<PAGE> 1
'97
Nationwide(R) Variable Account - II
December 31, 1997
[The BEST
of AMERICA(R) LOGO]
ANNUAL REPORT
[LOGO]
Nationwide Life Insurance Company
Home Office: Columbus, Ohio
<PAGE> 2
[LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215 - 2220
[PICTURE OF JOSEPH J. GASPER PRESIDENT]
PRESIDENT'S MESSAGE
We at Nationwide Life Insurance Company are pleased to bring you the 1997 annual
report of the Nationwide Variable Account-II.
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 VARIABLE ACCOUNT-II
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 Balanced (ACVPBal)
20,476,916 shares (cost $145,210,488) ................................. $ 168,729,789
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
35,124,238 shares (cost $366,581,346) ................................. 340,002,620
American Century VP - American Century VP International (ACVPInt)
26,517,160 shares (cost $175,620,106) ................................. 181,377,372
American Century VP - American Century VP Value (ACVPValue)
9,871,295 shares (cost $66,743,356) ................................... 68,408,074
American VI Series - Growth Fund (AVISGro)
589,564 shares (cost $20,775,384) ..................................... 26,518,568
American VI Series - High-Yield Bond Fund (AVISHiYld)
217,805 shares (cost $3,087,017) ...................................... 3,193,028
American VI Series - U.S. Government/AAA-Rated Securities Fund (AVISGvt)
458,636 shares (cost $5,228,988) ...................................... 5,090,859
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
7,268,176 shares (cost $168,325,784) .................................. 181,486,347
Dreyfus Stock Index Fund (DryStkIx)
42,571,692 shares (cost $948,590,264) ................................. 1,096,221,070
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
360,888 shares (cost $10,005,405) ..................................... 10,068,786
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
2,677,081 shares (cost $55,737,101) ................................... 55,629,748
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
106,941,882 shares (cost $1,935,779,096) .............................. 2,596,548,894
Fidelity VIP - Growth Portfolio (FidVIPGr)
53,769,558 shares (cost $1,588,057,111) ............................... 1,994,850,605
Fidelity VIP - High Income Portfolio (FidVIPHI)
60,959,130 shares (cost $746,503,217) ................................. 827,824,982
Fidelity VIP - Overseas Portfolio (FidVIPOv)
30,489,461 shares (cost $555,147,003) ................................. 585,397,647
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
59,999,206 shares (cost $881,598,674) ................................. 1,080,585,706
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
45,043,887 shares (cost $726,111,363) ................................. 898,175,106
</TABLE>
4
<PAGE> 4
<TABLE>
<S> <C>
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
2,473,099 shares (cost $45,823,984) ............................ 47,656,618
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
856,692 shares (cost $8,418,963) ............................... 8,284,216
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
17,142,857 shares (cost $314,022,786) .......................... 363,600,007
Nationwide SAT - Government Bond Fund (NSATGvtBd)
26,333,952 shares (cost $291,315,057) .......................... 299,680,377
Nationwide SAT - Money Market Fund (NSATMyMkt)
838,351,024 shares (cost $838,351,024) ......................... 838,351,024
Nationwide SAT - Small Company Fund (NSATSmCo)
18,331,094 shares (cost $280,417,300) .......................... 290,547,833
Nationwide SAT - Total Return Fund (NSATTotRe)
63,193,935 shares (cost $805,902,753) .......................... 1,035,116,651
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
15,635,041 shares (cost $409,653,043) .......................... 477,494,149
Neuberger & Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat)
13,346,294 shares (cost $185,376,903) .......................... 188,449,671
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
37,727,286 shares (cost $668,834,188) .......................... 777,182,092
Oppenheimer VAF - Bond Fund (OppBdFd)
24,430,851 shares (cost $282,815,152) .......................... 290,971,432
Oppenheimer VAF - Global Securities Fund (OppGlSec)
22,897,460 shares (cost $395,642,269) .......................... 489,318,728
Oppenheimer VAF - Growth Fund (OppGro)
499,105 shares (cost $16,341,029) .............................. 16,190,975
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
20,045,320 shares (cost $291,681,623) .......................... 340,970,893
Strong Opportunity Fund II, Inc. (StOpp2)
35,219,986 shares (cost $610,939,007) .......................... 764,273,695
Strong VIF - Strong Discovery Fund II (StDisc2)
16,231,621 shares (cost $182,339,802) .......................... 195,266,404
Strong VIF - Strong International Stock Fund II (StIntStk2)
5,334,902 shares (cost $59,514,572) ............................ 49,721,288
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
8,849,992 shares (cost $96,871,940) ............................ 97,261,416
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
7,070,676 shares (cost $102,193,831) ........................... 77,777,440
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
8,091,995 shares (cost $132,399,934) ........................... 127,206,167
</TABLE>
(Continued)
5
<PAGE> 5
<TABLE>
<S> <C>
Van Kampen American Capital LIT -
Morgan Stanley Real Estate Securities Portfolio (MSRESec)
16,950,883 shares (cost $256,967,075) ........................ 268,671,490
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
27,338,547 shares (cost $318,884,001) ........................ 286,781,360
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
1,327,288 shares (cost $14,924,669) .......................... 14,679,809
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
23,264,677 shares (cost $348,799,967) ........................ 383,401,872
--------------
Total investments ......................................... 17,848,964,808
Accounts receivable ................................................ 1,086,934
--------------
Total assets .............................................. 17,850,051,742
ACCOUNTS PAYABLE ...................................................... 250,315
--------------
CONTRACT OWNERS' EQUITY (NOTE 4) ...................................... $ 17,849,801,427
==============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL ACVPBal
--------------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 296,368,036 225,012,560 1,574,816 2,018,651
Mortality, expense and administration
charges (note 2) .................................. (210,285,310) (146,901,903) (2,067,765) (1,512,063)
---------------- -------------- ----------- -----------
Net investment activity ........................... 86,082,726 78,110,657 (492,949) 506,588
---------------- -------------- ----------- -----------
Proceeds from mutual fund shares sold ............... 6,440,464,106 4,787,197,972 33,424,138 8,647,771
Cost of mutual fund shares sold ..................... (5,862,745,516) (4,367,124,608) (24,057,900) (6,872,205)
---------------- -------------- ----------- -----------
Realized gain (loss) on investments ............... 577,718,590 420,073,364 9,366,238 1,775,566
Change in unrealized gain (loss) on investments ..... 1,250,486,745 281,999,873 5,524,757 6,463,296
---------------- -------------- ----------- -----------
Net gain (loss) on investments .................... 1,828,205,335 702,073,237 14,890,995 8,238,862
---------------- -------------- ----------- -----------
Reinvested capital gains ............................ 616,932,003 375,915,782 6,097,662 2,876,129
---------------- -------------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 2,531,220,064 1,156,099,676 20,495,708 11,621,579
---------------- -------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 3,614,758,515 3,619,439,725 31,207,874 38,739,406
Transfers between funds - - (4,226,209) (2,462,310)
Redemptions ......................................... (1,198,352,163) (664,029,620) (10,189,550) (5,395,131)
Annuity benefits .................................... (1,097,690) (792,443) (2,437) (9,573)
Annual contract maintenance charge (note 2) ......... (7,187,524) (6,040,328) (70,234) (61,745)
Contingent deferred sales charges (note 2) .......... (18,196,002) (10,783,506) (187,816) (123,085)
Adjustments to maintain reserves .................... (692,928) 559,630 (30,715) 83,333
---------------- -------------- ----------- -----------
Net equity transactions ......................... 2,389,232,208 2,938,353,458 16,500,913 30,770,895
---------------- -------------- ----------- -----------
Net change in contract owners' equity ............... 4,920,452,272 4,094,453,134 36,996,621 42,392,474
Contract owners' equity beginning of period ......... 12,929,349,155 8,834,896,021 131,737,212 89,344,738
---------------- -------------- ----------- -----------
Contract owners' equity end of period ............... $ 17,849,801,427 12,929,349,155 168,733,833 131,737,212
================ ============== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ACVPCapAp ACVPInt
----------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ -- -- 1,256,182 1,109,222
Mortality, expense and administration
charges (note 2) .................................. (5,142,983) (6,646,658) (2,090,255) (968,385)
----------- ----------- ----------- ----------
Net investment activity ........................... (5,142,983) (6,646,658) (834,073) 140,837
----------- ----------- ----------- ----------
Proceeds from mutual fund shares sold ............... 226,050,085 240,666,599 134,023,354 42,271,118
Cost of mutual fund shares sold ..................... (249,168,854) (193,528,522) (112,395,449) (38,207,780)
----------- ----------- ----------- ----------
Realized gain (loss) on investments ............... (23,118,769) 47,138,077 21,627,905 4,063,338
Change in unrealized gain (loss) on investments ..... 2,545,749 (124,936,016) (1,464,913) 4,485,538
----------- ----------- ----------- ----------
Net gain (loss) on investments .................... (20,573,020) (77,797,939) 20,162,992 8,548,876
----------- ----------- ----------- ----------
Reinvested capital gains ............................ 8,369,061 55,904,041 2,422,638 369,741
----------- ----------- ----------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations .............. (17,346,942) (28,540,556) 21,751,557 9,059,454
----------- ----------- ----------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 46,091,043 92,833,985 40,115,028 27,630,966
Transfers between funds (101,140,496) (76,797,656) 39,235,433 6,376,082
Redemptions ......................................... (38,900,571) (32,305,592) (8,333,537) (3,307,555)
Annuity benefits .................................... (49,144) (48,088) (1,590) --
Annual contract maintenance charge (note 2) ......... (323,047) (405,658) (50,442) (26,919)
Contingent deferred sales charges (note 2) .......... (640,085) (586,731) (133,437) (60,653)
Adjustments to maintain reserves .................... 1,134 1,732 1,318 5,595
----------- ----------- ----------- ----------
Net equity transactions ......................... (94,961,166) (17,308,008) 70,832,773 30,617,516
----------- ----------- ----------- ----------
Net change in contract owners' equity ............... (112,308,108) (45,848,564) 92,584,330 39,676,970
Contract owners' equity beginning of period ......... 452,299,206 498,147,770 88,792,296 49,115,326
----------- ----------- ----------- ----------
Contract owners' equity end of period ............... 339,991,098 452,299,206 181,376,626 88,792,296
=========== =========== =========== ==========
</TABLE>
(Continued)
7
<PAGE> 7
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ACVPValue AVISGro
-------------------------------- ------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 77,961 -- 144,798 138,557
Mortality, expense and administration
charges (note 2) ............................ (465,301) (106) (329,103) (303,185)
------------ ---------- ----------- -----------
Net investment activity ..................... (387,340) (106) (184,305) (164,628)
------------ ---------- ----------- -----------
Proceeds from mutual fund shares sold ......... 32,856,963 118,660 6,487,233 3,867,313
Cost of mutual fund shares sold ............... (27,872,971) (118,230) (3,240,097) (2,060,914)
------------ ---------- ----------- -----------
Realized gain (loss) on investments ......... 4,983,992 430 3,247,136 1,806,399
Change in unrealized gain (loss) on investments 1,666,087 (1,369) 21,117 (760,617)
------------ ---------- ----------- -----------
Net gain (loss) on investments .............. 6,650,079 (939) 3,268,253 1,045,782
------------ ---------- ----------- -----------
Reinvested capital gains ...................... 151,154 -- 3,172,499 1,661,940
------------ ---------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations .......... 6,413,893 (1,045) 6,256,447 2,543,094
------------ ---------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 18,394,894 43,638 597,163 692,043
Transfers between funds ....................... 44,252,062 1,030,309 (973,320) (671,878)
Redemptions ................................... (1,702,361) (319) (2,781,554) (2,669,013)
Annuity benefits .............................. -- -- (946) (852)
Annual contract maintenance charge (note 2) ... (7,615) -- (16,365) (18,116)
Contingent deferred sales charges (note 2) .... (15,377) -- (10,780) (13,815)
Adjustments to maintain reserves .............. (157) -- 998 709
------------ ---------- ----------- -----------
Net equity transactions ..................... 60,921,446 1,073,628 (3,184,804) (2,680,922)
------------ ---------- ----------- -----------
Net change in contract owners' equity ........... 67,335,339 1,072,583 3,071,643 (137,828)
Contract owners' equity beginning of period ..... 1,072,583 -- 23,447,300 23,585,128
------------ ---------- ----------- -----------
Contract owners' equity end of period ........... $ 68,407,922 1,072,583 26,518,943 23,447,300
============ ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AVISHiYid AVISGvt
----------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 253,822 260,531 369,310 511,480
Mortality, expense and administration
charges (note 2) ............................ (38,276) (38,243) (72,106) (97,504)
---------- ---------- ---------- -----------
Net investment activity ..................... 215,546 222,288 297,204 413,976
---------- ---------- ---------- -----------
Proceeds from mutual fund shares sold ......... 736,561 775,236 1,786,834 4,190,849
Cost of mutual fund shares sold ............... (655,361) (745,378) (1,861,559) (4,091,178)
---------- ---------- ---------- -----------
Realized gain (loss) on investments ......... 81,200 29,858 (74,725) 99,671
Change in unrealized gain (loss) on investments (32,967) 73,750 140,996 (465,801)
---------- ---------- ---------- -----------
Net gain (loss) on investments .............. 48,233 103,608 66,271 (366,130)
---------- ---------- ---------- -----------
Reinvested capital gains ...................... 33,142 -- -- --
---------- ---------- ---------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations .......... 296,921 325,896 363,475 47,846
---------- ---------- ---------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 75,598 164,228 127,889 208,435
Transfers between funds ....................... 264,205 (91,215) (309,384) (710,949)
Redemptions ................................... (409,603) (334,453) (1,207,471) (3,424,496)
Annuity benefits .............................. (1,226) (1,165) (536) (370)
Annual contract maintenance charge (note 2) ... (2,453) (2,748) (4,847) (6,694)
Contingent deferred sales charges (note 2) .... (1,609) (1,215) (4,252) (4,050)
Adjustments to maintain reserves .............. 271 231 51 21
---------- ---------- ---------- -----------
Net equity transactions ..................... (74,817) (266,337) (1,398,550) (3,938,103)
---------- ---------- ---------- -----------
Net change in contract owners' equity ........... 222,104 59,559 (1,035,075) (3,890,257)
Contract owners' equity beginning of period ..... 2,971,112 2,911,553 6,125,969 10,016,226
---------- ---------- ---------- -----------
Contract owners' equity end of period ........... 3,193,216 2,971,112 5,090,894 6,125,969
========== ========== ========== ===========
</TABLE>
8
<PAGE> 8
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
DrySRGro DryStkix
-------------------------------- ----------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 623,680 178,692 13,324,202 6,174,167
Mortality, expense and administration
charges (note 2) ............................ (1,766,137) (679,529) (11,066,164) (3,747,635)
------------- ----------- -------------- ------------
Net investment activity ....................... (1,142,457) (500,837) 2,258,038 2,426,532
------------- ----------- -------------- ------------
Proceeds from mutual fund shares sold ......... 79,140,012 59,366,774 196,995,162 107,011,967
Cost of mutual fund shares sold ............... (67,423,514) (52,067,858) (145,321,824) (83,630,388)
------------- ----------- -------------- ------------
Realized gain (loss) on investments ........... 11,716,498 7,298,916 51,673,338 23,381,579
Change in unrealized gain (loss) on investments 12,405,500 (1,979,227) 113,272,914 21,835,351
------------- ----------- -------------- ------------
Net gain (loss) on investments ................ 24,121,998 5,319,689 164,946,252 45,216,930
------------- ----------- -------------- ------------
Reinvested capital gains ...................... 4,861,060 3,199,917 30,917,521 7,007,422
------------- ----------- -------------- ------------
Net increase (decrease) in contract owners'
equity resulting from operations .......... 27,840,601 8,018,769 198,121,811 54,650,884
------------- ----------- -------------- ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 50,107,726 27,287,891 302,375,457 152,418,812
Transfers between funds ....................... 36,729,046 26,105,616 185,055,283 122,764,112
Redemptions ................................... (14,091,480) (2,226,938) (44,011,999) (12,727,321)
Annuity benefits .............................. (4,381) (3,044) (20,897) (14,015)
Annual contract maintenance charge (note 2) ... (67,753) (29,645) (248,202) (91,629)
Contingent deferred sales charges (note 2) .... (365,621) (45,645) (796,708) (283,373)
Adjustments to maintain reserves .............. 2,732 3,453 1,320 24,649
------------- ----------- -------------- ------------
Net equity transactions ..................... 72,310,269 51,091,688 442,354,254 262,091,235
------------- ----------- -------------- ------------
Net change in contract owners' equity ........... 100,150,870 59,110,457 640,476,065 316,742,119
Contract owners' equity beginning of period ..... 81,334,310 22,223,853 455,762,151 139,020,032
------------- ----------- -------------- ------------
Contract owners' equity end of period ........... $ 181,485,180 81,334,310 1,096,238,216 455,762,151
============= =========== ============== ============
</TABLE>
<TABLE>
<CAPTION>
DryCapAp DryGrInc
----------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 72,902 -- 403,974 --
Mortality, expense and administration
charges (note 2) ............................ (36,747) -- (387,061) (10)
----------- -- ----------- --------
Net investment activity ....................... 36,155 -- 16,913 (10)
----------- -- ----------- --------
Proceeds from mutual fund shares sold ......... 5,083,147 -- 7,332,820 161,759
Cost of mutual fund shares sold ............... (5,096,505) -- (6,945,321) (161,594)
----------- -- ----------- --------
Realized gain (loss) on investments ........... (13,358) -- 387,499 165
Change in unrealized gain (loss) on investments 63,381 -- (107,097) (256)
----------- -- ----------- --------
Net gain (loss) on investments ................ 50,023 -- 280,402 (91)
----------- -- ----------- --------
Reinvested capital gains ...................... 6,103 -- 3,333,581 --
----------- -- ----------- --------
Net increase (decrease) in contract owners'
equity resulting from operations .......... 92,281 -- 3,630,896 (101)
----------- -- ----------- --------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 3,431,579 -- 31,096,853 9,005
Transfers between funds ....................... 6,774,363 -- 21,834,332 199,331
Redemptions ................................... (246,314) -- (1,113,904) --
Annuity benefits .............................. -- -- -- --
Annual contract maintenance charge (note 2) ... (468) -- (5,976) --
Contingent deferred sales charges (note 2) .... (2,852) -- (21,429) --
Adjustments to maintain reserves .............. (701) -- 558 2
----------- -- ----------- --------
Net equity transactions ..................... 9,955,607 -- 51,790,434 208,338
----------- -- ----------- --------
Net change in contract owners' equity ........... 10,047,888 -- 55,421,330 208,237
Contract owners' equity beginning of period ..... -- -- 208,237 --
----------- -- ----------- --------
Contract owners' equity end of period ........... 10,047,888 -- 55,629,567 208,237
=========== == =========== ========
</TABLE>
(Continued)
9
<PAGE> 9
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FidVIPEI FidVIPGr
-------------------------------------- ------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 31,564,284 2,196,188 11,151,243 3,402,849
Mortality, expense and administration
charges (note 2) ............................ (30,084,349) (21,686,508) (24,599,980) (19,702,775)
--------------- ------------- ------------- -------------
Net investment activity ..................... 1,479,935 (19,490,320) (13,448,737) (16,299,926)
--------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 137,267,016 128,388,351 361,048,888 352,390,654
Cost of mutual fund shares sold ............... (91,126,170) (86,491,155) (231,057,958) (263,927,395)
--------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 46,140,846 41,897,196 129,990,930 88,463,259
Change in unrealized gain (loss) on investments 306,220,297 109,421,110 186,810,844 11,508,279
--------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 352,361,143 151,318,306 316,801,774 99,971,538
--------------- ------------- ------------- -------------
Reinvested capital gains ...................... 158,698,207 62,957,378 49,915,087 85,921,939
--------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 512,539,285 194,785,364 353,268,124 169,593,551
--------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 395,432,535 442,789,904 253,081,701 365,931,236
Transfers between funds ....................... (6,514,287) (69,441,399) (129,238,876) (10,863,005)
Redemptions ................................... (152,832,877) (81,847,725) (141,496,031) (75,999,761)
Annuity benefits .............................. (151,789) (88,594) (128,135) (72,619)
Annual contract maintenance charge (note 2) ... (987,195) (829,507) (1,099,317) (953,598)
Contingent deferred sales charges (note 2) .... (2,099,197) (1,245,285) (2,350,994) (1,299,922)
Adjustments to maintain reserves .............. (20,082) 162,241 (37,457) 88,603
--------------- ------------- ------------- -------------
Net equity transactions ................... 232,827,108 289,499,635 (21,269,109) 276,830,934
--------------- ------------- ------------- -------------
Net change in contract owners' equity ......... 745,366,393 484,284,999 331,999,015 446,424,485
Contract owners' equity beginning of period ... 1,851,157,378 1,366,872,379 1,662,797,746 1,216,373,261
--------------- ------------- ------------- -------------
Contract owners' equity end of period ......... $ 2,596,523,771 1,851,157,378 1,994,796,761 1,662,797,746
=============== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
FidVIPHI FidVIPOv
-------------------------------- --------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 47,561,883 33,785,879 9,616,272 6,275,770
Mortality, expense and administration
charges (note 2) ............................ (9,735,535) (6,818,446) (8,027,188) (7,305,363)
----------- ----------- ----------- -----------
Net investment activity ..................... 37,826,348 26,967,433 1,589,084 (1,029,593)
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ......... 311,819,193 277,588,488 325,866,496 239,748,204
Cost of mutual fund shares sold ............... (295,085,798) (254,093,887) (271,581,444) (221,736,644)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 16,733,395 23,494,601 54,285,052 18,011,560
Change in unrealized gain (loss) on investments 45,290,142 3,017,656 (34,908,260) 35,816,737
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. 62,023,537 26,512,257 19,376,792 53,828,297
----------- ----------- ----------- -----------
Reinvested capital gains ...................... 5,878,435 6,610,280 38,173,687 6,903,348
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 105,728,320 60,089,970 59,139,563 59,702,052
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 139,864,147 155,991,160 59,588,290 76,505,148
Transfers between funds ....................... (19,876,856) 39,129,338 (49,688,118) (55,066,402)
Redemptions ................................... (51,389,595) (29,229,650) (45,181,274) (30,773,300)
Annuity benefits .............................. (44,670) (21,532) (81,666) (57,270)
Annual contract maintenance charge (note 2) ... (245,933) (214,322) (348,798) (366,967)
Contingent deferred sales charges (note 2) .... (744,127) (513,145) (640,146) (556,340)
Adjustments to maintain reserves .............. 12,025 19,823 (19,734) (20,346)
----------- ----------- ----------- -----------
Net equity transactions ................... 67,574,991 165,161,672 (36,371,446) (10,335,477)
----------- ----------- ----------- -----------
Net change in contract owners' equity ......... 173,303,311 225,251,642 22,768,117 49,366,575
Contract owners' equity beginning of period ... 654,534,143 429,282,501 562,589,941 513,223,366
----------- ----------- ----------- -----------
Contract owners' equity end of period ......... 827,837,454 654,534,143 585,358,058 562,589,941
=========== =========== =========== ===========
</TABLE>
10
<PAGE> 10
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FidVIPAM FidVIPCon
----------------------------------- --------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 32,069,538 30,292,892 4,746,178 --
Mortality, expense and administration
charges (note 2) ............................ (13,400,915) (11,728,562) (9,830,834) (4,093,694)
--------------- ----------- ----------- -----------
Net investment activity ..................... 18,668,623 18,564,330 (5,084,656) (4,093,694)
--------------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ......... 64,155,222 71,369,834 79,785,498 42,857,454
Cost of mutual fund shares sold ............... (50,691,840) (58,727,873) (62,047,221) (37,740,520)
--------------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 13,463,382 12,641,961 17,738,277 5,116,934
Change in unrealized gain (loss) on investments 61,763,112 52,460,984 115,299,306 55,834,150
--------------- ----------- ----------- -----------
Net gain (loss) on investments .............. 75,226,494 65,102,945 133,037,583 60,951,084
--------------- ----------- ----------- -----------
Reinvested capital gains ...................... 80,445,621 24,978,350 12,543,472 1,453,926
--------------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 174,340,738 108,645,625 140,496,399 58,311,316
--------------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 111,981,451 123,467,338 205,780,604 194,711,240
Transfers between funds ....................... (50,915,784) (91,324,524) 60,354,302 165,546,497
Redemptions ................................... (79,250,445) (51,519,798) (35,225,735) (11,293,134)
Annuity benefits .............................. (154,671) (125,096) (26,879) (13,674)
Annual contract maintenance charge (note 2) ... (604,024) (645,091) (255,108) (92,454)
Contingent deferred sales charges (note 2) .... (1,221,254) (1,014,204) (633,851) (187,219)
Adjustments to maintain reserves .............. 20,989 (64,567) 19,885 26,929
--------------- ----------- ----------- -----------
Net equity transactions ................... (20,143,738) (21,225,942) 230,013,218 348,698,185
--------------- ----------- ----------- -----------
Net change in contract owners' equity ......... 154,197,000 87,419,683 370,509,617 407,009,501
Contract owners' equity beginning of period ... 926,404,131 838,984,448 527,666,759 120,657,258
--------------- ----------- ----------- -----------
Contract owners' equity end of period ......... $ 1,080,601,131 926,404,131 898,176,376 527,666,759
=============== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
FidVIPGrOp MSEmMkt
--------------------------- -----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... -- -- 215,622 --
Mortality, expense and administration
charges (note 2) ............................ (151,360) -- (32,654) --
---------- ---------
Net investment activity ..................... (151,360) -- 182,968 --
---------- ---------
Proceeds from mutual fund shares sold ......... 13,987,376 -- 9,201,428 --
Cost of mutual fund shares sold ............... (13,645,097) -- (9,604,273) --
---------- ---------
Realized gain (loss) on investments ......... 342,279 -- (402,845) --
Change in unrealized gain (loss) on investments 1,832,634 -- (134,747) --
---------- ---------
Net gain (loss) on investments .............. 2,174,913 -- (537,592) --
---------- ---------
Reinvested capital gains ...................... -- -- 93,569 --
---------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 2,023,553 -- (261,055) --
---------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 14,171,862 -- 3,095,151 --
Transfers between funds ....................... 32,032,277 -- 5,390,535 --
Redemptions ................................... (564,541) -- (69,221) --
Annuity benefits .............................. -- -- -- --
Annual contract maintenance charge (note 2) ... (2,292) -- (458) --
Contingent deferred sales charges (note 2) .... (5,479) -- (349) --
Adjustments to maintain reserves .............. 1,844 -- (7,793) --
---------- ---------
Net equity transactions ................... 45,633,671 -- 8,407,865 --
---------- ---------
Net change in contract owners' equity ......... 47,657,224 -- 8,146,810 --
Contract owners' equity beginning of period ... -- -- -- --
---------- ---------
Contract owners' equity end of period ......... 47,657,224 -- 8,146,810 --
========== == ========= ==
</TABLE>
(Continued)
11
<PAGE> 11
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NSATCapAp NSATGvtBd
----------------------------------- ---------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 2,726,088 1,251,542 17,136,024 16,514,790
Mortality, expense and administration
charges (note 2) ............................ (3,300,579) (1,068,996) (3,682,644) (3,520,523)
------------- ----------- ----------- -----------
Net investment activity ..................... (574,491) 182,546 13,453,380 12,994,267
------------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ......... 62,546,657 79,805,628 91,300,089 59,380,633
Cost of mutual fund shares sold ............... (46,273,238) (71,378,017) (88,341,190) (60,934,857)
------------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 16,273,419 8,427,611 2,958,899 (1,554,224)
Change in unrealized gain (loss) on investments 40,948,774 5,144,294 4,971,271 (5,952,743)
------------- ----------- ----------- -----------
Net gain (loss) on investments .............. 57,222,193 13,571,905 7,930,170 (7,506,967)
------------- ----------- ----------- -----------
Reinvested capital gains ...................... 7,703,943 3,995,751 -- --
------------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 64,351,645 17,750,202 21,383,550 5,487,300
------------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 79,512,984 28,289,821 36,656,330 50,815,571
Transfers between funds ....................... 95,314,794 64,574,647 (6,550,198) (9,883,482)
Redemptions ................................... (14,345,113) (4,361,006) (32,967,846) (23,561,082)
Annuity benefits .............................. (292) -- (22,811) (24,001)
Annual contract maintenance charge (note 2) ... (90,956) (44,443) (161,508) (177,041)
Contingent deferred sales charges (note 2) .... (235,192) (85,893) (449,182) (341,250)
Adjustments to maintain reserves .............. 8,193 3,484 2,293 4,597
------------- ----------- ----------- -----------
Net equity transactions ................... 160,164,418 88,376,610 (3,492,922) 16,833,312
------------- ----------- ----------- -----------
Net change in contract owners' equity ......... 224,516,063 106,126,812 17,890,628 22,320,612
Contract owners' equity beginning of period ... 139,089,426 32,962,614 281,791,284 259,470,672
------------- ----------- ----------- -----------
Contract owners' equity end of period ......... $ 363,605,489 139,089,426 299,681,912 281,791,284
============= =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
NSATMyMkt NSATSmCo
----------------------------------- --------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 46,200,443 39,940,518 -- 389,011
Mortality, expense and administration
charges (note 2) ............................ (12,168,923) (10,854,333) (2,933,759) (985,031)
----------- ----------- ----------- -----------
Net investment activity ..................... 34,031,520 29,086,185 (2,933,759) (596,020)
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ......... 2,446,735,002 1,686,345,891 136,575,863 74,827,220
Cost of mutual fund shares sold ............... (2,466,735,002) (1,686,345,891) (116,663,809) (69,879,234)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... -- -- 19,912,054 4,947,986
Change in unrealized gain (loss) on investments -- -- 4,818,936 4,726,862
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. -- -- 24,730,990 9,674,848
----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- -- 7,911,895 855,271
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 34,031,520 29,086,185 29,709,126 9,934,099
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 574,163,215 725,565,703 68,338,674 43,614,525
Transfers between funds ....................... (398,798,940) (475,046,733) 46,335,002 96,607,598
Redemptions ................................... (176,620,083) (112,018,563) (12,078,315) (4,098,691)
Annuity benefits .............................. (29,991) (23,110) (1,773) --
Annual contract maintenance charge (note 2) ... (338,131) (319,172) (76,406) (21,542)
Contingent deferred sales charges (note 2) .... (2,442,204) (1,484,513) (198,899) (107,153)
Adjustments to maintain reserves .............. 11,382 48,555 9,979 1,006
----------- ----------- ----------- -----------
Net equity transactions ................... (4,054,752) 136,722,167 102,328,262 135,995,743
----------- ----------- ----------- -----------
Net change in contract owners' equity ......... 29,976,768 165,808,352 132,037,388 145,929,842
Contract owners' equity beginning of period ... 809,469,729 643,661,377 158,512,835 12,582,993
----------- ----------- ----------- -----------
Contract owners' equity end of period ......... 839,446,497 809,469,729 290,550,223 158,512,835
=========== =========== =========== ===========
</TABLE>
12
<PAGE> 12
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NSATTotRe NBAMTGro
------------------------------------- ---------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 12,556,764 9,065,576 -- 140,538
Mortality, expense and administration
charges (note 2) ............................ (10,939,432) (5,979,077) (5,755,671) (5,044,635)
--------------- ------------ ------------ ------------
Net investment activity ..................... 1,617,332 3,086,499 (5,755,671) (4,904,097)
--------------- ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 36,066,433 33,249,637 177,857,355 194,983,679
Cost of mutual fund shares sold ............... (22,601,600) (24,444,426) (151,296,684) (172,820,024)
--------------- ------------ ------------ ------------
Realized gain (loss) on investments ......... 13,464,833 8,805,211 26,560,671 22,163,655
Change in unrealized gain (loss) on investments 139,386,896 51,380,231 47,617,333 (23,619,295)
--------------- ------------ ------------ ------------
Net gain (loss) on investments .............. 152,851,729 60,185,442 74,178,004 (1,455,640)
--------------- ------------ ------------ ------------
Reinvested capital gains ...................... 32,893,745 22,040,126 32,577,604 32,885,958
--------------- ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 187,362,806 85,312,067 100,999,937 26,526,221
--------------- ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 234,728,766 147,190,954 44,470,540 63,157,589
Transfers between funds ....................... 82,492,350 31,680,108 (3,323,065) (56,288,983)
Redemptions ................................... (51,176,329) (27,808,731) (39,592,901) (21,321,681)
Annuity benefits .............................. (152,880) (135,707) (60,735) (54,905)
Annual contract maintenance charge (note 2) ... (390,286) (276,719) (269,972) (261,627)
Contingent deferred sales charges (note 2) .... (714,965) (321,819) (523,316) (336,808)
Adjustments to maintain reserves .............. 38,731 43,110 12,128 (16,483)
--------------- ------------ ------------ ------------
Net equity transactions ................... 264,825,387 150,371,196 712,679 (15,122,898)
--------------- ------------ ------------ ------------
Net change in contract owners' equity ......... 452,188,193 235,683,263 101,712,616 11,403,323
Contract owners' equity beginning of period ... 582,959,358 347,276,095 375,781,424 364,378,101
--------------- ------------ ------------ ------------
Contract owners' equity end of period ......... $ 1,035,147,551 582,959,358 477,494,040 375,781,424
=============== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NBAMTLMat NBAMTPart
--------------------------------- ---------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 11,734,100 16,264,359 1,231,708 353,111
Mortality, expense and administration
charges (note 2) ............................ (2,628,324) (2,674,530) (7,824,975) (2,762,993)
------------ ------------ ------------ ------------
Net investment activity ..................... 9,105,776 13,589,829 (6,593,267) (2,409,882)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 57,634,002 51,617,066 239,929,783 104,141,211
Cost of mutual fund shares sold ............... (58,656,885) (54,630,288) (184,398,144) (83,085,149)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... (1,022,883) (3,013,222) 55,531,639 21,056,062
Change in unrealized gain (loss) on investments 1,972,323 (4,803,141) 71,315,949 27,820,051
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 949,440 (7,816,363) 126,847,588 48,876,113
------------ ------------ ------------ ------------
Reinvested capital gains ...................... -- -- 18,968,301 4,413,881
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 10,055,216 5,773,466 139,222,622 50,880,112
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 56,406,502 103,107,451 178,218,856 89,463,499
Transfers between funds ....................... (64,818,071) (80,971,699) 138,729,962 126,822,125
Redemptions ................................... (16,675,074) (11,098,410) (32,375,861) (9,554,710)
Annuity benefits .............................. (15,225) (14,378) (1,195) --
Annual contract maintenance charge (note 2) ... (65,787) (70,499) (163,783) (67,419)
Contingent deferred sales charges (note 2) .... (209,825) (166,112) (453,932) (152,084)
Adjustments to maintain reserves .............. 372 5,385 1,670 18,141
------------ ------------ ------------ ------------
Net equity transactions ................... (25,377,108) 10,791,738 283,955,717 206,529,552
------------ ------------ ------------ ------------
Net change in contract owners' equity ......... (15,321,892) 16,565,204 423,178,339 257,409,664
Contract owners' equity beginning of period ... 203,772,070 187,206,866 354,011,224 96,601,560
------------ ------------ ------------ ------------
Contract owners' equity end of period ......... 188,450,178 203,772,070 777,189,563 354,011,224
============ ============ ============ ============
</TABLE>
(Continued)
13
<PAGE> 13
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
OppBdFd OppGISec
----------------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... $ 14,915,295 11,841,875 4,353,191 --
Mortality, expense and administration
charges (note 2) ............................. (3,235,025) (2,458,735) (5,669,952) (3,373,580)
------------- ------------ ------------ ------------
Net investment activity....................... 11,680,270 9,383,140 (1,316,761) (3,373,580)
------------- ------------ ------------ ------------
Proceeds from mutual fund shares sold .......... 30,992,706 26,186,293 76,448,017 45,734,202
Cost of mutual fund shares sold ................ (30,503,439) (26,001,294) (62,463,469) (44,891,906)
------------- ------------ ------------ ------------
Realized gain (loss) on investments .......... 489,267 184,999 13,984,548 842,296
Change in unrealized gain (loss) on investments. 5,495,496 (2,545,288) 60,986,819 39,919,697
------------- ------------ ------------ ------------
Net gain (loss) on investments ............... 5,984,763 (2,360,289) 74,971,367 40,761,993
------------- ------------ ------------ ------------
Reinvested capital gains ....................... 738,909 96,121 -- --
------------- ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 18,403,942 7,118,972 73,654,606 37,388,413
------------- ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 55,252,898 64,689,526 90,024,052 69,450,810
Transfers between funds ........................ 19,335,126 3,142,114 43,312,410 15,287,141
Redemptions .................................... (16,712,535) (11,183,443) (23,014,747) (11,768,272)
Annuity benefits ............................... (54,502) (28,688) (4,941) (1,441)
Annual contract maintenance charge (note 2) .... (89,653) (82,976) (173,863) (140,721)
Contingent deferred sales charges (note 2) ..... (268,113) (162,459) (394,896) (243,448)
Adjustments to maintain reserves ............... (3,694) 5,388 (691,837) (24,847)
------------- ------------ ------------ ------------
Net equity transactions .................... 57,459,527 56,379,462 109,056,178 72,559,222
------------- ------------ ------------ ------------
Net change in contract owners' equity ............ 75,863,469 63,498,434 182,710,784 109,947,635
Contract owners' equity beginning of period ...... 215,102,822 151,604,388 306,611,894 196,664,259
------------- ------------ ------------ ------------
Contract owners' equity end of period ............ $ 290,966,291 215,102,822 489,322,678 306,611,894
============= ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
OppGro OppMult
----------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... -- -- 10,986,747 10,013,188
Mortality, expense and administration
charges (note 2) ............................. (40,955) -- (3,902,616) (2,686,847)
----------- -- ------------ ------------
Net investment activity....................... (40,955) -- 7,084,131 7,326,341
----------- -- ------------ ------------
Proceeds from mutual fund shares sold .......... 738,091 -- 8,146,767 7,288,916
Cost of mutual fund shares sold ................ (732,690) -- (6,105,557) (5,896,054)
----------- -- ------------ ------------
Realized gain (loss) on investments .......... 5,401 -- 2,041,210 1,392,862
Change in unrealized gain (loss) on investments. (150,054) -- 22,703,778 13,543,683
----------- -- ------------ ------------
Net gain (loss) on investments ............... (144,653) -- 24,744,988 14,936,545
----------- -- ------------ ------------
Reinvested capital gains ....................... -- -- 9,159,579 4,206,935
----------- -- ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... (185,608) -- 40,988,698 26,469,821
----------- -- ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 5,815,873 -- 67,724,310 54,730,085
Transfers between funds ........................ 10,665,183 -- 15,591,000 (2,296,771)
Redemptions .................................... (104,041) -- (20,273,082) (9,679,010)
Annuity benefits ............................... -- -- (8,967) (5,897)
Annual contract maintenance charge (note 2) .... (799) -- (128,063) (113,444)
Contingent deferred sales charges (note 2) ..... (619) -- (313,339) (172,551)
Adjustments to maintain reserves ............... 125 -- 2,876 8,410
----------- -- ------------ ------------
Net equity transactions .................... 16,375,722 -- 62,594,735 42,470,822
----------- -- ------------ ------------
Net change in contract owners' equity ............ 16,190,114 -- 103,583,433 68,940,643
Contract owners' equity beginning of period ...... -- -- 237,388,771 168,448,128
----------- -- ------------ ------------
Contract owners' equity end of period ............ 16,190,114 -- 340,972,204 237,388,771
=========== == ============ ============
</TABLE>
14
<PAGE> 14
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
StOpp2 StDisc2
----------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 2,534,711 3,950,904 -- 18,969,271
Mortality, expense and administration
charges (note 2) ............................ (9,066,407) (7,057,927) (2,604,823) (2,853,957)
------------ ------------ ------------ ------------
Net investment activity ..................... (6,531,696) (3,107,023) (2,604,823) 16,115,314
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 148,226,419 119,184,242 123,823,006 102,439,111
Cost of mutual fund shares sold ............... (109,705,183) (96,051,789) (138,054,663) (93,265,896)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 38,521,236 23,132,453 (14,231,657) 9,173,215
Change in unrealized gain (loss) on investments 53,401,226 42,622,463 35,647,182 (52,600,640)
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 91,922,462 65,754,916 21,415,525 (43,427,425)
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 57,079,292 18,522,999 -- 25,127,954
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 142,470,058 81,170,892 18,810,702 (2,184,157)
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 89,723,233 114,300,494 22,742,374 54,635,699
Transfers between funds ....................... (29,207,063) (1,880,976) (42,069,763) (61,723,439)
Redemptions ................................... (40,126,673) (24,806,464) (12,584,675) (10,218,470)
Annuity benefits .............................. (34,707) (24,921) (9,675) (6,945)
Annual contract maintenance charge (note 2) ... (341,773) (307,976) (105,512) (117,314)
Contingent deferred sales charges (note 2) .... (633,525) (443,883) (239,340) (194,690)
Adjustments to maintain reserves .............. (51,000) 15,330 2,840 4,270
------------ ------------ ------------ ------------
Net equity transactions ................... 19,328,492 86,851,604 (32,263,751) (17,620,889)
------------ ------------ ------------ ------------
Net change in contract owners' equity ........... 161,798,550 168,022,496 (13,453,049) (19,805,046)
Contract owners' equity beginning of period ..... 602,429,220 434,406,724 208,719,472 228,524,518
------------ ------------ ------------ ------------
Contract owners' equity end of period ........... $764,227,770 602,429,220 195,266,423 208,719,472
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
StintStk2 VEWrldBd
---------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 1,173,377 287,395 3,428,399 2,839,207
Mortality, expense and administration
charges (note 2) ............................ (921,090) (611,962) (1,337,855) (1,405,973)
----------- ----------- ------------ ------------
Net investment activity ..................... 252,287 (324,567) 2,090,544 1,433,234
----------- ----------- ------------ ------------
Proceeds from mutual fund shares sold ......... 39,269,990 40,635,874 36,100,931 26,316,732
Cost of mutual fund shares sold ............... (40,207,464) (39,555,594) (37,747,713) (24,676,513)
----------- ----------- ------------ ------------
Realized gain (loss) on investments ......... (937,474) 1,080,280 (1,646,782) 1,640,219
Change in unrealized gain (loss) on investments (9,982,351) 163,302 311,663 (1,896,860)
----------- ----------- ------------ ------------
Net gain (loss) on investments .............. (10,919,825) 1,243,582 (1,335,119) (256,641)
----------- ----------- ------------ ------------
Reinvested capital gains ...................... 1,762,973 -- -- --
----------- ----------- ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (8,904,565) 919,015 755,425 1,176,593
----------- ----------- ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 16,108,665 24,522,765 13,446,356 19,593,116
Transfers between funds ....................... (22,926,232) 44,391,422 (16,903,125) (10,054,511)
Redemptions ................................... (4,298,166) (2,445,130) (9,117,586) (7,422,209)
Annuity benefits .............................. (1,862) -- (11,204) (10,709)
Annual contract maintenance charge (note 2) ... (23,552) (13,534) (44,515) (54,748)
Contingent deferred sales charges (note 2) .... (69,910) (44,582) (111,505) (102,961)
Adjustments to maintain reserves .............. 5,043 3,498 3,411 5,937
----------- ----------- ------------ ------------
Net equity transactions ................... (11,206,014) 66,414,439 (12,738,168) 1,953,915
----------- ----------- ------------ ------------
Net change in contract owners' equity ........... (20,110,579) 67,333,454 (11,982,743) 3,130,508
Contract owners' equity beginning of period ..... 69,828,900 2,495,446 109,247,607 106,117,099
----------- ----------- ------------ ------------
Contract owners' equity end of period ........... 49,718,321 69,828,900 97,264,864 109,247,607
=========== =========== ============ ============
</TABLE>
(Continued)
15
<PAGE> 15
NATIONWIDE VARIABLE ACCOUNT -- II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
VEWrldEMkt VEWrldHAs
---------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 154,979 -- 2,942,339 1,557,690
Mortality, expense and administration
charges (note 2) ............................ (1,293,147) (3,588) (2,001,920) (2,044,967)
----------- ----------- ------------ ------------
Net investment activity ..................... (1,138,168) (3,588) 940,419 (487,277)
----------- ----------- ------------ ------------
Proceeds from mutual fund shares sold ......... 85,151,405 83,165 180,226,702 234,370,915
Cost of mutual fund shares sold ............... (84,005,535) (83,031) (178,928,373) (216,949,542)
----------- ----------- ------------ ------------
Realized gain (loss) on investments ......... 1,145,870 134 1,298,329 17,421,373
Change in unrealized gain (loss) on
investments ................................. (24,512,682) 96,291 (10,420,493) 1,524,272
----------- ----------- ------------ ------------
Net gain (loss) on investments .............. (23,366,812) 96,425 (9,122,164) 18,945,645
----------- ----------- ------------ ------------
Reinvested capital gains ...................... -- -- 3,986,394 1,527,541
----------- ----------- ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (24,504,980) 92,837 (4,195,351) 19,985,909
----------- ----------- ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 39,216,218 46,290 16,547,301 25,924,596
Transfers between funds ....................... 58,762,770 12,045,985 (24,931,349) (4,917,223)
Redemptions ................................... (7,729,327) (4,889) (11,775,774) (8,243,366)
Annuity benefits .............................. (1,090) -- (2,890) (1,348)
Annual contract maintenance charge (note 2) ... (31,176) (62) (76,665) (85,001)
Contingent deferred sales charges (note 2) .... (109,502) (40) (187,910) (143,065)
Adjustments to maintain reserves .............. (6,833) 112 (7,728) 51,242
----------- ----------- ------------ ------------
Net equity transactions ................... 90,101,060 12,087,396 (20,435,015) 12,585,835
----------- ----------- ------------ ------------
Net change in contract owners' equity ......... 65,596,080 12,180,233 (24,630,366) 32,571,744
Contract owners' equity beginning of period ... 12,180,233 -- 151,820,758 119,249,014
----------- ----------- ------------ ------------
Contract owners' equity end of period ......... $77,776,313 12,180,233 127,190,392 151,820,758
=========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
MSRESec WPinteq
------------------------------ -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 6,929,835 1,590,652 2,335,080 3,698,055
Mortality, expense and administration
charges (note 2) ............................ (2,856,831) (541,778) (4,217,409) (2,849,091)
------------ ------------ ------------ ------------
Net investment activity ..................... 4,073,004 1,048,874 (1,882,329) 848,964
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 87,738,533 16,573,232 94,815,826 106,917,675
Cost of mutual fund shares sold ............... (67,567,070) (14,961,481) (87,661,494) (99,742,804)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 20,171,463 1,611,751 7,154,332 7,174,871
Change in unrealized gain (loss) on
investments ................................. (8,041,235) 19,537,820 (34,790,695) 1,634,068
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 12,130,228 21,149,571 (27,636,363) 8,808,939
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 22,876,677 753,434 16,160,192 1,645,400
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 39,079,909 22,951,879 (13,358,500) 11,303,303
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 63,961,156 22,515,613 69,542,854 112,785,247
Transfers between funds ....................... 26,781,688 98,780,721 (17,704,103) 87,888,069
Redemptions ................................... (11,168,996) (1,228,962) (16,226,024) (9,488,177)
Annuity benefits .............................. (1,202) -- (8,123) (2,986)
Annual contract maintenance charge (note 2) ... (56,589) (10,786) (95,572) (62,895)
Contingent deferred sales charges (note 2) .... (156,322) (17,641) (245,953) (148,153)
Adjustments to maintain reserves .............. 4,138 3,554 4,927 25,385
------------ ------------ ------------ ------------
Net equity transactions ................... 79,363,873 120,042,499 35,268,006 190,996,490
------------ ------------ ------------ ------------
Net change in contract owners' equity ......... 118,443,782 142,994,378 21,909,506 202,299,793
Contract owners' equity beginning of period ... 150,233,923 7,239,545 264,866,519 62,566,726
------------ ------------ ------------ ------------
Contract owners' equity end of period ......... $268,677,705 150,233,923 286,776,025 264,866,519
============ ============ ============ ============
</TABLE>
16
<PAGE> 16
NATIONWIDE VARIABLE ACCOUNT -- II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
WPPVenCap WPSmCoGr
--------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 2,289 -- -- --
Mortality, expense and administration
charges (note 2) ............................ (303,833) (2,741) (4,274,427) (2,791,973)
----------- ---------- ------------ ------------
Net investment activity ..................... (301,544) (2,741) (4,274,427) (2,791,973)
----------- ---------- ------------ ------------
Proceeds from mutual fund shares sold ......... 46,674,220 -- 206,418,883 197,695,619
Cost of mutual fund shares sold ............... (44,520,920) -- (190,696,238) (177,329,297)
----------- ---------- ------------ ------------
Realized gain (loss) on investments ......... 2,153,300 -- 15,722,645 20,366,322
Change in unrealized gain (loss) on
investments.................................. (396,347) 151,486 32,994,104 (7,620,245)
----------- ---------- ------------ ------------
Net gain (loss) on investments .............. 1,756,953 151,486 48,716,749 12,746,077
----------- ---------- ------------ ------------
Reinvested capital gains ...................... -- -- -- --
----------- ---------- ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,455,409 148,745 44,442,322 9,954,104
----------- ---------- ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 6,835,129 34,854 78,705,384 105,581,082
Transfers between funds ....................... (463,676) 9,268,650 21,336,792 58,853,290
Redemptions ................................... (2,561,771) (3,576) (17,829,181) (10,660,592)
Annuity benefits .............................. -- -- (4,658) (1,515)
Annual contract maintenance charge (note 2) ... (5,950) (47) (116,486) (67,269)
Contingent deferred sales charges (note 2) .... (29,935) (30) (332,255) (179,689)
Adjustments to maintain reserves .............. 975 16 12,595 21,132
----------- ---------- ------------ ------------
Net equity transactions ................... 3,774,772 9,299,867 81,772,191 153,546,439
----------- ---------- ------------ ------------
Net change in contract owners' equity ......... 5,230,181 9,448,612 126,214,513 163,500,543
Contract owners' equity beginning of period ... 9,448,612 -- 257,182,600 93,682,057
----------- ---------- ------------ ------------
Contract owners' equity end of period ......... $14,678,793 9,448,612 383,397,113 257,182,600
=========== ========== ============ ============
</TABLE>
See accompanying notes to financial statements.
17
<PAGE> 17
NATIONWIDE VARIABLE ACCOUNT-II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Variable Account-II (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
Insurance Company (the Company) on October 7, 1981. 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, and Individual Modified Single
Premium Deferred Variable Annuity Contracts through the Account. The
primary distribution for the contracts is through the brokerage
community; however, other distributors are 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.
With certain exceptions, contract owners in either the accumulation or
the payout phase may invest in the following:
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP)
(formerly TCI Portfolios, Inc.);
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)
Funds of the American Variable Insurance Series (American VI
Series) (available only for contracts issued on or after May 1,
1987 and before September 1, 1989);
American VI Series - Growth Fund (AVISGro)
American VI Series - High-Yield Bond Fund (AVISHiYld)
American VI Series - U.S. Government/AAA-Rated Securities Fund
(AVISGvt)
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)
18
<PAGE> 18
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
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 - 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. 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 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.
19
<PAGE> 19
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company which is taxed as a life insurance company
under the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Reclassifications
Certain 1996 amounts have been reclassified to conform with the current
period presentation.
(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 a contract owner's contract value a contingent deferred sales
charge. For contracts issued prior to December 15, 1988, the contingent
deferred sales charge will be equal to 5% of the lesser of the total of all
purchase payments made within 96 months prior to the date of the request
for surrender or the amount surrendered. For contracts issued on or after
December 15, 1988, the Company will deduct a contingent deferred sales
charge not to exceed 7% of the lesser of purchase payments or the amount
surrendered, such charge declining 1% per year, to 0%, after the purchase
payment has been held in the contract for 84 months. No sales charges are
deducted on redemptions used to purchase units in the fixed investment
options of the Company.
The following contract charges are deducted by the Company: (a) for The
BEST OF AMERICA(R) contracts, an annual contract maintenance charge of $30,
with certain exceptions, which is satisfied by surrendering units; and (b)
for The BEST OF AMERICA(R) contracts issued prior to December 15, 1988, a
charge for mortality and expense risk assessed through the daily unit value
calculation equal to an annual rate of 0.80% and 0.50%, respectively; for
The BEST OF AMERICA(R) contracts issued on or after December 15, 1988, 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; for The BEST OF AMERICA(R)
America's Vision Annuity(SM) contracts, 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 0.15%,
respectively; and for The BEST OF AMERICA(R) Nationwide Insurance
Enterprise Annuity contracts, a mortality risk charge assessed through the
daily unit value calculation equal to an annual rate of 0.80%.
The following table provides mortality, expense and administration charges
by contract type for the period ended December 31, 1997:
<TABLE>
<CAPTION>
TOTAL ACVPBal ACVPCapap ACVPint ACVPValue
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BOA............................. $ 126,406,070 1,191,850 4,037,524 1,015,749 236,395
BOA Vision...................... 83,760,749 875,039 1,103,836 1,073,332 228,347
BOA Enterprise.................. 118,491 876 1,623 1,174 559
------------ ------------ ------------ ------------ ------------
Total....................... $ 210,285,310 2,067,765 5,142,983 2,090,255 465,301
============ ============ ============ ============ ============
AVISGro AVISHiYld AVISGvt DrySRGro DryStkIx
------------ ------------ ------------ ------------ ------------
BOA............................. $ 329,103 38,276 72,106 927,006 4,928,324
BOA Vision...................... - - - 837,713 6,128,921
BOA Enterprise.................. - - - 1,418 8,919
------------ ------------ ------------ ------------ ------------
Total....................... $ 329,103 38,276 72,106 1,766,137 11,066,164
============ ============ ============ ============ ============
</TABLE>
20
<PAGE> 20
<TABLE>
<CAPTION>
DryCapAp DryGrInc FidVIPEI FidVIPGr FidVIPHI
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BOA............................. $ 12,311 148,142 18,215,213 17,002,784 5,147,050
BOA Vision...................... 24,419 237,804 11,859,942 7,588,917 4,584,647
BOA Enterprise.................. 17 1,115 9,194 8,279 3,838
------------ ------------ ------------ ------------ ------------
Total....................... $ 36,747 387,061 30,084,349 24,599,980 9,735,535
============ ============ ============ ============ ============
FidVIPOv FidVIPAM FidVIPCon FidVipGrOp MSEmMkt
------------ ------------ ------------ ------------ ------------
BOA............................. $ 6,016,329 9,994,932 4,517,986 60,777 15,348
BOA Vision...................... 2,010,362 3,404,754 5,308,985 90,378 17,202
BOA Enterprise.................. 497 1,229 3,863 205 104
------------ ------------ ------------ ------------ ------------
Total....................... $ 8,027,188 13,400,915 9,830,834 151,360 32,654
============ ============ ============ ============ ============
NSATCaPap NSATGvtBd NSATMyMkt NSATSmCo NSATTotRe
------------ ------------ ------------ ------------ ------------
BOA............................. $ 1,856,637 2,631,037 6,719,210 1,428,117 6,944,503
BOA Vision...................... 1,437,155 1,049,731 5,441,823 1,497,619 3,970,444
BOA Enterprise.................. 6,787 1,876 7,890 8,023 24,485
------------ ------------ ------------ ------------ ------------
Total....................... $ 3,300,579 3,682,644 12,168,923 2,933,759 10,939,432
============ ============ ============ ============ ============
NBAMTGro NBAMTLMat NBAMTPart OppBdFd OppGISec
------------ ------------ ------------ ------------ ------------
BOA............................. $ 4,438,181 1,495,421 3,649,443 1,630,280 2,979,200
BOA Vision...................... 1,315,545 1,132,335 4,169,214 1,603,881 2,689,657
BOA Enterprise.................. 1,945 568 6,318 864 1,095
------------ ------------ ------------ ------------ ------------
Total....................... $ 5,755,671 2,628,324 7,824,975 3,235,025 5,669,952
============ ============ ============ ============ ============
OppGRo OppMult StOpp2 StDisc2 StintStk2
------------ ------------ ------------ ------------ ------------
BOA............................. $ 18,845 2,272,557 5,943,611 1,607,469 440,839
BOA Vision...................... 22,068 1,628,568 3,119,935 996,834 479,748
BOA Enterprise.................. 42 1,491 2,861 520 503
------------ ------------ ------------ ------------ ------------
Total....................... $ 40,955 3,902,616 9,066,407 2,604,823 921,090
============ ============ ============ ============ ============
VEWrldBd VEWrldEMkt VEWrlfHAs MSRESec WPIntEq
------------ ------------ ------------ ------------ ------------
BOA............................. $ 866,795 699,280 1,330,754 1,477,443 1,892,289
BOA Vision...................... 470,930 592,796 670,086 1,377,066 2,323,574
BOA Enterprise.................. 130 1,071 1,080 2,322 1,546
------------ ------------ ------------ ------------ ------------
Total....................... $ 1,337,855 1,293,147 2,001,920 2,856,831 4,217,409
============ ============ ============ ============ ============
WPPVenCap WPSmCoGr
------------ ------------
BOA............................. $ 135,993 2,040,961
BOA Vision...................... 167,588 2,229,554
BOA Enterprise.................. 252 3,912
------------ ------------
Total....................... $ 303,833 4,274,427
============ ============
</TABLE>
(3) 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.
21
<PAGE> 21
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1997,
for each series, in both the accumulation and payout phases.
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN
----- ---------- ------
<S> <C> <C> <C> <C>
Contracts in accumulation phase:
The BEST OF AMERICA(R) contracts:
American Century VP -
American Century VP Balanced:
Tax qualified ............................ 3,321,528 $ 16.345418 $54,291,764 14%
Non-tax qualified ........................ 2,535,285 16.345418 41,440,293 14%
American Century VP -
American Century VP Capital Appreciation:
Tax qualified ............................ 7,405,239 22.608168 167,418,887 (5)%
Non-tax qualified ........................ 4,340,405 22.608168 98,128,605 (5)%
American Century VP -
American Century VP International:
Tax qualified ............................ 3,513,167 13.753336 48,317,766 17%
Non-tax qualified ........................ 2,814,767 13.753336 38,712,436 17%
American Century VP -
American Century VP Value:
Tax qualified ............................ 1,153,698 12.621843 14,561,795 24%
Non-tax qualified ........................ 1,177,685 12.621843 14,864,555 24%
American VI Series - Growth Fund:
Tax qualified ............................ 425,839 31.433956 13,385,804 28%
Non-tax qualified ........................ 417,659 31.433956 13,128,675 28%
American VI Series -
High-Yield Bond Fund:
Tax qualified ............................ 79,449 25.696356 2,041,550 11%
Non-tax qualified ........................ 44,445 25.696356 1,142,075 11%
American VI Series - U.S. Government/
AAA-Rated Securities Fund:
Tax qualified ............................ 146,543 19.690955 2,885,572 7%
Non-tax qualified ........................ 111,728 19.690955 2,200,031 7%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ............................ 2,568,412 21.597400 55,471,021 27%
Non-tax qualified ........................ 1,595,569 21.597400 34,460,142 27%
Dreyfus Stock Index Fund:
Tax qualified ............................ 12,220,119 21.614298 264,129,294 31%
Non-tax qualified ........................ 9,791,828 21.614298 211,643,488 31%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ............................ 160,444 10.192063 1,635,255 2%(a)
Non-tax qualified ........................ 195,833 10.192063 1,995,942 2%(a)
Dreyfus VIF Growth and Income Portfolio:
Tax qualified ............................ 948,045 11.455116 10,859,965 15%
Non-tax qualified ........................ 850,450 11.455116 9,742,003 15%
</TABLE>
22
<PAGE> 22
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP - Equity-Income Portfolio:
Tax qualified .......................... 23,984,214 35.459509 850,468,452 26%
Non-tax qualified ...................... 19,527,927 35.459509 692,450,703 26%
Fidelity VIP - Growth Portfolio:
Tax qualified .......................... 17,382,123 46.918894 815,549,987 22%
Non-tax qualified ...................... 11,857,821 46.918894 556,355,847 22%
Fidelity VIP - High Income Portfolio:
Tax qualified .......................... 6,886,178 28.515871 196,365,364 16%
Non-tax qualified ...................... 8,097,358 28.515871 230,903,216 16%
Fidelity VIP - Overseas Portfolio:
Tax qualified .......................... 12,793,113 18.248482 233,454,892 10%
Non-tax qualified ...................... 11,023,038 18.248482 201,153,711 10%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified .......................... 20,417,818 24.319958 496,560,476 19%
Non-tax qualified ...................... 12,420,418 24.319958 302,064,044 19%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified .......................... 13,856,940 16.241378 225,055,800 23%
Non-tax qualified ...................... 11,315,346 16.241378 183,776,812 23%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified .......................... 946,688 10.932125 10,349,312 9%(a)
Non-tax qualified ...................... 861,112 10.932125 9,413,784 9%(a)
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified .......................... 172,203 9.810487 1,689,395 (2)%(a)
Non-tax qualified ...................... 222,098 9.810487 2,178,890 (2)%(a)
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified .......................... 3,948,978 23.867569 94,252,505 33%
Non-tax qualified ...................... 4,139,623 23.867569 98,802,738 33%
Nationwide SAT -
Government Bond Fund:
Tax qualified .......................... 3,575,004 32.793820 117,238,038 8%
Non-tax qualified ...................... 2,848,085 32.707206 93,152,903 8%
Nationwide SAT - Money Market Fund:
Tax qualified .......................... 10,935,137 22.994005 251,442,595 4%
Non-tax qualified ...................... 11,155,103 22.994005 256,500,494 4%
Nationwide SAT - Small Company Fund:
Tax qualified .......................... 4,812,645 16.020642 77,101,663 16%
Non-tax qualified ...................... 3,793,288 16.020642 60,770,909 16%
Nationwide SAT - Total Return Fund:
Tax qualified .......................... 4,368,093 80.108117 349,919,705 28%
Non-tax qualified ...................... 3,538,356 78.045294 276,152,034 28%
Neuberger & Berman AMT Growth Portfolio:
Tax qualified .......................... 5,338,769 37.889922 202,285,541 27%
Non-tax qualified ...................... 4,164,923 37.889922 157,808,608 27%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio:
Tax qualified .......................... 3,398,882 17.690564 60,128,140 5%
Non-tax qualified ...................... 2,928,007 17.690564 51,798,095 5%
(continued)
</TABLE>
23
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C>
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ....................... 7,980,031 22.354609 178,390,473 30%
Non-tax qualified ................... 7,769,569 22.354609 173,685,677 30%
Oppenheimer VAF - Bond Fund:
Tax qualified ....................... 4,076,992 18.715948 76,304,770 8%
Non-tax qualified ................... 3,420,959 18.715948 64,026,491 8%
Oppenheimer VAF -
Global Securities Fund:
Tax qualified ....................... 9,603,574 16.030693 153,951,946 21%
Non-tax qualified ................... 6,175,581 16.030693 98,998,843 21%
Oppenheimer VAF - Growth Fund:
Tax qualified ....................... 465,695 10.427884 4,856,213 4%(a)
Non-tax qualified ................... 330,322 10.427884 3,444,559 4%(a)
Oppenheimer VAF -
Multiple Strategies Fund:
Tax qualified ....................... 5,140,468 20.878401 107,324,752 16%
Non-tax qualified ................... 4,005,875 20.878401 83,636,265 16%
Strong Opportunity Fund II, Inc.:
Tax qualified ....................... 11,262,847 26.092982 293,881,264 24%
Non-tax qualified ................... 7,827,155 26.092982 204,233,815 24%
Strong VIF - Strong Discovery Fund II:
Tax qualified ....................... 3,782,422 17.733129 67,074,177 10%
Non-tax qualified ................... 3,017,702 17.733129 53,513,299 10%
Strong VIF -
Strong International Stock Fund II:
Tax qualified ....................... 1,303,896 9.509278 12,399,110 (15)%
Non-tax qualified ................... 1,020,345 9.509278 9,702,744 (15)%
Van Eck WIT - Worldwide Bond Fund:
Tax qualified ....................... 2,104,195 14.758566 31,054,901 1%
Non-tax qualified ................... 2,016,599 14.758566 29,762,109 1%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified ....................... 2,421,738 8.792462 21,293,039 (13)%
Non-tax qualified ................... 2,018,746 8.792462 17,749,747 (13)%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified ....................... 2,616,530 15.767781 41,256,872 (3)%
Non-tax qualified ................... 2,702,266 15.767781 42,608,738 (3)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified ....................... 3,539,264 17.901858 63,359,402 20%
Non-tax qualified ................... 4,040,440 17.901858 72,331,383 20%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified ....................... 5,900,906 11.164048 65,877,998 (4)%
Non-tax qualified ................... 5,196,387 11.164048 58,012,714 (4)%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ....................... 391,358 11.369600 4,449,584 12%
Non-tax qualified ................... 316,378 11.369600 3,597,091 12%
</TABLE>
24
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C>
Warburg Pincus Trust -
Small Company Growth Portfolio:
Tax qualified ........................... 6,148,609 15.950665 98,074,402 14%
Non-tax qualified ....................... 5,532,845 15.950665 88,252,557 14%
The BEST OF AMERICA(R) Nationwide Insurance
Enterprise Annuity contracts:
American Century VP -
American Century VP Balanced:
Tax qualified ........................... 7,706 13.063915 100,671 15%
Non-tax qualified ....................... 5,382 13.063915 70,310 15%
American Century VP -
American Century VP Capital Appreciation:
Tax qualified ........................... 7,635 8.999141 68,708 (4)%
Non-tax qualified ....................... 11,715 8.999141 105,425 (4)%
American Century VP -
American Century VP International:
Tax qualified ........................... 1,575 13.831167 21,784 18%
Non-tax qualified ....................... 10,967 13.831167 151,686 18%
American Century VP -
American Century VP Value:
Tax qualified ........................... 439 12.687119 5,570 25%
Non-tax qualified ....................... 10,139 12.687119 128,635 25%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ........................... 6,260 15.827982 99,083 27%
Non-tax qualified ....................... 9,564 15.827982 151,379 27%
Dreyfus Stock Index Fund:
Tax qualified ........................... 52,598 16.954928 891,795 32%
Non-tax qualified ....................... 46,692 16.954928 791,659 32%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ........................... 436 10.216047 4,454 2%(a)
Non-tax qualified ....................... 445 10.216047 4,546 2%(a)
Dreyfus VIF
Growth and Income Portfolio:
Tax qualified ........................... 21,624 11.514380 248,987 15%
Non-tax qualified ....................... 13,972 11.514380 160,879 15%
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ........................... 53,201 15.458195 822,391 27%
Non-tax qualified ....................... 47,182 15.458195 729,349 27%
Fidelity VIP - Growth Portfolio:
Tax qualified ........................... 51,572 13.440547 693,156 22%
Non-tax qualified ....................... 43,269 13.440547 581,559 22%
Fidelity VIP - High Income Portfolio:
Tax qualified ........................... 21,865 13.408646 293,180 17%
Non-tax qualified ....................... 28,876 13.408646 387,188 17%
Fidelity VIP - Overseas Portfolio:
Tax qualified ........................... 859 13.030895 11,194 11%
Non-tax qualified ....................... 5,016 13.030895 65,363 11%
</TABLE>
(Continued)
25
<PAGE> 25
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ........................... 8,799 14.332657 126,113 20%
Non-tax qualified ....................... 7,737 14.332657 110,892 20%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ........................... 22,202 15.126324 335,835 23%
Non-tax qualified ....................... 21,146 15.126324 319,861 23%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified ........................... 1,128 10.957842 12,360 10%(a)
Non-tax qualified ....................... 7,174 10.957842 78,612 10%(a)
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified ........................... 2,014 9.833594 19,805 (2)%(a)
Non-tax qualified ....................... 1,055 9.833594 10,374 (2)%(a)
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ........................... 41,342 17.967816 742,825 33%
Non-tax qualified ....................... 30,233 17.967816 543,221 33%
Nationwide SAT -
Government Bond Fund:
Tax qualified ........................... 12,756 11.460915 146,195 9%
Non-tax qualified ....................... 20,611 11.460915 236,221 9%
Nationwide SAT - Money Market Fund:
Tax qualified ........................... 39,718 10.971484 435,765 4%
Non-tax qualified ....................... 33,925 10.971484 372,208 4%
Nationwide SAT - Small Company Fund:
Tax qualified ........................... 28,143 16.185025 455,495 16%
Non-tax qualified ....................... 53,457 16.185025 865,203 16%
Nationwide SAT - Total Return Fund:
Tax qualified ........................... 154,636 16.295055 2,519,802 28%
Non-tax qualified ....................... 127,059 16.295055 2,070,433 28%
Neuberger & Berman AMT -
Growth Portfolio:
Tax qualified ........................... 12,673 13.815173 175,080 28%
Non-tax qualified ....................... 12,764 13.815173 176,337 28%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio:
Tax qualified ........................... 6,757 11.153775 75,366 6%
Non-tax qualified ....................... 4,478 11.153775 49,947 6%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ........................... 28,536 17.688563 504,761 30%
Non-tax qualified ....................... 35,613 17.688563 629,943 30%
Oppenheimer VAF - Bond Fund:
Tax qualified ........................... 9,333 11.589929 108,169 8%
Non-tax qualified ....................... 5,291 11.589929 61,322 8%
Oppenheimer VAF -
Global Securities Fund:
Tax qualified ........................... 6,749 14.315651 96,616 21%
Non-tax qualified ....................... 8,609 14.315651 123,243 21%
</TABLE>
26
<PAGE> 26
<TABLE>
<S> <C> <C> <C> <C>
Oppenheimer VAF - Growth Fund:
Tax qualified ............................ 1,122 10.452434 11,728 5%(a)
Non-tax qualified ........................ 153 10.452434 1,599 5%(a)
Oppenheimer VAF -
Multiple Strategies Fund:
Tax qualified ............................ 14,345 13.725672 196,895 16%
Non-tax qualified ........................ 9,530 13.725672 130,806 16%
Strong Opportunity Fund II, Inc.:
Tax qualified ............................ 19,338 15.443112 298,639 24%
Non-tax qualified ........................ 14,422 15.443112 222,721 24%
Strong VIF - Strong Discovery Fund II:
Tax qualified ............................ 1,366 11.566866 15,800 10%
Non-tax qualified ........................ 6,228 11.566866 72,038 10%
Strong VIF -
Strong International Stock Fund II:
Tax qualified ............................ 3,580 9.559256 34,222 (14)%
Non-tax qualified ........................ 1,291 9.559256 12,341 (14)%
Van Eck WIT - Worldwide Bond Fund:
Tax qualified ............................ 637 10.447140 6,655 2%
Non-tax qualified ........................ 1,016 10.447140 10,614 2%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified ............................ 10,818 8.838016 95,610 (12)%
Non-tax qualified ........................ 5,579 8.838016 49,307 (12)%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified ............................ 1,428 12.634338 18,042 (2)%
Non-tax qualified ........................ 9,072 12.634338 114,619 (2)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified ............................ 6,274 17.802527 111,693 21%
Non-tax qualified ........................ 16,279 17.802527 289,807 21%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified ............................ 9,899 10.962668 108,519 (3)%
Non-tax qualified ........................ 7,315 10.962668 80,192 (3)%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ............................ 774 11.428435 8,846 12%
Non-tax qualified ........................ 2,554 11.428435 29,188 12%
Warburg Pincus Trust -
Small Company Growth Portfolio:
Tax qualified ............................ 14,575 14.460130 210,756 15%
Non-tax qualified ........................ 23,748 14.460130 343,399 15%
The BEST OF AMERICA(R) America's Vision
Annuity(SM) contracts:
American Century VP -
American Century VP Balanced:
Tax qualified ............................ 2,000,046 15.050621 30,101,934 14%
Non-tax qualified ........................ 2,838,431 15.050621 42,720,149 14%
(continued)
</TABLE>
27
<PAGE> 27
<TABLE>
<S> <C> <C> <C> <C>
American Century VP -
American Century VP Capital Appreciation:
Tax qualified ............................ 2,614,244 11.511011 30,092,591 (5)%
Non-tax qualified ........................ 3,809,872 11.511011 43,855,479 (5)%
American Century VP -
American Century VP International:
Tax qualified ............................ 2,815,042 13.705793 38,582,383 17%
Non-tax qualified ........................ 4,053,845 13.705793 55,561,160 17%
American Century VP -
American Century VP Value:
Tax qualified ............................ 1,430,623 12.608786 18,038,419 24%
Non-tax qualified ........................ 1,650,353 12.608786 20,808,948 24%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ............................ 1,955,501 20.377644 39,848,503 27%
Non-tax qualified ........................ 2,524,371 20.377644 51,440,734 27%
Dreyfus Stock Index Fund:
Tax qualified ............................ 11,980,808 21.459607 257,103,431 31%
Non-tax qualified ........................ 16,840,871 21.459607 361,398,473 31%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ............................ 282,102 10.187254 2,873,845 2%(a)
Non-tax qualified ........................ 346,889 10.187254 3,533,846 2%(a)
Dreyfus VIF-
Growth and Income Portfolio:
Tax qualified ............................ 1,288,755 11.443262 14,747,561 15%
Non-tax qualified ........................ 1,736,408 11.443262 19,870,172 15%
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ............................ 21,713,028 20.400657 442,960,037 26%
Non-tax qualified ........................ 29,805,895 20.400657 608,059,840 26%
Fidelity VIP - Growth Portfolio:
Tax qualified ............................ 13,935,642 18.531166 258,243,695 22%
Non-tax qualified ........................ 19,539,694 18.531166 362,093,313 22%
Fidelity VIP - High Income Portfolio:
Tax qualified ............................ 10,404,298 15.270686 158,880,768 16%
Non-tax qualified ........................ 15,763,691 15.270686 240,722,375 16%
Fidelity VIP - Overseas Portfolio:
Tax qualified ............................ 4,225,490 13.990014 59,114,664 10%
Non-tax qualified ........................ 6,516,303 13.990014 91,163,170 10%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ............................ 8,255,827 14.837912 122,499,235 19%
Non-tax qualified ........................ 10,687,021 14.837912 158,573,077 19%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ............................ 12,933,714 16.200355 209,530,758 22%
Non-tax qualified ........................ 17,222,256 16.200355 279,006,661 22%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified ............................ 1,110,975 10.926972 12,139,593 9%(a)
Non-tax qualified ........................ 1,433,477 10.926972 15,663,563 9%(a)
</TABLE>
28
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C>
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified .......................... 116,227 9.805852 1,139,705 (2)%(a)
Non-tax qualified ...................... 317,019 9.805852 3,108,641 (2)%(a)
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified .......................... 3,473,388 21.128614 73,387,874 33%
Non-tax qualified ...................... 4,537,489 21.128614 95,870,854 33%
Nationwide SAT -
Government Bond Fund:
Tax qualified .......................... 3,380,799 12.352251 41,760,478 8%
Non-tax qualified ...................... 3,808,969 12.352251 47,049,341 8%
Nationwide SAT - Money Market Fund:
Tax qualified .......................... 11,607,724 11.491365 133,388,593 4%
Non-tax qualified ...................... 17,151,671 11.491365 197,096,112 4%
Nationwide SAT - Small Company Fund:
Tax qualified .......................... 4,030,537 15.985143 64,428,710 16%
Non-tax qualified ...................... 5,436,630 15.985143 86,905,308 16%
Nationwide SAT - Total Return Fund:
Tax qualified .......................... 9,306,942 19.626064 182,658,639 28%
Non-tax qualified ...................... 11,239,856 19.626064 220,594,133 28%
Neuberger & Berman AMT -
Growth Portfolio:
Tax qualified .......................... 2,761,902 16.816500 46,445,525 27%
Non-tax qualified ...................... 4,175,280 16.816500 70,213,596 27%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio:
Tax qualified .......................... 2,638,749 11.674415 30,805,851 5%
Non-tax qualified ...................... 3,901,992 11.674415 45,553,474 5%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified .......................... 7,939,693 22.277405 176,875,757 29%
Non-tax qualified ...................... 11,091,380 22.277405 247,087,164 29%
Oppenheimer VAF - Bond Fund:
Tax qualified .......................... 5,296,817 12.497968 66,199,449 8%
Non-tax qualified ...................... 6,726,718 12.497968 84,070,306 8%
Oppenheimer VAF -
Global Securities Fund:
Tax qualified .......................... 6,984,145 14.691771 102,609,459 21%
Non-tax qualified ...................... 9,087,704 14.691771 133,514,466 21%
Oppenheimer VAF - Growth Fund:
Tax qualified .......................... 291,665 10.422959 3,040,012 4%(a)
Non-tax qualified ...................... 463,976 10.422959 4,836,003 4%(a)
Oppenheimer VAF -
Multiple Strategies Fund:
Tax qualified .......................... 4,408,475 15.482895 68,255,956 16%
Non-tax qualified ...................... 5,254,667 15.482895 81,357,457 16%
Strong Opportunity Fund II, Inc.:
Tax qualified .......................... 5,827,943 19.146013 111,581,872 24%
Non-tax qualified ...................... 8,020,904 19.146013 153,568,332 24%
</TABLE>
(Continued)
29
<PAGE> 29
<TABLE>
<S> <C> <C> <C> <C>
Strong VIF - Strong Discovery Fund II:
Tax qualified 2,014,470 14.662845 29,537,861 10%
Non-tax qualified 3,067,461 14.662845 44,977,705 10%
Strong VIF -
Strong International Stock Fund II:
Tax qualified 1,239,246 9.488178 11,758,187 (15)%
Non-tax qualified 1,662,615 9.488178 15,775,187 (15)%
Van Eck WIT - Worldwide Bond Fund:
Tax qualified 1,224,872 11.708039 14,340,849 1%
Non-tax qualified 1,881,869 11.708039 22,032,996 1%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified 1,951,581 8.783348 17,141,415 (13)%
Non-tax qualified 2,439,264 8.783348 21,424,905 (13)%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified 1,258,548 12.924490 16,266,091 (3)%
Non-tax qualified 2,082,493 12.924490 26,915,160 (3)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified 3,169,047 17.856659 56,588,592 20%
Non-tax qualified 4,254,738 17.856659 75,975,406 20%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified 5,873,960 11.135857 65,411,579 (4)%
Non-tax qualified 8,729,469 11.135857 97,210,118 (4)%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified 267,447 11.357831 3,037,618 12%
Non-tax qualified 313,129 11.357831 3,556,466 12%
Warburg Pincus Trust -
Small Company Growth Portfolio:
Tax qualified 4,888,419 15.910364 77,776,526 14%
Non-tax qualified 7,458,638 15.910364 118,669,646 14%
======== =========
Reserves for annuity contracts in payout phase:
Tax qualified 3,165,730
Non-tax qualified 4,436,449
-------------
$ 17,849,801,427
==============
</TABLE>
(a) This investment option was not being utilized for the entire period.
30
<PAGE> 30
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Variable Account-II:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account-II as of December 31,
1997, and the related statements of operations and changes in contract owners'
equity for each of the years in the two year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 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 referred to above present fairly,
in all material respects, the financial position of Nationwide Variable
Account-II as of December 31, 1997, and the results of its operations and its
changes in contract owners' equity for each of the years in the two year period
then ended in conformity with generally accepted accounting principles.
[KPMG Peat Marwick LLP]
Columbus, Ohio
February 6, 1998
31
<PAGE> 31
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
