FIDELITY RETIREMENT RESERVES
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 1999
This Statement of Additional Information supplements the information
found in the current Prospectus for the variable annuity contracts
("Contracts") offered by Fidelity Investments Life Insurance Company
through its Variable Annuity Account I (the "Variable Account"). You
may obtain a copy of the Prospectus dated April 30, 1999, without
charge by calling 1-800-544-2442, or by accessing the SEC Internet
website at (http://www.sec.gov).
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
SHOULD BE READ TOGETHER WITH THE PROSPECTUS FOR THE CONTRACT.
TABLE OF CONTENTS PAGE
Accumulation Units 2
Fixed Annuity Income Payments 2
Variable Annuity Income 2
Payments
Hypothetical Illustrations of 4
Annuity Income Payouts
General Information 9
Performance 9
Exchanges Among Subaccounts 23
After the Annuity Date
Unavailability of Annuity 23
Income Options in Certain
Circumstances
IRS Required Distributions 23
Safekeeping of Variable 24
Account Assets
Distribution of the Contracts 24
State Regulation 24
Legal Matters 24
Registration Statement 24
Independent Accountants 24
Financial Statements 24
ACCUMULATION UNITS
We credit your payments allocated to the variable Subaccounts in the
form of Accumulation Units. The number of Accumulation Units credited
to each Subaccount is determined by dividing the net payment allocated
to that Subaccount by the Accumulation Unit Value for that Subaccount
for the Valuation Period during which the payment is received. In the
case of the initial payment, we credit Accumulation Units as explained
in the prospectus. Accumulation Units are adjusted for any exchanges
or transfers into or out of a Subaccount.
For each variable Subaccount the Accumulation Unit Value for the first
Valuation Period of the Subaccount was set at $10.00. The Accumulation
Unit Value for each subsequent Valuation Period is the Net Investment
Factor for that period, multiplied by the Accumulation Unit Value for
the immediately preceding Valuation Period. The Accumulation Unit
Value may increase or decrease from one Valuation Period to the next.
Each variable Subaccount has a Net Investment Factor (also referred to
as the "Total Return"). The Net Investment Factor is an index that
measures the investment performance of a Subaccount from one Valuation
Period to the next. The Net Investment Factor for each Subaccount for
a Valuation Period is determined by adding (a) and (b), subtracting
(c) and then dividing the result by (a) where:
(a) Is the value of the assets at the end of the preceding Valuation
Period;
(b) Is the investment income and capital gains, realized or
unrealized, credited during the current valuation period;
(c) Is the sum of:
(1) The capital losses, realized or unrealized, charged during the
current valuation period plus any amount charged or set aside for
taxes during the current Valuation Period; plus
(2) The deduction from the Subaccount during the current Valuation
Period representing a daily charge equivalent to an effective annual
rate of 0.80%.
The Net Investment Factor may be greater than or less than one. If it
is greater than one, the Accumulation Unit Value will increase; if
less than one, the Accumulation Unit Value will decrease.
FIXED ANNUITY INCOME PAYMENTS
The amount of monthly annuity income payments for a selected fixed
annuity income option or the fixed portion of a selected combination
annuity income option is calculated by applying the proceeds payable
to the income payment rates for the option selected. Annuity income
payments will be the larger of:
(a) The income based on the rates shown in the contract's Annuity
Tables for the option chosen; and
(b) The income calculated by applying the proceeds as a single premium
to our single premium annuity rates in effect on the date of the first
income payment for the same plan.
Annuity income payments under a fixed annuity or fixed portion of a
combination annuity will not vary in dollar amount and will not be
affected by the investment performance of the Variable Account.
Amounts used to purchase a fixed annuity may not be later transferred
to a variable annuity.
VARIABLE ANNUITY INCOME PAYMENTS
If a variable annuity is selected, annuity income payments will vary
in amount in accordance with the investment performance of the elected
Subaccounts of the Variable Account. If a combination annuity is
selected, annuity income payments attributable to the variable portion
of the annuity will likewise vary. On the Annuity Date, the amount of
the first annuity income payment is calculated by applying the
proceeds payable to the annuity table shown in the Contract (or any
more favorable annuity rates we may offer on the Annuity Date) for the
option chosen.
The dollar amount of the first annuity income payment attributable to
each variable Subaccount is then divided by each Subaccount's then
current Annuity Unit Value (Annuity Units are explained in the
prospectus) to establish the total number of Annuity Units that will
be the basis for determining later annuity income payments. Annuity
income payments after the first will be equal to the sum of the number
of Annuity Units determined in this manner for each Subaccount
multiplied by the then current Annuity Unit Value for each Subaccount,
which (as explained in the prospectus) depends upon the Net Investment
Factor for the subaccount adjusted by a factor to neutralize the
assumed rate of return used in the calculation of annuity income
payments. The number of Annuity Units remains fixed for all annuity
income payments, unless a transfer is made. The dollar amount of the
annuity income payments may change from payment to payment. We
guarantee that the dollar amount of each annuity income payment after
the first will not be affected by variations in mortality experience
from the mortality assumptions used to determine the first annuity
income payment.
To illustrate the above description of how annuity income payments are
determined, consider the following example. A male age 65 applies
$50,000 to purchase a lifetime income for himself with payments to be
made for at least 10 years (even if the Annuitant dies shortly after
payments have begun). Annuity income payments are to be made on a
monthly basis with the first annuity income payment to be made
immediately. The variable pay-out option is chosen with the amount of
each income payment dependent on the actual investment performance of
the subaccounts that are selected. Using an Assumed Investment Rate of
3.5%, the initial monthly income amount is $282.50. The investment
selection is 50% in Portfolio A and 50% in Portfolio B.
At Annuitization Portfolio A Portfolio B
(a) Initial Monthly Annuity $ 141.25 $ 141.25
Income Payment
(b) Annuity Unit Value 1.23456 1.32465
(c) Income in Units 114.413 106.632
The monthly annuity income payment allocated to each Subaccount is
translated into Annuity Units using the Annuity Unit Value at the time
of annuitization. Since each Subaccount is likely to have a different
Annuity Unit Value, the total number of Annuity Units is not
informative, rather you need to look at:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
# Annuity Units X Annuity Unit Value = Annuity Income Payment
Portfolio A 114.413 1.23456 141.25
Portfolio B 106.632 1.32465 141.25
$ 282.50
</TABLE>
Assume that during the next month, the investment results for each
subaccount are:
Portfolio A Portfolio B
(d) Actual Net Investment Results .4074% .1652%
(e) Assumed Investment Results .2871% .2871%
(f) Relative Performance Factor 1.00120 .99878
Line (d) shows the net investment result after the charge for assuming
mortality and expense risks and the administrative charge (0.80% on an
annual basis) and the charge for investment advisory fees and fund
expenses. Line (e) shows the investment results that were assumed in
the calculation of the initial monthly annuity income payment, 3.5% on
an annual basis. Line (f) represents how much $1 invested at the start
of the month in each of the subaccounts would have grown relative to
$1 earning 3.5%. (The formula for calculating the Relative Performance
Factor is 1+ (d) divided by 1 + (e)).
Note that since line (f) is more than 1 for Portfolio A and less than
1 for Portfolio B, the Portfolio A subaccount has earned more than
3.5% on an annual basis while the Portfolio B subaccount has earned
less than 3.5% on an annual basis.
The Annuity Unit Value grows with the actual investment performance
relative to the assumption of 3.5%. If a Subaccount earns more than
3.5% on an annual basis, then the Annuity Unit Value will increase.
Conversely, if less than 3.5% is earned, the Annuity Unit Value will
decrease. The Annuity Unit Value at the time of the second monthly
income payment is the Annuity Unit Value for the prior month (line b)
multiplied by the Relative Performance Factor (line f).
Portfolio A Portfolio B
(b) Annuity Unit Value (prior) 1.23456 1.32465
(f) Relative Performance Factor 1.00120 .99878
(g) Annuity Unit Value (current) 1.23604 1.32303
Except for exchanges between Subaccounts, the number of Annuity Units
remains fixed throughout the lifetime of the Annuitant. The value of
each annuity income payment, however, varies because the Annuity Unit
Value is usually changing as a result of investment experience. The
second monthly payment is calculated by multiplying the number of
payment units by the current Annuity Unit Value.
Portfolio A Portfolio B
(c) Monthly Income in Units 114.413 106.632
(g) Annuity Unit Value (current) 1.23604 1.32303
(h) Monthly Income (in dollars) $ 141.42 $ 141.08
Note that the Annuity Unit Value and the Monthly Income for the
Portfolio A portion of the payment has increased whereas the opposite
is true for the Portfolio B portion. The second monthly annuity income
payment would be the sum for each Subaccount, or $282.50.
To illustrate the possible volatility of the annuity income payments,
assume that during the following month, the investment results for
each Subaccount are:
Portfolio A Portfolio B
(i) Actual Net Investment Results 15.50% -13.00%
(e) Assumed Investment Results .2871% .2871%
(j) Relative Performance Factor 1.15169 .86751
The Annuity Unit Value at the time of the third monthly annuity income
payment is the Annuity Unit Value for the prior month (line g)
multiplied by the Relative Performance Factor (line j):
Portfolio A Portfolio B
(g) Annuity Unit Value (prior) 1.23604 1.32303
(j) Relative Performance Factor 1.15169 .86751
(k) Annuity Unit Value (current) 1.42353 1.14774
The third monthly annuity income amount is calculated by multiplying
the number of payment units by the current Annuity Unit Value:
Portfolio A Portfolio B
(c) Income in Units 114.413 106.632
(k) Annuity Unit Value (current) 1.42353 1.14774
(h) Monthly Income (in dollars) $ 162.87 $ 122.39
Note that the Annuity Unit Value and the Monthly Income for Portfolio
A portion of the income amount have again increased but to a much
greater extent than before whereas the opposite is true for the
Portfolio B portion. The third monthly annuity income payment would be
the sum for each subaccount, or $285.26.
An illustration of annuity income payments under various rates appears
in the tables on pages 7 and 9. The monthly equivalents of the annual
net returns of -1.75%, 3.50%, 4.14%, 6.11%, 8.07% and 10.04% shown in
the tables are -0.15%, 0.29%, 0.34%, 0.50%, 0.65% and 0.80%.
HYPOTHETICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS
The following tables have been prepared to show how variable annuity
income payments under the Contract change with investment performance
over an extended period of time. The tables illustrate how monthly
annuity income payments would vary over time if the return on the
assets in the selected portfolios were a uniform gross annual rate of
0%, 5.35%, 6%, 8%, 10% and 12%. The values would be different from
those shown if the returns averaged 0%, 5.35%, 6%, 8%, 10% or 12% but
fluctuated over and under those averages throughout the years.
The tables reflect the fact that the Total Return of the Subaccounts
is lower than the gross return of the selected portfolios. The tables
reflect the daily charge to the Subaccounts for assuming mortality and
expense risks, which is equivalent to an effective annual charge of
0.75% and the daily administrative charge which is equivalent to an
effective annual charge of 0.05%. The amounts shown in the tables also
take into account the portfolios' management fees and operating
expenses which are assumed to be at an annual rate of 0.96% of the
average daily net assets of the selected portfolios. This 0.96% figure
consists of assumed management fees of 0.57% and assumed operating
expenses of 0.39%, figures based on the average of current management
fees and operating expenses. Actual fees and expenses of the
portfolios associated with your Contract may be more or less than
0.96%, will vary from year to year, and will depend on how you
allocate your investment base. See the current prospectuses for the
Funds for more complete information. The monthly annuity income
payments illustrated are on a pre-tax basis. The Federal income tax
treatment of annuity income payments is generally described in the
section of your current prospectus entitled "Tax Considerations."
The tables show both the gross rate and the net rate. The difference
between gross and net rates represent the 0.80% risk and
administrative charges and the assumed 0.96% for investment management
and operating expenses. Since these charges are deducted daily from
assets, the difference between the gross and net rate is not exactly
1.76%.
Two tables follow. The first table assumes 100% of the Contract Value
is allocated to a variable annuity income option; the second table
assumes 50% of the Contract Value is placed under a fixed annuity
income option, using the fixed crediting rate Fidelity Investments
Life offered on the fixed annuity income option at the date of the
illustration. Both illustrations assume that the final value of the
accumulation account is $50,000 and is applied at age 65 to purchase a
life annuity for a guaranteed period of 10 years certain and life
thereafter. When part of the Contract Value has been allocated to the
fixed annuity income option, the guaranteed minimum annuity income
payment resulting from this allocation is also shown. The illustrated
variable annuity income payments are determined through the use of
standard mortality tables and the assumption that the Subaccounts'
Total Return will be 3.5% per year. Thus, actual performance greater
than a net return of 3.5% will result in increasing annuity income
payments and performance less than 3.5% per year will result in
decreasing annuity income payments. We may offer alternative Assumed
Investment Returns from which you may select. Fixed annuity income
payments remain constant. Initial monthly annuity income payments
under a fixed annuity income payout are generally higher than initial
payments under a variable income payout option.
These tables show the monthly income payments for several hypothetical
constant rates of return. Of course, actual investment performance
will not be constant and may be volatile. Actual monthly income
amounts would differ from those shown if the actual rate of return
averaged the rate shown over a period of years, but also fluctuated
above or below those averages for individual contract years. Upon
request and when you are considering an annuity income option, we will
furnish a comparable illustration based on your individual
circumstances.
ANNUITY PAY-OUT ILLUSTRATION
(100% VARIABLE PAYOUT)
ANNUITANT: John Doe
GROSS AMOUNT OF CONTRACT VALUE APPLIED: $50,000
DATE OF BIRTH: 2/1/34 STATE PREMIUM TAX: 0%
SEX: Male DATE OF ILLUSTRATION: 2/1/99
ANNUITY OPTION SELECTED: Lifetime Income with annuity income payments
guaranteed for 10 years(1)
FREQUENCY OF ANNUITY
INCOME PAYMENTS: Monthly payments with first payment the first of
the month after annuitization
FIXED MONTHLY ANNUITY INCOME PAYMENT AVAILABLE ON THE DATE OF THE
ILLUSTRATION IF 100% FIXED ANNUITY OPTION SELECTED: $311.00
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 100% OF THE CONTRACT VALUE IS
ALLOCATED TO THE VARIABLE PAYOUT
NET RETURN AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE,
NO MINIMUM DOLLAR AMOUNT IS GUARANTEED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNT OF FIRST MONTHLY ANNUITY INCOME
PAYMENT IN YEAR SHOWN ASSUMING A
CONSTANT ANNUAL INVESTMENT RETURN OF:
Gross: 0% 5.35% 6% 8% 10% 12%
PAYMENT YEAR CALENDAR YEAR AGE Net(2): -1.75% 3.50% 4.14% 6.11% 8.07% 10.04%
1 1999 65 283 283 283 283 283 283
2 2000 66 268 283 284 290 295 300
3 2001 67 255 283 286 297 308 319
4 2002 68 242 283 288 304 322 340
5 2003 69 229 283 290 312 336 361
10 2008 74 177 283 299 353 417 490
15 2013 79 136 283 308 400 517 666
20 2018 84 105 283 318 453 642 905
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY
AN OWNER AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED.
THE AMOUNT OF THE INCOME PAYMENT WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL GROSS RATES OF RETURN AVERAGED THE RATES SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. SINCE IT IS HIGHLY LIKELY THAT
INVESTMENT RETURNS WILL FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME
(TO THE EXTENT THAT IS BASED ON THE VARIABLE ACCOUNT) WILL ALSO
FLUCTUATE. NO REPRESENTATION CAN BE MADE BY FIDELITY INVESTMENTS LIFE
OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
(1) Monthly annuity income payments cease upon the death of the
Annuitant if the Annuitant dies after the 10 year Guarantee Period. If
the Annuitant dies during the Guarantee period, annuity income
payments will continue until the end of the Period. The cumulative
amount of annuity income payments received under the annuity depends
on how long the Annuitant lives after the Guarantee Period. An annuity
pools the mortality experience of annuitants. Annuitants who die
earlier, in effect, subsidize the payments for those who live longer.
(2) The illustrated net return reflects the deduction of average fund
expenses and the 0.80% risk/administrative charge from the gross
return.
ANNUITY PAY-OUT ILLUSTRATION
(50% VARIABLE - 50% FIXED PAYOUT)
ANNUITANT: John Doe
GROSS AMOUNT OF CONTRACT VALUE APPLIED: $50,000
DATE OF BIRTH: 2/1/34 STATE PREMIUM TAX: 0%
SEX: Male DATE OF ILLUSTRATION: 2/1/99
ANNUITY OPTION SELECTED: Lifetime Income with annuity income payments
guaranteed for 10 years(1)
FREQUENCY OF ANNUITY
INCOME PAYMENTS: Monthly payments with first payment the first of
the month after annuitization
FIXED MONTHLY ANNUITY INCOME PAYMENT AVAILABLE ON THE DATE OF THE
ILLUSTRATION IF 100% FIXED ANNUITY OPTION SELECTED: $311.00
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 50% OF THE CONTRACT VALUE IS
ALLOCATED TO THE VARIABLE PAYOUT AND 50% TO THE FIXED PAYOUT
NET RETURN AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE, BUT
WILL NEVER BE LESS THAN $155.50. THE MONTHLY GUARANTEED PAYMENT OF
$155.50 IS BEING PROVIDED BY THE $25,000 APPLIED UNDER THE FIXED
ANNUITY OPTION.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNT OF FIRST MONTHLY ANNUITY INCOME PAYMENT
IN YEAR SHOWN ASSUMING A CONSTANT ANNUAL
INVESTMENT RETURN OF:
Gross: 0% 5.35% 6% 8% 10% 12%
PAYMENT YEAR CALENDAR YEAR AGE Net(2): -1.75% 3.50% 4.14% 6.11% 8.07% 10.04%
1 1999 65 297 297 297 297 297 297
2 2000 66 290 297 298 300 303 306
3 2001 67 283 297 299 304 309 315
4 2002 68 276 297 299 308 316 325
5 2003 69 270 297 300 312 323 336
10 2008 74 244 297 305 332 364 401
15 2013 79 224 297 309 356 414 489
20 2018 84 208 297 314 382 477 608
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY
AN OWNER AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED.
THE AMOUNT OF THE INCOME PAYMENT WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL GROSS RATES OF RETURN AVERAGED THE RATES SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. SINCE IT IS HIGHLY LIKELY THAT
INVESTMENT RETURNS WILL FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME
(TO THE EXTENT THAT IS BASED ON THE VARIABLE ACCOUNT) WILL ALSO
FLUCTUATE. NO REPRESENTATION CAN BE MADE BY FIDELITY INVESTMENTS LIFE
OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
(1) Monthly annuity income payments cease upon the death of the
Annuitant if the Annuitant dies after the 10 year Guarantee Period. If
the Annuitant dies during the Guarantee period, annuity income
payments will continue until the end of the Period. The cumulative
amount of annuity income payments received under the annuity depends
on how long the Annuitant lives after the Guarantee Period. An annuity
pools the mortality experience of annuitants. Annuitants who die
earlier, in effect, subsidize the payments for those who live longer.
(2) The illustrated net return reflects the deduction of average fund
expenses and the 0.80% risk/administrative charge from the gross
return.
GENERAL INFORMATION
We may advertise quotes of Contract Owners discussing Fidelity
Retirement Reserves or services provided by Fidelity Investments Life.
We may also advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
plan, a policyowner invests a fixed dollar amount in a Subaccount
thereby purchasing fewer units when prices are high and more units
when prices are low. While such a strategy does not assume a profit
nor guard against a loss in a declining market, the Contract Owner's
average cost per unit can be lower than if fixed numbers of units had
been purchased at those intervals. In evaluating such a plan, Contract
Owners should consider their ability to continue purchasing units
through periods of low price levels. In addition, we may from time to
time use statistics in advertising to support the growth of annuity
sales. Information to support these statistics may be obtained from
the Life Insurance Marketing Research Association, A.M. Best, American
Council of Life Insurance or the Variable Annuity Research and Data
Service.
From time to time, we may reprint and use as advertising and sales
literature, articles or quotes from financial or business publications
and periodicals. In addition, we may reference or discuss the products
and services of other affiliated companies, which may include:
Fidelity funds; retirement investing; brokerage products and services;
saving for college; and charitable giving.
We may also provide information to help individuals understand their
investment goals and explore various financial strategies. In
communicating these strategies, we may:
(solid bullet) compare the differences between tax deferred and
taxable investments;
(solid bullet) discuss factors to consider when purchasing the
contract;
(solid bullet) discuss the effects of probate when transferring the
contract to heirs;
(solid bullet) discuss traditional sources of retirement income and
products which may be used to supplement that income;
(solid bullet) discuss effects of inflation on fixed-income sources
and how the variable investment options may be used as a potential
hedge against inflation during the deferral and income periods;
(solid bullet) illustrate and compare the effects additional payments
have on a contract;
(solid bullet) discuss strategies of reducing risk through
diversification of purchase payments and providing hypothetical
investment mixes;
(solid bullet) discuss past returns of different classes of
investments based on data supplied through various sources such as
Ibbotson Associates of Chicago, Illinois; and
(solid bullet) assist policyholders with inquiries regarding their
annuity.
This information may be obtained from various sources such as the U.S.
Department of the Treasury, U.S. Department of Labor, Statistical
Abstract of the U.S. and Individual Annuitant Mortality Table. We may
present this information through various methods such as charts,
graphs, illustrations, and tables.
You may purchase the Contract with proceeds from various sources such
as transactions qualifying for a tax-free exchange under Section 1035
of the Internal Revenue Code. Investments by the Subaccounts in
securities of foreign issuers may result in a foreign investment tax
credit which we will claim on our federal income tax filings.
PERFORMANCE
Performance information for any Subaccount may be compared, in reports
and advertising to: (1) the Standard & Poor's 500 Composite Stock
Price Index ("S & P 500"), Dow Jones Industrial Average ("DJIA"),
Donoghue's Money Market Institutional Averages; (2) other variable
annuity separate accounts or other investment products tracked by
Lipper Analytical Services, Morningstar, or the Variable Annuity
Research and Data Service, widely used independent research firms
which rank mutual funds and other investment companies by overall
performance, investment objectives, and assets; and (3) the Consumer
Price Index (measure for inflation) to assess the real rate of return
from an investment in a contract. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
annuity charges and investment management costs.
Total returns, yields and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising may also contain other information including (i) the
ranking of any subaccount derived from rankings of variable annuity
separate accounts or other investment products tracked by Lipper
Analytical Series or by rating services, companies, publications or
other persons who rank separate accounts or other investment products
on overall performance or other criteria, and (ii) the effect of tax
deferred compounding on a subaccount's investment returns, or returns
in general, which may be illustrated by graphs, charts, or otherwise,
and which may include a comparison, at various points in time, of the
return from an investment in a Contract (or returns in general) on a
tax-deferred basis (assuming one or more tax rates) with the return on
a taxable basis.
The following tables below provide performance results for each
Subaccount through 12/31/98. The performance information is based on
the historical investment experience of the Subaccounts and of the
Portfolios. It does not indicate or represent future performance.
TOTAL RETURN
Total returns quoted in advertising reflect all aspects of a
Subaccount's return, including the automatic reinvestment by the
separate account of all distributions and any change in the
Subaccount's value over the period. Average annual returns are
calculated by determining the growth or decline in value of a
hypothetical historical investment in the Subaccount over a stated
period, and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or
decline in value had been constant over the period. For example, a
cumulative return of 100% over ten years would produce an average
annual return of 7.18%, which is the steady rate that would equal 100%
growth on a compounded basis in ten years. While average annual
returns are a convenient means of comparing investment alternatives,
investors should realize that the subaccount's performance is not
constant over time, but changes from year to year, and that average
annual returns represent averaged figures as opposed to the actual
year-to-year performance of a subaccount.
Table 1 shows the average annual total return on a hypothetical
investment in the Subaccounts for the last year, from the date that
the Portfolios began operations, and, for Portfolios in existence for
five years or more, for five years, assuming that the Contract was
surrendered December 31, 1998. For any Portfolio in existence ten
years or more, figures are shown for a ten year period rather than for
the life of the Portfolio. The average annual total returns shown in
Table 1 are computed by finding the average annual compounded rates of
return over the periods shown that would equate the initial amount
invested to the withdrawal value, in accordance with the following
formula: P(1 +T)n = ERV where P is a hypothetical investment payment
of $1,000, T is the average annual total return, n is the number of
years, and ERV is the withdrawal value at the end of the periods
shown. The returns reflect the risk and administrative charge of 0.80%
(1% on an annual basis prior to November 1, 1997) and the maintenance
charge. Since the Contract is intended as a long-term product, the
table also shows the average annual total return assuming that no
money was withdrawn from the Contract. The average annual total return
is also shown for Contracts with at least $25,000 of premium and
assuming no money is withdrawn from the Contract. The average annual
total return would be larger for these Contracts because there is
currently no maintenance charge on these larger Contracts. The first
column shows the average annual total return if you surrender the
Contract at the end of the period, the second column shows the average
annual total return if you do not surrender the Contract and the third
column shows the average annual total return if you do not surrender
the Contract and no maintenance charge is applied to the Contract.
Table 1: Average Annual Total Return for Period Ending on 12/31/98
(a) One Year Average Annual Total Return For Contracts Issued on
December 31, 1997:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fidelity Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Asset Manager 9.11% 14.11% 14.13%
Money Market (0.13)% 4.60% 4.62%
Investment Grade Bond 3.06% 7.96% 7.98%
Equity-Income 5.71% 10.71% 10.73%
Growth 33.35% 38.35% 38.37%
High Income (9.36)% (5.11)% (5.09)%
Overseas 6.83% 11.83% 11.85%
Index 500 22.28% 27.28% 27.30%
Asset Manager: Growth 11.61% 16.61% 16.63%
Contrafund 23.92% 28.92% 28.94%
Growth opportunities 18.60% 23.60% 23.62%
Balanced 11.68% 16.68% 16.70%
Growth & Income 23.53% 28.53% 28.55%
Strong
Discovery Fund II 1.56% 6.38% 6.40%
Opportunity Fund II 7.61% 12.61% 12.63%
Growth Fund II1 22.63% 27.63% 27.65%
Warburg Pincus
International Equity (.24)% 4.48% 4.50%
Small Company Growth (7.97)% (3.65)% (3.63)%
Post-Venture Capital .86% 5.64% 5.66%
PBHG
Growth II 2.44% 7.30% 7.32%
Large Cap Value 31.84% 36.84% 36.86%
Select 20 56.20% 61.20% 61.22%
Small Cap Value 5.03% 10.03% 10.05%
Technology & Communications 26.12% 31.12% 31.14%
Morgan Stanley Dean Witter
Emerging Markets Equity (28.06)% (24.80)% (24.78)%
Emerging Markets Debt (32.02)% (28.97)% (28.95)%
Global Equity 7.55% 12.55% 12.57%
International Magnum 3.17% 8.07% 8.09%
</TABLE>
(b) Average Annual Total Return If Contract Issued at Commencement of
Portfolio (which in most cases it was not):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
Fidelity
Money Market 4/1/82 5.67% 5.67%
High Income 9/19/85 9.93% 9.93%
Equity-Income 10/9/86 13.22% 13.22%
Growth 10/9/86 16.14% 16.14%
Asset Manager 9/6/89 11.84% 11.84%
Investment Grade Bond 12/5/88 7.25% 7.25%
Overseas 1/28/87 7.46% 7.46%
Index 500 8/27/92 19.97% 19.97%
Asset Manager: Growth 1/3/95 19.97% 20.26%
Contrafund 1/3/95 27.15% 27.39%
Growth Opportunities 1/3/95 24.80% 25.06%
Balanced 1/3/95 14.42% 14.76%
Growth & Income 12/30/96 26.82% 27.99%
Strong
Discovery Fund II 5/8/92 10.23% 10.23%
Growth Fund II1 12/31/96 26.89% 28.06%
Opportunity Fund II 5/8/92 17.87% 17.87%
Warburg Pincus
International Equity 6/30/95 4.19% 4.70%
Post-Venture Capital 9/30/96 5.33% 6.57%
Small Company Growth 6/30/95 12.86% 13.28%
PBHG
Select 20 9/26/97 43.02% 45.88%
Growth II 5/1/97 6.22% 8.51%
Large Cap Value 10/29/97 31.85% 35.09%
Small Cap Value 10/29/97 9.33% 12.67%
Technology & Communications 5/1/97 17.89% 20.02%
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
Morgan Stanley Dean Witter
Emerging Markets Debt 6/16/97 (21.75)% (19.95)%
Emerging Markets Equity 10/1//96 (13.88)% (12.87)%
Global Equity 1/2/97 16.60% 18.31%
International Magnum 1/2/97 5.90% 7.78%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Fidelity
Money Market 5.75%
High Income 10.00%
Equity-Income 13.29%
Growth 16.20%
Asset Manager 11.88%
Investment Grade Bond 7.29%
Overseas 7.52%
Index 500 20.00%
Asset Manager: Growth 20.29%
Contrafund 27.41%
Growth Opportunities 25.08%
Balanced 14.78%
Growth & Income 28.01%
Strong
Discovery Fund II 10.26%
Growth Fund II1 28.08%
Opportunity Fund II 17.90%
Warburg Pincus
International Equity 4.72%
Post-Venture Capital 6.59%
Small Company Growth 13.30%
PBHG
Select 20 45.91%
Growth II 8.53%
Large Cap Value 35.11%
Small Cap Value 12.69%
Technology & Communications 20.04%
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Morgan Stanley Dean Witter
Emerging Markets Debt (19.93)%
Emerging Markets Equity (12.85)%
Global Equity 18.33%
International Magnum 7.80%
</TABLE>
Average Annual Total Return From Date When Portfolio Began in Separate
Account.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subaccount Date Portfolio Began In Return If Contract Surrendered Return If Contract Continued
Separate Account and Maintenance Charge Applied
Fidelity
Asset Manager 10/4/89 11.87% 11.87%
Index 500 9/1/92 19.89% 19.89%
Asset Manager:Growth 1/9/95 20.09% 20.39%
Contrafund 1/9/95 27.37% 27.62%
Growth Opportunities 1/3/95 24.80% 25.05%
Balanced 1/3/95 14.42% 14.76%
Growth & Income 12/31/96 27.51% 28.68%
Strong
Discovery Fund II 11/24/97 (.55)% 2.83%
Growth Fund II1 11/24/97 24.08% 27.63%
Opportunity Fund II 11/24/97 9.27% 12.87%
Warburg Pincus
International Equity 11/24/97 (.39)% 2.99%
Post-Venture Capital 11/24/97 3.97% 7.52%
Small Company Growth 11/24/97 (4.87)% (1.66)%
PBHG
Select 20 11/24/97 56.64% 60.10%
Growth II 11/24/97 4.51% 8.08%
Large Cap Value 11/24/97 32.64% 36.16%
Small Cap Value 11/24/97 9.72% 13.31%
Technology & Communications 11/24/97 22.81% 26.37%
Morgan Stanley Dean Witter
Emerging Markets Debt 11/24/97 (25.95)% (23.54)%
Emerging Markets Equity 11/24/97 (24.88)% (22.43)%
Global Equity 11/24/97 10.27% 13.86%
International Magnum 11/24/97 2.40% 5.89%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Fidelity
Asset Manager 11.91%
Index 500 19.92%
Asset Manager:Growth 20.41%
Contrafund 27.64%
Growth Opportunities 25.08%
Balanced 14.78%
Growth & Income 28.70%
Strong
Discovery Fund II 2.85%
Growth Fund II1 27.65%
Opportunity Fund II 12.89%
Warburg Pincus
International Equity 3.01%
Post-Venture Capital 7.54%
Small Company Growth (1.64)%
PBHG
Select 20 60.13%
Growth II 8.10%
Large Cap Value 36.19%
Small Cap Value 13.33%
Technology & Communications 26.39%
Morgan Stanley Dean Witter
Emerging Markets Debt (23.52)%
Emerging Markets Equity (22.41)%
Global Equity 13.88%
International Magnum 5.91%
</TABLE>
(c) Five Year Average Annual Total Return If Contract Issued on
December 31, 1993:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Fidelity
Asset Manager 10.58% 10.72% 10.74%
Money Market 4.09% 4.26% 4.29%
Investment Grade Bond 5.50% 5.66% 5.68%
Equity-Income 17.51% 17.62% 17.63%
Growth 20.46% 20.54% 20.57%
High Income 7.59% 7.73% 7.75%
Overseas 8.49% 8.62% 8.65%
Index 500 22.43% 22.50% 22.53%
Strong
Discovery Fund II 7.77% 7.92% 7.94%
Opportunity Fund II 15.76% 15.86% 15.88%
</TABLE>
(d) Ten Year Average Annual Total For Contracts Issued on December 31,
1988:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Money Market 4.60% 4.60% 4.64%
Investment Grade Bond 7.25% 7.25% 7.29%
High Income 9.94% 9.94% 9.98%
Equity-Income 14.44% 14.44% 14.48%
Growth 18.18% 18.18% 18.22%
Overseas 8.96% 8.96% 9.00%
</TABLE>
(The Separate Account inception date is 7/22/87.)
In addition to average annual returns, the Subaccounts may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Table 2 shows the
cumulative total return on a hypothetical investment in the
Subaccounts from the date the Portfolios began operations, and
assuming that the Contract was surrendered December 31, 1998. For any
Portfolio in existence five years or more, five year figures are also
shown. For any Portfolio in existence ten years or more, figures are
shown for a ten year period rather than for the life of the Portfolio.
The returns reflect the risk and administrative charge 0.80% on an
annual basis (1% prior to November 1, 1997) and the maintenance
charge. Since the Contract is intended as a long-term product, the
table also shows the cumulative total return assuming that no money
was withdrawn from the Contract. The cumulative total return is also
shown for Contracts with at least $25,000 of premium and assuming no
money is withdrawn from the Contract. The cumulative total return for
these Contracts would be larger because there is currently no
maintenance charge on these larger Contracts. The first column shows
the cumulative total return if you surrender the Contract at the end
of the period, the second column shows the cumulative total return if
you do not surrender the Contract and the third column shows the
cumulative total return if you do not surrender the Contract and no
maintenance charge is applied to the Contract.
Table 2: Cumulative Total Return For Periods Beginning at Commencement
of Portfolios and Ending on 12/31/98:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
Fidelity
Money Market 4/1/82 151.86% 151.86%
Asset Manager 9/6/89 183.90% 183.90%
Investment Grade Bond 12/5/88 102.41% 102.41%
High Income 9/19/85 251.91% 251.91%
Overseas 1/28/87 136.02% 136.02%
Index 500 8/27/92 217.65% 217.65%
Growth Opportunities 1/3/95 142.30% 144.30%
Balanced 1/3/95 71.31% 73.31%
Equity Income 10/9/86 357.05% 357.05%
Growth 10/9/86 523.62% 523.62%
Contrafund 1/3/95 161.02% 163.02%
Asset Manager: Growth 1/3/95 106.97% 108.97%
Growth & Income 12/30/96 60.92% 63.92%
Morgan Stanley Dean Witter
Emerging Markets Debt 6/16/97 (31.49)% (29.05)%
Emerging Markets Equity 10/1/96 (28.55)% (26.65)%
Global Equity 1/2/97 35.84% 39.84%
International Magnum 1/2/97 12.12% 16.12%
PBHG
Growth II 5/1/97 10.60% 14.60%
Large Cap Value 10/29/97 38.40% 42.40%
Small Cap Value 10/29/97 11.05% 15.05%
Technology & Communications 5/1/97 31.59% 35.59%
Select 20 9/26/97 57.29% 61.29%
Strong
Discovery Fund II 5/8/92 91.16% 91.16%
Growth Fund II1 12/31/96 61.00% 64.00%
Opportunity Fund II 5/8/92 198.60% 198.60%
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
Warburg Pincus
International Equity 6/30/95 15.49% 17.49%
Post-Venture Capital 9/30/96 12.41% 15.41%
Small Company Growth 6/30/95 52.85% 54.85%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Fidelity
Money Market 155.40%
Asset Manager 184.78%
Investment Grade Bond 103.21%
High Income 254.97%
Overseas 137.65%
Index 500 218.10%
Growth Opportunities 144.43%
Balanced 73.42%
Equity Income 360.27%
Growth 527.94%
Contrafund 163.21%
Asset Manager: Growth 109.13%
Growth & Income 63.98%
Morgan Stanley Dean Witter
Emerging Markets Debt (29.03)%
Emerging Markets Equity (26.61)%
Global Equity 39.89%
International Magnum 16.16%
PBHG
Growth II 14.63%
Large Cap Value 42.43%
Small Cap Value 15.08%
Technology & Communications 35.63%
Select 20 61.31%
Strong
Discovery Fund II 91.46%
Growth Fund II1 64.06%
Opportunity Fund II 199.05%
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Warburg Pincus
International Equity 17.57%
Post-Venture Capital 15.46%
Small Company Growth 54.95%
</TABLE>
(c) Cumulative Total Return For Five Year Period From 12/31/93 Through
12/31/98:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subaccount Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Asset Manager 65.37% 66.37% 66.55%
Money Market 22.22% 23.22% 23.36%
Investment Grade Bond 30.69% 31.69% 31.84%
Equity-Income 124.10% 125.10% 125.33%
Growth 153.63% 154.63% 154.89%
High Income 44.13% 45.13% 45.30%
Overseas 50.28% 51.28% 51.45%
Index 500 175.09% 176.09% 176.36%
Strong
Discovery Fund II 45.37% 46.37% 46.53%
Opportunity Fund II 107.85% 108.85% 109.07%
</TABLE>
(d) Cumulative Total Return For Ten Year Period From 12/31/88 Through
12/31/98:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Money Market 56.80% 56.80% 57.41%
High Income 158.12% 158.12% 159.12%
Equity-Income 285.73% 285.73% 287.16%
Growth 431.95% 431.95% 433.84%
Overseas 135.95% 135.95% 136.85%
Investment Grade Bond 101.53% 101.53% 102.30%
</TABLE>
1 Strong Growth Fund II is currently called Strong Mid Cap Growth Fund
II
(The Separate Account inception date is 7/22/87.)
YIELDS
Some Subaccounts may also advertise yields. Yields quoted in
advertising reflect the change in value of a hypothetical investment
in the Subaccount over a stated period of time, not taking into
account capital gains or losses. Yields are annualized and stated as a
percentage. Yields do not reflect the impact of any contingent
deferred sales load. Yields quoted in advertising may be based on
historical seven day periods.
Current yield for Money Market Subaccount reflects the income
generated by a Subaccount over a 7 day period. Current yield is
calculated by determining the net change, exclusive of capital
changes, in the value of a hypothetical account having one
Accumulation Unit at the beginning of the period adjusting for the
maintenance charge, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period
return, and multiplying the base period return by (365/7). The
resulting yield figure is carried to the nearest hundredth of a
percent. Effective yield for the Money Market Subaccount is calculated
in a similar manner to current yield except that investment income is
assumed to be reinvested throughout the year at the 7 day rate.
Effective yield is obtained by taking the base period returns as
computed above, and then compounding the base period return by adding
1, raising the sum to a power equal to (365/7) and subtracting one
from the result, according the formula Effective Yield = [(Base Period
Return + 1) 365/7] - 1. Since the reinvestment of income is assumed in
the calculation of effective yield, it will generally be higher than
current yield. For the 7 day period ending on 12/31/98, the Money
Market Subaccount had a current yield of 4.24% and an effective yield
of 4.33%. For Contracts on which there is currently no maintenance
charge, the current yield would be 4.26% and the effective yield would
be 4.35%.
A 30 day yield for bond subaccounts reflects the income generated by a
Subaccount over a 30 day period. Yield will be computed by dividing
the net investment income per Accumulation Unit earned during the
period by the maximum offering price per Accumulation Unit on the last
day of the period, according to the following formula: Yield =
2[(a-b/cd + 1)6 - 1] where a= net investment income earned by the
applicable portfolio, b = expenses for the period including expenses
charged to the contract owner accounts, c = the average daily number
of Accumulation Units outstanding during the period, and d = the
maximum offering price per Accumulation Unit on the last day of the
period. The 30 day yield for the period ending on 12/31/98 was 4.77%
for the Investment Grade Bond Subaccount, 9.57% for the High Income
Subaccount and 12.16% for the Emerging Markets Debt Subaccount. For
Contracts on which there is no maintenance charge, the 30 day yield
would be 4.79% for the Investment Grade Bond Subaccount, 9.59% for the
High Income Subaccount and 12.18% for the Emerging Markets Debt
Subaccount.
EXCHANGES AMONG SUBACCOUNTS AFTER THE ANNUITY DATE
After the Annuity Date, you may instruct us to reallocate the value of
some or all of the Annuity Units of a variable Subaccount then
credited to your Contract into an equal value of Annuity Units of one
or more other Subaccounts. The exchange shall be based on the relative
value of the Subaccount Annuity Units at the end of the Valuation
Period in which the request is received and will affect income
payments determined after that Valuation Period. To make such an
exchange, you must contact the Annuity Service Center. The value of
the Annuity Units exchanged must provide at least a $50 annuity income
payment at the time of the exchange, unless all of the Annuity Units
of a Subaccount are being exchanged.
UNAVAILABILITY OF ANNUITY INCOME OPTIONS IN CERTAIN CIRCUMSTANCES
We do not offer annuity income options to any corporate beneficiary,
partnership or trustee; any assignee, unless that assignee is a
beneficiary; or the executors or administrators of the Annuitant's
estate.
IRS REQUIRED DISTRIBUTIONS
If the Owner of the Contract dies (or either Joint Owner if the
Contract is owned jointly) before the entire interest in the Contract
is distributed, the value of the Contract must be distributed to the
designated beneficiary as described in this section so that the
Contract qualifies as an annuity under the Internal Revenue Code.
If the death occurs on or after the Annuity Date, the remaining
portion of the interest in the Contract must be distributed at least
as rapidly as under the method of distribution being used as of the
date of death. If the death occurs before the Annuity Date, the entire
interest in the Contract must be distributed within five years after
the date of death, unless the following conditions are met.
The Beneficiaries or second Owners' entire interest is payable over
the Beneficiary's or second Owners lifetime (or a period not extending
beyond the life expectancy of the Beneficiary or second Owner) by
electing annuitization within 60 days of the date of death 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.
However, for Qualified Contracts where the owner's spouse is the
beneficiary, annuity income payments need not begin within one year
after the Owner's death, rather they need only begin on or before
April 1 of the calendar year following the calendar year in which the
Owner would have attained age 70 1/2. The Owner's designated
beneficiary is the person to whom proceeds of the Contract pass by
reason of the death of the Owner.
If the Contract Owner is a trust or other "non-natural person," and
the Annuitant dies before the Annuity Date, the required distribution
upon death rules will apply.
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
The assets of the Variable Account are held by Fidelity Investments
Life. The assets of the Variable Account are held apart from our
general account assets and any other separate accounts we may
establish. We maintain records of all purchases and redemptions of the
shares of the Funds held by the variable Subaccounts. We maintain
fidelity bond coverage for the acts of our officers and employees.
DISTRIBUTION OF THE CONTRACTS
As explained in the Prospectus, the Contracts are distributed through
Fidelity Brokerage Services, Inc. and Fidelity Insurance Agency, Inc.,
which are affiliated with FMR Corp. and Fidelity Investments Life. The
offering of the contracts is continuous, and we do not anticipate
discontinuing offering the Contracts. However, we reserve the right to
discontinue offering the contracts.
STATE REGULATION
Fidelity Investments Life is subject to regulation by the Department
of Insurance of the State of Utah, which periodically examines our
financial condition and operations. We are also subject to the
insurance laws and regulations of all jurisdictions where we do
business. The Contract described in the Prospectus and Statement of
Additional Information has been filed with and, where required,
approved by, insurance officials in those jurisdictions where it is
sold.
We are required to submit annual statements of our operations,
including financial statements, to the insurance departments of the
various jurisdictions where we do business to determine solvency and
compliance with applicable insurance laws and regulations.
LEGAL MATTERS
The legal validity of the Contracts described in the Prospectus and
Statement of Additional Information has been passed on by David J.
Pearlman, Senior Legal Counsel of FILI. Jorden Burt Boros Cicchetti
Berenson & Johnson LLP of Washington, D.C. has passed on matters
relating to Federal securities laws.
REGISTRATION STATEMENT
We have filed a Registration Statement under the Securities Act of
1933 with the SEC relating to the Contracts. The Prospectus and
Statement of Additional Information do not include all the information
in the Registration Statement. We have omitted certain portions
pursuant to SEC rules. You may obtain the omitted information from the
SEC's main office in Washington, D.C. by paying the SEC's prescribed
fees.
INDEPENDENT ACCOUNTANTS
The consolidated balance sheets of Fidelity Investments Life Insurance
Company and its subsidiary as of December 31, 1998 and 1997, and the
related consolidated statements of income and comprehensive income, of
stockholder's equity, and of cash flows for each of the three years in
the period ended December 31, 1998, and the statement of assets and
liabilities of the Fidelity Investments Variable Annuity Account I as
of December 31, 1998, and the related statements of operations and
changes in net assets for the years ended December 31, 1998 and 1997
included in this registration statement have been included herein in
reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, on the authority of that firm as experts in accounting
and auditing.
FINANCIAL STATEMENTS
The financial statements of Fidelity Investments Life included herein
should be distinguished from the financial statements of the Variable
Account and should be considered only as bearing upon our ability to
meet our obligations under the Contracts.
