(2_FIDELITY_LOGOS)FIDELITY INVESTMENTS
VARIABLE ANNUITY ACCOUNT I
ANNUAL REPORT
DECEMBER 31, 1997
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION OF FIDELITY INVESTMENTS LIFE
INSURANCE COMPANY VARIABLE ANNUITY OWNERS. THIS REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED
OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. NEITHER FIDELITY
INVESTMENTS LIFE INSURANCE COMPANY NOR FIDELITY BROKERAGE SERVICES,
INC. IS A BANK, AND NEITHER THE ANNUITY NOR MUTUAL FUND SHARES ARE
BACKED OR GUARANTEED BY ANY BANK OR INSURED BY THE FDIC.
STATEMENT OF ASSETS AND LIABILITIES
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
OF
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
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ASSETS DECEMBER 31, 1997
INVESTMENTS AT CURRENT MARKET VALUE:
VARIABLE INSURANCE PRODUCTS FUND (VIP)
MONEY MARKET PORTFOLIO - 460,982,572 SHARES (COST $ 460,982,572) $ 460,982,572
HIGH INCOME PORTFOLIO - 23,562,757 SHARES (COST $285,396,045) 319,982,242
EQUITY-INCOME PORTFOLIO - 68,854,231 SHARES (COST $1,172,384,612) 1,671,780,722
GROWTH PORTFOLIO - 27,119,930 SHARES (COST $720,172,839) 1,006,149,404
OVERSEAS PORTFOLIO - 13,057,776 SHARES (COST $226,119,324) 250,709,295
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
INVESTMENT GRADE BOND PORTFOLIO - 8,678,689 SHARES (COST $105,071,360) 109,004,339
ASSET MANAGER PORTFOLIO - 43,062,200 SHARES (COST $639,821,964) 775,550,216
INDEX 500 PORTFOLIO - 6,478,500 SHARES (COST $575,914,283) 741,075,671
ASSET MANAGER: GROWTH PORTFOLIO - 19,819,521 SHARES (COST $258,793,890) 324,247,367
CONTRAFUND PORTFOLIO - 61,077,832 SHARES (COST $876,225,604) 1,217,891,969
VARIABLE INSURANCE PRODUCTS FUND III (VIP III)
BALANCED PORTFOLIO - 4,224,346 SHARES (COST $57,173,868) 61,590,960
GROWTH & INCOME PORTFOLIO - 20,276,256 SHARES (COST $226,604,918) 254,061,491
GROWTH OPPORTUNITIES PORTFOLIO - 14,481,673 SHARES (COST $241,548,958) 279,061,839
MORGAN STANLEY UNIVERSAL FUNDS (MSUF)
EMERGING MARKETS EQUITY PORTFOLIO - 188,634 SHARES (COST $1,833,208) 1,778,822
EMERGING MARKETS DEBT PORTFOLIO - 295,288 SHARES (COST $2,922,674) 2,855,436
GLOBAL EQUITY PORTFOLIO - 188,287 SHARES (COST $2,216,615) 2,210,491
INTERNATIONAL MAGNUM PORTFOLIO - 133,450 SHARES (COST $1,437,953) 1,385,206
PBHG INSURANCE SERIES FUNDS (PBHG)
GROWTH II PORTFOLIO - 204,826 SHARES (COST $2,132,436) 2,201,877
SMALL CAP VALUE PORTFOLIO - 785,346 SHARES (COST $8,033,806) 8,230,420
LARGE CAP VALUE PORTFOLIO - 72,842 SHARES (COST $746,849) 759,743
TECHNOLOGY & COMMUNICATIONS PORTFOLIO - 720,879 SHARES (COST $7,534,752) 7,504,351
SELECT 20 PORTFOLIO - 700,903 SHARES (COST $6,898,930) 7,030,055
STRONG VARIABLE INSURANCE FUNDS (SVIF)
DISCOVERY FUND II PORTFOLIO - 69,643 SHARES (COST $856,201) 837,800
GROWTH FUND II PORTFOLIO - 117,876 SHARES (COST $1,490,880) 1,467,550
OPPORTUNITY FUND II PORTFOLIO - 138,820 SHARES (COST $2,987,628) 3,012,387
WARBURG PINCUS TRUST (WPT)
SMALL COMPANY GROWTH PORTFOLIO - 388,177 SHARES (COST $6,245,903) 6,397,165
INTERNATIONAL EQUITY PORTFOLIO - 53,141 SHARES (COST $585,839) 557,449
POST-VENTURE CAPITAL PORTFOLIO - 112,196 SHARES (COST $1,220,247) 1,240,887
TOTAL ASSETS $ 7,519,557,726
NET ASSETS
VARIABLE ANNUITY CONTRACTS $ 7,262,735,649
ANNUITY RESERVES 255,519,966
RETAINED IN VARIABLE ACCOUNT BY FIDELITY INVESTMENTS LIFE INSURANCE COMPANY 1,302,111
TOTAL NET ASSETS $ 7,519,557,726
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FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
OF
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
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SUBACCOUNTS INVESTING IN:
VIP - VIP - VIP -
MONEY MARKET HIGH INCOME EQUITY-INCOME VIP -
GROWTH
12/31/97 12/31/96 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96
12/31/97
INCOME:
DIVIDENDS
$ 26,699,688 $ 22,183,498 $ 20,817,461 $ 16,728,273 $ 139,970,603 $ 55,685,270 $ 33,907,980 $ 52,408,311
EXPENSES:
MORTALITY RISK,
4,865,592 2,709,414 14,608,539 9,346,562
EXPENSE RISK
AND ADMINIS- 4,265,461 2,133,584 13,282,629 8,895,743
TRATIVE CHARGES
NET INVESTMENT
21,834,096 17,918,037 18,108,047 14,594,689 125,362,064 42,402,641 24,561,418 43,512,568
INCOME (LOSS)
REALIZED GAIN (LOSS) 6,949,695 4,215,546 48,965,707 44,973,966 67,921,108 34,665,280
UNREALIZED
APPRECIATION
(DEPRECIATION)
0 0 16,989,756 6,407,080 179,763,260 71,715,782 99,256,428 25,231,481
DURING THE PERIOD
NET INCREASE
(DECREASE) IN
NET ASSETS
21,834,096 17,918,037 42,047,498 25,217,315 354,091,031 159,092,389 191,738,954 103,409,329
FROM OPERATIONS
PAYMENTS
RECEIVED FROM
CONTRACT OWNERS
629,101,224 716,350,463 15,807,824 19,246,520 37,916,433 67,800,413 27,687,604 65,624,862
TRANSFERS
BETWEEN SUB-
(638,722,858) (572,043,365) 19,435,560 39,372,795 (42,350,907) 8,556,850 (133,879,505) 88,618,608
ACCOUNTS AND THE
FIXED ACCOUNT, NET
TRANSFERS
FOR CONTRACT
BENEFITS AND
(67,465,064) (34,497,387) (11,995,400) (4,602,693) (56,020,921) (27,944,559) (32,443,849) (19,664,847)
TERMINATIONS
OTHER TRANSFERS
(TO) FROM
FIDELITY INVEST-
MENTS LIFE
(215,320) (117,521) (71,599) (16,920) (43,377) (375,090) (59,301) (325,787)
INSURANCE
CO., NET
NET INCREASE
(DECREASE) IN
NET ASSETS
(77,302,018) 109,692,190 23,176,385 53,999,702 (60,498,772) 48,037,614 (138,695,051) 134,252,836
FROM CONTRACT
TRANSACTIONS
RETAINED IN
(RETURNED FROM)
VARIABLE
29,046 (279,345) (35,935) (113,623) (375,922) (734,182) (258,418) (385,048)
ANNUITY
ACCOUNT I, NET
TOTAL INCREASE
(55,438,876) 65,187,948 293,216,337 52,785,485
(DECREASE)
IN 127,330,882 79,103,394 206,395,821 237,277,117
NET ASSETS
NET ASSETS AT
BEGINNING
516,421,448 389,090,566 254,794,294 175,690,900 1,378,564,385 1,172,168,564 953,363,919 716,086,802
OF PERIOD
NET ASSETS AT END
OF PERIOD
$ 460,982,572 $ 516,421,448 $ 319,982,242 $ 254,794,294 $ 1,671,780,722 $ 1,378,564,385 $ 1,006,149,404 $ 953,363,919
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SUBACCOUNTS INVESTING IN:
VIP -
OVERSEAS
12/31/97 12/31/96
INCOME:
DIVIDENDS
$ 21,080,704 $ 5,076,103
EXPENSES:
MORTALITY RISK,
2,648,546
EXPENSE RISK
AND ADMINIS- 2,325,480
TRATIVE CHARGES
NET INVESTMENT
18,432,158 2,750,623
INCOME (LOSS)
REALIZED GAIN (LOSS)
13,687,852 4,977,991
UNREALIZED
APPRECIATION
(DEPRECIATION)
(6,167,246) 17,808,822
DURING THE PERIOD
NET INCREASE
(DECREASE) IN
NET ASSETS
25,952,764 25,537,436
FROM OPERATIONS
PAYMENTS
RECEIVED FROM
CONTRACT OWNERS
10,161,356 15,310,022
TRANSFERS
BETWEEN SUB-
(23,441,635) 27,187,801
ACCOUNTS AND THE
FIXED ACCOUNT, NET
TRANSFERS
FOR CONTRACT
BENEFITS AND
(7,577,179) (5,076,410)
TERMINATIONS
OTHER TRANSFERS
(TO) FROM
FIDELITY INVEST-
MENTS LIFE
(36,899) (58,320)
INSURANCE
CO., NET
NET INCREASE
(DECREASE) IN
NET ASSETS
(20,894,357) 37,363,093
FROM CONTRACT
TRANSACTIONS
RETAINED IN
(RETURNED FROM)
VARIABLE
(60,265) (91,969)
ANNUITY
ACCOUNT I, NET
TOTAL INCREASE
4,998,142
(DECREASE)
IN 62,808,560
NET ASSETS
NET ASSETS AT
BEGINNING
245,711,153 182,902,593
OF PERIOD
NET ASSETS AT END
OF PERIOD
$ 250,709,295 $ 245,711,153
</TABLE>
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VIP II - VIP II -
INVESTMENT VIP II - VIP II - ASSET MANAGER:
GRADE BOND ASSET MANAGER INDEX 500 GROWTH
12/31/97 12/31/96 12/31/97 12/31/96 12/31/96 12/31/97 12/31/96
12/31/97
INCOME:
DIVIDENDS
$ 4,769,202 $ 3,861,311 $ 84,602,748 $ 47,469,963 $ 14,463,456 $ 5,677,684 $ 327,986 $ 9,328,581
EXPENSES:
Mortality risk,
expense risk
and administrative
charges
836,719 7,130,105 5,648,542 2,618,594
Net investment
income (loss)
7,112,472 2,166,085 1,063,876
785,033
3,932,483 77,472,643 40,357,491 8,814,914 3,511,599 (2,290,608) 8,264,705
3,076,278
Realized
gain (loss)
858,556 888,717 13,884,351 20,343,996 24,508,427 4,975,965 5,935,984 673,453
Unrealized
appreciation
(depreciation)
during the
period
1,995,042 38,783,110 27,445,480 114,558,991 33,991,964 52,266,796 9,972,956
(2,329,345)
Net increase
(decrease) in
net assets
from
operations
1,635,650 130,140,104 88,146,967 147,882,332 42,479,528 55,912,172 18,911,114
6,786,081
Payments
received from
contract owners
4,109,827 4,922,193 12,080,157 13,647,683 46,826,607 33,319,804 19,500,391 15,662,363
Transfers
between subaccounts
and the fixed
account, net
22,693,615 (32,631,061) (114,227,037) 204,978,269 167,661,291 70,469,134 101,765,224
9,167,153
Transfers
for contract
benefits and
terminations
(7,797,627) (35,791,511) (25,764,391) (15,577,435) (3,781,296) (6,744,007) (2,189,943)
(2,141,175)
Other transfers
(to) from
Fidelity
Investments
Life
Insurance
Co., net
(72,701) (155,845) (237,492) (150,934) (64,159) (80,124) (38,727)
56,907
Net increase
(decrease) in
net assets
from contract
transactions
18,933,114 (56,498,260) (126,581,237) 236,076,507 197,135,640 83,145,394 115,198,917
12,005,078
Retained in
(returned from)
Variable
Annuity
Account I, net
46,432 (92,781) (616,502) (107,699) (30,838) (31,806) 4,437
(109,244)
Total increase
(decrease) in
net assets
25,765,627 73,549,063 383,851,140 139,025,760
(39,050,772) 239,584,330 134,114,468
13,531,484
Net assets at
beginning of
period
83,238,712 702,001,153 741,051,925 357,224,531 117,640,201 185,221,607 51,107,139
69,707,228
Net assets at
end of period
$109,004,339 $83,238,712 $775,550,216 $702,001,153 $741,075,671 $357,224,531 $324,247,367 $185,221,607
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VIP II -
CONTRAFUND
12/31/97 12/31/96
INCOME:
DIVIDENDS
$ 29,715,425 $ 4,625,874
EXPENSES:
Mortality risk,
expense risk
and administrative
charges
10,453,261
Net investment
income (loss)
6,890,563
19,262,164 (2,264,689)
Realized
gain (loss)
35,690,439 8,702,452
Unrealized
appreciation
(depreciation)
during the
period
161,313,279 123,250,956
Net increase
(decrease) in
net assets
from
operations
216,265,882 129,688,719
6,786,081
Payments
received from
contract owners
54,807,976 81,653,439
Transfers
between subaccounts
and the fixed
account, net
66,369,243 248,553,823
Transfers
for contract
benefits and
terminations
(25,715,125) (10,123,899)
Other transfers
(to) from
Fidelity
Investments
Life
Insurance
Co., net
(281,176) (261,226)
Net increase
(decrease) in
net assets
from contract
transactions
95,180,918 319,822,137
Retained in
(returned from)
Variable
Annuity
Account I, net
(190,999) (180,555)
Total increase
(decrease) in
net assets
311,255,801
449,330,301
Net assets at
beginning of
period
906,636,168 457,305,867
Net assets at
end of period
$1,217,891,969 $906,636,168
</TABLE>
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
OF
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
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SUBACCOUNTS INVESTING IN:
PBHG - PBHG -
SMALL CAP LARGE
VIP III - VIP III - VIP III - MSUF - MSUF - MSUF - MSUF - PBHG - VALUE** CAP
BALANCED* GROWTH & GROWTH EMERGING EMERGING GLOBAL INTERNAT
IONAL GROWTH II** VALUE**
INCOME* OPPORTUNITIES* MARKETS MARKETS EQUITY** MAGNUM**
EQUITY** DEBT**
12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
DIVIDENDS
$ 24,769 $ 6,524,950 $ 490,995 $ 50,198 $ 82,487 $ 38,854 $ 38,893 $ 0 $ 0 $ 0
EXPENSES:
MORTALITY RISK,
307,802 1,300,226 1,508,291 777 1,196 1,073 737 847 3,809 427
EXPENSE RISK
AND ADMINIS-
TRATIVE CHARGES
NET INVESTMENT
(283,033) 5,224,724 (1,017,296) 49,421 81,291 37,781 38,156 (847) (3,809) (427)
INCOME (LOSS)
REALIZED GAIN (LOSS)
1,117,028 255,257 671,295 1,555 1,555 0 1,566 726 1,588 1,407
UNREALIZED
APPRECIATION
(DEPRECIATION)
4,417,092 27,456,573 37,512,881 (54,386) (67,238) (6,124) (52,747) 69,441 196,614 12,894
DURING THE PERIOD
NET INCREASE
(DECREASE) IN
NET ASSETS
5,251,087 32,936,554 37,166,880 (3,410) 15,608 31,657 (13,025) 69,320 194,393 13,874
FROM OPERATIONS
PAYMENTS
RECEIVED FROM
CONTRACT OWNERS
6,706,277 29,329,428 42,870,806 56,721 28,145 347,239 130,652 110,103 604,447 56,451
TRANSFERS
BETWEEN SUB-
50,665,808 193,894,819 202,642,472 1,725,664 2,812,620 1,832,160 1,267,297 2,022,554 7,434,078 689,520
ACCOUNTS AND THE
FIXED ACCOUNT, NET
TRANSFERS
FOR CONTRACT
BENEFITS AND
(1,021,595) (2,031,557) (3,368,361) (91) 0 0 0 (117) (924) (102)
TERMINATIONS
OTHER TRANSFERS
(TO) FROM
FIDELITY INVEST-
MENTS LIFE
(11,728) (80,558) (262,599) (62) (946) (576) 268 21 (1,552) (1)
INSURANCE
CO., NET
NET INCREASE
(DECREASE) IN
NET ASSETS
56,338,762 221,112,132 241,882,318 1,782,232 2,839,819 2,178,823 1,398,217 2,132,561 8,036,049 745,868
FROM CONTRACT
TRANSACTIONS
RETAINED IN
(RETURNED FROM)
VARIABLE
1,111 12,805 12,641 0 9 11 14 (4) (22) 1
ANNUITY
ACCOUNT I, NET
TOTAL INCREASE
61,590,960 254,061,491 279,061,839 1,778,822 2,855,436 2,210,491 1,385,206 2,201,877 8,230,420 759,743
(DECREASE) IN
NET ASSETS
NET ASSETS AT
BEGINNING
0 0 0 0 0 0 0 0 0 0
OF PERIOD
NET ASSETS AT END
OF PERIOD
$ 61,590,960 $ 254,061,491 $ 279,061,839 $ 1,778,822 $ 2,855,436 $ 2,210,491 $ 1,385,206 $ 2,201,877 $ 8,230,420 $ 759,743
</TABLE>
* FOR THE PERIOD JANUARY 27, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997.
** FOR THE PERIOD NOVEMBER 24, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997.
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PBHG - SVIF - SVIF - SVIF - WPT - WPT - WPT -
SELECT 20** DISCOVERY GROWTH OPPORTUNITY SMALL INTERNAT
IONAL POST-
PBHG - FUND II** FUND II** FUND II** COMPANY EQUITY** VENTURE
TECHNOLOGY & GROWTH** CAPITAL**
COM-
MUNICATIONS** TOTAL
12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/96
INCOME:
DIVIDENDS
$ 0 $ 0 $ 0 $ 51,405 $ 2,789 $ 0 $ 24,727 $ 150 $ 383,685,470 $ 223,044,868
EXPENSES:
MORTALITY RISK,
EXPENSE RISK
AND ADMIN
ISTRATIVE
CHARGES
3,175 3,029 433 686 1,349 2,764 273 679 64,003,447 48,920,926
NET INVESTMENT
INCOME (LOSS)
(3,175) (3,029) (433) 50,719 1,440 (2,764) 24,454 (529) 319,682,023 174,123,942
REALIZED GAIN (LOSS)
348 49 (2,563) 438 3,293 (1) (984) (323) 220,454,353 124,417,366
UNREALIZED
APPRECIATION
(DEPRECIATION)
DURING THE PERIOD
(30,401) 131,125 (18,401) (23,330) 24,759 151,262 (28,390) 20,640 728,471,680 313,495,176
NET INCREASE
(DECREASE) IN
NET ASSETS FROM
OPERATIONS
(33,228) 128,145 (21,397) 27,827 29,492 148,497 (4,920) 19,788 1,268,608,056 612,036,484
PAYMENTS
RECEIVED FROM
CONTRACT OWNERS
1,166,675 241,149 115,879 210,484 316,468 547,503 37,724 322,881 941,198,431 1,033,537,762
TRANSFERS
BETWEEN
SUBACCOUNTS AND THE
FIXED ACCOUNT, NET
6,356,784 5,661,006 743,684 1,229,535 2,666,657 5,700,629 522,333 898,095 1,685,570 4,613,143
TRANSFERS
FOR CONTRACT
BENEFITS AND
TERMINATIONS
(1,170) (748) (383) 0 (73) 0 (93) (0) (273,553,332) (135,786,600)
OTHER TRANSFERS
(TO) FROM FIDELITY
INVESTMENTS LIFE
INSURANCE CO., NET
15,296 (2,417) (55) 20 (524) 1,366 (23,099) (2) (1,534,424) (1,438,335)
NET INCREASE
(DECREASE) IN
NET ASSETS FROM
CONTRACT
TRANSACTIONS
7,537,585 5,898,990 859,125 1,440,039 2,982,528 6,249,498 536,865 1,220,974 667,796,245 900,925,970
RETAINED IN
(RETUNED FROM)
VARIABLE ANNUITY
ACCOUNT I, NET
(6) 1,002,920 72 (316) 367 (830) 25,504 125 (23,945) (2,536,869)
TOTAL INCREASE
(DECREASE) IN
NET ASSETS
7,504,351 7,030,055 837,800 1,467,550 3,012,387 6,397,165 557,449 1,240,887 1,936,380,356
1,510,425,585
NET ASSETS AT
BEGINNING OF
PERIOD
0 0 0 0 0 0 0 0 5,583,177,370 4,072,751,785
NET ASSETS
AT END OF
PERIOD
$ 7,504,351 $ 7,030,055 $ 837,800 $ 1,467,550 $ 3,012,387 $ 6,397,165 $ 557,449 $ 1,240,887 $ 7,519,557,726 $5,583,177,370
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
OF
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
1. ORGANIZATION.
Fidelity Investments Variable Annuity Account I (the "Account"), a
unit investment trust registered under the Investment Company Act of
1940 as amended, was established by Fidelity Investments Life
Insurance Company (FILI) on July 22, 1987 and exists in accordance
with the regulations of the State of Utah Insurance Department. The
Account is a funding vehicle for individual Fidelity Retirement
Reserves and Fidelity Income Advantage variable annuity contracts.
FILI is a wholly-owned subsidiary of FMR Corp.
In 1997, FILI added eighteen new subaccounts to the Account: VIP III -
Balanced, VIP III - Growth & Income, VIP III - Growth Opportunities,
MSUF - Emerging Markets Equity, MSUF - Emerging Markets Debt, MSUF -
Global Equity, MSUF - International Magnum, PBHG - Growth II, PBHG -
Small Cap Value, PBHG - Large Cap Value, PBHG - Technology &
Communications, PBHG - Select 20, SVIF - Discovery Fund II, SVIF -
Growth Fund II, SVIF - Opportunity Fund II, WPT - Small Company
Growth, WPT - International Equity, WPT - Post-Venture Capital.
2. SIGNIFICANT ACCOUNTING POLICIES.
Investments are made in the portfolios of the subaccounts and are
valued at the reported net asset values of such portfolios.
Transactions are recorded on the trade date. Income from dividends is
recorded on the ex-dividend date. Realized gains and losses on the
sales of investments are computed on the basis of the identified cost
of the investment sold.
In addition to the Account, a contractholder may also allocate funds
to the Fixed Account, which is part of FILI's general account. Because
of exemptive and exclusionary provisions, interests in the Fixed
Account have not been registered under the Securities Act of 1933 and
FILI's general account has not been registered as an investment
company under the Investment Company Act of 1940.
Annuity reserves are computed for contracts in the income stage
according to the 1983 Individual Annuitant Mortality Table. The
assumed investment return is 3.5% unless the annuitant elects
otherwise, in which case the rate may vary from 3.5% to 7%, as
regulated by the laws of the respective states. The mortality risk is
fully borne by FILI and may result in additional amounts being
transferred into the Account by FILI.
The operations of the Account are included in the federal income tax
return of FILI, which is taxed as a life insurance company under the
provisions of the Internal Revenue Code ("the Code").
The preparation of the statement of assets and liabilities and the
statements of operations and changes in net assets in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the related amounts and
disclosures in the financial statements. Actual results could differ
from those estimates.
3. EXPENSES.
FILI deducts a daily charge from the net assets of the Account for
administrative expenses and for the assumption of mortality risk and
expense risk. Prior to November 3, 1997, the daily charge was
equivalent to an annual effective rate of 1% of net assets. On
November 3, 1997, FILI reduced the daily charge on the Retirement
Reserves contracts to an annual effective rate of 0.8% of net assets.
FILI also deducts an annual maintenance charge of $30 from the
Retirement Reserves contract value. The maintenance charge is waived
on certain contracts.
Under the current provisions of the Code, FILI does not expect to
incur federal income taxes on the earnings of the Account to the
extent the earnings are credited under the contracts. FILI incurs
federal income taxes on the difference between the financial statement
carrying value of reserves for contracts in the income stage and those
reserves held for federal income tax purposes. The tax effect of this
temporary difference is expected to be recovered by FILI. As such, no
charge is being made currently to the Account for federal income
taxes. FILI will review periodically the status of such decision based
on changes in the tax law. Such a charge may be made in future years
for any federal income taxes that would be attributable to the
contracts.
4. AFFILIATED COMPANY TRANSACTIONS.
The contracts are distributed through Fidelity Brokerage Services,
Inc. (FBSI) and Fidelity Insurance Agency, Inc. (FIA), both of which
are affiliated with FMR Corp. FBSI and FIA are the distributors and
FBSI is the principal underwriter of the contracts. Fidelity
Management & Research Company, an affiliate of FMR Corp., acts as
investment advisor to the VIP, VIP II and VIP III portfolios. Fidelity
Investments Institutional Operations Co., an affiliate of FMR Corp.,
is the transfer and shareholder servicing agent for the VIP, VIP II
and VIP III portfolios.
5. PURCHASES AND SALES OF INVESTMENTS.
The following table shows aggregate cost of shares purchased and
proceeds from sales of each subaccount for the year ended December 31,
1997:
PURCHASES SALES
VIP - MONEY MARKET $ 326,583,049 $ 382,021,925
VIP - HIGH INCOME 114,897,983 73,649,486
VIP - EQUITY-INCOME 198,894,123 134,406,753
VIP - GROWTH 56,549,510 170,941,561
VIP - OVERSEAS 72,099,269 74,621,733
VIP II - INVESTMENT GRADE BOND 47,032,620 24,120,591
VIP II - ASSET MANAGER 98,479,844 77,598,242
VIP II - INDEX 500 306,095,779 61,312,057
VIP II - ASSET MANAGER: GROWTH 100,798,108 19,975,128
VIP II - CONTRAFUND 199,694,635 85,442,570
VIP III - BALANCED 65,612,689 9,555,849
VIP III - GROWTH & INCOME 228,481,958 2,132,297
VIP III - GROWTH OPPORTUNITIES 245,497,853 4,620,190
MSUF - EMERGING MARKETS EQUITY 2,115,422 283,769
MSUF - EMERGING MARKETS DEBT 3,274,862 353,743
MSUF - GLOBAL EQUITY 2,216,615 0
MSUF - INTERNATIONAL MAGNUM 1,571,078 134,691
PBHG - GROWTH II 2,184,299 52,589
PBHG - SMALL CAP VALUE 8,166,634 134,416
PBHG - LARGE CAP VALUE 851,823 106,381
PBHG - TECHNOLOGY & COMMUNICATIONS 7,552,890 18,486
PBHG - SELECT 20 6,910,570 11,689
SVIF - DISCOVERY FUND II 1,033,348 174,584
SVIF - GROWTH FUND II 1,568,802 78,360
SVIF - OPPORTUNITY FUND II 3,262,583 278,248
WPT - SMALL COMPANY GROWTH 6,245,904 0
WPT - INTERNATIONAL EQUITY 921,970 335,147
WPT - POST-VENTURE CAPITAL 1,271,438 50,868
6. UNIT VALUES.
A summary of changes in accumulation units and ending unit and
contract values for variable annuity contracts at December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PAYMENTS
BEGINNING RECEIVED TRANSFERS CONTRACT
BALANCE FROM BETWEEN TERMINATIONS ENDING BALANCE
CONTRACT SUBACCOUNTS, UNITS UNIT VALUE DOLLARS
OWNERS NET
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1997 TO DECEMBER 31, 1997
VIP - MONEY MARKET 33,393,564 35,765,040 (40,993,364) 91,490 28,256,730 $ 15.98 $ 451,543,983
VIP - HIGH INCOME 9,856,952 586,582 661,363 (623,781) 10,481,116 $ 29.00 303,988,166
VIP - EQUITY-INCOME 43,073,117 1,075,044 (1,451,095) (1,859,034) 40,838,032 $ 39.39 1,608,658,423
VIP - GROWTH 26,772,269 709,036 (3,594,444) (838,737) 23,048,124 $ 42.76 985,593,562
VIP - OVERSEAS 11,419,855 436,554 (983,144) (360,741) 10,512,524 $ 23.52 247,274,432
VIP II - INVESTMENT
GRADE BOND 4,615,384 228,138 1,229,196 (547,810) 5,524,907 $ 18.75 103,579,135
VIP II - ASSET MANAGER 33,062,627 530,613 (1,505,174) (1,767,212) 30,320,855 $ 24.80 751,916,385
VIP II - INDEX 500 18,160,844 2,122,452 9,533,877 (1,121,909) 28,695,264 $ 24.83 712,404,342
VIP II - ASSET MANAGER:
GROWTH 12,261,937 1,205,712 4,500,037 (766,657) 17,201,030 $ 17.95 308,741,994
VIP II - CONTRAFUND 53,010,249 2,983,188 3,494,055 (1,698,427) 57,789,065 $ 20.47 1,183,200,370
VIP III - BALANCED * 606,056 4,630,639 (586,884) 4,649,810 $ 11.98 55,714,035
VIP III - GROWTH & INCOME * 2,622,603 17,602,327 (1,426,696) 18,798,233 $ 12.68 238,278,772
VIP III - GROWTH OPPORTUNITIES * 3,852,029 18,523,967 (1,221,162) 21,154,834 $ 12.63 267,246,966
MSUF - EMERGING MARKETS EQUITY ** 5,745 171,206 (15) 176,936 $ 10.05 1,778,822
MSUF - EMERGING MARKETS DEBT ** 2,756 269,897 (2,040) 270,613 $ 10.48 2,834,996
MSUF - GLOBAL EQUITY ** 34,595 181,040 (1,155) 214,479 $ 10.25 2,198,667
MSUF - INTERNATIONAL MAGNUM ** 13,105 127,421 (14,455) 126,071 $ 9.86 1,242,464
PBHG - GROWTH II ** 11,237 205,656 (18,025) 198,868 $ 10.15 2,018,998
PBHG - SMALL CAP VALUE ** 59,114 730,068 (28,259) 760,923 $ 10.43 7,936,253
PBHG - LARGE CAP VALUE ** 5,653 68,352 (2,944) 71,061 $ 10.27 729,623
PBHG - TECHNOLOGY & COMMUNICATIONS **120,942 639,601 (13,759) 746,784 $ 9.87 7,369,743
PBHG - SELECT 20 ** 23,751 554,810 (27,088) 551,473 $ 10.42 5,745,102
SVIF - DISCOVERY FUND II ** 11,942 74,522 (17,377) 69,087 $ 9.69 669,714
SVIF - GROWTH FUND II ** 21,083 122,113 (3,251) 139,945 $ 10.25 1,434,554
SVIF - OPPORTUNITY FUND II ** 31,632 265,241 (19,520) 277,353 $ 10.15 2,814,079
WPT - SMALL COMPANY GROWTH ** 55,431 572,410 (30,997) 596,845 $ 10.19 6,081,692
WPT - INTERNATIONAL EQUITY ** 3,884 53,678 (2,581) 54,981 $ 9.24 508,179
WPT - POST-VENTURE CAPITAL ** 32,317 88,717 (836) 120,198 $ 10.25 1,232,198
$ 7,262,735,649
JANUARY 1, 1996 TO DECEMBER 31, 1996
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
VIP - MONEY MARKET 26,268,846 42,913,398 (38,375,363) 2,586,683 33,393,564 $ 15.30 $ 510,850,998
VIP - HIGH INCOME 7,797,315 816,399 1,649,890 (406,652) 9,856,952 $ 24.89 245,332,651
VIP - EQUITY-INCOME 41,937,122 2,359,548 324,284 (1,547,837) 43,073,117 $ 31.05 1,337,348,204
VIP - GROWTH 23,019,869 1,987,476 2,629,901 (864,978) 26,772,269 $ 34.97 936,189,066
VIP - OVERSEAS 9,560,376 770,514 1,400,639 (311,673) 11,419,855 $ 21.29 243,142,393
VIP II - INVESTMENT
GRADE BOND 3,993,107 291,738 528,603 (198,064) 4,615,384 $ 17.36 80,112,903
VIP II - ASSET MANAGER 39,821,641 708,287 (6,035,625) (1,431,676) 33,062,627 $ 20.75 686,200,145
VIP II - INDEX 500 7,333,800 1,943,169 9,613,725 (729,850) 18,160,844 $ 18.89 343,086,654
VIP II - ASSET
MANAGER: GROWTH 4,035,434 1,168,481 7,592,101 (534,078) 12,261,937 $ 14.49 177,691,548
VIP II - CONTRAFUND 32,421,946 5,482,352 16,672,452 (1,566,501) 53,010,249 $ 16.65 882,817,550
$ 5,442,772,112
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
* FOR THE PERIOD JANUARY 27, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH
DECEMBER 31, 1997.
** FOR THE PERIOD NOVEMBER 24, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997.
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE CONTRACT OWNERS OF FIDELITY INVESTMENTS VARIABLE ANNUITY
ACCOUNT I:
We have audited the accompanying statement of assets and liabilities
of Fidelity Investments Variable Annuity Account I (comprised of VIP -
Money Market, VIP - High Income, VIP - Equity-Income, VIP - Growth,
VIP - Overseas, VIP II - Investment Grade Bond, VIP II - Asset
Manager, VIP II - Index 500, VIP II - Asset Manager: Growth, VIP II -
Contrafund, VIP III - Balanced, VIP III - Growth & Income, VIP III -
Growth Opportunities, MSUF - Emerging Markets Equity, MSUF - Emerging
Markets Debt, MSUF - Global Equity, MSUF - International Magnum, PBHG
- - Growth II, PBHG - Small Cap Value, PBHG - Large Cap Value, PBHG -
Technology & Communications, PBHG - Select 20, SVIF - Discovery Fund
II, SVIF - Growth Fund II, SVIF - Opportunity Fund II, WPT - Small
Company Growth, WPT - International Equity and WPT - Post-Venture
Capital) of Fidelity Investments Life Insurance Company as of December
31, 1997, and the related statements of operations and changes in net
assets for each of the periods indicated therein. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the
aforementioned subaccounts comprising Fidelity Investments Variable
Annuity Account I of Fidelity Investments Life Insurance Company as of
December 31, 1997, and the results of their operations and the changes
in their net assets for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 28, 1998
(registered trademark)
America's largest privately-held investment management organization.
Fidelity Retirement Reserves (policy form FVA-88200 and NRR-96100),
Fidelity Variable Annuity and Fidelity Income Advantage (policy form
FVIA-92100) are issued by Fidelity Investments Life Insurance Company.
Fidelity Brokerage Services, Inc., member NYSE, SIPC, Fidelity
Insurance Agency, Inc. and Fidelity Investments Insurance
Agency of Texas, Inc. are the distributors.
82 Devonshire Street, Boston, MA 02109
