PROSPECTUS
1.FIDELITY RETIREMENT RESERVES
This prospectus describes a variable annuity contract (the "Contract")
offered by Fidelity Investments Life Insurance Company ("Fidelity
Investments Life", "We" or "Us"), the life insurance company that is
part of the group of financial service companies known as Fidelity
Investments. The Contract is designed for individual investors who
desire to accumulate capital on a tax-deferred basis for retirement or
other long-term purposes. It may be purchased on a non-qualified
basis. It may also be purchased on a qualified basis as an individual
retirement annuity ("IRA") under Section 408(b) of the Internal
Revenue Code of 1986, as amended, in connection with a "rollover" of
contributions from other qualified plans, tax sheltered annuities or
IRAs. You may choose to have amounts paid out in a single payment or
as a series of annuity payments, including payments guaranteed for
your lifetime.
You may purchase a Non-qualified Contract by making a payment of at
least $2,500. You may make additional payments to a Non-qualified
Contract as long as each payment is at least $250 (unless the payment
is part of an automatic deduction plan). You may purchase a Qualified
Contract by making a payment of at least $10,000. You may make
additional payments to a Qualified Contract as long as each payment is
at least $2,500 unless your Contract provides for a lower minimum.
Your payments will be invested as you direct in one or more of the
twenty-eight Subaccounts of the Fidelity Investments Variable Annuity
Account I (the "Variable Account") and/or allocated to a fixed-rate
investment option funded through Fidelity Investments Life's general
account (the "Fixed Account"). The Fixed Account may also be referred
to as the "Guaranteed Account". YOUR INITIAL PAYMENT ALLOCATED TO THE
VARIABLE ACCOUNT WILL BE INVESTED INITIALLY IN THE MONEY MARKET
SUBACCOUNT FOR THE PERIOD WE ESTIMATE OR CALCULATE YOUR FREE LOOK
RIGHT TO BE IN EXISTENCE. The variable Subaccounts invest in the
mutual fund portfolios of the Variable Insurance Products Fund, the
Variable Insurance Products Fund II, and the Variable Insurance
Products Fund III (the "Fidelity Funds"). The Fidelity Funds are each
managed by Fidelity Management & Research Company. Also The variable
Subaccounts also invest in the mutual fund portfolios of corresponding
portfolios of other eligible funds (the "Other Funds") All mutual fund
portfolios available in this prospectus are collectively known as
("The Funds"). Additional Subaccounts and portfolios may be added in
the future. Fidelity Investments Life credits interest on amounts
allocated to the Fixed Account at specified interest rates that vary
from time to time.
You may select a date on which annuity income payments may commence.
Prior to that Annuity Date, you may withdraw all or part of the Cash
Surrender Value of your Contract. The value allocated to the Variable
Account will vary with the investment performance of the Subaccounts
you select, and the value allocated to the Fixed Account will increase
as interest is credited. In certain circumstances, withdrawals are
subject to a contingent deferred sales charge and a tax penalty.
Annuity income payments may be fixed, variable, or a combination of
both. If you elect to receive fixed income, the value of your Contract
on the Annuity Date will be applied to provide fixed annuity payments.
If you elect variable income, the amount of your annuity income
payments will increase or decrease according to the investment
performance of the Subaccounts you select. If you elect a combination
of fixed and variable income, a portion of your payment will be fixed
and a portion will vary according to investment performance. This
prospectus provides information that a prospective investor should
know before investing. Additional information about the Contract and
the Variable Account has been filed with the Securities and Exchange
Commission in a Statement of Additional Information dated August 29,
1997. The Statement of Additional Information is incorporated by
reference in this prospectus and is available without charge by
calling Fidelity Investments Life at 800-544-2442. The table of
contents of the Statement of Additional Information appears on page .
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS
NOT VALID UNLESS ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE MONEY
MARKET OR ANY OTHER FUNDS AVAILABLE IN THE CONTRACT.
FOR FURTHER INFORMATION CALL FIDELITY INVESTMENTS:
Nationally 800-544-2442
Date: August 29, 1997
PROSPECTUS CONTENTS
GLOSSARY
Summary of the Contract
FACTS ABOUT FILI, THE VARIABLE ACCOUNT AND THE FUNDS
Fidelity Investments Life
The Variable Account
The Funds
FACTS ABOUT THE CONTRACT
Purchase of a Contract
Free Look Privilege
Investment Allocation of Your Purchase Payments
Accumulation Units
Withdrawals
Signature Guarantee
Charges
Death Benefit
Required Distributions Upon Death
Annuity Date
Selection of Annuity Income Options
Fixed, Variable, or Combination Annuity Income Options
Types of Annuity Income Options
Reports to Owners
THE FIXED ACCOUNT
The Fixed Account
MORE ABOUT THE CONTRACT
Tax Considerations
Other Contract Provisions
Selling the Contracts
Automatic Deduction Plan
Special Provisions For Sponsored Arrangements
Dollar Cost Averaging
Postponement of Payment
MORE ABOUT THE VARIABLE ACCOUNT AND THE FUNDS
Changes in Investment Options
Net Rate of Return for a Subaccount
Voting Rights
Resolving Material Conflicts
Performance
Litigation
Appendix I: Accumulation Units
Table of Contents of the Statement of Additional Information
THE CONTRACT IS NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS.
2.GLOSSARY
ACCUMULATION UNIT - A unit of measure used prior to the Annuity Date
to calculate the value of your Contract in the Subaccounts.
ANNUITANT - The person designated by the Contract Owner, upon whose
life annuity payments are based.
ANNUITY CONTRACT OR CONTRACT - A Contract designed to provide an
Annuitant with an income, which may be a lifetime income, beginning on
the Annuity Date.
ANNUITY DATE - The date when annuity payments begin.
ANNUITY UNIT - A unit of measure used after the Annuity Date to
calculate the amount of variable annuity payments.
BENEFICIARY OR BENEFICIARIES- The person or persons who receive the
proceeds in the event of the death of all the Owners or the Annuitant.
CASH SURRENDER VALUE - The amount payable to you upon surrender of the
Contract prior to the Annuity Date during the Annuitant's lifetime,
before the deduction of any taxes.
CODE - The Internal Revenue Code of 1986, as amended.
CONTRACT ANNIVERSARY - The same day and month as the Contract Date in
each later year.
CONTRACT DATE - The date your Contract becomes effective. It will be
stated in your Contract.
CONTRACT OWNER(S) OR YOU - The person or persons who have the
ownership rights and privileges of the Contract. Two people may
purchase a Contract only if they are spouses.
CONTRACT VALUE - The total amount attributable to your Contract at any
time prior to the Annuity Date, representing amounts in the
Subaccounts and the Fixed Account.
CONTRACT YEAR - A year that starts on the Contract Date or on a
Contract Anniversary.
DEATH BENEFIT - Amount payable to the Beneficiary or Beneficiaries
upon the death of the Annuitant before the Annuity Date.
FIXED ACCOUNT - A fixed-rate investment option funded through Fidelity
Investments Life's general account. Fidelity Investments Life credits
interest to the amount allocated to the Fixed Account at a rate
declared periodically in advance. The Fixed Account may also be
referred to as the "Guaranteed Account".
INVESTMENT OPTIONS - The Subaccounts and the Fixed Account.
IRA - Refers generally to both an individual retirement account and an
individual retirement annuity as defined in Sections 408(a) and (b),
respectively, of the Code. When used to refer to a Qualified Contract
described herein, it means a Contract that qualifies as an individual
retirement annuity as defined in Section 408(b) of the Code.
NET RATE OF RETURN - An index used to measure the investment
performance of a Subaccount from one Valuation Period to the next.
NON-QUALIFIED CONTRACT - A Contract other than a Qualified Contract.
QUALIFIED CONTRACT - A Contract that qualifies as an individual
retirement annuity under Section 408(b) of the Code.
SUBACCOUNT - A division of the Variable Account, the assets of which
are invested in the shares of the corresponding portfolio of the Funds
available in this prospectus.
VALUATION PERIOD - The period of time from one determination of
Accumulation Unit Values and Annuity Unit Values to the next
determination of such values. Such determinations are made as of the
close of business (normally 4:00 p.m. Eastern Time) each day the New
York Stock Exchange is open for trading.
VARIABLE ACCOUNT - Fidelity Investments Variable Annuity Account I.
THIS PAGE INTENTIONALLY LEFT BLANK
3.SUMMARY OF THE CONTRACT
The purpose of this variable annuity contract is to allow you, the
Owner(s), to accumulate funds on a tax-deferred basis by investing in
one or more investment portfolios managed by Fidelity Management &
Research Company ("FMR"), Morgan Stanley Asset Management Inc.
("Morgan Stanley"), Pilgrim Baxter & Associates, Ltd. or Newbold's
Asset Management, Inc. ("PBHG"), Strong Capital Management, Inc.
("Strong") and Warburg Pincus Asset Management, Inc. ("Warburg
Pincus") and to permit the Annuitant (who may or may not be an
Owner) to receive annuity income payments commencing on the Annuity
Date. There is no assurance that values invested in the Subaccounts
will increase. As the Contract Owner(s), you bear the investment risk
with respect to those values. The Contract also allows you to allocate
funds to a fixed-rate investment option funded through Fidelity
Investments Life's general account (the "Fixed Account"). (The Fixed
Account may also be referred to as the "Guaranteed Account".) We
guarantee that amounts allocated to the Fixed Account will earn
interest at declared rates.
The Contract is designed to provide income for retirement or to meet
other long-term investment goals. It may be purchased on a
non-qualified basis or, if you so choose, it may be purchased on a
qualified basis as an individual retirement annuity ("IRA") under
Section 408(b) of the Code in connection with the "rollover" of
contributions from other qualified plans, tax sheltered annuities or
IRAs. It may also be purchased by exchanging Fidelity Variable Annuity
(another annuity contract issued by Fidelity Investments Life). The
minimum initial payment required to purchase a Non-qualified Contract
is $2,500. You may also make additional payments to a Non-qualified
Contract prior to the Annuity Date as long as each payment is not less
than $250 and the Annuitant is living. These minimum payments may be
reduced for individuals under certain sponsored arrangements or if the
payment is part of an automatic deduction plan. You may purchase a
Qualified Contract by making a payment of at least $10,000. You may
make additional payments to a Qualified Contract as long as each
payment is at least $2,500 unless your Contract provides for a lower
minimum. Your purchase payments will be invested as you direct in the
Fixed Account and in the Subaccounts of the Variable Account, except
that the portion of your first payment allocated to the Variable
Account must be invested initially in the Money Market Subaccount for
the period we estimate or calculate your free look right to be in
existence, which is generally fifteen days after the Contract Date.
See INVESTMENT ALLOCATION OF YOUR PURCHASE PAYMENTS on page . There
are currently twenty-eight variable Subaccounts. Five Subaccounts
invest in the shares of one of the mutual fund portfolios of Variable
Insurance Products Fund. The Variable Insurance Products Fund
currently offers a Money Market Portfolio, High Income Portfolio,
Equity-Income Portfolio, Growth Portfolio and Overseas Portfolio. Five
Subaccounts invest exclusively in shares of one of the mutual fund
portfolios of Variable Insurance Products Fund II. The Variable
Insurance Products Fund II currently offers an Investment Grade Bond
Portfolio, Asset Manager Portfolio, Index 500 Portfolio, Asset
Manager: Growth Portfolio and Contrafund Portfolio. Three Subaccounts
invest exclusively in shares of one of the mutual fund portfolios of
Variable Insurance Products Fund III. The Variable Insurance Products
Fund III currently offers a Growth & Income Portfolio, Balanced
Portfolio, and Growth Opportunities Portfolio. The remaining
subaccounts invest in shares of one of the mutual fund portfolios of
Morgan Stanley, PBHG, Strong or Warburg Pincus. Fidelity Investments
Life credits interest on amounts allocated to the Fixed Account at
interest rates that vary from time to time.
Prior to the Annuity Date, you may withdraw all or part of the Cash
Surrender Value of your Contract. During the first five Contract
Years, the withdrawal may be subject to a contingent deferred sales
charge. This charge is a maximum of 5% of the amount of purchase
payments withdrawn in the first Contract Year and decreases 1% per
year until it disappears after five Contract Years. However, in each
of the first five Contract years you may withdraw up to 10% of your
purchase payments without incurring such a charge. In certain
circumstances, Fidelity Investments Life may waive the contingent
deferred sales charge. See WITHDRAWAL CHARGE on page . The maximum
partial withdrawal is one that, along with any applicable withdrawal
charge, would reduce your Contract Value to $2,500. Certain
withdrawals may be subject to a Federal penalty tax as well as to
Federal income tax. See TAX CONSIDERATIONS on page .
You may select from a number of annuity income options, including
annuity income payments for the life of the Annuitant, with or without
a guaranteed number of payments. See TYPES OF ANNUITY INCOME OPTIONS
on page . You may choose any of these annuity income options to be
paid on a fixed basis, a variable basis, or a combination of both. See
FIXED, VARIABLE, OR COMBINATION ANNUITY INCOME OPTIONS on page . If
you elect a fixed income, your Contract's participation in the
investment experience of the Variable Account will cease with the
commencement of the annuity income payments. If you elect a variable
income, annuity income payments will vary in accordance with the
investment experience of the Subaccounts you select during the payout
period. If you elect a combination of fixed and variable income, a
portion of your income payment will be fixed, and a portion will vary
according to investment performance of the selected Subaccounts. On
the Annuity Date the Annuitant becomes the Owner of the Contract.
In the event that the Annuitant dies prior to the Annuity Date, we
will pay a Death Benefit to the Beneficiary you select. See DEATH
BENEFIT on page . In the event that any Owner dies before the entire
value of the Contract is distributed, the remaining value of the
Contract must be distributed according to certain specified rules in
order for the Contract to qualify as an annuity for tax purposes. See
REQUIRED DISTRIBUTIONS UPON DEATH on page .
In addition to the contingent deferred sales charge applicable to
withdrawals within the first five Contract Years (other than
withdrawals in each year of up to 10% of your purchase payments), we
assess an annual maintenance charge currently set at $30 per year and
guaranteed not to exceed $50 per year. Prior to the Annuity Date this
charge is deducted from your Contract Value, and after the Annuity
Date it is deducted from each annuity income payment on a pro rata
basis. We currently waive this annual charge if total purchase
payments less any withdrawals equal at least $25,000. In addition, we
will waive this charge for Contracts purchased after May 1, 1990 by
exchanging Fidelity Variable Annuity (another annuity contract issued
by Fidelity Investments Life). We also make a daily charge (equivalent
to an effective annual rate of .05%) against the assets of each
variable Subaccount for administrative expenses and a daily asset
charge (equivalent to an effective annual rate of not more than 0.75%)
for mortality and expense risks. These daily asset charges are not
assessed against amounts allocated to the Fixed Account. Our current
practice is generally to deduct any applicable premium taxes from your
Contract Value on the Annuity Date or upon payment of proceeds.
However, we may make a deduction for taxes required by any state upon
receipt of your payments for Contracts issued for delivery in that
jurisdiction. We reserve the right to deduct premium taxes when we
incur such taxes. See CHARGES on page . Further, the portfolios in the
Funds pay monthly management fees and other expenses. See the
prospectuses for the Funds for discussions of expenses.
You may return your Contract for a refund within 10 days after you
receive the Contract. When you are replacing an existing insurance
product with the Contract, the free look period will be extended to at
least 20 days. We will refund your purchase payment or, if greater,
your Contract Value plus any amount deducted from your payment prior
to allocation to the variable Subaccounts or the Fixed Account. This
provision may vary by state. See FREE LOOK PRIVILEGE on page .
This summary is intended to provide only an overview of the more
significant aspects of the Contract. More detailed information is
provided in the subsequent sections of this prospectus and in your
Contract. The Contract constitutes the entire agreement between you
and us and should be retained.
The following page contains the various investment options available
to you under the Contract.
FIDELITY RETIREMENT RESERVES
Guaranteed Account Company Variable Account
Guaranteed Interest FIDELITY Asset Manager Portfolio
Money Market Portfolio
Investment Grade Bond Portfolio
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Overseas Portfolio
Index 500 Portfolio
Asset Manager: Growth Portfolio
Contrafund Portfolio
Growth Opportunities Portfolio
Balanced Portfolio
Growth & Income Portfolio
MORGAN
STANLEY Emerging Markets Debt Portfolio
Emerging Markets Equity Portfolio
Global Equity Portfolio
International Magnum Portfolio
PBHG Select 20 Portfolio
Growth II Portfolio
Large Cap Value Portfolio
Small Cap Value Portfolio
Technology & Communications Portfolio
STRONG Discovery Fund II Portfolio
Growth Fund II Portfolio
Opportunity Fund II Portfolio
WARBURG
PINCUS International Equity Portfolio
Post-Venture Capital Portfolio
Small Company Growth Portfolio
4.FEE TABLE
This information is intended to assist you in understanding the
various costs and expenses that a Contract Owner will bear directly or
indirectly. It reflects expenses of the Separate Account as well as
the Portfolios. The tables below do not reflect any deductions for
premium taxes or Federal income tax expenses that are determined
solely from the amount of premiums received. We generally deduct any
applicable premium taxes from your Contract Value on the Annuity Date
or when proceeds are paid. We do not currently deduct any Federal
income tax expense. See CHARGES on page of the prospectus for
additional information.
CONTRACT OWNER EXPENSES (as a percentage of purchase payments)
Sales Charge Imposed on Purchases 0.00%
Maximum Contingent Deferred Sales Charge (1) 5.00%
Surrender Charge 0.00%
Exchange Fee 0.00%
ANNUAL MAINTENANCE CHARGE (2) $30.00
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charge 0.75%
Account Fees and Expenses:
Administrative Charge 0.05%
Total Separate Account Annual Expenses 0.80%
(1) The Maximum Contingent Deferred Sales Charge decreases 1% each
year so there is no charge after 5 years. Each year up to 10% of total
purchase payments may be withdrawn without a contingent deferred sales
charge. The contingent deferred sales charge is based solely on the
Contract Year - additional purchase payments do not cause the
contingent deferred sales charge percentages to start over. The
contingent deferred sales charge may be reduced or waived for
Contracts issued under certain sponsored arrangements.
(2) The annual maintenance charge is a single $30 charge on a
Contract. It is deducted proportionally from the investment options in
use at the time of the charge. The annual maintenance charge is
currently waived for Contracts with at least $25,000 of accumulated
purchase payments less any withdrawals. This charge may be reduced or
waived for Contracts issued under certain sponsored arrangements. In
the Examples, the annual maintenance charge is approximated as a 0.02%
annual asset charge based on the experience of the Contracts.
PORTFOLIO ANNUAL EXPENSES
(as a percentage of Portfolio average net assets)
MANAGEMENT OTHER TOTAL ANNUAL
FEES EXPENSES EXPENSES
FIDELITY
ASSET MANAGER 0.64% 0.10% 0.74%1
MONEY MARKET 0.21% 0.09% 0.30%
INVESTMENT GRADE BOND 0.45% 0.13% 0.58%
HIGH INCOME 0.59% 0.12% 0.71%
EQUITY-INCOME 0.51% 0.07% 0.58%1
INDEX 500 0.13% 0.15% 0.28%2
GROWTH 0.61% 0.08% 0.69%1
OVERSEAS 0.76% 0.17% 0.93%1
ASSET MANAGER: GROWTH 0.65% 0.22% 0.87%1
CONTRAFUND 0.61% 0.13% 0.74%1
GROWTH OPPORTUNITIES 0.61% 0.16% 0.77%1
BALANCED 0.48% 0.24% 0.72%1
GROWTH & INCOME 0.64% 0.10% 0.74%1
MORGAN STANLEY
EMERGING MARKETS DEBT 0.80% 0.50% 1.30%3
EMERGING MARKETS EQUITY 1.25% 0.50% 1.75%3
GLOBAL EQUITY 0.80% 0.35% 1.15%3
INTERNATIONAL MAGNUM 0.80% 0.35% 1.15%3
PBHG
SELECT 20 0.61% 0.59% 1.20%4
GROWTH II 0.85% 0.30% 1.15%4
LARGE CAP VALUE 0.41% 0.59% 1.00%4
SMALL CAP VALUE 0.77% 0.43% 1.20%4
TECHNOLOGY &
COMMUNICATIONS 0.61% 0.59% 1.20%4
STRONG
DISCOVERY FUND II 1.00% 0.21% 1.21%
GROWTH FUND II 1.00% 0.20% 1.20%5
OPPORTUNITY FUND II 1.00% 0.20% 1.20%
WARBURG PINCUS
INTERNATIONAL EQUITY 0.96% 0.40% 1.36%6
POST-VENTURE CAPITAL 0.62% 0.78% 1.40%7
SMALL COMPANY GROWTH 0.90% 0.26% 1.16%6
1) A portion of the brokerage commissions that certain Funds pay was
used to reduce Funds expenses. In addition, certain Funds have entered
into arrangements with their custodian and transfer agent whereby
interest earned on uninvested cash balances was used to reduce
custodian and transfer agent expenses. Including these reductions, the
total operating expenses presented in the table would have been .56%
for Equity-Income Portfolio, .67% for Growth Portfolio, .92% for
Overseas Portfolio, .73% for Asset Manager Portfolio, .71% for
Contrafund Portfolio, .85% for Asset Manager: Growth Portfolio, .76%
for Growth Opportunities Portfolio, and .71% for Balanced Portfolio.
2) FMR agreed to reimburse a portion of Index 500 Portfolio's expenses
during the period. Without this reimbursement, the Fund's management
fee, other expenses and total expenses would have been .28%, .15% and
.43%, respectively.
3) Morgan Stanley Asset Management Inc. with respect to the
Portfolios, has voluntarily agreed to waive receipt of its management
fees and agreed to reimburse the Portfolio, if necessary, if such fees
would cause the total annual operating expenses of the Portfolio to
exceed the respective percentage of average daily net assets. Such
waivers and reimbursements may be modified or terminated at any time
by Morgan Stanley Asset Management Inc.
4) Pilgrim Baxter & Associates, Ltd. (the "Adviser") has voluntarily
agreed to waive or limit its Advisory Fees or assume Other Expenses in
an amount that operates to limit Total Operating Expenses of the
Portfolios to not more than of the 1.20% of the average daily net
assets of the Growth II, Small Cap Value, Technology & Communications
and Select 20 Portfolios and to not more than 1.00% of the average
daily net assets of the Large Cap Value Portfolio, through December
31, 1997. Total Operating Expenses include, but are not limited to,
expenses such as investment advisory fees, transfer agent fees and
legal fees. Such waivers of Advisory fees and possible assumptions of
Other Expenses by the Adviser is subject to a possible reimbursement
by the Portfolios in future years if such reimbursement can be
achieved within foregoing annual expense limits. Such fee
waiver/expense reimbursement arrangements may be modified or
terminated at any time after December 31, 1997. Absent such fee
waivers/expense reimbursements. the Advisory Fees and estimated Total
Operating Expenses for the Small Cap Value, Large Cap Value,
Technology & Communications and Select 20 Portfolios would be 1.00%
and 1.43%;.65% and 1.24%; .85% and 1.44%; and .85% and 1.44%,
respectively. Given the projected asset size of the Growth II
Portfolio, it is not anticipated that a fee waiver or expense
reimbursement will be necessary with respect to that Portfolio.
5) Strong Capital Management, Inc., the investment Adviser, has
voluntarily agreed to cap the Fund's total operating expenses at
1.20%. The Adviser has no current intention to, but may in the future,
discontinue or modify any waiver of fees or absorption of expenses at
its discretion with appropriate notification to its shareholders.
6) Management Fees, Other Expenses and Total Annual Expenses for the
International Equity and Small Company Growth Portfolios are based on
actual expenses for the fiscal year ended December 31, 1996, net any
fee waivers or expense reimbursements. Without such waivers or
reimbursements, Management Fees would have equaled 1.00% and 0.90%,
Other Expenses would have equalled 0.40% and 0.27% and Total Annual
Expenses would have equalled 1.40% and 1.17% for the International
Equity and Small Company Growth Portfolios, respectively. The
Portfolios' investment adviser and co-administrator have undertaken to
limit each Portfolio's Total Annual Expenses to the limits shown in
the table above through December 31, 1997.
7) Absent the waiver of fees by the Post-Venture Capital Portfolio's
investment adviser and co-administrator, Management Fees for the
Post-Venture Capital Portfolio would equal 1.25%; Other Expenses would
equal 0.82%; and Total Annual Expenses would equal 2.07%. Other
Expenses for the Post-Venture Capital Portfolio are based on
annualized estimates of expenses for the fiscal year ending December
31, 1997, net of any fee waivers or expense reimbursements. The
Portfolio's investment adviser and co-administrator have undertaken to
limit the Portfolio's Expenses to the limits shown in the table above
through December 31, 1997.
EXAMPLES
If you assume that Contract Owner expenses are as shown above, and
that each Portfolio's annual return is 5% annually and its operating
expenses are just as described above, then for every $1,000 of
purchase payments, here's how much you would have paid in total
expenses if you surrendered your Contract after the number of years
indicated, or if you annuitize your contract during the first year.
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
FIDELITY
ASSET MANAGER $63 $79 $95 $186
MONEY MARKET 58 66 72 136
INVESTMENT GRADE BOND 61 74 87 168
HIGH INCOME 62 78 93 182
EQUITY-INCOME 61 74 87 168
GROWTH 62 78 92 180
OVERSEAS 64 85 105 206
INDEX 500 58 65 71 134
ASSET MANAGER: GROWTH 64 83 102 200
CONTRAFUND 63 79 95 186
GROWTH OPPORTUNITIES 63 80 97 189
BALANCED 62 79 94 183
GROWTH & INCOME 62 78 93 181
MORGAN STANLEY
EMERGING MARKETS DEBT 68 96 124 245
EMERGING MARKETS EQUITY 72 109 147 290
GLOBAL EQUITY 67 92 116 230
INTERNATIONAL MAGNUM 67 92 116 230
PBHG
SELECT 20 67 93 119 235
GROWTH II 67 92 116 230
LARGE CAP VALUE 65 87 109 214
SMALL CAP VALUE 67 93 119 235
TECHNOLOGY &
COMMUNICATIONS 67 93 119 235
STRONG
DISCOVERY FUND II 67 93 119 236
GROWTH FUND II 67 93 110 235
OPPORTUNITY FUND II 67 93 119 235
WARBURG PINCUS
INTERNATIONAL EQUITY 69 98 127 251
POST-VENTURE CAPITAL 69 99 129 255
SMALL COMPANY GROWTH 67 92 117 231
If you do not surrender your Contract or if you annuitize after the
first contract year, here is what your total expenses would be on a
$1,000 investment, assuming a 5% annual return on your assets:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
FIDELITY
ASSET MANAGER $16 $49 $85 $186
MONEY MARKET 11 36 62 136
INVESTMENT GRADE BOND 14 44 77 168
HIGH INCOME 16 48 83 182
EQUITY-INCOME 14 44 77 168
GROWTH 15 48 82 180
OVERSEAS 18 55 95 206
INDEX 500 11 35 61 134
ASSET MANAGER: GROWTH 17 53 92 200
CONTRAFUND 16 49 85 186
GROWTH OPPORTUNITIES 16 50 87 189
BALANCED 16 49 84 183
GROWTH & INCOME 15 48 83 181
MORGAN STANLEY
EMERGING MARKETS DEBT 22 66 114 245
EMERGING MARKETS EQUITY 26 80 137 290
GLOBAL EQUITY 20 62 106 260
INTERNATIONAL MAGNUM 20 62 106 260
PBHG
GROWTH II 20 62 106 260
LARGE CAP VALUE 18 57 99 214
SELECT 20 21 63 109 235
SMALL CAP VALUE 21 63 109 235
TECHNOLOGY &
COMMUNICATIONS 21 63 109 235
STRONG
DISCOVERY FUND II 21 64 109 236
GROWTH FUND II 21 63 109 235
OPPORTUNITY FUND II 21 63 109 235
WARBURG PINCUS
INTERNATIONAL EQUITY 22 68 117 251
POST-VENTURE CAPITAL 23 69 119 255
SMALL COMPANY GROWTH 20 62 107 231
THESE FIGURES ILLUSTRATE THE COMBINED EFFECT OF ALL CURRENT CHARGES.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
THE OTHER FUNDS ANNUAL EXPENSES AND THESE EXAMPLES ARE BASED ON DATA
PROVIDED BY THE OTHER FUNDS. THE COMPANY HAS NO REASON TO DOUBT THE
ACCURACY OR COMPLETENESS OF THAT DATA, BUT THE COMPANY HAS NOT
VERIFIED THE OTHER FUNDS' FIGURES. IN PREPARING THE OTHER FUNDS'
EXPENSE TABLE AND EXAMPLES ABOVE, THE COMPANY HAS RELIED ON THE
FIGURES PROVIDED BY THE OTHER FUNDS.
5.FACTS ABOUT FIDELITY INVESTMENTS LIFE, THE VARIABLE ACCOUNT,
AND THE FUNDS
FIDELITY INVESTMENTS LIFE
Fidelity Investments Life is a stock life insurance company organized
under the laws of the State of Utah. Fidelity Investments Life was
organized in 1981 under the laws of the Commonwealth of Pennsylvania
and changed its home state to Utah in 1992. Fidelity Investments Life
is part of Fidelity Investments, a group of companies that provides a
variety of financial services and products. Fidelity Investments Life
is a wholly-owned subsidiary of FMR Corp., the parent company of the
Fidelity companies. Through ownership of voting common stock, Edward
C. Johnson 3d and various trusts for the benefit of Johnson family
members form a controlling group with respect to FMR Corp. FMR Corp.
acquired Fidelity Investments Life on December 30, 1986. Immediately
before the acquisition Fidelity Investments Life (which was known by a
different name) had no outstanding assets or liabilities relating to
annuity or insurance contracts. Fidelity Investments Life's financial
statements appear in the Statement of Additional Information. Fidelity
Investments Life's principal executive offices are located at 82
Devonshire Street, Boston, Massachusetts 02109.
THE VARIABLE ACCOUNT
Fidelity Investments Variable Annuity Account I is a separate
investment account of Fidelity Investments Life established on July
22, 1987. It is used to support the variable annuity contracts
described herein and another form of variable annuity contracts issued
by Fidelity Investments Life, and for other purposes permitted by law.
The Variable Account is registered with the Securities and Exchange
Commission ("SEC") as a unit investment trust under the Investment
Company Act of 1940 ("1940 Act"). The Variable Account's financial
statements appear in the Statement of Additional Information.
We are the legal owner of the assets in the Variable Account. As
required by law, however, the assets of the Variable Account are kept
separate from our general account assets and from any other separate
accounts we may have and may not be charged with liabilities from any
other business we conduct. The assets in the Variable Account will
always be at least equal to the reserves and other liabilities of the
Variable Account. If the assets exceed the required reserves and other
liabilities, we may transfer the excess to our general account. We are
obligated to pay all benefits provided under the Contracts. There are
currently twenty-eight Subaccounts in the Variable Account. Five
Subaccounts invest exclusively in shares of a specific portfolio of
the Variable Insurance Products Fund. Five Subaccounts invest
exclusively in shares of a specific portfolio of the Variable
Insurance Products Fund II. Three portfolios invest exclusively in
shares of a specific portfolio of the Variable Insurance Products Fund
III. There are currently 15 other investment options offered by four
different mutual fund investment Advisers.
1THE FUNDS
FIDELITY
The Variable Insurance Products Fund, the Variable Insurance Products
Fund II, and the Variable Insurance Products Fund III, each is an
open-end, diversified management investment company organized by
Fidelity Management & Research Company. Each is the type of investment
company commonly known as a series mutual fund.
The investment objectives of the Funds are described below. There is,
of course, no assurance that any portfolio will meet its investment
objective.
VARIABLE INSURANCE PRODUCTS FUND
MONEY MARKET PORTFOLIO seeks to obtain as high a level of current
income as is consistent with preserving capital and providing
liquidity. It invests only in high-quality money market instruments.
The fund may be appropriate for investors who would like to earn
income at current money market rates while preserving the value of
their investment. The Fund is managed to keep its share price stable
at $1.00. The rate of income will vary from day to day, generally
reflecting short-term interest rates.
HIGH INCOME PORTFOLIO seeks to obtain a high level of current income
by investing primarily in high-yielding, lower-rated, fixed-income
securities. In choosing these securities growth of capital will also
be considered. A Fund's level of risk and potential reward depend on
the quality and maturity of its investments. The Fund is for
long-term, aggressive investors who understand the potential risks and
rewards of investing in lower-quality debt, including defaulted
securities. Investors must be willing to accept the Fund's greater
price movements and credit risks.
EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily
in income-producing equity securities. In choosing these securities
the portfolio will also consider the potential for capital
appreciation. The portfolio's goal is to achieve a yield which exceeds
the composite yield on the securities comprising the Standard & Poor's
500 Composite Stock Price Index. The Fund may be appropriate for
investors who are willing to ride out stock market fluctuations in
pursuit of potentially high long-term returns. The Fund is designed
for those who want some income from equity and bond investments, but
also want to be invested in the stock market for its long-term growth
potential.
GROWTH PORTFOLIO seeks to achieve capital appreciation normally
through the purchase of common stocks (although the portfolio's
investments are not restricted to any one type of security). Capital
appreciation may also be found in other types of securities, including
bonds and preferred stocks. The Fund may be appropriate for investors
who are willing to ride out stock market fluctuations in pursuit of
potentially high long-term returns. The Fund is designed for those who
want to pursue growth wherever it may arise, and who understand that
this strategy often leads to investments in smaller, less well-known
companies. The Fund invests for growth and does not pursue an income
strategy.
OVERSEAS PORTFOLIO seeks long-term growth of capital primarily through
investments in foreign securities. Overseas Portfolio provides a means
for investors to diversify their own portfolios by participating in
companies and economies outside of the United States. The Fund may be
appropriate for investors who want to pursue their investment goals in
markets outside of the United States. By including international
investments in your portfolio, you can achieve additional
diversification and participate in growth opportunities around the
world. However, it is important to note that investments in foreign
securities involve risks in addition to those of U.S. investments.In
addition to general risks, international investing involves different
or increased risks. The performance of international funds depends
upon currency values, the political and regulatory environment, and
overall economic factors in the countries in which the Fund invests.
VARIABLE INSURANCE PRODUCTS FUND II
ASSET MANAGER PORTFOLIO seeks high total return with reduced risk over
the long-term by allocating its assets among domestic and foreign
stocks, bonds and short-term, fixed income instruments. The Fund may
be appropriate for investors who want to diversify among domestic and
foreign stocks, bonds, short-term instruments and other types of
securities, the Fund spreads its assets among all three asset classes
moderating both its risk and return potential. Because the Fund owns
different types of investments, the performance is affected by a
variety of factors. The value of each Fund's investments and the
income generated will vary from day to day, and generally reflect
interest rates, market conditions, and other company, political and
economic news. Performance also depends on FMR's skills in allocating
assets.
INVESTMENT GRADE BOND PORTFOLIO seeks as high a level of current
income as is consistent with the preservation of capital by investing
in a broad range of investment-grade fixed-income securities. The Fund
may be appropriate for investors who want high current income from a
portfolio of investment-grade debt securities. A Fund's level of risk
and potential reward depend on the quality and maturity of its
investments. With its focus on medium- to high-quality investments,
the Fund has a moderate risk level and yield potential.
INDEX 500 PORTFOLIO seeks to provide investment results that
correspond to the total return (i.e. the combination of capital
changes and income) of common stocks publicly traded in the United
States. In seeking this objective, the portfolio attempts to duplicate
the composition and total return of the Standard & Poor's 500
Composite Stock Price Index. The Fund may be appropriate for investors
who are willing to ride out stock market fluctuations in pursuit of
potentially high long-term returns. The Fund is designed for those who
want to pursue growth of capital and current income through a
portfolio of securities that broadly represents the U.S. stock market,
as measured by the S&P 500. The Fund seeks to keep expenses low as it
attempts to match the return of the S&P 500. Because the Fund seeks to
track, rather than beat, the performance of the S&P 500, it is not
managed in the same manner as other funds.
ASSET MANAGER: GROWTH PORTFOLIO seeks maximum total return over the
long-term by allocating its assets among an aggressive mix of domestic
and foreign stocks, bonds and short-term fixed income instruments. The
Fund may be appropriate for investors who want to diversify among
domestic and foreign stocks, bonds, short-term instruments and other
types of securities, in one fund. The Fund, while spreading its assets
among all three asset classes, uses a more aggressive approach by
focusing on stocks for a higher potential return. Because the Fund
owns different types of investments, their performance is affected by
a variety of factors. The value of each Fund's investments and the
income they generate will vary from day to day, and generally reflect
interest rates, market conditions, and other company, political and
economic news. Performance also depends on FMR's skills in allocating
assets.
CONTRAFUND PORTFOLIO seeks long-term capital appreciation by investing
in equity securities of companies considered undervalued or
out-of-favor by the Fund's Adviser. The Fund may be appropriate for
investors who are willing to ride out stock market fluctuations in
pursuit of potentially high long-term returns. The Fund is designed
for those who are looking for an investment approach that follows a
contrarian philosophy.
VARIABLE INSURANCE PRODUCTS FUND III
GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation by investing
mainly in equity securities. The Fund may also invest in equity
securities that are not paying dividends, but offer the potential for
capital appreciation of future income. The Fund may be appropriate for
investors who are willing to ride out stock market fluctuations in
pursuit of potentially high long-term returns. The Fund is designed
for those who seek a combination of growth and income from equity and
some bond investment.
GROWTH OPPORTUNITIES PORTFOLIO seeks capital growth by investing in a
wide range of common domestic and foreign stocks, and securities
convertible into common stocks. Although the Fund invests primarily in
common stock, it has the ability to purchase securities, such as
preferred stock and bonds that may produce capital growth. The value
of the Fund's investments and, as applicable, the income they generate
will vary from day to day, and generally reflect changes in market
conditions, interest rates, and other company, political, or economic
news. In the short-term, stock prices can fluctuate dramatically in
response to these factors.
BALANCED PORTFOLIO seeks both income and growth of capital by
investing in a broad selection of stocks, bonds, and convertible
securities. When FMR's outlook is neutral, it will invest
approximately 60% of the Fund's assets in equity securities and will
always invest at least 25% of the Fund's assets in fixed income
securities. The value of the Fund's investments and, as applicable,
the income they generate will vary from day to day, and generally
reflect changes in market conditions, interest rates, and other
company, political, or economic news. In the short-term, stock prices
can fluctuate dramatically in response to these factors.
MORGAN STANLEY ASSET MANAGEMENT INC.
EMERGING MARKETS DEBT PORTFOLIO seeks high total return by investing
primarily in Fixed Income Securities of government and
government-related issuers located in emerging market countries, which
securities provide a high level of current income, while at the same
time holding the potential for capital appreciation if the perceived
credit worthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in
which the issuer is located. Under normal market conditions, the
Portfolio will invest a large portion of its total assets in
Government Fixed Income Securities, including Loan Participations and
Assignments between governments and financial institutions, securities
issued by government owned, controlled or sponsored entities and
securities of entities organized to restructure outstanding debt of
such issuers. In selecting Emerging Market Country Fixed Income
Securities for the Portfolio, Morgan Stanley Asset Management Inc.
("MSAM") will apply a market risk analysis contemplating assessment of
factors such as liquidity, volatility, tax implications, interest rate
sensitivity, counterparty risks and technical market considerations.
As opportunities to invest in debt securities in other countries
develop, the Portfolio expects to expand and further diversify the
universe of emerging market countries in which it invests. The
Portfolio maybe appropriate for those who seek a high level of current
income from Emerging Market Country Securities that are Fixed Income
Securities, while holding the potential for capital appreciation.
EMERGING MARKETS EQUITY PORTFOLIO seeks long-term capital appreciation
by investing primarily in Equity Securities of emerging market country
issuers with a focus on those in which MSAM believes the economies are
developing strongly and in which the markets are becoming more
sophisticated. The Portfolio may be appropriate for those who seek to
achieve long-term capital appreciation by investing in Emerging Market
Country Securities. By including emerging market country investments
in their portfolio, investors can achieve additional diversification
and participate in growth opportunities in emerging market countries.
Under normal market conditions, a large percentage of the total assets
of the Portfolio will be invested in Emerging Market Country Equity
Securities. There are currently over 130 countries which, in the
opinion of MSAM, are generally considered to be emerging or developing
countries by the international financial community, approximately 40
of which currently have stock markets. As markets in other countries
develop, the Portfolio expects to expand and further diversify the
emerging market countries in which it invests. In selecting industries
and particular issuers, MSAM will evaluate costs of labor and raw
materials, access to technology, export of products and government
regulation. Although the Portfolio seeks to invest in larger
companies, it may invest in small-and medium size companies that, in
MSAM's view, have potential for growth.
GLOBAL EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in Equity Securities of issuers throughout the
world, including U.S. issuers and issuers in emerging market
countries, using an approach that is oriented to the selection of
individual stocks that MSAM believes are undervalued. The Portfolio
may be appropriate for investors who seek to pursue their investment
goals in markets throughout the world, including the United States. By
including international investments in their portfolio, investors can
achieve additional diversification and participate in growth
opportunities around the world. Under normal circumstances, a
substantial amount of the total assets of the Portfolio will be
invested in Equity Securities, and a lesser percentage of the
Portfolio's assets will be invested in Common Stocks of U.S. issuers
and the remaining equity position will be invested in at least three
countries other than the United States. MSAM's approach is oriented to
individual stock selection and is value driven. In selecting stocks
for the Portfolio, MSAM initially identifies those stocks that it
believes to be undervalued in relation to the issuers assets, cash
flow, earnings and revenues, and then evaluates the future value of
such stocks by running the results of an in-depth study of the issuer
through a dividend discount model. In selecting investments, MSAM
utilizes the research of a number of sources, including Morgan Stanley
Capital International, an affiliate of MSAM located in Geneva,
Switzerland.
INTERNATIONAL MAGNUM PORTFOLIO seeks long-term capital appreciation by
investing primarily in Equity Securities of non U.S. issuers domiciled
in EAFE countries, pursuant to weightings determined by MSAM. The
Portfolio may be appropriate for investors who seek to pursue their
investment goals in markets outside of the United States. By including
international investments in their portfolio, investors can achieve
additional diversification and participate in growth opportunities
around the world. The countries in which the Portfolio will invest are
those comprising the Morgan Stanley Capital International EAFE Index,
which includes Australia, Japan, New Zealand, most nations located in
Western Europe and certain developed countries in Asia, such as Hong
Kong and Singapore (each an "EAFE country", and collectively the "EAFE
countries"). Under normal market conditions, a large percentage of the
total assets of the Portfolio will be invested in Equity Securities of
issuers in at least three different EAFE countries.
PBHG
SELECT 20 PORTFOLIO seeks long-term growth of capital and
income. The Portfolio will normally be substantially invested in
equity securities (including ADRs and foreign equity securities). The
equity securities in which the Portfolio will invest are common
stocks, warrants and rights to purchase common stocks, and debt
securities and preferred stocks that are convertible into common
stocks. Under normal market conditions, the Portfolio will invest at
least 65%of its total assets in equity securities of a limited number
(i.e., no more than 20 stocks) of large capitalization companies that,
in Pilgrim Baxter & Associates, Ltd.'s (the "Adviser") opinion, have a
strong earnings growth outlook and potential for capital appreciation.
Such large companies have market capitalization in excess of $1
billion. Because the Portfolio focuses on equity securities of a small
number of companies, the impact of a change in value of a single stock
holding may be magnified.
GROWTH II PORTFOLIO seeks capital appreciation and will normally be as
fully invested as practicable in common stocks and securities
convertible into common stocks. Under normal market conditions, the
Portfolio will invest at least 65%of its total assets in common stocks
and convertible securities of small and medium sized growth companies
(market capitalization or annual revenues up to $4 billion). The
Portfolio will seek to achieve its objective by investing in companies
believed by the Adviser to have an outlook for strong earnings growth
and the potential for significant capital appreciation. The Securities
will be sold when the Adviser believes that anticipated appreciation
is no longer probable, alternative investments offer superior
appreciation prospects, or the risk of a decline in market price is
too great. The Portfolio will likely have somewhat greater volatility
than the stock market in general. Because the investment techniques
employed by the Adviser are responsive to near-term earnings trends of
the companies whose securities are owned by the Portfolio, the
Portfolio turnover can be expected to be fairly high.
LARGE CAP VALUE PORTFOLIO seeks long-term growth of capital and
income. Current income is a secondary objective. Under normal market
conditions, the Portfolio will invest a majority percentage of its
total assets in a diversified Portfolio of equity securities of large
capitalization companies which, in the opinion of the Adviser and
Newbold's Asset Management, Inc. (the "Sub-Adviser"), are undervalued
or overlooked by the market. In selecting investments for the
Portfolio, the Adviser and Sub-Adviser emphasize fundamental
investment value and consider the following factors, among others, in
identifying and analyzing a security's fundamental value: the
relationship of a company's potential earnings power to its current
stock price; current dividend income and potential for current
dividends, strong balance sheet with with low financial leverage; low
price/earnings ratio relative to other similar companies; and
potential for favorable business developments.
SMALL CAP VALUE PORTFOLIO seeks to achieve above-average total return
over a market cycle of three to five years, consistent with reasonable
risk, by investing primarily in a diversified Portfolio of common
stocks of small companies with market capitalizations in the range of
companies represented in the Russell 2000 Index which are considered
to be relatively undervalued based on certain proprietary measures of
value. In selecting investments for the Portfolio, the Adviser and
Sub-Adviser emphasize fundamental investment value and consider the
following factors, among others, in identifying and analyzing a
security's fundamental value: the relationship of a company's
potential earnings power to its current stock price; current dividend
income and potential for current dividends; low price/earnings ratio
relative to other similar companies; strong competitive advantages,
including a recognized brand or trade name or niche market position;
sufficient resources for expansion; capability of management; and
favorable overall business prospects.
TECHNOLOGY & COMMUNICATIONS PORTFOLIO seeks long-term growth of
capital. Current income is incidental to the Portfolio's objective.
Under normal market conditions, the Portfolio will invest at least 65%
of its total assets in common stocks of companies which rely
extensively on technology or communications in their product
development or operations, or which are expected to benefit from
technological advances and improvements, and that may be experiencing
exceptional growth in sales and earnings driven by technology- or
communication-related products and services. Such technology and
communications companies may be in different industries or fields,
including computer software and hardware, electronic components and
systems, network and cable broadcasting, telecommunications, mobile
communications, satellite communications, defense and aerospace,
transportation systems, data storage and retrieval, biotechnology and
medical, and environmental. As a result of this focus, the Portfolio
offers investors the significant growth potential of companies that
may be responsible for breakthrough products or technologies or that
are positioned to take advantage of cutting-edge developments. The
Portfolios stock holdings can range from small companies developing
new technologies or pursuing scientific breakthroughs to large, blue
chip firms with established track records in developing and marketing
such scientific advances.
STRONG
DISCOVERY FUND II PORTFOLIO seeks capital growth. The Fund invests in
securities that the Adviser believes represent attractive growth
opportunities. The Fund normally emphasizes equity securities,
although it has the flexibility to invest in any type of security that
the Adviser believes has the potential for capital appreciation. The
Fund may invest up to 100% of its total assets in equity securities,
including common stocks, preferred stocks, and securities that are
convertible into common or preferred stocks, such as warrants and
convertible bonds. The Fund may also invest up to 100% of its assets
in debt obligations, including intermediate-to-long term corporate or
U.S. government debt securities. When the Adviser determines that
market conditions warrant a temporary defensive position, the Fund may
invest without limitation in cash and short-term fixed-income
securities. Although the debt obligations in which it invests will be
primarily investment-grade, the Fund may invest up to 5% of its net
assets in non-investment grade debt obligations. The Fund may also
invest up to 25% of its net assets in foreign securities, including
both direct investments and investments made through depository
receipts. The Adviser attempts to identify companies that are poised
for accelerated earnings growth due to innovative products or
services, new management, or favorable economic or market cycles.
These companies may be small, unseasoned firms in early stages of
development, or they may be mature organizations.
GROWTH FUND II PORTFOLIO seeks capital growth. The Fund invests
primarily in equity securities that the Adviser believes have
above-average growth prospects. Under normal market conditions, the
Fund will invest at least 65% of its total assets in equity
securities, including common stocks, preferred stocks, and securities
that are convertible into common or preferred stocks, such as warrants
and convertible bonds. While the emphasis of the Fund is clearly on
equity securities, the Fund may invest a limited portion of its assets
in debt obligations when the Adviser perceives that they are more
attractive than stocks on a long-term basis. The Fund may invest up to
35% of its total assets in debt obligations, including
intermediate-to-long term corporate or U.S. government debt
securities. When the Adviser determines that market conditions warrant
a temporary defensive position, the Fund may invest without limitation
in cash and short-term fixed-income securities. Although the debt
obligations in which it invests will be primarily investment grade,
the Fund may invest up to 5% of its net assets in non-investment grade
debt obligations. The Fund may invest up to 25% of its assets in
foreign securities, including both direct investments and investments
made through depository receipts. The Fund generally will invest in
companies whose earnings are believed to be in a relatively strong
growth trend, and, to a lesser extent, in companies in which
significant further growth is not anticipated but whose market value
is thought to be undervalued. In identifying companies with favorable
growth prospects, the Adviser ordinarily looks to certain other
characteristics, such as prospects for above-average sales and
earnings growth; high return on invested capital; overall financial
strength, including sound financial and accounting policies and a
strong balance sheet; competitive advantages, including innovative
products and service; effective research, product development and
marketing; and stable, capable management.
OPPORTUNITY FUND II PORTFOLIO seeks capital growth. The Fund invests
primarily in equity securities and currently emphasizes investments in
medium-sized companies the Adviser believes are under researched and
attractively valued. The Fund will invest at least 70% of its total
assets in equity securities, including common stocks, preferred
stocks, and securities that are convertible into common or preferred
stocks, such as warrants and convertible bonds. Under normal market
conditions, the Fund expects to be fully invested in equities. The
Fund may, however, invest up to 30% of its net assets in debt
obligations, including intermediate-to long-term corporate or U.S.
government debt securities, and when the Adviser determines that
market conditions warrant a temporary defensive position, it may use
that allowance to invest up to 30% of its net assets in cash and
short-term fixed-income securities. Although the debt obligations in
which it invests will be primarily investment grade, the Fund may
invest up to 5% of its net assets in non-investment grade debt
obligations. The Fund may also invest up to 25% of its assets in
foreign securities, including both direct investments and investments
made through depository receipts. In selecting its equity investments,
the Adviser seeks to identify attractive investment opportunities that
have not become widely recognized by other stock analysts or the
financial press. Through first-hand research that often includes
on-site visits with the leaders of companies, the Advisers looks for
companies with fundamental value or growth potential that is not yet
reflected in their current market prices. In many cases, companies in
the small- and medium-capitalization markets are under-followed and,
as a result, less efficiently priced than their larger, better-known
counterparts. The Fund's investments are therefore likely to consist,
in part, of securities in small- and medium-sized companies. Many of
these companies may have successfully emerged from the start-up phase
and have potential for future growth. Because of their longer track
records and more seasoned management, they generally pose less
investment uncertainty than do the smallest companies. In general,
smaller-capitalization companies often involve greater risks than
investments in established companies.
WARBURG PINCUS
INTERNATIONAL EQUITY PORTFOLIO seeks long-term capital appreciation by
investing in equity securities of non-U.S. issuers. The Portfolio
pursues its investment objective by investing primarily in a broadly
diversified portfolio of equity securities of companies, wherever
organized, that in the judgement of the Adviser, have their principal
business activities and interests outside of the United States. The
Portfolio will ordinarily invest substantially all of its assets in
common stocks, warrants and securities convertible into or
exchangeable for common stocks, and will generally invest in at least
three countries other than the United States. The Portfolio intends to
be widely diversified across securities of many corporations located
in a number of foreign countries. The Adviser anticipates, however,
that the Portfolio from time to time invest a significant portion of
its assets in a single country such as Japan, which may involve
special risks. In appropriate circumstances, such as when a direct
investment by the Portfolio in the securities of a particular country
cannot be made or when the securities of an investment company are
more liquid than the underlying portfolio securities, the Portfolio
may invest in the securities of closed-end investment companies that
invest in foreign securities. The Portfolio intends to invest
principally in the securities of financially strong companies with
opportunities for growth within growing international economies and
markets through increased earning power and improved utilization or
recognition of assets. International investment entails special risk
considerations, including currency fluctuations, lower liquidity,
economic instability, political uncertainty and differences in
accounting methods.
POST-VENTURE CAPITAL PORTFOLIO seeks long-term growth of capital. The
Portfolio pursues an aggressive investment strategy by investing
primarily in equity securities of companies considered by the Adviser
to be in their post-venture capital stage of development. Although the
Portfolio may invest up to 10% of its assets in venture capital and
other investment Funds, the Portfolio is not designed primarily to
provide venture capital financing. Rather, under normal market
conditions, the Portfolio will invest up to at least 65% of its total
assets in equity securities of "post-venture capital companies." A
post-venture capital company is a company that has received venture
capital financing either (a) during the early stages of the company's
existence or the early stages of the development of a new product or
service or (b) as part of a restructuring or recapitalization of the
company. The investment of venture capital financing, distribution of
such company's securities to venture capital investors, or initial
public offering ("IPO"), whichever is later, will have been made
within ten years prior to the Portfolio's purchase of the company's
securities. The Adviser believes that venture capital participation in
a company's capital structure can lead to revenue/earnings growth
rates above those of older, public companies such as those in the Dow
Jones Industrial Average or the Fortune 500. Up to 10% of the
Portfolio's assets may be invested in United States or foreign private
limited partnerships or other investment Funds ("Private Funds") that
themselves invest in equity or debt securities of (a) companies in the
venture capital or post-venture capital stages of development or (b)
companies engaged in special situations or changes in corporate
control, including buyouts. Because of the nature of the Portfolio's
investments and certain strategies it may use, such as investing in
Private Funds, an investment in the Portfolio should be considered
only for the aggressive portion of an investor's portfolio and may not
be appropriate for all investors.
SMALL COMPANY GROWTH PORTFOLIO seeks capital growth by investing
primarily in equity securities of small sized domestic companies
(i.e., companies having stock market capitalizations of between $25
million and $1 billion at the time of purchase) that represent
attractive opportunities for capital growth. It is anticipated that
the Portfolio will invest primarily in companies whose securities are
traded on domestic stock exchanges or in the over-the -counter market.
Small companies may still be in the development stage, may be older
companies that appear to be entering a new stage of growth progress
owing to factors such as management changes or development of new
technology, products or markets or may be companies providing products
or services with a high unit volume growth rate. The Portfolio's
investments will be made on the basis of their equity characteristics
and securities ratings generally will not be a factor in the selection
process. The Portfolio may also invest in securities of emerging
growth companies, which can be either small- or medium-sized companies
that have passed their start up phase and that show positive earnings
and prospects of achieving significant profit and gain in a relatively
short period of time. Emerging growth companies generally stand to
benefit from new products or services, technological developments or
changes in management and other factors and include smaller companies
experiencing unusual developments affecting their market value.
Shares of the Fidelity Funds may also be sold to a variable life
separate account of Fidelity Investments Life and to variable annuity
and variable life separate accounts of other insurance companies. For
a discussion of the possible consequences associated with having the
Fidelity Funds available to such other separate accounts, see
RESOLVING MATERIAL CONFLICTS on page .
The investment adviser for the Fidelity Funds is Fidelity Management &
Research Company, a registered adviser under the Investment Advisers
Act of 1940. Fidelity Management & Research Company is the original
Fidelity company and was founded in 1946. It provides a number of
mutual funds and other clients with investment research and portfolio
management services. It maintains a large staff of experienced
investment personnel and a full complement of related support
facilities. As of December 31, 1996, it advised funds having more than
29 million shareholder accounts with a total value of more than $432
billion. The portfolios of the Fidelity Funds, as part of their
operating expenses, pay an investment management fee to Fidelity
Management & Research Company. These fees are part of the Funds'
expenses. See the prospectuses for the Funds for discussions of the
Funds' expenses.
The investment adviser for the Morgan Stanley Universal Funds is
Morgan Stanley Asset Management Inc., a wholly-owned subsidiary of
Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"), which is a
publicly owned financial services corporation listed on the New York
stock exchange. MSAM, a registered Investment Adviser under the
Investment Advisers Act of 1940, as amended, serves as investment
adviser to numerous open-end and closed-end investment companies, as
well as many institutions, pension plans and individuals. MSAM's
principal business office is located at 1221 Avenue of the Americas,
New York, New York 10020.
The investment adviser for the PBHG Insurance Series Fund, Inc is
Pilgrim Baxter & Associates, Ltd. (the "Adviser"), a professional
investment management firm and registered investment adviser that,
along with its predecessors, has been in business since 1982. The
controlling shareholder of the Adviser is United Asset Management
Corporation ("UAM"), a New York stock exchange listed holding company
principally engaged through affiliated firms, in providing
institutional investments management services and acquiring
institutional investment management firms. UAM's headquarters are
located at One International Place, Boston, Massachusetts 02110. The
principal business address of the Adviser is 1255 Drummers Lane, Suite
300, Wayne, Pennsylvania 19087. Newbold's Asset Management, Inc., the
Sub-Adviser, 950 Haverford Road, Bryn Mawr, Pennsylvania 19010, is a
registered investment adviser that was formed in 1940. As with the
Adviser, the controlling shareholder of the Sub-Adviser is UAM.
The investment adviser for the Strong Funds is Strong Capital
Management, Inc. The Adviser began conducting business in 1974. Since
then, its principal business has been providing continuous investment
supervision for individuals and institutional accounts, such as
pension funds and profit-sharing plans, as well as mutual funds,
several of which are funding vehicles for variable insurance products.
The Adviser's principal mailing address is P.O. Box 2936, Milwaukee,
Wisconsin 53201. Mr. Richard S. Strong, the Chairman of the Board of
the Fund, is the controlling shareholder of the Adviser.
The investment adviser for the Warburg Pincus Funds is Warburg Pincus.
Incorporated in 1970, Warburg Pincus is indirectly controlled by
Warburg, Pincus & Co.("WP&Co."), Warburg G.P has no business other
than being a holding company of Warburg Pincus and its affiliates.
Lionel I. Pincus, the managing partner of WP&Co., may be deemed to
control both WP&Co. and Warburg Pincus. Warburg Pincus' address is 466
Lexington Avenue, New York, New York 10017-3147.
You will find more complete information about the Funds, including the
risks associated with each portfolio, in their respective
prospectuses. You should read them in conjunction with this
prospectus.
6.FACTS ABOUT THE CONTRACT
PURCHASE OF A CONTRACT
We offer the Contracts only in states in which we have obtained the
necessary approval. The Contracts are available on a non-qualified
basis ("Non-qualified Contracts") and as individual retirement
annuities ("IRAs") that qualify for special Federal income tax
treatment ("Qualified Contracts").
Generally, Qualified Contracts may be purchased only in connection
with a "rollover" of funds from another qualified plan, tax sheltered
annuity or IRA and contain certain other restrictive provisions
limiting the timing and amount of payments to and distributions from
the Qualified Contract. See TAX CONSIDERATIONS on page .
To purchase a Non-qualified Contract you must make a purchase payment
of at least $2,500 and complete an application form. To purchase a
Qualified Contract you must make a purchase payment of at least
$10,000 and complete an application form. For a Non-qualified
Contract, the proposed Annuitant must be no older than 80 years old.
If your application and initial purchase payment can be accepted in
the form received, the payment will be applied to the purchase of a
Contract within two business days after receipt at the Annuity Service
Center. The date that the payment is credited and your Contract issued
is called the Contract Date. If an incomplete application is received,
we will request the information necessary to complete the application.
Once the completed application is received, the initial payment will
be applied to the purchase of a Contract within two business days. If
the application remains incomplete for five business days, we will
return your payment unless we obtain your specific permission to
retain the payment pending completion of the application.
A Non-qualified Contract may also be purchased by exchanging Fidelity
Variable Annuity (another annuity contract issued by Fidelity
Investments Life). In such an exchange, the original contract will be
exchanged for a new contract with a purchase price equal to the
contract value of the original contract on the date of the exchange.
In addition, a Contract purchased through such an exchange will be
subject to certain special provisions, which are described throughout
the prospectus. For example, the withdrawal charge is subject to
special rules. See WITHDRAWAL CHARGE on page .
You may make additional payments to a Non-qualified Contract during
the life of the Annuitant and before the Annuity Date. The smallest
such payment we will accept is $250. You may, however, elect to make
regular monthly payments of a minimum of $100 by authorizing regular
transfers from a checking account. See AUTOMATIC DEDUCTION PLAN on
page . Furthermore, we may offer Contracts with lower minimum payment
requirements to individuals under certain sponsored arrangements that
meet our eligibility requirements. See SPECIAL PROVISIONS APPLICABLE
TO SALES UNDER SPONSORED ARRANGEMENTS on page . You may make
additional payments to a Qualified Contract of additional rollover
contributions from another qualified plan, tax sheltered annuity or
IRA. See TAX CONSIDERATIONS on page . The smallest such payment we
will accept is $2,500 unless your Contract provides for a lower
minimum. After the free look period, additional payments allocated to
the variable Subaccounts will be credited to your Contract based on
the next computed value of an Accumulation Unit following receipt of
your payment at the Annuity Service Center. See ACCUMULATION UNITS on
page . Payments allocated to the Fixed Account will be credited under
your Contract as of the date the payment is received at our Annuity
Service Center. See THE FIXED ACCOUNT on page . We may limit the
maximum amount of initial or subsequent payments that we will accept.
FREE LOOK PRIVILEGE
You may return your Contract for a refund within 10 days (or longer
where required by applicable state insurance law), after you receive
it (the "free look period"). When you are replacing an existing
insurance product with the Contract, the free look period will be
extended to at least 20 days (or longer where required by applicable
state insurance law). The entire portion of any net purchase payment
allocated to the Variable Account will be invested in the Money Market
Subaccount for the period we estimate or calculate your free look
right to be in existence, which is generally 15 days after the
Contract Date (25 days if you are replacing an existing insurance
product). The Contract value in the Money Market Subaccount will then
be transferred to the Subaccounts you chose on the application or in
any later instructions to us. For Contracts with large initial
payments, we will calculate the exact date your free look right
expires based on the actual date you receive the Contract.
If you choose not to retain your Contract, return it to our Annuity
Service Center within the free look period. Upon written instruction,
the Contract will be canceled and we will refund promptly the greater
of (1) your purchase payment without interest, and (2) your Contract
Value plus any amount deducted from your payment prior to allocation
to the variable Subaccounts or the Fixed Account. This provision does
not apply to contracts purchased by exchanging Fidelity Variable
Annuity (another annuity contract issued by Fidelity Investments Life)
and may vary by state where required by applicable state insurance
law.
INVESTMENT ALLOCATION OF YOUR PURCHASE PAYMENTS
At the end of the Valuation Period in which your free look period
expires (by our estimation or calculation), your Contract Value in the
Money Market Subaccount will be allocated among the variable
Subaccounts according to the instructions on your application or your
later instructions to us, based on the respective Accumulation Unit
Values of the Subaccounts at that time. The portion of your initial
payment allocated to the Fixed Account will be credited directly to
the Fixed Account. Payments after the free look period are allocated
directly to the selected investment options. All percentage
allocations must be in whole numbers. Prior to the Annuity Date, you
generally may not allocate more than $100,000 (including transfers) to
the Fixed Account during any one Contract Year.
You may currently transfer amounts among variable Subaccounts before
the Annuity Date as often as you wish without charge. However,
excessive trading activity can disrupt portfolio management strategy
and increase portfolio expenses, which are borne by all Contract
Owners participating in the portfolio regardless of their transfer
activity. Therefore, we reserve the right to limit the number of
transfers permitted, but not to fewer than five per Contract Year. For
certain contracts issued after May 1, 1997, FILI also reserves the
right to charge for transfers in excess of 12 per calendar year. The
request may be in terms of dollars, such as a request to transfer
$5,000 from one Subaccount to another, or may be in terms of a
percentage reallocation among Subaccounts. In the latter case, the
percentages must be in whole numbers. The minimum amount you may
transfer is $250 or, if less, the entire portion of your Contract
Value allocated to a particular Subaccount. You may transfer amounts
or change your investment allocation with respect to future payments
by sending a letter or calling the Annuity Service Center.
Fidelity Investments Life and the Funds reserve the right to revise or
terminate the telephone exchange provisions, limit the amount of or
reject any exchange, as deemed necessary, at any time. Telephone
exchange authorizations will be limited to eighteen per calendar year.
Fidelity Investments Life will not accept exchange requests via fax.
Fidelity Investments Life will not be responsible for any losses
resulting from unauthorized telephone reallocations if it follows
reasonable procedures designed to verify the identity of the caller.
Fidelity Investments Life will request your Personal Identification
Number and may also record calls. You should verify the accuracy of
your confirmation statements immediately after you receive them.
In some cases, contracts may be sold to individuals who independently
utilize the services of a firm or individual engaged in market timing.
Generally, market timing services obtain authorization from Contract
Owner(s) to make transfers and exchanges among the sub-accounts on the
basis of perceived market trends. Because the large transfers of
assets associated with market timing services may disrupt the
management of the portfolios of the Funds, such transactions may
become a detriment to Contract Owners not utilizing the market timing
service.
The right to exchange contract values among subaccounts may be subject
to modification if such rights are executed by a market timing firm or
similar third party authorized to initiate transfers or exchange
transactions on behalf of a Contract Owner(s). In modifying such
rights, the Company may, among other things, decline to accept (1) the
transfer or exchange instructions of any agent acting under a power of
attorney on behalf of more than one Contract Owner, or (2) the
transfer or exchange instructions of individual Contract Owners who
have executed pre-authorized transfer or exchange forms which are
submitted by market timing firms or other third parties on behalf of
more than one Contract Owner at the same time. The Company will impose
such restrictions only if it believes that doing so will prevent harm
to other Contract Owners.
When a transfer between variable Subaccounts is requested, the
redemption of the requested amount from the Subaccount will always be
effected as of the end of the Valuation Period in which the request is
received at our Annuity Service Center. That amount will generally be
credited to the new Subaccount at the same time. However, when (1) you
are making a transfer to a Subaccount which invests in a portfolio
that accrues dividends on a daily basis and requires Federal funds
before accepting a purchase order and (2) the Subaccount from which
the transfer is being made is investing in an equity portfolio in an
illiquid position due to substantial redemptions or transfers that
require it to sell portfolio securities in order to make funds
available, then the crediting of the amount transferred to the new
Subaccount may be delayed until the Subaccount from which the transfer
is being made obtains liquidity through the earliest of the
portfolio's receipt of proceeds from sales of portfolio securities,
new contributions by Contract Owners, or otherwise, but no longer than
seven days. During this period, the amount transferred will be
uninvested.
Transfers to and from the Fixed Account may be made only with our
consent. For certain contracts issued May 1, 1997 or later, we may
discontinue the availability of the Fixed Account for transfers from
the Variable Account or for purchase payments at any time. You may
currently transfer amounts from the variable Subaccounts to the Fixed
Account before the Annuity Date as often as you wish (with one
exception described below) without charge. The minimum dollar amount
you may transfer is $250 from any Subaccount or, if less, the entire
portion of your Contract Value allocated to a particular Subaccount.
If you request a percentage reallocation among the investment options,
the percentages must be in whole numbers. Transfers from the Fixed
Account before the Annuity Date are currently subject to the following
limitations. The maximum amount that currently may be transferred out
of the Fixed Account is 25% of the amount invested in the Fixed
Account or, if larger, the amount that you transferred from the Fixed
Account in the prior Contract Year. The 25% limitation will be
reviewed monthly and may be updated but will not be reduced below 25%.
When this maximum amount is less than $1,000 we permit a transfer of
up to $1,000. You may make one transfer out of the Fixed Account
during each Contract Year. A transfer into the Fixed Account is not
permitted during the 12 months following a transfer out of the Fixed
Account. When amounts are withdrawn from or transferred out of the
Fixed Account, the amounts that have been credited to the Fixed
Account for the shortest time are withdrawn first. These limits are
subject to change in the future. See THE FIXED ACCOUNT on page .
The portion of your Contract Value allocated to the variable
Subaccounts will change with the investment performance of the
selected Subaccounts. You should periodically review your allocation
of Contract Value in light of market conditions and your financial
objectives. Transfers after the Annuity Date are subject to different
limitations. See FIXED, VARIABLE, OR COMBINATION ANNUITY INCOME
OPTIONS on page .
2ACCUMULATION UNITS
When your purchase payments are allocated to a selected variable
Subaccount, they result in a particular number of Accumulation Units
being credited to your Contract. The number of Accumulation Units
credited is determined by dividing the dollar amount allocated to each
Subaccount by the value of an Accumulation Unit for that Subaccount as
of the end of the Valuation Period in which the payment is received at
the Annuity Service Center. The value of each Subaccount's
Accumulation Units varies each Valuation Period (i.e., each day that
there is trading on the New York Stock Exchange) with the Net Rate of
Return of the Subaccount. The Net Rate of Return reflects the
investment performance of the Subaccount for the Valuation Period and
is net of the asset charges to the Subaccount. See NET RATE OF RETURN
FOR A SUBACCOUNT on page .
WITHDRAWALS
You may at any time prior to the Annuity Date surrender your Contract
for its Cash Surrender Value. You may also make partial withdrawals of
$500 or more. Certain withdrawals, however, are subject to a penalty
tax. See TAX CONSIDERATIONS on page . You may not make a partial
withdrawal that, including the appropriate withdrawal charge, would
reduce your Contract Value to less than $2,500. Unless you provide
other instructions, partial withdrawals (plus any applicable
withdrawal charge) will be taken from all of your selected investment
options in proportion to your Contract Value in each investment option
at the time of the withdrawal. We will pay you the amount of any
surrender or partial withdrawal, less any required tax withholding,
within seven days after we receive a properly completed withdrawal
request. We may defer payment from the Variable Account under certain
limited circumstances for a longer period, and we reserve the right to
defer payment from the Fixed Account under any circumstances for not
more than six months. See POSTPONEMENT OF PAYMENT on page .
SIGNATURE GUARANTEE
A signature guarantee is designed to protect you and Fidelity
Investments Life from fraud. Disbursement or free look requests must
include a signature guarantee if any of the following situations
apply:
1. Your account registration has changed within the last 30 days.
2. The requested amount is more than $25,000.
3. The check is being mailed to a different address than the one on
your account (record address).
4. The check is made payable to someone other than the Owner.
5. In other circumstances where we deem it necessary for the
protection of you, the customer (e.g. the signature does not resemble
the signature we have on file).
You should be able to obtain a signature guarantee from a bank, broker
dealer (including Fidelity Investor Centers), credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
3CHARGES
The following are all the charges we make under your Contract.
1. PREMIUM TAXES. In general, we do not currently deduct any amount
from your payments for premium taxes. The entire amount of your
purchase payments will be allocated to the investment options you
select. Several states assess a premium tax upon the commencement of
annuity income payments. If you live in a jurisdiction which imposes
such a tax and if annuity income payments commence under your
Contract, we will deduct a charge from your Contract Value for the tax
we incur at the Annuity Date. A few states may require us to pay
premium taxes upon receipt of your payment. Wyoming and South Dakota
currently requires us to pay a premium tax upon receipt of your
purchase payment on non-qualified contracts. Currently, there is no
tax imposed on qualified premiums. However, we may make a deduction
for taxes required by any state upon receipt of your payments for
Contracts issued for delivery in that jurisdiction. We reserve the
right to make the deduction in any jurisdiction when we incur these
taxes. As of the date of this prospectus, the current range of state
premium taxes is from 0% to 3.5%.
2. ADMINISTRATIVE CHARGES. Administrative charges compensate us for
the expenses we incur in administering the Contracts. These expenses
include the cost of issuing the Contract, maintaining necessary
systems and records, and providing reports. We seek to cover these
expenses by two types of administrative charges: an annual maintenance
charge and daily administrative charge.
Currently, on each Contract Anniversary before the Annuity Date an
annual maintenance charge of $30 is deducted from your Contract Value.
We currently waive this annual charge prior to the Annuity Date if
your total purchase payments, less any withdrawals, equal at least
$25,000. In addition, we waive this annual maintenance charge for
Contracts purchased after May 1, 1990 by exchanging Fidelity Variable
Annuity (another annuity contract issued by Fidelity Investments
Life). Although we do not now intend to charge more than $30 per year,
we reserve the right to increase this annual charge to up to $50 if
warranted by the expenses we incur.
We also reserve the right to assess this charge against all Contracts
(except for those Contracts issued after May 1, 1990 by exchanging
Fidelity Variable Annuity). The annual maintenance charge will be
deducted from each investment option in proportion to the amount of
your total Contract Value invested in that option on the date of
deduction. We will deduct a pro rata portion of the charge on the
Annuity Date or the date the Contract is surrendered. After the
Annuity Date, we will deduct this charge on a pro rata basis from each
annuity income payment. The charge assessed after the Annuity Date
will never be greater than the charge that was in effect just prior to
the Annuity Date.
Each day, we also deduct from the assets of the Subaccounts a
percentage of those assets equivalent to an effective annual rate of
0.05%. As a charge against the Subaccounts, this administrative charge
is not assessed against your Contract Value allocated to the Fixed
Account. This charge is guaranteed never to be increased above an
effective annual rate of 0.25%.
3. MORTALITY AND EXPENSE RISK CHARGE. We deduct a daily asset charge
for our assumption of mortality and expense risks. This charge is made
by deducting daily from the assets of each Subaccount a percentage of
those assets equal to an effective annual rate of not more than 0.75%.
As with the daily administrative charge, this charge is not assessed
against your Contract Value allocated to the Fixed Account. We
guarantee never to increase this charge above an effective annual rate
of 0.75%. For Contract Owners effecting a life annuity, the mortality
risk we bear is that of making the annuity income payments for the
life of the Annuitant (or the life of the Annuitant and the life of a
second person in the case of a joint and survivor annuity) no matter
how long that might be. We also bear a mortality risk under the
Contracts, regardless of whether an annuity income payment option is
actually effected, in that we make guaranteed purchase rates
available. In addition, we bear a mortality risk by guaranteeing a
Death Benefit if the Annuitant dies prior to the Annuity Date and
prior to age 70. This Death Benefit may be greater than the Contract
Value. See DEATH BENEFIT on page . The expense risk we assume is the
risk that the costs of issuing and administering the Contracts will be
greater than we expected when setting the administrative charges. Of
this 0.75% charge, it is estimated that 0.65% is for assuming
mortality risks and it is estimated that 0.10% is for assuming expense
risks. We will realize a gain from the charge for these risks to the
extent that it is not needed to provide for benefits and expenses
under the Contracts.
4. WITHDRAWAL CHARGE. We do not assess any sales charge if you keep
your Contract in force for more than five years. If you surrender your
Contract within the first five Contract Years, we will reduce the
amount payable to you by a withdrawal charge (i.e., a contingent
deferred sales charge) to compensate us for the expenses of selling
and distributing the Contracts. In addition, we will impose a
withdrawal charge for sales expenses on certain partial withdrawals
during the first five Contract Years. We do not assess any withdrawal
charge on the death of the Owner or Annuitant. We currently assess a
withdrawal charge upon annuitization if the Contract has been in
existence for less than one year. Bearing this in mind, the Contract
should be viewed as a long-term investment and insurance product. You
may surrender the Contract without any withdrawal charges for thirty
days after notification is mailed to you of any of the following
events: (1) the renewal interest rate on any portion of your Contract
Value allocated to the Fixed Account decreased by more than 1% from
the expiring interest rate; (2) the maintenance charge is increased
above the amount shown in the Contract at issue; or (3) the
maintenance charge is imposed on your Contract as a result of a change
in practice.
There is no withdrawal charge if you withdraw the value of your
Contract in whole or in part after five Contract Years. In addition,
during the first five Contract Years, no withdrawal charge is assessed
against total withdrawals in each Contract Year of an amount up to 10%
of your total purchase payments as of the date of withdrawal. For this
purpose, "total purchase payments" refers to all purchase payments
made less any amounts previously withdrawn that were subject to a
withdrawal charge.
When a partial or full withdrawal is made within the first five
Contract Years, the amount of purchase payments withdrawn from your
Contract Value (less any amount entitled to the 10% exception) will be
subject to a withdrawal charge for sales expenses as follows:
Withdrawal Charge
As Percentage of Amount of
Contract Year Purchase Payments Withdrawn
1 5%
2 4%
3 3%
4 2%
5 1%
6 and later 0%
For purposes of determining this withdrawal charge, any amount you
withdraw in excess of amounts entitled to the 10% exception will be
considered as a withdrawal of purchase payments until you have
withdrawn an amount equal to all your payments. Amounts withdrawn
after an amount equal to your aggregate purchase payments has been
withdrawn are considered to be withdrawals of investment earnings and
are not subject to any withdrawal charge.
Additional purchase payments during the first five Contract Years will
increase the dollar amount of the potential withdrawal charge by
increasing the amount of payments that may be withdrawn while the
withdrawal charge is in effect. Additional payments do not, however,
cause the schedule of possible withdrawal charges to start over again.
For example, if an additional payment is made during the fifth
Contract Year and withdrawn later during that same year, it and all
payments withdrawn that year will be subject to a 1% withdrawal
charge. Additional payments after the fifth Contract Year will not be
subject to any possible withdrawal charge.
Free withdrawals are not cumulative. For example, let us assume that
you (1) make an initial purchase payment of $10,000; (2) make no
withdrawals during the first Contract Year; (3) make no additional
purchase payments; and (4) make a withdrawal of $1,500 in the second
Contract Year. Given this example, $1,000 would be free from a
withdrawal charge, but $500 would be subject to a withdrawal charge.
We will waive the withdrawal charge during the free look period if (a)
you purchased your contract (1) by exchanging another annuity contract
or life insurance policy, or (2) by trustee to trustee transfer or
direct rollover from an IRA or other qualified plan, and (b) (1) you
are exchanging the Contract for another annuity contract, or (2) you
are making a trustee to trustee transfer or direct rollover of the
money in a Qualified Contract to another IRA or a qualified plan.
In connection with a Contract purchased after May 1, 1990 by
exchanging Fidelity Variable Annuity (another annuity contract issued
by Fidelity Investments Life), we will determine the withdrawal charge
as if (1) the new contract had been purchased on the date the original
contract was purchased, and (2) any additional purchase payments made
under the original contract had been made under the new contract on
the same date they were actually made under the original contract.
Since the Contract is intended to be long-term, we expect that the
withdrawal charge will not be sufficient to cover our expenses in
selling the Contracts. To the extent that the withdrawal charges are
not sufficient, we will pay these expenses from our general assets.
These assets may include proceeds from the mortality and expense risk
charge described above.
5. TRANSFER CHARGE. On certain contracts issued after May 1, 1997 we
reserve the right to charge for transfers in excess of 12 per calendar
year.
6. FUNDS' EXPENSES. The expenses and charges incurred by the Funds are
described in their respective prospectuses.
7. OTHER TAXES. We reserve the right to charge for certain taxes
(other than premium taxes) that we may have to pay. See FIDELITY
INVESTMENTS LIFE'S TAXES on page .
DEATH BENEFIT
If the Annuitant dies prior to the Annuity Date, we will, upon receipt
of proof of death at the Annuity Service Center, pay a Death Benefit
to the Beneficiary you have designated. If the Annuitant dies on or
before his or her 70th birthday, the Death Benefit will equal the
greater of: (1) the purchase payments paid, less any partial
withdrawals and charges thereon; and (2) the Contract Value as of the
end of the Valuation Period in which proof of death is received at our
Annuity Service Center. If the Annuitant dies after his or her 70th
birthday, the Death Benefit will equal the Contract Value as of the
end of the Valuation Period in which proof of death is received at our
Annuity Service Center. However, for Contracts purchased after May 1,
1990 by exchanging Fidelity Variable Annuity (another annuity contract
issued by Fidelity Investments Life), the Death Benefit will be the
greater of: (1) the purchase payments paid, less any partial
withdrawals and charges thereon; and (2) the Contract Value as of the
end of the Valuation Period in which proof of death is received. No
withdrawal charge is made in connection with the payment of a Death
Benefit. The Death Benefit may be paid in a single sum or applied
under a fixed, variable or combination annuity.
During the lifetime of the Annuitant, you may elect that the Death
Benefit be applied under any one of the annuity income options listed
in the Contract or under any other income option acceptable to us. If
you have not selected an annuity income option and the Annuitant dies
prior to the Annuity Date, the Beneficiary may choose an income option
for the Death Benefit.
REQUIRED DISTRIBUTIONS UPON DEATH
Federal tax law requires that if any Owner dies before the Annuity
Date, the entire interest in the Contract must be distributed within
five years after the Owner's death, unless: the Beneficiary's or
second Owner's entire interest is payable over the Beneficiary's or
second Owner's lifetime (or a period not extending beyond the life
expectancy of the Beneficiary or second Owner) with distributions
beginning within one year of the date of death, or the Beneficiary is
the surviving spouse of the deceased Owner, in which case the spouse
may elect to continue the Contract as the Owner.
If the Contract is Jointly Owned and if either Owner dies before the
Annuity Date, the entire interest will be distributed to the surviving
Owner unless the deceased Owner was the Annuitant. In that case, the
Beneficiary will receive the distribution.
If the Owner is a corporation or other non-individual and the
Annuitant dies before the Annuity Date, the Beneficiary's entire
interest in the Contract must be distributed in the same manner as if
the contract were owned by one individual who was also the Annuitant
and that individual had died prior to the Annuity Date.
The rules regarding required distributions upon the Owner's death are
described in the Statement of Additional Information. We intend to
administer the Contracts to comply with Federal tax law.
ANNUITY DATE
When your Contract is issued, it will generally provide for the latest
permissible Annuity Date. The latest permissible date is the first day
of the calendar month following the Annuitant's 85th birthday or, if
later, the first day of the calendar month following the Contract's
fifth Contract Anniversary. You may change the Annuity Date by written
notice received at the Annuity Service Center at least 30 days prior
to the current Annuity Date then in effect. The Annuity Date must be
the first day of a month. The earliest permissible Annuity Date is the
first day of the calendar month following the expiration of the free
look period.
SELECTION OF ANNUITY INCOME OPTIONS
While the Annuitant is living and at least 30 days prior to the
Annuity Date, you may elect any one of the annuity income options
described in the Contract. You may also change your election to a
different annuity income option by notifying us in writing at least 30
days prior to the Annuity Date. Once annuity payments begin, depending
on the annuity payment option chosen, it may not be possible to change
later to a different form of payment, or to make any withdrawals.
In the case of a Qualified Contract, you must elect an option before
we make any annuity income payments. If, under a Non-qualified
Contract, you have not elected an annuity income option at least 30
days prior to the Annuity Date, the automatic annuity income option
will be a combination annuity for life, with 120 monthly payments
guaranteed. The Contract Value allocated to the Fixed Account, less
any maintenance charge and premium taxes, will be applied to the
purchase of the fixed portion of the annuity and the Contract Value
allocated to the Variable Account, less any maintenance charge and
premium taxes, will be applied to the purchase of the variable portion
of the annuity. See Annuity Income Option No. 3 under TYPES OF ANNUITY
INCOME OPTIONS on page .
FIXED, VARIABLE, OR COMBINATION ANNUITY INCOME OPTIONS
You may elect to have annuity income payments made on a fixed basis, a
variable basis, or a combination of both. If you choose a fixed
annuity, the amount of each payment will be set and will not change.
Upon selection of a fixed annuity, your Contract Value will be
transferred to the Fixed Account. The annuity income payments will be
fixed in amount and duration by the fixed annuity provisions selected,
the adjusted age and sex of the Annuitant (except Contracts utilizing
unisex purchase rates), and the then current guaranteed interest rate
used to determine fixed annuity income payments. In no event will the
guaranteed interest rate be less than 3.5% (3.0% for certain Contracts
issued May 1, 1997 or later).
If you select a variable annuity, your Contract Value will be
transferred to the Variable Account. The dollar amount of the first
variable annuity income payment will be determined in accordance with
the applicable annuity payment rates, the age and sex of the Annuitant
(except Contracts utilizing unisex purchase rates), and an assumed
annual interest rate of 3.5% unless we also offer an alternative
assumed interest rate on the Annuity Date and you select that
alternative. All subsequent variable annuity income payments are
calculated based on the Subaccount Annuity Units credited to the
Contract. Annuity Units are similar to Accumulation Units except that
built into the calculation of Annuity Unit Values is the assumption
that the Net Rate of Return of a Subaccount will equal the assumed
interest rate. Thus, with a 3.5% assumed interest rate, the Subaccount
Annuity Unit Value will not change if the daily Net Rate of Return of
the Subaccount is equivalent to an annual rate of return of 3.5%. If
the Net Rate of Return is greater than the assumed interest rate, the
Subaccount Annuity Unit Value will increase; if the Net Rate of Return
is less than the assumed interest rate, the Subaccount Annuity Unit
Value will decrease.
When variable annuity income payments commence, the number of Annuity
Units credited to the Contract in a particular Subaccount is
determined by dividing that portion of the first variable income
annuity payment attributable to that Subaccount by the Annuity Unit
Value of that Subaccount for the Valuation Period in which the Annuity
Date occurs. The number of Annuity Units of each Subaccount credited
to the Contract then remains fixed unless there is a subsequent
transfer involving the Subaccount. The dollar amount of each variable
annuity income payment after the first may increase, decrease or
remain constant. The income payment is equal to the sum of the amounts
determined by multiplying the number of Annuity Units of each
Subaccount credited to the Contract by the Annuity Unit Value for the
particular Subaccount for the Valuation Period in which each
subsequent annuity income payment is due.
If you select a combination annuity, your Contract Value will be split
between the Fixed Account and the Variable Account in accordance with
your instructions. Your annuity income payments will be the sum of the
income payment attributable to your fixed portion and the income
payment attributable to your variable portion.
After the Annuity Date, transfers between the Variable Account and the
Fixed Account are not permitted. Transfers among the variable
Subaccounts, however, are permitted subject to some limitations. See
TRANSFERS AMONG SUBACCOUNTS AFTER THE ANNUITY DATE in the Statement of
Additional Information.
TYPES OF ANNUITY INCOME OPTIONS
The Contract provides for three types of annuity income options. All
are available on a fixed, variable or combination basis. You may not
select more than one option. If your Contract Value on the Annuity
Date would not provide an initial monthly payment of at least $20, we
may pay the proceeds in a single sum rather than pursuant to the
selected option.
1. LIFE ANNUITY. Income payments will be made monthly during the
Annuitant's lifetime ceasing with the last payment due prior to the
Annuitant's death. No income payments are payable after the death of
the Annuitant. Thus, it is quite possible that income payments will be
made that are less than the value of the Contract. Indeed, if the
Annuitant were to die within one month after the Annuity Date, only
one monthly income payment would have been made. Because of this risk,
this option offers the highest level of monthly payments.
2. JOINT AND SURVIVOR ANNUITY. This option provides monthly income
payments during the joint lifetimes of the Annuitant and a designated
second person and during the lifetime of the survivor. There are some
limitations on the use of this option in qualified annuities. As in
the case of the life annuity described above, there is no guaranteed
number of income payments and no income payments are payable after the
death of the Annuitant and the designated second person.
3. LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED. This
option provides monthly income payments during the lifetime of the
Annuitant, and in any event for one hundred twenty (120) or two
hundred forty (240) months certain as elected. In the case of a
Qualified Contract, the guarantee period may not exceed the life
expectancy of the Annuitant. In the event of the death of the
Annuitant under this option, the Contract provides that any guaranteed
monthly income payments will be paid to the Beneficiary or
Beneficiaries during the remaining months of the term selected.
However, a Beneficiary may, at any time, elect to receive the
discounted value of his or her remaining income payments in a single
sum. In such event, the discounted value for fixed or variable annuity
income payments will be based on interest compounded annually at the
applicable interest rate used in determining the first annuity income
payment. Upon the death of a Beneficiary receiving annuity benefits
under this option, the present value of the guaranteed benefits
remaining after we receive notice of the death of the Beneficiary,
computed at the applicable interest rate, shall be paid in a single
sum to the estate of the Beneficiary. The present value is computed as
of the Valuation Period during which notice of the death of the
Beneficiary is received at the Annuity Service Center.
You may choose to have income payments made on a monthly basis or at
another frequency such as quarterly, semi-annually or annually. In
addition to the Annuity Income Options provided for in the Contracts,
other Annuity Income Options may be made available by the Company.
REPORTS TO OWNERS
During the Accumulation period, four times each Contract Year you will
receive a statement of your Contract Value, including a summary of all
transactions since the preceding quarterly statement.
In addition, you will receive semiannual reports containing financial
statements for the Variable Account and a list of portfolio securities
of the Funds, as required by the Investment Company Act of 1940.
7.THE FIXED ACCOUNT
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE
FIXED ACCOUNT OPTION UNDER THE CONTRACTS HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND THE GENERAL ACCOUNT HAS NOT BEEN
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT
OF 1940. ACCORDINGLY, INTERESTS IN THE FIXED ACCOUNT OPTION ARE NOT
SUBJECT TO THE PROVISIONS OF THOSE ACTS, AND FIDELITY INVESTMENTS LIFE
HAS BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS
RELATING TO THE FIXED ACCOUNT OPTION. DISCLOSURES REGARDING THE
GENERAL ACCOUNT MAY, HOWEVER, BE SUBJECT TO CERTAIN GENERALLY
APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE
ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
As noted earlier, you may allocate purchase payments or transfer all
or a part of your Contract Value to a fixed-rate investment option
funded through Fidelity Investments Life's general account (the "Fixed
Account"). The Fixed Account may also be referred to as the
"Guaranteed Account". Funds allocated or transferred to the Fixed
Account do not fluctuate with the investment experience of Fidelity
Investments Life's general account. We guarantee that the portion of
your Contract Value that is held in the Fixed Account will accrue
interest daily at an annual rate that will never be less than 3.5%
(3.0% for certain contacts issued May 1, 1997 or later). When a
purchase payment is received or an amount is transferred into the
Fixed Account, an interest rate will be assigned to that amount. That
rate will be guaranteed for a certain period of time depending on when
the amount was allocated to the Fixed Account. When this initial
period expires, a new interest rate will be assigned to that amount
which will be guaranteed for a period of at least a year. Thereafter,
interest rates credited to that amount will be similarly guaranteed
for successive periods of at least one year. Therefore, different
interest rates may apply to different amounts in the Fixed Account
depending on when the amount was initially allocated. Furthermore, the
interest rate applicable to any particular amount may vary from time
to time.
For certain contracts issued May 1, 1997 or later, we may discontinue
the availability of the Fixed Account for transfers from the Variable
Account or for purchase payments at any time.
The amount of your Contract Value in the Fixed Account and the amount
of interest credited will be included in the quarterly statements we
send to you. See REPORTS TO OWNERS on page .
8.MORE ABOUT THE CONTRACT
TAX CONSIDERATIONS
The following discussion is not intended as tax advice. For tax advice
you should consult a tax Adviser. Although the following discussion is
based on our understanding of Federal income tax laws as currently
interpreted, there is no guarantee that those laws or interpretations
will not change. The following discussion does not take into account
state or local income tax or other considerations which may be
involved in the purchase of a Contract or the exercise of options
under the Contracts. In addition, the following discussion assumes
that the Contract is owned by an individual, and we do not intend to
offer the Contracts to "non natural" persons such as corporations,
unless the Contract is held by such person as a nominee for an
individual. (If the Contract is not owned by or held for a natural
person, the contract will generally not be treated as an annuity for
tax purposes.)
The following discussion assumes that the Contract will be treated as
an annuity for Federal income tax purposes. Section 817(h) of the Code
provides that the investments of a separate account underlying a
variable annuity contract (or the investments of a mutual fund, the
shares of which are owned by the variable annuity separate account)
must be "adequately diversified" in order for the Contract to be
treated as an annuity for tax purposes. The Treasury Department has
issued regulations prescribing such diversification requirements. The
Variable Account, through each of the portfolios of the Funds, intends
to comply with these requirements. We have entered into agreements
with the Funds that require the Funds to operate in compliance with
the Treasury Department's requirements. In connection with the
issuance of prior regulations relating to diversification
requirements, the Treasury Department announced that such regulations
do not provide guidance concerning the extent to which owners may
direct their investments to particular divisions of a separate
account. Additional guidance relating to this subject is expected in
the near future. It is not clear what this guidance will provide or
whether it will be prospective only. It is possible that when this
guidance is issued the Contract may need to be modified to comply with
it.
In addition, to qualify as an annuity for Federal tax purposes, the
Contract must satisfy certain requirements for distributions in the
event of the death of the Owner of the Contract. The Contract contains
such required distribution provisions. For further information on
these requirements see the Statement of Additional Information.
The individual situation of each Owner or Beneficiary will determine
the Federal estate taxes and the state and local estate, inheritance
and other taxes due if an Owner or the Annuitant dies.
QUALIFIED CONTRACTS
The Contract may be used as a qualified individual retirement annuity.
Under Section 408(b) of the Code, eligible individuals may contribute
to an individual retirement annuity ("IRA"). The Code permits certain
"rollover" contributions to be made to an IRA. In particular, certain
qualifying distributions from another qualified plan, tax sheltered
annuity or IRA may be received tax-free if rolled over to an IRA
within 60 days of receipt. Because the Contract's minimum initial
payment of $10,000 is greater than the maximum annual contribution
permitted to an IRA, a Qualified Contract may be purchased only in
connection with a "rollover" of the proceeds from another qualified
plan, tax sheltered annuity or IRA. IN ADDITION, QUALIFIED CONTRACTS
WILL NOT ACCEPT ANY SUBSEQUENT CONTRIBUTIONS OTHER THAN ADDITIONAL
ROLLOVER CONTRIBUTIONS FROM ANOTHER QUALIFIED PLAN, TAX SHELTERED
ANNUITY OR IRA. In order to qualify as an IRA under Section 408(b) of
the Code, a Contract must contain certain provisions: (1) the Owner of
the Contract must be the Annuitant and, except for certain transfers
incident to a divorce decree, the Owner cannot be changed and the
Contract cannot be transferable; (2) the Owner's interest in the
Contract cannot be forfeitable; and (3) annuity and death benefit
payments must satisfy certain minimum distribution requirements.
Contracts issued on a qualified basis will conform to the requirements
for an IRA and will be amended to conform to any future changes in the
requirements for an IRA.
CONTRACT VALUES AND PROCEEDS
Under current law, you will not be taxed on increases in the value of
your Contract until a distribution occurs. A distribution may occur in
the form of a withdrawal, death benefit payment, or payments under an
Annuity Income Option. An amount received as a loan under, or the
assignment or pledge of any portion of the value of, a Contract may
also be treated as a distribution. In the case of a Qualified
Contract, you may not receive or make any such loan or pledge. Any
such loan or pledge will result in disqualification of the Contract
and inclusion of the value of the entire Contract in income.
Additionally, a transfer of a Non-qualified Contract for less than
full and adequate consideration will result in a deemed distribution,
unless the transfer is to your spouse (or to a former spouse pursuant
to a divorce decree). The taxable portion of a distribution is
generally taxed as ordinary income.
If you fully surrender your Contract before annuity income payments
commence, you will be taxed on the portion of the distribution that
exceeds your cost basis in your Contract. For Non-qualified Contracts,
the cost basis is generally the amount of your payments, and the
taxable portion of the proceeds is taxed as ordinary income. For
Qualified Contracts, the cost basis is generally zero, and the entire
amount of the surrender payment is generally taxed as ordinary income.
In addition, for both Qualified and Non-qualified Contracts, amounts
received as the result of the death of the Owner or Annuitant that are
in excess of your cost basis will also be taxed.
Partial withdrawals under a Non-qualified Contract are treated for tax
purposes as first being taxable withdrawals of investment income,
rather than as return of purchase payments, until all investment
income earned by your Contract has been withdrawn. You will be taxed
on the amount withdrawn to the extent that your Contract Value at that
time, unreduced by the withdrawal charge, exceeds your payments.
Partial withdrawals under a Qualified Contract are prorated between
taxable income and non-taxable return of investment. Generally, the
cost basis of a Qualified Contract is zero, and the partial withdrawal
will be fully taxed.
All annuity contracts issued by the same company (or an affiliated
company) to the same contract owner during any calendar year are
treated as one annuity contract for purposes of determining the amount
includible in income of any distribution that is not received as an
annuity payment. In the case of a Qualified Contract, the tax law
requires for all post-1986 contributions and distributions that all
individual retirement accounts and annuities be treated as one
contract.
Although the tax consequences may vary depending on the form of
annuity selected under the Contract, the recipient of an annuity
income payment under the Contract generally is taxed on the portion of
such income payment that exceeds the cost basis in the Contract. For
variable annuity income payments, the taxable portion is determined by
a formula that establishes a specific dollar amount that is not taxed.
This dollar amount is determined by dividing the Contract's cost basis
by the total number of expected periodic income payments. However, the
entire distribution will be fully taxable once the recipient is deemed
to have recovered the dollar amount of the investment in the Contract.
For Qualified Contracts, the cost basis is generally zero and each
annuity income payment is fully taxed.
A penalty tax equal to 10% of the amount treated as taxable income may
be imposed on distributions. The penalty tax applies to early
withdrawals or distributions. The penalty tax is not imposed on: (1)
distributions made to persons on or after age 59 1/2; (2)
distributions made after death of the Owner; (3) distributions to a
recipient who has become disabled; (4) distributions in substantially
equal installments made for the life of the taxpayer or the lives of
the taxpayer and a designated second person; and (5) in the case of
Qualified Contracts, distributions received from the rollover of the
Contract into another qualified contract or IRA. In the case of a
Contract held in custody for a minor under the Uniform Gifts to Minors
Act or the Uniform Transfers to Minors Act, a distribution under the
Contract ordinarily is taxable to the minor. Whether the penalty tax
applies to such a distribution ordinarily is determined by the
circumstance or characteristics of the minor, not the custodian. Thus,
for example, a distribution taxable to a minor will not qualify for
the exception to the penalty tax for distributions made on or after
age 59 1/2, even if the custodian is 59 1/2 or older. In addition, in
the case of a Qualified Contract, a 50% excise tax is imposed on the
amount by which minimum required annuity or death benefit
distributions exceed actual distributions. Penalty taxes also are
imposed on aggregate distributions from specified retirement programs
(including IRAs) in excess of a specified amount annually and in
certain other circumstances.
We will withhold and remit to the U.S. Government a part of the
taxable portion of each distribution made under the Contract, unless
the Owner, Annuitant or Beneficiary files a written election prior to
the distribution stating that he or she chooses not to have any
amounts withheld.
FIDELITY INVESTMENTS LIFE'S TAXES
The earnings of the Variable Account are taxed as part of the
operations of Fidelity Investments Life. Under the current provisions
of the Code, we do not expect to incur Federal income taxes on
earnings of the Variable Account to the extent the earnings are
credited under the Contracts. Based on this, no charge is being made
currently to the Variable Account for our Federal income taxes. We
will periodically review the need for a charge to the Variable Account
for company Federal income taxes. Such a charge may be made in future
years for any Federal income taxes that would be attributable to the
Contracts.
Under current laws we may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not
significant and are not charged against the Contracts or the Variable
Account. If the amount of these taxes changes substantially, we may
make charges for such taxes against the Variable Account.
OTHER CONTRACT PROVISIONS
You should also be aware of the following important provisions of your
Contract.
1. OWNER. As an Owner named in the application, you have the rights
and privileges specified in the Contract. If there are two Owners they
must be spouses. Owners own the Contract in accordance with its terms.
Because they are inconsistent with the operation of the Contract, we
will not accept applications with additional legal terms such as
"tenancy by the entirety," "joint tenants in common" or "joint
ownership by husband and wife".
Prior to the Annuity Date and during the lifetime of the Annuitant,
you may change an Owner or Beneficiary (but not the Annuitant) by
notifying us in writing. You may not, however, change the Owner of a
Qualified Contract. A change in the Owner of a Non-qualified Contract
will take effect on the date the request was signed, but it will not
apply to any payments made by us before the request was received and
recorded at the Annuity Service Center. If there are two Owners, any
written authorizations must come from both Owners.
2. BENEFICIARY. The Beneficiary(ies) is (are) named on the application
unless later changed. The proceeds will be paid to the Beneficiary or
Beneficiaries if all the Owners or the Annuitant dies before the
Annuity Date. No Beneficiary has rights in the contract until all the
Owners or the Annuitant has died. If no Beneficiary survives the
deceased Annuitant or the last deceased Owner, the proceeds will be
paid to the surviving Owner(s) or to the estate or estates of the
deceased Owner(s). All Beneficiaries must be identified by name. A
Beneficiary may be a "Primary Beneficiary" or a "Contingent
Beneficiary". No Contingent Beneficiary has the right to proceeds
unless all of the Primary Beneficiaries die before proceeds are
determined.
3. MISSTATEMENT OF AGE OR SEX. If the age or sex of the Annuitant has
been misstated, we will change the benefits to those which the
proceeds would have purchased had the correct age and sex been stated.
If the misstatement is not discovered until after annuity income
payments have started, we will take the following action: (1) if we
made any overpayments, we may add interest at the rate of 6% per year
compounded annually and charge them against income payments to be made
in the future; (2) if we made any underpayments, the balance plus
interest at the rate of 6% per year compounded annually will be paid
in a single sum.
4. ASSIGNMENT. You may assign a Non-qualified Contract at any time
during the lifetime of the Annuitant and before the Annuity Date. See
TAX CONSIDERATIONS on page . No assignment will be binding on us
unless it is written in a form acceptable to us and received at our
Annuity Service Center. Your rights and the rights of any Beneficiary
will be affected by an assignment. We will not be responsible for the
validity of any assignment. No assignment may be made of a Qualified
Contract.
5. DIVIDENDS. Our variable annuity Contracts are "non-participating".
This means that they do not provide for dividends. Investment results
under the Contracts are reflected in benefits.
SELLING THE CONTRACTS
The Contracts will be distributed through Fidelity Brokerage Services,
Inc. and Fidelity Insurance Agency, Inc., both of which are affiliated
with FMR Corp., the parent company of Fidelity Investments Life.
Fidelity Brokerage Services, Inc. is the principal underwriter
(distributor) of the Contracts. Fidelity Distributors Corporation is
the distributor of the Fidelity family of funds, including the
Fidelity Funds. The principal business address of Fidelity Brokerage
Services, Inc. and Fidelity Distributors Corporation is 82 Devonshire
Street, Boston, Massachusetts 02109. We pay Fidelity Insurance Agency,
Inc. first year sales compensation of not more than 2% of payments
received in the first Contract Year as well as renewal sales
compensation in later years based on persistency of Contracts and the
size of Contract Values. Our renewal sales compensation payments will
be approximately equal to 0.10% of the Contract Value as of the end of
each Contract Year.
AUTOMATIC DEDUCTION PLAN
Under the automatic deduction plan you can make regular payments by
pre-authorized transfers from a checking account. Your checking
account must be at a banking institution which is a member of ACH
(Automatic Clearing House). The minimum regular payment is $100. This
minimum may be reduced for Contracts issued under certain sponsored
arrangements. Transactions pursuant to an automatic deduction plan
will be confirmed in your quarterly statement. We reserve the right to
restrict your participation in the automatic deduction plan if your
checking account has insufficient funds to cover the transfer.
SPECIAL PROVISIONS APPLICABLE TO SALES UNDER SPONSORED ARRANGEMENTS
We may reduce the annual maintenance charge and/or the withdrawal
charge on Contracts offered to individuals under a sponsored
arrangement. See CHARGES on page . We determine the eligibility of
groups for such reduced charges, and the amount of such reductions for
particular groups, by considering the following factors: (1) the size
of the group; (2) the total amount of purchase payments expected to be
received from the group; (3) the nature of the group and the
persistency expected in that group; (4) the purpose for which the
Contracts are purchased and whether that purpose makes it likely that
expenses will be reduced; and (5) any other circumstances which we
believe to be relevant in determining whether reduced sales or
administrative expenses may be expected. Some of the reductions in
charges for these sales may be contractually guaranteed; other
reductions may be withdrawn or modified on a uniform basis. Our
reductions in charges for sponsored sales will not be unfairly
discriminatory to the interests of any Contract Owners.
Contracts issued under a sponsored arrangement generally utilize
unisex annuity purchase rates.
We may also reduce minimum purchase payment requirements on Contracts
issued under these arrangements. Because of these reductions, we
include a provision in such Contracts that allows us to cancel
smaller, inactive Contracts. If we cancel your Contract under this
provision, we will pay you your Contract Value in a single sum
payment. Specifically, we may, at our option, cancel such a Contract
prior to the Annuity Date if all of the following conditions exist at
the same time: (1) no purchase payments have been made during the
previous 24 months; (2) the total purchase payments credited to the
Contract are less than $2,000; and (3) the Contract Value is less than
$2,000.
DOLLAR COST AVERAGING
Dollar cost averaging allows you to make automatic monthly dollar
amount transfers from the Money Market Subaccount to any of the other
variable Subaccounts. Dollar cost averaging transfers are not
permitted to the Fixed Account.
These monthly transfers will take effect on the same day each month.
You may select any date between the 1st and 28th as the date of your
dollar cost averaging transfers (the "Transfer Date"). If the Transfer
Date occurs on a day the New York Stock Exchange is closed (i.e.,
weekend or holiday), the dollar cost averaging transfer will take
effect as of the next business day which the New York Stock Exchange
is open. Your transfers will continue until the balance in the Money
Market Subaccount is exhausted or you notify us of cancellation of
dollar cost averaging for your Contract.
The minimum monthly transfer allowed to any variable Subaccount is
$250.
Dollar cost averaging is currently available at no charge to the
Contract Owner. Fidelity Investments Life reserves the right to modify
or terminate the dollar cost averaging feature.
POSTPONEMENT OF PAYMENT
In general, we will ordinarily pay any partial or full cash withdrawal
within seven days after we receive your written request at our Annuity
Service Center. We will usually pay any Death Benefit within seven
days after we receive proof of the Annuitant's death. However, we may
delay payment if (1) the disposal or valuation of the Variable
Account's assets is not reasonably practicable because the New York
Stock Exchange is closed for other than a regular holiday or weekend,
trading is restricted by the SEC, or the SEC declares that an
emergency exists; or (2) the SEC by order permits postponement of
payment to protect our Contract Owners. In addition, we reserve the
right to delay payment of any partial or full cash withdrawal from the
Fixed Account for not more than six months. If payment from the Fixed
Account is delayed for more than 30 days, it will be credited with
interest from the date of withdrawal at a rate not less than 3.5% per
year compounded annually (3.0% per year for certain contracts issued
May 1, 1997 or later) or, if greater, the rate required by law.
9.MORE ABOUT THE VARIABLE ACCOUNT AND THE FUNDS
CHANGES IN INVESTMENT OPTIONS
We may from time to time make additional Subaccounts available to you.
These Subaccounts will invest in investment portfolios that we find
suitable for the Contracts.
We also have the right to eliminate Subaccounts from the Variable
Account, to combine two or more Subaccounts, or to substitute a new
portfolio or fund for the portfolio in which a Subaccount invests. A
substitution may become necessary if, in our judgment, a portfolio or
Fund no longer suits the purposes of the Contracts. This may happen
due to a change in laws or regulations, or a change in a portfolio's
investment objectives or restrictions, or because the portfolio is no
longer available for investment, or for some other reason. We would
obtain prior approval from the SEC and any other required approvals
before making such a substitution.
We also reserve the right to operate the Variable Account as a
management investment company under the 1940 Act or any other form
permitted by law or to deregister the Variable Account under such Act
in the event such registration is no longer required.
NET RATE OF RETURN FOR A SUBACCOUNT
A Subaccount's Net Rate of Return depends on how the investments of
the Subaccount perform. We determine the Net Rate of Return of a
Subaccount at the end of each Valuation Period. Such determinations
are made as of the close of business each day the New York Stock
Exchange is open for business. The Net Rate of Return reflects the
investment performance of the Subaccount for the Valuation Period and
is net of the asset charges to the Subaccounts.
Shares of the Funds are valued at net asset value. Any dividends or
capital gains distributions of a portfolio of the Funds are reinvested
in shares of that portfolio.
VOTING RIGHTS
We will vote shares of the Funds owned by the Variable Account
according to your instructions. However, if the Investment Company Act
of 1940 or any related regulations or interpretations should change,
and we decide that we are permitted to vote the shares of the Funds in
our own right, we may decide to do so.
Before the Annuity Date, we calculate the number of shares that you
may instruct us to vote by dividing your Contract Value in a
Subaccount by the net asset value of one share of the corresponding
portfolio. If variable annuity income payments have commenced, we
calculate the number of shares that the payee may instruct us to vote
by dividing the reserve maintained in each Subaccount to meet the
obligations under the Contract by the net asset value of one share of
the corresponding portfolio. Fractional votes will be counted. We
reserve the right to modify the manner in which we calculate the
weight to be given to your voting instructions where such a change is
necessary to comply with then current Federal regulations or
interpretations of those regulations.
We will determine the number of shares you can instruct us to vote 90
days or less before the applicable Fund shareholder meeting. At least
14 days before the meeting, we will send you material by mail for
providing us with your voting instructions.
If your voting instructions are not received in time, we will vote the
shares in the same proportion as the instructions received from other
Contract Owners. We will also vote shares we hold in the Variable
Account that are not attributable to Contract Owners in the same
proportionate manner. Under certain circumstances, we may be required
by state regulatory authorities to disregard voting instructions. This
may happen if following such instructions would change the
sub-classification or investment objectives of the portfolios, or
result in the approval or disapproval of an investment Advisery
contract.
Under Federal regulations, we may also disregard instructions to vote
for Contract Owner-initiated changes in investment policies or the
investment adviser if we disapprove of the proposed changes. We would
disapprove a proposed change only if it were contrary to state law,
prohibited by state regulatory authorities, or if we decided that the
change would result in overly speculative or unsound investments. If
we ever disregard voting instructions, we will include a summary of
our actions in the next semiannual report.
RESOLVING MATERIAL CONFLICTS
The investment portfolios of the Funds are available to registered
separate accounts offering variable annuity and variable life products
of other participating insurance companies, as well as to the Variable
Account and other separate accounts we establish.
Although we do not anticipate any disadvantages to this, there is a
possibility that a material conflict may arise between the interest of
the Variable Account and one or more of the other separate accounts
participating in the Funds. A conflict may occur due to a change in
law affecting the operations of variable life and variable annuity
separate accounts, differences in the voting instructions of our
Contract Owners and those of other companies, or some other reason. In
the event of a conflict, we will take any steps necessary to protect
our Contract Owners and variable annuity payees.
PERFORMANCE
Performance information for the variable Subaccounts may appear in
reports and advertising to current and prospective Contract Owners.
The performance information is based on historical investment
experience of the Subaccounts and the Funds and does not indicate or
represent future performance.
Total returns are based on the overall dollar or percentage change in
value of a hypothetical investment. Total return quotations reflect
changes in Fund share price, the automatic reinvestment by the
separate account of all distributions and the deduction of applicable
annuity charges (including any contingent deferred sales charges that
would apply if a Contract Owner surrendered the Contract at the end of
the period indicated). Quotations of total return may also be shown
that do not take into account certain contractual charges such as a
maintenance charge or a contingent deferred sales load. The total
return percentage will be higher under this method than under the
standard method described above.
A cumulative total return reflects performance over a stated period of
time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same
cumulative total return if the performance had been constant over the
entire period. Because average annual total returns tend to smooth out
variations in a Subaccount's returns, you should recognize that they
are not the same as actual year-by-year results.
Some Subaccounts may also advertise yield. These measures reflect the
income generated by an investment in the Subaccount over a specified
period of time. This income is annualized and shown as a percentage.
Yields do not take into account capital gains or losses or the
contingent deferred sales load. The standard quotations of yield
reflect the maintenance charge. Quotations of yield may also be shown
that do not reflect the maintenance charge. The yield calculation will
be higher under this method than under the standard method.
The Money Market Subaccount may advertise its current and effective
yield. Current yield reflects the income generated by an investment in
the Subaccount over a 7 day period. Effective yield is calculated in a
similar manner except that income earned is assumed to be reinvested.
The Investment Grade Bond, High Income and Emerging Markets Debt
Subaccounts may advertise a 30 day yield which reflects the income
generated by an investment in the Subaccount over a 30 day period.
LITIGATION
No litigation is pending that would have a material effect on us or
the Variable Account.
10. APPENDIX 1
Accumulation Unit Values
Fidelity Investments Variable Annuity Account 1
Condensed Financial Information
Money Market Subaccount
Accumulation Accumulation Percentage Increase Number of
Unit Value at Unit Value at or (Decrease) Accumulation
Beginning Units at
of Period End of Period During Period End of Period
1996 14.66 15.30 4.34% 33,393,564
1995 13.99 14.66 4.82% 26,268,846
1994 13.55 13.99 3.21% 24,546,739
1993 13.26 13.55 2.20% 10,961,418
1992 12.89 13.26 2.86% 8,273,590
1991 12.27 12.89 5.03% 6,461,782
1990 11.48 12.27 6.95% 5,020,276
1989 10.62 11.48 8.06% 1,449,116
1988* 10.00 10.62 6.21% 204,424
* Period from 1/05/88 to 12/31/88
High Income Subaccount
Accumulation Accumulation Percentage Increase Number of
Unit Value at Unit Value at or (Decrease) Accumulation
Beginning Units at
of Period End of Period During Period End of Period
1996 22.05 24.89 12.88% 9,856,952
1995 18.47 22.05 19.40% 7,797,315
1994 18.94 18.47 (2.53)% 5,106,950
1993 15.88 18.94 19.31% 5,122,946
1992 13.03 15.88 21.82% 2,624,011
1991 9.73 13.03 33.92% 859,030
1990 10.07 9.73 (3.35)% 356,960
1989 10.63 10.07 (5.23)% 273,152
1988* 10.00 10.63 6.26 % 69,632
* Period from 2/10/88 to 12/31/88
Equity-Income Subaccount
Accumulation Accumulation Percentage Increase Number of
Unit Value at Unit Value at or (Decrease) Accumulation
Beginning Units at
of Period End of Period During Period End of Period
1996 27.44 31.05 13.13% 43,073,117
1995 20.52 27.44 33.75% 41,937,122
1994 19.36 20.52 6.00% 30,415,281
1993 16.54 19.36 17.02% 19,318,902
1992 14.28 16.54 15.81% 8,648,323
1991 10.98 14.28 30.14% 3,225,101
1990 13.09 10.98 (16.14)% 1,391,751
1989 11.27 13.09 16.17% 714,730
1988* 10.00 11.27 12.67% 90,240
* Period from 2/10/88 to 12/31/88
Growth Subaccount
Accumulation Accumulation Percentage Increase Number of
Unit Value at Unit Value at or (Decrease) Accumulation
Beginning Units at
of Period End of Period During Period End of Period
1996 30.80 34.97 13.55% 26,772,269
1995 22.98 30.80 34.02% 23,019,869
1994 23.22 22.98 (1.02)% 17,470,386
1993 19.64 23.22 18.18% 12,073,224
1992 18.15 19.64 8.23% 8,401,957
1991 12.60 18.15 44.06% 4,162,470
1990 14.42 12.60 (12.62)% 1,654,455
1989 11.08 14.42 30.09% 434,747
1988* 10.00 11.08 10.84% 47,640
* Period from 2/10/88 to 12/31/88
Overseas Subaccount
Accumulation Accumulation Percentage Increase Number of
Unit Value at Unit Value at or (Decrease) Accumulation
Beginning Units at
of Period End of Period During Period End of Period
1996 19.00 21.30 12.08% 11,419,855
1995 17.50 19.00 8.58% 9,560,376
1994 17.37 17.50 0.71% 14,336,196
1993 12.79 17.37 35.86% 8,857,429
1992 14.47 12.79 (11.61)% 1,983,970
1991 13.51 14.47 7.09% 1,413,997
1990 13.89 13.51 (2.73)% 1,086,588
1989 11.11 13.89 25.02% 160,830
1988* 10.00 11.11 11.08% 13,527
* Period from 2/10/88 to 12/31/88
Investment Grade Bond Subaccount
Accumulation Accumulation Percentage Increase Number of
Unit Value at Unit Value at or (Decrease) Accumulation
Beginning Units at
of Period End of Period During Period End of Period
1996 16.99 17.36 2.15% 4,615,384
1995 14.63 16.99 16.15% 3,993,107
1994 15.35 14.63 (4.72)% 3,151,087
1993 13.98 15.35 9.85% 3,714,356
1992 13.24 13.98 5.59% 2,651,021
1991 11.48 13.24 15.33% 1,860,441
1990 10.93 11.48 5.04% 486,509
1989 10.01 10.93 9.19% 106,584
1988* 10.00 10.01 0.06% 270
* Period from 12/27/88 to 12/31/88
Asset Manager Subaccount
Accumulation Accumulation Percentage Increase Number of
Unit Value at Unit Value at or (Decrease) Accumulation
Beginning Units at
of Period End of Period During Period End of Period
1996 18.29 20.76 13.45% 33,062,627
1995 15.80 18.29 15.79% 39,821,641
1994 16.99 15.80 (7.03)% 56,621,559
1993 14.18 16.99 19.84% 48,441,225
1992 12.80 14.18 10.76% 22,395,511
1991 10.55 12.80 21.33% 6,736,284
1990 9.98 10.55 5.75% 1,376,582
1989* 10.00 9.98 (0.23)% 223,855
* Period from 10/04/89 to 12/31/89
Index 500 Subaccount
Accumulation Accumulation Percentage Increase Number of
Unit Value at Unit Value at or (Decrease) Accumulation
Beginning Units at
of Period End of Period During Period End of Period
1996 15.54 18.90 21.59% 18,160,844
1995 11.44 15.54 35.82% 7,333,800
1994 11.44 11.44 0.03% 2,102,667
1993 10.53 11.44 8.64% 1,509,615
1992* 10.00 10.53 5.26% 637,942
* Period from 9/1/92 to 12/31/92.
Asset Manager: Growth Subaccount
Accumulation Accumulation Percentage Increase Number of
Unit Value at Unit Value at or (Decrease) Accumulation
Beginning Units at
of Period End of Period During Period End of Period
1996 12.20 14.50 18.73% 12,261,937
1995* 10.00 12.20 22.06% 4,035,434
* Period from 1/3/95 (commencement of operations) to 12/31/95
Contrafund Subaccount
Accumulation Accumulation Percentage Increase Number of
Unit Value at Unit Value at or (Decrease) Accumulation
Beginning Units at
of Period End of Period During Period End of Period
1996 13.87 16.66 20.09% 53,010,249
1995* 10.00 13.87 38.68% 32,421,946
* Period from 1/3/95 (commencement of operations) to 12/31/95
Accumulation Unit Values shown above are rounded to two decimal
places. Percentage changes in Accumulation Unit Values were calculated
using exact Accumulation Unit Values (six decimal places). The
percentage changes shown are therefore more precise than the figures
that would be obtained using the rounded Accumulation Unit values
shown for the beginning and end of each period.
Certain contracts in this prospectus have been offered only as of
December 7, 1988, and others only as of May 1, 1997. The financial
information in the above table includes periods prior to December 7,
1988 because an earlier class of variable annuity contracts is also
being funded through the Variable Account. Financial information
reflects all classes of contracts. Because the three classes of
contracts funded through the Variable Account have the same total
asset-based charges, Accumulation Unit Values will be the same for all
classes of contracts.
The financial statements of the Variable Account appear in the
Statement of Additional Information.
11.TABLE OF CONTENTS
OF THE STATEMENT OF ADDITIONAL INFORMATION
Accumulation Units
Fixed Annuity Income Payments
Variable Annuity Income Payments
Hypothetical Illustrations of Annuity Income Payouts
General Information
Performance
Transfers Among Subaccounts After the Annuity Date
Unavailability of Annuity Income Options in Certain Circumstances
IRS Required Distributions
Safekeeping of Variable Account Assets
Distribution of the Contracts
State Regulation
Legal Matters
Registration Statement
Independent Accountants
Financial Statements
THIS PAGE INTENTIONALLY LEFT BLANK
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
1. Internal Revenue Service Regulations require you be given this
Disclosure Statement to make certain that you fully understand the
nature of an Individual Retirement Account (IRA). For this reason, it
is important that you read this statement carefully.
REVOCATION
2. You are allowed to revoke or cancel your IRA within ten (10) days
of the later of (1) the date of the application for the IRA; or (2)
the date you receive the IRA contract. A revocation treats an IRA as
if it never existed, and entitles you to a full refund of your entire
contribution. FILI will refund the greater of: (1) your Purchase
Payment in full, neither crediting your account for earnings, nor
charging it with any administrative expenses, or (2) your contract
value at the time of revocation plus any amount deducted from your
contribution prior to such time.
You may revoke your IRA by mailing or delivering a notice of
revocation to:
Fidelity Investments Life Insurance Company
Annuity Service Center
P.O. Box 1306
Boston, MA 02104-9907
Any question regarding this procedure may be directed to a Fidelity
Insurance Specialist at 1-800-544-2442.
CONTRIBUTIONS
3. You may establish an IRA for the purpose of rolling over all or a
portion of your distribution from a qualified plan, tax sheltered
annuity or other IRA. If you retire, terminate your employment prior
to retirement age, or become disabled, and you are entitled to a
single sum distribution, all or a portion of the distribution may be
transferred to a qualifying IRA tax-free if done within 60 days of
receipt of the single sum distribution. The amount of your rollover
IRA contribution will not be included in your taxable income for the
year in which you receive the qualified plan distribution.
4. Subsequent contributions, other than additional rollover
contributions from another qualified plan, tax sheltered annuity or
IRA, will not be accepted.
5. No deduction is allowed for a rollover contribution which is not
treated as income to the individual.
INVESTMENTS
6 The assets in your IRA are nonforfeitable, subject to the surrender
charges specified in the IRA contract.
7. The assets in your IRA cannot be commingled with other property
except in a common trust fund or common investment fund.
8. No part of the IRA may be invested in life insurance or endowment
contracts.
DISTRIBUTIONS
9. Distributions from your IRA will be included in your gross income
for federal income tax purposes for the year in which you receive
them.
10. To the extent they are included in taxable income, distribution
from your IRA made before age 59 1/2 will be subject to a 10%
non-deductible penalty tax (in addition to being taxable as ordinary
income) unless the distribution is rolled over to another qualified
plan, tax sheltered annuity or IRA, or the distribution is made on
account of your death or disability, or the distribution is one of a
scheduled series of payments over your life or life expectancy or the
joint life expectancies of yourself and the second person designated
by you.
11. You must begin receiving distributions of the assets in your IRAs
by April 1 of the calendar year following the calendar year in which
you reach 70 1/2. Subsequent distributions must be made by December 31
of each year.
12. You may select one of the following methods of distribution for
the assets of this IRA:
(a) Distribution over your life or your life and the life of a second
person designated by you;
(b) Distribution over a period certain not to exceed your life
expectancy or your life expectancy and that of a second person
designated by you;
(c) Single sum payment; or
(d) Partial withdrawals that, together with withdrawals from your
other IRAs, satisfy the minimum distribution requirements discussed
below.
(See Contract and Endorsement for a full description of these
distribution methods.)
13. Once distributions are required to begin, they must not be less
than the amount each year (determined by actuarial tables) which would
exhaust the value of all your IRAs over the required distribution
period, which is generally your life expectancy or the joint life and
last survivor expectancy of you and your spouse. You will be subject
to a 50% excise tax on the amount by which the distribution you
actually received in any year falls short of the minimum distribution
required for the year.
14. If you die after distribution of the IRA has commenced, the
remaining balance must continue to be distributed under the same or a
more rapid method of distribution.
15. If you die before distribution of the IRA commences, the entire
balance must be distributed to the beneficiary within five (5) years
unless:
(a) The beneficiary is your surviving spouse and the beneficiary
either treats the IRA as his or her own IRA or elects within a five
(5) year period to receive payments over his or her own life
expectancy commencing at any date prior to the date you would have
reached age 70 1/2; or
(b) The beneficiary is not your surviving spouse and the beneficiary
elects to have the IRA distributed over his or her life expectancy
commencing within one (1) year of your death.
16. There is a 15% excise tax assessed against annual distribution
from tax-favored retirement plans, including IRAs, which exceed the
greater of (a) $150,000; and (b) $112,500 adjusted after 1988 to
reflect cost-of-living increases. To determine whether you have
distributions in excess of this limit you must aggregate the amounts
of all distributions received by you during the calendar year from all
retirement plans, including IRAs. Please consult with your tax advisor
for more complete information including favorable elections.
17. You may rollover all or a portion of your IRA into another IRA or
individual retirement annuity and maintain the tax-deferred status of
these assets. Tax-free rollovers between IRAs may be made no more than
once every twelve months.
OTHER TAX CONSIDERATIONS
18. Distributions are taxed as ordinary income under federal income
tax laws.
19. The tax treatment of single sum distributions under Section 402(e)
of the Code is not applicable to distributions from IRAs.
20. Reporting to the IRS will be required by you in the event that
special taxes or penalties described herein are due. You must file
Treasury Form 5329 with the IRS for each taxable year in which a
premature distribution takes place or less than the required minimum
amount is distributed from your IRA. The Tax Reform Act of 1986 also
requires you to report the amount of all distributions you received
from your IRA and the aggregate balance of all IRAs as of the end of
the calendar year.
PROHIBITED TRANSACTIONS
21. If any of the events prohibited by Section 4975 of the Code (such
as any sale, exchange or leasing of any property between you and your
IRA) occurs during the existence of your IRA, your account will be
disqualified and the entire balance in your account will be treated as
if distributed to you, as of the first day of the year in which the
prohibited event occurs. This "distribution" would be subject to
ordinary income tax and, if you were under age 59 1/2 at the time, to
the 10% penalty tax on premature distributions.
22. If you or your beneficiary borrow any money under, or by use of,
all or a portion of your IRA, then the portion pledged will be treated
as if distributed to you, and will be taxable to you as ordinary
income and subject to the 10% penalty during the year in which you
make such a pledge.
FINANCIAL INFORMATION
23. The value of your investment will depend on how you allocate funds
between the Fixed Account and the subaccounts of the Variable Account.
The Company guarantees that the portion of your contract value that is
held in the Fixed Account will accrue interest daily at specified
interest rates that vary from time to time. With respect to funds
allocated to the Variable Account, the value will depend upon the
actual investment performance of the subaccounts that you choose; no
minimum value is guaranteed. See your prospectus for a more detailed
description.
24. As further described in the prospectus, the following are all the
charges that the Company currently makes:
(a) ADMINISTRATIVE CHARGE
The Company currently deducts an annual maintenance charge of $30 on
each contract anniversary. This charge is currently waived if total
payments, less any withdrawals, equal at least $25,000.
The Company also deducts a daily charge from the assets of the
subaccounts equivalent to an effective annual rate of 0.25%. This
charge is not made against the Fixed Account.
(b) MORTALITY AND EXPENSE RISK CHARGE
The Company deducts a daily charge from the assets of the subaccounts
equivalent to an effective annual rate of 0.75%. This charge is not
made against the Guaranteed Account.
(c) WITHDRAWAL CHARGE
During the first five contract years the Company assesses a charge
upon the surrender of the contract or the withdrawal of more than the
Exempt Withdrawal Amount. This charge in the first year is 5% of the
purchase payments withdrawn. The factor decreases by 1% per year so
that no withdrawal charge is made after the fifth contract year.
(d) PORTFOLIO EXPENSES
The portfolios associated with the Variable Account incur operating
expenses and pay monthly management fees to Fidelity Management &
Research Company. The level of expenses vary by portfolio. This charge
is not made against the Fixed Account.
