Asset charges ................ (.034375) (.037359)
------------ ------------
Ending unit value - Dec. 31 .. 10.687672 12.461074
------------ ------------
Percentage increase (decrease)
in unit value*(a) ............ 4%(b) 22%(b)
============ ============
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not utilized or was not available.
*** No other investment options were being utilized.
See note 7.
16
<PAGE> 16
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide VLI Separate Account-3:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VLI Separate Account-3 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 VLI Separate Account-3 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
17
<PAGE> 17
NATIONWIDE LIFE 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
