<PAGE>
Fidelity INCOME PLUS
The Fidelity Variable Annuity Account
Semi-Annual Report
June 30, 1996
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY
2
<PAGE>
DEAR FIDELITY INCOME PLUS OWNER:
Your semi-annual reports are enclosed--both your Annuity Semi-Annual Report
(Fidelity Income Plus) and the Semi-Annual Reports for its underlying mutual
funds (The Variable Insurance Products Funds).
Many owners of Fidelity Income Plus make additional contributions to their
annuities after their initial purchase. By doing this, their annuity is even
better positioned to help assure an adequate income at retirement.
An easy way to make additions to your contract is to simply write a check for
your annuity each month as you write out your regular monthly checks. The nice
part of this method is that you're actually paying yourself. We are including a
postage-paid return envelope for your convenience if you would like to use this
method. Remember, unlike many annuities, with Fidelity Income Plus there are no
surrender charges.
We value the confidence you have placed in us and will work to make Fidelity
Income Plus your continued choice for retirement savings.
Sincerely,
/s/ William L. Busler
William L. Busler
President
PFL Life Insurance Company
3
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
BALANCE SHEET (AMOUNTS IN THOUSANDS)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
MONEY HIGH EQUITY
MARKET INCOME INCOME GROWTH
COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash..................... $ 15 14 -- -- --
Investments in mutual
funds, at current market
value (Note 2):
Variable Insurance
Products Fund--Money
Market Portfolio...... 106,481 106,481 -- -- --
Variable Insurance
Products Fund--High
Income Portfolio...... 54,119 -- 54,119 -- --
Variable Insurance
Products Fund--Equity
Income Portfolio...... 239,244 -- -- 239,244 --
Variable Insurance
Products Fund--Growth
Portfolio............. 162,972 -- -- -- 162,972
Variable Insurance
Products Fund--
Overseas Portfolio.... 39,027 -- -- -- --
Variable Insurance
Products Fund II--
Investment Grade Bond
Portfolio............. 15,951 -- -- -- --
Variable Insurance
Products Fund II--
Asset Manager
Portfolio............. 77,265 -- -- -- --
Variable Insurance
Products Fund II--
Asset Manager Growth
Portfolio............. 4,136 -- -- -- --
Variable Insurance
Products Fund II--
Contrafund Portfolio.. 39,635 -- -- -- --
Variable Insurance
Products Fund II--
Index 500 Portfolio... 13,427 -- -- -- --
Fidelity Daily Income
Trust................. 403 -- -- -- --
Fidelity Capital and
Income Fund........... 149 -- -- -- --
Fidelity Cash
Reserves.............. 74 -- -- -- --
-------- ------- ------ ------- -------
Total Investments in
Mutual Funds.......... 752,883 106,481 54,119 239,244 162,972
-------- ------- ------ ------- -------
Total Assets............ $752,898 106,495 54,119 239,244 162,972
======== ======= ====== ======= =======
LIABILITIES AND CONTRACT
OWNERS' EQUITY
Liabilities.............. -- -- -- -- --
Deferred annuity
contracts terminable by
owners (Notes 3 and 6).. 752,898 106,495 54,119 239,244 162,972
-------- ------- ------ ------- -------
Total Liabilities and
Contract Owners'
Equity................. $752,898 106,495 54,119 239,244 162,972
======== ======= ====== ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY
ASSET DAILY FIDELITY FIDELITY
INVESTMENT ASSET MANAGER INCOME CAPITAL AND CASH
OVERSEAS GRADE BOND MANAGER GROWTH CONTRAFUND INDEX 500 TRUST INCOME FUND RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- -- -- -- -- 1 -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
39,027 -- -- -- -- -- -- -- --
-- 15,951 -- -- -- -- -- -- --
-- -- 77,265 -- -- -- -- -- --
-- -- -- 4,136 -- -- -- -- --
-- -- -- -- 39,635 -- -- -- --
-- -- -- -- -- 13,427 -- -- --
-- -- -- -- -- -- 403 -- --
-- -- -- -- -- -- -- 149 --
-- -- -- -- -- -- -- -- 74
------ ------ ------ ----- ------ ------ --- --- ---
39,027 15,951 77,265 4,136 39,635 13,427 403 149 74
------ ------ ------ ----- ------ ------ --- --- ---
39,027 15,951 77,265 4,136 39,635 13,427 404 149 74
====== ====== ====== ===== ====== ====== === === ===
-- -- -- -- -- -- -- -- --
39,027 15,951 77,265 4,136 39,635 13,427 404 149 74
------ ------ ------ ----- ------ ------ --- --- ---
39,027 15,951 77,265 4,136 39,635 13,427 404 149 74
====== ====== ====== ===== ====== ====== === === ===
</TABLE>
5
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
Six Months Ended June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
MONEY HIGH EQUITY
MARKET INCOME INCOME GROWTH
COMBINED SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME
Income:
Dividends................ $ 37,356 2,836 5,170 11,012 10,224
Expenses:
Administrative fee (Note
5)...................... -- -- -- -- --
Mortality and expense
risk charge (Note 5).... 2,945 432 224 967 598
-------- ------- ------ ------- ------
Net investment income
...................... 34,411 2,404 4,946 10,045 9,626
-------- ------- ------ ------- ------
NET REALIZED & UNREALIZED
CAPITAL GAIN (LOSS) FROM
INVESTMENTS
Net realized capital gain
(loss) from sales of
investments:
Proceeds from sales...... 358,353 105,171 70,570 49,800 57,437
Cost of investments
sold.................... 329,647 105,171 70,948 36,853 44,945
-------- ------- ------ ------- ------
Net realized capital gain
(loss) from sales of
investments.............. 28,706 -- (378) 12,947 12,492
-------- ------- ------ ------- ------
Net change in unrealized
appreciation/depreciation
of investments:
Beginning of the
period.................. 66,352 -- 2,015 44,061 12,225
End of the period........ 46,087 -- 1,141 33,944 4,279
-------- ------- ------ ------- ------
Net change in unrealized
appreciation/depreciation
of investments........... (20,265) -- (874) (10,117) (7,946)
-------- ------- ------ ------- ------
Net realized and
unrealized capital gain
(loss) from investments.. 8,441 -- (1,252) 2,830 4,546
-------- ------- ------ ------- ------
INCREASE (DECREASE) FROM
OPERATIONS............... $ 42,852 2,404 3,694 12,875 14,172
======== ======= ====== ======= ======
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY
ASSET DAILY FIDELITY GOVERNMENT FIDELITY
INVESTMENT ASSET MANAGER INCOME CAPITAL AND SECURITIES CASH
OVERSEAS GRADE BOND MANAGER GROWTH CONTRAFUND INDEX 500 TRUST INCOME FUND FUND, LTD. RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
919 897 5,431 113 250 483 10 9 -- 2
-- -- -- -- -- -- -- -- -- --
149 67 321 14 124 49 -- -- -- --
------ ------ ------ ----- ------ ------ --- --- --- ---
770 830 5,110 99 126 434 10 9 -- 2
------ ------ ------ ----- ------ ------ --- --- --- ---
25,386 4,147 14,576 4,809 10,822 15,553 12 34 36 --
23,399 4,153 13,758 4,808 10,355 15,180 12 30 35 --
------ ------ ------ ----- ------ ------ --- --- --- ---
1,987 (6) 818 1 467 373 -- 4 1 --
------ ------ ------ ----- ------ ------ --- --- --- ---
1,760 717 5,333 (23) 32 234 -- (4) 2 --
1,406 (475) 3,622 138 1,736 305 -- (9) -- --
------ ------ ------ ----- ------ ------ --- --- --- ---
(354) (1,192) (1,711) 161 1,704 71 -- (5) (2) --
------ ------ ------ ----- ------ ------ --- --- --- ---
1,633 (1,198) (893) 162 2,171 444 -- (1) (1) --
------ ------ ------ ----- ------ ------ --- --- --- ---
2,403 (368) 4,217 261 2,297 878 10 8 (1) 2
====== ====== ====== ===== ====== ====== === === === ===
</TABLE>
7
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY (AMOUNTS IN THOUSANDS)
Six Months Ended June 30, 1996 and Twelve Months Ended December 31, 1995,
Except as Noted (Unaudited)
<TABLE>
<CAPTION>
MONEY
MARKET
COMBINED SUBACCOUNT
----------------- ----------------
1996 1995 1996 1995
-------- ------- ------- -------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)............ $ 34,411 22,353 2,404 6,192
Net realized capital gain (loss)........ 28,706 44,390 -- --
Net change in unrealized
appreciation/depreciation.............. (20,265) 62,917 -- --
-------- ------- ------- -------
Increase (decrease) from operations..... 42,852 129,660 2,404 6,192
-------- ------- ------- -------
CONTRACT TRANSACTIONS
Net contract purchase payments (Note
6)..................................... 11,040 22,440 2,002 3,470
Transfers between funds................. -- -- (2,527) (20,233)
Contract terminations, withdrawals, and
other deductions....................... (20,611) (69,091) (7,064) (22,493)
-------- ------- ------- -------
Increase (decrease) from contract
transactions........................... (9,571) (46,651) (7,589) (39,256)
-------- ------- ------- -------
Net increase (decrease) in contract
owners' equity......................... 33,281 83,009 (5,185) (33,064)
-------- ------- ------- -------
CONTRACT OWNERS' EQUITY
Beginning of period..................... 719,617 636,608 111,680 144,744
-------- ------- ------- -------
End of period........................... $752,898 719,617 106,495 111,680
======== ======= ======= =======
<CAPTION>
ASSET
ASSET MANAGER
MANAGER GROWTH
SUBACCOUNT SUBACCOUNT /1/
----------------- ----------------
1996 1995 1996 1995
-------- ------- ------- -------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)............ $ 5,110 1,582 99 82
Net realized capital gain (loss)........ 818 3,000 1 (23)
Net change in unrealized
appreciation/depreciation.............. (1,711) 9,527 161 (23)
-------- ------- ------- -------
Increase (decrease) from operations..... 4,217 14,109 261 36
-------- ------- ------- -------
CONTRACT TRANSACTIONS
Net contract purchase payments (Note
6)..................................... 535 1,021 246 45
Transfers between funds................. (7,933) (37,186) 1,492 2,120
Contract terminations, withdrawals, and
other deductions....................... (3,326) (15,131) (63) (1)
-------- ------- ------- -------
Increase (decrease) from contract
transactions........................... (10,724) (51,296) 1,675 2,164
-------- ------- ------- -------
Net increase (decrease) in contract
owners' equity......................... (6,507) (37,187) 1,936 2,200
-------- ------- ------- -------
CONTRACT OWNERS' EQUITY
Beginning of period..................... 83,772 120,959 2,200 --
-------- ------- ------- -------
End of period........................... $ 77,265 83,772 4,136 2,200
======== ======= ======= =======
</TABLE>
/1/Period from September 5, 1995 (commencement of operations) to December 31,
1995.
/2/Period from September 1, 1995 (commencement of operations) to December 31,
1995.
See accompanying Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH EQUITY INVESTMENT
INCOME INCOME GROWTH OVERSEAS GRADE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------- ---------------- ---------------- --------------- --------------
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4,946 2,608 10,045 11,754 9,626 (553) 770 52 830 368
(378) 3,235 12,947 15,463 12,492 22,367 1,987 (371) (6) 641
(874) 3,610 (10,117) 32,361 (7,946) 12,555 (354) 3,390 (1,192) 1,231
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
3,694 9,453 12,875 59,578 14,172 34,369 2,403 3,071 (368) 2,240
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
558 2,542 2,689 6,476 1,772 5,014 477 759 204 266
(5,766) 5,666 (12,880) 26,450 5,228 18,973 4,667 (26,175) (7) 3,593
(976) (3,140) (4,302) (15,873) (3,102) (7,509) (512) (3,073) (601) (1,621)
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
(6,184) 5,068 (14,493) 17,053 3,898 16,478 4,632 (28,489) (404) 2,238
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
(2,490) 14,521 (1,618) 76,631 18,070 50,847 7,035 (25,418) (772) 4,478
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
56,609 42,088 240,862 164,231 144,902 94,055 31,992 57,410 16,723 12,245
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
54,119 56,609 239,244 240,862 162,972 144,902 39,027 31,992 15,951 16,723
====== ====== ======= ======= ======= ======= ====== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
DAILY CAPITAL AND GOVERNMENT FIDELITY
INCOME INCOME SECURITIES CASH
CONTRAFUND INDEX 500 TRUST FUND FUND, LTD. RESERVES
SUBACCOUNT/2/ SUBACCOUNT/2/ SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -------------- ------------- ------------ ------------- ------------- ------------
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
- ------ ------ ------ ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
126 230 434 (12) 10 26 9 18 -- 2 2 4
467 (3) 373 65 -- -- 4 16 1 -- -- --
1,704 32 71 234 -- -- (5) (3) (2) 3 -- --
- ------ ------ ------ ----- ---- ----- ----- ----- ----- ----- ----- -----
2,297 259 878 287 10 26 8 31 (1) 5 2 4
- ------ ------ ------ ----- ---- ----- ----- ----- ----- ----- ----- -----
2,025 2,487 532 360 -- -- -- -- -- -- -- --
14,616 18,199 3,120 8,652 (10) -- -- (59) -- -- -- --
(243) (5) (350) (52) (2) (177) (34) (3) (36) -- -- (13)
- ------ ------ ------ ----- ---- ----- ----- ----- ----- ----- ----- -----
16,398 20,681 3,302 8,960 (12) (177) (34) (62) (36) -- -- (13)
- ------ ------ ------ ----- ---- ----- ----- ----- ----- ----- ----- -----
18,695 20,940 4,180 9,247 (2) (151) (26) (31) (37) 5 2 (9)
- ------ ------ ------ ----- ---- ----- ----- ----- ----- ----- ----- -----
20,940 -- 9,247 -- 406 557 175 206 37 32 72 81
- ------ ------ ------ ----- ---- ----- ----- ----- ----- ----- ----- -----
39,635 20,940 13,427 9,247 404 406 149 175 -- 37 74 72
====== ====== ====== ===== ==== ===== ===== ===== ===== ===== ===== =====
</TABLE>
9
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT WHERE NOTED)
June 30, 1996 (Unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization--The Fidelity Variable Annuity Account ("Variable Account") is a
segregated investment account of PFL Life Insurance Company ("PFL Life"), an
indirect, wholly owned subsidiary of AEGON USA, Inc. ("AUSA"), a holding
company. AUSA is an indirect, wholly owned subsidiary of AEGON nv, a holding
company organized under the laws of The Netherlands.
The Asset Manager Growth subaccount commenced operations on September 5, 1995.
The Contrafund and Index 500 subaccounts commenced operations on September 1,
1995.
The Variable Account is registered with the Securities and Exchange Commission
as a Unit Investment Trust pursuant to provisions of the Investment Company Act
of 1940.
Investments--Net purchase payments received by the Variable Account are
invested in the subaccounts of the eligible mutual funds, Variable Insurance
Products Fund and Variable Insurance Products Fund II ("VIPF II"), as selected
by the contract owner. Transfers into the subaccounts of the eligible Funds are
permitted from the formerly eligible funds. Investments are stated at the
closing net asset values per share as of June 30, 1996.
Realized capital gains and losses from sale of shares in the mutual funds are
determined on the first-in, first-out 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. Unrealized gains or losses
from investments in the mutual funds are credited or charged to contract
owners' equity.
Dividend Income--Dividends received from the mutual fund investments are
reinvested to purchase additional mutual fund shares.
2. INVESTMENTS
A summary of the investments in mutual funds at June 30, 1996 follows:
<TABLE>
<CAPTION>
(IN DOLLARS)
NUMBER NET ASSET
OF SHARES VALUE MARKET
SUB-ACCOUNT HELD PER SHARE VALUE COST
----------- --------- ------------ -------- --------
<S> <C> <C> <C> <C>
Variable Insurance Products Fund--
Money Market........................ 106,481 $ 1.00 $106,481 $106,481
Variable Insurance Products Fund--
High Income......................... 4,594 11.78 54,119 52,978
Variable Insurance Products Fund--
Equity Income....................... 12,282 19.48 239,244 205,300
Variable Insurance Products Fund--
Growth.............................. 5,422 30.06 162,972 158,693
Variable Insurance Products Fund--
Overseas............................ 2,183 17.88 39,027 37,621
Variable Insurance Products Fund II--
Investment Grade Bond............... 1,366 11.68 15,951 16,426
Variable Insurance Products Fund II--
Asset Manager....................... 4,943 15.63 77,265 73,643
Variable Insurance Products Fund II--
Asset Manager Growth................ 334 12.40 4,136 3,998
Variable Insurance Products Fund II--
Contrafund.......................... 2,682 14.78 39,635 37,899
Variable Insurance Products Fund II--
Index 500........................... 168 79.92 13,427 13,122
Fidelity Daily Income Trust.......... 403 1.00 403 403
Fidelity Capital and Income Fund..... 16 9.05 149 158
Fidelity Cash Reserves............... 74 1.00 74 74
-------- --------
$752,883 $706,796
======== ========
</TABLE>
10
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
3. CONTRACT OWNERS' EQUITY
A summary of deferred annuity contracts terminable by owners at June 30, 1996
follows:
<TABLE>
<CAPTION>
(IN DOLLARS)
ACCUMULATION TOTAL
ACCUMULATION UNIT CONTRACT
SUB-ACCOUNT UNITS OWNED VALUE VALUE
----------- ------------ ------------ --------
<S> <C> <C> <C>
Variable Insurance Products Fund--Money
Market.................................... 45,137 $2.359362 $106,495
Variable Insurance Products Fund--High
Income.................................... 17,435 3.104141 54,119
Variable Insurance Products Fund--Equity
Income.................................... 76,871 3.112280 239,244
Variable Insurance Products Fund--Growth... 44,359 3.673965 162,972
Variable Insurance Products Fund--
Overseas.................................. 20,868 1.870168 39,027
Variable Insurance Products Fund II--
Investment Grade Bond..................... 9,745 1.636912 15,951
Variable Insurance Products Fund II--Asset
Manager................................... 40,201 1.921978 77,265
Variable Insurance Products Fund II--Asset
Manager Growth............................ 3,769 1.097153 4,136
Variable Insurance Products Fund II--
Contrafund................................ 36,105 1.097755 39,635
Variable Insurance Products Fund II--Index
500....................................... 11,162 1.202941 13,427
Fidelity Daily Income Trust................ 127 3.172165 404
Fidelity Capital and Income Fund........... 21 7.055078 149
Fidelity Cash Reserves..................... 23 3.187013 74
--------
$752,898
========
</TABLE>
A summary of changes in contract owners' account units follows:
<TABLE>
<CAPTION>
MONEY HIGH EQUITY INVESTMENT ASSET
MARKET INCOME INCOME GROWTH OVERSEAS GRADE BOND MANAGER
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at
1/1/95................. 65,884 17,337 74,571 37,917 35,748 8,539 76,955
Units purchased......... 1,538 960 2,496 1,618 466 170 617
Units redeemed and
transferred............ (19,030) 1,192 4,534 3,963 (17,906) 1,311 (31,639)
------- ------ ------ ------ ------- ------ -------
Units outstanding at
12/31/95............... 48,392 19,489 81,601 43,498 18,308 10,020 45,933
Units purchased......... 860 187 884 505 264 123 287
Units redeemed and
transferred............ (4,115) (2,241) (5,614) 356 2,296 (398) (6,019)
------- ------ ------ ------ ------- ------ -------
Units outstanding at at
6/30/96................ 45,137 17,435 76,871 44,359 20,868 9,745 40,201
======= ====== ====== ====== ======= ====== =======
<CAPTION>
FIDELITY FIDELITY
ASSET DAILY FIDELITY GOVERNMENT FIDELITY
MANAGER INCOME CAPITAL AND SECURITIES CASH
GROWTH CONTRAFUND INDEX 500 TRUST INCOME FUND FUND, LTD. RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at at
1/1/95................. -- -- -- 191 36 8 28
Units purchased......... 46 2,482 341 -- -- -- --
Units redeemed and
transferred............ 2,132 18,089 8,091 (60) (10) -- (5)
------- ------ ------ ------ ------- ------ -------
Units outstanding at
12/31/95............... 2,178 20,571 8,432 131 26 8 23
Units purchased......... 232 1,939 462 -- -- -- --
Units redeemed and
transferred............ 1,359 13,595 2,268 (4) (5) (8) --
------- ------ ------ ------ ------- ------ -------
Units outstanding at at
6/30/96................ 3,769 36,105 11,162 127 21 -- 23
======= ====== ====== ====== ======= ====== =======
</TABLE>
11
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
4. TAXES
Operations of the Variable Account form a part of PFL Life, which is taxed as a
life insurance company under Subchapter L of the Internal Revenue Code of 1986,
as amended (the "Code"). The operations of the Variable Account are accounted
for separately from other operations of PFL Life for purposes of federal income
taxation. The Variable Account is not separately taxable as a regulated
investment company under Subchapter M of the Code and is not otherwise taxable
as an entity separate from PFL Life. Under existing federal income tax laws,
the income of the Variable Account, to the extent applied to increase reserves
under the variable annuity contracts, is not taxable to PFL Life.
5. ADMINISTRATIVE AND MORTALITY RISK CHARGE
Administrative charges include an annual charge of $35 per contract. Charges
for administrative fees to the variable annuity contracts are an expense of the
Variable Account.
PFL Life deducts a daily charge equal to an annual rate of 0.8% of the value of
the contract owners' individual account of the eligible funds as a charge for
assuming the mortality risk.
6. NET ASSETS
At June 30, 1996 contract owners' equity was comprised of:
<TABLE>
<CAPTION>
MONEY HIGH EQUITY INVESTMENT ASSET
MARKET INCOME INCOME GROWTH OVERSEAS GRADE BOND MANAGER
TOTAL SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit transactions,
accumulated net
investment income and
realized capital
gains.................. $706,811 106,495 52,978 205,300 158,693 37,621 16,426 73,643
Adjustment for
appreciation
(depreciation) to
market value........... 46,087 -- 1,141 33,944 4,279 1,406 (475) 3,622
-------- ------- ------ ------- ------- ------ ------ ------
Total Contract Owners'
Equity................. $752,898 106,495 54,119 239,244 162,972 39,027 15,951 77,265
======== ======= ====== ======= ======= ====== ====== ======
<CAPTION>
FIDELITY
ASSET DAILY FIDELITY FIDELITY
MANAGER INCOME CAPITAL AND CASH
GROWTH CONTRAFUND INDEX 500 TRUST INCOME FUND RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unit transactions,
accumulated net
investment income and
realized capital
gains.................. 3,998 37,899 13,122 404 158 74
Adjustment for
appreciation
(depreciation) to
market value........... 138 1,736 305 -- (9) --
-------- ------- ------ ------- ------- ------
Total Contract Owners'
Equity................. 4,136 39,635 13,427 404 149 74
======== ======= ====== ======= ======= ======
</TABLE>
12
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
7. PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS ENDED DECEMBER 31, 1995,
JUNE 30, 1996 EXCEPT AS NOTED
------------------ ---------------------
PURCHASES SALES PURCHASES SALES
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Variable Insurance Products Fund--
Money Market..................... $ 99,930 $105,171 $167,885 $201,362
Variable Insurance Products Fund--
High Income...................... 69,311 70,570 86,734 78,936
Variable Insurance Products Fund--
Equity Income.................... 45,250 49,800 85,312 56,298
Variable Insurance Products Fund--
Growth........................... 70,898 57,437 121,271 105,005
Variable Insurance Products Fund--
Overseas......................... 30,773 25,386 31,688 60,191
Variable Insurance Products Fund
II--Investment Grade Bond........ 4,567 4,147 21,723 19,043
Variable Insurance Products Fund
II--Asset Manager................ 8,918 14,576 7,515 57,258
Variable Insurance Products Fund
II--Asset Manager Growth......... 6,582 4,809 3,622/1/ 1,376/1/
Variable Insurance Products Fund
II--Contrafund................... 27,341 10,822 21,244/2/ 328/2/
Variable Insurance Products Fund
II--Index 500.................... 19,287 15,553 11,106/2/ 2,156/2/
Fidelity Daily Income Trust....... 10 12 25 178
Fidelity Capital and Income Fund.. 8 34 19 62
Fidelity Government Securities
Fund, Ltd........................ -- 36 5 2
Fidelity Cash Reserves............ 2 -- 4 14
-------- -------- -------- --------
$382,877 $358,353 $558,153 $582,209
======== ======== ======== ========
</TABLE>
/1/Period from September 5, 1995 (commencement of operations) to December 31,
1995.
/2/Period from September 1, 1995 (commencement of operations) to December 31,
1995.
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N.INC/896 SA
