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"), STRONG 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 U.S.
Securities and Exchange Commission in a Statement of Additional
Information dated April 30, 1999. The Statement of Additional
Information is incorporated by reference in this prospectus and is
available without charge by calling Fidelity Investments Life at
1- 800-544-2442 or by accessing the SEC I nternet website
at (http://www.sec.gov). The table of contents of the Statement of
Additional Information appears on page 50.
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 1- 800-544-2442
Date: April 30, 1999
PROSPECTUS CONTENTS
GLOSSARY 3
Summary of the Contract 5
FACTS ABOUT FILI, THE
VARIABLE ACCOUNT AND THE FUNDS
Fidelity Investments Life 15
The Variable Account 15
The Funds 15
FACTS ABOUT THE CONTRACT
Purchase of a Contract 23
Free Look Privilege 23
Investment Allocation of Your 23
Purchase Payments
Accumulation Units 24
Withdrawals 24
Signature Guarantee 26
Charges 26
Death Benefit 27
Required Distributions Upon 28
Death
Annuity Date 28
Selection of Annuity Income 28
Options
Fixed, Variable, or 28
Combination Annuity Income
Options
Types of Annuity Income 29
Options
Reports to Owners 29
THE FIXED ACCOUNT
The Fixed Account 29
MORE ABOUT THE CONTRACT
Tax Considerations 30
Other Contract Provisions 31
Selling the Contracts 32
Automatic Deduction Plan 32
Special Provisions For 32
Sponsored Arrangements
Dollar Cost Averaging 32
Automatic Rebalancing 32
Postponement of Payment 32
MORE ABOUT THE VARIABLE
ACCOUNT AND THE FUNDS
Changes in Investment Options 33
Total Return for a Subaccount 33
Voting Rights 33
Resolving Material Conflicts 33
Performance 33
Litigation 33
Appendix A: Accumulation Units 35
Table of Contents of the 48
Statement of Additional
Information
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.
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.
TOTAL RETURN - An index used to measure the investment performance of
a Subaccount from one Valuation Period to the next.
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 24.
There are currently twenty-eight variable Subaccounts.
(small solid bullet) Five Subaccounts invest in shares of one of the
mutual fund portfolios of Fidelity Variable Insurance Products Fund.
The Variable Insurance Products Fund currently offers Money Market
Portfolio, High Income Portfolio, Equity-Income Portfolio, Growth
Portfolio, and Overseas Portfolio.
(small solid bullet) Five Subaccounts invest in shares of one of the
mutual fund portfolios of Fidelity Variable Insurance Products Fund
II. The Variable Insurance Products Fund II currently offers
Investment Grade Bond Portfolio, Asset Manager Portfolio, Index 500
Portfolio, Asset Manager: Growth Portfolio, and Contrafund Portfolio.
(small solid bullet) Three Subaccounts invest in shares of one of the
mutual fund portfolios of Fidelity Variable Insurance Products Fund
III. The Variable Insurance Products Fund III currently offers 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 Morgan Stanley Dean Witter,
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 28.
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 Federal
income tax. See TAX CONSIDERATIONS on page 32.
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 31. 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 30.
(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 in accordance with the 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 29. 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 30.
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 currently waive this
charge, but we reserve the right to deduct it 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.
ADDITIONAL MORTALITY RISK CHARGE. We may offer the Owner the
opportunity to elect a Death Benefit Rider. If the Owner elects the
Rider, we will deduct a mortality charge once each quarter. The amount
of the charge for each quarter will not exceed 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) 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 28.
(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 28.
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 25.
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.
Following are the various investment options available to you under
the Contract.
FIDELITY RETIREMENT RESERVES
<TABLE>
<CAPTION>
<S> <C> <C>
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
MSDW Investment Management Emerging Markets Debt Portfolio
Emerging Markets Equity
Portfolio
Global Equity Portfolio
International Magnum Portfolio
PBHG Select 20 Portfolio
Growth II Portfolio
Large Cap Value Portfolio
Small Cap Value Portfolio
Technology & Communications
Portfolio
Strong Discovery Fund II Portfolio
Mid Cap Growth Fund II
Portfolio
Opportunity Fund II Portfolio
Warburg Pincus International Equity Portfolio
Post-Venture Capital Portfolio
Small Company Growth Portfolio
</TABLE>
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 29 of the prospectus for additional information.
CONTRACT OWNER EXPENSES
(as a percentage of purchase
payments)
Sales Charge Imposed on 0.00%
Purchases
Maximum Contingent Deferred 5.00%
Sales ChargeA
Surrender Charge 0.00%
Exchange Fee 0.00%
Annual Maintenance ChargeB $ 30.00
Separate Account Annual
Expenses (as a percentage of
average account value)
Separate Account Annual
Expenses (as a percentage of
average account value)
Mortality and Expense Risk 0.75%
Charge
Account Fees and Expenses:
Administrative Charge 0.05%
Total Separate Account Annual 0.80%
Expenses
A 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.
B 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 0.01%
ANNUAL ASSET CHARGE BASED ON THE EXPERIENCE OF THE CONTRACTS.
PORTFOLIO ANNUAL EXPENSES
(as a percentage of Portfolio average net assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management Fees Other Expenses Total Annual Expenses (after
reimbursement)
FIDELITYA
Asset Manager 0.54% 0.09% 0.63%
Money Market 0.20% 0.10% 0.30%
Investment Grade Bond 0.43% 0.14% 0.57%
High Income 0.58% 0.12% 0.70%
Equity-Income 0.49% 0.08% 0.57%
Index 500 0.24% 0.04% 0.28%B
Growth 0.59% 0.07% 0.66%
Overseas 0.74% 0.15% 0.89%
Asset Manager: Growth 0.59% 0.13% 0.72%
Contrafund 0.59% 0.07% 0.66%
Growth Opportunities 0.59% 0.11% 0.70%
Balanced 0.44% 0.14% 0.58%
Growth & Income 0.49% 0.11% 0.60%
Management Fees Other Expenses Total Annual Expenses (after
reimbursement)
MSDW INVESTMENT MANAGEMENT
Emerging Markets Debt 0.27% 1.25% 1.52%C
Emerging Markets Equity 0.00% 1.95% 1.95%C
Global Equity 0.32% 0.83% 1.15%C
International Magnum 0.15% 1.00% 1.15%C
PBHG
Select 20 0.84% 0.36% 1.20%D
Growth II 0.51% 0.69% 1.20%D
Large Cap Value 0.18% 0.82% 1.00%D
Small Cap Value 0.74% 0.46% 1.20%D
Technology & Communications 0.49% 0.71% 1.20%D
STRONG
Discovery Fund II 1.00% 0.18% 1.18%
Growth Fund II* 1.00% 0.20% 1.20%E
Opportunity Fund II 1.00% 0.16% 1.16%
WARBURG PINCUS
International Equity 1.00% 0.33% 1.33%F
Post-Venture Capital 1.08% 0.32% 1.40%F
Small Company Growth 0.90% 0.24% 1.14%F
</TABLE>
A A PORTION OF THE BROKERAGE COMMISSIONS THAT CERTAIN FUNDS PAY WAS
USED TO REDUCE FUND EXPENSES. IN ADDITION, CERTAIN FUNDS, OR FMR ON
BEHALF OF CERTAIN FUNDS, HAVE ENTERED INTO ARRANGEMENTS WITH THEIR
CUSTODIAN WHEREBY CREDITS REALIZED AS A RESULT OF UNINVESTED CASH
BALANCES WERE USED TO REDUCE CUSTODIAN EXPENSES. WITHOUT THESE
REDUCTIONS, THE TOTAL OPERATING EXPENSES PRESENTED IN THE TABLE WOULD
HAVE BEEN .58% FOR EQUITY-INCOME PORTFOLIO, .68% FOR GROWTH PORTFOLIO,
.91% FOR OVERSEAS PORTFOLIO, .64% FOR ASSET MANAGER PORTFOLIO, .70%
FOR CONTRAFUND PORTFOLIO, .73% FOR ASSET MANAGER: GROWTH PORTFOLIO,
.71% FOR GROWTH OPPORTUNITIES PORTFOLIO, .59% FOR BALANCED PORTFOLIO,
AND .61% FOR GROWTH AND INCOME PORTFOLIO.
B 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 .24%, .11% AND
.35%, RESPECTIVELY.
C 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 CERTAIN EXPENSES OF THE
PORTFOLIO. MSDW INVESTMENT MANAGEMENT MAY TERMINATE THIS VOLUNTARY
WAIVER AND REIMBURSEMENT AT ANY TIME AT ITS SOLE DISCRETION. WITHOUT
WAIVERS AND REIMBURSEMENTS, "MANAGEMENT FEES," "OTHER EXPENSES" AND
"TOTAL ANNUAL EXPENSES," RESPECTIVELY, WOULD BE AS FOLLOWS: EMERGING
MARKETS DEBT PORTFOLIO (0.80%, 1.25%, 2.05%); EMERGING MARKETS EQUITY
PORTFOLIO (1.25%, 2.20%, 3.45%); GLOBAL EQUITY PORTFOLIO (0.80%,
0.83%, 1.63%); INTERNATIONAL MAGNUM PORTFOLIO (0.80%, 1.00%, 1.80%).
D 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 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, 1999.
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, 1999. 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 1.54%; 1.00% AND 1.46%; 0.65% AND 1.47%; 0.85% AND 1.56%; AND
0.85% AND 1.21%, RESPECTIVELY.
E 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.
MANAGEMENT FEES, OTHER EXPENSES, AND TOTAL ANNUAL EXPENSES FOR
DISCOVERY II, OPPORTUNITY II, AND GROWTH FUND II ARE CALCULATED ON AN
ANNUALIZED BASIS FROM THE BEGINNING OF THE FISCAL YEAR THROUGH THE
CURRENT QUARTER END. THE ADVISOR FOR THE GROWTH FUND II PORTFOLIO IS
ABSORBING EXPENSES OF 0.35%. WITHOUT THESE ABSORPTIONS THE EXPENSE
RATIO WOULD HAVE BEEN 1.55%. *GROWTH FUND II IS CURRENTLY CALLED MID
CAP GROWTH FUND II.
F 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, 1998, 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
0.33%, 0.45% AND 0.24%; AND TOTAL ANNUAL EXPENSES WOULD HAVE EQUALLED
1.33%, 1.70% AND 1.14% FOR THE INTERNATIONAL EQUITY, POST-VENTURE
CAPITAL, AND SMALL COMPANY GROWTH PORTFOLIOS, RESPECTIVELY. FEE
WAIVERS AND EXPENSE REIMBURSEMENTS OR CREDITS MAY BE DISCONTINUED AT
ANY TIME.
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 annuitized your Contract during the first year.
FIDELITY One year Three Years Five Years Ten Years
Asset Manager $ 61 $ 76 $ 89 $ 172
Money Market 58 65 71 135
Investment Grade Bond 61 74 86 166
High Income 62 78 92 180
Equity-Income 61 74 86 166
Growth 62 76 90 176
Overseas 64 84 102 201
Index 500 58 65 70 133
Asset Manager: growth 62 78 93 182
Contrafund 62 76 90 176
Growth Opportunities 62 78 92 180
Balanced 61 74 86 167
Growth & Income 61 75 87 169
MSDW INVESTMENT MANAGEMENT
Emerging Markets Debt 70 102 135 267
Emerging Markets Equity 74 115 156 309
Global Equity 66 91 116 229
International Magnum 66 91 116 229
PBHG
Growth II 67 93 118 234
Large Cap Value 65 87 108 213
Select 20 67 93 118 234
Small Cap Value 67 93 118 234
Technology & Communications 67 93 118 234
STRONG
Discovery Fund II 67 92 117 232
Growth Fund II* 67 93 118 234
Opportunity Fund II 67 92 116 230
WARBURG PINCUS
International Equity 68 97 125 247
Post-Venture Capital 69 99 128 254
Small Company Growth 66 91 115 227
* CURRENTLY CALLED MID CAP GROWTH FUND II.
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 Year Three Years Five Years Ten Years
Asset Manager $ 15 $ 46 $ 79 $ 172
Money Market 11 35 61 135
Investment Grade Bond 14 44 76 166
High Income 15 48 82 180
Equity-Income 14 44 76 166
Growth 15 46 80 176
Overseas 17 54 92 201
Index 500 11 35 60 133
Asset Manager: Growth 16 48 83 182
Contrafund 15 46 80 176
Growth Opportunities 15 48 82 180
Balanced 14 44 76 167
Growth & Income 14 45 77 169
MSDW INVESTMENT MANAGEMENT
Emerging Markets Debt 24 73 125 267
Emerging Markets Equity 28 86 146 309
Global Equity 20 62 106 229
International Magnum 20 62 106 229
PBHG
Growth II 20 63 108 234
Large Cap Value 18 57 98 213
Select 20 20 63 108 234
Small Cap Value 20 63 108 234
Technology & Communications 20 63 108 234
STRONG
Discovery Fund II 20 62 107 232
Growth Fund II* 20 63 108 234
Opportunity Fund II 20 62 106 230
WARBURG PINCUS
International Equity 22 67 115 247
Post-Venture Capital 22 69 118 254
Small Company Growth 20 61 105 227
* CURRENTLY CALLED MID CAP GROWTH FUND II.
(small solid bullet) The above 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. Edward C. Johnson 3d, the Johnson
family members, and various key employees of FMR Corp. own the voting
common stock of 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-ended, 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 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 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:
Bankers Trust Company's ("BT," a New York banking corporation serving
as sub-adviser and custodian for VIP II Index 500) 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.
(small solid bullet) 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 and, to a lesser extent, of corporate
issuers located in emerging market countries.
(small solid bullet) APPROACH. MSDW Investment Management seeks high
total return by investing in a portfolio of emerging market debt that
offers low correlation to many other asset classes. Using
macroeconomic and fundamental analysis, MSDW Investment Management
seeks to identify developing countries that are undervalued and have
attractive or improving fundamentals. After the country allocation is
determined, the sector and security selection is made within each
country.
(small solid bullet) PROCESS. MSDW Investment Management's global
allocation team analyzes the global economic environment and its
impact on emerging markets. MSDW Investment Management focuses on
investing in countries that show signs of positive fundamental change.
This analysis considers macroeconomic factors, such as GDP growth,
inflation, monetary policy, fiscal policy and interest rates and
sociopolitical factors such as political risk, leadership, social
stability, and commitment to reform. In selecting securities, MSDW
Investment Management first examines yield curves with respect to a
country and then considers instrument-specific criteria, including:
(1) spread duration; (2) real interest rates; and (3) liquidity. 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, when or if available, use hedging
strategies, including the use of derivatives to protect the Portfolio
from overvalued currencies or to take advantage of undervalued
currencies.
EMERGING MARKETS EQUITY PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term capital
appreciation by investing primarily in Equity Securities of issuers in
emerging market countries.
(small solid bullet) APPROACH. MSDW Investment Management seeks to
maximize returns by investing primarily in growth-oriented equity
securities in undervalued emerging markets and, from time to time, in
fixed income securities. MSDW Investment Management's investment
approach combines top-down country allocation with bottom-up stock
selection. Investment selection criteria include attractive growth
characteristics, reasonable valuations and managements that focus on
shareholder value.
(small solid bullet) PROCESS. MSDW Investment Management's global
allocation team analyzes the global economic environment, particularly
its impact on emerging markets and allocates the Portfolio's assets
among emerging markets based on relative economic, political, and
social fundamentals, stock valuations and investor sentiment. MSDW
Investment Management invests within countries based on the work of
country specialists who conduct extensive fundamental analysis of
issuers within these markets and seek to identify issuers with strong
earnings growth prospects. To manage risk, MSDW Investment Management
emphasizes thorough macroeconomic and fundamental research.
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.
(small solid bullet) APPROACH. MSDW Investment Management seeks to
maintain a diversified portfolio of global equity securities based on
individual stock selection. MSDW Investment Management emphasizes a
bottom-up approach to investing that seeks to identify securities of
undervalued issuers. The investment process is value driven and
considers value criteria with an emphasis on cash flow and the
intrinsic value of company assets. Securities which appear undervalued
according to these criteria are then subjected to in-depth fundamental
analysis. MSDW Investment Management conducts a thorough investigation
of the issuer's balance sheet, cash flow and income statement and
assesses the company's business franchise, including product,
competitiveness, market positioning, and industry structure. Meetings
with senior company management are integral to the investment process.
(small solid bullet) PROCESS. MSDW Investment Management selects
securities for investment from a universe of eligible issuers
consisting of approximately 3,200 companies in the Morgan Stanley
Capital International (MSCI) World Index. MSDW Investment Management
expects to invest at least 20% of the Portfolio's total assets in the
common stocks of U.S. issuers.
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.
(small solid bullet) APPROACH. MSDW Investment Management seeks to
achieve superior long-term returns by creating a diversified portfolio
of undervalued international equity securities. To achieve this goal,
MSDW Investment Management uses a combination of strategic geographic
asset allocation and fundamental, value oriented stock selection.
(small solid bullet) PROCESS. The Portfolio is managed using a
two-part process combining the expertise of investment teams based in
New York, London, Tokyo, and Singapore. The New York-based portfolio
management team decides upon the appropriate allocation of the
Portfolio's assets among Europe, Japan and developed Asia, including
Australia and New Zealand. Regional allocation decisions are based on
variety of factors, including relative valuations, earnings
expectations, macroeconomic factors, as well as input from the
regional stock selection teams from the MSDW Investment Management's
Asset Allocation Committee, which is made up of several of the MSDW
Investment Management's most senior investment officers. Once the
allocations to Europe, Asia, and Japan have been determined, three
overseas investment teams in London (for European stocks), Tokyo (for
Japanese stocks) and Singapore (for Asian stocks) decide which stocks
to purchase for their respective geographic regions. The regional
portfolio management teams look for stocks that they believe to be
undervalued by the market. The regional specialists analyze each
company's management before a stock is purchased for the Portfolio.
The Portfolio invests primarily in countries comprising the MSCI
Europe, Australiasia, Far East (EAFE) Index (the "EAFE Index"). EAFE
countries include Japan, most nations in Western Europe, and the more
developed nations of Asia, such as Australia, New Zealand, Hong Kong,
and Singapore. However, the Portfolio also may invest up to 5% of its
assets in countries not included in the EAFE Index.
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 growth 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) The growth securities in the Portfolio are
primarily common stocks, but may also include other equity securities
such as 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 growth securities of
small and medium sized 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 between $500 million and $10 billion.
(small solid bullet) The growth securities in the Portfolio are
primarily common stocks, but may also include other equity securities
such as warrants and rights to purchase common stocks, and convertible
securities.
(small solid bullet) The Portfolio emphasizes small and medium sized
growth companies, so it may be more volatile than the stock market in
general, as measured by the S&P 500.
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 value securities of
large capitalization companies that, in the opinion of the Adviser and
Pilgrim Baxter Value Investors, Inc. (the "Sub-Adviser"), are
currently underpriced using certain financial measurements, such as
their price-to-earnings ratios.
(small solid bullet) The value securities in the Portfolio are
primarily common stocks that, in the opinion of the Adviser and the
Sub-Adviser, are currently underpriced using certain financial
measurements, such as their price-to-earnings ratios, but may also
include other equity securities such as warrants and rights to
purchase common stocks and convertible securities.
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 value securities of
companies whose market capitalizations are within the range of the
Russell 2000 index.
(small solid bullet) The value securities in the Portfolio are
primarily common stocks that, in the opinion of the Adviser and the
Sub-Adviser, are currently underpriced using certain financial
measurements, such as their price-to-earnings ratios, but may also
include other equity securities such as warrants and rights to
purchase common stocks and convertible securities.
(small solid bullet) The Portfolio's sector weightings are generally
within 10% of the Russell 2000's sector weightings. In addition, the
Portfolio generally has lower price-to-earnings ratios than the
Russell 2000.
(small solid bullet) The Portfolio emphasizes value securities of
smaller sized companies, so it is likely to be more volatile than the
stock market in general, as measured by the S&P 500 Index.
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.
(small solid bullet) Securities of technology companies are strongly
affected by worldwide scientific and technological developments and
governmental policies and, therefore, are generally more volatile than
securities of companies not dependent upon or associated with
technology issues.
STRONG
DISCOVERY FUND II
OBJECTIVE AND STRATEGY
(small solid bullet) Discovery Fund II 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.
MID CAP GROWTH FUND II (FORMERLY GROWTH FUND II)
OBJECTIVE AND STRATEGY
(small solid bullet) Mid Cap Growth Fund II seeks capital growth
through investments in mid-sized companies.
(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 mid-size
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
OBJECTIVE AND STRATEGY
(small solid bullet) Opportunity Fund II 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 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) A portion 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 continue 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) 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.
(small solid bullet) The Portfolio is non-diversified and may invest a
greater portion of its assets in the securities of a smaller number of
issuers.
RISK. The Portfolio's main risks are the risks associated with equity
securities, particularly small, start-up, and special-situation
companies. The Portfolio may be subject to volatility resulting from
its non-diversified status.
FUNDS' AVAILABILITY TO SEPARATE ACCOUNTS
Shares of the 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
Funds available to such other separate accounts, see RESOLVING
MATERIAL CONFLICTS on page 42.
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
39 million shareholder accounts with a total value of more than $694
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 is a wholly-owned subsidiary of Bankers Trust
Corporation (formerly Bankers Trust New York Corporation). BT
currently serves as sub-adviser and custodian for the Index 500
Portfolio. BT chooses Index 500 Portfolio's investments and places
orders to buy, sell, and lend the fund's investments.
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
The investment Adviser for the Morgan Stanley Dean Witter 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."), with 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.
On February 15, 1999, WP & Co. and Credit Suisse Group announced that
they reached an agreement for Credit Suisse Group to acquire Warburg
Pincus. It is expected that Warburg Pincus will be combined with
Credit Suisse Asset Management (New York), the institutional asset
management and mutual fund arm of Credit Suisse Group. As of December
31, 1998, Credit Suisse Asset Management had global assets under
management of $210 billion. Under the terms of the arrangement, no
immediate changes are planned to Warburg's investment portfolio
managers and investment professionals.
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 40.
(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 36.
(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 43.
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 43.
You may make a telephone request to add an additional payment to the
Contract from either your Fidelity Mutual Fund or Brokerage "core"
account. Additional payment requests by telephone are currently
limited to $100,000 or less with the transfer coming from identical
registrations.
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 41. 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
35.
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 40.
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,
as the exchange does not begin a new Contract date. This provision may
vary by state where required by applicable state insurance law. If you
are replacing an existing insurance product with the Contract and you
choose not to retain your Contract, it is considered a surrender and
any gain since you first purchased your old Contract is taxable.
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) EXCHANGES AMONG VARIABLE SUBACCOUNTS
You may currently exchange amounts among the variable Subaccounts
before the Annuity Date as often as you wish without charge. However,
excessive exchange activity can disrupt portfolio management strategy
and increase portfolio expenses, which are borne by all Contract
Owners participating in the portfolio regardless of their exchange
activity. Therefore, we reserve the right to limit the number of
exchanges 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 exchanges in excess of 12 per calendar year.
The request may be in terms of dollars, such as a request to exchange
$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
exchange is $250 or, if less, the entire portion of your Contract
Value allocated to a particular Subaccount. You may exchange amounts
or change your investment allocation with respect to future payments
by sending a letter or calling the Annuity Service Center or, at some
future date, on our Internet website. If your instructions are
incomplete (e.g. unclear or percentages do not equal 100%), your
payments will be allocated to the VIP Money Market Portfolio until we
receive your complete instructions.
(small solid bullet) TRANSACTIONS BY TELEPHONE OR INTERNET (AVAILABLE
AT A FUTURE DATE)
Fidelity Investments Life reserves the right to revise or terminate
the telephone or Internet exchange provisions, limit the amount of or
reject any exchange, as deemed necessary, at any time. We will limit
telephone/Internet exchange authorizations to a combined total of
eighteen per calendar year. After this total is reached, you will only
be permitted to complete exchanges in writing. We will not accept
exchange requests via fax.
We will not be responsible for any losses resulting from unauthorized
telephone or Internet exchanges if we follow reasonable procedures
designed to verify the identity of the caller or Internet user. 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 exchanges among the Subaccounts on the basis of
perceived market trends. Because the large exchange 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 exchange transactions on
behalf of a Contract Owner(s). In modifying such rights, we may, among
other things, decline to accept (1) the exchange instructions of any
agent acting under a power of attorney on behalf of more than one
Contract Owner, or (2) the exchange instructions of individual
Contract Owners who have executed pre-authorized 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. We will impose such
restrictions only if we believe that doing so will prevent harm to
other Contract Owners.
(small solid bullet) EFFECTIVE DATE OF EXCHANGES AMONG VARIABLE
SUBACCOUNTS
When you request an exchange 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 an exchange 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 exchange is being made is investing in an
equity portfolio in an illiquid position due to substantial
redemptions or exchanges that require it to sell portfolio securities
in order to make funds available, then the crediting of the amount
exchanged to the new Subaccount may be delayed. This delay will be
until the Subaccount from which the exchange 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 exchanged 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. At the end of the current renewal interest
guarantee period, January 31, 2000, 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 42.
(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 the Contract Value in light of market conditions and your financial
objectives. Exchanges or transfers after the Annuity Date are subject
to different limitations. See FIXED, VARIABLE, OR COMBINATION ANNUITY
INCOME OPTIONS on page 41.
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 Total Return of the Subaccount. The Total
Return reflects the investment performance of the Subaccount for the
Valuation Period and is net of the asset charges to the Subaccount.
See TOTAL RETURN FOR A SUBACCOUNT on page 46.
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. You may request a partial withdrawal by telephone.
Withdrawals by telephone are limited to the following criteria: 1)
withdrawals of $500 to $25,000 with no more than $25,000 dollars being
withdrawn during a seven day period; 2) for Contracts that have had an
address change in the last 30 days, the limit is $10,000; and 3) the
check must be made payable to all registered Owners. You may request
to have the money wired to your Fidelity Mutual fund or Brokerage
account with identical registration. We reserve the right to change
telephone withdrawal requirements or limitations.
Certain withdrawals, however, are subject to a penalty tax. See TAX
CONSIDERATIONS on page 43. 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 45.
(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 39. 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 or from 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 warranted by the
expenses we incur.
We also reserve the right to assess this charge against all Contracts
(except for those Contracts issued after May 1, 1990 by exchanging
Fidelity Variable Annuity). 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
currently waive this charge, but we reserve the right to 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 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 41.
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. We may offer the Owner the
opportunity to elect a Death Benefit Rider. If the Owner elects the
Rider, we will deduct a mortality charge once each quarter. The amount
of the charge for each quarter will not exceed 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 has 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 sixteen months. Elimination would be
effective on the first Contract Anniversary after 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. EXCHANGE CHARGE. On certain contracts issued after May 1, 1997 we
reserve the right to charge for exchanges 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 47.
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) or (2) below, except as described in the
following sentence. In general, after approval by the insurance
department in the state in which the Owner's Contract was issued, we
will provide the opportunity to purchase an optional Death Benefit
Rider at the Owner's policy anniversary subsequent to the approval in
substantially all the states. The Death Benefit will then be the
greatest of (1), (2), or (3) below.
1) The purchase payments made, less any partial withdrawals and any
incurred taxes.
2) The Contract Value as of the end of the valuation period that 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 the Death Benefit 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.
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 .
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 we 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.
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 45.
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 Total
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 Total Return of the Subaccount is
equivalent to an annual rate of return of 3.5%. If the Total Return is
greater than the assumed investment return, the Subaccount Annuity
Unit Value will increase; if the Total 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 or exchange 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. Exchanges among the variable
Subaccounts, however, are permitted subject to some limitations. See
EXCHANGES 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 by you. 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.
You should verify the accuracy of your transaction confirmations and
monthly statements immediately after you receive them. Information
contained on transaction confirmations and account statements is
conclusive unless you object in writing within five and ten days,
respectively.
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 .
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 additional 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 . 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. An
assignment is (1) a change of Owner and Beneficiary to the Assignee,
or (2) a change of the Contract by the Owner(s) which is not a change
of Owner or Beneficiary, but their rights will be subject to the terms
of the assignment.
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 . 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 exchanges 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 exchanges 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 exchanges will take effect on the same day each month.
You may select any date from the 1st to the 28th as the date for your
dollar cost averaging exchanges (the "Exchange Date"). If the New York
Stock Exchange is not open on your selected date in a particular
month, the exchange will be made at the close of the Valuation Period
that includes the date you selected. Your exchanges 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 exchange 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 exchanges will be made on the same day of each month. You
may select any date from the 1st to the 28th as the date for your
automatic rebalancing exchanges. If the New York Stock Exchange is not
open on your selected date in a particular month, the exchanges will
be made at the close of the Valuation Period that includes the date
you selected. Your exchanges 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.
TOTAL RETURN FOR A SUBACCOUNT
A Subaccount's Total Return depends on how the investments of the
Subaccount perform. We determine the Total 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 Total 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
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Money Market Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 15.98 16.72 42,335,962
1997 15.30 15.98 28,256,730
1996 14.66 15.30 33,393,564
1995 13.99 14.66 26,268,846
1994 13.55 13.99 24,546,739
1993 13.26 13.55 10,961,418
1992 12.89 13.26 8,273,590
1991 12.27 12.89 6,461,782
1990 11.48 12.27 5,020,276
1989 10.62 11.48 1,449,116
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
High Income Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 29.00 27.53 9,274,597
1997 24.89 29.00 10,481,116
1996 22.05 24.89 9,856,952
1995 18.47 22.05 7,797,315
1994 18.94 18.47 5,106,950
1993 15.88 18.94 5,122,946
1992 13.03 15.88 2,624,011
1991 9.73 13.03 859,030
1990 10.07 9.73 356,960
1989 10.63 10.07 273,152
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Equity-Income Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 39.39 43.62 34,627,026
1997 31.05 39.39 40,838,032
1996 27.44 31.05 43,073,117
1995 20.52 27.44 41,937,122
1994 19.36 20.52 30,415,281
1993 16.54 19.36 19,318,902
1992 14.28 16.54 8,648,323
1991 10.98 14.28 3,225,101
1990 13.09 10.98 1,391,751
1989 11.27 13.09 714,730
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Growth Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 42.76 59.17 22,783,884
1997 34.97 42.76 23,048,124
1996 30.80 34.97 26,772,269
1995 22.98 30.80 23,019,869
1994 23.22 22.98 17,470,386
1993 19.64 23.22 12,073,224
1992 18.15 19.64 8,401,957
1991 12.60 18.15 4,162,470
1990 14.42 12.60 1,654,455
1989 11.08 14.42 434,747
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Overseas Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 23.52 26.31 9,537,903
1997 21.30 23.52 10,512,524
1996 19.00 21.30 11,419,855
1995 17.50 19.00 9,560,376
1994 17.37 17.50 14,336,196
1993 12.79 17.37 8,857,429
1992 14.47 12.79 1,983,970
1991 13.51 14.47 1,413,997
1990 13.89 13.51 1,086,588
1989 11.11 13.89 160,830
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Investment Grade Bond Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 18.75 20.24 11,642,575
1997 17.36 18.75 5,524,907
1996 16.99 17.36 4,615,384
1995 14.63 16.99 3,993,107
1994 15.35 14.63 3,151,087
1993 13.98 15.35 3,714,356
1992 13.24 13.98 2,651,021
1991 11.48 13.24 1,860,441
1990 10.93 11.48 486,509
1989 10.01 10.93 106,584
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Asset Manager Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 24.80 28.30 27,415,335
1997 20.76 24.80 30,320,855
1996 18.29 20.76 33,062,627
1995 15.80 18.29 39,821,641
1994 16.99 15.80 56,621,559
1993 14.18 16.99 48,441,225
1992 12.80 14.18 22,395,511
1991 10.55 12.80 6,736,284
1990 9.98 10.55 1,376,582
1989* 10.00 9.98 223,855
* PERIOD FROM 9/1/92 TO 12/31/92
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Index 500 Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 24.83 31.60 32,083,136
1997 18.90 24.83 28,695,264
1996 15.54 18.90 18,160,844
1995 11.44 15.54 7,333,800
1994 11.44 11.44 2,102,667
1993 10.53 11.44 1,509,615
1992* 10.00 10.53 637,942
* PERIOD FROM 9/1/92 TO 12/31/92
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Asset Manager: Growth Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 17.95 20.93 14,675,155
1997 14.50 17.95 17,201,030
1996 12.20 14.50 12,261,937
1995* 10.00 12.20 4,035,434
* PERIOD FROM 1/3/95 (COMMENCEMENT OF OPERATIONS) TO 12/31/95
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Contrafund Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 20.47 26.40 55,426,745
1997 16.66 20.47 57,789,065
1996 13.87 16.66 53,010,249
1995* 10.00 13.87 32,421,946
* PERIOD FROM 1/3/95 (COMMENCEMENT OF OPERATIONS) TO 12/31/95
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Growth Opportunities Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 12.63 15.62 25,247,156
1997* 10.00 12.63 21,154,834
* PERIOD FROM 1/27/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Balanced Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 11.98 13.98 6,933,405
1997* 10.00 11.98 4,649,810
* PERIOD FROM 1/27/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Growth & Income Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 12.68 16.29 32,986,321
1997* 10.00 12.68 18,798,233
* PERIOD FROM 1/27/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Emerging Markets Debt Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.48 7.44 280,904
1997* 10.00 10.48 270,613
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Emerging Markets Equity Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.05 7.56 586,128
1997* 10.00 10.05 176,936
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Global Equity Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.25 11.54 1,504,399
1997* 10.00 10.25 214,479
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
International Magnum Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 9.86 10.65 998,415
1997* 10.00 9.86 126,071
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PBHG Growth II Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.15 10.90 439,863
1997* 10.00 10.15 198,868
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Large Cap Value Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.27 14.05 1,331,167
1997* 10.00 10.27 71,061
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Small Cap Value Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.43 11.48 3,428,665
1997* 10.00 10.43 760,923
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Select 20 Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.42 16.80 16,529,457
1997* 10.00 10.42 551,473
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Technology & Communications Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 9.87 12.94 1,929,033
1997* 10.00 9.87 746,784
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Discovery Fund II Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 9.69 10.31 215,210
1997* 10.00 9.69 69,087
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Growth Fund II** Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.25 13.08 832,891
1997* 10.00 10.25 139,945
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
** CURRENTLY CALLED MID CAP GROWTH FUND II
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Opportunity Fund II Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.15 11.43 2,219,038
1997* 10.00 10.15 277,353
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
International Equity Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 9.89 10.33 374,074
1997* 10.00 9.89 54,981
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Post-Venture Capital Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.25 10.83 588,128
1997* 10.00 10.25 120,198
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Small Company Growth Subaccount
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.19 9.82 1,848,787
1997* 10.00 10.19 596,845
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
</TABLE>
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
Exchanges 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
Investment Company Act of 1940 File no. 811-5315
N.NRR-PRO-0999
1.722610.100
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 age 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. 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
17. Distributions are taxed as ordinary income under Federal income
tax laws.
18. The tax treatment of single sum distributions under Section 402(e)
of the Code is not applicable to distributions from IRAs.
19. 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
20. 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) occur 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.
21. 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
22. 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.
23. As further described in the prospectus, the following are 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 Fixed 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.
