As filed with the SEC on January 25, 1999
Registration No. 33-24400
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 15 [x]
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 22 [x]
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
(Exact name of registrant)
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(Name of depositor)
82 Devonshire Street
Boston, Massachusetts 02109
(Address of depositor's principal executive offices)
Depositor's telephone number: (800) 544-8888
_________________________________________________
RODNEY R. ROHDA
Chairman
Fidelity Investments Life Insurance Company
82 Devonshire Street
Boston, Massachusetts 02109
(Name and address of agent for service)
_________________________________________________
Individual Variable Annuity Contracts -- The Registrant has registered
an indefinite amount of securities pursuant to Rule 24f-2 of the
Investment Company Act of 1940. The Rule 24f-2 Notice for the fiscal
year ending December 31, 1997, was filed on March 30, 1998.
It is proposed that this filing will become effective (check
appropriate space):
immediately upon filing pursuant to paragraph (b) of rule 485
on , pursuant to paragraph (b) (1) (v) of rule 485
X 60 days after filing pursuant to paragraph (a) (1) of rule 485
on , pursuant to paragraph (a) (1) of rule 485
75 days after filing pursuant to paragraph (a) (2) of rule 485
on , pursuant to paragraph (a) (2) of rule 485
Page _ of _
Exhibit Index Appears on Page __
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
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Part A
Item Heading in Prospectus
N-4
Item
Item 1. Cover Page Cover Page
Item 2. Definitions Glossary
Item 3. Synopsis or Highlights Summary of the Contract
Item 4. Condensed Financial Information Accumulation Unit Values
Item 5. General Description of Facts About Fidelity
Registrant, Depositor, and Investments Life, The
Portfolio Companies Variable Account, and
the Funds
a) Depositor Fidelity Investments
Life
b) Registrant The Variable Account;
The Fixed Account
c) Portfolio Company The Funds
d) Prospectus The Funds
e) Voting Voting Rights
f) Administrator Charges
Item 6. Deductions and Expenses Charges
a) Deductions Charges; Premium Taxes
b) Sales load Withdrawal Charge
c) Special purchase plans Special Provisions
Applicable to Sales
under Sponsored
Arrangements; Automatic
Deduction Plan; Dollar
Cost Averaging
d) Commissions Selling the Contracts
e) Portfolio company deductions
and expenses Charges
f) Registrant's expenses Charges
Item 7. General Description of Variable
Annuity Contracts
a) Rights Summary of the Contract;
Investment Allocation of
Your Purchase Payments;
Withdrawals; Death
Benefit; Selection of
Annuity Income Options;
Reports to Owners;
Voting Rights; Other
Contract Provisions
b) Provisions and limitations Investment Allocation of
Your Purchase Payments
c) Changes in contracts or Changes in Investment
operations Options
d) Contract owner inquiries Cover Page
Item 8 Annuity Period
a) Level of benefits Fixed, Variable or
Combination Annuity
Income Options; Types of
Annuity Income Options
b) Annuity commencement date Annuity Date
c) Annuity payments Types of Annuity Income
Options
d) Assumed investment return Fixed, Variable or
Combination Annuity
Income Options
e) Minimums Types of Annuity Income Options
f) Rights to change options or Investment Allocation of
transfer contract value Your Purchase Payments
Item 9. Death Benefit
a) Death benefit calculation Death Benefit
b) Forms of benefits Death Benefit; Types of
Annuity Income Options
Item 10. Purchases and Contract Values
a) Procedures for purchases Purchase of a Contract
b) Accumulation unit value Accumulation Units
c) Calculation of accumulation Accumulation Units
unit value
d) Principal underwriter Selling the Contracts
Item 11. Redemptions
a) Redemption procedures Withdrawals
b) Texas Optional Retirement Not Applicable
Program
c) Delay Postponement of
Payment
d) Lapse Not Applicable
e) Revocation rights Free Look Privilege
Item 12. Taxes
a) Tax Consequences Tax Considerations; Contract Values
and Proceeds; Required Distributions
Upon Death
b) Qualified plans Purchase of A Contract;
Tax Considerations
c) Impact of taxes Tax Considerations
Item 13. Legal Proceedings Litigation
Item 14. Table of Contents for Table of Contents for
Statement of Additional Statement of Additional
Information Information
Part B Heading in Statement of
Form Additional Information
N-4
Item
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and
History
a) Name change Fidelity Investments Life
(Prospectus)
b) Attribution of Assets Not Applicable
c) Control of Depositor Fidelity Investments Life
(Prospectus)
Item 18. Services
a) Fees, expenses and costs Charges (Prospectus)
b) Management - related Not Applicable
c) Custodian and independent Independent Accountants
public accountant
d) Other custodianship Safekeeping of Account
Assets
e) Administrative servicing Fidelity Investments Life
agent (Prospectus); The Variable Account
(Prospectus)
f) Depositor as principal Not Applicable
underwriter
Item 19. Purchase of Securities Being
Offered
a) Manner of Offering Distribution of the
Contracts; Selling the
Contracts (Prospectus)
b) Sales load Withdrawal Charge (Prospectus)
Item 20. Underwriters
a) Depositor or affiliate as Selling the Contracts
principal underwriter (Prospectus)
b) Continuous offering Distribution of Contracts
c) Underwriting commissions Not Applicable
d) Payments to underwriter Not Applicable
Item 21. Calculation of Performance Data Performance
Item 22. Annuity Payments Fixed Annuity Income
Payments; Variable
Annuity Income Payments;
Unavailability of
Annuity Income Payments
in Certain Circumstances
Item 23. Not Applicable.
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PROSPECTUS
FIDELITY RETIREMENT RESERVES
INTRODUCTION
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.
You may purchase the Contract (1) on a non-qualified basis or (2) on a
qualified basis as an individual retirement annuity ("IRA") under
Section 408(b) of the Internal Revenue Code of 1986, as amended. You
may choose to receive amounts in a single payment or as a series of
annuity payments, including payments guaranteed for your lifetime.
INVESTMENT OPTIONS
You may direct your money to one or more of the twenty-eight
Subaccounts of Fidelity Investments Variable Annuity Account I (the
"Variable Account"). You may also direct part or all of your money to
a fixed-rate investment option funded through our general account (the
"Fixed Account").
The variable Subaccounts invest in the mutual fund portfolios of
Variable Insurance Products Fund, Variable Insurance Products Fund II,
and Variable Insurance Products Fund III (the "Fidelity Funds").
FIDELITY MANAGEMENT & RESEARCH COMPANY ("FMR") MANAGES EACH OF THE
FIDELITY FUNDS.
The variable Subaccounts also invest in the portfolios of other mutual
funds managed by MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT,
INC. ("MSDW INVESTMENT MANAGEMENT"), PILGRIM BAXTER & ASSOCIATES, LTD.
or PILGRIM BAXTER VALUE INVESTORS, INC. ("PBHG"), STONG CAPITAL
MANAGEMENT, INC. ("STRONG"), and WARBURG PINCUS ASSET MANAGEMENT, INC.
("WARBURG PINCUS") ("Other Funds").
All mutual fund portfolios available in this prospectus are
collectively known as the "Funds".
We may add additional Subaccounts and portfolios in the future. We
credit interest on amounts allocated to the Fixed Account at specified
interest rates that vary from time to time.
LEGAL INFORMATION
This prospectus provides information that a prospective investor
should know before investing. We have filed additional information
about the Contract and the Variable Account with the Securities and
Exchange Commission in a Statement of Additional Information dated
March 26, 1999. 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 or by
accessing the SEC internet website at (http://www.sec.gov). The table
of contents of the Statement of Additional Information appears on page
.
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. 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 EITHER THE CURRENT PROSPECTUS FOR THE
MONEY MARKET INVESTMENT OPTION OR THE PROSPECTUSES FOR ALL THE
INVESTMENT OPTIONS AVAILABLE IN THE CONTRACT.
THE CONTRACT IS NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT BE LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS.
FOR FURTHER INFORMATION CALL FIDELITY INVESTMENTS:
Nationally 800-544-2442
Date: March 26, 1999
PROSPECTUS CONTENTS
Glossary iv
Summary of the Contract 11
FACTS ABOUT FILI, THE VARIABLE ACCOUNT AND THE FUNDS
Fidelity Investments Life 19
The Variable Account 19
The Funds 114
FACTS ABOUT THE CONTRACT
Purchase of a Contract 26
Free Look Privilege 27
Investment Allocation of Your Purchase Payments 27
Withdrawals 28
Signature Guarantee 29
Charges 29
Death Benefit 40
Required Distributions Upon Death 30
Annuity Date 31
Selection of Annuity Income Options 31
Fixed, Variable, or Combination Annuity Income Options 31
Types of Annuity Income Options 31
Reports to Owners 31
THE FIXED ACCOUNT
The Fixed Account 32
MORE ABOUT THE CONTRACT
Tax Considerations 32
Other Contract Provisions 33
Selling the Contracts 34
Automatic Deduction Plan 34
Special Provisions For Sponsored Arrangements 34
Dollar Cost Averaging 34
Automatic Rebalancing 34
Postponement of Payment 35
MORE ABOUT THE VARIABLE ACCOUNT AND THE FUNDS
Changes in Investment Options 35
Net Rate of Return for a Subaccount 35
Voting Rights 35
Resolving Material Conflicts 35
Performance 35
Litigation 36
Appendix A: Accumulation Units 37
Table of Contents of the Statement of Additional Information 45
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.
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
SUMMARY OF THE CONTRACT
PURPOSE
(small solid bullet) This variable annuity contract allows you, the
Owner(s), to accumulate funds on a tax-deferred basis by investing in
one or more variable Subaccounts.
(small solid bullet) The Contract also permits the Annuitant to
receive annuity income payments commencing on the Annuity Date, a date
the Owner selects. The Owner designates the Annuitant, the person upon
whose life annuity payments are based. The Annuitant may be an Owner
or someone else.
(small solid bullet) 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.
(small solid bullet) The Contract also allows you to allocate funds to
a fixed-rate investment option funded through our 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.
(small solid bullet) We designed the Contract to provide income for
retirement or to meet other long-term goals. You may purchase the
Contract as follows:
(1) on a NON-QUALIFIED basis;
(2) 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; or
(3) by exchanging Fidelity Variable Annuity (another annuity contract
issued by Fidelity Investments Life).
NON-QUALIFIED CONTRACT
We require an initial minimum of $2,500 to purchase a Non-qualified
Contract. You may also make additions to a Non-qualified Contract
before annuity payments begin (the "Annuity Date"). Each addition must
be at least $250 and the Annuitant must still be living. We may reduce
these minimums for individuals under certain sponsored arrangements or
for automatic deduction plans.
QUALIFIED CONTRACT
We require an initial minimum of $10,000 to purchase a Qualified
Contract. You may make additions to a Qualified Contract as long as
each addition is at least $2,500. Some Contracts may have lower
minimums.
INVESTMENT OPTIONS
Your may direct your money to the Subaccounts of the Variable Account
and/or to the Fixed Account. MONEY ALLOCATED TO THE VARIABLE ACCOUNT
WILL BE INVESTED IN THE MONEY MARKET SUBACCOUNT UNTIL THE END OF THE
"FREE LOOK" PERIOD, WHICH IS GENERALLY FIFTEEN DAYS AFTER WE MAIL THE
CONTRACT TO YOU. SEE INVESTMENT ALLOCATION OF YOUR PURCHASE PAYMENTS
on page .
There are currently twenty-eight variable Subaccounts.
(small solid bullet) Five Subaccounts invest in the shares of one of
the mutual fund portfolios of Fidelity 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.
(small solid bullet) Five Subaccounts invest exclusively in shares of
one of the mutual fund portfolios of Fidelity 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.
(small solid bullet) Three Subaccounts invest exclusively in shares of
one of the mutual fund portfolios of Fidelity Variable Insurance
Products Fund III. The Variable Insurance Products Fund III currently
offers a Growth & Income Portfolio, Balanced Portfolio, and Growth
Opportunities Portfolio.
(small solid bullet) The remaining Investment Options invest in shares
of one of the mutual fund portfolios of MSDW Investment Management,
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.
WITHDRAWALS
You may withdraw all or part of your Contract's Cash Surrender Value
before the Annuity Date and while the Annuitant is still living. The
Cash Surrender Value of your Contract is the amount payable before the
deduction of taxes, if you surrender your Contract.
During the first five Contract Years, we may subject the withdrawal 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.
The contingent deferred sales charge 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 .
ANNUITY INCOME OPTIONS
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 (1) a FIXED basis, (2) a VARIABLE basis, or (3) a COMBINATION
of both. See FIXED, VARIABLE, OR COMBINATION ANNUITY INCOME OPTIONS on
page .
(small solid bullet) If you elect a FIXED income, your Contract's
participation in the investment experience of the Variable Account
will cease when the annuity income payments begin.
(small solid bullet) 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.
(small solid bullet) 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.
DEATH BENEFIT
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 40. 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 .
CHARGES
In addition to the contingent deferred sales charge, we assess the
following charges:
(1) ANNUAL MAINTENANCE CHARGE. This charge is currently set at $30 per
year and guaranteed not to exceed $50 per year.
(small solid bullet) Before the Annuity Date, we deduct this charge
from your Contract Value.
(small solid bullet) After the Annuity Date, we deduct this charge
from each annuity income payment on a pro rata basis.
(small solid bullet) 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.
(2) DAILY ADMINISTRATIVE CHARGE. We also make a daily charge
(equivalent to an effective annual rate of .05%) against the assets of
each variable Subaccount for administrative expenses.
(3) MORTALITY AND EXPENSE RISK CHARGE. We assess 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.
(4) PREMIUM TAXES. 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 .
(5) FUNDS' EXPENSES. The portfolios in the Funds pay monthly
management fees and other expenses. See the prospectuses for the Funds
for discussions of expenses.
For further information see CHARGES on page 34.
FREE LOOK PRIVILEGE
You may return your Contract for a refund within 10 days after you
receive the Contract. 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. When you are replacing an existing insurance product with the
Contract, the free look period will be extended to at least 20 days.
This provision may vary by state. See FREE LOOK PRIVILEGE on page .
IMPORTANT
This summary provides 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 together with its attached application 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
DEAN WITTER 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
FEE TABLE
This information may 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 you may withdraw
up to 10% of total purchase payments without a contingent deferred
sales charge. We base the contingent deferred sales charge solely on
the Contract Year - additional purchase payments do not cause the
contingent deferred sales charge percentages to start over. We may
reduce or waive the contingent deferred sales charge for Contracts
issued under certain sponsored arrangements.
(2) The ANNUAL MAINTENANCE CHARGE is a single $30 charge each year. We
deduct this charge proportionally from the investment options in use
at the time of the charge. We currently waive the annual maintenance
charge for Contracts with at least $25,000 of accumulated purchase
payments less any withdrawals. We may reduce or waive this charge 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)
FIDELITY1 MANAGEMENT OTHER TOTAL
FEES EXPENSES ANNUAL
EXPENSES
ASSET MANAGER 0.55% 0.10% 0.65%
MONEY MARKET 0.21% 0.10% 0.31%
INVESTMENT GRADE BOND 0.44% 0.14% 0.58%
HIGH INCOME 0.59% 0.12% 0.71%
EQUITY-INCOME 0.50% 0.08% 0.58%
INDEX 500 0.24% 0.04% 0.28%2
GROWTH 0.60% 0.09% 0.69%
OVERSEAS 0.75% 0.17% 0.92%
ASSET MANAGER: GROWTH 0.60% 0.17% 0.77%
CONTRAFUND 0.60% 0.11% 0.71%
GROWTH OPPORTUNITIES 0.60% 0.14% 0.74%
BALANCED 0.45% 0.16% 0.61%
GROWTH & INCOME 0.49% 0.21% 0.70%
MORGAN STANLEY DEAN WITTER
EMERGING MARKETS DEBT 0.09% 1.21% 1.30%3
EMERGING MARKETS EQUITY 0.00% 1.75% 1.75%3
GLOBAL EQUITY 0.00% 1.15% 1.15%3
INTERNATIONAL MAGNUM 0.00% 1.15% 1.15%3
PBHG
SELECT 20 0.61% 0.59% 1.20%4
GROWTH II 0.61% 0.59% 1.20%4
LARGE CAP VALUE 0.05% 0.95% 1.00%4
SMALL CAP VALUE 0.74% 0.46% 1.20%4
TECHNOLOGY & 0.58% 0.62% 1.20%4
COMMUNICATIONS
STRONG
DISCOVERY FUND II 1.00% 0.18% 1.18%
GROWTH FUND II 1.00% 0.20% 1.20%5
OPPORTUNITY FUND II 1.00% 0.15% 1.15%
WARBURG PINCUS
INTERNATIONAL EQUITY 1.00% 0.35% 1.35%6
POST-VENTURE CAPITAL 1.07% 0.33% 1.40%6
SMALL COMPANY GROWTH 0.90% 0.24% 1.14%6
1) A portion of the brokerage commissions that certain Funds pay was
used to reduce Fund expenses. In addition, certain Funds have entered
into arrangements with their custodian and transfer agent so that
interest earned on uninvested cash balances was used to reduce
custodian expenses. Including these reductions, the total operating
expenses presented in the table would have been .57% for Equity-Income
Portfolio, .67% for Growth Portfolio, .90% for Overseas Portfolio,
.64% for Asset Manager Portfolio, .68% for Contrafund Portfolio, .76%
for Asset Manager: Growth Portfolio, .73% for Growth Opportunities
Portfolio, .60% for Balanced Portfolio and .71% for High Income
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 .27%, .13% and
.40%, respectively.
3) MORGAN STANLEY DEAN WITTER INVESTMENT 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. MSDW Investment Management may terminate this voluntary waiver
at any time at its sole discretion. Absent such reductions,
"Management Fees", "Other Expenses" and "Total Annual Expenses",
respectively, would be as follows: Emerging Markets Debt Portfolio -
0.80%, 1.26%, 2.06%; Emerging Markets Equity Portfolio - 1.25%, 2.62%,
4.12%%; Global Equity Portfolio - 0.80%, 1.63%, 2.43%; International
Magnum Portfolio - 0.80%, 1.98%, 2.78%.
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, 1998. 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, 1998. Absent such fee
waivers/expense reimbursements the Advisory Fees and estimated Total
Operating Expenses for the Growth II, Small Cap Value, Large Cap
Value, Technology & Communications and Select 20 Portfolios would be
0.85% and 1.44%; 1.00% and 1.46%; .65% and 1.60%; .85% and 1.47%; and
.85% and 1.44%, respectively.
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, Post-Venture Capital and Small Company Growth
Portfolios are based on actual expenses for the fiscal year ended
December 31, 1997, net any fee waivers or expense reimbursements.
Without such waivers or reimbursements, Management Fees would have
equaled 1.00%, 1.25% and 0.90%; Other Expenses would have equalled
0.40%, 0.33% and 0.27%; and Total Annual Expenses would have equalled
1.40%, 1.58% and 1.15% 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, 1998.
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.
FIDELITY ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
ASSET MANAGER $ 62 $ 76 $ 90 $ 176
MONEY MARKET 58 66 72 137
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 85 104 205
INDEX 500 58 65 71 134
ASSET MANAGER: GROWTH 63 80 97 189
CONTRAFUND 62 78 93 182
GROWTH OPPORTUNITIES 63 79 95 186
BALANCED 61 75 88 171
GROWTH & INCOME 62 78 93 181
MORGAN STANLEY DEAN WITTER
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
GROWTH II 67 93 119 235
LARGE CAP VALUE 65 87 109 214
SELECT 20 67 93 119 235
SMALL CAP VALUE 67 93 119 235
TECHNOLOGY & COMMUNICATIONS 67 93 119 235
STRONG
DISCOVERY FUND II 67 93 118 233
GROWTH FUND II 67 93 119 235
OPPORTUNITY FUND II 67 92 116 230
WARBURG PINCUS
INTERNATIONAL EQUITY 68 98 126 250
POST-VENTURE CAPITAL 69 99 129 255
SMALL COMPANY GROWTH 66 91 116 229
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:
FIDELITY ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
ASSET MANAGER $ 15 $ 46 $ 80 $ 176
MONEY MARKET 12 36 62 137
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 94 205
INDEX 500 11 35 61 134
ASSET MANAGER: GROWTH 16 50 87 189
CONTRAFUND 16 48 83 182
GROWTH OPPORTUNITIES 16 49 85 186
BALANCED 15 45 78 171
GROWTH & INCOME 15 48 83 181
MORGAN STANLEY DEAN WITTER
EMERGING MARKETS DEBT 22 66 114 245
EMERGING MARKETS EQUITY 26 80 137 290
GLOBAL EQUITY 20 62 106 230
INTERNATIONAL MAGNUM 20 62 106 230
PBHG
GROWTH II 21 63 109 235
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 20 63 108 233
GROWTH FUND II 21 63 109 235
OPPORTUNITY FUND II 20 62 106 230
WARBURG PINCUS
INTERNATIONAL EQUITY 22 68 116 250
POST-VENTURE CAPITAL 23 69 119 255
SMALL COMPANY GROWTH 20 62 106 229
(small solid bullet) These figures illustrate the combined effect of
all current charges. The examples should not be considered a
representation of past or future expenses. Actual expenses may be
greater or less than those shown.
(small solid bullet) 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.
FACTS ABOUT FIDELITY INVESTMENTS LIFE, THE VARIABLE ACCOUNT,
AND THE FUNDS
FIDELITY INVESTMENTS LIFE
Fidelity Investments Life is a stock life insurance company organized
in 1981 and existing under the laws of the state of Utah. 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. Fidelity Investments Life's financial statements appear in the
Statement of Additional Information. Our 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 Fidelity Variable Insurance Products Fund. Five Subaccounts invest
exclusively in shares of a specific portfolio of Fidelity Variable
Insurance Products Fund II. Three portfolios invest exclusively in
shares of a specific portfolio of Fidelity Variable Insurance Products
Fund III. There are currently 15 other investment options offered by
four different mutual fund investment Advisers.
THE FUNDS
FIDELITY:
The Fidelity Funds are Variable Insurance Products Fund, Variable
Insurance Products Fund II, and 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
VIP MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE. Money Market Portfolio seeks as high a level of
current income as is consistent with the preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing in U.S. dollar-denominated money market
securities, including U.S. Government securities and repurchase
agreements, and entering into reverse repurchase agreements.
(small solid bullet) Investing more than 25% of total assets in the
financial services industry.
(small solid bullet) Investing in compliance with industry-standard
requirements for money market funds for the quality, maturity, and
diversification of investments.
INVESTOR PROFILE. 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. An investment in the fund is not a deposit
of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the
fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
VIP HIGH INCOME PORTFOLIO
INVESTMENT OBJECTIVE. High Income Portfolio seeks a high level of
current income. Growth of capital may also be considered.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing at least 65% of total assets in
income-producing debt securities, preferred stocks and convertible
securities, with an emphasis on lower-quality debt securities.
(small solid bullet) Potentially investing in non-income producing
securities, including defaulted securities and common stocks.
(small solid bullet) Investing in companies in troubled or uncertain
financial condition.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
INVESTOR PROFILE. 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.
VIP EQUITY-INCOME PORTFOLIO
INVESTMENT OBJECTIVE. Equity-Income Portfolio seeks reasonable income.
The fund will consider the potential for capital appreciation. The
fund seeks a yield for its shareholders that exceeds the yield on the
securities comprising the S&P 500.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing at least 65% of total assets in
income-producing equity securities, which tends to lead to investments
in large cap "value" stocks.
(small solid bullet) Potentially investing in other types of equity
securities and debt securities, including lower-quality debt
securities.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
INVESTOR PROFILE. The fund may be appropriate for investors who are
willing to ride out stock market fluctuations in pursuit of
potentially above-average long-term returns. The fund is designed for
those who want some income from equity and bond securities, but also
want to be invested in the stock market for its long-term growth
potential.
VIP GROWTH PORTFOLIO
INVESTMENT OBJECTIVE. Growth Portfolio seeks capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing primarily in common stocks.
(small solid bullet) Investing in companies that it believes have
above-average growth potential, measured by factors such as earnings
or revenue (stocks of these companies are often called "growth
stocks").
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
INVESTOR PROFILE. The fund may be appropriate for investors who are
willing to ride out stock market fluctuations in pursuit of
potentially above-average long-term returns. The fund is designed for
those who want to pursue growth potential, and who understand that
this strategy often leads to investments in smaller, less well-known
companies with higher than average price/earnings ratios. The fund
invests for growth and does not pursue an income strategy.
VIP OVERSEAS PORTFOLIO
INVESTMENT OBJECTIVE. Overseas Portfolio seeks long-term growth of
capital.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing at least 65% of total assets in foreign
securities.
(small solid bullet) Investing primarily in common stocks.
(small solid bullet) Allocating investments across countries and
regions considering the size of the market in each country and region
relative to the size of the international market as a whole.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition, industry position, and market and economic
conditions to select investments.
INVESTOR PROFILE AND RISK:
(small solid bullet) 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.
(small solid bullet) 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
VIP II ASSET MANAGER PORTFOLIO
INVESTMENT OBJECTIVE. Asset Manager Portfolio seeks high total return
with reduced risk over the long term by allocating its assets among
stocks, bonds, and short-term instruments.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.
(small solid bullet) Maintaining a neutral mix over time of 50% of
assets in stocks, 40% of assets in bonds, and 10% of assets in
short-term and money market instruments.
(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (30% - 70%), bond
class (20% - 60%), and short-term/money market class (0% - 50%).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors evaluating and each security's current price
relative to estimated long-term value in selecting investments.
INVESTOR PROFILE. The fund may be appropriate for investors who want
to diversify among stocks, bonds, short-term instruments and other
types of securities. The fund's assets may also be invested in other
instruments that do not fall within these classes.
VIP II INVESTMENT GRADE BOND PORTFOLIO
INVESTMENT OBJECTIVE. Investment Grade Bond Portfolio seeks a high
level of current income.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing in U.S. dollar-denominated
investment-grade bonds.
(small solid bullet) Managing the fund to have similar overall
interest rate risk to the Lehman Brothers Aggregate Bond Index.
(small solid bullet) Allocating assets across different market sectors
and maturities.
(small solid bullet) Analyzing a security's structural features,
current pricing and trading opportunities, and the credit quality of
its issuer in selecting investments.
INVESTOR PROFILE. The fund may be appropriate for investors who want
the potential for high current income from a portfolio of
investment-grade debt securities. The fund's level of risk and
potential reward depend on the quality and maturity of its
investments, and has overall interest rate risk similar to the index.
VIP II INDEX 500 PORTFOLIO
INVESTMENT OBJECTIVE. Index 500 Portfolio seeks 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, as represented by the S&P 500, while keeping transaction costs
and other expenses low.
PRINCIPAL INVESTMENT STRATEGIES:
BT's (a New York banking corporation) principal investment strategies
include:
(small solid bullet) Investing at least 80% of assets in common stocks
included in the S&P 500.
(small solid bullet) Lending securities to earn income for the fund.
(small solid bullet) 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. The fund is managed by FMR, which handles its
business affairs. BT, Index 500 Portfolio's sub-adviser, chooses the
Fund's investments. FMR supervises the sub-adviser and, in conjunction
with the Board of Trustees, reviews the sub-adviser's performance of
its duties. BT also acts as Index 500 Portfolio's custodian.
INVESTOR PROFILE. The fund may be appropriate for investors who are
willing to ride out stock market fluctuations in pursuit of
potentially above-average long-term returns in relation to the S&P
500.
VIP II ASSET MANAGER: GROWTH PORTFOLIO
INVESTMENT OBJECTIVE. Asset Manager: Growth Portfolio seeks to
maximize total return over the long term by allocating its assets
among stocks, bonds, short-term instruments, and other investments.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.
(small solid bullet) Maintaining a neutral mix over time of 70% of
assets in stocks, 25% of assets in bonds, and 5% of assets in
short-term and money market instruments.
(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (50% - 100%), bond
class (0% - 50%), and short-term/money market class (0% - 50%).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors and evaluating each security's current price
relative to estimated long-term value in selecting investments.
INVESTOR PROFILE. 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, while spreading
its assets among all three asset classes, uses a more aggressive
approach by focusing on stocks for a higher potential return. The
value of each fund's investments and the income they generate will
vary.
VIP II CONTRAFUND PORTFOLIO
INVESTMENT OBJECTIVE. Contrafund Portfolio seeks capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing primarily in common stocks.
(small solid bullet) Investing in securities of companies whose value
it believes is not fully recognized by the public.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
INVESTOR PROFILE. The fund may be appropriate for investors who are
willing to ride out stock market fluctuations in pursuit of
potentially above-average long-term returns.
VARIABLE INSURANCE PRODUCTS FUND III
VIP III GROWTH & INCOME PORTFOLIO
INVESTMENT OBJECTIVE. Growth & Income Portfolio seeks high total
return through a combination of current income and capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing a majority of assets in common stocks
with a focus on those that pay current dividends and show potential
for capital appreciation.
(small solid bullet) Potentially investing in bonds, including
lower-quality debt securities, as well as stocks that are not
currently paying dividends, but offer prospects for future income or
capital appreciation.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
INVESTOR PROFILE. 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
investments.
VIP III GROWTH OPPORTUNITIES PORTFOLIO
INVESTMENT OBJECTIVE. Growth Opportunities Portfolio seeks to provide
capital growth.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing primarily in common stocks.
(small solid bullet) Potentially investing in other types of
securities, including bonds which may be lower-quality debt
securities. These securities can be more volatile due to increased
sensitivity to interest rate increases, and adverse issuer, political,
regulatory, market or economic developments.
(small solid bullet) Investing in domestic and foreign
issuers.Investing in either "growth" stocks or "value" stocks or both.
The value of the fund's investments will vary and can decline in
response to adverse issuer, political, regulatory, market or economic
developments.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
INVESTOR PROFILE. The fund may be appropriate for investors seeking
growth of capital. The investment philosophy is not constrained by any
particular investment style. The fund's assets may be invested in
securities of foreign issuers in addition to securities of domestic
issuers.
VIP III BALANCED PORTFOLIO
INVESTMENT OBJECTIVE. Balanced Portfolio seeks both income and growth
of capital.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing approximately 60% of assets in stocks
and other equity securities and the remainder in bonds and other debt
securities, including lower-quality debt securities when its outlook
is neutral.
(small solid bullet) Investing at least 25% of total assets in
fixed-income senior securities (including debt securities and
preferred stock).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) With respect to equity investments, emphasizing
above-average income-producing equity securities, which tends to lead
to investments in stocks that have more "value" characteristics than
"growth" characteristics.
(small solid bullet) Analyzing a security's issuer using fundamental
factors and evaluating each security's current price relative to
estimated long-term value in selecting investments. The value of the
fund's investments will vary from day to day, and can decline in
response to interest rate increases, adverse issuer, political,
regulatory or economic developments.
INVESTOR PROFILE. The fund may be appropriate for investors who seek a
balance between stocks and bonds. The fund may invest its assets in
securities of foreign issuers in addition to domestic issuers.
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
EMERGING MARKETS DEBT PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks high total return by
investing primarily in Fixed Income Securities of government and
government-related issuers located in emerging market countries.
(small solid bullet) The Portfolio seeks those securities which
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.
(small solid bullet) Under normal market conditions, the Portfolio
will invest a large portion of its total assets in Government Fixed
Income Securities, including: (1) Loan Participations and Assignments
between governments and financial institutions; (2) securities issued
by government owned, controlled or sponsored entities; and (3)
securities of entities organized to restructure outstanding debt of
such issuers.
(small solid bullet) In selecting Emerging Market Country Fixed Income
Securities for the Portfolio, Morgan Stanley Dean Witter Investment
Management Inc. ("MSDW Investment Management") examines yield curves
and instrument specific criteria, including (1) maturity and duration;
(2) spreads; (3) the prospects for restructuring an issuer's debts;
(4) real interest rates; and (5) currency valuations. The Portfolio's
holdings may range in maturity from overnight to 30 years or more and
will not be subject to any minimum credit rating standard. MSDW
Investment Management may use hedging strategies, including the use of
derivatives to protect the Portfolio from overvalued currencies or to
take advantage of undervalued currencies.
(small solid bullet) 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.
INVESTOR PROFILE
(small solid bullet) The Emerging Market Debts Portfolio may be
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
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term capital
appreciation by investing primarily in Equity Securities of emerging
market country issuers with a focus on those in which MSDW Investment
Management believes the economies are developing strongly and the
markets are becoming more sophisticated.
(small solid bullet) Under normal market conditions, the Portfolio
will invest a large percentage of its total assets in Emerging Market
Country Equity Securities.
(small solid bullet) There are currently over 150 countries which, in
the opinion of MSDW Investment Management, are generally considered to
be emerging or developing countries by the international financial
community.
(small solid bullet) As markets in other countries develop, the
Portfolio expects to expand and further diversify the emerging market
countries in which it invests.
INVESTOR PROFILE
(small solid bullet) 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.
GLOBAL EQUITY PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The 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. The Portfolio uses an approach that is oriented to
the selection of individual stocks that MSDW Investment Management
believes are undervalued relative to their intrinsic assets and cash
flow.
(small solid bullet) Under normal circumstances, a substantial amount
of the total assets of the Portfolio will be invested in Equity
Securities. The Portfolio will invest a lesser percentage of its
assets 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.
(small solid bullet) MSDW Investment Management'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 based on the issuer's price-to-book value,
price-to-cash flow, and other value-oriented criteria. MSAM 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.
(small solid bullet) 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.
INVESTOR PROFILE
(small solid bullet) 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.
INTERNATIONAL MAGNUM PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The 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 MSDW Investment Management.
(small solid bullet) The countries in which the Portfolio will
primarily invest are those comprising the Morgan Stanley Capital
International EAFE Index, which include 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").
(small solid bullet) The Portfolio may invest up to 5% of its total
assets in the securities of issuers domiciled in non-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.
INVESTOR PROFILE
(small solid bullet) 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.
PBHG
SELECT 20 PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Select 20 Portfolio, a non-diversified
Portfolio, seeks long-term growth of capital.
(small solid bullet) 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 strong earnings growth and capital appreciation
potential. These companies will generally have market capitalization
in excess of $1 billion.
(small solid bullet) These equity securities may include common
stocks, warrants and rights to purchase common stocks, and convertible
securities.
(small solid bullet) The Portfolio is non-diversified, which means its
performance is dependent upon the securities of a smaller number of
companies. As a result, the impact of a single change in value
(positive or negative) of a single holding may be magnified.
GROWTH II PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks capital appreciation.
(small solid bullet) 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
that, in the Adviser's opinion, have strong earnings growth and
capital appreciation potential. These companies will generally have
market capitalizations or annual revenues under $4 billion.
(small solid bullet) The Adviser considers selling a security when its
anticipated appreciation is no longer probable, alternative
investments offer more superior appreciation prospects, or the risk of
a decline in its market price is too great. The Portfolio emphasizes
growth companies, so it may be more volatile than the stock market in
general, as measured by the S&P's 500. In managing the Portfolio, the
Adviser may respond to a company's near-term earnings trend. As a
result, Portfolio turnover may be high.
LARGE CAP VALUE PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term growth of capital
and income. Current income is a secondary objective.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in a diversified
Portfolio of equity securities of large capitalization companies
which, in the opinion of the Adviser and Pilgrim Baxter Value
Investors, Inc. (the "Sub-Adviser"), are undervalued or overlooked by
the market. These equity securities may include common stocks,
preferred stocks, warrants, rights and convertible securities.
(small solid bullet) To determine whether a company is undervalued,
the Adviser and Sub-Adviser use their own research, computer models
and proprietary measures of value. They consider factors like a
company's earnings power vs. its current stock price, its dividend
income potential, its price-to-earnings ratio vs. similar companies,
its competitive advantages, like brand or trade name or market niche,
its management team and its current and future business prospects.
SMALL CAP VALUE PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks to achieve above-average
total return over a market cycle of three to five years, consistent
with reasonable risk.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in common stocks of
undervalued companies whose market capitalizations are within the
range of the Russell 2000 index.
(small solid bullet) To determine whether a company is undervalued,
the Adviser and Sub-Adviser use their own research, computer models
and proprietary measures of value. They consider factors like a
company's earnings power vs. its current stock price, its dividend
income potential, its price-to-earnings ratio vs. similar companies,
its competitive advantages, like brand or trade name or market niche,
its management team and its current and future business prospects.
TECHNOLOGY & COMMUNICATIONS PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term growth of capital.
Current income is incidental to the Portfolio's objective.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in common stocks of
companies that rely extensively on technology or communications in
their product development or operations, are expected to benefit from
technological advances and improvements, or may be experiencing
exceptional growth in sales and earnings driven by technology-or
communication-related products and services.
These companies may be in different industries, 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.
(small solid bullet) The Portfolio offers investors significant growth
potential because it invests in companies that may be responsible for
breakthrough products or technologies or are positioned to take
advantage of cutting-edge developments.
(small solid bullet) The Portfolio's holdings may range from small
companies developing new technologies or pursuing scientific
breakthroughs to large, blue chip firms with established track records
in developing and marketing scientific advances.
STRONG
DISCOVERY FUND II PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Discovery Fund II Portfolio seeks capital
growth.
(small solid bullet) The Fund invests in securities that the Adviser
believes represent attractive growth opportunities.
(small solid bullet) 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.
(small solid bullet) The Fund may invest up to 100% of its total
assets in equity securities, including (a) common stocks, (b)
preferred stocks, and (c) securities that are convertible into common
or preferred stocks, such as warrants and convertible bonds.
(small solid bullet) 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. 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.
(small solid bullet) 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.
(small solid bullet) 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.
(small solid bullet) 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
OBJECTIVE AND STRATEGY
(small solid bullet) The Growth Fund II Portfolio seeks capital
growth.
(small solid bullet) The Fund invests primarily in equity securities
that the Adviser believes have above-average growth prospects.
(small solid bullet) Under normal market conditions, the Fund will
invest at least 65% of its total assets in equity securities,
including (a) common stocks, (b) preferred stocks, and (c) securities
that are convertible into common or preferred stocks, such as warrants
and convertible bonds.
(small solid bullet) 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.
(small solid bullet) 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. 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.
(small solid bullet) 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.
(small solid bullet) The Fund may invest up to 25% of its assets in
foreign securities, including both direct investments and investments
made through depository receipts.
(small solid bullet) 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.
(small solid bullet) In identifying companies with favorable growth
prospects, the Adviser ordinarily looks to certain characteristics,
such as (a) prospects for above-average sales and earnings growth; (b)
high return on invested capital; (c) overall financial strength,
including sound financial and accounting policies and a strong balance
sheet; (d) competitive advantages, including innovative products and
services; (e) effective research, product development and marketing;
and (f) stable, capable management.
OPPORTUNITY FUND II PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Opportunity Fund II Portfolio seeks capital
growth.
(small solid bullet) The Fund invests primarily in equity securities
and currently emphasizes investments in medium-sized companies the
Adviser believes are under-researched and attractively valued.
(small solid bullet) The Fund will invest at least 70% of its total
assets in equity securities, including (a) common stocks, (b)
preferred stocks, and (c) securities that are convertible into common
or preferred stocks, such as warrants and convertible bonds.
(small solid bullet) Under normal market conditions, the Fund expects
to be fully invested in equities.
(small solid bullet) 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. 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.
(small solid bullet) 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.
(small solid bullet) The Fund may invest up to 25% of its assets in
foreign securities, including both direct investments and investments
made through depository receipts.
(small solid bullet) 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 Adviser 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.
(small solid bullet) 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
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term capital
appreciation.
(small solid bullet) The Portfolio pursues its investment objective by
investing in equity securities of companies located or conducting
business outside the United States.
(small solid bullet) 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.
(small solid bullet) The Portfolio intends to be widely diversified
across securities of many corporations located in a number of foreign
countries, but may from time to time may invest a significant portion
of its assets in a single country.
(small solid bullet) Although the Portfolio emphasizes developed
countries, it may also invest in emerging markets.
(small solid bullet) In choosing equity securities, the Portfolio
managers look for companies of any size whose securities appear to be
discounted relative to earnings, assets, or projected growth. The
Portfolio managers determine value based on research and analysis,
taking all relevant factors into account.
(small solid bullet) 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.
RISK. In addition to risks associated with equity securities,
international investment entails special risk considerations,
including currency fluctuations, lower liquidity, economic
instability, political uncertainty and differences in accounting
methods.
POST-VENTURE CAPITAL PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) Post-Venture Capital Portfolio seeks long-term
growth of capital.
(small solid bullet) The Portfolio pursues an aggressive investment
strategy by investing primarily in equity securities of U.S. companies
considered to be in their post-venture capital stage of development.
(small solid bullet) 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.
In addition, the investment of venture capital financing, distribution
of such company's securities to venture capital investors, or initial
public offering ("IPO"), will have been made within ten years prior to
the Portfolio's purchase of the company's securities.
(small solid bullet) Up to 10% of the Portfolio's assets may be
invested in private equity portfolios that invest in venture capital
companies.
(small solid bullet) Up to 10% of the Portfolio's assets may be
invested in assets of companies expected to experience "special
situations", such as mergers or reorganizations.
(small solid bullet) Up to 20% of the Portfolio's assets may be
invested in foreign securities.
RISK. The main risks associated with the portfolio include risks
associated with equity securities, particularly small, start-up and
special-situation companies. The Portfolio employs aggressive
strategies and may not be appropriate for all investors.
SMALL COMPANY GROWTH PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks capital growth by investing
primarily in equity securities of small sized U.S. companies that
represent attractive opportunities for capital growth.
(small solid bullet) The Portfolio considers a "small" company to be
one that has a market capitalization, measured at the time the
Portfolio purchases a security of that company, within the range of
capitalizations of companies represented in the Russell 2000 Index. As
of January 31, 1998, the Russell 2000 Index included companies with
market capitalizations between $23.7 million and $2.7 billion.
Companies that outgrow the definition of small company after the
Portfolio has purchased its securities continued to be considered
small for purposes of the Portfolio's investment policies.
(small solid bullet) Small companies may (1) still be in the
development stage, (2) be older companies that appear to be entering a
new stage of growth, or (3) may be companies providing products or
services with a high unit volume growth rate.
(small solid bullet) 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.
(small solid bullet) 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.
RISK. The Portfolio's main risks are the risks associated with equity
securities, particularly small, start-up and special-situation
companies.
FIDELITY FUNDS AVAILABILITY TO SEPARATE ACCOUNTS
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 ADVISERS
FIDELITY
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, 1998, it advised funds having more than
34 million shareholder accounts with a total value of more than $529
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.. Fidelity Investments Money Management, Inc. (FIMM),
a subsidiary of FMR, chooses investments for Money Market Portfolio
and Investment Grade Bond Portfolio. FIMM also chooses certain types
of investments for Asset Manager, Asset Manager: Growth, and Balanced
Portfolios. Foreign affiliates of FMR may help choose investments for
some of the Funds. BT, a New York banking corporation, is a
wholly-owned subsidiary of Bankers Trust Corporation (formerly Bankers
Trust New York Corporation). BT currently serves as sub-adviser to
Index 500 Portfolio and manages the Fund's portfolio.
MORGAN STANLEY
The investment Adviser for the Morgan Stanley Universal Funds, Inc. is
Morgan Stanley Dean Witter Investment Management Inc., which is a
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co., which is
a preeminent global financial services firm that maintains leading
market positions in each of its three primary businesses - securities,
asset management and credit services. MSDW Investment Management, 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, to employee benefit
plans, endowment funds, foundations and other institutional investors.
MSDW Investment Management's principal business office is located at
1221 Avenue of the Americas, New York, New York 10020.
PBHG
The investment Adviser for the PBHG Insurance Series Fund, Inc. is
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter"), a professional
investment management firm and registered investment Adviser that,
along with its predecessors, has been in business since 1982. The
controlling shareholder of Pilgrim Baxter 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 825 Dupertail Road,
Wayne, Pennsylvania 19087. Pilgrim Baxter Value Investors, Inc., the
Sub-Adviser, is a wholly owned subsidiary of Pilgrim Baxter and is a
registered investment Adviser that was formed in 1940. As with the
Adviser, the controlling shareholder of the Sub-Adviser is UAM. The
principal business address of the Sub-Adviser is 825 Dupertail Road,
Wayne, Pennsylvania 19087.
STRONG
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.
WARBURG PINCUS
The investment Adviser for the Warburg Pincus Funds is Warburg Pincus
Asset Management, Inc. Incorporated in 1970, Warburg Pincus is
indirectly controlled by Warburg, Pincus & Co. ("WP&Co."), which
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.
IMPORTANT
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.
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 (1) a non-qualified
basis ("Non-qualified Contracts"), and (2) as Individual Retirement
Annuities ("IRAs") that qualify for special Federal income tax
treatment ("Qualified Contracts").
(small solid bullet) Generally, you may purchase a QUALIFIED CONTRACT
only in connection with a "rollover" of funds from a qualified plan,
tax sheltered annuity or IRA. To purchase a Qualified Contract you
must make a purchase payment of at least $10,000 and complete an
application form. There are other restrictive provisions limiting the
timing and amount of payments to and distributions from the Qualified
Contract. See TAX CONSIDERATIONS on page .
(small solid bullet) To purchase a NON-QUALIFIED CONTRACT, you must
make a purchase payment of at least $2,500 and complete an application
form. For a Non-qualified Contract, the proposed Annuitant must be no
older than 80 years old (for Contracts purchased through a 1035
exchange, the annuitant must be no older than 85 years old).
(small solid bullet) APPLICATION AND INITIAL PURCHASE PAYMENTS
If we can accept your application and initial purchase payment in the
form received, we will apply the payment to the purchase of a Contract
within two business days after receipt at the Annuity Service Center.
The date that we credit the payment and issue your Contract is called
the Contract Date. If we receive an incomplete application, we will
request the information necessary to complete the application.
Once we receive the completed application, we will apply the initial
payment 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. In this situation, we will exchange the original
contract 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 .
(small solid bullet) ADDITIONAL PAYMENTS TO CONTRACTS
You may add money to a NON-QUALIFIED CONTRACT during the life of the
Annuitant and before the Annuity Date. The smallest such payment we
will accept is generally $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 a 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, we will extend the free look
period 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 is mailed to
you (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,
we will cancel the Contract and refund promptly the greater of (1)
your purchase payment without interest, or (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
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.
(small solid bullet) TRANSFERS AMONG VARIABLE SUBACCOUNTS
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.
(small solid bullet) TRANSACTIONS BY TELEPHONE
Fidelity Investments Life reserves the right to revise or terminate
the telephone exchange provisions, limit the amount of or reject any
exchange, as deemed necessary, at any time. We will limit telephone
exchange authorizations to eighteen per calendar year. We will not
accept exchange requests via fax.
We will not be responsible for any losses resulting from unauthorized
telephone reallocations if we follow reasonable procedures designed to
verify the identity of the caller. We may record calls. You should
verify the accuracy of your confirmation statements immediately after
you receive them.
(small solid bullet) USE OF MARKET TIMING SERVICES
In some cases, we may sell contracts 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 Subaccounts 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.
(small solid bullet) EFFECTIVE DATE OF TRANSFERS AMONG VARIABLE
SUBACCOUNTS
When you request a transfer between variable Subaccounts, the
redemption of the requested amount from the Subaccount will always be
effected as of the end of the Valuation Period in which we receive the
request at our Annuity Service Center. We will generally credit that
amount 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. This delay will be
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.
(small solid bullet) FIXED ACCOUNT TRANSFERS
You may make transfers to and from the Fixed Account 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.
The amount that you may transfer from the Fixed Account will be
determined by us, at our sole discretion, but will not be less than
25% of the amount invested in the Fixed Account. When the maximum
amount is less than $1000, we permit a transfer of up to $1000. You
may make one transfer out of the Fixed Account during each Contract
Year. We do not permit a transfer into the Fixed Account during the 12
months following a transfer out of the Fixed Account.
When you withdraw or transfer amounts out of the Fixed Account the
amounts that have been credited to the Fixed Account for the shortest
time are withdrawn first. The maximum withdrawal amount is 25% of the
amount invested in the Fixed Account. At the end of the current
renewal interest guarantee period, January 31, 1999, the amount that
may be transferred for the month of February will be declared and will
not be less than the minimums specified above. See THE FIXED ACCOUNT
on page .
(small solid bullet) IMPORTANT
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 .
ACCUMULATION UNITS
When you allocate your purchase payments to a selected variable
Subaccount, we credit a particular number of Accumulation Units to
your Contract. An Accumulation Unit is a unit of measure used prior to
the Annuity Date to calculate the value of your Contract in the
Subaccounts.
We determine the number of Accumulation Units credited 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 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 .
(small solid bullet) SYSTEMATIC WITHDRAWALS
Contract Owner(s) may elect in writing on a form we provide to take
systematic withdrawals of a specified dollar amount (of at least $100)
on a monthly, quarterly, semi-annual, or annual basis. We will require
a $10,000 minimum Contract Value to begin this program. Systematic
withdrawals will be taken proportionately from all of your selected
investment options at the time of each withdrawal. The withdrawal
charge may also apply to systematic withdrawals as set forth in the
WITHDRAWAL CHARGE section on page . If a systematic withdrawal would
bring the Contract Value below $2,500, the systematic withdrawal will
be made only for the amount that will reduce the Contract Value to
$2,500, and the systematic withdrawal option will automatically
terminate.
Each systematic withdrawal is subject to federal income taxes,
including any penalty tax that may apply, the same as for any other
withdrawal. We reserve the right to modify or discontinue the
systematic withdrawal program.
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 Contract 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 Contract (record address).
4. The check is made payable to someone other than the Owner(s).
5. The address of record on the Contract has changed in the past 30
days and the request is for $10,000 or more.
6. The Proceeds are being wired to a Fidelity account with different
Owner(s) than the annuity Contract.
7. In other circumstances where we deem it necessary for your
protection (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.
CHARGES
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 require 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.
(small solid bullet) ANNUAL MAINTENANCE CHARGE. Currently, on each
Contract Anniversary before the Annuity Date, we deduct an annual
maintenance charge of $30 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. 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 expenses we incur
increase.
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). We will deduct the annual maintenance
charge 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.
(small solid bullet) DAILY ADMINISTRATIVE CHARGE. Each day, we also
deduct from the assets of the Subaccounts, but not the Fixed Account,
a percentage of those assets equivalent to an effective annual rate of
0.05%. We guarantee to never increase this charge 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. We make this charge
by deducting daily from the assets of each Subaccount a percentage
equal to an effective annual rate of not more than 0.75%. As with the
daily administrative charge, this charge does not apply 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 85. This
Death Benefit may be greater than the Contract Value. See DEATH
BENEFIT on page 40.
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.
ADDITIONAL MORTALITY RISK CHARGE. The Company may offer the Owner
the opportunity to elect a Death Benefit rider. If the Owner elects
the rider, the Company will deduct a mortality charge once each
quarter. The amount of the charge for each quarter will be 0.10% of
the Contract Value on the date of the quarterly charge. There will be
no charges made once the Annuitant reaches their 85th birthday.
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:
Contract Year Withdrawal Charge
As Percentage of Amount of
Purchase Payments Withdrawn
1 5%
2 4%
3 3%
4 2%
5 1%
6 and later 0%
For purposes of determining this withdrawal charge, we will consider
any amount you withdraw in excess of amounts entitled to the 10%
exception as a withdrawal of purchase payments until you have
withdrawn an amount equal to all your payments. We will consider
amounts withdrawn after an amount equal to your aggregate purchase
payments have been withdrawn to be withdrawals of investment earnings
and 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 (1)
you purchased your Contract (a) by exchanging another annuity Contract
or life insurance policy, or (b) by trustee to trustee transfer or
direct rollover from an IRA or qualified plan, and (2) (a) you are
exchanging the Contract for another annuity contract, or (b) 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.
Under certain circumstances we may waive the withdrawal charge for
certain Owners who have previously exchanged out of a Fidelity
Retirement Reserves Contract and have since purchased a Fidelity
Retirement Reserves Contract through a 1035 exchange.
In connection with a Contract purchased after May 1, 1990 by
exchanging Fidelity Variable Annuity, we will determine the withdrawal
charge as if (a) the new Contract had been purchased on the date the
original Contract was purchased, and (b) 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.
Subject to regulatory approval, we intend to begin to eliminate the
withdrawal charge during the next twelve months. Elimination would be
effective on the first Contract Anniversary after the we send you
notice of the change. We will send you notice on a date determined by
us, but not before (1) the insurance department of the state in which
the Contract was issued has approved the elimination and (2) similar
approvals have been granted by substantially all other states. We will
not send you notification of elimination of the withdrawal charge if
you have owned your Contract for more than five years, since the
withdrawal charge will have already expired.
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 Death of the
Annuitant occurs on or before his or her 85th birthday, the Death
Benefit will be the greater of 1 and 2 below, except as described in
the following sentence. Soon after approval by the insurance
department of the state in which the Owner's contract was issued, and
similar approvals have been granted by substantially all other states,
we will offer a one-time opportunity to purchase an optional Death
Benefit Rider under which the Death Benefit will be the greatest of 1,
2 and 3 below. If the rider is available when the Owner submits an
application for the Contract, the Owner must choose at that time
whether or not to purchase the Death Benefit rider . There will be a
charge for the Death Benefit rider, as described on page 27.
1) The purchase payments made, less any partial withdrawals and any
incurred taxes.
2) The Contract Value as of the end of the valuation periodthat
proof of death is received by the Company at the Annuity Service
Center.
3) The highest Contract Value on any Contract Anniversary on or
after the Contract Anniversary when this Rider is added to the
Contract and before the Annuitant reaches age 80, plus any purchase
payments received by the Company after such Contract Anniversary,
reduced for any withdrawals after such Contract Anniversary as
described in the next sentence. Any withdrawals after such Contract
Anniversary will reduce the amount otherwise payable under this
paragraph proportionately to the reduction in the Contract Value
caused by the withdrawal. For Contracts with net purchase payments
greater than $4 million, this value can never exceed the amount
calculated above, multiplied by $4 million, divided by the net
purchase payments.
If the death of the Annuitant occurs after his or her 85th
birthday, the Death Benefit will be the Contract Value on the date
that proof of death is received by the Company at the Annuity Service
Center.
The Owner may elect to terminate the Death Benefit rider by
providing advance written notice to the Company. Termination will be
effective as of the date the next charge is scheduled after the
Company receives such notice at the Annuity Service Center.
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. However, this requirement does not
apply if (1) 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) by electing annuitization within 60 days of the date of death
with distributions beginning within one year of the date of death, or
(2) 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 to be 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 request that the company allow the Annuity Date
to be as late as the first day of the calendar month following the
Annuitant's 90th birthday. 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. 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.
(small solid bullet) FIXED ANNUITY INCOME PAYMENTS
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 (1) the fixed annuity
provisions selected, (2) the adjusted age and sex of the Annuitant
(except Contracts utilizing unisex purchase rates), and (3) the then
current guaranteed interest rate used to determine fixed annuity
income payments. In no event will the guaranteed interest rate be less
than 3.0% (3.5% for most Contracts issued before May 1, 1997).
(small solid bullet) VARIABLE ANNUITY INCOME PAYMENTS
If you select a variable annuity, we will transfer your Contract Value
to the Variable Account. The dollar amount of the first variable
annuity income payment will be determined in accordance with (1) the
applicable annuity payment rates, (2) the age and sex of the Annuitant
(except Contracts utilizing unisex purchase rates), and (3) an assumed
annual investment return of 3.5%, unless we also offer an alternative
assumed investment return 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 investment return.
Thus, with a 3.5% assumed investment return, 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 investment return, the
Subaccount Annuity Unit Value will increase; if the Net Rate of Return
is less than the assumed investment return, 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.
(small solid bullet) COMBINATION FIXED AND VARIABLE ANNUITY INCOME
PAYMENTS
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.
(small solid bullet) IMPORTANT
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. We will make income payments 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. Under this option we will provide
monthly income payments during the joint lifetimes of the Annuitant, a
designated second person, and during the lifetime of the survivor.
There are some limitations on the use of this option in Qualified
Contracts. 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. Under
this option we provide 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 we will pay any guaranteed monthly income
payments 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.
(small solid bullet) 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, we will
send you a statement of your Contract Value, including a summary of
all transactions since the preceding quarterly statement.
In addition, we will send you 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.
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.
FACTS ABOUT THE FIXED ACCOUNT
(small solid bullet) 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 our general account (the
"Fixed Account"). The Fixed Account may also be referred to as the
"Guaranteed Account".
(small solid bullet) Any funds in the Fixed Account do not fluctuate
with the investment experience of our general account.
(small solid bullet) We guarantee that funds held in the Fixed Account
will accrue interest daily at an annual rate that will never be less
than 3.0% (3.5% for most Contacts issued before May 1, 1997).
(small solid bullet) 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.
(small solid bullet) 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.
(small solid bullet) 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 32.
MORE ABOUT THE CONTRACT
TAX CONSIDERATIONS
We do not intend the following discussion to be 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 Contract. 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. It is not clear when additonal guidance will be
provided, whether it will be provided at all, or whether it will be
prospective only. It is possible that if 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
You may use the Contract as an 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 a qualified plan,
tax sheltered annuity or IRA.
IN ADDITION, QUALIFIED CONTRACTS WILL NOT ACCEPT ANY SUBSEQUENT
CONTRIBUTIONS OTHER THAN ADDITIONAL ROLLOVER CONTRIBUTIONS FROM A
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.
(small solid bullet) A distribution may occur in the form of a
withdrawal, death benefit payment, or payments under an Annuity Income
Option.
(small solid bullet) 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.
(small solid bullet) 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).
(small solid bullet) The taxable portion of a distribution is
generally taxed as ordinary income.
(small solid bullet) TAXES ON SURRENDER OF CONTRACT BEFORE ANNUITY
INCOME PAYMENTS BEGIN
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.
(small solid bullet) TAXES ON PARTIAL WITHDRAWALS
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.
(small solid bullet) TAXES ON INCOME PAYMENTS
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.
(small solid bullet) 10% PENALTY TAX ON EARLY WITHDRAWALS OR
DISTRIBUTIONS
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.
(small solid bullet) OTHER TAX INFORMATION
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 our
operations. 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 we make before the request is received and
recorded at the Annuity Service Center. If there are two Owners, both
Owners must provide any written authorizations.
2. BENEFICIARY. The Beneficiary(ies) is (are) named on the application
unless later changed. We will pay the proceeds 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; or (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 33. No assignment will be binding on us
unless it is written in a form acceptable to us and received at our
Annuity Service Center. An assignment will affect your rights and the
rights of any Beneficiary. We will not be responsible for the validity
of any assignment. A QUALIFIED CONTRACT may not be assigned.
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
Fidelity Brokerage Services, Inc. and Fidelity Insurance Agency, Inc.,
affiliates of FMR Corp., our parent company, will distribute the
Contracts. 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 ("Automatic Annuity Builder") 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
(small solid bullet) REDUCTION OF CHARGES
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 30. 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.
(small solid bullet) REDUCTION OF MINIMUM PURCHASE PAYMENT
REQUIREMENTS
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 either the Money Market Subaccount or the
Investment Grade Bond Subaccount (the "Source Account") to any of the
other variable Subaccounts. Dollar cost averaging transfers are
allowed from one Source Account only and are not permitted to the
Fixed Account. Dollar cost averaging will not be allowed in
conjunction with the Automatic Rebalance feature described in this
prospectus.
These monthly transfers will take effect on the same day each month.
You may select any date from the 1st to the 28th as the date of your
dollar cost averaging transfers (the "Transfer Date"). If the New York
Stock Exchange is not open on your selected date in a particular
month, the transfer will be made at the close of the Valuation Period
that includes the date you selected. Your transfers will continue
until the balance in the Source Account is exhausted or you notify us
to cancel dollar cost averaging for your Contract.
The minimum monthly transfer allowed to any variable Subaccount is
$250.
Dollar cost averaging is available at no charge. Fidelity Investments
Life reserves the right to modify or terminate the dollar cost
averaging feature.
AUTOMATIC REBALANCING
Automatic Rebalancing is available to you. Automatic Rebalancing is
designed to help you maintain your specified allocation mix between
the Investment Options. You can direct Fidelity Investments Life to
readjust your allocations on a quarterly, semi-annual, or annual basis
to return to the allocations you select on the rebalancing instruction
form. These transfers will be made on the same day of each month. You
may select any date from the 1st to the 28th as the date of your
automatic rebalancing transfers. If the New York Stock Exchange is not
open on your selected date in a particular month, the transfers will
be made at the close of the Valuation Period that includes the date
you selected. Your transfers will continue until you notify us to
cancel Automatic Rebalancing for your Contract.
Automatic Rebalancing is available at no charge. Fidelity Investments
Life reserves the right to modify or terminate the automatic
rebalancing feature.
(small solid bullet) You may not participate in Automatic Rebalancing
and the Dollar Cost Averaging program at the same time.
POSTPONEMENT OF PAYMENT
(small solid bullet) In general, we will ordinarily pay any partial or
full cash withdrawal within seven days after we receive your request.
(small solid bullet) We will usually pay any Death Benefit within
seven days after we receive proof of the Annuitant's death.
(small solid bullet) However, we may delay payment if (a) 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 (b) the SEC by order
permits postponement of payment to protect our Contract Owners.
(small solid bullet) 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, we will credit it with interest from
the date of withdrawal at a rate not less than 3.0% per year
compounded annually (3.5% per year for most Contracts issued before
May 1, 1997) or, if greater, the rate required by law.
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, a change in a portfolio's
investment objectives or restrictions, 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 Advisory 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 Fidelity 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.
Other Funds may be offered to qualified plans as well.
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.
(small solid bullet) 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.
(small solid bullet) A CUMULATIVE TOTAL RETURN reflects performance
over a stated period of time.
(small solid bullet) 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.
(small solid bullet) 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.
(small solid bullet) 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.
APPENDIX A
Accumulation Unit Values
Fidelity Investments Variable Annuity Account I
Condensed Financial Information
Money Market Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997 15.30 15.98 4.46% 28,256,730
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 Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997 24.89 29.00 16.53% 10,481,116
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 Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997 31.05 39.39 26.87% 40,838,032
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 Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997 34.97 42.76 22.29% 23,048,124
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 Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997 21.30 23.52 10.48% 10,512,524
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 Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997 17.36 18.75 8.01% 5,524,907
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 Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997 20.76 24.80 19.49% 30,320,855
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 Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997 18.90 24.83 31.42% 28,695,264
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 Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997 14.50 17.95 23.86% 17,201,030
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 Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997 16.66 20.47 22.94% 57,789,065
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
Growth Opportunities Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 12.63 28.70% 21,154,834
* Period from 1/27/97 (commencement of operations) to 12/31/97
Balanced Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 11.98 21.00% 4,649,810
* Period from 1/27/97 (commencement of operations) to 12/31/97
Growth & Income Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 12.68 28.84% 18,798,233
* Period from 1/27/97 (commencement of operations) to 12/31/97
Emerging Markets Debt Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 10.48 4.76% 270,613
* Period from 11/24/97 (commencement of operations) to 12/31/97
Emerging Markets Equity Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 10.05 0.53% 176,936
* Period from 11/24/97 (commencement of operations) to 12/31/97
Global Equity Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 10.25 2.51% 214,479
* Period from 11/24/97 (commencement of operations) to 12/31/97
International Magnum Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 9.86 (1.45)% 126,071
* Period from 11/24/97 (commencement of operations) to 12/31/97
PBHG Growth II Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 10.15 1.52% 198,868
* Period from 11/24/97 (commencement of operations) to 12/31/97
Large Cap Value Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 10.27 2.68% 71,061
* Period from 11/24/97 (commencement of operations) to 12/31/97
Small Cap Value Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 10.43 4.30% 760,923
* Period from 11/24/97 (commencement of operations) to 12/31/97
Select 20 Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 10.42 4.18% 551,473
* Period from 11/24/97 (commencement of operations) to 12/31/97
Technology & Communications Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 9.87 (1.31)% 746,784
* Period from 11/24/97 (commencement of operations) to 12/31/97
Discovery Fund II Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 9.69 (3.06)% 69,087
* Period from 11/24/97 (commencement of operations) to 12/31/97
Growth Fund II Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 10.25 2.51% 139,945
* Period from 11/24/97 (commencement of operations) to 12/31/97
Opportunity Fund II Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 10.15 1.46% 277,353
* Period from 11/24/97 (commencement of operations) to 12/31/97
International Equity Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 9.89 (1.13)% 54,981
* Period from 11/24/97 (commencement of operations) to 12/31/97
Post-Venture Capital Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 10.25 2.53% 120,198
* Period from 11/24/97 (commencement of operations) to 12/31/97
Small Company Growth Subaccount
Accumulation Accumulation Percentage Number of
Unit Value at Unit Value at Increase Accumulation
Beginning of Period End of Period or (Decrease) Units at End of
During Period Period
1997* 10.00 10.19 1.90% 596,845
* Period from 11/24/97 (commencement of operations) to 12/31/97
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.
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 0.05%. 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.
PART B
INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
FIDELITY RETIREMENT RESERVES
STATEMENT OF ADDITIONAL INFORMATION
MARCH 26, 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 March 26, 1999 ,
without charge by calling 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 49
Fixed Annuity Income Payments 49
Variable Annuity Income Payments 49
Hypothetical Illustrations of Annuity Income Payouts 51
General Information 55
Performance 55
Transfers Among Subaccounts After the Annuity Date 62
Unavailability of Annuity Income Options in Certain Circumstances 62
IRS Required Distributions 62
Safekeeping of Variable Account Assets 62
Distribution of the Contracts 62
State Regulation 62
Legal Matters 62
Registration Statement 62
N.NRR-SAI-3-26-99
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 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 "Net Rate of 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 $282.86. The investment
selection is 50% in Portfolio A and 50% in Portfolio B.
At Annuitization Portfolio A Portfolio B
(a) Initial Monthly Annuity Income Payment $ 141.43 $ 141.43
(b) Annuity Unit Value 1.23456 1.32465
(c) Income in Units 114.559 106.768
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:
# Annuity X Annuity = Annuity
Units Unit Value Income
Payment
Portfolio A 114.559 1.23456 141.43
Portfolio B 106.768 1.32465 141.43
$ 282.86
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 (1% 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 114.559 106.768
(g) Annuity Unit Value (current) 1.23604 1.32303
(h) Monthly Income (in dollars) $ 141.60 $ 141.26
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 $282.86.
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 114.559 106.768
(k) Annuity Unit Value (current) 1.42353 1.14774
(h) Monthly Income (in dollars) $ 163.08 $ 122.54
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 $285.62.
An illustration of annuity income payments under various rates appears
in the tables on pages 6 and 7. 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 Net Investment Return on the
assets held in 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 0.60% and assumed operating expenses of
0.36%, 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 net investment
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: 3/1/33 STATE PREMIUM TAX: 0%
SEX: Male DATE OF ILLUSTRATION: 3/1/98
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: $311.85.
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 CALENDAR AGE Net(2): -1.75% 3.50% 4.14% 6.11% 8.07% 10.04%
YEAR YEAR
1 1998 65 283 283 283 283 283 283
2 1999 66 269 283 285 290 295 301
3 2000 67 255 283 286 297 308 320
4 2001 68 242 283 288 305 322 340
5 2002 69 230 283 290 312 336 361
10 2007 74 177 283 299 354 417 491
15 2012 79 136 283 308 401 518 667
20 2017 84 105 283 318 454 643 906
</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: 3/1/33 STATE PREMIUM TAX: 0%
SEX: Male DATE OF ILLUSTRATION: 3/1/98
ANNUITY OPTION SELECTED: Lifetime Income with annuity income payment
guaranteed for 10 years(1)
FREQUENCY OF ANNUITY Monthly payments with first payment the first
of INCOME PAYMENTS: the month after
annuitization
FIXED MONTHLY ANNUITY INCOME PAYMENT AVAILABLE ON THE DATE OF THE
ILLUSTRATION IF 100% FIXED ANNUITY OPTION SELECTED: $311.85.
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 $155.93. THE MONTHLY GUARANTEED PAYMENT OF
$311.85 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 CALENDAR AGE Net(2): -1.75% 3.50% 4.14% 6.11% 8.07% 10.04%
YEAR YEAR
1 1998 65 297 297 297 297 297 297
2 1999 66 290 297 298 301 304 306
3 2000 67 283 297 299 305 310 316
4 2001 68 277 297 300 308 317 326
5 2002 69 271 297 301 312 324 337
10 2007 74 244 297 305 333 365 401
15 2012 79 224 297 310 356 415 489
20 2017 84 209 297 315 383 477 609
</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 12/31/97. 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, 1997. 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 12/31/97
(a) One Year Average Annual Total Return For Contracts Issued on
December 31, 1996
Fidelity Return Return Return
If Contract If Contract If Contract
Surrendered Continued and Continued and
Maintenance Maintenance
Charge Applied Charge Not
Applicable
Asset Manager 14.47% 19.47% 19.49%
Money Market (0.28)% 4.44% 4.46%
Investment Grade Bond 3.09% 7.99% 8.01%
Equity-Income 21.85% 26.85% 26.87%
Growth 17.27% 22.27% 22.29%
High Income 11.51% 16.51% 16.53%
Overseas 5.46% 10.46% 10.48%
Index 500 26.40% 31.40% 31.42%
Asset Manager: Growth 18.84% 23.84% 23.86%
Contrafund 17.92% 22.92% 22.94%
Growth opportunities 23.68% 28.68% 28.70%
Balanced 15.98% 20.98% 21.00%
Growth & Income 23.82% 28.82% 28.84%
Strong
Discovery Fund II 5.01% 10.01% 10.03%
Opportunity Fund II 19.21% 24.21% 24.23%
Growth Fund II 23.50% 28.50% 28.52%
Warburg Pincus
International Equity (7.56)% (3.22)% (3.20)%
Small Company Growth 9.61% 14.61% 14.63%
Post-Venture Capital 7.23% 12.23% 12.25%
Morgan Stanley
Emerging Markets Equity (4.67)% (0.18)% (0.16)%
(b) Average Annual Total Return If Contract Issued at Commencement of
Portfolio
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Subaccount Portfolio's Return Return Return
Start Date If Contract If Contract If Contract
Surrendered Continued and Continued and
Maintenance Maintenance
Charge Charge Not
Applied Applicable
Fidelity
Money Market 4/1/82 5.73% 5.73% 5.83%
High Income 9/19/85 11.25% 11.25% 11.33%
Equity-Income 10/9/86 13.45% 13.45% 13.52%
Growth 10/9/86 14.34% 14.34% 14.41%
Asset Manager 9/6/89 11.57% 11.57% 11.61%
Investment Grade 12/5/88 7.17% 7.17% 7.21%
Bond
Overseas 1/28/87 7.07% 7.07% 7.14%
Index 500 8/27/92 18.65% 18.65% 18.68%
Asset Manager: 1/3/95 20.83% 21.51% 21.53%
Growth
Contrafund 1/3/95 26.26% 26.89% 26.91%
Growth 1/3/95 24.90% 25.54% 25.57%
Opportunities
Balanced 1/3/95 13.35% 14.12% 14.14%
Growth & Income 12/30/96 23.46% 27.45% 27.47%
Strong
Discovery Fund II 5/8/92 10.93% 10.93% 10.95%
Growth Fund II 12/31/96 24.50% 28.50% 28.52%
Opportunity Fund II 5/8/92 18.83% 18.83% 18.86%
Warburg Pincus
International l Equity 6/30/95 3.67% 4.79% 4.81%
Post-Venture Capital 9/30/96 4.20% 7.32% 7.34%
Small Company 6/30/95 19.93% 20.84% 20.86%
Growth
PBHG
Select 20 9/26/97 N/A N/A N/A
Growth II 5/1/97 N/A N/A N/A
Large Cap Value 10/29/97 N/A N/A N/A
Small Cap Value 10/29/97 N/A N/A N/A
Technology & 5/1/97 N/A N/A N/A
Communications
Morgan Stanley
Emerging Markets 6/16/97 N/A N/A N/A
Debt
Emerging Markets 10/1//96 (4.80)% (1.97)% (1.95)%
Equity
Global Equity 1/2/97 N/A N/A N/A
International 1/2/97 N/A N/A N/A
Magnum
</TABLE>
(c) Five Year Average Annual Total Return If Contract Issued on
December 31, 1993
If Contract Return Return
Surrendered If Contract If Contract
Continued and Continued and
Maintenance Maintenance
Charge Applied Charge Not
Applicable
Fidelity
Asset Manager 11.67% 11.79% 11.82%
Money Market 3.60% 3.77% 3.80%
Investment Grade Bond 5.86% 6.02% 6.05%
Equity-Income 18.82% 18.91% 18.94%
Growth 16.70% 16.80% 16.82%
High Income 12.65% 12.77% 12.80%
Overseas 12.82% 12.93% 12.96%
Index 500 18.59% 18.68% 18.71%
Strong
Discovery Fund II 10.56% 10.68% 10.71%
Opportunity Fund II 18.00% 18.09% 18.12%
(d) Ten Year Average Annual Total For Contracts Issued on December 31,
1987
If Contract Return Return
Surrendered If Contract If Contract
Continued and Continued and
Maintenance Maintenance
Charge Applied Charge Not
Applicable
Money Market 4.75% 4.75% 4.80%
High Income 11.62% 11.62% 11.68%
Equity-Income 15.49% 15.49% 15.55%
Growth 15.95% 15.95% 16.00%
Overseas 8.46% 8.46% 8.52%
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 for from the date the Portfolios began operations, and
assuming that the Contract was surrendered December 31, 1997. 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 12/31/97
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Subaccount Portfolio's Return Return Return
Start Date If Contract If Contract If Contract
Surrendered Continued and Continued and
Maintenance Maintenance
Charge Applied Charge Not
Applicable
Fidelity
Asset Manager 9/6/89 148.80% 148.80% 149.52%
Investment Grade 12/5/88 87.50% 87.50% 88.20%
Bond
High Income 9/19/85 270.88% 270.88% 274.02%
Overseas 1/28/87 111.05% 111.05% 112.47%
Index 500 8/27/92 149.57% 149.57% 149.88%
Growth Opportunities 1/3/95 94.62% 97.62% 97.73%
Balanced 1/3/95 45.52% 48.52% 48.61%
Equity Income 10/9/86 312.82% 312.82% 315.66%
Growth 10/9/86 350.74% 350.74% 353.79%
Contrafund 1/3/95 101.02% 104.02% 104.13%
Asset Manager: Growth 1/3/95 76.21% 79.21% 79.31%
Growth & Income 12/30/9 23.53% 27.53% 27.55%
Morgan Stanley
Emerging Markets 6/16/97 (5.12)% (0.12)% (0.10%)
Debt
Emerging Markets 10/1/96 (6.46)% (2.46)% (2.43)%
Equity
Global Equity 1/2/97 19.25% 24.25% 24.27%
International Magnum 1/2/97 2.45% 7.45% 7.47%
PBHG
Growth II 5/1/97 1.80% 6.80% 6.81%
Large Cap Value 10/29/97 (0.93)% 4.07% 4.07%
Small Cap Value 10/2 9 /97 (0.43)% 4.57% 4.57%
Technology & 5/1/97 (1.59)% 3.41% 3.42%
Communications
Select 20 9/2 6 /97 (4.95)% 0.05% 0.06%
Strong
Discovery Fund II 5/8/92 79.69% 79.69% 79.95%
Growth Fund II 12/31/96 24.50% 28.50% 28.52%
Opportunity Fund II 5/8/92 165.15% 165.15% 165.50%
Warburg Pincus
International Equity 6/30/95 9.45% 12.45% 12.51%
Post-Venture Capital 9/30/96 5.25% 9.25% 9.28%
Small Company 6/30/95 57.71% 60.71% 60.79%
Growth
</TABLE>
(c) Cumulative Total Return For Five Year Period From 12/31/92 Through
12/31/97
Subaccount Return Return Return
If Contract If Contract If Contract
Surrendered Continued and Continued and
Maintenance Maintenance
Charge Applied Charge Not
Applicable
Asset Manager 73.68% 74.68% 74.88%
Money Market 19.36% 20.36% 20.51%
Investment Grade Bond 32.97% 33.97% 34.14%
Equity-Income 136.86% 137.86% 138.13%
Growth 116.44% 117.44% 117.68%
High Income 81.44% 82.44% 82.65%
Overseas 82.75% 83.75% 83.96%
Index 500 134.60% 135.60% 135.86%
Strong
Discovery Fund II 6 5.16 % 66.16% 66.35%
Opportunity Fund II 128.76% 129.76% 130.02%
(d) Cumulative Total Return For Ten Year Period From 12/31/87 Through
12/31/97
Return Return Return
If Contract If Contract If Contract
Surrendered Continued and Continued and
Maintenance Maintenance
Charge Applied Charge Not
Applicable
Money Market 59.11% 59.11% 59.95%
High Income 200.47% 200.47% 202.01%
Equity-Income 322.73% 322.73% 324.79%
Growth 339.74% 339.74% 341.86%
Overseas 125.50% 125.50% 126.66%
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 12/31/97, the Money
Market Subaccount had a current yield of 4.71% and an effective yield
of 4.82%. For Contracts on which there is currently no maintenance
charge, the current yield would be 4.73% and the effective yield would
be 4.84%.
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 12/31/97 was 4.95%
for the Investment Grade Bond Subaccount, 7.55% for the High Income
Subaccount and 9.15% for the Emerging Markets Debt Subaccount. For
Contracts on which there is no maintenance charge, the 30 day yield
would be 4.97% for the Investment Grade Bond Subaccount, 7.57% for the
High Income Subaccount and 9.17% for the Emerging Markets Debt
Subaccount.
TRANSFERS 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 transfer 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 a
transfer, 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.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a) There are no financial statements associated with this filing.
There are no financial statements included in Part A, other than
Accumulation Unit Values.
b) Exhibits
(1) Resolution of Board of Directors of Fidelity Investments
Life Insurance Company ("Fidelity Investments Life") establishing the
Fidelity Investments Variable Annuity Account I. (Note 1)
(2) Not Applicable.
(3) (a) Distribution Agreement between Fidelity Investments
Life, Fidelity Insurance Agency and Fidelity Brokerage Services, Inc.
(Note 1)
(b) Commission Schedule. (Note 1)
(4) (a) Specimen Variable Annuity Contract. (Note 1)
(b) Specimen Variable Annuity Contract for Use with
Sponsored Arrangements. (Note 1)
(c) Endorsement for Qualified Contracts. (Note 1)
(5) (a) Application for Variable Annuity Contract. (Note 1)
(b) Application for Variable Annuity Contract for Use
with Sponsored Arrangements. (Note 1)
(6) (i) Articles of Domestication of Fidelity Investments
Life. (Note 1)
(ii) Revised Bylaws of Fidelity Investments Life. (Note
1)
(7) Not Applicable.
(8) Not Applicable
(9) Opinion and consent of David J. Pearlman, as to the
legality of securities being issued. (Note 5 ).
(10) Not Applicable.
(11) Not Applicable.
(12) Not Applicable.
(13) Performance Advertising Calculations (Note 1)
(14) (a) Form of Participation Agreement between Fidelity
Investments Life and Variable Insurance Products Fund. (Note 1)
(b) Form of Participation Agreement between Fidelity
Investments Life and Variable Insurance Products Fund II. (Note 1)
(c) Form of Participation Agreement between Fidelity
Investments Life and Variable Insurance Products Fund III. (Note 1)
(d) Form of Participation Agreement between Fidelity
Investments Life and Strong Variable Insurance Funds, Inc. on behalf
of the Portfolios, and Strong Opportunity Fund II, Inc., Strong
Capital Management, Inc. (the "Adviser"), (Note 3)
(e) Form of Participation Agreement between Fidelity
Investments Life and PBHG INSURANCE SERIES FUND, INC. ("FUND"), and
PILGRIM BAXTER & ASSOCIATES, LTD. ("ADVISER"). (Note 3)
(f) Form of Participation Agreement between Fidelity
Investments Life and MORGAN STANLEY UNIVERSAL FUNDS, INC. (the
"Fund"), and MORGAN STANLEY ASSET MANAGEMENT INC. and MILLER ANDERSON
& SHERRERD, LLP (the "Advisers"). (Note 3)
(g) Form of Participation Agreement between Fidelity
Investments Life and Warburg, Pincus Trust, (the "Fund"); Warburg,
Pincus Counsellors, Inc. (the "Adviser"); and Counsellors Securities
Inc. (Note 3)
(15) Powers of Attorney
Powers of Attorney (Note 2)
Power of Attorney for Stephen P. Jonas and David C. Weinstein (Note 5)
(Note 1) Incorporated by reference to Post-Effective Amendment No. 11
to this Registration Statement filed electronically on April 27, 1997.
(Note 2) Incorporated by reference to Post-Effective Amendment No.
10 to this Registration Statement filed on April 26, 1996.
(Note 3) Incorporated by reference to Post-Effective Amendment No. 12
to this Registration Statement filed electronically on August 29,
1997.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 13
to this Registration Statement filed electronically on April 28, 1998
(Note 5) Filed herein
Item 25. Directors and Officers of the Depositor
The directors and officers of Fidelity Investments Life are as
follows:
Directors of Fidelity Investments Life
EDWARD C. JOHNSON 3d, Director and Chairman of the Board
J. GARY BURKHEAD, Director
JAMES C. CURVEY, Director
JOHN J. REMONDI, Director
RODNEY R. ROHDA, Director and Chairman
STEPHEN P. JONAS, Director
DAVID C. WEINSTEIN, Director
Executive Officers Who Are Not Directors
Executive officers of Fidelity Investments Life who are not
directors are as follows:
JOSEPH L. KURTZER, JR., Treasurer
DAVID J. PEARLMAN, Vice President, Senior Legal Counsel and
Secretary
MELANIE CALZETTI-SPAHR, Executive Vice President, Operations
The principal business address of all persons listed in Item 25 is 82
Devonshire Street, Boston, Massachusetts 02109.
Item 26. Persons Controlled By or Under Common Control with the
Depositor or Registrant.
See Exhibit 26 of the original registration statement on Form N-4
filed August 17, 1991, Reg. No. 33-42376, on behalf of Empire Fidelity
Investments Variable Annuity Account A, which is incorporated herein
by reference.
Item 27. Number of Contract Owners.
On December 31, 1997, there were 5,036 Qualified Contracts and
93,380 Non-qualified Contracts.
Item 28. Indemnification
FMR Corp. and its subsidiaries own a directors' and officers'
liability reimbursement contract (the "Policy"), issued by National
Union Fire Insurance Company, that provides coverage for "Loss" (as
defined in the Policy) arising from any claim or claims by reason of
any breach of duty, neglect, error, misstatement, misleading
statement, omission or other act done or wrongfully attempted by a
person while he or she is acting in his or her capacity as a director
or officer. The coverage is provided to these insureds, including
Fidelity Investments Life, to the extent required or permitted
according to applicable law, common or statutory, or under their
respective charters or by-laws, to indemnify directors or officers for
Loss arising from the above-described matters. Coverage is also
provided to the individual directors or officers for such Loss, for
which they shall not be indemnified, subject to relevant contract
exclusions. Loss is essentially the legal liability on claims against
a director or officer, including damages, judgements, settlements,
costs, charges and expenses (excluding salaries of officers or
employees) incurred in the defense of actions, suits or proceedings
and appeals therefrom.
There are a number of exclusions from coverage. Among the matters
excluded are Losses arising as the result of (1) fines or penalties
imposed by law or other matters that may be deemed uninsurable under
the law pursuant to which the Policy is construed, (2) claims brought
about or contributed to by the fraudulent, dishonest, or criminal acts
of a director or officer, (3) any claim made against the directors or
officers for violation of any of the responsibilities, obligations, or
duties imposed upon fiduciaries by the Employee Retirement Income
Security Act of 1974 or amendments thereto, (4) professional errors or
omissions, and (5) claims for an accounting of profits in fact made
from the purchase or sale by a director or officer of any securities
of the insured corporations within the meaning of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any state statutory law.
The limit of coverage of the Policy is $10 million, as an annual
aggregate limit, with 95% co-insurance for the first $1 million of
coverage, and with a deductible of $500,000 in the event that Fidelity
Investments Life indemnifies the director or officer, or a deductible
of $5,000 per individual director or officer (with a maximum aggregate
per loss deductible of $25,000) if Fidelity Investments Life does not
indemnify the director or officer.
Utah law (Revised Business Corporation Act (sub-section)16-10a-901 et
seq.) provides, in substance, that a corporation may indemnify a
director, officer, employee or agent against liability if he acted in
good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
The Text of Article XIV of Fidelity's By-Laws, which relates to
indemnification of the directors and officers, is as follows:
INDEMNIFICATION OF DIRECTORS, OFFICERS AND PERSONS
ADMINISTERING EMPLOYEE BENEFIT PLANS
Each officer or Director or former officer or Director of the
Corporation, and each person who shall, at the Corporation's request,
have served as an officer or director of another corporation or as
trustee, partner or officer of a trust, partnership or association,
and each person who shall, at the Corporation's request, have served
in any capacity with respect to any employee benefit plan, whether or
not then in office then serving with respect to such employee benefit
plan, and the heirs, executors, administrators, successors and assigns
of each of them, shall be indemnified by the Corporation against all
satisfaction of judgements, in compromise and or as fines or penalties
and fees and disbursement of counsel, imposed upon or reasonably
incurred by him or them in connection with or arising out of any
action, suit or proceeding, by reason of his being or having been such
officer, trustee, partner or director, or by reason of any alleged act
or omission by him in such capacity or in serving with respect to an
employee benefit plan, including the cost of reasonable settlements
(other than amounts paid to the Corporation itself) made with a view
to curtailment of costs of litigation.
The Corporation shall not, however, indemnify any such person, or his
heirs, executors, administrators, successors, or assigns, with respect
to any matter as to which his conduct shall be finally adjudged in any
such action, suit, or proceedings to constitute willful misconduct or
recklessness or to the extent that such matter relates to service with
respect to any employee benefit plan, to not be in the best interest
of the participants or beneficiaries of such employee benefit plan.
Such indemnification may include payment by the Corporation of
expenses incurred in defending any such action, suit, or proceeding in
advance of the final disposition thereof, upon receipt of an
undertaking by or on behalf of the person indemnified to repay such
payment if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation. Such undertaking may be
accepted by the corporation without reference to the financial ability
of such person to make repayment.
The foregoing rights of indemnification shall not be exclusive of
other rights to which any such director, officer, trustee, partner or
person serving with respect to an employee benefit plan may be
entitled as a matter of law. These indemnity provisions shall be
separable, and if any portion thereof shall be finally adjudged to be
invalid, such invalidity shall not affect any other portion which can
be given effect.
The Board of Directors may purchase and maintain insurance on behalf
of any persons who is or was a Director, officer, trustee, partner,
employee or other agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, trustee,
partner, employee or other agent of another corporation, association,
trust or partnership, against any liability incurred by him in any
such, whether or not the Corporation would have the power to indemnify
him against such liability.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director or officer, or controlling persons of
the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
its is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 29. Principal Underwriters.
(a) Fidelity Brokerage Services, Inc. acts as distributor for other
variable life and variable annuity contracts registered by separate
accounts of Fidelity Investments Life, Empire Fidelity Investments
Life Insurance Company, and PFL Life Insurance Company.
(b)
Name and Principal Positions and Offices with Underwriter
Business Address
Roger T. Servison Director
Robert P. Mazzarella Director and President
Rodney R. Rohda Director
Edward L. McCartney Executive Vice President
J. Peter Benzie Executive Vice President
Bruce MacAlpine Vice President
Kenneth Klipper Treasurer
Gary Greenstein Assistant Treasurer
Jeffrey R. Larsen Legal Counsel & Clerk
Linda Holland Compliance Officer
Richard Blades Compliance Registered Options Principal
Jay Freedman Assistant Clerk
(c) Commissions and other compensation received by principal
underwriter.
See Item 24 (b)(3)(b). No compensation was received by the principal
underwriter from the registrant or depositor during the registrant's
or depositor's last fiscal year.
The address for each person named in Item 29 is 82 Devonshire Street,
Boston, Massachusetts 02109.
Item 30. Location of Accounts and Records
The records regarding the Account required to be maintained by
Section 31(a) of the Investment Company Act of 1940, and Rules 31a-1
to 31a-3 promulgated thereunder, are maintained at Fidelity
Investments Life Insurance Company at 82 Devonshire Street, Boston,
Massachusetts 02109.
Item 31. Management Services
Not applicable
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that
the audited financial statements in the Registration Statement are
never more than 16 months old for so long as payments under the
variable annuity contracts may be accepted.
(b) Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a postcard or similar written communication
affixed to or included in the prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request.
(d) Registrant represents that it meets the definition of a "separate
account" under the federal
securities laws.
(e) Fidelity Investment Life Insurance Company hereby represents that
the aggregate charges under the variable annuity policy ("the
contract") offered by Fidelity Investment Life Insurance Company are
reasonable in relation to services rendered, the expenses expected to
be incurred, and the risks assumed by Fidelity Investment Life
Insurance Company
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, Fidelity Investments Variable Annuity
Account I, certifies that it meets the requirements of the Securities
Act Rule 485(a) for effectiveness of this Registration Statement and
has caused this Post-Effective Amendment No. 15 to the Registration
Statement to be signed on its behalf in the city of Boston and the
Commonwealth of Massachusetts, on this 25th day of January, 1999.
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
(Registrant)
By: FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(Depositor)
By:/s/ Rodney R. Rohda Attest:/s/ David J. Pearlman
Rodney R. Rohda, President, David J. Pearlman
Chairman, Chief Operating Secretary
Officer and Chief Executive
Officer
As required by the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities
indicated on this 25th day of January, 1999.
Signature Title
_/s/ Rodney R. Rohda President, Chairman and Director
Rodney R. Rohda (Chief Executive Officer)
(Chief Operating Officer)
________________ )
Joseph L. Kurtzer Jr. Treasurer )
)
________________ )
Edward C. Johnson 3d Director )
)
________________ )
J. Gary Burkhead Director ) By:/s/ David J. Pearlman_
) David J. Pearlman
_________________ ) (Attorney-in-Fact)
James C. Curvey Director )
)
_________________ )
John J. Remondi Director )
)
_________________ )
David C. Weinstein Director )
)
_________________ )
Stephen P. Jonas Director )
POWER OF ATTORNEY
I the undersigned Director of Fidelity Investments Life Insurance
Company (the "Company"), hereby constitute and appoint David J.
Pearlman, my true and lawful attorneys-in-fact, with full power of
substitution, to sign for me and in my name in the appropriate
capacities, all Initial Registration Statements of the Company, all
Pre-Effective Amendments to any Registration Statements of the
Company, any and all subsequent Post-Effective Amendments to said
Registration Statements, and any supplements or other instruments in
connection therewith, and generally to do all such things in my name
and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact or their
substitutes may do or cause to be done by virtue hereof.
/s/David C. Weinstein_________ June 17, 1998
David C. Weinstein
POWER OF ATTORNEY
I the undersigned Director of Fidelity Investments Life Insurance
Company (the "Company"), hereby constitute and appoint David J.
Pearlman, my true and lawful attorneys-in-fact, with full power of
substitution, to sign for me and in my name in the appropriate
capacities, all Initial Registration Statements of the Company, all
Pre-Effective Amendments to any Registration Statements of the
Company, any and all subsequent Post-Effective Amendments to said
Registration Statements, and any supplements or other instruments in
connection therewith, and generally to do all such things in my name
and behalf in connection therewith as said attorneys-in-fact deem
necessary or appropriate, to comply with the provisions of the
Securities Act of 1933 and Investment Company Act of 1940, and all
related requirements of the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact or their
substitutes may do or cause to be done by virtue hereof.
/s/Stephen P. Jonas_________ June 17, 1998
Stephen P. Jonas
EXHIBIT INDEX
Exhibit
(9) Opinion and consent of David J. Pearlman, as to the legality of
securities being issued.
FIDELITY (LOGO) INVESTMENTS(registered trademark) FMR Corp.
82 Devonshire Street
Boston MA 02109-3614
617 563 7000
January 25, 1999
Board of Directors
Fidelity Investments Life Insurance Company
82 Devonshire Street
Boston, MA 02109
Ladies and Gentlemen:
In my capacity as Associate General Counsel of FMR Corp., the parent
company of Fidelity Investments Life Insurance Company ("Fidelity
Life"), I have provided legal advice to Fidelity Life with respect to
the establishment of Fidelity Investments Variable Annuity Account I
(the "Account") pursuant to the laws of the Commonwealth of
Pennsylvania, and its continuance following the redomestication of
Fidelity Life under the applicable provisions of the laws of the State
of Utah. The Account was established by unanimous consent of the
Board of Directors of Fidelity Life on July 22, 1987 and its existence
continued without interruption following the redomestication of
Fidelity Life to Utah on November 10, 1992. The Account exists for
the investment of assets under certain variable annuity contracts (the
"Contracts") issued by Fidelity Life. I have participated in the
preparation and review of Post-Effective Amendment No. 15 to the
Registration Statement on Form N-4 for the registration of the
Contracts with the Securities and Exchange Commission under the
Securities Act of 1933, Reg. No. 33-24400 and the registration of the
Account under the Investment Company Act of 1940.
I am of the following opinion:
(1) Fidelity Life is duly organized and validly existing under the
laws of the State of Utah.
(2) The Account is duly organized and validly existing as a separate
account of Fidelity Life under the laws of the State of Utah.
(3) The portion of the assets to be held in the Account equal to the
reserve and other liabilities for variable benefits under the
Contracts is not chargeable with liabilities arising out of any other
business Fidelity Life may conduct.
(4) The Contracts, when issued as set forth in the Registration
Statement, will be legal and binding obligations of Fidelity Life in
accordance with their terms.
In arriving at the foregoing opinion, I have made such examination of
law and examined such records and other documents as I judged to be
necessary or appropriate.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement, and to the reference to my name under the
heading "Legal Matters" in the Statement of Additional Information.
Very truly yours,
/s/David J. Pearlman
David J. Pearlman
