<PAGE>
Fidelity INCOME PLUS
The Fidelity Variable Annuity Account
Annual Report December 31, 1996
<PAGE>
DEAR FIDELITY INCOME PLUS OWNER:
Your annual reports are enclosed--both your Annuity Annual Report (Fidelity
Income Plus) and the 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
Fidelity Income Plus Additional Payment Form and 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,
LOGO
William L. Busler
President
PFL Life Insurance Company
This report may be distributed only to current policyholders or to persons who
have received current prospectuses of the variable annuity and the underlying
funds.
2
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND CONTRACT OWNERS OF
THE FIDELITY VARIABLE ANNUITY ACCOUNT,
PFL LIFE INSURANCE COMPANY:
We have audited the accompanying balance sheet of The Fidelity Variable
Annuity Account (comprising, respectively, the Money Market, High Income,
Equity Income, Growth, Overseas, Investment Grade Bond, Asset Manager, Asset
Manager Growth, Contrafund, Index 500, Fidelity Daily Income Trust, Fidelity
Government Securities Fund, Ltd., Fidelity Capital and Income Fund, and
Fidelity Cash Reserves subaccounts) as of December 31, 1996, and the related
statements of operations and changes in contract owners' equity for the
periods indicated therein. These financial statements are the responsibility
of the Variable Account'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 audits 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 mutual fund shares owned as of December
31, 1996, by correspondence with the mutual funds' transfer agent. 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 each of the respective
subaccounts constituting The Fidelity Variable Annuity Account at December 31,
1996, and the results of their operations and changes in their contract
owners' equity for the periods indicated therein in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Des Moines, Iowa
January 31, 1997
3
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
BALANCE SHEET (AMOUNTS IN THOUSANDS)
December 31, 1996
<TABLE>
<CAPTION>
MONEY HIGH EQUITY
MARKET INCOME INCOME GROWTH
TOTAL SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash..................... $ 26 24 -- -- 1
Investments in mutual
funds, at current market
value (Note 2):
Variable Insurance
Products Fund--Money
Market Portfolio...... 125,318 125,318 -- -- --
Variable Insurance
Products Fund--High
Income Portfolio...... 61,458 -- 61,458 -- --
Variable Insurance
Products Fund--Equity
Income Portfolio...... 227,948 -- -- 227,948 --
Variable Insurance
Products Fund--Growth
Portfolio............. 145,279 -- -- -- 145,279
Variable Insurance
Products Fund--
Overseas Portfolio.... 36,305 -- -- -- --
Variable Insurance
Products Fund II--
Investment Grade Bond
Portfolio............. 16,541 -- -- -- --
Variable Insurance
Products Fund II--
Asset Manager
Portfolio............. 77,157 -- -- -- --
Variable Insurance
Products Fund II--
Asset Manager Growth
Portfolio............. 9,359 -- -- -- --
Variable Insurance
Products Fund II--
Contrafund Portfolio.. 52,553 -- -- -- --
Variable Insurance
Products Fund II--
Index 500 Portfolio... 30,849 -- -- -- --
Fidelity Daily Income
Trust................. 372 -- -- -- --
Fidelity Capital and
Income Fund........... 158 -- -- -- --
Fidelity Cash
Reserves.............. 76 -- -- -- --
-------- ------- ------ ------- -------
Total Investments in
Mutual Funds.......... 783,373 125,318 61,458 227,948 145,279
-------- ------- ------ ------- -------
Total Assets............ $783,399 125,342 61,458 227,948 145,280
======== ======= ====== ======= =======
LIABILITIES AND CONTRACT
OWNERS' EQUITY
Liabilities:
Contract terminations
payable................ 1 -- -- -- --
-------- ------- ------ ------- -------
Total Liabilities....... 1 -- -- -- --
Contract Owners' Equity:
Deferred annuity
contracts terminable by
owners (Notes 3 and 6).. 783,398 125,342 61,458 227,948 145,280
-------- ------- ------ ------- -------
Total Liabilities and
Contract Owners'
Equity................. $783,399 125,342 61,458 227,948 145,280
======== ======= ====== ======= =======
</TABLE>
See accompanying Notes to Financial Statements.
4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY
ASSET DAILY CAPITAL AND FIDELITY
INVESTMENT ASSET MANAGER INCOME INCOME CASH
OVERSEAS GRADE BOND MANAGER GROWTH CONTRAFUND INDEX 500 TRUST FUND RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- -- -- -- -- 1 -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- --
36,305 -- -- -- -- -- -- -- --
-- 16,541 -- -- -- -- -- -- --
-- -- 77,157 -- -- -- -- -- --
-- -- -- 9,359 -- -- -- -- --
-- -- -- -- 52,553 -- -- -- --
-- -- -- -- -- 30,849 -- -- --
-- -- -- -- -- -- 372 -- --
-- -- -- -- -- -- -- 158 --
-- -- -- -- -- -- -- -- 76
------ ------ ------ ----- ------ ------ --- --- ---
36,305 16,541 77,157 9,359 52,553 30,849 372 158 76
------ ------ ------ ----- ------ ------ --- --- ---
36,305 16,541 77,157 9,359 52,553 30,849 373 158 76
====== ====== ====== ===== ====== ====== === === ===
-- 1 -- -- -- -- -- -- --
------ ------ ------ ----- ------ ------ --- --- ---
-- 1 -- -- -- -- -- -- --
36,305 16,540 77,157 9,359 52,553 30,849 373 158 76
------ ------ ------ ----- ------ ------ --- --- ---
36,305 16,541 77,157 9,359 52,553 30,849 373 158 76
====== ====== ====== ===== ====== ====== === === ===
</TABLE>
5
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
Year Ended December 31, 1996
<TABLE>
<CAPTION>
MONEY HIGH EQUITY
MARKET INCOME INCOME GROWTH
TOTAL SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME
(LOSS)
Income:
Dividends................. $ 41,026 6,128 5,172 11,005 10,237
Expenses (Note 5):
Administrative fee........ 296 49 22 89 57
Mortality and expense
risk charge.............. 6,017 933 466 1,889 1,210
-------- ------- ------- ------ -------
Net investment income
(loss)................. 34,713 5,146 4,684 9,027 8,970
-------- ------- ------- ------ -------
NET REALIZED & UNREALIZED
CAPITAL GAIN (LOSS) FROM
INVESTMENTS
Net realized capital gain
from sales of investments:
Proceeds from sales....... 751,141 240,470 113,076 98,353 145,038
Cost of investments
sold..................... 702,357 240,470 111,308 74,116 130,990
-------- ------- ------- ------ -------
Net realized capital gain
from sales of
investments............... 48,784 -- 1,768 24,237 14,048
-------- ------- ------- ------ -------
Net change in unrealized
appreciation/depreciation
of investments:
Beginning of the period... 66,352 -- 2,015 44,061 12,225
End of the period......... 66,967 -- 2,581 39,562 7,486
-------- ------- ------- ------ -------
Net change in unrealized
appreciation/depreciation
of investments............ 615 -- 566 (4,499) (4,739)
-------- ------- ------- ------ -------
Net realized and unrealized
capital gain (loss) from
investments............... 49,399 -- 2,334 19,738 9,309
-------- ------- ------- ------ -------
INCREASE (DECREASE) FROM
OPERATIONS................ $ 84,112 5,146 7,018 28,765 18,279
======== ======= ======= ====== =======
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY
ASSET DAILY GOVERNMENT FIDELITY FIDELITY
INVESTMENT ASSET MANAGER INCOME SECURITIES CAPITAL AND CASH
OVERSEAS GRADE BOND MANAGER GROWTH CONTRAFUND INDEX 500 TRUST FUND, LTD. INCOME FUND RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
920 896 5,429 465 253 484 20 -- 13 4
14 5 37 3 13 7 -- -- -- --
301 133 630 38 286 131 -- -- -- --
------ ------ ------ ----- ------ ------ --- --- --- ---
605 758 4,762 424 (46) 346 20 -- 13 4
------ ------ ------ ----- ------ ------ --- --- --- ---
49,100 10,166 23,100 9,763 29,493 32,431 81 36 34 --
45,839 10,128 21,596 9,429 27,232 31,103 81 35 30 --
------ ------ ------ ----- ------ ------ --- --- --- ---
3,261 38 1,504 334 2,261 1,328 -- 1 4 --
------ ------ ------ ----- ------ ------ --- --- --- ---
1,760 717 5,333 (23) 32 234 -- 2 (4) --
2,111 234 9,001 48 4,494 1,454 -- -- (4) --
------ ------ ------ ----- ------ ------ --- --- --- ---
351 (483) 3,668 71 4,462 1,220 -- (2) -- --
------ ------ ------ ----- ------ ------ --- --- --- ---
3,612 (445) 5,172 405 6,723 2,548 -- (1) 4 --
------ ------ ------ ----- ------ ------ --- --- --- ---
4,217 313 9,934 829 6,677 2,894 20 (1) 17 4
====== ====== ====== ===== ====== ====== === === === ===
</TABLE>
7
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY (AMOUNTS IN THOUSANDS)
Years Ended December 31, 1996 and 1995, Except as Noted
<TABLE>
<CAPTION>
MONEY
MARKET
TOTAL SUBACCOUNT
----------------- ----------------
1996 1995 1996 1995
-------- ------- ------- -------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)............ $ 34,713 22,353 5,146 6,192
Net realized capital gain (loss)........ 48,784 44,390 -- --
Net change in unrealized
appreciation/depreciation.............. 615 62,917 -- --
-------- ------- ------- -------
Increase (decrease) from operations..... 84,112 129,660 5,146 6,192
-------- ------- ------- -------
CONTRACT TRANSACTIONS
Net contract purchase payments.......... 19,236 22,440 3,536 3,470
Transfers between funds................. -- -- 17,795 (20,233)
Contract terminations, withdrawals, and
other deductions....................... (39,567) (69,091) (12,815) (22,493)
-------- ------- ------- -------
Increase (decrease) from contract
transactions........................... (20,331) (46,651) 8,516 (39,256)
-------- ------- ------- -------
Net increase (decrease) in contract
owners' equity......................... 63,781 83,009 13,662 (33,064)
-------- ------- ------- -------
CONTRACT OWNERS' EQUITY
Beginning of period..................... 719,617 636,608 111,680 144,744
-------- ------- ------- -------
End of period........................... $783,398 719,617 125,342 111,680
======== ======= ======= =======
<CAPTION>
ASSET
ASSET MANAGER
MANAGER GROWTH
SUBACCOUNT SUBACCOUNT
----------------- ----------------
1995
1996 1995 1996 /1/
-------- ------- ------- -------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income (loss)............ $ 4,762 1,582 424 82
Net realized capital gain (loss)........ 1,504 3,000 334 (23)
Net change in unrealized
appreciation/depreciation.............. 3,668 9,527 71 (23)
-------- ------- ------- -------
Increase (decrease) from operations..... 9,934 14,109 829 36
-------- ------- ------- -------
CONTRACT TRANSACTIONS
Net contract purchase payments.......... 928 1,021 525 45
Transfers between funds................. (12,356) (37,186) 5,971 2,120
Contract terminations, withdrawals, and
other deductions....................... (5,121) (15,131) (166) (1)
-------- ------- ------- -------
Increase (decrease) from contract
transactions........................... (16,549) (51,296) 6,330 2,164
-------- ------- ------- -------
Net increase (decrease) in contract
owners' equity......................... (6,615) (37,187) 7,159 2,200
-------- ------- ------- -------
CONTRACT OWNERS' EQUITY
Beginning of period..................... 83,772 120,959 2,200 --
-------- ------- ------- -------
End of period........................... $ 77,157 83,772 9,359 2,200
======== ======= ======= =======
</TABLE>
/1Period/from September 5, 1995 (commencement of operations) to December 31,
1995.
/2Period/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>
4,684 2,608 9,027 11,754 8,970 (553) 605 52 758 368
1,768 3,235 24,237 15,463 14,048 22,367 3,261 (371) 38 641
566 3,610 (4,499) 32,361 (4,739) 12,555 351 3,390 (483) 1,231
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
7,018 9,453 28,765 59,578 18,279 34,369 4,217 3,071 313 2,240
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
1,146 2,542 4,151 6,476 3,338 5,014 813 759 335 266
(565) 5,666 (36,951) 26,450 (15,213) 18,973 647 (26,175) 188 3,593
(2,750) (3,140) (8,879) (15,873) (6,026) (7,509) (1,364) (3,073) (1,019) (1,621)
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
(2,169) 5,068 (41,679) 17,053 (17,901) 16,478 96 (28,489) (496) 2,238
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
4,849 14,521 (12,914) 76,631 378 50,847 4,313 (25,418) (183) 4,478
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
56,609 42,088 240,862 164,231 144,902 94,055 31,992 57,410 16,723 12,245
- ------ ------ ------- ------- ------- ------- ------ ------- ------ ------
61,458 56,609 227,948 240,862 145,280 144,902 36,305 31,992 16,540 16,723
====== ====== ======= ======= ======= ======= ====== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
DAILY GOVERNMENT CAPITAL AND FIDELITY
INCOME SECURITIES INCOME CASH
CONTRAFUND INDEX 500 TRUST FUND, LTD. FUND RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -------------- -------------- ------------ ------------- ------------- ------------
1995 1995
1996 /2/ 1996 /2/ 1996 1995 1996 1995 1996 1995 1996 1995
- ------ ------ ------ ------ ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(46) 230 346 (12) 20 26 -- 2 13 18 4 4
2,261 (3) 1,328 65 -- -- 1 -- 4 16 -- --
4,462 32 1,220 234 -- -- (2) 3 -- (3) -- --
- ------ ------ ------ ------ ---- ----- ----- ----- ----- ----- ----- -----
6,677 259 2,894 287 20 26 (1) 5 17 31 4 4
- ------ ------ ------ ------ ---- ----- ----- ----- ----- ----- ----- -----
3,121 2,487 1,343 360 -- -- -- -- -- -- -- --
22,391 18,199 18,103 8,652 (10) -- -- -- -- (59) -- --
(576) (5) (738) (52) (43) (177) (36) -- (34) (3) -- (13)
- ------ ------ ------ ------ ---- ----- ----- ----- ----- ----- ----- -----
24,936 20,681 18,708 8,960 (53) (177) (36) -- (34) (62) -- (13)
- ------ ------ ------ ------ ---- ----- ----- ----- ----- ----- ----- -----
31,613 20,940 21,602 9,247 (33) (151) (37) 5 (17) (31) 4 (9)
- ------ ------ ------ ------ ---- ----- ----- ----- ----- ----- ----- -----
20,940 -- 9,247 -- 406 557 37 32 175 206 72 81
- ------ ------ ------ ------ ---- ----- ----- ----- ----- ----- ----- -----
52,553 20,940 30,849 9,247 373 406 -- 37 158 175 76 72
====== ====== ====== ====== ==== ===== ===== ===== ===== ===== ===== =====
</TABLE>
9
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT WHERE NOTED)
December 31, 1996
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 portfolios 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 December 31, 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 mutual fund investment at December 31, 1996 follows:
<TABLE>
<CAPTION>
NET ASSET
NUMBER VALUE
OF SHARES PER SHARE MARKET
HELD (IN DOLLARS) VALUE COST
--------- ------------ -------- --------
<S> <C> <C> <C> <C>
Variable Insurance Products Fund--
Money Market........................ 125,318 $ 1.00 $125,318 $125,318
Variable Insurance Products Fund--
High Income......................... 4,909 12.52 61,458 58,877
Variable Insurance Products Fund--
Equity Income....................... 10,839 21.03 227,948 188,386
Variable Insurance Products Fund--
Growth.............................. 4,665 31.14 145,279 137,793
Variable Insurance Products Fund--
Overseas............................ 1,927 18.84 36,305 34,194
Variable Insurance Products Fund II--
Investment Grade Bond............... 1,351 12.24 16,541 16,307
Variable Insurance Products Fund II--
Asset Manager....................... 4,557 16.93 77,157 68,156
Variable Insurance Products Fund II--
Asset Manager Growth................ 714 13.10 9,359 9,311
Variable Insurance Products Fund II--
Contrafund.......................... 3,174 16.56 52,553 48,059
Variable Insurance Products Fund II--
Index 500........................... 346 89.13 30,849 29,395
Fidelity Daily Income Trust.......... 372 1.00 372 372
Fidelity Capital and Income Fund..... 17 9.36 158 162
Fidelity Cash Reserves............... 76 1.00 76 76
-------- --------
$783,373 $716,406
======== ========
</TABLE>
10
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
3. CONTRACT OWNERS' EQUITY
A summary of deferred annuity contracts terminable by owners at December 31,
1996 follows:
<TABLE>
<CAPTION>
ACCUMULATION
UNIT
ACCUMULATION VALUE TOTAL
SUBACCOUNT UNITS OWNED (IN DOLLARS) CONTRACT VALUE
---------- ------------ ------------ --------------
<S> <C> <C> <C>
Variable Insurance Products Fund--
Money Market........................ 51,937 $2.413358 $125,342
Variable Insurance Products Fund--
High Income......................... 18,704 3.285775 61,458
Variable Insurance Products Fund--
Equity Income....................... 68,119 3.346303 227,948
Variable Insurance Products Fund--
Growth.............................. 38,327 3.790532 145,280
Variable Insurance Products Fund--
Overseas............................ 18,498 1.962599 36,305
Variable Insurance Products Fund II--
Investment Grade Bond............... 9,682 1.708442 16,540
Variable Insurance Products Fund II--
Asset Manager....................... 37,213 2.073401 77,157
Variable Insurance Products Fund II--
Asset Manager Growth................ 7,789 1.201587 9,359
Variable Insurance Products Fund II--
Contrafund.......................... 42,901 1.224976 52,553
Variable Insurance Products Fund II--
Index 500........................... 23,088 1.336134 30,849
Fidelity Daily Income Trust.......... 115 3.252838 373
Fidelity Capital and Income Fund..... 21 7.515932 158
Fidelity Cash Reserves............... 23 3.268738 76
--------
$783,398
========
</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......... 1,502 370 1,349 940 443 200 485
Units redeemed and
transferred............ 2,043 (1,155) (14,831) (6,111) (253) (538) (9,205)
------- ------ ------- ------ ------- ------ -------
Units outstanding at
12/31/96............... 51,937 18,704 68,119 38,327 18,498 9,682 37,213
======= ====== ======= ====== ======= ====== =======
<CAPTION>
FIDELITY FIDELITY FIDELITY
ASSET DAILY GOVERNMENT CAPITAL AND FIDELITY
MANAGER INCOME SECURITIES INCOME CASH
GROWTH CONTRAFUND INDEX 500 TRUST FUND, LTD. FUND RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at
1/1/95................. -- -- -- 191 8 36 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 8 26 23
Units purchased......... 480 2,899 1,094 -- -- -- --
Units redeemed and
transferred............ 5,131 19,431 13,562 (16) (8) (5) --
------- ------ ------- ------ ------- ------ -------
Units outstanding at
12/31/96............... 7,789 42,901 23,088 115 -- 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 0.80% 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 December 31, 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.................. $716,431 125,342 58,877 188,386 137,794 34,194 16,306 68,156
Adjustment for
appreciation
(depreciation) to
market value........... 66,967 -- 2,581 39,562 7,486 2,111 234 9,001
-------- ------- ------ ------- ------- ------ ------ ------
Total Contract Owners'
Equity................. $783,398 125,342 61,458 227,948 145,280 36,305 16,540 77,157
======== ======= ====== ======= ======= ====== ====== ======
<CAPTION>
FIDELITY FIDELITY
ASSET DAILY CAPITAL AND FIDELITY
MANAGER INCOME INCOME CASH
GROWTH CONTRAFUND INDEX 500 TRUST FUND RESERVES
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.................. 9,311 48,059 29,395 373 162 76
Adjustment for
appreciation
(depreciation) to
market value........... 48 4,494 1,454 -- (4) --
-------- ------- ------ ------- ------- ------
Total Contract Owners'
Equity................. 9,359 52,553 30,849 373 158 76
======== ======= ====== ======= ======= ======
</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 DECEMBER 31 OR COMMENCEMENT OF
OPERATIONS TO DECEMBER 31
---------------------------------------------
1996 1995
---------------------- ----------------------
PURCHASES SALES PURCHASES SALES
---------------------- ----------------------
<S> <C> <C> <C> <C>
Variable Insurance Products
Fund--Money Market............. $ 254,066 $ 240,470 $ 167,885 $ 201,362
Variable Insurance Products
Fund--High Income.............. 115,569 113,076 86,734 78,936
Variable Insurance Products
Fund--Equity Income............ 65,599 98,353 85,312 56,298
Variable Insurance Products
Fund--Growth................... 136,043 145,038 121,271 105,005
Variable Insurance Products
Fund--Overseas................. 49,786 49,100 31,688 60,191
Variable Insurance Products Fund
II--Investment Grade Bond...... 10,423 10,166 21,723 19,043
Variable Insurance Products Fund
II--Asset Manager.............. 11,269 23,100 7,515 57,258
Variable Insurance Products Fund
II--Asset Manager Growth....... 16,517 9,763 3,622 1,376
Variable Insurance Products Fund
II--Contrafund................. 54,378 29,493 21,244 328
Variable Insurance Products Fund
II--Index 500.................. 51,483 32,431 11,106 2,156
Fidelity Daily Income Trust..... 48 81 25 178
Fidelity Government Securities
Fund, Ltd...................... -- 36 5 2
Fidelity Capital and Income
Fund........................... 12 34 19 62
Fidelity Cash Reserves.......... 4 -- 4 14
---------- ---------- ---------- ----------
$ 765,197 $ 751,141 $ 558,153 $ 582,209
========== ========== ========== ==========
</TABLE>
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