<PAGE> 1
NATIONWIDE(R)
FIDELITY
ADVISOR
VARIABLE
ACCOUNT
Annual Report
[GRAPHIC]
FIDELITY
ADVISOR
ANNUITIES
December 31, 1996
<PAGE> 2
[LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
[PHOTO]
PRESIDENT'S MESSAGE
On behalf of Nationwide Life Insurance Company, we are pleased to bring you the
1996 annual report of the Nationwide Fidelity Advisor Variable Account.
The U.S. economy is enjoying the rewards of a stable political system and a
globally competitive business sector. These good times will last, although not
all years will show the stellar performance of the last two years. 1997 may be
the year in which normalcy will return.
The economic expansion has lasted six years already, and all resources are more
or less fully employed. The job market in particular is showing some strains,
and wages are rising a bit faster than before. Also, the competitive pressures
from abroad are increasing due to a sharp rise in the exchange value of our
currency. Business will be hard pressed under those conditions to continue
showing above-average profit increases. For the economy as a whole, inflation
has hit the low point in this business cycle and will slowly but surely be a
more important variable for monetary policy.
In the last few years, and especially in 1996, our economy expanded faster than
the natural rate of growth. This cannot continue without creating bottlenecks
that in turn induce price increases. Either the economy will slow under its own
weight or the Federal Reserve will have to step in. Some indicators point to a
softening of business activity. But whether this is enough will be a close call.
Again, the long-term trend is very positive for the U.S., its business activity,
and its financial markets. However, 1997 might turn out to have some more
surprises than anticipated right now.
/s/ Joseph J. Gasper
Joseph J. Gasper, President
2
<PAGE> 3
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at market value:
Fidelity Advisor Annuity Government Investment Fund (FAAGvInv)
1,869,588 shares (cost $20,563,268) ....................... $ 20,060,680
Fidelity Advisor Annuity Growth Opportunities Fund (FAAGrOpp)
24,875,768 shares (cost $322,601,532) ..................... 383,086,825
Fidelity Advisor Annuity High Yield Fund (FAAHiYld)
7,450,140 shares (cost $88,628,848) ....................... 91,040,712
Fidelity Advisor Annuity Income & Growth Fund (FAAIncGr)
8,434,144 shares (cost $93,504,258) ....................... 103,149,577
Fidelity Advisor Annuity Money Market Fund (FAAMyMkt)
29,940,523 shares (cost $29,940,523) ...................... 29,940,523
Fidelity Advisor Annuity Overseas Fund (FAAOSeas)
3,775,845 shares (cost $42,399,385) ....................... 45,196,866
Fidelity VIP - High Income Portfolio (FidVIPHI)
13,449 shares (cost $167,006) ............................. 168,388
Fidelity VIP - Money Market Portfolio (FidVIPMMkt)
1,414,117 shares (cost $1,414,117) ........................ 1,414,117
Fidelity VIP - Overseas Portfolio (FidVIPOv)
12,249 shares (cost $226,202) ............................. 230,774
Fidelity VIP-II - Investment Grade Bond Portfolio (FidVIPIGBd)
8,006 shares (cost $98,408) ............................... 97,996
-----------
Total investments ....................................... 674,386,458
Accounts Receivable ............................................ 10,433
-----------
Total assets ............................................ 674,396,891
===========
CONTRACT OWNERS' EQUITY .......................................... $674,396,891
===========
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
Contract owners' equity represented by: Units Unit Value
----- ----------
Fidelity Advisor Annuity Classic contracts:
<S> <C> <C> <C>
Fidelity Advisor Annuity Government Investment Fund:
Tax qualified ................................... 87,766 $11.558317 $ 1,014,427
Non-tax qualified ............................... 41,334 11.558317 477,751
Fidelity Advisor Annuity Growth Opportunities Fund:
Tax qualified ................................... 1,299,987 15.270633 19,851,624
Non-tax qualified ............................... 1,303,197 15.270633 19,900,643
Fidelity Advisor Annuity High Yield Fund:
Tax qualified ................................... 250,228 13.295788 3,326,978
Non-tax qualified ............................... 222,178 13.295788 2,954,032
Fidelity Advisor Annuity Income & Growth Fund:
Tax qualified ................................... 427,514 12.206048 5,218,256
Non-tax qualified ............................... 372,756 12.206048 4,549,878
Fidelity Advisor Annuity Money Market Fund:
Tax qualified ................................... 85,401 10.790682 921,535
Non-tax qualified ............................... 70,953 10.790682 765,631
Fidelity Advisor Annuity Overseas Fund:
Tax qualified ................................... 177,086 12.115241 2,145,440
Non-tax qualified ............................... 151,077 12.115241 1,830,334
Fidelity VIP - High Income Portfolio:
Non-tax qualified ............................... 1,976 10.223564 20,202
Fidelity VIP - Overseas Portfolio:
Tax qualified ................................... 290 10.520251 3,051
Non-tax qualified ............................... 114 10.520251 1,199
Fidelity Advisor Annuity Select contracts:
Fidelity Advisor Annuity Government Investment Fund:
Tax qualified ................................... 598,689 11.535024 6,905,892
Non-tax qualified ............................... 1,011,100 11.535024 11,663,063
Fidelity Advisor Annuity Growth Opportunities Fund:
Tax qualified ................................... 6,415,213 15.239855 97,766,916
Non-tax qualified ............................... 16,114,264 15.239855 245,579,047
Fidelity Advisor Annuity High Yield Fund:
Tax qualified ................................... 1,803,678 13.269007 23,933,016
Non-tax qualified ............................... 4,584,342 13.269007 60,829,666
Fidelity Advisor Annuity Income & Growth Fund:
Tax qualified ................................... 2,291,575 12.181451 27,914,709
Non-tax qualified ............................... 5,374,512 12.181451 65,469,355
Fidelity Advisor Annuity Money Market Fund:
Tax qualified ................................... 966,655 10.768919 10,409,829
Non-tax qualified ............................... 1,656,190 10.768919 17,835,376
Fidelity Advisor Annuity Overseas Fund:
Tax qualified ................................... 998,224 12.090800 12,069,327
Non-tax qualified ............................... 2,411,166 12.090800 29,152,926
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fidelity VIP - High Income Portfolio:
Tax qualified ................................... 2,287 10.221866 23,377
Non-tax qualified ............................... 12,210 10.221866 124,809
Fidelity VIP - Money Market Portfolio:
Tax qualified ................................... 77,545 10.063199 780,351
Non-tax qualified ............................... 62,978 10.063199 633,760
Fidelity VIP - Overseas Portfolio:
Tax qualified ................................... 4,339 10.518503 45,640
Non-tax qualified ............................... 17,196 10.518503 180,876
Fidelity VIP-II - Investment Grade Bond Portfolio:
Tax qualified ................................... 8,008 10.059105 80,553
Non-tax qualified ............................... 1,732 10.059105 17,422
------- --------- -----------
$ 674,396,891
===========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 6
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
Investment activity:
<S> <C> <C>
Reinvested capital gains and dividends ............... $ 11,357,337 5,253,187
Mortality, expense and administration charges (note 2) (7,056,063) (1,324,577)
----------- -----------
Net investment activity ........................ 4,301,274 3,928,610
----------- -----------
Proceeds from mutual fund shares sold ................ 45,891,295 10,325,387
Cost of mutual fund shares sold ...................... (44,457,369) (10,182,494)
----------- -----------
Realized gain (loss) on investments ............... 1,433,926 142,893
Change in unrealized gain (loss) on investments ...... 62,292,552 12,550,359
----------- -----------
Net gain (loss) on investments .................... 63,726,478 12,693,252
----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ............ 68,027,752 16,621,862
----------- -----------
Equity transactions:
Purchase payments received from contract owners ...... 326,836,927 286,274,311
Redemptions .......................................... (20,699,510) (2,222,588)
Annual contract maintenance charge (note 2) .......... (54,534) (251)
Contingent deferred sales charges (note 2) ........... (402,606) (29,016)
Adjustments to maintain reserves ..................... 36,535 8,009
----------- -----------
Net equity transactions ........................ 305,716,812 284,030,465
----------- -----------
Net change in contract owners' equity ................... 373,744,564 300,652,327
Contract owners' equity beginning of period ............. 300,652,327 --
----------- -----------
Contract owners' equity end of period ................... $674,396,891 300,652,327
============ ===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
(1) Summary of Significant Accounting Policies
(a) Organization and Nature of Operations
Nationwide Fidelity Advisor Variable Account (the Account) was
established pursuant to a resolution of the Board of Directors of Nationwide
Life Insurance Company (the Company) on July 22, 1994. 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 Fidelity Investments(R).
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees, are offered for purchase. See note
2 for a discussion of contract expenses.
Contract owners in either the accumulation or the payout phase may
invest in any of the following:
Funds of Fidelity Advisor Annuity Fund;
Fidelity Advisor Annuity Government Investment Fund (FAAGvInv)
Fidelity Advisor Annuity Growth Opportunities Fund (FAAGrOpp)
Fidelity Advisor Annuity High Yield Fund (FAAHiYld)
Fidelity Advisor Annuity Income & Growth Fund (FAAIncGr)
Fidelity Advisor Annuity Money Market Fund (FAAMyMkt)
Fidelity Advisor Annuity Overseas Fund (FAAOSeas)
Portfolios of the Fidelity Variable Insurance Products Fund (Fidelity
VIP);
Fidelity VIP - High Income Portfolio (FidVIPHI)
Fidelity VIP - Money Market Portfolio (FidVIPMMkt)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Portfolio of the Fidelity Variable Insurance Products Funds II
(Fidelity VIP-II);
Fidelity VIP-II - Investment Grade Bond Portfolio (FidVIPIGBd)
At December 31, 1996, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment results of each
fund, equity transactions by contract owners and certain contract expenses (see
note 2). The accompanying financial statements include only contract owners'
purchase payments pertaining to the variable portions of their contracts and
exclude any purchase payments for fixed dollar benefits, the latter being
included in the accounts of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1996. The cost of investments sold is
determined on a specific identification basis. Investment transactions are
accounted for on the trade date (date the order to buy or sell is executed) and
dividend income is recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company which is taxed as a life insurance company under the
Internal Revenue Code.
7
<PAGE> 8
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 1995 amounts have been reclassified to conform with the current
year 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, 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
Fidelity Advisor Annuity Classic contracts an annual contract maintenance charge
of $30, with certain exceptions, which is satisfied by surrendering units; and
(b) for the Fidelity Advisor Annuity Classic 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 0.05%,
respectively; for the Fidelity Advisor Annuity Select contracts a mortality risk
charge, an expense risk charge and an administration charge assessed through the
daily unit value calculations equal to an annual rate of 0.80%, 0.45% and 0.15%,
respectively.
(3) Schedule I
Schedule I presents the components of the change in the unit values, which
are the basis for determining contract owners' equity. This schedule is
presented for each series, as applicable, in the following format:
- Beginning unit value - Jan. 1
- Reinvested dividends and capital gains
(This amount reflects the increase in the unit value due to
dividend and capital gain distributions from the underlying
mutual funds.)
- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
- Contract charges
(This amount reflects the decrease in the unit value due to the
mortality risk charge, expense risk charge and administration
charge discussed in note 2.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
For contracts in the payout phase, an assumed investment return of 3.5%,
used in the calculation of the annuity benefit payment amount, results in a
corresponding reduction in the components of the unit values as shown in
Schedule I.
<PAGE> 9
===============================================================================
SCHEDULE I
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
FIDELITY ADVISOR ANNUITY CLASSIC CONTRACTS
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
FAAGvInv FAAGrOpp FAAHiYld FAAIncGr FAAMyMkt FAAOSeas FidVIPHI FidVIPOv
-------- -------- -------- -------- -------- -------- -------- --------
1996***
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $11.504795 13.082083 11.858324 11.245581 10.385538 10.868973 10.000000 10.000000
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .563863 .049986 .941213 .050277 .544367 .382665 .000000 .000000
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.362149) 2.319799 .660145 1.059477 .000000 1.013511 .245224 .542388
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.148192) (.181235) (.163894) (.149287) (.139223) (.149908) (.021660) (.022137)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $11.558317 15.270633 13.295788 12.206048 10.790682 12.115241 10.223564 10.520251
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 0% 17% 12% 9% 4% 11% 2%(b) 5%(b)
===================================================================================================================================
1995
Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000 10.000000 10.000000 ** **
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .562856 .177745 .424612 .217242 .517389 .059248
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.081135 3.053458 1.576049 1.165103 .000000 .944343
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.139196) (.149120) (.142337) (.136764) (.131851) (.134618)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $11.504795 13.082083 11.858324 11.245581 10.385538 10.868973
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 15% 31% 19% 12% 4% 9%
===================================================================================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not being utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
</TABLE>
9
<PAGE> 10
===============================================================================
SCHEDULE I, CONTINUED
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
FIDELITY ADVISOR ANNUITY SELECT CONTRACTS
TAX QUALIFIED and NON-TAX QUALIFIED
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
FAAGvInv FAAGrOpp FAAHiYld FAAIncGr FAAMyMkt FAAOSeas FidVIPHI FidVIPMMkt FidVIPOv FidVIPIGBd
-------- -------- -------- -------- -------- -------- -------- ---------- -------- ----------
1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning unit value
- Jan. 1 $11.493314 13.069019 11.846502 11.234358 10.375160 10.858102 10.000000 10.000000 10.000000 10.000000
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .562746 .049931 .939358 .050222 .543536 .381915 .000000 .086432 .000000 .000000
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.361605) 2.315879 .659472 1.057486 .000000 1.012051 .245200 .000000 .542354 .082415
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.159431) (.194974) (.176325) (.160615) (.149777) (.161268) (.023334) (.023233) (.023851) (.023310)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value
- Dec. 31 $11.535024 15.239855 13.269007 12.181451 10.768919 12.090800 10.221866 10.063199 10.518503 10.059105
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value* (a) 0% 17% 12% 8% 4% 11% 2%(b) 1%(b) 5%(b) 1%(b)
===================================================================================================================================
1995
Beginning unit value
- Jan. 1 $10.000000 10.000000 10.000000 10.000000 10.000000 10.000000 ** ** ** **
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital
gains and dividends .562307 .177572 .424198 .217030 .517131 .059190
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.080916 3.052053 1.575576 1.164620 .000000 .943888
- -----------------------------------------------------------------------------------------------------------------------------------
Contract charges (.149909) (.160606) (.153272) (.147292) (.141971) (.144976)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value
- Dec. 31 $11.493314 13.069019 11.846502 11.234358 10.375160 10.858102
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase
(decrease) in unit
value* (a) 15% 31% 18% 12% 4% 9%
===================================================================================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Contract charges do not include the annual contract maintenance charge
discussed in note 2; and
(b) This investment option was not being utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
</TABLE>
See note 3.
10
<PAGE> 11
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Fidelity Advisor Variable Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Fidelity Advisor Variable Account as of
December 31, 1996, and the related statements of operations and changes in
contract owners' equity and schedules of changes in unit value for each of the
years in the two year period then ended. These financial statements and
schedules of changes in unit value are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules of changes in unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures include confirmation of securities
owned as of December 31, 1996, by correspondence with the transfer agents of the
underlying mutual funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of Nationwide Fidelity Advisor Variable Account as of December 31,
1996, and the results of its operations and its changes in contract owners'
equity and the schedules of changes in unit value 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 7, 1997
11
<PAGE> 12
[GRAPHIC] FIDELITY [GRAPHIC] INVESTMENTS(R)
Nationwide Life Insurance Company. Home Office: Columbus, Ohio
Before investing, understand that variable annuities are not insured by the
FDIC or any other government agency, are not bank deposits, and are not the
obligation of, or guaranteed by, the financial institution where they are
offered. Variable annuities involve investment risk, including the
possible loss of principal.
Nationwide(R) is a registered federal service mark of
Nationwide Mutual Insurance Company.
