<PAGE>
Fidelity INCOME PLUS
The Fidelity Variable Annuity Account
Semi-Annual Report
June 30, 1997
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY
2
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY
3
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
BALANCE SHEET (AMOUNTS IN THOUSANDS)
June 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
MONEY HIGH EQUITY INVESTMENT
MARKET INCOME INCOME GROWTH OVERSEAS GRADE BOND
TOTAL SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash.................... $ 36 33 -- 1 1 -- --
Investments in mutual
funds, at current
market value (Note 2):
Variable Insurance
Products Fund:
Money Market
Portfolio............ 118,118 118,118 -- -- -- -- --
High Income
Portfolio............ 57,583 -- 57,583 -- -- -- --
Equity Income
Portfolio............ 241,392 -- -- 241,392 -- -- --
Growth Portfolio...... 147,304 -- -- -- 147,304 -- --
Overseas Portfolio.... 49,358 -- -- -- -- 49,358 --
Variable Insurance
Products Fund II:
Investment Grade Bond
Portfolio............ 15,972 -- -- -- -- -- 15,972
Asset Manager
Portfolio............ 80,782 -- -- -- -- -- --
Asset Manager Growth
Portfolio............ 13,915 -- -- -- -- -- --
Contrafund Portfolio.. 46,428 -- -- -- -- -- --
Index 500 Portfolio... 49,348 -- -- -- -- -- --
Variable Insurance
Products Fund III:
Growth Opportunities
Portfolio............ 2,622 -- -- -- -- -- --
Growth & Income
Portfolio............ 2,137 -- -- -- -- -- --
Balanced Portfolio.... 312 -- -- -- -- -- --
Fidelity Daily Income
Trust................. 286 -- -- -- -- -- --
Fidelity Capital and
Income Fund........... 168 -- -- -- -- -- --
Fidelity Cash
Reserves.............. 78 -- -- -- -- -- --
-------- ------- ------ ------- ------- ------ ------
Total Investments in
Mutual Funds.......... 825,803 118,118 57,583 241,392 147,304 49,358 15,972
-------- ------- ------ ------- ------- ------ ------
Total Assets........... $825,839 118,151 57,583 241,393 147,305 49,358 15,972
======== ======= ====== ======= ======= ====== ======
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)..................... 825,838 118,151 57,583 241,393 147,305 49,358 15,972
-------- ------- ------ ------- ------- ------ ------
Total Liabilities and
Contract Owners'
Equity................ $825,839 118,151 57,583 241,393 147,305 49,358 15,972
======== ======= ====== ======= ======= ====== ======
</TABLE>
See accompanying Notes to Financial Statements.
4
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY
ASSET DAILY CAPITAL AND FIDELITY
ASSET MANAGER GROWTH GROWTH & INCOME INCOME CASH
MANAGER GROWTH CONTRAFUND INDEX 500 OPPORTUNITIES INCOME BALANCED TRUST FUND RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------- ---------- ---------- ---------- ------------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- -- -- -- -- -- 1 -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
80,782 -- -- -- -- -- -- -- -- --
-- 13,915 -- -- -- -- -- -- -- --
-- -- 46,428 -- -- -- -- -- -- --
-- -- -- 49,348 -- -- -- -- -- --
-- -- -- -- 2,622 -- -- -- -- --
-- -- -- -- -- 2,137 -- -- -- --
-- -- -- -- -- -- 312 -- -- --
-- -- -- -- -- -- -- 286 -- --
-- -- -- -- -- -- -- -- 168 --
-- -- -- -- -- -- -- -- -- 78
------ ------ ------ ------ ----- ----- --- --- --- ---
80,782 13,915 46,428 49,348 2,622 2,137 312 286 168 78
------ ------ ------ ------ ----- ----- --- --- --- ---
80,782 13,915 46,428 49,348 2,622 2,137 312 287 168 78
====== ====== ====== ====== ===== ===== === === === ===
-- -- 1 -- -- -- -- -- -- --
------ ------ ------ ------ ----- ----- --- --- --- ---
-- -- 1 -- -- -- -- -- -- --
80,782 13,915 46,427 49,348 2,622 2,137 312 287 168 78
------ ------ ------ ------ ----- ----- --- --- --- ---
80,782 13,915 46,428 49,348 2,622 2,137 312 287 168 78
====== ====== ====== ====== ===== ===== === === === ===
</TABLE>
5
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
Six Months Ended June 30, 1997, Except as Noted (Unaudited)
<TABLE>
<CAPTION>
INVESTMENT
MONEY HIGH EQUITY GRADE
MARKET INCOME INCOME GROWTH OVERSEAS BOND
TOTAL SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME
(LOSS)
Income:
Dividends................ $52,067 3,253 5,044 22,351 5,304 3,129 894
Expenses (Note 5):
Administrative fee....... -- -- -- -- -- -- --
Mortality and expense
risk charge............. 3,121 490 238 895 569 156 59
------- ------- ------ ------ ------ ------ -----
Net Investment income
(loss)................ 48,946 2,763 4,806 21,456 4,735 2,973 835
------- ------- ------ ------ ------ ------ -----
NET REALIZED & UNREALIZED
CAPITAL GAIN (LOSS) FROM
INVESTMENTS
Net realized capital gain
from sales of
investments:
Proceeds from sales...... 442,350 156,365 42,840 40,976 70,665 38,736 3,810
Cost of investments
sold.................... 416,825 156,365 42,261 30,424 65,146 37,503 3,886
------- ------- ------ ------ ------ ------ -----
Net realized capital gain
from sales of
investments.............. 25,525 -- 579 10,552 5,519 1,233 (76)
------- ------- ------ ------ ------ ------ -----
Net change in unrealized
appreciation/depreciation
of investments:
Beginning of the
period.................. 66,967 -- 2,581 39,562 7,486 2,111 234
End of the period........ 79,148 -- 1,360 41,261 15,139 4,155 (183)
------- ------- ------ ------ ------ ------ -----
Net change in unrealized
appreciation/depreciation
of investments........... 12,181 -- (1,221) 1,699 7,653 2,044 (417)
------- ------- ------ ------ ------ ------ -----
Net realized and
unrealized capital gain
(loss) from investments.. 37,706 -- (642) 12,251 13,172 3,277 (493)
------- ------- ------ ------ ------ ------ -----
INCREASE FROM OPERATIONS.. $86,652 2,763 4,164 33,707 17,907 6,250 342
======= ======= ====== ====== ====== ====== =====
</TABLE>
/1/ Period from May 1, 1997 (commencement of operations) to June 30, 1997.
See accompanying Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY
ASSET DAILY FIDELITY FIDELITY
ASSET MANAGER GROWTH GROWTH & INCOME CAPITAL AND CASH
MANAGER GROWTH CONTRAFUND INDEX 500 OPPORTUNITIES INCOME .BALANCED TRUST INCOME FUND RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT/1/ SUBACCOUNT/1/ SUBACCOUNT/1/ SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------- ---------- ---------- ---------- ------------- ------------- ------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9,369 16 1,542 1,148 -- -- -- 8 7 2
-- -- -- -- -- -- -- -- -- --
311 51 194 150 3 5 -- -- -- --
------ ----- ------ ------ ----- ----- --- --- --- ---
9,058 (35) 1,348 998 (3) (5) -- 8 7 2
------ ----- ------ ------ ----- ----- --- --- --- ---
9,313 6,244 24,070 45,207 1,951 1,388 691 94 -- --
8,742 5,657 20,872 41,977 1,889 1,334 675 94 -- --
------ ----- ------ ------ ----- ----- --- --- --- ---
571 587 3,198 3,230 62 54 16 -- -- --
------ ----- ------ ------ ----- ----- --- --- --- ---
9,001 48 4,494 1,454 -- -- -- -- (4) --
7,469 1,038 4,919 3,950 19 21 1 -- (1) --
------ ----- ------ ------ ----- ----- --- --- --- ---
(1,532) 990 425 2,496 19 21 1 -- 3 --
------ ----- ------ ------ ----- ----- --- --- --- ---
(961) 1,577 3,623 5,726 81 75 17 -- 3 --
------ ----- ------ ------ ----- ----- --- --- --- ---
8,097 1,542 4,971 6,724 78 70 17 8 10 2
====== ===== ====== ====== ===== ===== === === === ===
</TABLE>
7
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY (AMOUNTS IN THOUSANDS)
Six Months Ended June 30, 1997 and Twelve Months Ended December 31, 1996,
Except as Noted (Unaudited)
<TABLE>
<CAPTION>
MONEY HIGH
MARKET INCOME
TOTAL SUBACCOUNT SUBACCOUNT
----------------- ---------------- ------------------------
1997 1996 1997 1996 1997 1996
-------- ------- ------- ------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income
(loss).................... $ 48,946 34,713 2,763 5,146 4,806 4,684
Net realized capital gain
(loss).................... 25,525 48,784 -- -- 579 1,768
Net change in unrealized
appreciation/depreciation.. 12,181 615 -- -- (1,221) 566
-------- ------- ------- ------- ------ ------
Increase (decrease) from
operations................ 86,652 84,112 2,763 5,146 4,164 7,018
-------- ------- ------- ------- ------ ------
CONTRACT TRANSACTIONS
Net contract purchase
payments.................. 6,924 19,236 1,365 3,536 461 1,146
Transfers between funds.... -- -- 6,931 17,795 (6,622) (565)
Contract terminations,
withdrawals, and other
deductions................ (51,136) (39,567) (18,250) (12,815) (1,878) (2,750)
-------- ------- ------- ------- ------ ------
Increase (decrease) from
contract transactions..... (44,212) (20,331) (9,954) 8,516 (8,039) (2,169)
-------- ------- ------- ------- ------ ------
Net increase (decrease) in
contract owners' equity... 42,440 63,781 (7,191) 13,662 (3,875) 4,849
-------- ------- ------- ------- ------ ------
CONTRACT OWNERS' EQUITY
Beginning of period........ 783,398 719,617 125,342 111,680 61,458 56,609
-------- ------- ------- ------- ------ ------
End of period.............. $825,838 783,398 118,151 125,342 57,583 61,458
======== ======= ======= ======= ====== ======
<CAPTION>
GROWTH GROWTH &
CONTRAFUND INDEX 500 OPPORTUNITIES INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
----------------- ---------------- ------------- ----------
1997 1996 1997 1996 1997/1/ 1997/1/
-------- ------- ------- ------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net investment income
(loss).................... 1,348 (46) 998 346 (3) (5)
Net realized capital gain
(loss).................... 3,198 2,261 3,230 1,328 62 54
Net change in unrealized
appreciation/depreciation.. 425 4,462 2,496 1,220 19 21
-------- ------- ------- ------- ------ ------
Increase (decrease) from
operations................ 4,971 6,677 6,724 2,894 78 70
-------- ------- ------- ------- ------ ------
CONTRACT TRANSACTIONS
Net contract purchase
payments.................. 957 3,121 793 1,343 56 110
Transfers between funds.... (9,639) 22,391 14,216 18,103 2,488 1,957
Contract terminations,
withdrawals, and other
deductions................ (2,415) (576) (3,234) (738) -- --
-------- ------- ------- ------- ------ ------
Increase (decrease) from
contract transactions..... (11,097) 24,936 11,775 18,708 2,544 2,067
-------- ------- ------- ------- ------ ------
Net increase (decrease) in
contract owners' equity... (6,126) 31,613 18,499 21,602 2,622 2,137
-------- ------- ------- ------- ------ ------
CONTRACT OWNERS' EQUITY
Beginning of period........ 52,553 20,940 30,849 9,247 -- --
-------- ------- ------- ------- ------ ------
End of period.............. 46,427 52,553 49,348 30,849 2,622 2,137
======== ======= ======= ======= ====== ======
</TABLE>
/1/ Period from May 1, 1997 (commencement of operations) to June 30, 1997.
See accompanying Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSET
EQUITY INVESTMENT ASSET MANAGER
INCOME GROWTH OVERSEAS GRADE BOND MANAGER GROWTH
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------- ---------------- -------------- -------------- --------------- -------------
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
- ---------- ------- ------- ------- ------ ------ ------ ------ ------ ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
21,456 9,027 4,735 8,970 2,973 605 835 758 9,058 4,762 (35) 424
10,552 24,237 5,519 14,048 1,233 3,261 (76) 38 571 1,504 587 334
1,699 (4,499) 7,653 (4,739) 2,044 351 (417) (483) (1,532) 3,668 990 71
------- ------- ------- ------- ------ ------ ------ ------ ------ ------- ------ -----
33,707 28,765 17,907 18,279 6,250 4,217 342 313 8,097 9,934 1,542 829
------- ------- ------- ------- ------ ------ ------ ------ ------ ------- ------ -----
1,035 4,151 754 3,338 236 813 59 335 480 928 597 525
(6,982) (36,951) (10,912) (15,213) 8,167 647 (424) 188 (1,957) (12,356) 2,567 5,971
(14,315) (8,879) (5,724) (6,026) (1,600) (1,364) (545) (1,019) (2,995) (5,121) (150) (166)
------- ------- ------- ------- ------ ------ ------ ------ ------ ------- ------ -----
(20,262) (41,679) (15,882) (17,901) 6,803 96 (910) (496) (4,472) (16,549) 3,014 6,330
------- ------- ------- ------- ------ ------ ------ ------ ------ ------- ------ -----
13,445 (12,914) 2,025 378 13,053 4,313 (568) (183) 3,625 (6,615) 4,556 7,159
------- ------- ------- ------- ------ ------ ------ ------ ------ ------- ------ -----
227,948 240,862 145,280 144,902 36,305 31,992 16,540 16,723 77,157 83,772 9,359 2,200
------- ------- ------- ------- ------ ------ ------ ------ ------ ------- ------ -----
241,393 227,948 147,305 145,280 49,358 36,305 15,972 16,540 80,782 77,157 13,915 9,359
======= ======= ======= ======= ====== ====== ====== ====== ====== ======= ====== =====
<CAPTION>
FIDELITY FIDELITY FIDELITY
DAILY GOVERNMENT CAPITAL AND FIDELITY
INCOME SECURITIES INCOME CASH
BALANCED TRUST FUND, LTD. FUND RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------- ---------------- --------------- -------------- --------------
1997/1/ 1997 1996 1997 1996 1997 1996 1997 1996
- ---------- ------- ------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- 8 20 -- -- 7 13 2 4
16 -- -- -- 1 -- 4 -- --
1 -- -- -- (2) 3 -- -- --
------- ------- ------- ------- ------ ------ ------ ------ ------
17 8 20 -- (1) 10 17 2 4
------- ------- ------- ------- ------ ------ ------ ------ ------
21 -- -- -- -- -- -- -- --
274 (64) (10) -- -- -- -- -- --
-- (30) (43) -- (36) -- (34) -- --
------- ------- ------- ------- ------ ------ ------ ------ ------
295 (94) (53) -- (36) -- (34) -- --
------- ------- ------- ------- ------ ------ ------ ------ ------
312 (86) (33) -- (37) 10 (17) 2 4
------- ------- ------- ------- ------ ------ ------ ------ ------
-- 373 406 -- 37 158 175 76 72
------- ------- ------- ------- ------ ------ ------ ------ ------
312 287 373 -- -- 168 158 78 76
======= ======= ======= ======= ====== ====== ====== ====== ======
</TABLE>
9
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT WHERE NOTED)
June 30, 1997 (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 Growth Opportunities, Growth & Income, and Balanced subaccounts commenced
operations on May 1, 1997.
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, Variable Insurance Products Fund II, and Variable Insurance
Products Fund III, 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, 1997.
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 investments at June 30, 1997 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........................ 118,118 $ 1.00 $118,118 $118,118
Variable Insurance Products Fund--
High Income......................... 4,633 12.43 57,583 56,223
Variable Insurance Products Fund--
Equity Income....................... 10,943 22.06 241,392 200,131
Variable Insurance Products Fund--
Growth.............................. 4,307 34.20 147,304 132,165
Variable Insurance Products Fund--
Overseas............................ 2,463 20.04 49,358 45,203
Variable Insurance Products Fund II--
Investment Grade Bond............... 1,349 11.84 15,972 16,155
Variable Insurance Products Fund II--
Asset Manager....................... 4,866 16.60 80,782 73,313
Variable Insurance Products Fund II--
Asset Manager Growth................ 932 14.93 13,915 12,877
Variable Insurance Products Fund II--
Contrafund.......................... 2,589 17.93 46,428 41,509
Variable Insurance Products Fund II--
Index 500........................... 476 103.62 49,348 45,398
Variable Insurance Products Fund
III--Growth Opportunities........... 153 17.12 2,622 2,603
Variable Insurance Products Fund
III--Growth & Income................ 186 11.49 2,137 2,116
Variable Insurance Products Fund
III--Balanced....................... 23 13.61 312 311
Fidelity Daily Income Trust.......... 286 1.00 286 286
Fidelity Capital and Income Fund..... 18 9.52 168 169
Fidelity Cash Reserves............... 78 1.00 78 78
-------- --------
$825,803 $746,655
======== ========
</TABLE>
10
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
3. CONTRACT OWNERS' EQUITY
A summary of deferred annuity contracts terminable by owners at June 30, 1997
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........................ 47,879 $2.467700 $118,151
Variable Insurance Products Fund--
High Income......................... 16,336 3.524893 57,583
Variable Insurance Products Fund--
Equity Income....................... 62,222 3.879560 241,393
Variable Insurance Products Fund--
Growth.............................. 34,275 4.297710 147,305
Variable Insurance Products Fund--
Overseas............................ 21,685 2.276163 49,358
Variable Insurance Products Fund II--
Investment Grade Bond............... 9,130 1.749507 15,972
Variable Insurance Products Fund II--
Asset Manager....................... 35,174 2.296634 80,782
Variable Insurance Products Fund II--
Asset Manager Growth................ 10,187 1.366043 13,915
Variable Insurance Products Fund II--
Contrafund.......................... 34,087 1.362019 46,427
Variable Insurance Products Fund II--
Index 500........................... 30,847 1.599747 49,348
Variable Insurance Products Fund
III--Growth Opportunities........... 2,385 1.099527 2,622
Variable Insurance Products Fund
III--Growth & Income................ 1,922 1.111916 2,137
Variable Insurance Products Fund
III--Balanced....................... 289 1.077890 312
Fidelity Daily Income Trust.......... 86 3.335217 287
Fidelity Capital and Income Fund..... 21 7.958933 168
Fidelity Cash Reserves............... 23 3.352983 78
--------
$825,838
========
</TABLE>
11
<PAGE>
THE FIDELITY VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
3. CONTRACT OWNERS' EQUITY (CONTINUED)
A summary of changes in contract owners' account units follows:
<TABLE>
<CAPTION>
MONEY HIGH EQUITY INVESTMENT
MARKET INCOME INCOME GROWTH OVERSEAS GRADE BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at
1/1/96................. 48,392 19,489 81,601 43,498 18,308 10,020
Units purchased......... 1,502 370 1,349 940 443 200
Units redeemed and
transferred............ 2,043 (1,155) (14,831) (6,111) (253) (538)
------ ------ ------- ------ ------ ------
Units outstanding at
12/31/96............... 51,937 18,704 68,119 38,327 18,498 9,682
Units purchased......... 560 138 291 191 115 35
Units redeemed and
transferred............ (4,618) (2,506) (6,188) (4,243) 3,072 (587)
------ ------ ------- ------ ------ ------
Units outstanding at
6/30/97................ 47,879 16,336 62,222 34,275 21,685 9,130
====== ====== ======= ====== ====== ======
<CAPTION>
ASSET
ASSET MANAGER GROWTH GROWTH &
MANAGER GROWTH CONTRAFUND INDEX 500 OPPORTUNITIES INCOME
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at
1/1/96................. 45,933 2,178 20,571 8,432 -- --
Units purchased......... 485 480 2,899 1,094 -- --
Units redeemed and
transferred............ (9,205) 5,131 19,431 13,562 -- --
------ ------ ------- ------ ------ ------
Units outstanding at
12/31/96............... 37,213 7,789 42,901 23,088 -- --
Units purchased......... 224 470 761 549 52 99
Units redeemed and
transferred............ (2,263) 1,928 (9,575) 7,210 2,333 1,823
------ ------ ------- ------ ------ ------
Units outstanding at
6/30/97................ 35,174 10,187 34,087 30,847 2,385 1,922
====== ====== ======= ====== ====== ======
<CAPTION>
FIDELITY FIDELITY FIDELITY
DAILY GOVERNMENT CAPITAL AND FIDELITY
INCOME SECURITIES INCOME CASH
BALANCED TRUST FUND, LTD. FUND RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at
1/1/96................. -- 131 8 26 23
Units purchased......... -- -- -- -- --
Units redeemed and
transferred............ -- (16) (8) (5) --
------ ------ ------- ------ ------
Units outstanding at
12/31/96............... -- 115 -- 21 23
Units purchased......... 19 -- -- -- --
Units redeemed and
transferred............ 270 (29) -- -- --
------ ------ ------- ------ ------
Units outstanding at
6/30/97................ 289 86 -- 21 23
====== ====== ======= ====== ======
</TABLE>
12
<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 June 30, 1997 contract owners' equity was comprised of:
<TABLE>
<CAPTION>
MONEY HIGH EQUITY
MARKET INCOME INCOME GROWTH OVERSEAS
TOTAL SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Unit transactions,
accumulated net
investment income and
realized capital
gains.................. $746,690 118,151 56,223 200,132 132,166 45,203
Adjustment for
appreciation
(depreciation) to
market value........... 79,148 -- 1,360 41,261 15,139 4,155
-------- ------- ------ ------- ------- ------
Total Contract Owners'
Equity................. $825,838 118,151 57,583 241,393 147,305 49,358
======== ======= ====== ======= ======= ======
<CAPTION>
ASSET
INVESTMENT ASSET MANAGER GROWTH
GRADE BOND MANAGER GROWTH CONTRAFUND INDEX 500 OPPORTUNITIES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Unit transactions,
accumulated net
investment income and
realized capital
gains.................. 16,155 73,313 12,877 41,508 45,398 2,603
Adjustment for
appreciation
(depreciation) to
market value........... (183) 7,469 1,038 4,919 3,950 19
-------- ------- ------ ------- ------- ------
Total Contract Owners'
Equity................. 15,972 80,782 13,915 46,427 49,348 2,622
======== ======= ====== ======= ======= ======
<CAPTION>
FIDELITY FIDELITY
DAILY CAPITAL AND FIDELITY
GROWTH & INCOME INCOME CASH
INCOME BALANCED TRUST FUND RESERVES
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Unit transactions,
accumulated net
investment income and
realized capital
gains.................. 2,116 311 287 169 78
Adjustment for
appreciation
(depreciation) to
market value........... 21 1 -- (1) --
-------- ------- ------ ------- -------
Total Contract Owners'
Equity................. 2,137 312 287 168 78
======== ======= ====== ======= =======
</TABLE>
13
<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>
SIX MONTHS ENDED
JUNE 30, 1997, YEAR ENDED
EXCEPT AS NOTED DECEMBER 31, 1996
--------------------- ------------------
PURCHASES SALES PURCHASES SALES
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Variable Insurance Products Fund--
Money Market..................... $149,165 $156,365 $254,066 $240,470
Variable Insurance Products Fund--
High Income...................... 39,607 42,840 115,569 113,076
Variable Insurance Products Fund--
Equity Income.................... 42,169 40,976 65,599 98,353
Variable Insurance Products Fund--
Growth........................... 59,518 70,665 136,043 145,038
Variable Insurance Products Fund--
Overseas......................... 48,512 38,736 49,786 49,100
Variable Insurance Products Fund
II--Investment Grade Bond........ 3,734 3,810 10,423 10,166
Variable Insurance Products Fund
II--Asset Manager................ 13,899 9,313 11,269 23,100
Variable Insurance Products Fund
II--Asset Manager Growth......... 9,223 6,244 16,517 9,763
Variable Insurance Products Fund
II--Contrafund................... 14,322 24,070 54,378 29,493
Variable Insurance Products Fund
II--Index 500.................... 57,980 45,207 51,483 32,431
Variable Insurance Products Fund
III--Growth Opportunities........ 4,493/1/ 1,951/1/ -- --
Variable Insurance Products Fund
III--Growth & Income............. 3,450/1/ 1,388/1/ -- --
Variable Insurance Products Fund
III--Balanced.................... 986/1/ 691/1/ -- --
Fidelity Daily Income Trust....... 8 94 48 81
Fidelity Government Securities
Fund, Ltd........................ -- -- -- 36
Fidelity Capital and Income Fund.. 6 -- 12 34
Fidelity Cash Reserves............ 2 -- 4 --
-------- -------- -------- --------
$447,074 $442,350 $765,197 $751,141
======== ======== ======== ========
</TABLE>
/1/ Period from May 1, 1997 (commencement of operations) to June 30, 1997.
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N.INC/897 SA
