N-30D 1 dn30d.htm NATIONWIDE VARIABLE ACCOUNT 11 Nationwide Variable Account 11

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NATIONWIDE®

VARIABLE

ACCOUNT-11

Annual Report

to

Contract Owners

December 31, 2007

NATIONWIDE LIFE INSURANCE COMPANY

HOME OFFICE: COLUMBUS, OHIO

APO–5396 –12/07

NATIONWIDE VARIABLE ACCOUNT-11

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS’ EQUITY

December 31, 2007

 

Assets:

   

Investments at fair value:

   

Federated IS – American Leaders Fund II – Primary Shares (FedAmLead)

   

269,363 shares (cost $4,941,507)

    $ 4,614,181

Federated IS – Capital Appreciation Fund II – Primary Shares (FedCapAp)

   

547,920 shares (cost $2,932,449)

      4,049,131

Federated IS – Capital Income Fund II (FedCapInc)

   

59,321 shares (cost $546,835)

      570,666

Federated IS – Equity Income Fund II (FedEqInc)

   

251,097 shares (cost $3,180,109)

      4,070,276

Federated IS – Fund for US Government Securities II (FedGvtSec)

   

49,989 shares (cost $569,041)

      576,375

Federated IS – High Income Bond Fund II – Primary Shares (FedHiInc)

   

247,597 shares (cost $1,894,342)

      1,854,499

Federated IS – International Equity Fund II (FedIntEq)

   

44,288 shares (cost $734,967)

      828,630

Federated IS – Kaufmann Fund II – Primary Shares (FedKaufmann)

   

234,599 shares (cost $2,922,682)

      4,415,159

Federated IS – Mid Cap Growth Strategies Fund II (FedMidCpGr2)

   

11,057 shares (cost $271,991)

      334,594

Federated IS – Prime Money Fund II (FedPriMony)

   

1,309,741 shares (cost $1,309,741)

      1,309,741

Federated IS – Quality Bond Fund II – Primary Shares (FedQualBd)

   

106,567 shares (cost $1,202,385)

      1,208,475
      

Total investments

      23,831,727

Accounts receivable

      —  
      

Total assets

      23,831,727

Accounts payable

      310
      

Contract owners’ equity (note 4)

    $ 23,831,417
      

See accompanying notes to financial statements.

 

2

NATIONWIDE VARIABLE ACCOUNT-11

STATEMENTS OF OPERATIONS

Year Ended December 31, 2007

 

      Total     FedAmLead     FedCapAp     FedCapInc     FedEqInc     FedGvtSec     FedHiInc     FedIntEq  

Investment activity:

                 

Reinvested dividends

    $ 598,582     87,377     34,061     28,215     126,273     33,525     162,643     1,375  

Mortality and expense risk charges (note 2)

      (284,327 )   (61,469 )   (45,120 )   (6,635 )   (48,415 )   (7,348 )   (22,838 )   (9,044 )
                                                  

Net investment income (loss)

      314,255     25,908     (11,059 )   21,580     77,858     26,177     139,805     (7,669 )
                                                  

Proceeds from mutual fund shares sold

      6,288,646     1,271,476     818,918     255,885     858,045     280,243     352,316     299,070  

Cost of mutual fund shares sold

      (4,837,775 )   (1,025,407 )   (510,442 )   (231,445 )   (561,663 )   (296,127 )   (357,965 )   (209,732 )
                                                  

Realized gain (loss) on investments

      1,450,871     246,069     308,476     24,440     296,382     (15,884 )   (5,649 )   89,338  

Change in unrealized gain (loss) on investments

      (1,731,813 )   (1,495,636 )   64,210     (28,273 )   (329,663 )   20,175     (85,746 )   (18,768 )
                                                  

Net gain (loss) on investments

      (280,942 )   (1,249,567 )   372,686     (3,833 )   (33,281 )   4,291     (91,395 )   70,570  
                                                  

Reinvested capital gains

      900,113     651,025     —       —       —       —       —       —    
                                                  

Net increase (decrease) in contract owners’ equity resulting from operations

    $ 933,426     (572,634 )   361,627     17,747     44,577     30,468     48,410     62,901  
                                                  
     FedKaufmann     FedMidCpGr2     FedPriMony     FedQualBd                          

Investment activity:

                 

Reinvested dividends

    $ —       —       67,464     57,649          

Mortality and expense risk charges (note 2)

      (48,490 )   (4,305 )   (16,341 )   (14,322 )        
                                  

Net investment income (loss)

      (48,490 )   (4,305 )   51,123     43,327          
                                  

Proceeds from mutual fund shares sold

      1,059,467     153,834     755,438     183,954          

Cost of mutual fund shares sold

      (595,537 )   (102,640 )   (755,438 )   (191,379 )        
                                  

Realized gain (loss) on investments

      463,930     51,194     —       (7,425 )        

Change in unrealized gain (loss) on investments

      127,318     1,706     —       12,864          
                                  

Net gain (loss) on investments

      591,248     52,900     —       5,439          
                                  

Reinvested capital gains

      249,088     —       —       —            
                                  

Net increase (decrease) in contract owners’ equity resulting from operations

    $ 791,846     48,595     51,123     48,766          
                                  

See accompanying notes to financial statements.

 

3

NATIONWIDE VARIABLE ACCOUNT-11

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY

Years Ended December 31, 2007 and 2006

 

     Total     FedAmLead     FedCapAp     FedCapInc  
     2007     2006     2007     2006     2007     2006     2007     2006  

Investment activity:

                 

Net investment income (loss)

    $ 314,255     350,381     25,908     31,725     (11,059 )   (10,022 )   21,580     28,579  

Realized gain (loss) on investments

      1,450,871     1,235,670     246,069     276,460     308,476     196,367     24,440     58,676  

Change in unrealized gain (loss) on investments

      (1,731,813 )   958,196     (1,495,636 )   (218,232 )   64,210     397,844     (28,273 )   4,111  

Reinvested capital gains

      900,113     872,978     651,025     811,340     —       —       —       —    
                                                  

Net increase (decrease) in contract owners’ equity resulting from operations

      933,426     3,417,225     (572,634 )   901,293     361,627     584,189     17,747     91,366  
                                                  

Equity transactions:

                 

Purchase payments received from contract owners (note 3)

      209,555     130,518     35,802     58,285     27,360     8,279     41,122     5,025  

Transfers between funds

      —       —       (407,024 )   (179,614 )   14,478     (157,827 )   128,755     171,071  

Redemptions (note 3)

      (3,974,373 )   (3,833,975 )   (815,638 )   (961,251 )   (635,665 )   (432,001 )   (183,072 )   (361,273 )

Annual contract maintenance charges (note 2)

      (4,032 )   (4,546 )   (910 )   (1,091 )   (652 )   (731 )   (99 )   (69 )

Contingent deferred sales charges (note 2)

      (15,674 )   (15,711 )   (1,512 )   (3,923 )   (1,748 )   (3,278 )   (218 )   —    

Adjustments to maintain reserves

      (228 )   (544 )   (59 )   (4 )   (59 )   (86 )   (65 )   8  
                                                  

Net equity transactions

      (3,784,752 )   (3,724,258 )   (1,189,341 )   (1,087,598 )   (596,286 )   (585,644 )   (13,577 )   (185,238 )
                                                  

Net change in contract owners’ equity

      (2,851,326 )   (307,033 )   (1,761,975 )   (186,305 )   (234,659 )   (1,455 )   4,170     (93,872 )

Contract owners’ equity beginning of period

      26,682,743     26,989,776     6,376,141     6,562,446     4,283,729     4,285,184     566,473     660,345  
                                                  

Contract owners’ equity end of period

   $ 23,831,417     26,682,743     4,614,166     6,376,141     4,049,070     4,283,729     570,643     566,473  
                                                  

CHANGES IN UNITS:

                 

Beginning units

      1,945,518     2,239,206     466,473     554,363     336,718     387,188     43,084     57,312  
                                                  

Units purchased

      179,583     217,731     4,912     12,460     13,667     9,905     17,782     22,811  

Units redeemed

      (442,599 )   (511,419 )   (93,123 )   (100,350 )   (57,250 )   (60,375 )   (18,663 )   (37,039 )
                                                  

Ending units

      1,682,502     1,945,518     378,262     466,473     293,135     336,718     42,203     43,084  
                                                  

(Continued)

 

4

NATIONWIDE VARIABLE ACCOUNT-11

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2007 and 2006

 

     FedEqInc     FedGvtSec     FedHiInc     FedIntEq  
     2007     2006     2007     2006     2007     2006     2007     2006  

Investment activity:

                 

Net investment income (loss)

    $ 77,858     49,250     26,177     26,034     139,805     194,102     (7,669 )   (6,149 )

Realized gain (loss) on investments

      296,382     281,719     (15,884 )   (12,120 )   (5,649 )   (3,188 )   89,338     62,991  

Change in unrealized gain (loss) on investments

      (329,663 )   535,401     20,175     11,189     (85,746 )   7,195     (18,768 )   41,247  

Reinvested capital gains

      —       —       —       —       —       —       —       —    
                                                  

Net increase (decrease) in contract owners’ equity resulting from operations

      44,577     866,370     30,468     25,103     48,410     198,109     62,901     98,089  
                                                  

Equity transactions:

                 

Purchase payments received from contract owners (note 3)

      27,044     2,779     1,238     344     6,102     1,746     272     5,120  

Transfers between funds

      32,279     115,584     62,557     (22,872 )   (25,018 )   (199,637 )   234,559     166,152  

Redemptions (note 3)

      (593,230 )   (594,791 )   (265,090 )   (131,610 )   (235,251 )   (332,773 )   (198,096 )   (94,301 )

Annual contract maintenance charges (note 2)

      (613 )   (648 )   (116 )   (143 )   (394 )   (427 )   (83 )   (76 )

Contingent deferred sales charges (note 2)

      (1,335 )   (2,235 )   (1,828 )   (130 )   (1,222 )   (1,051 )   (564 )   (91 )

Adjustments to maintain reserves

      (10 )   (31 )   19     (15 )   (21 )   (24 )   13     (102 )
                                                  

Net equity transactions

      (535,865 )   (479,342 )   (203,220 )   (154,426 )   (255,804 )   (532,166 )   36,101     76,702  
                                                  

Net change in contract owners’ equity

      (491,288 )   387,028     (172,752 )   (129,323 )   (207,394 )   (334,057 )   99,002     174,791  

Contract owners’ equity beginning of period

      4,561,560     4,174,532     749,146     878,469     2,061,877     2,395,934     729,616     554,825  
                                                  

Contract owners’ equity end of period

   $ 4,070,272     4,561,560     576,394     749,146     1,854,483     2,061,877     828,618     729,616  
                                                  

CHANGES IN UNITS:

                 

Beginning units

      305,737     340,574     66,369     79,931     145,274     184,752     50,409     45,130  
                                                  

Units purchased

      18,657     23,045     6,200     3,255     5,704     15,545     21,202     25,169  

Units redeemed

      (53,772 )   (57,882 )   (23,938 )   (16,817 )   (23,107 )   (55,023 )   (18,664 )   (19,890 )
                                                  

Ending units

      270,622     305,737     48,631     66,369     127,871     145,274     52,947     50,409  
                                                  

(Continued)

 

5

NATIONWIDE VARIABLE ACCOUNT-11

STATEMENTS OF CHANGES IN CONTRACT OWNERS’ EQUITY, Continued

Years Ended December 31, 2007 and 2006

 

     FedKaufmann     FedMidCpGr2     FedPriMony     FedQualBd  
     2007     2006     2007     2006     2007     2006     2007     2006  

Investment activity:

                 

Net investment income (loss)

    $ (48,490 )   (47,407 )   (4,305 )   (4,655 )   51,123     47,627     43,327     41,297  

Realized gain (loss) on investments

      463,930     347,734     51,194     54,509     —       —       (7,425 )   (27,478 )

Change in unrealized gain (loss) on investments

      127,318     186,378     1,706     (30,984 )   —       —       12,864     24,047  

Reinvested capital gains

      249,088     61,638     —       —       —       —       —       —    
                                                  

Net increase (decrease) in contract owners’ equity resulting from operations

      791,846     548,343     48,595     18,870     51,123     47,627     48,766     37,866  
                                                  

Equity transactions:

                 

Purchase payments received from contract owners (note 3)

      13,429     16,672     10,162     5,369     28,465     25,395     18,559     1,504  

Transfers between funds

      (167,263 )   37,556     (1,408 )   24,679     36,470     80,339     91,615     (35,431 )

Redemptions (note 3)

      (673,975 )   (499,658 )   (86,689 )   (61,492 )   (162,230 )   (131,579 )   (125,437 )   (233,246 )

Annual contract maintenance charges (note 2)

      (676 )   (778 )   (66 )   (55 )   (198 )   (257 )   (225 )   (271 )

Contingent deferred sales charges (note 2)

      (5,298 )   (3,759 )   (318 )   (95 )   (894 )   (757 )   (737 )   (392 )

Adjustments to maintain reserves

      (7 )   (147 )   (31 )   (63 )   24     (53 )   (32 )   (27 )
                                                  

Net equity transactions

      (833,790 )   (450,114 )   (78,350 )   (31,657 )   (98,363 )   (26,912 )   (16,257 )   (267,863 )
                                                  

Net change in contract owners’ equity

      (41,944 )   98,229     (29,755 )   (12,787 )   (47,240 )   20,715     32,509     (229,997 )

Contract owners’ equity beginning of period

      4,456,925     4,358,696     364,338     377,125     1,356,996     1,336,281     1,175,942     1,405,939  
                                                  

Contract owners’ equity end of period

   $ 4,414,981     4,456,925     334,583     364,338     1,309,756     1,356,996     1,208,451     1,175,942  
                                                  

CHANGES IN UNITS:

                 

Beginning units

      275,846     306,321     23,826     26,358     130,030     132,318     101,752     124,959  
                                                  

Units purchased

      10,570     17,964     3,952     8,947     63,400     59,805     13,537     18,825  

Units redeemed

      (58,055 )   (48,439 )   (8,945 )   (11,479 )   (72,142 )   (62,093 )   (14,940 )   (42,032 )
                                                  

Ending units

      228,361     275,846     18,833     23,826     121,288     130,030     100,349     101,752  
                                                  

See accompanying notes to financial statements.

 

6

NATIONWIDE VARIABLE ACCOUNT-11

NOTES TO FINANCIAL STATEMENTS

December 31, 2007 and 2006

 

(1) Background and Summary of Significant Accounting Policies

 

  (a) Organization and Nature of Operations

Nationwide Variable Account-11 (the Account) was established pursuant to a resolution of the Board of Directors of Nationwide Life Insurance Company (the Company) on December 15, 1999 and commenced operations on August 2, 2002. The Account is registered as a unit investment trust under the Investment Company Act of 1940.

The Company offers Individual Deferred Variable Annuity Contracts through the Account. The contracts are distributed by the Company and marketed exclusively through Federated Investors.

 

  (b) The Contracts

Contract owners in either the accumulation or payout phase may invest in any of the following:

Portfolios of the Federated Insurance Series (Federated IS);

Federated IS – American Leaders Fund II – Primary Shares (FedAmLead)

Federated IS – Capital Appreciation Fund II – Primary Shares (FedCapAp)

Federated IS – Capital Income Fund II (FedCapInc)

Federated IS – Equity Income Fund II (FedEqInc)

Federated IS – Fund for US Government Securities II (FedGvtSec)

Federated IS – High Income Bond Fund II – Primary Shares (FedHiInc)

Federated IS – International Equity Fund II (FedIntEq)

Federated IS – Kaufmann Fund II – Primary Shares (FedKaufmann)

Federated IS – Mid Cap Growth Strategies Fund II (FedMidCpGr2)

Federated IS – Prime Money Fund II (FedPriMony)

Federated IS – Quality Bond Fund II – Primary Shares (FedQualBd)

Federated IS – Total Return Bond Fund II (FedTotRe)*

 

 

* At December 31, 2007, contract owners were not invested in this fund.

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.

A contract owner may choose from among a number of different underlying mutual fund options. The underlying mutual fund options are not available to the general public directly. The underlying mutual funds are available as investment options in variable life insurance policies or variable annuity contracts issued by life insurance companies or, in some cases, through participation in certain qualified pension or retirement plans.

Some of the underlying mutual funds have been established by investment advisers which manage publicly traded mutual funds having similar names and investment objectives. While some of the underlying mutual funds may be similar to, and may in fact be modeled after, publicly traded mutual funds, the underlying mutual funds are not otherwise directly related to any publicly traded mutual fund. Consequently, the investment performance of publicly traded mutual funds and any corresponding underlying mutual funds may differ substantially.

(Continued)

 

7

NATIONWIDE VARIABLE ACCOUNT-11 (NOTES TO FINANCIAL STATEMENTS, Continued)

 

  (c) Security Valuation, Transactions and Related Investment Income

Investments in underlying mutual funds are valued based on the closing net asset value per share at December 31, 2007 of such funds, which value their investment securities at fair value. The cost of investments sold is determined on a First in – First out basis. Investment transactions are accounted for on the trade date (date the order to buy or sell is executed) and dividends (which include capital gain distributions) are accrued as of the ex-dividend date and are reinvested in the underlying mutual funds.

 

  (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 U.S. 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) New Accounting Pronouncement

In September 2006, the FASB issued SFAS 157, Fair Value Measurements (SFAS 157). SFAS 157 provides enhanced guidance for using fair value to measure assets and liabilities and requires new disclosures about fair value measurements. SFAS 157 also provides guidance regarding the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. For assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to initial recognition, the reporting entity shall disclose information that enables financial statement users to assess the inputs used to develop those measurements. SFAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, with early adoption permitted. The Company will adopt SFAS 157 effective January 1, 2008. SFAS 157 is not expected to have a material impact on the Company’s financial position or results of operations upon adoption.

(Continued)

 

8

NATIONWIDE VARIABLE ACCOUNT-11 (NOTES TO FINANCIAL STATEMENTS, Continued)

 

(2) Expenses

For Premium Deferred Variable Annuity contracts, 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 owners’ contract value a contingent deferred sales charge not to exceed 7% of the purchase payments surrendered. This charge declines 1% per year. After the purchase payment has been held in the contract for 7 years the charge is 0%. No sales charges are deducted on redemptions used to purchase units in the fixed investment options of the Company.

For the Deferred Variable Annuity contracts, a sales charge of up to 5.5% is deducted from each purchase payment. The sales charge declines based upon the amount of the cumulative qualifying purchase payment, which may include certain deposits made to other qualifying investments in addition to the deposits made to the contract. An additional sales charge of 0.5% is applied against any purchase payments in excess of $1 million that are withdrawn within one year of deposit to the contract. No sales charges are deducted on redemptions used to purchase units in the fixed investment options of the Company.

The Company may deduct an annual contract maintenance charge of $40, depending on the amount of assets in the contract, which is satisfied by surrendering units.

The Company deducts a mortality and expense risk charge assessed through the daily unit value calculation. The Option table below illustrates the annual rate for all contract level charges by product, as well as the maximum variable account charge per product. The table also summarizes the contract level options available to contract holders. The options and related charges are described in more detail in the applicable product prospectus.

Nationwide Variable Account-11 Options

 

      Deferred     Premium
Deferred		  

Variable Account Charges – Recurring

   0.80 %   1.20 %

Death Benefit Option:

    

Greater of One-Year or 5% Enhanced

   0.15 %   0.15 %

If death before annuitization, benefit will be greatest of (i) contract value,

(ii) lessor of purchase payments less surrenders or 2 times the contract value as of the date death benefit is calculated,

(iii) highest contract value before 86th birthday less surrenders or (iv) the 5% interest anniversary value.

     

Beneficiary Protector Option

   0.40 %   0.40 %

Upon annuitant death, in addition to any death benefit payable, an additional amount will be credited to contract.

    

Maximum Variable Account Charges *:

   1.35 %   1.75 %

 

* When maximum options are elected.

(Continued)

 

9

NATIONWIDE VARIABLE ACCOUNT-11 (NOTES TO FINANCIAL STATEMENTS, Continued)

The following table provides mortality and expense risk charges by asset fee rates for the period ended December 31, 2007:

 

     Total    FedAmLead    FedCapAp    FedCapInc    FedEqInc    FedGvtSec    FedHiInc    FedIntEq

0.80%

    $ 72,287    16,968    14,960    1,765    12,843    714    4,213    2,314

0.95%

      11,960    2,349    1,333    1,502    2,061    326    803    1,072

1.20%

      116,361    26,557    17,654    1,285    17,450    3,427    10,274    2,522

1.35%

      71,128    13,827    8,990    1,665    14,831    2,397    6,235    2,557

1.75%

      12,591    1,768    2,183    418    1,230    484    1,313    579
                                         

Totals

    $ 284,327    61,469    45,120    6,635    48,415    7,348    22,838    9,044
                                         
     FedKaufmann    FedMidCpGr2    FedPriMony    FedQualBd                    

0.80%

    $ 13,103    433    3,457    1,517            

0.95%

      1,433    213    154    714            

1.20%

      20,449    949    8,206    7,588            

1.35%

      10,118    2,352    4,071    4,085            

1.75%

      3,387    358    453    418            
                                 

Totals

    $ 48,490    4,305    16,341    14,322            
                                 

 

(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.

Contract owners may, with certain restrictions, transfer their assets between the Account and a fixed dollar contract (fixed account) maintained in the accounts of the Company. The fixed account assets are not reflected in the accompanying financial statements. In addition, the Account portion of contract owner loans is transferred to the accounts of the Company for administration and collection. Loan repayments are transferred to the Account at the direction of the contract owner. For the years ended December 31, 2007 and 2006, total transfers to the Account from the fixed account were $179,306 and $90,961, respectively, and total transfers from the Account to the fixed account were $187,393 and $26,807, respectively. Transfers from the Account to the fixed account are included in redemptions, and transfers to the Account from the fixed account are included in purchase payments received from contract owners, as applicable, on the accompanying Statements of Changes in Contract Owners’ Equity.

(Continued)

 

10

NATIONWIDE VARIABLE ACCOUNT-11 (NOTES TO FINANCIAL STATEMENTS, Continued)

 

(4) Financial Highlights

The Company offers several variable annuity products through the Account that have unique combinations of features and fees that are assessed to the contract owner. Differences in fee structures result in a variety of contract expense rates, unit fair values and total returns. The following tabular presentation is a summary of units, unit fair values and contract owners’ equity outstanding for variable annuity contracts as of the end of the periods indicated, and contract expense rate, investment income ratio and total return for each period in the five-year period ended December 31, 2007. The information is presented as a range of minimum to maximum values based upon product grouping. The range is determined by identifying the lowest and the highest contract expense rate. The unit fair values and total returns related to these identified contract expense rates are also disclosed as a range below. Accordingly, some individual contract amounts may not be within the ranges presented.

 

     Contract
Expense
Rate*		    Units    Unit
Fair Value		    Contract
Owners’
Equity		    Investment
Income
Ratio**		     Total
Return***

Federated IS –American Leaders Fund II –Primary Shares

                 

2007

    0.80% to 1.75%    378,262    $  12.40 to 11.75    $ 4,614,166    1.59 %   -10.39% to -11.25%

2006

    0.80% to 1.75%    466,473      13.84 to 13.24      6,376,141    1.52 %   15.88% to 14.77%

2005

    0.80% to 1.75%    554,363      11.94 to 11.54      6,562,446    1.48 %   4.18% to 3.19%

2004

    0.80% to 1.75%    574,522      11.46 to 11.18      6,545,002    1.37 %   8.90% to 7.86%

2003

    0.80% to 1.75%    532,185      10.53 to 10.37      5,581,921    0.92 %   26.68% to 25.46%

Federated IS –Capital Appreciation Fund II –Primary Shares

                 

2007

    0.80% to 1.75%    293,135      14.03 to 13.29      4,049,070    0.82 %   9.00% to 7.95%

2006

    0.80% to 1.75%    336,718      12.87 to 12.32      4,283,729    0.78 %   15.29% to 14.19%

2005

    0.80% to 1.75%    387,188      11.16 to 10.79      4,285,184    1.02 %   1.10% to 0.14%

2004

    0.80% to 1.75%    419,739      11.04 to 10.77      4,606,561    0.55 %   6.54% to 5.52%

2003

    0.80% to 1.75%    383,347      10.36 to 10.21      3,958,698    0.29 %   22.93% to 21.75%

Federated IS – Capital Income Fund II

                 

2007

    0.80% to 1.75%    42,203      13.74 to 13.02      570,643    4.96 %   3.20% to 2.21%

2006

    0.80% to 1.75%    43,084      13.31 to 12.74      566,473    5.70 %   14.72% to 13.62%

2005

    0.80% to 1.75%    57,312      11.60 to 11.21      660,345    4.28 %   5.44% to 4.43%

2004

    0.80% to 1.75%    43,589      11.00 to 10.73      477,355    4.07 %   9.04% to 8.00%

2003

    0.80% to 1.75%    30,435      10.09 to 9.94      306,272    0.32 %   19.71% to 18.56%

Federated IS – Equity Income Fund II

                 

2007

    0.80% to 1.75%    270,622      15.30 to 14.50      4,070,272    2.93 %   1.23% to 0.26%

2006

    0.80% to 1.75%    305,737      15.11 to 14.46      4,561,560    2.19 %   22.15% to 20.99%

2005

    0.80% to 1.75%    340,574      12.37 to 11.95      4,174,532    2.20 %   2.51% to 1.53%

2004

    0.80% to 1.75%    367,233      12.07 to 11.77      4,403,900    1.82 %   11.94% to 10.87%

2003

    0.80% to 1.75%    322,353      10.78 to 10.62      3,463,008    1.04 %   26.26% to 25.05%

Federated IS – Fund for US Government Securities II

                 

2007

    0.80% to 1.75%    48,631      12.12 to 11.49      576,394    5.06 %   5.43% to 4.42%

2006

    0.80% to 1.75%    66,369      11.50 to 11.00      749,146    4.40 %   3.31% to 2.32%

2005

    0.80% to 1.75%    79,931      11.13 to 10.75      878,469    4.22 %   1.21% to 0.25%

2004

    0.80% to 1.75%    72,957      11.00 to 10.73      794,099    4.44 %   2.78% to 1.80%

2003

    0.80% to 1.75%    73,085      10.70 to 10.54      777,002    3.35 %   1.55% to 0.57%

Federated IS – High Income Bond Fund II – Primary Shares

                 

2007

    0.80% to 1.75%    127,871      14.79 to 14.02      1,854,483    8.31 %   2.60% to 1.61%

2006

    0.80% to 1.75%    145,274      14.42 to 13.80      2,061,877    9.82 %   9.92% to 8.87%

2005

    0.80% to 1.75%    184,752      13.12 to 12.67      2,395,934    8.09 %   1.84% to 0.86%

2004

    0.80% to 1.75%    205,696      12.88 to 12.56      2,628,583    6.88 %   9.58% to 8.53%

2003

    0.80% to 1.75%    179,584      11.75 to 11.58      2,101,220    3.94 %   21.24% to 20.08%

Federated IS – International Equity Fund II

                 

2007

    0.80% to 1.75%    52,947      15.93 to 15.10      828,618    0.18 %   8.67% to 7.62%

2006

    0.80% to 1.75%    50,409      14.66 to 14.03      729,616    0.19 %   17.94% to 16.82%

2005

    0.80% to 1.75%    45,130      12.43 to 12.01      554,825    0.00 %   8.21% to 7.17%

2004

    0.80% to 1.75%    43,192      11.49 to 11.21      492,371    0.00 %   13.15% to 12.07%

2003

    0.80% to 1.75%    30,778      10.15 to 10.00      311,114    0.00 %   30.81% to 29.55%

Federated IS – Kaufmann Fund II – Primary Shares

                 

2007

    0.80% to 1.75%    228,361      19.67 to 18.64      4,414,981    0.00 %   20.06% to 18.91%

2006

    0.80% to 1.75%    275,846      16.38 to 15.67      4,456,925    0.00 %   13.96% to 12.87%

2005

    0.80% to 1.75%    306,321      14.37 to 13.89      4,358,696    0.00 %   10.36% to 9.30%

2004

    0.80% to 1.75%    314,321      13.03 to 12.71      4,064,236    0.00 %   13.74% to 12.65%

2003

    0.80% to 1.75%    306,045      11.45 to 11.28      3,488,946    0.00 %   38.59% to 37.26%

(Continued)

 

 

11

NATIONWIDE VARIABLE ACCOUNT-11 (NOTES TO FINANCIAL STATEMENTS, Continued)

 

     Contract
Expense
Rate*		    Units    Unit
Fair Value		    Contract
Owners’ Equity		    Investment
Income
Ratio**		    Total Return***

Federated IS – Mid Cap Growth Strategies Fund II

            

2007

    0.80% to 1.75%    18,833    $  18.22 to 17.27    $ 334,583    0.00%    17.07% to 15.94%

2006

    0.80% to 1.75%    23,826      15.56 to 14.89      364,338    0.00%    7.37% to 6.34%

2005

    0.80% to 1.75%    26,358      14.50 to 14.01      377,125    0.00%    11.80% to 10.74%

2004

    0.80% to 1.75%    27,178      12.97 to 12.65      349,101    0.00%    14.51% to 13.41%

2003

    0.80% to 1.75%    20,498      11.32 to 11.15      230,934    0.00%    38.96% to 37.63%

Federated IS – Prime Money Fund II

            

2007

    0.80% to 1.75%    121,288      11.00 to 10.42      1,309,756    5.06%    3.93% to 2.93%

2006

    0.80% to 1.75%    130,030      10.58 to 10.13      1,356,996    4.71%    3.68% to 2.69%

2005

    0.80% to 1.75%    132,318      10.21 to 9.86      1,336,281    2.44%    1.88% to 0.91%

2004

    0.80% to 1.75%    191,079      10.02 to 9.77      1,900,805    0.37%    0.01% to -0.95%

2003

    0.80% to 1.75%    33,546      10.02 to 9.87      333,850    0.91%    -0.12% to -1.08%

Federated IS – Quality Bond Fund II – Primary Shares

            

2007

    0.80% to 1.75%    100,349      12.30 to 11.65      1,208,451    4.84%    4.54% to 3.53%

2006

    0.80% to 1.75%    101,752      11.76 to 11.25      1,175,942    4.37%    3.32% to 2.34%

2005

    0.80% to 1.75%    124,959      11.38 to 11.00      1,405,939    4.08%    0.49% to -0.47%

2004

    0.80% to 1.75%    119,715      11.33 to 11.05      1,344,911    3.81%    2.79% to 1.81%

2003

    0.80% to 1.75%    89,008      11.02 to 10.85      976,472    2.43%    3.81% to 2.81%

Federated IS – Total Return Bond Fund II

            

2003

    0.80% to 1.75%    198,906      10.83 to 10.66      2,144,626    0.01%    2.51% to 1.53%
                     

2007 Contract owners’ equity

             $ 23,831,417      
                     

2006 Contract owners’ equity

             $ 26,682,743      
                     

2005 Contract owners’ equity

             $ 26,989,776      
                     

2004 Contract owners’ equity

             $ 27,606,924      
                     

2003 Contract owners’ equity

    .          $ 23,674,063      
                     

 

* This represents the range of annual contract expense rates of the variable account for the period indicated and includes only those expenses that are charged through a reduction in the unit values. Excluded are expenses of the underlying mutual funds and charges made directly to contract owner accounts through the redemption of units.
** This represents the dividends for the period indicated, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by average net assets. The ratios exclude those expenses, such as mortality and expense charges or annual contract maintenance charges, that result in direct reductions to the contractholder accounts through reductions in unit values or redemption of units. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest.
*** This represents the range of minimum and maximum total returns for the period indicated, including changes in the value of the underlying mutual fund, which reflects the reduction of unit value for expenses assessed. It does not include any expenses assessed through the redemption of units, the inclusion of which would result in a reduction of the total return presented.

 

12

Report of Independent Registered Public Accounting Firm

The Board of Directors of Nationwide Life Insurance Company and

    Contract Owners of Nationwide Variable Account-11:

We have audited the accompanying statement of assets, liabilities and contract owners’ equity of Nationwide Variable Account-11 (comprised of the sub-accounts listed in note 1(b) (collectively, “the Accounts”)) as of December 31, 2007, and the related statements of operations and changes in contract owners’ equity, and the financial highlights for each of the periods indicated herein. These financial statements and financial highlights are the responsibility of the Accounts’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights 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, 2007, by correspondence with the transfer agents of the underlying mutual funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Accounts as of December 31, 2007, and the results of their operations, changes in contract owners’ equity, and financial highlights for each of the periods indicated herein, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Columbus, Ohio

March 18, 2008

 

13

NATIONWIDE LIFE INSURANCE COMPANY

HOME OFFICE: ONE NATIONWIDE PLAZA • COLUMBUS, OHIO 43215-2220

       PRSRT STD U.S. POSTAGE PAID NATIONWIDE

Nationwide® is a registered federal service mark of Nationwide Mutual Insurance Company