<PAGE> 1
N A T I O N W I D E(R)
F I D E L I T Y
A D V I S O R
V A R I A B L E
A C C O U N T
ANNUAL REPORT
F I D E L I T Y
A D V I S O R
A N N U I T I E S
December 31, 1997
<PAGE> 2
[LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215 - 2220
[PICTURE OF JOSEPH J. GASPER]
PRESIDENT'S MESSAGE
We at Nationwide Life Insurance Company are pleased to bring you the
1997 annual report of the Nationwide Fidelity Advisor Variable
Account.
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 FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Fidelity VIP - Equity-Income Portfolio
1,599,038 shares (cost $35,248,681) ............................... $ 38,824,634
Fidelity VIP - Growth Portfolio
640,125 shares (cost $22,206,927) ................................. 23,748,634
Fidelity VIP - High Income Portfolio
10,995,541 shares (cost $132,833,923) ............................. 149,319,451
Fidelity VIP - Money Market Portfolio
43,662,630 shares (cost $43,662,630) .............................. 43,662,630
Fidelity VIP - Overseas Portfolio
3,584,762 shares (cost $65,258,243) ............................... 68,827,431
Fidelity VIP-II - Asset Manager Portfolio
558,030 shares (cost $9,279,565) .................................. 10,050,112
Fidelity VIP-II - Asset Manager: Growth Portfolio
505,876 shares (cost $7,473,921) .................................. 8,276,124
Fidelity VIP-II - Contrafund Portfolio
2,583,928 shares (cost $46,279,142) ............................... 51,523,515
Fidelity VIP-II - Index 500 Portfolio
251,026 shares (cost $25,844,659) ................................. 28,714,885
Fidelity VIP-II - Investment Grade Bond Portfolio
2,272,129 shares (cost $26,465,418) ............................... 28,537,938
Fidelity VIP-III - Balanced Portfolio
9,766,299 shares (cost $112,089,702) .............................. 142,392,642
Fidelity VIP-III - Growth and Income Portfolio
2,081,025 shares (cost $23,761,073) ............................... 26,075,242
Fidelity VIP-III - Growth Opportunities Portfolio
32,098,555 shares (cost $448,021,663) ............................. 618,539,161
--------------
Total investments .............................................. 1,238,492,399
Accounts receivable ..................................................... 15,691
--------------
Total assets ................................................... 1,238,508,090
ACCOUNTS PAYABLE ........................................................... -
--------------
CONTRACT OWNERS' EQUITY (NOTE 4) ........................................... $1,238,508,090
==============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 4
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
GOVERNMENT
TOTAL INVESTMENT FUND
----------------------------- -----------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. $ 13,779,569 9,453,706 287,288 977,630
Mortality, expense and administration
charges (note 2) ............................... (13,519,814) (7,056,063) (56,693) (219,745)
--------------- ------------- ------------- -------------
Net investment activity ........................ 259,755 2,397,643 230,595 757,885
--------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ............ 287,881,219 45,891,295 20,683,351 784,643
Cost of mutual fund shares sold .................. (283,840,344) (44,457,369) (21,543,654) (750,095)
--------------- ------------- ------------- -------------
Realized gain (loss) on investments ............ 4,040,875 1,433,926 (860,303) 34,548
Change in unrealized gain (loss) on investments .. 165,223,943 62,292,552 502,588 (479,363)
--------------- ------------- ------------- -------------
Net gain (loss) on investments ................. 169,264,818 63,726,478 (357,715) (444,815)
--------------- ------------- ------------- -------------
Reinvested capital gains ......................... 17,399,176 1,903,631 - -
--------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 186,923,749 68,027,752 (127,120) 313,070
--------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 429,777,841 326,836,927 703,479 12,167,493
Transfers between funds .......................... - - (20,346,585) 162,562
Redemptions ...................................... (51,393,337) (20,699,510) (279,350) (957,625)
Annuity benefits ................................. (2,059) - - -
Annual contract maintenance charge (note 2) ...... (99,391) (54,534) (386) (810)
Contingent deferred sales charges (note 2) ....... (1,101,526) (402,606) (11,183) (18,984)
Adjustments to maintain reserves ................. 5,922 36,535 13 438
--------------- ------------- ------------- -------------
Net equity transactions ...................... 377,187,450 305,716,812 (19,934,012) 11,353,074
--------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 564,111,199 373,744,564 (20,061,132) 11,666,144
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 674,396,891 300,652,327 20,061,132 8,394,988
--------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 1,238,508,090 674,396,891 - 20,061,132
=============== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD FUND MONEY MARKET FUND
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. 1,664,977 6,331,250 290,239 1,690,430
Mortality, expense and administration
charges (note 2) ............................... (265,500) (945,208) (81,263) (462,483)
------------- -------------- -------------- -------------
Net investment activity ........................ 1,399,477 5,386,042 208,976 1,227,947
------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold ............ 97,566,593 2,719,663 34,287,294 36,765,530
Cost of mutual fund shares sold .................. (98,450,573) (2,339,519) (34,287,294) (36,765,530)
------------- -------------- -------------- -------------
Realized gain (loss) on investments ............ (883,980) 380,144 - -
Change in unrealized gain (loss) on investments .. (2,411,864) 2,035,510 - -
------------- -------------- -------------- -------------
Net gain (loss) on investments ................. (3,295,844) 2,415,654 - -
------------- -------------- -------------- -------------
Reinvested capital gains ......................... 3,446,055 38,004 - -
------------- -------------- -------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 1,549,688 7,839,700 208,976 1,227,947
------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 5,965,726 42,194,826 5,893,573 41,393,976
Transfers between funds .......................... (97,185,398) 4,859,831 (35,384,849) (38,807,936)
Redemptions ...................................... (1,335,478) (3,134,966) (643,822) (2,833,508)
Annuity benefits ................................. - - - -
Annual contract maintenance charge (note 2) ...... (1,254) (4,524) (196) (1,592)
Contingent deferred sales charges (note 2) ....... (37,325) (78,197) (8,540) (21,113)
Adjustments to maintain reserves ................. 352 2,682 2,487 (8,090)
------------- -------------- -------------- -------------
Net equity transactions ...................... (92,593,377) 43,839,652 (30,141,347) (278,263)
------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ (91,043,689) 51,679,352 (29,932,371) 949,684
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 91,043,689 39,364,337 29,932,371 28,982,687
------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ - 91,043,689 - 29,932,371
============= ============== ============== =============
</TABLE>
(Continued)
5
<PAGE> 5
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
OVERSEAS FUND EQUITY-INCOME PORTFOLIO
----------------------------- -----------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. $ 53,871 452,482 15,751 -
Mortality, expense and administration
charges (note 2) ............................... (128,292) (456,932) (242,173) -
------------- ------------- ------------- -------------
Net investment activity ........................ (74,421) (4,450) (226,422) -
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ............ 48,228,759 1,489,407 22,507 -
Cost of mutual fund shares sold .................. (48,637,341) (1,345,257) (21,016) -
------------- ------------- ------------- -------------
Realized gain (loss) on investments ............ (408,582) 144,150 1,491 -
Change in unrealized gain (loss) on investments .. (2,797,481) 2,436,624 3,575,954 -
------------- ------------- ------------- -------------
Net gain (loss) on investments ................. (3,206,063) 2,580,774 3,577,445 -
------------- ------------- ------------- -------------
Reinvested capital gains ......................... 4,309,141 941,567 79,191 -
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 1,028,657 3,517,891 3,430,214 -
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 2,025,184 19,990,667 28,876,880 -
Transfers between funds .......................... (47,818,089) 6,205,243 7,018,612 -
Redemptions ...................................... (425,271) (973,327) (494,788) -
Annuity benefits ................................. - - - -
Annual contract maintenance charge (note 2) ...... (821) (3,284) (203) -
Contingent deferred sales charges (note 2) ....... (9,277) (23,667) (7,134) -
Adjustments to maintain reserves ................. 1,590 1,314 1,397 -
------------- ------------- ------------- -------------
Net equity transactions ...................... (46,226,684) 25,196,946 35,394,764 -
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ (45,198,027) 28,714,837 38,824,978 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 45,198,027 16,483,190 - -
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ - 45,198,027 38,824,978 -
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
GROWTH PORTFOLIO HIGH INCOME PORTFOLIO
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. 4,508 - 105,786 -
Mortality, expense and administration
charges (note 2) ............................... (145,297) - (1,409,930) (112)
------------- -------------- -------------- -------------
Net investment activity ........................ (140,789) - (1,304,144) (112)
------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold ............ 701,523 - 9,990,931 51,577
Cost of mutual fund shares sold .................. (663,222) - (9,469,396) (51,480)
------------- -------------- -------------- -------------
Realized gain (loss) on investments ............ 38,301 - 521,535 97
Change in unrealized gain (loss) on investments .. 1,541,707 - 16,484,146 1,382
------------- -------------- -------------- -------------
Net gain (loss) on investments ................. 1,580,008 - 17,005,681 1,479
------------- -------------- -------------- -------------
Reinvested capital gains ......................... 20,178 - 13,075 -
------------- -------------- -------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 1,459,397 - 15,714,612 1,367
------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 17,228,215 - 40,442,027 57,687
Transfers between funds .......................... 5,458,035 - 98,072,875 109,940
Redemptions ...................................... (389,446) - (4,965,856) (595)
Annuity benefits ................................. - - (520) -
Annual contract maintenance charge (note 2) ...... (174) - (6,797) (12)
Contingent deferred sales charges (note 2) ....... (7,662) - (105,011) -
Adjustments to maintain reserves ................. 387 - 1,793 1
------------- -------------- -------------- -------------
Net equity transactions ...................... 22,289,355 - 133,438,511 167,021
------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 23,748,752 - 149,153,123 168,388
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... - - 168,388 -
------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ 23,748,752 - 149,321,511 168,388
============= ============== ============== =============
</TABLE>
6
<PAGE> 6
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO OVERSEAS PORTFOLIO
----------------------------- -----------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. $ 2,138,816 1,914 13,050 -
Mortality, expense and administration
charges (note 2) .................................... (560,839) (512) (730,502) (341)
------------- ------------- ------------- -------------
Net investment activity ............................. 1,577,977 1,402 (717,452) (341)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ................. 50,465,388 14,704 6,692,136 297
Cost of mutual fund shares sold ....................... (50,465,388) (14,704) (6,194,942) (288)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ................. - - 497,194 9
Change in unrealized gain (loss) on investments ....... - - 3,564,616 4,572
------------- ------------- ------------- -------------
Net gain (loss) on investments ...................... - - 4,061,810 4,581
------------- ------------- ------------- -------------
Reinvested capital gains .............................. - - 51,803 -
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners' .......
equity resulting from operations ................ 1,577,977 1,402 3,396,161 4,240
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 53,240,636 1,297,033 19,142,453 23,854
Transfers between funds ............................... (8,324,168) 115,682 48,946,911 202,834
Redemptions ........................................... (4,162,215) - (2,818,245) (151)
Annuity benefits ...................................... - - - -
Annual contract maintenance charge (note 2) ........... (1,833) - (5,435) (3)
Contingent deferred sales charges (note 2) ............ (81,918) - (65,968) -
Adjustments to maintain reserves ...................... (128) (6) 3,181 (8)
------------- ------------- ------------- -------------
Net equity transactions ........................... 40,670,374 1,412,709 65,202,897 226,526
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 42,248,351 1,414,111 68,599,058 230,766
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... 1,414,111 - 230,766 -
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $ 43,662,462 1,414,111 68,829,824 230,766
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
ASSET MANAGER:
ASSET MANAGER PORTFOLIO GROWTH PORTFOLIO
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .................................. 5,034 - - -
Mortality, expense and administration
charges (note 2) .................................... (63,622) - (60,894) -
------------- -------------- -------------- -------------
Net investment activity ............................. (58,588) - (60,894) -
------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold ................. 167,650 - 608,370 -
Cost of mutual fund shares sold ....................... (169,948) - (526,461) -
------------- -------------- -------------- -------------
Realized gain (loss) on investments ................. (2,298) - 81,909 -
Change in unrealized gain (loss) on investments ....... 770,547 - 802,203 -
------------- -------------- -------------- -------------
Net gain (loss) on investments ...................... 768,249 - 884,112 -
------------- -------------- -------------- -------------
Reinvested capital gains .............................. 12,628 - 620 -
------------- -------------- -------------- -------------
Net increase (decrease) in contract owners' .......
equity resulting from operations ................ 722,289 - 823,838 -
------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ..................................... 6,537,589 - 5,851,889 -
Transfers between funds ............................... 2,915,117 - 1,816,591 -
Redemptions ........................................... (124,289) - (210,136) -
Annuity benefits ...................................... - - - -
Annual contract maintenance charge (note 2) ........... (65) - (56) -
Contingent deferred sales charges (note 2) ............ (642) - (5,660) -
Adjustments to maintain reserves ...................... 169 - (319) -
------------- -------------- -------------- -------------
Net equity transactions ........................... 9,327,879 - 7,452,309 -
------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 10,050,168 - 8,276,147 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... - - - -
------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. 10,050,168 - 8,276,147 -
============= ============== ============== =============
</TABLE>
(Continued)
7
<PAGE> 7
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
CONTRAFUND PORTFOLIO INDEX 500 PORTFOLIO
----------------------------- -----------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. $ 24,653 - 9,636 -
Mortality, expense and administration
charges (note 2) ............................... (369,125) - (190,547) -
------------- ------------- ------------- -------------
Net investment activity ........................ (344,472) - (180,911) -
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ............ 565,018 - 965,594 -
Cost of mutual fund shares sold .................. (487,291) - (889,248) -
------------- ------------- ------------- -------------
Realized gain (loss) on investments ............ 77,727 - 76,346 -
Change in unrealized gain (loss) on investments .. 5,244,373 - 2,870,226 -
------------- ------------- ------------- -------------
Net gain (loss) on investments ................. 5,322,100 - 2,946,572 -
------------- ------------- ------------- -------------
Reinvested capital gains ......................... 65,154 - 19,553 -
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 5,042,782 - 2,785,214 -
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 36,229,846 - 20,344,888 -
Transfers between funds .......................... 11,100,887 - 6,144,151 -
Redemptions ...................................... (814,886) - (540,303) -
Annuity benefits ................................. - - - -
Annual contract maintenance charge (note 2) ...... (692) - (330) -
Contingent deferred sales charges (note 2) ....... (18,768) - (17,514) -
Adjustments to maintain reserves ................. (15,272) - (1,008) -
------------- ------------- ------------- -------------
Net equity transactions ...................... 46,481,115 - 25,929,884 -
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 51,523,897 - 28,715,098 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... - - - -
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 51,523,897 - 28,715,098 -
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT GRADE
BOND PORTFOLIO BALANCED PORTFOLIO
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. 21,628 - 2,651,503 -
Mortality, expense and administration
charges (note 2) ............................... (279,791) (140) (1,746,213) (1,051,093)
------------- -------------- -------------- -------------
Net investment activity ........................ (258,163) (140) 905,290 (1,051,093)
------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold ............ 2,093,567 309 4,520,541 727,396
Cost of mutual fund shares sold .................. (2,017,251) (307) (3,490,030) (656,256)
------------- -------------- -------------- -------------
Realized gain (loss) on investments ............ 76,316 2 1,030,511 71,140
Change in unrealized gain (loss) on investments .. 2,072,932 (411) 20,657,622 8,506,461
------------- -------------- -------------- -------------
Net gain (loss) on investments ................. 2,149,248 (409) 21,688,133 8,577,601
------------- -------------- -------------- -------------
Reinvested capital gains ......................... - - - 218,962
------------- -------------- -------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 1,891,085 (549) 22,593,423 7,745,470
------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 6,750,960 27,814 23,981,267 50,651,260
Transfers between funds .......................... 21,294,182 70,964 (1,028,043) 4,814,234
Redemptions ...................................... (1,465,723) (258) (6,165,682) (3,143,740)
Annuity benefits ................................. - - (296) -
Annual contract maintenance charge (note 2) ...... (1,273) - (13,901) (7,597)
Contingent deferred sales charges (note 2) ....... (29,247) - (126,607) (65,894)
Adjustments to maintain reserves ................. 222 5 1,693 6,349
------------- -------------- -------------- -------------
Net equity transactions ...................... 26,549,121 98,525 16,648,431 52,254,612
------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 28,440,206 97,976 39,241,854 60,000,082
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... 97,976 - 103,152,198 43,152,116
------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ 28,538,182 97,976 142,394,052 103,152,198
============= ============== ============== =============
</TABLE>
8
<PAGE> 8
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
GROWTH AND INCOME GROWTH OPPORTUNITIES
PORTFOLIO PORTFOLIO
----------------------------- -----------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................. $ 157,740 - 6,335,089 -
Mortality, expense and administration
charges (note 2) ............................... (166,292) - (7,022,841) (3,919,497)
------------- ------------- ------------- -------------
Net investment activity ........................ (8,552) - (687,752) (3,919,497)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ............ 45,518 - 10,276,479 3,337,769
Cost of mutual fund shares sold .................. (40,650) - (6,486,639) (2,533,933)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ............ 4,868 - 3,789,840 803,836
Change in unrealized gain (loss) on investments .. 2,314,169 - 110,032,205 49,787,777
------------- ------------- ------------- -------------
Net gain (loss) on investments ................. 2,319,037 - 113,822,045 50,591,613
------------- ------------- ------------- -------------
Reinvested capital gains ......................... 512,654 - 8,869,124 705,098
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........... 2,823,139 - 122,003,417 47,377,214
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................ 18,613,704 - 137,949,525 159,032,317
Transfers between funds .......................... 5,163,722 - 2,156,049 22,266,646
Redemptions ...................................... (510,742) - (26,047,105) (9,655,340)
Annuity benefits ................................. - - (1,243) -
Annual contract maintenance charge (note 2) ...... (188) - (65,787) (36,712)
Contingent deferred sales charges (note 2) ....... (14,424) - (554,646) (194,751)
Adjustments to maintain reserves ................. 235 - 9,130 33,850
------------- ------------- ------------- -------------
Net equity transactions ...................... 23,252,307 - 113,445,923 171,446,010
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............ 26,075,446 - 235,449,340 218,823,224
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ...... - - 383,098,233 164,275,009
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ............ $ 26,075,446 - 618,547,573 383,098,233
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 9
NATIONWIDE FIDELITY ADVISOR VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(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 (effective January 20,
1997, the following funds are no longer available);
Fidelity Advisor Annuity Government Investment Fund
Fidelity Advisor Annuity High Yield Fund
Fidelity Advisor Annuity Money Market Fund
Fidelity Advisor Annuity Overseas Fund
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio
Fidelity VIP - Growth Portfolio
Fidelity VIP - High Income Portfolio
Fidelity VIP - Money Market Portfolio
Fidelity VIP - Overseas Portfolio
Portfolios of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Asset Manager Portfolio
Fidelity VIP-II - Asset Manager: Growth Portfolio
Fidelity VIP-II - Contrafund Portfolio
Fidelity VIP-II - Index 500 Portfolio
Fidelity VIP-II - Investment Grade Bond Portfolio
Portfolios of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Balanced Portfolio
(formerly Fidelity Advisor Annuity Income & Growth Fund)
Fidelity VIP-III - Growth and Income Portfolio
Fidelity VIP-III - Growth Opportunities Portfolio
(formerly Fidelity Advisor Annuity Growth Opportunities Fund)
At December 31, 1997, except as noted, 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.
10
<PAGE> 10
(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 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.
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, 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. Optional
long term care facility with a one-year stepped up death benefit rider is
offered at an additional annual rate of 0.05% (Rider Option 1). Optional
long care facility with a 5% enhanced death benefit rider is offered at an
additional annual rate of 0.10% (Rider Option 2).
11
<PAGE> 11
The following table provides mortality, expense and administration charges
by contract type for the period ended December 31, 1997:
<TABLE>
<CAPTION>
GOVERNMENT HIGH MONEY
INVESTMENT YIELD MARKET OVERSEAS
TOTAL FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Classic......................... $ 1,083,010 3,971 16,813 3,845 10,730
Select.......................... 12,435,476 52,722 248,687 77,418 117,562
Select (Rider Opt. 1)........... 1,046 - - - -
Select (Rider Opt. 2)........... 282 - - - -
------------ ------------ ------------ ------------ ------------
Total....................... $ 13,519,814 56,693 265,500 81,263 128,292
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
EQUITY- HIGH MONEY
INCOME GROWTH INCOME MARKET OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Classic......................... $ 10,689 8,415 79,502 20,370 60,043
Select.......................... 231,323 136,613 1,330,341 540,448 670,326
Select (Rider Opt. 1)........... 126 254 45 21 105
Select (Rider Opt. 2)........... 35 15 42 - 28
------------ ------------ ------------ ------------ ------------
Total....................... $ 242,173 145,297 1,409,930 560,839 730,502
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
ASSET INVESTMENT
ASSET MANAGER INDEX GRADE
MANAGER GROWTH CONTRAFUND 500 BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Classic......................... $ 2,325 3,230 23,334 10,070 18,691
Select.......................... 61,279 57,643 345,666 180,444 261,060
Select (Rider Opt. 1)........... 18 13 95 24 -
Select (Rider Opt. 2)........... - 8 30 9 40
------------ ------------ ------------ ------------ ------------
Total....................... $ 63,622 60,894 369,125 190,547 279,791
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
GROWTH AND GROWTH
BALANCED INCOME OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------
<S> <C> <C> <C>
Classic......................... $ 153,146 6,903 650,933
Select.......................... 1,593,030 159,344 6,371,570
Select (Rider Opt. 1)........... 28 13 304
Select (Rider Opt. 2)........... 9 32 34
------------ ------------ ------------
Total....................... $ 1,746,213 166,292 7,022,841
============ ============ ============
</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.
12
<PAGE> 12
(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>
FIDELITY ADVISOR ANNUITY CLASSIC CONTRACTS:
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ........................... 85,072 $ 12.257123 $1,042,738 23%(a)
Non-tax qualified ....................... 68,943 12.257123 845,043 23%(a)
Fidelity VIP - Growth Portfolio:
Tax qualified ........................... 72,191 11.621651 838,979 16%(a)
Non-tax qualified ....................... 55,100 11.621651 640,353 16%(a)
Fidelity VIP - High Income Portfolio:
Tax qualified ........................... 385,182 11.873382 4,573,413 16%
Non-tax qualified ....................... 335,906 11.873382 3,988,340 16%
Fidelity VIP - Money Market Portfolio:
Tax qualified ........................... 208,431 10.478255 2,183,993 4%
Non-tax qualified ....................... 63,314 10.478255 663,420 4%
Fidelity VIP - Overseas Portfolio:
Tax qualified ........................... 278,008 11.583345 3,220,263 10%
Non-tax qualified ....................... 233,174 11.583345 2,700,935 10%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ........................... 16,173 11.662002 188,610 17%(a)
Non-tax qualified ....................... 17,854 11.662002 208,213 17%(a)
Fidelity VIP-II - Asset Manager:
Growth Portfolio:
Tax qualified ........................... 24,630 11.951807 294,373 20%(a)
Non-tax qualified ....................... 15,156 11.951807 181,142 20%(a)
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ........................... 166,852 11.743945 1,959,501 17%(a)
Non-tax qualified ....................... 111,999 11.743945 1,315,310 17%(a)
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified ........................... 83,194 12.506255 1,040,445 25%(a)
Non-tax qualified ....................... 51,803 12.506255 647,862 25%(a)
Fidelity VIP-II - Investment Grade
Bond Portfolio:
Tax qualified ........................... 114,654 10.829778 1,241,677 8%
Non-tax qualified ....................... 64,921 10.829778 703,080 8%
Fidelity VIP-III - Balanced Portfolio:
Tax qualified ........................... 502,946 14.720075 7,403,403 21%
Non-tax qualified ....................... 389,668 14.720075 5,735,942 21%
Fidelity VIP-III - Growth and
Income Portfolio:
Tax qualified ........................... 56,646 12.362549 700,289 24%(a)
Non-tax qualified ....................... 35,101 12.362549 433,938 24%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio:
Tax qualified ........................... 1,496,661 19.586347 29,314,122 28%
Non-tax qualified ....................... 1,474,036 19.586347 28,870,981 28%
</TABLE>
(Continued)
13
<PAGE> 13
FIDELITY ADVISOR ANNUITY SELECT CONTRACTS:
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ......................... 1,102,775 12.245396 13,503,917 22%(a)
Non-tax qualified ..................... 1,900,080 12.245396 23,267,232 22%(a)
Fidelity VIP - Growth Portfolio:
Tax qualified ......................... 711,162 11.610523 8,256,963 16%(a)
Non-tax qualified ..................... 1,186,843 11.610523 13,779,868 16%(a)
Fidelity VIP - High Income Portfolio:
Tax qualified ......................... 3,723,025 11.859397 44,152,832 16%
Non-tax qualified ..................... 8,132,611 11.859397 96,447,862 16%
Fidelity VIP - Money Market Portfolio:
Tax qualified ......................... 1,517,808 10.465899 15,885,225 4%
Non-tax qualified ..................... 2,372,121 10.465899 24,826,379 4%
Fidelity VIP - Overseas Portfolio:
Tax qualified ......................... 1,594,615 11.569690 18,449,201 10%
Non-tax qualified ..................... 3,828,801 11.569690 44,298,041 10%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ......................... 234,516 11.650850 2,732,311 17%(a)
Non-tax qualified ..................... 585,920 11.650850 6,826,466 17%(a)
Fidelity VIP-II - Asset Manager:
Growth Portfolio:
Tax qualified ......................... 236,306 11.940378 2,821,583 19%(a)
Non-tax qualified ..................... 412,776 11.940378 4,928,701 19%(a)
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ......................... 1,484,705 11.732706 17,419,607 17%(a)
Non-tax qualified ..................... 2,614,941 11.732706 30,680,334 17%(a)
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified ......................... 687,172 12.494291 8,585,727 25%(a)
Non-tax qualified ..................... 1,471,434 12.494291 18,384,525 25%(a)
Fidelity VIP-II - Investment Grade
Bond Portfolio:
Tax qualified ......................... 881,781 10.817010 9,538,234 8%
Non-tax qualified ..................... 1,572,576 10.817010 17,010,570 8%
Fidelity VIP-III - Balanced Portfolio:
Tax qualified ......................... 2,672,535 14.675543 39,220,902 20%
Non-tax qualified ..................... 6,127,776 14.675543 89,928,440 20%
Fidelity VIP-III - Growth and
Income Portfolio:
Tax qualified ......................... 641,220 12.350709 7,919,522 24%(a)
Non-tax qualified ..................... 1,370,152 12.350709 16,922,349 24%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio:
Tax qualified ......................... 8,514,753 19.527096 166,268,399 28%
Non-tax qualified ..................... 20,154,563 19.527096 393,560,087 28%
</TABLE>
14
<PAGE> 14
FIDELITY ADVISOR ANNUITY SELECT (RIDER OPTION 1):
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ......................... 1,233 10.334399 12,742 3%(a)
Non-tax qualified ..................... 9,973 10.334399 103,065 3%(a)
Fidelity VIP - Growth Portfolio:
Tax qualified ......................... 1,555 10.025497 15,590 0%(a)
Non-tax qualified ..................... 19,167 10.025497 192,159 0%(a)
Fidelity VIP - High Income Portfolio:
Tax qualified ......................... 1,197 10.125956 12,121 1%(a)
Non-tax qualified ..................... 6,913 10.125956 70,001 1%(a)
Fidelity VIP - Money Market Portfolio:
Non-tax qualified ..................... 10,276 10.066783 103,446 1%(a)
Fidelity VIP - Overseas Portfolio:
Tax qualified ......................... 63 9.894400 623 (1)%(a)
Non-tax qualified ..................... 12,510 9.894400 123,779 (1)%(a)
Fidelity VIP-II - Asset Manager Portfolio:
Non-tax qualified ..................... 9,263 10.209261 94,568 2%(a)
Fidelity VIP-II - Asset Manager
Growth Portfolio:
Non-tax qualified ..................... 3,686 10.239737 37,744 2%(a)
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ......................... 913 9.951886 9,086 0%(a)
Non-tax qualified ..................... 9,371 9.951886 93,259 0%(a)
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified ......................... 61 10.330898 630 3%(a)
Non-tax qualified ..................... 3,644 10.330898 37,646 3%(a)
Fidelity VIP-III - Balanced Portfolio:
Non-tax qualified ..................... 8,383 10.272783 86,117 3%(a)
Fidelity VIP-III - Growth and
Income Portfolio:
Non-tax qualified ..................... 6,119 10.404380 63,664 4%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio:
Tax qualified ......................... 2,407 10.392122 25,014 4%(a)
Non-tax qualified ..................... 37,507 10.392122 389,777 4%(a)
</TABLE>
(Continued)
15
<PAGE> 15
FIDELITY ADVISOR ANNUITY SELECT (RIDER OPTION 2):
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ...................... 2,158 10.333567 22,300 3%(a)
Non-tax qualified .................. 2,704 10.333567 27,942 3%(a)
Fidelity VIP - Growth Portfolio:
Tax qualified ...................... 1,085 10.024687 10,877 0%(a)
Non-tax qualified .................. 1,393 10.024687 13,964 0%(a)
Fidelity VIP - High Income Portfolio:
Tax qualified ...................... 2,387 10.125138 24,169 1%(a)
Non-tax qualified .................. 4,150 10.125138 42,019 1%(a)
Fidelity VIP - Overseas Portfolio:
Tax qualified ...................... 400 9.893604 3,957 (1)%(a)
Non-tax qualified .................. 3,338 9.893604 33,025 (1)%(a)
Fidelity VIP-II - Asset Manager:
Growth Portfolio:
Non-tax qualified .................. 1,231 10.238907 12,604 2%(a)
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ...................... 1,148 9.951081 11,424 0%(a)
Non-tax qualified .................. 3,555 9.951081 35,376 0%(a)
Fidelity VIP-II - Index 500 Portfolio:
Tax qualified ...................... 386 10.330070 3,987 3%(a)
Non-tax qualified .................. 1,382 10.330070 14,276 3%(a)
Fidelity VIP-II - Investment Grade
Bond Portfolio:
Tax qualified ...................... 1,718 10.145651 17,430 1%(a)
Non-tax qualified .................. 2,680 10.145651 27,190 1%(a)
Fidelity VIP-III - Balanced Portfolio:
Non-tax qualified .................. 1,363 10.271954 14,001 3%(a)
Fidelity VIP-III - Growth and
Income Portfolio:
Non-tax qualified .................. 3,430 10.403545 35,684 4%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio:
Tax qualified ...................... 1,056 10.391285 10,973 4%(a)
Non-tax qualified .................. 7,724 10.391285 80,262 4%(a)
======= =========
Reserves for annuity contracts
in payout phase:
Tax qualified 43,957
---------------
$ 1,238,508,090
===============
</TABLE>
(a) This investment option was not being utilized for the entire period.
16
<PAGE> 16
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, 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 Fidelity Advisor
Variable Account 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
17
<PAGE> 17
[LOGO] [FIDELITY INVESTMENTS LOGO]
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.
APO - 2929 - E (12/97)
