As filed with the SEC on April 24, 2000
Registration No. 33-24400
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 18 [x]
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 25 [x]
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
(Exact name of registrant)
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(Name of depositor)
82 Devonshire Street
Boston, Massachusetts 02109
(Address of depositor's principal executive offices)
Depositor's telephone number: (800) 544-8888
_________________________________________________
RODNEY R. ROHDA
Chairman
Fidelity Investments Life Insurance Company
82 Devonshire Street
Boston, Massachusetts 02109
(Name and address of agent for service)
___________________________________________________________
Individual Variable Annuity Contracts -- The Registrant has registered
an indefinite amount of securities pursuant to Rule 24f-2 of the
Investment Company Act of 1940. The Rule 24f-2 Notice for the fiscal
year ending December 31, 1999, was filed on March 30, 2000.
It is proposed that this filing will become effective (check
appropriate space):
immediately upon filing pursuant to paragraph (b) of rule 485
X on April 30, 2000, pursuant to paragraph (b) (1) (v) of rule 485
60 days after filing pursuant to paragraph (a) (1) of rule 485
on , pursuant to paragraph (a) (1) of rule 485
75 days after filing pursuant to paragraph (a) (2) of rule 485
on , pursuant to paragraph (a) (2) of rule 485
Page _ of _
Exhibit Index Appears on Page __
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
Part A
Item N-4 Item Heading in Prospectus
Item 1. Cover Page Cover Page
Item 2. Definitions Glossary
Item 3. Synopsis or Highlights Summary of the Contract
Item 4. Condensed Financial Information Accumulation Unit Values
Item 5. General Description of Facts About Fidelity
Registrant, Depositor, and Investments Life, The
Portfolio Companies Variable Account, and
the Funds
a) Depositor Fidelity Investments
Life
b) Registrant The Variable Account;
The Fixed Account
c) Portfolio Company The Funds
d) Prospectus The Funds
e) Voting Voting Rights
f) Administrator Charges
Item 6. Deductions and Expenses Charges
a) Deductions Charges; Premium Taxes
b) Sales load Withdrawal Charge
c) Special purchase plans Special Provisions
Applicable to Sales
under Sponsored
Arrangements; Automatic
Deduction Plan; Dollar
Cost Averaging
d) Commissions Selling the Contracts
e) Portfolio company deductions
and expenses Charges
f) Registrant's expenses Charges
Item 7. General Description of Variable
Annuity Contracts
a) Rights Summary of the Contract;
Investment Allocation of
Your Purchase Payments;
Withdrawals; Death
Benefit; Selection of
Annuity Income Options;
Reports to Owners;
Voting Rights; Other
Contract Provisions
b) Provisions and limitations Investment Allocation of
Your Purchase Payments
c) Changes in contracts or Changes in Investment
operations Options
d) Contract owner inquiries Cover Page
Item 8. Annuity Period
a) Level of benefits Fixed, Variable or
Combination Annuity
Income Options; Types of
Annuity Income Options
b) Annuity commencement date Annuity Date
c) Annuity payments Types of Annuity Income
Options
d) Assumed investment return Fixed, Variable or
Combination Annuity
Income Options
e) Minimums Types of Annuity Income
Options
f) Rights to change options or Investment Allocation of
transfer contract value Your Purchase Payments
Item 9. Death Benefit
a) Death benefit calculation Death Benefit
b) Forms of benefits Death Benefit; Types of
Annuity Income Options
Item 10. Purchases and Contract Values
a) Procedures for purchases Purchase of a Contract
b) Accumulation unit value Accumulation Units
c) Calculation of accumulation Accumulation Units
unit value
d) Principal underwriter Selling the Contracts
Item 11. Redemptions
a) Redemption procedures Withdrawals
b) Texas Optional Retirement Not Applicable
Program
c) Delay Postponement of
Payment
d) Lapse Not Applicable
e) Revocation rights Free Look Privilege
Item 12. Taxes
a) Tax Consequences Tax Considerations; Contract
Values
and Proceeds; Required
Distributions
Upon Death
b) Qualified plans Purchase of A Contract;
Tax Considerations
c) Impact of taxes Tax Considerations
Item 13. Legal Proceedings Litigation
Item 14. Table of Contents for Table of Contents for
Statement of Additional Statement of Additional
Information Information
Part B Heading in Statement of
Form N-4 Item Additional Information
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and
History
a) Name change Fidelity Investments Life
(Prospectus)
b) Attribution of Assets Not Applicable
c) Control of Depositor Fidelity Investments Life
(Prospectus)
Item 18. Services
a) Fees, expenses and costs Charges (Prospectus)
b) Management - related Not Applicable
c) Custodian and independent Independent Accountants
public accountant
d) Other custodianship Safekeeping of Account
Assets
e) Administrative servicing Fidelity Investments Life
agent (Prospectus); The Variable
Account
(Prospectus)
f) Depositor as principal Not Applicable
underwriter
Item 19. Purchase of Securities Being
Offered
a) Manner of Offering Distribution of the
Contracts; Selling the
Contracts (Prospectus)
b) Sales load Withdrawal Charge
(Prospectus)
Item 20. Underwriters
a) Depositor or affiliate as Selling the Contracts
principal underwriter (Prospectus)
b) Continuous offering Distribution of Contracts
c) Underwriting commissions Not Applicable
d) Payments to underwriter Not Applicable
Item 21. Calculation of Performance Data Performance
Item 22. Annuity Payments Fixed Annuity Income
Payments; Variable
Annuity Income Payments;
Unavailability of
Annuity Income Payments
in Certain Circumstances
Item 23. Financial Statements
a) Registrant Financial Statements
b) Depositor Financial Statements
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 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 ASSET MANAGEMENT ("MORGAN
STANLEY "), PILGRIM BAXTER & ASSOCIATES, LTD. or PILGRIM BAXTER
VALUE INVESTORS, INC. ("PBHG"), STRONG CAPITAL MANAGEMENT, INC.
("STRONG"), and CREDIT SUISSE ASSET MANAGEMENT, LLC for the WARBURG
PINCUS TRUST PORTFOLIOS ("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, 2000 . 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 Internet website at (http://www.sec.gov). The table
of contents of the Statement of Additional Information appears on page
56.
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: Ap ril 30, 2000
PROSPECTUS CONTENTS
GLOSSARY 9
Summary of the Contract 11
FACTS ABOUT FILI, THE
VARIABLE ACCOUNT AND THE FUNDS
Fidelity Investments Life 21
The Variable Account 21
The Funds 21
FACTS ABOUT THE CONTRACT
Purchase of a Contract 29
Free Look Privilege 29
Investment Allocation of Your 29
Purchase Payments
Trading Among Variable 29
Subaccounts
Accumulation Units 30
Withdrawals 30
Signature Guarantee 31
Charges 31
Death Benefit 32
Required Distributions Upon 32
Death
Annuity Date 33
Selection of Annuity Income 33
Options
Fixed, Variable, or 34
Combination Annuity Income
Options
Types of Annuity Income 34
Options
Reports to Owners 34
THE FIXED ACCOUNT
The Fixed Account 34
MORE ABOUT THE CONTRACT
Tax Considerations 35
Other Contract Provisions 36
Selling the Contracts 37
Automatic Deduction Plan 37
Special Provisions For 37
Sponsored Arrangements
Dollar Cost Averaging 37
Automatic Rebalancing 37
Postponement of Payment 37
MORE ABOUT THE VARIABLE
ACCOUNT AND THE FUNDS
Changes in Investment Options 38
Total Return for a Subaccount 38
Voting Rights 38
Resolving Material Conflicts 38
Performance 38
Litigation 39
Appendix A: Accumulation Units 40
Table of Contents of the 57
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 - Used to measure the investment performance of a
Subaccount from one Valuation Period to the next.
TRADING AMONG VARIABLE SUBACCOUNTS - Transfers of amounts
among the investment options.
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 1 5 CALEND AR DAYS AFTER
WE MAIL THE CONTRACT TO YOU. See INVESTMENT ALLOCATION OF YOUR
PURCHASE PAYMENTS on page 28.
There are currently twenty-eight variable Subaccounts available
as investment options.
(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) Four 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, Growth Opportunities
Portfolio and Mid Cap Portfolio .
(small solid bullet) The remaining Subaccounts invest in shares
of one of the mutual fund portfolios of Morgan Stanley, PBHG, Strong,
or Warburg Pincus.
Fidelity Investments Life credits interest on amounts allocated to the
Fixed Account at interest rates that vary from time to time.
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.
The maximum partial withdrawal is one that 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 34.
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 33. 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 33.
(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 31. 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 31.
CHARGES
W e assess the following charges.
(1) ANNUAL MAINTENANCE CHARGE. This charge is currently set at $30 per
year and is 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 0 .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 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 offer the Owner the opportunity
to elect a Death Benefit Rider at the time of purchase. If the
Owner elects the Rider, we will deduct a mortality charge once each
quarter. The amount of the charge for each quarter will be
0. 05 % 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 31.
(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 31.
FREE LOOK PRIVILEGE
You may return your Contract for a refund within 10 calendar
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 calendar days. This provision may vary by state. See
FREE LOOK PRIVILEGE on page 29.
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 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
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
Mid Cap Portfolio
Morgan Stanley Emerging Markets Debt Portfolio
Emerging Markets Equity
Portfolio
Global Equity Portfolio
International Magnum Portfolio
PBHG Select 20 Portfolio
Growth II Portfolio
Select Value Portfolio
Small Cap Value Portfolio
Technology & Communications
Portfolio
Strong Mid Cap Growth Fund II
Portfolio
Opportunity Fund II Portfolio
Warburg Pincus International Equity Portfolio
Global Post-Venture Capital
Portfolio
Small Company Growth Portfolio
FEE TABLE
This information may assist you in understanding the various costs and
expenses that a Contract Owner will bear directly or indirectly. It
reflects expenses of the Separate Account as well as the Portfolios.
The tables below do not reflect any deductions for premium taxes or
federal income tax expenses that are determined solely from the amount
of premiums received. We generally deduct any applicable premium taxes
from your Contract Value on the Annuity Date or when proceeds are
paid. We do not currently deduct any federal income tax expense. See
CHARGES on page 31 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)
Mortality and Expense Risk 0.75%
Charge
Account Fees and Expenses:
Administrative Charge 0.05%
Total Separate Account Annual 0.80%
Expenses
A CONTRACTS ISSUED ON OR AFTER SEPTEMBER 13, 1999 DO NOT HAVE A
CONTINGENT DEFERRED SALES CHARGE. CONTRACTS ISSUED PRIOR TO APRIL 30,
1995 NO LONGER HAVE A CONTINGENT DEFERRED SALES CHARGE. CONTRACTS
ISSUED BETWEEN APRIL 30, 1995 AND SEPTEMBER 10, 1999 NO LONGER HAVE A
CONTINGENT DEFERRED SALES CHARGE ON THEIR NEXT CONTRACT ANNIVERSARY
FOLLOWING SEPTEMBER 29, 1999. THE MAXIM UM CONTINGENT DEFERRED
SALES CHARGE DECREAS ES 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>
Management Fees Other Expenses Total Annual Expenses (after
reimbursement)
<S> <C> <C> <C>
FIDELITYA
Asset Manager 0.53% 0.09% 0.62%
Money Market 0.18% 0.09% 0.27%
Investment Grade Bond 0.43% 0.11% 0.54%
High Income 0.58% 0.11% 0.69%
Equity-Income 0.48% 0.08% 0.56%
Index 500 0.24% 0.04% 0.28%B
Growth 0.58% 0.07% 0.65%
Overseas 0.73% 0.14% 0.87%
Asset Manager: Growth 0.58% 0.12% 0.70%
Contrafund 0.58% 0.07% 0.65%
Growth Opportunities 0.58% 0.10% 0.68%
Balanced 0.43% 0.12% 0.55%
Growth & Income 0.48% 0.11% 0.59%
Mid Cap 0.57% 0.40% 0.97%
MORGAN STANLEY ASSET MANAGEMENT
Emerging Markets Debt 0.45% 0.98% 1.43%C
Emerging Markets Equity 0.42% 1.37% 1.79%C
Global Equity 0.47% 0.68% 1.15%C
International Magnum 0.29% 0.87% 1.16%C
PBHG
Select 20 0.85% 0.20% 1.05%D
Growth II 0.85% 0.35% 1.20%D
Select Value* 0.65% 0.30% 0.95%D
Small Cap Value 0.91% 0.29% 1.20%D
Technology & Communications 0.85% 0.24% 1.09%D
STRONG
Mid Cap Growth Fund II 1.00% 0.15% 1.15%E
Opportunity Fund II 1.00% 0.14% 1.14%E
WARBURG PINCUS
International Equity 1.00% 0.32% 1.32%F
Global Post-Venture Capital** 1.07% 0.33% 1.40%F
Small Company Growth 0.90% 0.24% 1.14%F
</TABLE>
* PREVIOUSLY CALLED LARGE CAP VALUE.
** PREVIOUSLY CALLED POST-VENTURE CAPITAL.
A A PORTION OF THE BROKERAGE COMMISSIONS THAT CERTAIN FIDELITY
FUNDS PAY WAS USED TO REDUCE FUND EXPENSES. IN ADDITION, CERTAIN
FIDELITY 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 A PORTION OF FUND
EXPENSES. WITHOUT THESE REDUCTIONS, THE TOTAL OPERATING EXPENSES
PRESENTED IN THE TABLE WOULD HAVE BEEN 0.57% FOR EQUITY-INCOME
PORTFOLIO, 0.66% FOR GROWTH PORTFOLIO, 0.91% FOR OVERSEAS PORTFOLIO,
0.63% FOR ASSET MANAGER PORTFOLIO, 0.67% FOR CONTRAFUND PORTFOLIO,
0.70% FOR ASSET MANAGER: GROWTH PORTFOLIO, 0.68% FOR GROWTH
OPPORTUNITIES PORTFOLIO, 0.55% FOR BALANCED PORTFOLIO, 0.59% FOR
GROWTH AND INCOME PORTFOLIO, AND 3.34% FOR MID CAP 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 0.24%,
0. 10 % AND 0.34%, RESPECTIVELY.
C MORGAN STANLEY ASSET MANAGEMENT , WITH RESPECT TO THE
PORTFOLIOS, HAS VOLUNTARILY AGREED TO WAIVE RECEIPT OF ITS MANAGEMENT
FEES AND AGREED TO REIMBURSE CERTAIN EXPENSES OF THE PORTFOLIO. MORGAN
STANLEY ASSET 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%, 0.98%, 1.78%); EMERGING MARKETS EQUITY
PORTFOLIO (1.25%, 1.37%, 2.62%); GLOBAL EQUITY PORTFOLIO (0.80%,
0.68%, 1.48%); INTERNATIONAL MAGNUM PORTFOLI O (0.80%, 0.87%,
1.67%).
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 SELECT 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 SMALL CAP VALUE PORTFOLIO WOULD BE 1.00%
AND 1.29 %.
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
OPPORTUNITY II AND MID CAP GROWTH FUND II ARE CALCULATED ON AN
ANNUALIZED BASIS FROM THE BEGINNING OF THE FISCAL YEAR THROUGH THE
CURRENT QUARTER END. THE ADVISOR FOR MID CAP GROWTH FUND II IS
ABSORBING EXPENSES OF 0.02%. WITHOUT THESE ABSORPTIONS THE EXPENSE
RATIO WOULD HAVE BEEN 1.17%.
F MANAGEMENT FEES, OTHER EXPENSES AND TOTAL ANNUAL EXPENSES FOR THE
INTERNATIONAL EQUITY, GLOBAL POST-VENTURE CAPITAL AND SMALL
COMPANY GROWTH PORTFOLIOS ARE BASED ON ACTUAL EXPENSES FOR THE FISCAL
YEAR ENDED DECEMBER 31, 199 9 , 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 0.3 2 %, 0. 33 % AND 0.24%; AND TOTAL ANNUAL
EXPENSES WOULD HAVE EQUALLED 1.3 2 %, 1. 58 % AND 1.14% FOR
THE INTERNATIONAL EQUITY, GLOBAL 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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FIDELITY One year Three Years Five Years Ten Years
Asset Manager $ 61 $ 75 $ 88 $ 171
Money Market 58 64 70 132
Investment Grade Bond 61 73 84 162
High Income 62 77 92 179
Equity-Income 61 73 85 165
Growth 62 76 90 175
Overseas 64 83 101 199
Index 500 58 65 70 133
Asset Manager: Growth 62 78 92 180
Contrafund 62 76 90 175
Growth Opportunities 62 77 91 178
Balanced 61 73 84 164
Growth & Income 61 74 87 168
Mid Cap 65 86 106 209
MORGAN STANLEY ASSET MANAGEMENT
Emerging Markets Debt 69 100 130 257
Emerging Markets Equity 73 110 148 293
Global Equity 66 91 116 229
International Magnum 67 92 116 230
PBHG
Growth II 67 93 118 234
Select Value* 65 85 105 207
Select 20 65 88 111 218
Small Cap Value 67 93 118 234
Technology & Communications 66 90 113 222
STRONG
Mid Cap Growth Fund II 66 91 116 229
Opportunity Fund II 66 91 115 227
WARBURG PINCUS
International Equity 68 96 124 246
Global Post-Venture Capital** 69 99 128 254
Small Company Growth 66 91 115 227
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FIDELITY One Year Three Years Five Years Ten Years
Asset Manager $ 15 $ 45 $ 78 $ 171
Money Market 11 34 60 132
Investment Grade Bond 14 43 74 162
High Income 15 47 82 179
Equity-Income 14 43 75 165
Growth 15 46 80 175
Overseas 17 53 91 199
Index 500 11 35 60 133
Asset Manager: Growth 15 48 82 180
Contrafund 15 46 80 175
Growth Opportunities 15 47 81 178
Balanced 14 43 74 164
Growth & Income 14 44 77 168
Mid Cap 18 56 96 209
MORGAN STANLEY ASSET MANAGEMENT
Emerging Markets Debt 23 70 120 257
Emerging Markets Equity 26 81 138 293
Global Equity 20 62 106 229
International Magnum 20 62 106 230
PBHG
Growth II 20 63 108 234
Select Value* 18 55 95 207
Select 20 19 58 101 218
Small Cap Value 20 63 108 234
Technology & Communications 19 60 103 222
STRONG
Mid Cap Growth Fund II 20 62 106 229
Opportunity Fund II 20 61 105 227
WARBURG PINCUS
International Equity 22 67 114 246
Global Post-Venture Capital** 22 69 118 254
Small Company Growth 20 61 105 227
</TABLE>
* P REVIOUSLY CALLED LARGE CAP VALUE.
** PREVIO USLY CALLED POST-VENTURE CAPITAL.
(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- nine Subaccounts in the Variable
Account. One of these Subaccounts, Strong Discovery Fund II
Portfolio, is no longer available as an investment option in the
Contract and no money may be allocated to this Subaccount. On or about
May 26, 2000, any Contract Values remaining in Strong Discovery Fund
II Portfolio will be exchanged to VIP III Mid Cap Portfolio. 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. Four Subaccounts invest exclusively
in shares of a specific portfolio of Fidelity Variable Insurance
Products Fund III. The other 14 available investment options
are offered by four different mutual fund investment advisers.
THE FUNDS
FIDELITY:
The Fidelity Funds are Variable Insurance Products Fund, Variable
Insurance Products Fund II, and Variable Insurance Products Fund III.
Each is an open-end, diversified management investment company
organized by Fidelity Management & Research Company. Each is the type
of investment company commonly known as a series mutual fund. Each
fund includes a number of individual mutual fund portfolios.
The investment objectives of the Fidelity 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 to achiev e 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 more volatile investments than the
market as a whol e.
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. 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 Portfoli o seeks as high
a level of current income as is consistent with the preservation of
capital.
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 l ong-term
cap ital 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.
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.
VIP III MID CAP PORTFOLIO
INVESTMENT OBJECTIVE. Mid Cap Portfolio seeks long-term growth of
capital.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing primarily in common stocks.
(small solid bullet) Investing at least 65% of total assets in
securities of companies with medium market capitalizations (those with
market capitalizations similar to companies in the S&P Mid Cap
400).
(small solid bullet) Potentially investing in companies with
smaller or larger market capitalizations.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" 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
seeking long-term growth of capital through equity securities,
including growth or value stocks, or a combination of both.
MORGAN STANLEY ASSET MANAGEMENT
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 in emerging market countries.
(small solid bullet) APPROACH. Morgan Stanley Asset 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, Morgan Stanley Asset
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. Morgan Stanley Asset Management's
global allocation team analyzes the global economic environment and
its impact on emerging markets. Morgan Stanley As set 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, Morgan Stanley Asset 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. Morgan Stanley Asset
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. Mor gan Stanley Asset Management
seeks to maximize returns by investing in growth-oriented equity
securities in emerging markets. Mor gan Stanley Asset 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 with a strong shareholder value orientation.
(small solid bullet) PROCESS. Morgan Stanley Asset 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. Morgan Stanley Asset 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, Morgan Stanley Asset 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. Morgan Stanley Asset
Management seeks to maintain a diversified portfolio of global equity
securities based on individual stock selection. Morgan Stan ley
Asset Management emphasizes a bottom-up approach to investing that
seeks to identify securities of undervalued issuers.
(small solid bullet) PROCESS. Morgan Stanley Asset Management
selects securities for investment from a universe of eligible issuers
consisting of approximately 3,200 companies in the Mor gan Stanley
Capital International (MSCI) World Index. Morgan Stanley Asset
Management expects to invest at least 20% of the Portfolio's total
assets in the common stocks of U.S. issuers. The investment process is
value driven and based on individual stock selection. Morgan Stanley
Asset Management 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. Morgan Stanley Asset 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.
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. Morgan Stanley A sset Management
seeks to achieve superior long-term returns by creating a diversified
portfolio of undervalued international equity securities. To
achieve this goal, Morgan Stanley Asset 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 and from the Morgan Stanley Asset
Management's Asset Allocation Committee, which is made up of several
of the Morgan Stanley Asset 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 finances, products, and management, typically
meeting with 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 business momentum , 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 business momentum, 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.
SELECT VALUE PORTFOLIO (PREVIOUSLY CALLED 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 no
more than 30 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, but may also include other equity
securities such as warrants and rights to purchase common stocks and
convertible securities. The Portfolio holds a limited number of
stocks and the impact of the change in value (positive or negative) of
a single holding may be magn ified.
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, a non- diversified
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 doing business in the technology and communications sectors
of the market. The Portfolio is concentrated which means it will
invest 25% of more of its total assets in one or more of the
industries within these sectors. These industries may include computer
software and hardware, network and cable broadcasting, semiconductors,
defense and data storage and retrieval, and biotechnology.
(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 positioned to
take advantage of cutting-edge developments.
(small solid bullet) The Portfolio's holdings may range from
smaller companies developing new technologies or pursuing scientific
breakthroughs to large, blue chip firms with established track records
in developing, using or marketing scientific advances.
(small solid bullet) The Portfolio is non-diversified, which means
it its performance is dependent on the securities of a smaller number
of companies. As a result, the impact of a change in value
(positive or negative) of a single holding may be magnified.
(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
MID CAP 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 a
majority of their business outside the United States.
(small solid bullet) The Portfolio i nten ds to 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 diversify across
securities of issues 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.
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.
GLOBAL POST-VENTURE CAPITAL PORTFOLIO ( PREVIOUSLY CALLED
POST-VENTURE CAPITAL PORTFOLIO)
OBJECTIVE AND STRATEGY
(small solid bullet) The 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. and
foreign 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) The Portfolio will invest in three
countries, including the U.S.
(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.
RISK. The main risks associated with the portfolio include risks
associated with equity securities, particularly small, start-up and
special-situation companies. I n 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. 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 December 31, 1999 , the Russell 2000 Index included companies
with market capitalizations between $17.8 million and $1.3 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. 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 46.
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 ( FMR ) 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 o f February 29, 2000, FMR managed over $829
billion in assets . The portfolios of the Fidelity Funds, as part
of their operating expenses, pay an investment management fee to
FMR . These fees are part of the Fidelity Funds'
expenses. See the prospectuses for the Fidelity Funds for
discussions of the Fidelity Funds' expenses. Fidelity
Investments Money Managemen t, Inc., a subsidiary of FMR, chooses
certain investments for some of the Fidelity Funds. Beginning January
1, 2001, FMR Co., Inc., a su bsidiary of FMR, will also choose
certain investments for the Fidelity Funds. Foreign affiliates of FMR
may help choose investments for some of the Fidelity Funds. BT
is a wholly-owned subsidiary of Bankers Trust Corporation. BT
currently serves as sub-adviser and custodian for the Index 500
Portfolio.
MORGAN STANLEY ASSET MANAGEMENT
On December 1, 1998, Morgan Stanley Asset Management Inc. changed
its name to Morgan Stanley Dean Witter Investment Management Inc. but
continues to do business in certain instances using the name Morgan
Stanley Asset Management. The investment Adviser for T he Universal
Institutional Funds, Inc. is Morgan Stanley Asset Management, 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. Morgan Stanley Asset
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. Morgan Stanley Asset 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 Duportail
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
Duportail 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 Trust is Credit
Suisse Asset Management, LLC. Credit Suisse Asset Management, LLC is a
member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group, one of the
world's leading banks. Credit Suisse Asset Management companies manage
approximately $72 billion in the U.S. and $203 billion globally.
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 43.
(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.
(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 45.
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 45.
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 transfers 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 43. 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
39.
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 43.
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 1 0 calendar 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 calendar days (or long er 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 calendar 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. If your free look
period ends on a non-business day, the next business day will be
used.
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 original 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. If your future payment allocation
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. In these cases,
we will not be responsible for the results of unit value changes or
lost market opportunity.
TRADING 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 on our
Internet website.
(small solid bullet) TRA DING BY TELEPHONE OR INTERNET
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 exchanges to a total of eighteen per calendar year.
After this total is reached, you will only be permitted to complete
exchanges in writing. Multiple exchanges among the Subaccounts in a
single trading day count as one exchange. We will not accept exchange
requests via fax or electronic mail.
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 and notify the
Annuity Service Center promptly of any discrepancies as we will not be
responsible for resulting losses due to unit value ch anges after
10 calendar days from the mailing of the re port.
(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, 2001 , 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
44.
(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 45.
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 49.
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 46. 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 48.
(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 43. 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 $100 ,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 any other circumstances where we deem it necessary for
your protection.
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 45.
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 offer the Owner the
opportunity to elect a Death Benefit Rider at the time of the Contract
purchase. If the Owner elects the Rider, we will deduct a mortality
charge once each quarter. The amount of the charge for each quarter
will be 0. 05 % 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. Contracts issued on or after September 13,
1999 do not have a withdrawal charge (i.e. a contingent deferred sales
charge). Contracts issued prior to April 30, 1995 no longer have a
withdrawal charge. Contracts issued between April 30, 1995 and
September 10, 1999 no longer have a withdrawal charge on their next
Contract Anniversary following September 29, 1999.
The following discussion only applies to Contracts subject to a
withdrawal charge as defined in the preceding paragraph. The
withdrawal charge is assessed 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.
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.
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 49.
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. W e provide the opportunity to purchase an
optional Death Benefit Rider at the ti me of issuing the Contract.
This option is not available after the purchase of the Contract. There
is a charge for the Death Benefit Rider as described on page . If
elected, 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 before the
Annuitant reaches age 80, plus any purchase payments received by the
Company after such Contract Anniversary, reduced for any withdrawals
after such Contract Anniversary as described in the next sentence. Any
withdrawals after such Contract Anniversary will reduce the amount
otherwise payable under this paragraph proportionately to the
reduction in the Contract Value caused by the withdrawal. For
Contracts with net purchase payments greater than $4 million, this
value can never exceed the amount calculated above, multiplied by $4
million, divided by the net purchase payments.
If the death of the Annuitant occurs after his or her 85th birthday,
the Death Benefit will be the Contract Value on the date that proof of
death is received by the Company at the Annuity Service Center.
The Owner may elect to terminate the Death Benefit rider by providing
advance written notice to the Company. Termination will be effective
as of the date the next charge is scheduled after the Company receives
such notice at the Annuity Service Center.
REQUIRED DISTRIBUTIONS UPON DEATH
Federal tax law requires that if any Owner dies before the Annuity
Date, the entire interest in the Contract must be distributed within
five years after the Owner's death. However, this requirement does not
apply to B enefi ciaries designated by the Owner 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 f ederal 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 48.
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%.
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,
and during the lifetime of the survivor , a designated second
person . 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 and notify
the Annuity Service Center promptly of any discrepancies as we will
not be responsible for resulting losses due to unit value changes
after 10 calendar days from the mailing of the report.
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 a dviser. 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 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.
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 (Automat ed 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 Rebalanc ing 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
Money Market Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 16.72 17.44 57,437,711
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>
High Income Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 27.53 29.53 7,900,244
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>
Equity-Income Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 43.62 46.01 27,782,187
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>
Growth Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 59.17 80.67 26,896,697
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>
Overseas Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 26.31 37.22 9,883,063
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>
Investment Grade Bond Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 20.24 19.87 8,926,481
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>
Asset Manager Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 28.30 31.19 23,956,537
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
</TABLE>
* PERIOD FROM 9/1/92 TO 12/31/92
Index 500 Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 31.60 37.78 32,433,379
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
</TABLE>
* PERIOD FROM 9/1/92 TO 12/31/92
Asset Manager: Growth Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 20.93 23.93 13,048,622
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
</TABLE>
* PERIOD FROM 1/3/95 (COMMENCEMENT OF OPERATIONS) TO 12/31/95
Contrafund Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 26.40 32.54 55,465,802
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
</TABLE>
* PERIOD FROM 1/3/95 (COMMENCEMENT OF OPERATIONS) TO 12/31/95
Growth Opportunities Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 15.62 16.15 18,899,900
1998 12.63 15.62 25,247,156
1997* 10.00 12.63 21,154,834
</TABLE>
* PERIOD FROM 1/27/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Balanced Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 13.98 14.50 6,804,534
1998 11.98 13.98 6,933,405
1997* 10.00 11.98 4,649,810
</TABLE>
* PERIOD FROM 1/27/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Growth & Income Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 16.29 17.65 29,319,255
1998 12.68 16.29 32,986,321
1997* 10.00 12.68 18,798,233
</TABLE>
* PERIOD FROM 1/27/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Emerging Markets Debt Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 7.44 9.55 345,928
1998 10.48 7.44 280,904
1997* 10.00 10.48 270,613
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Emerging Markets Equity Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 7.56 14.68 4,154,981
1998 10.05 7.56 586,128
1997* 10.00 10.05 176,936
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Global Equity Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 11.54 11.92 1,301,505
1998 10.25 11.54 1,504,399
1997* 10.00 10.25 214,479
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
International Magnum Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 10.65 13.23 943,026
1998 9.86 10.65 998,415
1997* 10.00 9.86 126,071
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
PBHG Growth II Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 10.90 21.42 5,516,793
1998 10.15 10.90 439,863
1997* 10.00 10.15 198,868
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Select Value** Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 14.05 15.18 2,204,343
1998 10.27 14.05 1,331,167
1997* 10.00 10.27 71,061
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
** PREVIOUSLY CALLED LARGE CAP VALUE
Small Cap Value Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 11.48 13.20 2,934,512
1998 10.43 11.48 3,428,665
1997* 10.00 10.43 760,923
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Select 20 Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 16.80 33.42 19,184,426
1998 10.42 16.80 16,529,457
1997* 10.00 10.42 551,473
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Technology & Communications Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 12.94 42.93 31,566,100
1998 9.87 12.94 1,929,033
1997* 10.00 9.87 746,784
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Mid Cap Growth Fund II Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 13.08 24.65 9,194,563
1998 10.25 13.08 832,891
1997* 10.00 10.25 139,945
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Opportunity Fund II Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 11.43 15.29 3,180,619
1998 10.15 11.43 2,219,038
1997* 10.00 10.15 277,353
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
International Equity Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 10.33 15.73 1,244,582
1998 9.89 10.33 374,074
1997* 10.00 9.89 54,981
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Global Post-Venture Capital** Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 10.83 17.57 694,255
1998 10.25 10.83 588,128
1997* 10.00 10.25 120,198
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
** PREVIOUSLY CALLED POST- VENTURE CAPITAL
Small Company Growth Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 9.82 16.47 2,580,091
1998 10.19 9.82 1,848,787
1997* 10.00 10.19 596,845
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Accumulation Unit Values shown above are rounded to two decimal
places. Percentage changes in Accumulation Unit Values were calculated
using exact Accumulation Unit Values (six decimal places). The
percentage changes shown are therefore more precise than the figures
that would be obtained using the rounded Accumulation Unit values
shown for the beginning and end of each period.
Certain contracts in this prospectus have been offered only as of
December 7, 1988, and others only as of May 1, 1997. The financial
information in the above table includes periods prior to December 7,
1988 because an earlier class of variable annuity contracts is also
being funded through the Variable Account. Financial information
reflects all classes of contracts. Because the three classes of
contracts funded through the Variable Account have the same total
asset-based charges, Accumulation Unit Values will be the same for all
classes of contracts.
The financial statements of the Variable Account appear in the
Statement of Additional Information.
TABLE OF CONTENTS
OF THE STATEMENT OF ADDITIONAL INFORMATION
Accumulation Units
Fixed Annuity Income Payments
Variable Annuity Income
Payments
Hypothetical Illustrations of
Annuity Income Payouts
General Information
Performance
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
NRR-pro-0400
1.722610.101
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 ) PORTFOLIO EXPENSES
The portfolios associated with the Variable Account incur operating
expenses and pay monthly management fees. The level of expenses vary
by portfolio. This charge is not made against the Fixed Account.
PART B
INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
FIDELITY RETIREMENT RESERVES
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 2000
This Statement of Additional Information supplements the information
found in the current Prospectus for the variable annuity contracts
("Contracts") offered by Fidelity Investments Life Insurance Company
through its Variable Annuity Account I (the "Variable Account"). You
may obtain a copy of the Prospectus dated April 30, 2000, without
charge by calling 1-800-544-2442, or by accessing the SEC Internet
website at (http://www.sec.gov).
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
SHOULD BE READ TOGETHER WITH THE PROSPECTUS FOR THE CONTRACT.
TABLE OF CONTENTS PAGE
Accumulation Units 48
Fixed Annuity Income Payments 48
Variable Annuity Income 48
Payments
Hypothetical Illustrations of 50
Annuity Income Payouts
General Information 54
Performance 54
Exchanges Among Subaccounts 72
After the Annuity Date
Unavailability of Annuity 72
Income Options in Certain
Circumstances
IRS Required Distributions 72
Safekeeping of Variable 73
Account Assets
Distribution of the Contracts 73
State Regulation 73
Legal Matters 73
Registration Statement 73
Independent Accountants 73
Financial Statements 73
ACCUMULATION UNITS
We credit your payments allocated to the variable Subaccounts in the
form of Accumulation Units. The number of Accumulation Units credited
to each Subaccount is determined by dividing the net payment allocated
to that Subaccount by the Accumulation Unit Value for that Subaccount
for the Valuation Period during which the payment is received. In the
case of the initial payment, we credit Accumulation Units as explained
in the prospectus. Accumulation Units are adjusted for any exchanges
or transfers into or out of a Subaccount.
For each variable Subaccount the Accumulation Unit Value for the first
Valuation Period of the Subaccount was set at $10.00. The Accumulation
Unit Value for each subsequent Valuation Period is the Net Investment
Factor for that period, multiplied by the Accumulation Unit Value for
the immediately preceding Valuation Period. The Accumulation Unit
Value may increase or decrease from one Valuation Period to the next.
Each variable Subaccount has a Net Investment Factor (also referred to
as the "Total Return"). The Net Investment Factor is an index that
measures the investment performance of a Subaccount from one Valuation
Period to the next. The Net Investment Factor for each Subaccount for
a Valuation Period is determined by adding (a) and (b), subtracting
(c) and then dividing the result by (a) where:
(a) Is the value of the assets at the end of the preceding Valuation
Period;
(b) Is the investment income and capital gains, realized or
unrealized, credited during the current valuation period;
(c) Is the sum of:
(1) The capital losses, realized or unrealized, charged during the
current valuation period plus any amount charged or set aside for
taxes during the current Valuation Period; plus
(2) The deduction from the Subaccount during the current Valuation
Period representing a daily charge equivalent to an effective annual
rate of 0.80%.
The Net Investment Factor may be greater than or less than one. If it
is greater than one, the Accumulation Unit Value will increase; if
less than one, the Accumulation Unit Value will decrease.
FIXED ANNUITY INCOME PAYMENTS
The amount of monthly annuity income payments for a selected fixed
annuity income option or the fixed portion of a selected combination
annuity income option is calculated by applying the proceeds payable
to the income payment rates for the option selected. Annuity income
payments will be the larger of:
(a) The income based on the rates shown in the contract's Annuity
Tables for the option chosen; and
(b) The income calculated by applying the proceeds as a single premium
to our single premium annuity rates in effect on the date of the first
income payment for the same plan.
Annuity income payments under a fixed annuity or fixed portion of a
combination annuity will not vary in dollar amount and will not be
affected by the investment performance of the Variable Account.
Amounts used to purchase a fixed annuity may not be later transferred
to a variable annuity.
VARIABLE ANNUITY INCOME PAYMENTS
If a variable annuity is selected, annuity income payments will vary
in amount in accordance with the investment performance of the elected
Subaccounts of the Variable Account. If a combination annuity is
selected, annuity income payments attributable to the variable portion
of the annuity will likewise vary. On the Annuity Date, the amount of
the first annuity income payment is calculated by applying the
proceeds payable to the annuity table shown in the Contract (or any
more favorable annuity rates we may offer on the Annuity Date) for the
option chosen.
The dollar amount of the first annuity income payment attributable to
each variable Subaccount is then divided by each Subaccount's then
current Annuity Unit Value (Annuity Units are explained in the
prospectus) to establish the total number of Annuity Units that will
be the basis for determining later annuity income payments. Annuity
income payments after the first will be equal to the sum of the number
of Annuity Units determined in this manner for each Subaccount
multiplied by the then current Annuity Unit Value for each Subaccount,
which (as explained in the prospectus) depends upon the Net Investment
Factor for the subaccount adjusted by a factor to neutralize the
assumed rate of return used in the calculation of annuity income
payments. The number of Annuity Units remains fixed for all annuity
income payments, unless a transfer is made. The dollar amount of the
annuity income payments may change from payment to payment. We
guarantee that the dollar amount of each annuity income payment after
the first will not be affected by variations in mortality experience
from the mortality assumptions used to determine the first annuity
income payment.
To illustrate the above description of how annuity income payments are
determined, consider the following example. A male age 65 applies
$50,000 to purchase a lifetime income for himself with payments to be
made for at least 10 years (even if the Annuitant dies shortly after
payments have begun). Annuity income payments are to be made on a
monthly basis with the first annuity income payment to be made
immediately. The variable pay-out option is chosen with the amount of
each income payment dependent on the actual investment performance of
the subaccounts that are selected. Using an Assumed Investment Rate of
3.5%, the initial monthly income amount is $28 1. 50. The
investment selection is 50% in Portfolio A and 50% in Portfolio B.
At Annuitization Portfolio A Portfolio B
(a) Initial Monthly Annuity $ 140.75 $ 140.75
Income Payment
(b) Annuity Unit Value 1.23456 1.32465
(c) Income in Units 114.008 106.254
The monthly annuity income payment allocated to each Subaccount is
translated into Annuity Units using the Annuity Unit Value at the time
of annuitization. Since each Subaccount is likely to have a different
Annuity Unit Value, the total number of Annuity Units is not
informative, rather you need to look at:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
# Annuity Units X Annuity Unit Value = Annuity Income Payment
Portfolio A 114.008 1.23456 140.75
Portfolio B 106.254 1.32465 140.75
$ 281.50
</TABLE>
Assume that during the next month, the investment results for each
subaccount are:
Portfolio A Portfolio B
(d) Actual Net Investment Results .4074% .1652%
(e) Assumed Investment Results .2871% .2871%
(f) Relative Performance Factor 1.00120 .99878
Line (d) shows the net investment result after the charge for assuming
mortality and expense risks and the administrative charge (0.80% on an
annual basis) and the charge for investment advisory fees and fund
expenses. Line (e) shows the investment results that were assumed in
the calculation of the initial monthly annuity income payment, 3.5% on
an annual basis. Line (f) represents how much $1 invested at the start
of the month in each of the subaccounts would have grown relative to
$1 earning 3.5%. The formula for calculating the Relative Performance
Factor is ( 1+ (d) ) divided by ( 1 + (e)).
Note that since line (f) is more than 1 for Portfolio A and less than
1 for Portfolio B, the Portfolio A subaccount has earned more than
3.5% on an annual basis while the Portfolio B subaccount has earned
less than 3.5% on an annual basis.
The Annuity Unit Value grows with the actual investment performance
relative to the assumption of 3.5%. If a Subaccount earns more than
3.5% on an annual basis, then the Annuity Unit Value will increase.
Conversely, if less than 3.5% is earned, the Annuity Unit Value will
decrease. The Annuity Unit Value at the time of the second monthly
income payment is the Annuity Unit Value for the prior month (line b)
multiplied by the Relative Performance Factor (line f).
Portfolio A Portfolio B
(b) Annuity Unit Value (prior) 1.23456 1.32465
(f) Relative Performance Factor 1.00120 .99878
(g) Annuity Unit Value (current) 1.23604 1.32303
Except for exchanges between Subaccounts, the number of Annuity Units
remains fixed throughout the lifetime of the Annuitant. The value of
each annuity income payment, however, varies because the Annuity Unit
Value is usually changing as a result of investment experience. The
second monthly payment is calculated by multiplying the number of
payment units by the current Annuity Unit Value.
Portfolio A Portfolio B
(c) Monthly Income in Units 114.008 106.254
(g) Annuity Unit Value (current) 1.23604 1.32303
(h) Monthly Income (in dollars) $ 140.92 $ 140.58
Note that the Annuity Unit Value and the Monthly Income for the
Portfolio A portion of the payment has increased whereas the opposite
is true for the Portfolio B portion. The second monthly annuity income
payment would be the sum for each Subaccount, or $28 1 .50.
To illustrate the possible volatility of the annuity income payments,
assume that during the following month, the investment results for
each Subaccount are:
Portfolio A Portfolio B
(i) Actual Net Investment Results 15.50% -13.00%
(e) Assumed Investment Results .2871% .2871%
(j) Relative Performance Factor 1.15169 .86751
The Annuity Unit Value at the time of the third monthly annuity income
payment is the Annuity Unit Value for the prior month (line g)
multiplied by the Relative Performance Factor (line j):
Portfolio A Portfolio B
(g) Annuity Unit Value (prior) 1.23604 1.32303
(j) Relative Performance Factor 1.15169 .86751
(k) Annuity Unit Value (current) 1.42353 1.14774
The third monthly annuity income amount is calculated by multiplying
the number of payment units by the current Annuity Unit Value:
Portfolio A Portfolio B
(c) Income in Units 114.008 106.254
(k) Annuity Unit Value (current) 1.42353 1.14774
(h) Monthly Income (in dollars) $ 162.29 $ 121.95
Note that the Annuity Unit Value and the Monthly Income for Portfolio
A portion of the income amount have again increased but to a much
greater extent than before whereas the opposite is true for the
Portfolio B portion. The third monthly annuity income payment would be
the sum for each subaccount, or $ 284.24 .
An illustration of annuity income payments under various rates appears
in the tables on pages 83 and 85. The monthly equivalents of the
annual net returns of -1.7 1 %, 3.50%, 4.1 8 %,
6.1 5 %, 8. 12 % and 10.0 8 % shown in the tables are
- -0.1 4 %, 0.29%, 0.34%, 0.50%, 0.65% and 0.80%.
HYPOTHETICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS
The following tables have been prepared to show how variable annuity
income payments under the Contract change with investment performance
over an extended period of time. The tables illustrate how monthly
annuity income payments would vary over time if the return on the
assets in the selected portfolios were a uniform gross annual rate of
0%, 5.3 0 %, 6%, 8%, 10% and 12%. The values would be different
from those shown if the returns averaged 0%, 5.3 0 %, 6%, 8%, 10%
or 12% but fluctuated over and under those averages throughout the
years.
The tables reflect the fact that the Total Return of the Subaccounts
is lower than the gross return of the selected portfolios. The tables
reflect the daily charge to the Subaccounts for assuming mortality and
expense risks, which is equivalent to an effective annual charge of
0.75% and the daily administrative charge which is equivalent to an
effective annual charge of 0.05%. The amounts shown in the tables also
take into account the portfolios' management fees and operating
expenses which are assumed to be at an annual rate of 0.9 2 % of
the average daily net assets of the selected portfolios. This
0.9 2 % figure consists of assumed management fees of
0. 63 % and assumed operating expenses of 0. 2 9%, figures
based on the average of current management fees and operating
expenses. Actual fees and expenses of the portfolios associated with
your Contract may be more or less than 0.9 2 %, will vary from
year to year, and will depend on how you allocate your investment
base. See the current prospectuses for the Funds for more complete
information. The monthly annuity income payments illustrated are on a
pre-tax basis. The Federal income tax treatment of annuity income
payments is generally described in the section of your current
prospectus entitled "Tax Considerations."
The tables show both the gross rate and the net rate. The difference
between gross and net rates represent the 0.80% risk and
administrative charges and the assumed 0.9 2 % for investment
management and operating expenses. Since these charges are deducted
daily from assets, the difference between the gross and net rate is
not exactly 1.7 2 %.
Two tables follow. The first table assumes 100% of the Contract Value
is allocated to a variable annuity income option; the second table
assumes 50% of the Contract Value is placed under a fixed annuity
income option, using the fixed crediting rate Fidelity Investments
Life offered on the fixed annuity income option at the date of the
illustration. Both illustrations assume that the final value of the
accumulation account is $50,000 and is applied at age 65 to purchase a
life annuity for a guaranteed period of 10 years certain and life
thereafter. When part of the Contract Value has been allocated to the
fixed annuity income option, the guaranteed minimum annuity income
payment resulting from this allocation is also shown. The illustrated
variable annuity income payments are determined through the use of
standard mortality tables and the assumption that the Subaccounts'
Total Return will be 3.5% per year. Thus, actual performance greater
than a net return of 3.5% will result in increasing annuity income
payments and performance less than 3.5% per year will result in
decreasing annuity income payments. We may offer alternative Assumed
Investment Returns from which you may select. Fixed annuity income
payments remain constant. Initial monthly annuity income payments
under a fixed annuity income payout are generally higher than initial
payments under a variable income payout option.
These tables show the monthly income payments for several hypothetical
constant rates of return. Of course, actual investment performance
will not be constant and may be volatile. Actual monthly income
amounts would differ from those shown if the actual rate of return
averaged the rate shown over a period of years, but also fluctuated
above or below those averages for individual contract years. Upon
request and when you are considering an annuity income option, we will
furnish a comparable illustration based on your individual
circumstances.
ANNUITY PAY-OUT ILLUSTRATION
(100% VARIABLE PAYOUT)
ANNUITANT: John Doe
GROSS AMOUNT OF CONTRACT VALUE APPLIED: $50,000
DATE OF BIRTH: 2/1/ 1935 STATE PREMIUM TAX: 0%
SEX: Male DATE OF ILLUSTRATION: 2/1/2000
ANNUITY OPTION SELECTED: Lifetime Income with annuity income payments
guaranteed for 10 years(1)
FREQUENCY OF ANNUITY
INCOME PAYMENTS: Monthly payments with first payment the first
of the month after annuitization
FIXED MONTHLY ANNUITY INCOME PAYMENT AVAILABLE ON THE DATE OF THE
ILLUSTRATION IF 100% FIXED ANNUITY OPTION SELECTED: $3 90 .00
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 100% OF THE CONTRACT VALUE IS
ALLOCATED TO THE VARIABLE PAYOUT
NET RETURN AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE,
NO MINIMUM DOLLAR AMOUNT IS GUARANTEED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNT OF FIRST MONTHLY ANNUITY INCOME
PAYMENT IN YEAR SHOWN ASSUMING A
CONSTANT ANNUAL INVESTMENT RETURN OF:
Gross: 0% 5.30% 6% 8% 10% 12%
PAYMENT YEAR CALENDAR YEAR AGE Net(2): -1.71% 3.50% 4.18% 6.15% 8.12% 10.08%
1 2000 65 282 282 282 282 282 282
2 2001 66 267 282 283 289 294 299
3 2002 67 254 282 285 296 307 318
4 2003 68 241 282 287 304 321 339
5 2004 69 229 282 289 311 335 360
10 2009 74 177 282 299 353 417 490
15 2014 79 137 282 309 401 519 667
20 2019 84 106 282 319 455 645 908
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY
AN OWNER AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED.
THE AMOUNT OF THE INCOME PAYMENT WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL GROSS RATES OF RETURN AVERAGED THE RATES SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. SINCE IT IS HIGHLY LIKELY THAT
INVESTMENT RETURNS WILL FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME
(TO THE EXTENT THAT IS BASED ON THE VARIABLE ACCOUNT) WILL ALSO
FLUCTUATE. NO REPRESENTATION CAN BE MADE BY FIDELITY INVESTMENTS LIFE
OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
(1) Monthly annuity income payments cease upon the death of the
Annuitant if the Annuitant dies after the 10 year Guarantee Period. If
the Annuitant dies during the Guarantee period, annuity income
payments will continue until the end of the Period. The cumulative
amount of annuity income payments received under the annuity depends
on how long the Annuitant lives after the Guarantee Period. An annuity
pools the mortality experience of annuitants. Annuitants who die
earlier, in effect, subsidize the payments for those who live longer.
(2) The illustrated net return reflects the deduction of average fund
expenses and the 0.80% risk/administrative charge from the gross
return.
ANNUITY PAY-OUT ILLUSTRATION
(50% VARIABLE - 50% FIXED PAYOUT)
ANNUITANT: John Doe
GROSS AMOUNT OF CONTRACT VALUE APPLIED: $50,000
DATE OF BIRTH: 2/1/ 1935 STATE PREMIUM TAX: 0%
SEX: Male DATE OF ILLUSTRATION: 2/1/2000
ANNUITY OPTION SELECTED: Lifetime Income with annuity income payments
guaranteed for 10 years(1)
FREQUENCY OF ANNUITY
INCOME PAYMENTS: Monthly payments with first payment the first
of the month after annuitization
FIXED MONTHLY ANNUITY INCOME PAYMENT AVAILABLE ON THE DATE OF THE
ILLUSTRATION IF 100% FIXED ANNUITY OPTION SELECTED: $3 90 .00
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 50% OF THE CONTRACT VALUE IS
ALLOCATED TO THE VARIABLE PAYOUT AND 50% TO THE FIXED PAYOUT
NET RETURN AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE, BUT
WILL NEVER BE LESS THAN $1 9 5. 0 0. THE MONTHLY GUARANTEED
PAYMENT OF $1 95 . 0 0 IS BEING PROVIDED BY THE $25,000
APPLIED UNDER THE FIXED ANNUITY OPTION.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNT OF FIRST MONTHLY ANNUITY INCOME PAYMENT
IN YEAR SHOWN ASSUMING A CONSTANT ANNUAL
INVESTMENT RETURN OF:
Gross: 0% 5.30% 6% 8% 10% 12%
PAYMENT YEAR CALENDAR YEAR AGE Net(2): -1.71% 3.50% 4.18% 6.15% 8.12% 10.08%
1 2000 65 336 336 336 336 336 336
2 2001 66 329 336 337 339 342 345
3 2002 67 322 336 338 343 349 354
4 2003 68 316 336 339 347 355 364
5 2004 69 309 336 339 351 363 375
10 2009 74 283 336 344 372 404 440
15 2014 79 263 336 349 396 454 529
20 2019 84 248 336 354 423 518 649
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY
AN OWNER AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED.
THE AMOUNT OF THE INCOME PAYMENT WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL GROSS RATES OF RETURN AVERAGED THE RATES SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. SINCE IT IS HIGHLY LIKELY THAT
INVESTMENT RETURNS WILL FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME
(TO THE EXTENT THAT IS BASED ON THE VARIABLE ACCOUNT) WILL ALSO
FLUCTUATE. NO REPRESENTATION CAN BE MADE BY FIDELITY INVESTMENTS LIFE
OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
(1) Monthly annuity income payments cease upon the death of the
Annuitant if the Annuitant dies after the 10 year Guarantee Period. If
the Annuitant dies during the Guarantee period, annuity income
payments will continue until the end of the Period. The cumulative
amount of annuity income payments received under the annuity depends
on how long the Annuitant lives after the Guarantee Period. An annuity
pools the mortality experience of annuitants. Annuitants who die
earlier, in effect, subsidize the payments for those who live longer.
(2) The illustrated net return reflects the deduction of average fund
expenses and the 0.80% risk/administrative charge from the gross
return.
GENERAL INFORMATION
We may advertise quotes of Contract Owners discussing Fidelity
Retirement Reserves or services provided by Fidelity Investments Life.
We may also advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a
plan, a policyowner invests a fixed dollar amount in a Subaccount
thereby purchasing fewer units when prices are high and more units
when prices are low. While such a strategy does not assume a profit
nor guard against a loss in a declining market, the Contract Owner's
average cost per unit can be lower than if fixed numbers of units had
been purchased at those intervals. In evaluating such a plan, Contract
Owners should consider their ability to continue purchasing units
through periods of low price levels. In addition, we may from time to
time use statistics in advertising to support the growth of annuity
sales. Information to support these statistics may be obtained from
the Life Insurance Marketing Research Association, A.M. Best, American
Council of Life Insurance or the Variable Annuity Research and Data
Service.
From time to time, we may reprint and use as advertising and sales
literature, articles or quotes from financial or business publications
and periodicals. In addition, we may reference or discuss the products
and services of other affiliated companies, which may include:
Fidelity funds; retirement investing; brokerage products and services;
saving for college; and charitable giving.
We may also provide information to help individuals understand their
investment goals and explore various financial strategies. In
communicating these strategies, we may:
(solid bullet) compare the differences between tax deferred and
taxable investments;
(solid bullet) discuss factors to consider when purchasing the
contract;
(solid bullet) discuss the effects of probate when transferring the
contract to heirs;
(solid bullet) discuss traditional sources of retirement income and
products which may be used to supplement that income;
(solid bullet) discuss effects of inflation on fixed-income sources
and how the variable investment options may be used as a potential
hedge against inflation during the deferral and income periods;
(solid bullet) illustrate and compare the effects additional payments
have on a contract;
(solid bullet) discuss strategies of reducing risk through
diversification of purchase payments and providing hypothetical
investment mixes;
(solid bullet) discuss past returns of different classes of
investments based on data supplied through various sources such as
Ibbotson Associates of Chicago, Illinois; and
(solid bullet) assist policyholders with inquiries regarding their
annuity.
This information may be obtained from various sources such as the U.S.
Department of the Treasury, U.S. Department of Labor, Statistical
Abstract of the U.S. and Individual Annuitant Mortality Table. We may
present this information through various methods such as charts,
graphs, illustrations, and tables.
You may purchase the Contract with proceeds from various sources such
as transactions qualifying for a tax-free exchange under Section 1035
of the Internal Revenue Code. Investments by the Subaccounts in
securities of foreign issuers may result in a foreign investment tax
credit which we will claim on our federal income tax filings. Also,
we receive fees from the funds' Advisers for administrative services
we provide.
PERFORMANCE
Performance information for any Subaccount may be compared, in reports
and advertising to: (1) the Standard & Poor's 500 Composite Stock
Price Index ("S & P 500"), Dow Jones Industrial Average ("DJIA"),
Donoghue's Money Market Institutional Averages and other
indices ; (2) other variable annuity separate accounts or other
investment products tracked by Lipper Analytical Services,
Morningstar, or the Variable Annuity Research and Data Service, widely
used independent research firms which rank mutual funds and other
investment companies by overall performance, investment objectives,
and assets; and (3) the Consumer Price Index (measure for inflation)
to assess the real rate of return from an investment in a contract.
Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions for annuity charges and investment
management costs.
Total returns, yields and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising may also contain other information including (i) the
ranking of any subaccount derived from rankings of variable annuity
separate accounts or other investment products tracked by Lipper
Analytical Series or by rating services, companies, publications or
other persons who rank separate accounts or other investment products
on overall performance or other criteria, and (ii) the effect of tax
deferred compounding on a subaccount's investment returns, or returns
in general, which may be illustrated by graphs, charts, or otherwise,
and which may include a comparison, at various points in time, of the
return from an investment in a Contract (or returns in general) on a
tax-deferred basis (assuming one or more tax rates) with the return on
a taxable basis.
The following tables below provide performance results for each
Subaccount through December 31, 1999 . The performance
information is based on the historical investment experience of the
Subaccounts and of the Portfolios. It does not indicate or represent
future performance.
TOTAL RETURN
Total returns quoted in advertising reflect all aspects of a
Subaccount's return, including the automatic reinvestment by the
separate account of all distributions and any change in the
Subaccount's value over the period. Average annual returns are
calculated by determining the growth or decline in value of a
hypothetical historical investment in the Subaccount over a stated
period, and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or
decline in value had been constant over the period. For example, a
cumulative return of 100% over ten years would produce an average
annual return of 7.18%, which is the steady rate that would equal 100%
growth on a compounded basis in ten years. While average annual
returns are a convenient means of comparing investment alternatives,
investors should realize that the subaccount's performance is not
constant over time, but changes from year to year, and that average
annual returns represent averaged figures as opposed to the actual
year-to-year performance of a subaccount.
Table 1 shows the average annual total return on a hypothetical
investment in the Subaccounts for the last year, from the date that
the Portfolios began operations, and, for Portfolios in
existence for five years or more, for five years, assuming that the
Contract was surrendered December 31, 199 9 . For any Portfolio
in existence ten years or more, figures are shown for a ten year
period. Life returns are also shown from the date that each Portfolio
began in the separate account. The average annual total returns shown
in Table 1 are computed by finding the average annual compounded rates
of return over the periods shown that would equate the initial amount
invested to the withdrawal value, in accordance with the following
formula: P(1 +T)n = ERV where P is a hypothetical investment payment
of $1,000, T is the average annual total return, n is the number of
years, and ERV is the withdrawal value at the end of the periods
shown. The returns reflect the risk and administrative charge of 0.80%
(1% on an annual basis prior to November 1, 1997) and the maintenance
charge. Since the Contract is intended as a long-term product, the
table also shows the average annual total return assuming that no
money was withdrawn from the Contract. The average annual total return
is also shown for Contracts with at least $25,000 of premium and
assuming no money is withdrawn from the Contract. The average annual
total return would be larger for these Contracts because there is
currently no maintenance charge on these larger Contracts. The first
column shows the average annual total return if you surrender the
Contract at the end of the period, the second column shows the average
annual total return if you do not surrender the Contract (first and
second columns combined in table showing one year return) and the
third column shows the average annual total return if you do not
surrender the Contract and no maintenance charge is applied to the
Contract.
Table 1: Average Annual Total Return for Period Ending on December
31, 1999.
(a) One Year Average Annual Total Return For Contracts Issued
o n December 31, 1998:
<TABLE>
<CAPTION>
Fidelity Return If Contract Continued Return If Contract Continued
or Surrendered and and Maintenance Charge Not
Maintenance Charge Applied Applicable
<S> <C> <C>
Asset Manager 10.19% 10.20%
Money Market 4.32% 4.33%
Investment Grade Bond (1.85)% (1.84)%
Equity-Income 5.47% 5.48%
Growth 36.33% 36.34%
High Income 7.28% 7.29%
Overseas 41.48% 41.49%
Index 500 19.54% 19.55%
Asset Manager: Growth 14.33% 14.34%
Contrafund 23.25% 23.26%
Growth Opportunities 3.43% 3.44%
Balanced 3.70% 3.71%
Growth & Income 8.28% 8.29%
Mid Cap 47.84% 47.85%
Strong
Opportunity Fund II 33.82% 33.83%
Mid Cap Growth Fund II 88.35% 88.36%
Warburg Pincus
International Equity 52.20% 52.21%
Small Company Growth 67.72% 67.73%
Global Post-Venture Capital1 62.18% 62.19%
PBHG
Growth II 96.60% 96.61%
Select Value2 8.01% 8.02%
Select 20 99.00% 99.01%
Small Cap Value 15.00% 15.01%
Technology & Communications 231.70% 231.71%
Morgan Stanley
Emerging Markets Equity 94.11% 94.12%
Emerging Markets Debt 28.33% 28.34%
Global Equity 3.26% 3.27%
International Magnum 24.18% 24.19%
</TABLE>
(b) Average Annual Total Return If Contract Issued at Commencement of
Portfolio (which in most cases it was not):
<TABLE>
<CAPTION>
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
<S> <C> <C> <C>
Fidelity
Money Market 4/1/82 5.59% 5.59%
High Income 9/19/85 9.74% 9.74%
Equity-Income 10/9/86 12.62% 12.62%
Growth 10/9/86 17.55% 17.55%
Asset Manager 9/6/89 11.68% 11.68%
Investment Grade Bond 12/5/88 6.39% 6.39%
Overseas 1/28/87 9.77% 9.77%
Index 500 8/27/92 19.91% 19.91%
Asset Manager: Growth 1/3/95 18.95% 18.95%
Contrafund 1/3/95 26.47% 26.47%
Growth Opportunities 1/3/95 20.29% 20.29%
Balanced 1/3/95 12.33% 12.33%
Growth & Income 12/31/96 21.04% 21.04%
Mid Cap 12/28/98 47.89% 51.89%
Strong
Mid Cap
Growth Fund II 12/31/96 45.33% 45.64%
Opportunity Fund II 5/8/92 19.84% 19.84%
Warburg Pincus
International Equity 6/30/95 13.62% 13.77%
Global Post-Venture Capital1 9/30/96 20.86% 21.26%
Small Company Growth 6/30/95 23.48% 23.59%
PBHG
Select 20 9/25/97 66.62% 67.31%
Growth II 5/1/97 34.90% 35.58%
Select Value2 10/28/97 20.78% 21.88%
Small Cap Value 10/28/97 12.54% 13.73%
Technology & Communications 5/1/97 75.23% 75.67%
Morgan Stanley
Emerging Markets Debt 6/16/97 (4.64)% (3.62)%
Emerging Markets Equity 10/1/96 11.00% 11.49%
Global Equity 1/2/97 12.26% 13.05%
International Magnum 1/2/97 12.21% 13.00%
</TABLE>
<TABLE>
<CAPTION>
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
<S> <C>
Fidelity
Money Market 5.67%
High Income 9.81%
Equity-Income 12.68%
Growth 17.61%
Asset Manager 11.72%
Investment Grade Bond 6.43%
Overseas 9.83%
Index 500 19.94%
Asset Manager: Growth 19.07%
Contrafund 26.57%
Growth Opportunities 20.41%
Balanced 12.47%
Growth & Income 21.50%
Mid Cap 51.90%
Strong
Mid Cap
Growth Fund II 45.66%
Opportunity Fund II 19.87%
Warburg Pincus
International Equity 13.78%
Global Post-Venture Capital1 21.28%
Small Company Growth 23.61%
PBHG
Select 20 67.33%
Growth II 35.60%
Select Value2 21.90%
Small Cap Value 13.75%
Technology & Communications 75.69%
Morgan Stanley
Emerging Markets Debt (3.60)%
Emerging Markets Equity 11.51%
Global Equity 13.07%
International Magnum 13.02%
</TABLE>
Average Annual Total Return From Date When Portfolio Began in Separate
Account.
<TABLE>
<CAPTION>
Subaccount Date Portfolio Began In Return If Contract Surrendered Return If Contract Continued
Separate Account and Maintenance Charge Applied
<S> <C> <C> <C>
Fidelity
Asset Manager 10/4/89 11.71% 11.71%
Index 500 9/1/92 19.85% 19.85%
Asset Manager:Growth 1/9/95 19.04% 19.15%
Contrafund 1/9/95 26.65% 26.74%
Growth Opportunities 1/3/95 20.29% 20.40%
Balanced 1/3/95 12.33% 12.46%
Growth & Income 12/31/96 21.04% 21.49%
Strong
Mid Cap Growth Fund II 11/24/97 52.70% 53.60%
Opportunity Fund II 11/24/97 21.24% 22.40%
Warburg Pincus
International Equity 11/24/97 22.89% 24.03%
Global Post-Venture Capital1 11/24/97 29.68% 30.75%
Small Company Growth 11/24/97 25.68% 26.79%
PBHG
Select 20 11/24/97 76.80% 77.56%
Growth II 11/24/97 42.72% 43.68%
Select Value2 11/24/97 20.80% 21.95%
Small Cap Value 11/24/97 12.87% 14.11%
Technology & Communications 11/24/97 99.36% 100.02%
Morgan Stanley
Emerging Markets Debt 11/24/97 (3.43)% (2.17)%
Emerging Markets Equity 11/24/97 18.85% 20.04%
Global Equity 11/24/97 7.37% 8.69%
International Magnum 11/24/97 12.99% 14.23%
</TABLE>
<TABLE>
<CAPTION>
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
<S> <C>
Fidelity
Asset Manager 11.74%
Index 500 19.87%
Asset Manager:Growth 19.16%
Contrafund 26.75%
Growth Opportunities 20.41%
Balanced 12.47%
Growth & Income 21.50%
Strong
Mid Cap Growth Fund II 53.61%
Opportunity Fund II 22.41%
Warburg Pincus
International Equity 24.04%
Global Post-Venture Capital1 30.76%
Small Company Growth 26.80%
PBHG
Select 20 77.58%
Growth II 43.70%
Select Value2 21.97%
Small Cap Value 14.13%
Technology & Communications 100.04%
Morgan Stanley
Emerging Markets Debt (2.16)%
Emerging Markets Equity 20.04%
Global Equity 8.70%
International Magnum 14.25%
</TABLE>
(c) Five Year Average Annual Total Return If Contract Issued on
December 31, 1994:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Fidelity
Asset Manager 14.56% 14.56% 14.57%
Money Market 4.50% 4.50% 4.51%
Investment Grade Bond 6.31% 6.31% 6.31%
Equity-Income 17.52% 17.52% 17.53%
Growth 28.55% 28.55% 28.55%
High Income 9.84% 9.84% 9.85%
Overseas 16.29% 16.29% 16.30%
Index 500 26.99% 26.99% 26.99%
Strong
Opportunity Fund II 22.22% 22.22% 22.23%
</TABLE>
(d) Ten Year Average Annual Total For Contracts Issued on December 31,
1989:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Money Market 4.24% 4.24% 4.27%
Investment Grade Bond 6.13% 6.13% 6.16%
High Income 11.33% 11.33% 11.36%
Equity-Income 13.36% 13.36% 13.40%
Growth 18.76% 18.76% 18.79%
Overseas 10.33% 10.33% 10.36%
Asset Manager 12.04% 12.04% 12.07%
</TABLE>
(The Separate Account inception date is 7/22/87.)
In addition to average annual returns, the Subaccounts may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Table 2 shows the
cumulative total return on a hypothetical investment in the
Subaccounts from the date the Portfolios began operations, from the
date each Portfolio began in the Separate Account , and assuming
that the Contract was surrendered December 31, 199 9 . For any
Portfolio in existence five years or more, five year figures are also
shown. For any Portfolio in existence ten years or more, figures are
shown for a ten year period. One year cumulative total returns are
the same as the average annual total returns for the same period.
The returns reflect the risk and administrative charge 0.80% on an
annual basis (1% prior to November 1, 1997) and the maintenance
charge. Since the Contract is intended as a long-term product, the
table also shows the cumulative total return assuming that no money
was withdrawn from the Contract. The cumulative total return is also
shown for Contracts with at least $25,000 of premium and assuming no
money is withdrawn from the Contract. The cumulative total return for
these Contracts would be larger because there is currently no
maintenance charge on these larger Contracts. The column s show
the cumulative total return if you surrender the Contract at the end
of the period, if you do not surrender the Contract and if you do not
surrender the Contract and no maintenance charge is applied to the
Contract.
Table 2: Cumulative Total Return For Periods Beginning at Commencement
of Portfolios and Ending on December 31, 1999 :
<TABLE>
<CAPTION>
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
<S> <C> <C> <C>
Fidelity
Money Market 4/1/82 163.06% 163.06%
Asset Manager 9/6/89 212.98% 212.98%
Investment Grade Bond 12/5/88 98.88% 98.88%
High Income 9/19/85 277.79% 277.79%
Overseas 1/28/87 234.57% 234.57%
Index 500 8/27/92 280.05% 280.05%
Growth Opportunities 1/3/95 151.72% 152.72%
Balanced 1/3/95 78.76% 79.76%
Equity Income 10/9/86 382.87% 382.87%
Growth 10/9/86 751.98% 751.98%
Contrafund 1/3/95 223.31% 224.31%
Asset Manager: Growth 1/3/95 138.00% 139.00%
Growth & Income 12/31/96 77.33% 79.33%
Mid Cap 12/28/98 48.41% 52.41%
Morgan Stanley
Emerging Markets Debt 6/16/97 (11.39)% (8.96)%
Emerging Markets Equity 10/1/96 40.38% 42.38%
Global Equity 1/2/97 41.40% 44.40%
International Magnum 1/2/97 41.20% 44.20%
PBHG
Growth II 5/1/97 122.30% 125.30%
Select Value2 10/28/97 50.80% 53.80%
Small Cap Value 10/28/97 29.31% 32.31%
Technology & Communications 5/1/97 346.78% 349.78%
Select 20 9/25/97 217.97% 220.97%
Strong
Mid Cap Growth Fund II 12/31/96 206.92% 208.92%
Opportunity Fund II 5/8/92 299.94% 299.94%
Warburg Pincus
International Equity 6/30/95 77.86% 78.86%
Global Post-Venture Capital1 9/30/96 85.17% 87.17%
Small Company Growth 6/30/95 158.80% 159.80%
</TABLE>
<TABLE>
<CAPTION>
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
<S> <C>
Fidelity
Money Market 166.45%
Asset Manager 213.84%
Investment Grade Bond 99.47%
High Income 280.84%
Overseas 236.24%
Index 500 280.27%
Growth Opportunities 152.83%
Balanced 79.86%
Equity Income 385.49%
Growth 756.12%
Contrafund 224.43%
Asset Manager: Growth 139.11%
Growth & Income 79.37%
Mid Cap 52.42%
Morgan Stanley
Emerging Markets Debt (8.91)%
Emerging Markets Equity 42.46%
Global Equity 44.46%
International Magnum 44.27%
PBHG
Growth II 125.38%
Select Value2 53.84%
Small Cap Value 32.35%
Technology & Communications 349.90%
Select 20 221.04%
Strong
Mid Cap Growth Fund II 209.92%
Opportunity Fund II 300.21%
Warburg Pincus
International Equity 78.95%
Global Post-Venture Capital1 87.27%
Small Company Growth 159.90%
</TABLE>
Cumulative Total Return From Date When Portfolio Began in Separate
Account.
<TABLE>
<CAPTION>
Subaccount Date Portfolio Began in Return If Contract Surrendered Return If Contract Continued
Separate Account and Maintenance Charge Applied
<S> <C> <C> <C>
Fidelity
Money Market 1/29/88 72.99% 72.99%
Asset Manager 10/4/89 211.19% 211.19%
Investment Grade Bond 12/30/88 98.01% 98.01%
High Income 2/29/88 188.25% 188.25%
Overseas 2/10/88 271.06% 271.06%
Index 500 9/1/92 277.59% 277.59%
Growth Opportunities 1/3/95 151.72% 152.72%
Balanced 1/3/95 78.76% 79.76%
Equity Income 2/10/88 358.55% 358.55%
Growth 2/10/88 704.49% 704.49%
Contrafund 1/9/95 224.28% 225.28%
Asset Manager: Growth 1/9/95 138.24% 139.24%
Growth & Income 12/31/96 77.33% 79.33%
Morgan Stanley
Emerging Markets Debt 11/24/97 (7.08)% (4.51)%
Emerging Markets Equity 11/24/97 43.77% 46.77%
Global Equity 11/24/97 16.13% 19.13%
International Magnum 11/24/97 29.26% 32.26%
PBHG
Growth II 11/24/97 111.17% 114.17%
Select Value2 11/24/97 48.74% 51.74%
Small Cap Value 11/24/97 28.97% 31.97%
Technology & Communications 11/24/97 326.22% 329.22%
Select 20 11/24/97 231.19% 234.19%
Strong
Mid Cap Growth Fund II 11/24/97 143.41% 146.41%
Opportunity Fund II 11/24/97 50.55% 52.92%
Warburg Pincus
International Equity 11/24/97 54.28% 57.26%
Global Post-Venture Capital1 11/24/97 72.70% 75.70%
Small Company Growth 11/24/97 61.74% 64.70%
</TABLE>
<TABLE>
<CAPTION>
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
<S> <C>
Fidelity
Money Market 73.71%
Asset Manager 211.91%
Investment Grade Bond 98.57%
High Income 189.57%
Overseas 272.24%
Index 500 277.82%
Growth Opportunities 152.83%
Balanced 79.86%
Equity Income 360.10%
Growth 706.75%
Contrafund 225.40%
Asset Manager: Growth 139.35%
Growth & Income 79.37%
Morgan Stanley
Emerging Markets Debt (4.47)%
Emerging Markets Equity 46.79%
Global Equity 19.16%
International Magnum 32.30%
PBHG
Growth II 114.22%
Select Value2 51.78%
Small Cap Value 32.00%
Technology & Communications 329.31%
Select 20 234.25%
Strong
Mid Cap Growth Fund II 146.47%
Opportunity Fund II 52.94%
Warburg Pincus
International Equity 57.26%
Global Post-Venture Capital1 75.70%
Small Company Growth 64.71%
</TABLE>
(c) Cumulative Total Return For Five Year Period From 12/31/94 Through
12/31/99:
<TABLE>
<CAPTION>
Subaccount Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
<S> <C> <C> <C>
Asset Manager 97.35% 97.35% 97.42%
Money Market 24.64% 24.64% 24.69%
Investment Grade Bond 35.76% 35.76% 35.82%
Equity-Income 124.17% 124.17% 124.22%
Growth 250.99% 250.99% 251.08%
High Income 59.87% 59.87% 59.93%
Overseas 112.70% 112.70% 112.76%
Index 500 230.21% 230.21% 230.27%
Strong
Opportunity Fund II 172.74% 172.74% 172.80%
</TABLE>
(d) Cumulative Total Return For Ten Year Period From 12/31/89 Through
12/31/99:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Money Market 51.76% 51.76% 51.97%
High Income 192.80% 192.80% 193.26%
Equity-Income 251.15% 251.15% 251.51%
Growth 459.09% 459.09% 459.47%
Overseas 167.77% 167.77% 168.04%
Investment Grade Bond -81.60% 81.60% 81.85%
</TABLE>
1 Previously called Warburg Pincus Post-Venture Capital.
2 Previously called PBHG Large Cap Value.
(The Separate Account inception date is 7/22/87.)
YIELDS
Some Subaccounts may also advertise yields. Yields quoted in
advertising reflect the change in value of a hypothetical investment
in the Subaccount over a stated period of time, not taking into
account capital gains or losses. Yields are annualized and stated as a
percentage. Yields do not reflect the impact of any contingent
deferred sales load. Yields quoted in advertising may be based on
historical seven day periods.
Current yield for Money Market Subaccount reflects the income
generated by a Subaccount over a 7 day period. Current yield is
calculated by determining the net change, exclusive of capital
changes, in the value of a hypothetical account having one
Accumulation Unit at the beginning of the period adjusting for the
maintenance charge, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period
return, and multiplying the base period return by (365/7). The
resulting yield figure is carried to the nearest hundredth of a
percent. Effective yield for the Money Market Subaccount is calculated
in a similar manner to current yield except that investment income is
assumed to be reinvested throughout the year at the 7 day rate.
Effective yield is obtained by taking the base period returns as
computed above, and then compounding the base period return by adding
1, raising the sum to a power equal to (365/7) and subtracting one
from the result, according the formula Effective Yield = [(Base Period
Return + 1) 365/7] - 1. Since the reinvestment of income is assumed in
the calculation of effective yield, it will generally be higher than
current yield. For the 7 day period ending on 12/31/9 9 , the
Money Market Subaccount had a current yield of 4. 88 % and an
effective yield of 5.00 %. For Contracts on which there is
currently no maintenance charge, the current yield would be
4. 89 % and the effective yield would be 5.01 %.
A 30 day yield for bond subaccounts reflects the income generated by a
Subaccount over a 30 day period. Yield will be computed by dividing
the net investment income per Accumulation Unit earned during the
period by the maximum offering price per Accumulation Unit on the last
day of the period, according to the following formula: Yield =
2[(a-b/cd + 1)6 - 1] where a= net investment income earned by the
applicable portfolio, b = expenses for the period including expenses
charged to the contract owner accounts, c = the average daily number
of Accumulation Units outstanding during the period, and d = the
maximum offering price per Accumulation Unit on the last day of the
period. The 30 day yield for the period ending on 12/31/ 99 was
5.94 % for the Investment Grade Bond Subaccount, 10.13 %
for the High Income Subaccount and 1 3.43 % for the Emerging
Markets Debt Subaccount. For Contracts on which there is no
maintenance charge, the 30 day yield would be 5.95 % for the
Investment Grade Bond Subaccount, 10.14 % for the High Income
Subaccount and 13.44 % for the Emerging Markets Debt Subaccount.
EXCHANGES AMONG SUBACCOUNTS AFTER THE ANNUITY DATE
After the Annuity Date, you may instruct us to reallocate the value of
some or all of the Annuity Units of a variable Subaccount then
credited to your Contract into an equal value of Annuity Units of one
or more other Subaccounts. The exchange shall be based on the relative
value of the Subaccount Annuity Units at the end of the Valuation
Period in which the request is received and will affect income
payments determined after that Valuation Period. To make such an
exchange, you must contact the Annuity Service Center. The value of
the Annuity Units exchanged must provide at least a $50 annuity income
payment at the time of the exchange, unless all of the Annuity Units
of a Subaccount are being exchanged.
UNAVAILABILITY OF ANNUITY INCOME OPTIONS IN CERTAIN CIRCUMSTANCES
We do not offer annuity income options to any corporate beneficiary,
partnership or trustee; any assignee, unless that assignee is a
beneficiary; or the executors or administrators of the Annuitant's
estate.
IRS REQUIRED DISTRIBUTIONS
If the Owner of the Contract dies (or either Joint Owner if the
Contract is owned jointly) before the entire interest in the Contract
is distributed, the value of the Contract must be distributed to the
person entitled to the proceeds as described in this section so
that the Contract qualifies as an annuity under the Internal Revenue
Code.
If the death occurs on or after the Annuity Date, the remaining
portion of the interest in the Contract must be distributed at least
as rapidly as under the method of distribution being used as of the
date of death. If the death occurs before the Annuity Date, the entire
interest in the Contract must be distributed within five years after
the date of death, unless the following conditions are met.
The Beneficiaries or second Owners' entire interest is payable over
the Beneficiary's or second Owners lifetime (or a period not extending
beyond the life expectancy of the Beneficiary or second Owner) by
electing annuitization within 60 days of the date of death with
distributions beginning within one year of the date of death, or the
Beneficiary is the Surviving Spouse of the deceased Owner, in which
case the Spouse may elect to continue the Contract as the Owner.
However, for Qualified Contracts where the owner's spouse is the
beneficiary, annuity income payments need not begin within one year
after the Owner's death, rather they need only begin on or before
April 1 of the calendar year following the calendar year in which the
Owner would have attained age 70 1/2. The Owner's designated
beneficiary is the person to whom proceeds of the Contract pass by
reason of the death of the Owner.
If the Contract Owner is a trust or other "non-natural person," and
the Annuitant dies before the Annuity Date, the required distribution
upon death rules will apply.
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
The assets of the Variable Account are held by Fidelity Investments
Life. The assets of the Variable Account are held apart from our
general account assets and any other separate accounts we may
establish. We maintain records of all purchases and redemptions of the
shares of the Funds held by the variable Subaccounts. We maintain
fidelity bond coverage for the acts of our officers and employees.
DISTRIBUTION OF THE CONTRACTS
As explained in the Prospectus, the Contracts are distributed through
Fidelity Brokerage Services, Inc. and Fidelity Insurance Agency, Inc.,
which are affiliated with FMR Corp. and Fidelity Investments Life. The
offering of the contracts is continuous, and we do not anticipate
discontinuing offering the Contracts. However, we reserve the right to
discontinue offering the C ontracts.
STATE REGULATION
Fidelity Investments Life is subject to regulation by the Department
of Insurance of the State of Utah, which periodically examines our
financial condition and operations. We are also subject to the
insurance laws and regulations of all jurisdictions where we do
business. The Contract described in the Prospectus and Statement of
Additional Information has been filed with and, where required,
approved by, insurance officials in those jurisdictions where it is
sold.
We are required to submit annual statements of our operations,
including financial statements, to the insurance departments of the
various jurisdictions where we do business to determine solvency and
compliance with applicable insurance laws and regulations.
LEGAL MATTERS
The legal validity of the Contracts described in the Prospectus and
Statement of Additional Information has been passed on by David J.
Pearlman, Senior Legal Counsel of Fidelity Investments Life
Insurance Company . Jorden Burt Boros Cicchetti Berenson & Johnson
LLP of Washington, D.C. has passed on matters relating to Federal
securities laws.
REGISTRATION STATEMENT
We have filed a Registration Statement under the Securities Act of
1933 with the SEC relating to the Contracts. The Prospectus and
Statement of Additional Information do not include all the information
in the Registration Statement. We have omitted certain portions
pursuant to SEC rules. You may obtain the omitted information from the
SEC's main office in Washington, D.C. by paying the SEC's prescribed
fees.
INDEPENDENT ACCOUNTANTS
The consolidated balance sheets of Fidelity Investments Life Insurance
Company and its subsidiary as of December 31, 199 9 and
199 8 , and the related consolidated statements of income and
comprehensive income, of stockholder's equity, and of cash flows for
each of the three years in the period ended December 31, 199 9 ,
and the statement of assets and liabilities of the Fidelity
Investments Variable Annuity Account I as of December 31, 199 9 ,
and the related statements of operations and o f changes in net
assets for the years ended December 31, 199 9 and 199 8
included in this registration statement have been included herein in
reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in
accounting and auditing.
FINANCIAL STATEMENTS
The financial statements of Fidelity Investments Life included herein
should be distinguished from the financial statements of the Variable
Account and should be considered only as bearing upon our ability to
meet our obligations under the Contracts.
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Subsidiary of FMR Corp.)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Subsidiary of FMR Corp.)
CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1999, 1998 and 1997
Page(s)
Report of Independent 1
Accountants
Consolidated Balance Sheets 2
Consolidated Statements of 3
Income and Comprehensive
Income
Consolidated Statements of 4
Stockholder's Equity
Consolidated Statements of 5
Cash Flows
Notes to Consolidated 6-15
Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Fidelity Investments Life Insurance Company:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and comprehensive income, of
stockholder's equity and of cash flows present fairly, in all material
respects, the financial position of Fidelity Investments Life
Insurance Company (a wholly-owned subsidiary of FMR Corp.) and its
subsidiary at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United
States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
January 25, 2000
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Subsidiary of FMR Corp.)
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31, 1999 and 1998
ASSETS 1999 1998
Investments:
Debt securities available for $241,340 $221,087
sale
Common stocks - 4,067
Other investments 2,673 2,552
Policy loans 143 170
Total investments 244,156 227,876
Cash and cash equivalents 8,736 18,681
Accrued investment income 4,668 3,814
Deferred policy acquisition 27,248 22,984
costs
Goodwill, net of accumulated
amortization of
$1,613 in 1999 and
$1,499 in 1998 3,173 3,287
Other assets 2,370 1,222
Net deferred tax asset 35,665 21,640
Separate account assets 15,122,142 10,835,950
Total assets $15,448,158 $11,135,454
LIABILITIES
Future contract and policy $47,908 $50,918
benefits
Other liabilities and accrued 7,038 12,976
expenses
Federal and state income 10,558 10,128
taxes payable
Payable to parent and 3,265 5,900
affiliates
Separate account liabilities 15,122,151 10,835,168
Total liabilities 15,190,920 10,915,090
Commitments and contingencies
(Note 8)
STOCKHOLDER'S EQUITY
Common stock, par value $10
per share -
1,000,000 shares authorized;
300,000 shares issued and 3,000 3,000
outstanding
Additional paid-in capital 68,048 68,048
Accumulated other (4,790) 3,469
comprehensive (loss) income
Retained earnings 190,980 145,847
Total stockholder's equity 257,238 220,364
Total liabilities and $15,448,158 $11,135,454
stockholder's equity
The accompanying notes are an
integral part
of the consolidated financial
statements.
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Subsidiary of FMR Corp.)
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(in thousands)
for the years ended December 31, 1999, 1998 and 1997
1999 1998 1997
Revenues:
Fees charged to contractholders $104,900 $79,238 $73,553
Net investment income 15,153 13,498 12,509
Net realized (losses) gains (378) 1,914 946
Premium revenue 2,565 1,119 286
Other income - - 263
122,240 95,769 87,557
Benefits and expenses:
Underwriting, acquisition and
insurance
expenses (1) 47,239 33,992 26,354
Contract and policy benefits
and
expenses 5,096 3,229 3,379
52,335 37,221 29,733
Income before provision for 69,905 58,548 57,824
income taxes
Provision for income taxes 24,772 20,787 20,325
Net income 45,133 37,761 37,499
Other comprehensive (loss)
income,
before tax:
Unrealized (losses) gains on
securities:
Unrealized holding (losses)
gains
arising during period (13,315) 3,993 3,187
Less: reclassification
adjustment for
losses (gains) included
in net income 378 (1,914) (946)
Benefit (provision) for
income taxes
related to items of other
comprehensive (loss) income 4,678 (754) (814)
Other comprehensive (loss)
income, net
of tax (8,259) 1,325 1,427
Comprehensive income $36,874 $39,086 $38,926
(1) Includes affiliated party
transactions (Note 6)
The accompanying notes are an
integral
part of the consolidated
financial
statements.
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Subsidiary of FMR Corp.)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(in thousands)
for the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Accumulated
Additional Other Total
Common Paid-In Comprehensive Retained Stockholder's
Stock Capital (Loss) Income Earnings Equity
Balance at
December 31,
1996 $3,000 $68,048 $717 $70,587 $142,352
Comprehensive
income: Net
income 37,499 37,499
Other
comprehensive
income 1,427 1,427
Balance at
December 31, 1997 3,000 68,048 2,144 108,086 181,278
Comprehensive
income: Net
income 37,761 37,761
Other
comprehensive
income 1,325 1,325
Balance at
December 31, 1998 3,000 68,048 3,469 145,847 220,364
Comprehensive
income: Net
income 45,133 45,133
Other
comprehensive
loss (8,259) (8,259)
Balance at
December 31, 1999 $3,000 $68,048 $(4,790) $190,980 $257,238
The accompanying
notes are an
integral part of
the consolidated
financial
statements.
</TABLE>
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Subsidiary of FMR Corp.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
for the years ended December 31, 1999, 1998 and 1997
1999 1998 1997
Cash flows from operating
activities:
Net income $45,133 $37,761 $37,499
Adjustments to reconcile net
income
to net cash provided
by operating activities:
Amortization of investment
discounts
and premiums 971 1,065 1,110
Realized loss (gain) on 378 (1,914) (946)
investments
Amortization of goodwill 114 114 114
Depreciation 399 528 551
Change in deferred taxes (9,348) (5,107) (4,991)
Addition to deferred policy
acquisition costs,
net of amortization (4,264) (4,893) (1,224)
Changes in assets and
liabilities:
Accrued investment income (854) (287) (798)
Transfer from separate accounts 791 696 120
Future contract and policy (3,010) (12,522) (2,828)
benefits
Payable to parent and
affiliates,
net (2,635) 1,591 2,624
Federal and state income 430 10,128 (109)
taxes payable
Other assets and liabilities (648) 2,199 806
Net cash provided by operating
activities 27,457 29,359 31,928
Cash flows from investing
activities:
Purchase of investments (115,124) (102,640) (178,474)
Proceeds from disposal of
investments 84,531 81,204 148,758
Additions to fixed assets (394) (427) (328)
Net cash used in investing
activities (30,987) (21,863) (30,044)
Cash flows from financing
activities:
(Decrease) increase in cash
overdraft (6,415) 6,415 -
Net cash (used in) provided by
financing activities (6,415) 6,415 -
Net (decrease) increase in
cash and
cash equivalents (9,945) 13,911 1,884
Cash and cash equivalents:
Beginning of year 18,681 4,770 2,886
End of year $8,736 $18,681 $4,770
The accompanying notes are an
integral
part of the consolidated
financial
statements.
1. Organization:
The consolidated financial statements include the accounts of
Fidelity Investments Life Insurance Company (FILI),a Utah domiciled
insurance company, and Empire Fidelity Investments Life Insurance
Company (EFILI), a wholly-owned insurance company operating
exclusively in the State of New York (collectively, the "Company").
All intercompany transactions have been eliminated in consolidation.
The Company issues variable deferred and immediate annuity contracts
and is licensed in all states. Amounts invested in the fixed option of
the contracts are allocated to the general account of the Company.
Amounts invested in the variable option of the contracts are allocated
to the Variable Annuity Accounts, separate accounts of the Company.
Amounts invested in the variable life policies are allocated to the
Variable Life Account I, also a separate account of the Company. The
assets of the Variable Annuity Accounts are invested in the portfolios
of the Variable Insurance Products Fund, the Variable Insurance
Products Fund II, the Variable Insurance Products Fund III, the Morgan
Stanley Dean Witter Universal Funds, the PBHG Insurance Series Funds,
the Strong Variable Insurance Funds and the Warburg Pincus Trust
Funds. The assets of the Variable Life Account I are invested in the
portfolios of the Variable Insurance Products Fund and the Variable
Insurance Products Fund II. The invested assets are reported at the
net asset value of such portfolios.
FILI and EFILI also offer a term life insurance product with level
premium paying periods of five, ten, fifteen and twenty years.
2. Summary of Significant Accounting Policies:
Basis of Presentation
The accompanying consolidated financial statements of the Company
have been prepared on the basis of generally accepted accounting
principles, which vary in certain respects from reporting practices
prescribed or permitted by state insurance regulatory authorities.
Investments
Investments in debt securities available for sale and Common stocks
are reported at fair value. Fair values are derived from external
market quotations. Unrealized gains or losses on debt securities and
common stock are reported as other comprehensive income. The discount
or premium on debt securities, excluding loan-backed bonds and
structured securities, is amortized using the effective interest
method. Amortization of loan-backed bonds and structured securities
includes anticipated prepayments over the estimated economic life of
the security. When actual prepayments differ significantly from
anticipated prepayments, the effective yield is recalculated to
reflect actual payments to date and anticipated future payments and
any resulting adjustment is included in investment income.
Other investments represent an investment in a limited liability
corporation reported at fair value.
Policy loans are carried at outstanding principal balances, not in
excess of policy cash surrender value. These loans are an integral
part of the insurance products and have no maturity dates.
Consequently, it is impracticable to determine the fair value of
policy loans.
Investment income is recognized on the accrual basis. Realized gains
or losses on investments sold are determined by the specific
identification method. Realized gains or losses on the Company's funds
retained in the separate account are reflected in income.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an
original maturity date of three months or less to be cash equivalents.
Cash and cash equivalents represent amounts in demand deposit accounts
and money market mutual funds and are reported at fair value. Money
market mutual funds used to fund long-term investments and to meet
operating cash requirements were $7,478,000 and $15,050,000 at
December 31, 1999 and 1998, respectively. Cash overdrafts included in
other liabilities and accrued expenses were $6,415,000 at December 31,
1998.
Separate Accounts
Separate account assets represent funds held for the exclusive
benefit ofvariable annuity and variable life insurance contractholders
and are reported at fair value. Since the contractholders receive the
full benefit and bear the full risk of the separate account
investments, the income and realized and unrealized gains and losses
from such investments are offset by an increase or decrease in the
amount of liabilities related to the separate account. Differences
between separate account assets and separate account liabilities
represent Company funds due to (from) the separate accounts.
Revenue Recognition
Fees charged to contractholders include mortality and expense risk,
administrative charges and surrender charges for variable annuity and
life contractholders and also include the cost of providing insurance
protection for variable life contractholders. Premium revenues for
term life insurance products are recognized as revenues over the
premium-paying period.
Future Contract and Policy Benefits
Future contract and policy benefits are liabilities for fixed annuity
and life products. Such liabilities are established in amounts
adequate to meet the estimated future obligations of policies in
force. Future contract benefits for annuity products are computed
using interest rates ranging from 3.5% to 7.8% and approximate the
contractholder's account balance. The liabilities for future policy
benefits for traditional life insurance products are computed using
the natural reserve method and are based upon estimates as to future
investment yield, mortality and withdrawals that include provisions
for adverse deviation.
Deferred Policy Acquisition Costs
The costs of acquiring new business, principally first-year
commissions paid to Fidelity Insurance Agency, Inc. in accordance with
a contractual agreement as described in Note 6 and certain expenses
for traditional life policy issue and underwriting have been deferred.
These acquisition costs are being amortized in proportion to the
present value of expected future gross profits or expected future
policy premiums.
Income Taxes
FILI files a consolidated federal income tax return with its
subsidiary, EFILI. Under a tax sharing agreement, each company is
charged or credited its share of taxes as determined on a
separate-company basis.
The liability method is used in accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based
on differences between financial reporting and tax bases of assets and
liabilities and are measured using the current enacted tax rates.
Goodwill
Goodwill, representing the excess of FMR Corp.'s cost over the net
assets of the Company at the date of acquisition, has been reflected
in these financial statements net of certain identifiable tax benefits
realized and is being amortized on a straight-line basis over 40
years.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments," requires disclosure of
fair value information about certain financial instruments (insurance
contracts, real estate, goodwill and taxes are excluded) for which it
is practicable to estimate such values, whether or not these
instruments are included in the balance sheet. The fair values and
methods used to estimate fair values of financial instruments are
disclosed throughout the notes to consolidated financial statements.
Use of Estimates
The preparation of the consolidated financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the related
amounts and disclosures in the financial statements. Actual results
could differ from those estimates. Reclassifications
Certain prior year balances have been reclassified to conform with
current year presentation.
New Accounting Pronouncements
In 1999 the Company adopted Statement of Position 97-3, "Accounting
by Insurance and Other Enterprises for Insurance Related Assessments"
(SOP No. 97-3). SOP No. 97-3 provides guidance on when a liability
should be recognized for guaranty fund and other assessments and how
to measure the liability. The adoption of SOP No. 97-3 did not have a
material impact on the results of operations or financial position.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (Statement No. 133),
which establishes accounting and reporting standards for derivative
instruments. Statement No. 133 requires that an entity recognize all
derivatives as either assets or liabilities at fair value in the
statement of financial position. This statement is effective for
fiscal years beginning after June 15, 2000. The Company is currently
assessing the impact of adopting Statement No. 133.
3. Investments:
The components of net investment income were as follows:
Years Ended December 31,
1999 1998 1997
(in thousands)
Debt securities $14,670 $13,095 $11,840
Common stocks 211 283 271
Cash and cash equivalents 1,335 960 529
Other invested assets 199 94 -
Policy loans 11 14 10
Investment in separate
Accounts 40 236 610
Other 31 - -
Total investment income 16,497 14,682 13,260
Investment expenses 1,344 1,184 751
Net investment income $15,153 $13,498 $12,509
Gross realized losses from the sale of common stocks were $269,000 in
1999. Gross realized gains and losses from the sale of debt securities
were as follows:
Years Ended December 31,
1999 1998 1997
(in thousands)
Gross realized gains $377 $1,989 $1,030
Gross realized losses $486 $ 75 $ 84
The amortized cost and estimated fair value of debt securities, by
type of issuer, and common stock were as follows:
December 31, 1999
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
U.S. Treasury
securities $43,689 $ 75 $(1,059) $ 42,705
Corporate securities 196,338 101 (6,460) 189,979
Loan-backed bonds and
Structured securities 8,745 - (89) 8,656
Total debt securities $248,772 $176 $(7,608) $241,340
Other investments $ 2,756 - $ (83) $ 2,673
December 31, 1998
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
U.S. Treasury
securities $34,752 $2,271 $ (12) $ 37,011
Corporate securities 169,335 3,321 (168) 172,488
Loan-backed bonds and
Structured securities 11,334 254 - 11,588
Total debt securities $215,421 $5,846 $(180) $221,087
Common stock $ 4,270 - $(203) $ 4,067
Other investments $ 2,593 - $ (41) $ 2,552
The amortized cost and estimated fair value of debt securities at
December 31, 1999, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
or prepayment penalties.
Estimated
Amortized Fair
Cost Value
(in thousands)
Due in 1 year or less $ 15,068 $ 15,074
Due after 1 year through 5 136,421 133,449
years
Due after 5 years through 10 72,111 68,707
years
Due after 10 years 16,427 15,455
Subtotal 240,027 232,685
Loan-backed bonds and
structured
securities 8,745 8,655
$248,772 $241,340
99% of debt securities are investment grade and there are no
significant concentrations by issuer or by industry, other than U.S.
Treasury securities.
4. Income Taxes
The components of the provision for income taxes attributable to
operations were as follows:
Years Ended December 31,
1999 1998 1997
(in thousands)
Current $34,120 $25,894 $25,316
Deferred (9,348) (5,107) (4,991)
Provision for income
Taxes $24,772 $20,787 $20,325
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets
were as follows:
Years Ended December 31,
1999 1998
(in thousands)
Deferred income tax assets:
Deferred policy acquisition $21,170 $16,406
costs
Contractholder reserves 11,923 7,448
Unrealized loss (gain) on
securities available for sale 2,725 (1,953)
Other, net (153) (261)
Net deferred tax asset $35,665 $21,640
Management believes that the Company's future income will be
sufficient to realize the net deferred tax asset.
FILI paid federal income taxes of $32,104,000, $14,781,000 and
$25,314,000 in 1999, 1998 and 1997, respectively. State income and
franchise taxes of $1,245,000, $640,000 and $884,000 were paid in
1999, 1998 and 1997, respectively.
The statute of limitations on the Company's federal income tax
returns is open for the taxable years ended December 31, 1994 and
thereafter. A refund to claim for additional dividends received
deduction and foreign tax credit has been filed with the Internal
Revenue Service for the tax years ended 1994 through 1998 and is under
review. In management's opinion, adequate tax liabilities have been
established for all years.
The effective tax rates approximate the statutory federal income tax
rates for the years ended 1999, 1998 and 1997.
5. Stockholder's Equity and Dividend Restrictions:
Generally, the net assets of the Company available for transfer to
FMR Corp. are limited to the excess of FILI's net assets, as
determined in accordance with statutory accounting practices, over
minimum statutory capital requirements; however, payments of such
amounts as dividends may be subject to approval by regulatory
authorities. Under the Insurance Code of the State of Utah, the
Company may pay dividends only from the profits arising from its
business. No dividends are allowed that would impair surplus by more
than 35% without prior notice to the Insurance Commissioner. No
dividends have been paid or declared.
Net income and capital stock and surplus as determined in accordance
with statutory accounting practices were as follows:
Years Ended December 31,
1999 1998 1997
(in thousands)
Statutory net income $ 40,549 $ 26,690 $ 30,620
Statutory capital stock and $203,474 $162,810 $136,356
surplus
6. Affiliated Company Transactions:
The Company's insurance contracts are distributed through Fidelity
Brokerage Services, Inc., Fidelity Insurance Agency, Inc. (FIA), and
Fidelity Investments Institutional Services Company, Inc., all of
which are affiliated with FMR Corp. FILI and EFILI have agreements
with FIA under which FILI pays FIA first-year sales compensation of
$50 per deferred annuity contract and renewal sales compensation of
0.10% of the annuity contract value each year. EFILI pays FIA sales
compensation of 3% of annuity payments received. The Company also pays
FIA 37.5% of term life insurance first-year premiums. The Company
compensated FIA in the amount of $17,252,000, $12,785,000 and
$10,604,000 in 1999, 1998 and 1997, respectively.
The Company has an administrative services agreement with FIA whereby
the Company provides certain administrative and accounting functions.
The Company received $1,338,000, $1,224,000 and $1,044,000 in 1999,
1998 and 1997, respectively, for such services. The reimbursements are
accounted for as a direct reduction of the Company's expenses.
In 1998, the Company entered into an administrative services
agreement with FMR Corp. and its subsidiaries whereby certain
administrative and special services are provided for the Company. The
Company paid FMR Corp. and its subsidiaries $8,542,000 and $5,961,000
in 1999 and 1998, respectively, for such services.
FMR Corp. maintains a noncontributory trusteed defined benefit
pension plan covering substantially all eligible Company employees.
The benefits earned are based on years of service and the employees'
compensation during the last five years of employment. FMR Corp.'s
policy for the plan is to fund the maximum amount deductible for
income tax purposes, and to charge each subsidiary for its share of
such contributions. Pension costs of $423,000, $235,000, and $204,000
were charged to the Company in 1999, 1998 and 1997, respectively.
FMR Corp. sponsors a trusteed Profit-Sharing Plan and a contributory
401(k) Thrift Plan covering substantially all eligible Company
employees. Payments are made to the trustee by FMR Corp. annually for
the Profit-Sharing Plan and monthly for the 401(k) Thrift Plan. FMR
Corp.'s policy is to fund all costs accrued and to charge each
subsidiary for its share of the cost. The cost charged to the Company
for these plans amounted to $1,015,000, $708,000 and $621,000 in 1999,
1998 and 1997, respectively.
The Company participates in various FMR Corp. stock-based
compensatory plans. The compensation is based on the change in the net
asset value of FMR Corp. common stock, as defined. The aggregate
expenses related to these plans charged to the Company were
$3,943,000, $3,229,000 and $424,000 in 1999, 1998 and 1997,
respectively.
7. Underwriting, Acquisition and Insurance Expenses:
Underwriting, acquisition and insurance expenses were as follows:
Years Ended December 31,
1999 1998 1997
(in thousands)
Commissions, gross $17,252 $12,785 $10,604
Capitalization of
deferred policy
acquisition costs (6,699) (4,964) (4,136)
Amortization of
deferred policy
acquisition costs 2,435 71 2,912
Amortization of goodwill 114 114 114
Taxes, licenses and fees 1,373 1,129 1,175
General insurance expenses 32,764 24,857 15,685
$47,239 $33,992 $26,354
Amortization of deferred policy acquisition costs is adjusted
periodically when estimates of future gross profits are revised to
reflect actual experience. In 1999, 1998 and 1997, the Company
adjusted amortization by $140,000, $(1,095,000) and $1,850,000,
respectively, to reflect actual experience for investment performance,
persistency and inflation assumptions. This adjustment has been
reflected in amortization expense.
8. Commitments and Contingencies:
Reinsurance
The Company reinsures certain of its life insurance products risks
with other companies. The Company retains a maximum coverage per
individual life of $25,000 plus 30% of the excess over $25,000; the
maximum initial retention not to exceed $100,000.
The Company has entered into agreements to reinsure certain guarantee
provisions and mortality losses on its annuity contracts. Premiums and
deposits ceded under these reinsurance contracts were not material to
the consolidated financial statements.
The Company is contingently liable for claims reinsured that the
assuming companies are unable to pay.
Litigation
The Company is, from time to time, involved in various legal actions
concerning policy benefits and certain other matters. Those actions
are considered by the Company in estimating policy reserves and other
liabilities. The Company believes that the resolution of those actions
should not have a material adverse effect on stockholder's equity.
STATEMENT OF ASSETS AND LIABILITIES
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
OF
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
ASSETS DECEMBER 31, 1999
Investments at current market
value:
Variable Insurance Products
Fund (VIP)
Money Market Portfolio - $ 1,034,800,366
1,034,800,366 shares (cost $
1,034,800,366)
High Income Portfolio - 261,740,986
23,142,439 shares (cost
$288,891,737)
Equity-Income Portfolio - 1,368,732,781
53,237,370 shares (cost
$1,054,223,689)
Growth Portfolio - 2,275,450,859
41,424,556 shares (cost
$1,404,711,711)
Overseas Portfolio - 379,505,600
13,830,379 shares (cost
$268,791,864)
Variable Insurance Products
Fund II (VIP II)
Investment Grade Bond 197,380,314
Portfolio - 16,231,934
shares (cost $205,244,503)
Asset Manager Portfolio - 801,919,715
42,952,315 shares (cost
$672,191,944)
Index 500 Portfolio - 1,322,070,644
7,897,202 shares (cost
$886,207,820)
Asset Manager: Growth 348,310,936
Portfolio - 18,950,541
shares (cost $277,009,021)
Contrafund Portfolio - 1,914,069,592
65,662,765 shares (cost
$1,129,015,399)
Variable Insurance Products
Fund III (VIP III)
Balanced Portfolio - 123,711,592
7,731,974 shares (cost
$119,578,899)
Growth & Income Portfolio - 588,502,063
34,017,460 shares (cost
$489,222,747)
Growth Opportunities 327,459,619
Portfolio - 14,145,124
shares (cost $271,733,805)
Morgan Stanley Dean Witter
Universal Funds (MSDWUF)
Emerging Markets Equity 64,896,080
Portfolio - 4,665,426 shares
(cost $49,298,981)
Emerging Markets Debt 3,407,039
Portfolio - 493,059 shares
(cost $4,397,335)
Global Equity Portfolio - 16,214,474
1,258,888 shares (cost
$16,881,750)
International Magnum 13,187,280
Portfolio - 949,408 shares
(cost $11,872,866)
PBHG Insurance Series Funds
(PBHG)
Growth II Portfolio - 124,988,707
5,422,504 shares (cost
$94,133,369)
Small Cap Value Portfolio - 41,373,038
3,073,777 shares (cost
$36,356,515)
Large Cap Value Portfolio - 36,317,922
2,390,910 shares (cost
$34,538,002)
Technology & Communications 1,429,027,945
Portfolio - 31,059,073
shares (cost $748,929,141)
Select 20 Portfolio - 677,661,395
20,723,590 shares (cost
$335,206,119)
Strong Variable Insurance
Funds (SVIF)
Discovery Fund II Portfolio 3,113,152
- - - 273,563 shares (cost
$3,171,203)
Mid Cap Growth Fund II 243,753,053
Portfolio - 8,026,113 shares
(cost $175,773,315)
Opportunity Fund II 52,797,806
Portfolio - 2,031,466 shares
(cost $46,136,486)
Warburg Pincus Trust (WPT)
Small Company Growth 45,708,345
Portfolio - 1,744,593 shares
(cost $33,277,030)
International Equity 20,215,143
Portfolio - 1,210,488 shares
(cost $17,014,360)
Post-Venture Capital 12,722,297
Portfolio - 660,555 shares
(cost $9,178,217)
Total Assets $ 13,729,038,743
NET ASSETS COMPRISED OF:
Variable Annuity Contracts $ 12,871,054,665
Annuity Reserves 857,994,081
Payable to Variable Account (10,003)
by Fidelity Investments Life
Insurance Company
NET ASSETS $ 13,729,038,743
STATEMENT OF OPERATIONS
For the years ended December 31, 1999 and 1998
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
OF
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
VIP - VIP -
VIP - HIGH INCOME EQUITY-INCOME
MONEY MARKET
12/31/99 12/31/98 12/31/99 12/31/98 12/31/99
INCOME:
Dividends $ 43,056,097 $ 32,096,882 $ 24,152,091 $ 23,805,612 $ 22,453,718
EXPENSES:
Mortality risk, expense risk 6,937,983 4,901,964 2,238,473 2,633,630 12,300,342
and administrative charges
Net investment income (loss) 36,118,114 27,194,918 21,913,618 21,171,982 10,153,376
Realized gain on sale of fund 0 0 182,459 4,318,426 165,178,034
shares
Realized gain distributions 0 0 902,883 15,126,483 49,634,534
Unrealized appreciation 0 0 (4,017,281) (57,719,667) (148,832,159)
(depreciation)
Net increase (decrease) in $ 36,118,114 $ 27,194,918 $ 18,981,679 $ (17,102,776) $ 76,133,785
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP - VIP -
GROWTH OVERSEAS
12/31/98 12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 23,290,879 $ 2,554,613 $ 5,047,927 $ 3,847,399 $ 4,778,919
EXPENSES:
Mortality risk, expense risk 13,686,765 14,297,940 9,170,424 2,193,157 2,183,325
and administrative charges
Net investment income (loss) 9,604,114 (11,743,327) (4,122,497) 1,654,242 2,595,594
Realized gain on sale of fund 104,830,108 43,006,924 40,388,245 8,152,274 9,228,055
shares
Realized gain distributions 82,888,133 160,621,295 132,043,151 6,205,483 14,085,236
Unrealized appreciation (36,054,859) 380,135,317 204,627,266 87,545,263 (1,421,498)
(depreciation)
Net increase (decrease) in $ 161,267,496 $ 572,020,209 $ 372,936,165 $ 103,557,262 $ 24,487,387
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP II - VIP II - VIP II -
INVESTMENT GRADE BOND ASSET MANAGER INDEX 500
12/31/99 12/31/98 12/31/99 12/31/98 12/31/99
INCOME:
Dividends $ 10,063,980 $ 5,744,010 $ 26,505,755 $ 24,381,840 $ 10,770,676
EXPENSES:
Mortality risk, expense risk 1,936,261 1,339,333 6,538,920 6,456,036 9,964,363
and administrative charges
Net investment income (loss) 8,127,719 4,404,677 19,966,835 17,925,804 806,313
Realized gain on sale of fund 244,359 2,547,932 25,832,009 16,078,991 85,020,408
shares
Realized gain distributions 3,157,327 681,493 33,573,955 73,145,521 7,308,673
Unrealized appreciation (16,237,106) 4,439,938 (2,415,965) (3,584,516) 124,508,783
(depreciation)
Net increase (decrease) in $ (4,707,701) $ 12,074,040 $ 76,956,834 $ 103,565,800 $ 217,644,177
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP II - VIP II -
ASSET MANAGER: CONTRAFUND
GROWTH
12/31/98 12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 9,035,234 $ 7,827,870 $ 6,481,674 $ 7,541,601 $ 8,346,877
EXPENSES:
Mortality risk, expense risk 7,372,193 2,746,761 2,605,407 13,984,571 10,705,399
and administrative charges
Net investment income (loss) 1,663,041 5,081,109 3,876,267 (6,442,970) (2,358,522)
Realized gain on sale of fund 42,436,975 19,404,288 15,999,371 93,340,810 53,814,041
shares
Realized gain distributions 20,927,197 12,982,809 30,311,357 55,305,071 61,409,174
Unrealized appreciation 146,192,653 7,512,419 (1,663,981) 219,949,013 223,438,815
(depreciation)
Net increase (decrease) in $ 211,219,866 $ 44,980,625 $ 48,523,014 $ 362,151,924 $ 336,303,508
net assets from operations
</TABLE>
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
OF
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
VIP III -
VIP III - GROWTH &
BALANCED INCOME
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 2,668,561 $ 1,599,419 $ 3,801,304 $ 0
EXPENSES:
Mortality risk, expense risk 1,086,080 655,242 5,373,329 3,314,273
and administrative charges
Net investment income (loss) 1,582,481 944,177 (1,572,025) (3,314,273)
Realized gain on sale of fund 6,102,937 3,178,661 71,504,723 5,527,477
shares
Realized gain distributions 3,101,301 2,443,558 7,602,607 1,561,847
Unrealized appreciation (6,374,709) 6,090,310 (27,907,245) 99,729,988
(depreciation)
Net increase (decrease) in $ 4,412,010 $ 12,656,706 $ 49,628,060 $ 103,505,039
net assets from operations
MSDWUF - GLOBAL EQUITY MSDWUF - INTERNATIONAL
MAGNUM
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 196,524 $ 119,133 $ 87,571 $ 38,795
EXPENSES:
Mortality risk, expense risk 141,042 95,443 91,871 69,283
and administrative charges
Net investment income (loss) 55,482 23,690 (4,300) (30,488)
Realized gain on sale of fund 313,353 275,615 31,185 445,069
shares
Realized gain distributions 769,099 107,863 56,501 43,290
Unrealized appreciation (647,744) (13,408) 2,474,219 (1,107,058)
(depreciation)
Net increase (decrease) in $ 490,190 $ 393,760 $ 2,557,605 $ (649,187)
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP III - MSDWUF -
GROWTH EMERGING MARKETS
OPPORTUNITIES EQUITY
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 4,157,611 $ 3,366,752 $ 6,296 $ 24,349
EXPENSES:
Mortality risk, expense risk 3,214,105 2,888,523 183,185 31,210
and administrative charges
Net investment income (loss) 943,506 478,229 (176,889) (6,861)
Realized gain on sale of fund 41,356,198 7,155,764 2,228,308 198,635
shares
Realized gain distributions 7,772,926 11,703,472 0 0
Unrealized appreciation (37,906,680) 56,119,613 16,923,324 (1,271,839)
(depreciation)
Net increase (decrease) in $ 12,165,950 $ 75,457,078 $ 18,974,743 $ (1,080,065)
net assets from operations
PBHG - GROWTH II PBHG - SMALL CAP VALUE
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 0 $ 0 $ 0 $ 6,754
EXPENSES:
Mortality risk, expense risk 200,218 32,504 321,079 225,695
and administrative charges
Net investment income (loss) (200,218) (32,504) (321,079) (218,941)
Realized gain on sale of fund 867,275 225,669 2,287,120 1,376,831
shares
Realized gain distributions 0 0 0 40,814
Unrealized appreciation 30,717,543 68,354 3,650,843 1,169,066
(depreciation)
Net increase (decrease) in $ 31,384,600 $ 261,519 $ 5,616,884 $ 2,367,770
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MSDWUF -
EMERGING MARKETS
DEBT
12/31/99 12/31/98
INCOME:
Dividends $ 409,018 $ 245,208
EXPENSES:
Mortality risk, expense risk 21,575 20,510
and administrative charges
Net investment income (loss) 387,443 224,698
Realized gain on sale of fund 52,286 31,585
shares
Realized gain distributions 0 0
Unrealized appreciation 182,290 (1,105,348)
(depreciation)
Net increase (decrease) in $ 622,019 $ (849,065)
net assets from operations
PBHG - LARGE CAP VALUE
12/31/99 12/31/98
INCOME:
Dividends $ 1,033 $ 49,627
EXPENSES:
Mortality risk, expense risk 292,040 54,157
and administrative charges
Net investment income (loss) (291,007) (4,530)
Realized gain on sale of fund 2,987,992 495,109
shares
Realized gain distributions 882,489 104,635
Unrealized appreciation (585,169) 2,352,195
(depreciation)
Net increase (decrease) in $ 2,994,305 $ 2,947,409
net assets from operations
</TABLE>
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
OF
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
PBHG - TECHNOLOGY & PBHG - SELECT 20
COMMUNICATIONS
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 0 $ 2,529 $ 0 $ 2,946
EXPENSES:
Mortality risk, expense risk 2,762,048 114,064 3,174,141 853,459
and administrative charges
Net investment income (loss) (2,762,048) (111,535) (3,174,141) (850,513)
Realized gain on sale of fund 9,207,801 501,364 36,793,079 4,426,860
shares
Realized gain distributions 0 0 0 0
Unrealized appreciation 676,031,390 4,097,815 287,462,086 54,862,065
(depreciation)
Net increase (decrease) in $ 682,477,143 $ 4,487,644 $ 321,081,024 $ 58,438,412
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SVIF - DISCOVERY FUND SVIF - MID CAP GROWTH
II FUND II
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 0 $ 0 $ 0 $ 27
EXPENSES:
Mortality risk, expense risk 18,633 15,019 573,402 51,977
and administrative charges
Net investment income (loss) (18,633) (15,019) (573,402) (51,950)
Realized gain on sale of fund 42,846 29,945 1,320,568 177,519
shares
Realized gain distributions 292,833 23,062 29,051 0
Unrealized appreciation (87,515) 47,865 66,604,569 1,398,499
(depreciation)
Net increase (decrease) in $ 229,531 $ 85,853 $ 67,380,786 $ 1,524,068
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SVIF - OPPORTUNITY FUND
II
12/31/99 12/31/98
INCOME:
Dividends $ 0 $ 57,387
EXPENSES:
Mortality risk, expense risk 297,094 144,279
and administrative charges
Net investment income (loss) (297,094) (86,892)
Realized gain on sale of fund 1,045,329 178,312
shares
Realized gain distributions 2,985,965 1,317,403
Unrealized appreciation 7,090,430 (453,869)
(depreciation)
Net increase (decrease) in $ 10,824,630 $ 954,954
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WPT - SMALL COMPANY WPT - INTERNATIONAL
GROWTH EQUITY
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 0 $ 0 $ 139,563 $ 23,172
EXPENSES:
Mortality risk, expense risk 171,003 110,109 47,030 33,469
and administrative charges
Net investment income (loss) (171,003) (110,109) 92,533 (10,297)
Realized gain on sale of fund 840,101 365,092 179,279 131,244
shares
Realized gain distributions 1,164,244 0 0 0
Unrealized appreciation 12,968,059 (688,006) 3,699,852 (470,679)
(depreciation)
Net increase (decrease) in $ 14,801,401 $ (433,023) $ 3,971,664 $ (349,732)
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WPT - POST-VENTURE TOTAL
CAPITAL
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 0 $ 0 $ 170,241,281 $ 148,545,952
EXPENSES:
Mortality risk, expense risk 55,782 39,091 91,162,428 69,802,783
and administrative charges
Net investment income (loss) (55,782) (39,091) 79,078,853 78,743,169
Realized gain on sale of fund 361,254 267,294 617,883,199 314,630,189
shares
Realized gain distributions 0 0 354,349,046 447,963,689
Unrealized appreciation 3,847,450 (324,010) 1,686,291,277 698,755,704
(depreciation)
Net increase (decrease) in $ 4,152,922 $ (95,807) $ 2,737,602,375 $ 1,540,092,751
net assets from operations
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
OF
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
VIP - HIGH INCOME
VIP - MONEY MARKET
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 36,118,114 $ 27,194,918 $ 21,913,618 $ 21,171,982
Net realized gain on 0 0 1,085,342 19,444,909
investments
Unrealized appreciation 0 0 (4,017,281) (57,719,667)
(depreciation)
Net increase (decrease) in 36,118,114 27,194,918 18,981,679 (17,102,776)
net assets from operations
Payments received from 1,286,021,535 807,653,915 10,344,306 19,052,726
contract owners
Transfers between (907,311,345) (484,805,719) (29,864,881) (34,335,132)
sub-accounts and the fixed
account, net
Transfers for contract (109,640,243) (81,249,209) (13,964,158) (11,355,372)
benefits and terminations
Other transfers (to) from 4,752 (59,095) (1,374) 16,131
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 269,074,699 241,539,892 (33,486,107) (26,621,647)
net assets from contract
transactions
Retained in (returned from) (66,104) (43,725) (53,692) 41,287
Variable Annuity Account I,
net
Total increase (decrease) in 305,126,709 268,691,085 (14,558,120) (43,683,136)
net assets
Net assets at beginning of year 729,673,657 460,982,572 276,299,106 319,982,242
Net assets at end of year $ 1,034,800,366 $ 729,673,657 $ 261,740,986 $ 276,299,106
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP - EQUITY-INCOME VIP - GROWTH
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 10,153,376 $ 9,604,114 $ (11,743,327) $ (4,122,497)
Net realized gain on 214,812,568 187,718,241 203,628,219 172,431,396
investments
Unrealized appreciation (148,832,159) (36,054,859) 380,135,317 204,627,266
(depreciation)
Net increase (decrease) in 76,133,785 161,267,496 572,020,209 372,936,165
net assets from operations
Payments received from 20,760,151 28,208,563 60,915,377 24,665,215
contract owners
Transfers between (248,038,028) (202,330,328) 318,329,136 19,580,093
sub-accounts and the fixed
account, net
Transfers for contract (66,840,847) (72,201,646) (59,702,522) (39,644,250)
benefits and terminations
Other transfers (to) from 49,660 (31,813) 187,727 43,976
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in (294,069,064) (246,355,224) 319,729,718 4,645,034
net assets from contract
transactions
Retained in (returned from) (113,160) 88,226 (41,670) 11,999
Variable Annuity Account I,
net
Total increase (decrease) in (218,048,439) (84,999,502) 891,708,257 377,593,198
net assets
Net assets at beginning of year 1,586,781,220 1,671,780,722 1,383,742,602 1,006,149,404
Net assets at end of year $ 1,368,732,781 $ 1,586,781,220 $ 2,275,450,859 $ 1,383,742,602
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
VIP - OVERSEAS
12/31/99 12/31/98
Net investment income (loss) $ 1,654,242 $ 2,595,594
Net realized gain on 14,357,757 23,313,291
investments
Unrealized appreciation 87,545,263 (1,421,498)
(depreciation)
Net increase (decrease) in 103,557,262 24,487,387
net assets from operations
Payments received from 7,513,162 6,532,880
contract owners
Transfers between 24,941,971 (17,347,796)
sub-accounts and the fixed
account, net
Transfers for contract (12,164,645) (8,696,657)
benefits and terminations
Other transfers (to) from 4,234 (19,610)
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 20,294,722 (19,531,183)
net assets from contract
transactions
Retained in (returned from) (14,758) 2,875
Variable Annuity Account I,
net
Total increase (decrease) in 123,837,226 4,959,079
net assets
Net assets at beginning of year 255,668,374 250,709,295
Net assets at end of year $ 379,505,600 $ 255,668,374
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP II - INVESTMENT VIP II - ASSET MANAGER
GRADE BOND
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 8,127,719 $ 4,404,677 $ 19,966,835 $
17,925,804
Net realized gain on 3,401,686 3,229,425 59,405,964
89,224,512
investments
Unrealized appreciation (16,237,106) 4,439,938 (2,415,965)
(3,584,516)
(depreciation)
Net increase (decrease) in (4,707,701) 12,074,040 76,956,834
103,565,800
net assets from operations
Payments received from 11,926,064 11,683,573 11,134,826
12,519,190
contract owners
Transfers between (42,438,815) 127,113,509 (47,080,749)
(28,136,317)
sub-accounts and the fixed
account, net
Transfers for contract (18,481,934) (8,719,110) (51,761,153)
(50,593,986)
benefits and terminations
Other transfers (to) from 7,162 (74,990) (159,301) (55,296)
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in (48,987,523) 130,002,982 (87,866,377)
(66,266,409)
net assets from contract
transactions
Retained in (returned from) (6,429) 606 (35,795) 15,446
Variable Annuity Account I,
net
Total increase (decrease) in (53,701,653) 142,077,628 (10,945,338)
37,314,837
net assets
Net assets at beginning of year 251,081,967 109,004,339 812,865,053
775,550,216
Net assets at end of year $ 197,380,314 $ 251,081,967 $ 801,919,715 $
812,865,053
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP II - INDEX 500 VIP II - ASSET MANAGER:
GROWTH
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 806,313 $ 1,663,041 $ 5,081,109 $ 3,876,267
Net realized gain on 92,329,081 63,364,172 32,387,097 46,310,728
investments
Unrealized appreciation 124,508,783 146,192,653 7,512,419 (1,663,981)
(depreciation)
Net increase (decrease) in 217,644,177 211,219,866 44,980,625 48,523,014
net assets from operations
Payments received from 41,913,743 44,069,986 9,448,324 11,653,847
contract owners
Transfers between 32,545,382 105,883,805 (23,374,601) (45,226,128)
sub-accounts and the fixed
account, net
Transfers for contract (36,869,546) (35,534,283) (11,322,189) (10,573,682)
benefits and terminations
Other transfers (to) from 42,586 85,476 (40,329) 13,593
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 37,632,165 114,504,984 (25,288,795) (44,132,370)
net assets from contract
transactions
Retained in (returned from) (71,526) 65,307 (14,340) (4,565)
Variable Annuity Account I,
net
Total increase (decrease) in 255,204,816 325,790,157 19,677,490 4,386,079
net assets
Net assets at beginning of year 1,066,865,828 741,075,671 328,633,446 324,247,367
Net assets at end of year $ 1,322,070,644 $ 1,066,865,828 $ 348,310,936 $ 328,633,446
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
VIP II - CONTRAFUND
12/31/99 12/31/98
Net investment income (loss) $ (6,442,970) $ (2,358,522)
Net realized gain on 148,645,881 115,223,215
investments
Unrealized appreciation 219,949,013 223,438,815
(depreciation)
Net increase (decrease) in 362,151,924 336,303,508
net assets from operations
Payments received from 50,161,456 40,420,854
contract owners
Transfers between 37,507,774 (39,056,459)
sub-accounts and the fixed
account, net
Transfers for contract (54,008,095) (37,401,390)
benefits and terminations
Other transfers (to) from 107,751 6,747
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 33,768,886 (36,030,248)
net assets from contract
transactions
Retained in (returned from) (51,523) 35,076
Variable Annuity Account I,
net
Total increase (decrease) in 395,869,287 300,308,336
net assets
Net assets at beginning of year 1,518,200,305 1,217,891,969
Net assets at end of year $ 1,914,069,592 $ 1,518,200,305
</TABLE>
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
OF
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
VIP III - GROWTH &
VIP III - BALANCED INCOME
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 1,582,481 $ 944,177 $ (1,572,025) $ (3,314,273)
Net realized gain on 9,204,238 5,622,219 79,107,330 7,089,324
investments
Unrealized appreciation (6,374,709) 6,090,310 (27,907,245) 99,729,988
(depreciation)
Net increase (decrease) in 4,412,010 12,656,706 49,628,060 103,505,039
net assets from operations
Payments received from 6,988,735 6,770,357 29,125,121 35,584,695
contract owners
Transfers between 7,342,988 33,261,216 (55,352,241) 204,942,506
sub-accounts and the fixed
account, net
Transfers for contract (6,160,455) (3,139,722) (22,609,519) (10,371,919)
benefits and terminations
Other transfers (to) from 13,799 (22,185) 31,178 (29,796)
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 8,185,067 36,869,666 (48,805,461) 230,125,486
net assets from contract
transactions
Retained in (returned from) (828) (1,989) (67,783) 55,231
Variable Annuity Account I,
net
Total increase (decrease) in 12,596,249 49,524,383 754,816 333,685,756
net assets
Net assets at beginning of year 111,115,343 61,590,960 587,747,247 254,061,491
Net assets at end of year $ 123,711,592 $ 111,115,343 $ 588,502,063 $ 587,747,247
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP III - GROWTH MSDWUF - EMERGING MARKETS
OPPORTUNITIES EQUITY
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 943,506 $ 478,229 $ (176,889) $ (6,861)
Net realized gain on 49,129,124 18,859,236 2,228,308 198,635
investments
Unrealized appreciation (37,906,680) 56,119,613 16,923,324 (1,271,839)
(depreciation)
Net increase (decrease) in 12,165,950 75,457,078 18,974,743 (1,080,065)
net assets from operations
Payments received from 13,230,641 22,707,942 2,075,239 662,190
contract owners
Transfers between (103,481,122) 46,362,214 40,713,185 3,132,046
sub-accounts and the fixed
account, net
Transfers for contract (10,322,606) (7,734,200) (1,329,321) (41,665)
benefits and terminations
Other transfers (to) from 6,223 18,591 7,833 3,198
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in (100,566,864) 61,354,547 41,466,936 3,755,769
net assets from contract
transactions
Retained in (returned from) (67,342) 54,411 (137) 12
Variable Annuity Account I,
net
Total increase (decrease) in (88,468,256) 136,866,036 60,441,542 2,675,716
net assets
Net assets at beginning of year 415,927,875 279,061,839 4,454,538 1,778,822
Net assets at end of year $ 327,459,619 $ 415,927,875 $ 64,896,080 $ 4,454,538
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MSDWUF - EMERGING MARKETS
DEBT
12/31/99 12/31/98
Net investment income (loss) $ 387,443 $ 224,698
Net realized gain on 52,286 31,585
investments
Unrealized appreciation 182,290 (1,105,348)
(depreciation)
Net increase (decrease) in 622,019 (849,065)
net assets from operations
Payments received from 416,636 385,556
contract owners
Transfers between 273,396 (235,454)
sub-accounts and the fixed
account, net
Transfers for contract (59,988) (2,839)
benefits and terminations
Other transfers (to) from 910 12
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 630,954 147,275
net assets from contract
transactions
Retained in (returned from) 431 (11)
Variable Annuity Account I,
net
Total increase (decrease) in 1,253,404 (701,801)
net assets
Net assets at beginning of year 2,153,635 2,855,436
Net assets at end of year $ 3,407,039 $ 2,153,635
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MSDWUF - GLOBAL EQUITY MSDWUF - INTERNATIONAL
MAGNUM
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 55,482 $ 23,690 $ (4,300) $ (30,488)
Net realized gain on 1,082,452 383,478 87,686 488,359
investments
Unrealized appreciation (647,744) (13,408) 2,474,219 (1,107,058)
(depreciation)
Net increase (decrease) in 490,190 393,760 2,557,605 (649,187)
net assets from operations
Payments received from 1,324,280 2,573,393 396,375 1,938,850
contract owners
Transfers between (3,422,048) 13,267,550 (1,092,928) 9,227,074
sub-accounts and the fixed
account, net
Transfers for contract (484,218) (145,036) (402,623) (174,277)
benefits and terminations
Other transfers (to) from (536) 6,688 2,993 (1,810)
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in (2,582,522) 15,702,595 (1,096,183) 10,989,837
net assets from contract
transactions
Retained in (returned from) (161) 121 22 (20)
Variable Annuity Account I,
net
Total increase (decrease) in (2,092,493) 16,096,476 1,461,444 10,340,630
net assets
Net assets at beginning of year 18,306,967 2,210,491 11,725,836 1,385,206
Net assets at end of year $ 16,214,474 $ 18,306,967 $ 13,187,280 $ 11,725,836
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PBHG - GROWTH II PBHG - SMALL CAP VALUE
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ (200,218) $ (32,504) $ (321,079) $ (218,941)
Net realized gain on 867,275 225,669 2,287,120 1,417,645
investments
Unrealized appreciation 30,717,543 68,354 3,650,843 1,169,066
(depreciation)
Net increase (decrease) in 31,384,600 261,519 5,616,884 2,367,770
net assets from operations
Payments received from 3,883,840 850,883 2,539,992 6,007,615
contract owners
Transfers between 85,042,612 1,772,018 (6,626,178) 25,244,658
sub-accounts and the fixed
account, net
Transfers for contract (345,883) (74,612) (1,238,687) (771,427)
benefits and terminations
Other transfers (to) from 12,078 (85) 2,701 (610)
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 88,592,647 2,548,204 (5,322,172) 30,480,236
net assets from contract
transactions
Retained in (returned from) (138) (2) (155) 55
Variable Annuity Account I,
net
Total increase (decrease) in 119,977,109 2,809,721 294,557 32,848,061
net assets
Net assets at beginning of year 5,011,598 2,201,877 41,078,481 8,230,420
Net assets at end of year $ 124,988,707 $ 5,011,598 $ 41,373,038 41,078,481
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
PBHG - LARGE CAP VALUE
12/31/99 12/31/98
Net investment income (loss) $ (291,007) $ (4,530)
Net realized gain on 3,870,481 599,744
investments
Unrealized appreciation (585,169) 2,352,195
(depreciation)
Net increase (decrease) in 2,994,305 2,947,409
net assets from operations
Payments received from 3,588,662 1,617,512
contract owners
Transfers between 10,944,342 14,686,725
sub-accounts and the fixed
account, net
Transfers for contract (1,118,795) (75,122)
benefits and terminations
Other transfers (to) from 11,457 (38,316)
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 13,425,666 16,190,799
net assets from contract
transactions
Retained in (returned from) 20 (20)
Variable Annuity Account I,
net
Total increase (decrease) in 16,419,991 19,138,188
net assets
Net assets at beginning of year 19,897,931 759,743
Net assets at end of year $ 36,317,922 $ 19,897,931
</TABLE>
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
OF
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
PBHG - TECHNOLOGY & PBHG - SELECT 20
COMMUNICATIONS
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ (2,762,048) $ (111,535) $ (3,174,141) $ (850,513)
Net realized gain on 9,207,801 501,364 36,793,079 4,426,860
investments
Unrealized appreciation 676,031,390 4,097,815 287,462,086 54,862,065
(depreciation)
Net increase (decrease) in 682,477,143 4,487,644 321,081,024 58,438,412
net assets from operations
Payments received from 51,059,274 2,914,877 33,137,434 22,652,708
contract owners
Transfers between 677,999,380 11,118,897 44,079,310 203,599,981
sub-accounts and the fixed
account, net
Transfers for contract (8,579,567) (214,261) (9,333,271) (1,977,564)
benefits and terminations
Other transfers (to) from 260,165 (1,544) 110,152 (152,719)
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 720,739,252 13,817,969 67,993,625 224,122,406
net assets from contract
transactions
Retained in (returned from) 1,563 23 (669) (1,003,458)
Variable Annuity Account I,
net
Total increase (decrease) in 1,403,217,958 18,305,636 389,073,980 281,557,360
net assets
Net assets at beginning of year 25,809,987 7,504,351 288,587,415 7,030,055
Net assets at end of year $ 1,429,027,945 $ 25,809,987 $ 677,661,395 $ 288,587,415
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SVIF - DISCOVERY FUND SVIF - MID CAP GROWTH
II FUND II
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ (18,633) $ (15,019) $ (573,402) $ (51,950)
Net realized gain on 335,679 53,007 1,349,619 177,519
investments
Unrealized appreciation (87,515) 47,865 66,604,569 1,398,499
(depreciation)
Net increase (decrease) in 229,531 85,853 67,380,786 1,524,068
net assets from operations
Payments received from 146,300 491,666 14,044,251 1,725,445
contract owners
Transfers between 289,032 1,159,295 152,381,500 7,060,545
sub-accounts and the fixed
account, net
Transfers for contract (57,132) (73,254) (1,723,645) (127,725)
benefits and terminations
Other transfers (to) from 2,370 1,767 19,917 264
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 380,570 1,579,474 164,722,023 8,658,529
net assets from contract
transactions
Retained in (returned from) (4) (72) (217) 314
Variable Annuity Account I,
net
Total increase (decrease) in 610,097 1,665,255 232,102,592 10,182,911
net assets
Net assets at beginning of year 2,503,055 837,800 11,650,461 1,467,550
Net assets at end of year $ 3,113,152 $ 2,503,055 $ 243,753,053 $ 11,650,461
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SVIF - OPPORTUNITY FUND
II
12/31/99 12/31/98
Net investment income (loss) $ (297,094) $ (86,892)
Net realized gain on 4,031,294 1,495,715
investments
Unrealized appreciation 7,090,430 (453,869)
(depreciation)
Net increase (decrease) in 10,824,630 954,954
net assets from operations
Payments received from 3,435,223 4,918,575
contract owners
Transfers between 12,840,283 18,289,352
sub-accounts and the fixed
account, net
Transfers for contract (1,256,287) (215,435)
benefits and terminations
Other transfers (to) from (5,623) (2)
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 15,013,596 22,992,490
net assets from contract
transactions
Retained in (returned from) 80 (331)
Variable Annuity Account I,
net
Total increase (decrease) in 25,838,306 23,947,113
net assets
Net assets at beginning of year 26,959,500 3,012,387
Net assets at end of year $ 52,797,806 $ 26,959,500
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WPT - SMALL COMPANY WPT - INTERNATIONAL
GROWTH EQUITY
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ (171,003) $ (110,109) $ 92,533 $ (10,297)
Net realized gain on 2,004,345 365,092 179,279 131,244
investments
Unrealized appreciation 12,968,059 (688,006) 3,699,852 (470,679)
(depreciation)
Net increase (decrease) in 14,801,401 (433,023) 3,971,664 (349,732)
net assets from operations
Payments received from 1,350,991 3,197,677 842,164 691,255
contract owners
Transfers between 11,333,526 9,924,432 11,659,796 3,128,429
sub-accounts and the fixed
account, net
Transfers for contract (647,647) (217,900) (267,100) (35,648)
benefits and terminations
Other transfers (to) from (1,097) 2,322 647 41,204
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 12,035,773 12,906,531 12,235,507 3,825,240
net assets from contract
transactions
Retained in (returned from) (334) 832 112 (25,097)
Variable Annuity Account I,
net
Total increase (decrease) in 26,836,840 12,474,340 16,207,283 3,450,411
net assets
Net assets at beginning of year 18,871,505 6,397,165 4,007,860 557,449
Net assets at end of year $ 45,708,345 $ 18,871,505 $ 20,215,143 $ 4,007,860
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WPT - POST-VENTURE TOTAL
CAPITAL
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ (55,782) $ (39,091) $ 79,078,853 $ 78,743,169
Net realized gain on 361,254 267,294 972,232,245 762,593,878
investments
Unrealized appreciation 3,847,450 (324,010) 1,686,291,277 698,755,704
(depreciation)
Net increase (decrease) in 4,152,922 (95,807) 2,737,602,375 1,540,092,751
net assets from operations
Payments received from 346,462 1,694,793 1,678,070,564 1,123,846,738
contract owners
Transfers between 1,608,293 3,942,912 1,748,970 11,223,924
sub-accounts and the fixed
account, net
Transfers for contract (124,952) (40,972) (500,817,028) (381,403,163)
benefits and terminations
Other transfers (to) from 221 (2,354) 678,256 (250,256)
Fidelity Investments Life
Insurance Co., net
Net increase (decrease) in 1,830,024 5,594,379 1,179,680,762 753,417,243
net assets from contract
transactions
Retained in (returned from) 20 (128) (604,517) (707,597)
Variable Annuity Account I,
net
Total increase (decrease) in 5,982,966 5,498,444 3,916,678,620 2,292,802,397
net assets
Net assets at beginning of year 6,739,331 1,240,887 9,812,360,123 7,519,557,726
Net assets at end of year $ 12,722,297 $ 6,739,331 $ 13,729,038,743 $ 9,812,360,123
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
OF
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
1. ORGANIZATION
Fidelity Investments Variable Annuity Account I (the "Account"), a
unit investment trust registered under the Investment Company Act of
1940 as amended, was established by Fidelity Investments Life
Insurance Company (FILI) on July 22, 1987 and exists in accordance
with the regulations of the State of Utah Insurance Department. The
Account is a funding vehicle for individual Fidelity Retirement
Reserves and Fidelity Income Advantage variable annuity contracts.
FILI is a wholly-owned subsidiary of FMR Corp. Under applicable
insurance law, the assets and liabilities of the Account are clearly
identified and distinguished from the other assets and liabilities of
FILI. The Account cannot be charged with liabilities arising out of
any other business of FILI.
In addition to the Account, a contractholder may also allocate funds
to the Fixed Account, which is part of FILI's general account. Because
of exemptive and exclusionary provisions, interests in the Fixed
Account have not been registered under the Securities Act of 1933 and
FILI's general account has not been registered as an investment
company under the Investment Company Act of 1940.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by the Account in preparation of the financial statements
in conformity with generally accepted accounting principles.
INVESTMENT VALUATION
Investments are made by the subaccounts in their corresponding mutual
fund portfolios and are valued at the reported net asset values of
such portfolios.
ACCOUNTING FOR INVESTMENTS
Investment transactions are recorded on the trade date. Income from
dividends is recorded on the ex-dividend date. Realized gains and
losses on the sales of investments are computed on the basis of the
identified cost of the investment sold.
ANNUITY RESERVES
Annuity reserves are computed for contracts in the payout stage
according to the 1983 Individual Annuitant Mortality Table. The
assumed investment return is 3.5% unless the annuitant elects
otherwise, in which case the rate may vary from 3.5% to 7%, as
regulated by the laws of the respective states. The mortality risk is
fully borne by FILI and may result in additional amounts being
transferred into the Account by FILI.
FEDERAL INCOME TAXES
The operations of the Account are included in the federal income tax
return of FILI, which is taxed as a life insurance company under the
provisions of the Internal Revenue Code ("the Code").
Under the current provisions of the Code, FILI does not expect to
incur federal income taxes on the earnings of the Account to the
extent the earnings are credited under the contracts. FILI incurs
federal income taxes on the difference between the financial statement
carrying value of reserves for contracts in the income stage and those
reserves held for federal income tax purposes. The tax effect of this
temporary difference is expected to be recovered by FILI. As such, no
charge is being made currently to the Account for federal income
taxes. FILI will review periodically the status of such decision based
on changes in the tax law. Such a charge may be made in future years
for any federal income taxes that would be attributable to the
contracts.
ESTIMATES
The preparation of the statement of assets and liabilities and the
statements of operations and of changes in net assets in accordance
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the related amounts and
disclosures in the financial statements. Actual results could differ
from those estimates.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with the
current year presentation.
3. EXPENSES
FILI deducts a daily charge from the net assets of the Account for
administrative expenses and for the assumption of mortality risk and
expense risk. The daily charge is equivalent to an annual effective
rate of 1% of net assets for Income Advantage contracts and is
equivalent to an annual effective rate of 0.8% of net assets for
Retirement Reserves contracts. FILI also deducts an annual maintenance
charge of $30 from the Retirement Reserves contract value. The
maintenance charge is waived on certain contracts.
In 1999, FILI began offering Retirement Reserves contractholders the
opportunity to elect a death benefit rider. If elected, FILI deducts a
quarterly charge which will not exceed 0.10% of the Retirement Reserve
contract value on the date of the charge. There will be no charges
made once the annuitant reaches their 85th birthday.
4. AFFILIATED COMPANY TRANSACTIONS
The contracts are distributed through Fidelity Brokerage Services,
Inc. (FBSI), Fidelity Insurance Agency, Inc. (FIA), and Fidelity
Investments Institutional Services Company, Inc. (FIIS), all of which
are affiliated with FMR Corp. FBSI, FIA, and FIIS are the distributors
and FBSI is the principal underwriter of the contracts. Fidelity
Management & Research Company, an affiliate of FMR Corp., acts as
investment advisor to the VIP, VIP II and VIP III portfolios. Fidelity
Investments Institutional Operations Company, Inc., an affiliate of
FMR Corp., is the transfer and shareholder servicing agent for the
VIP, VIP II and VIP III portfolios.
5. PURCHASES AND SALES OF INVESTMENTS
The following table shows aggregate cost of shares purchased and
proceeds from sales of each subaccount for the year ended December 31,
1999:
PURCHASES SALES
VIP - Money Market $ 761,591,353 $ 456,464,644
VIP - High Income 114,614,588 125,337,886
VIP - Equity-Income 181,351,922 415,746,236
VIP - Growth 554,076,266 85,510,250
VIP - Overseas 73,781,115 45,641,426
VIP II - Investment Grade Bond 82,497,677 120,206,583
VIP II - Asset Manager 106,566,746 140,928,128
VIP II - Index 500 221,435,138 175,759,513
VIP II - Asset Manager: Growth 65,188,960 72,428,177
VIP II - Contrafund 256,696,762 174,117,298
VIP III - Balanced 67,707,564 54,839,543
VIP III - Growth & Income 164,527,899 207,370,561
VIP III - Growth Opportunities 49,272,147 141,189,921
MSDWUF - Emerging Markets 62,474,483 21,184,573
Equity
MSDWUF - Emerging Markets Debt 8,145,756 7,126,928
MSDWUF - Global Equity 7,236,563 8,994,665
MSDWUF - International Magnum 11,726,626 12,770,586
PBHG - Growth II 93,891,460 5,499,169
PBHG - Small Cap Value 23,534,140 29,177,546
PBHG - Large Cap Value 30,255,243 16,238,075
PBHG - Technology & 743,673,703 25,694,936
Communications
PBHG - Select 20 183,360,841 118,542,026
SVIF - Discovery Fund II 3,804,697 3,149,931
SVIF - Mid Cap Growth Fund II 169,254,987 5,077,532
SVIF - Opportunity Fund II 30,210,304 12,507,757
WPT - Small Company Growth 25,543,796 12,515,116
WPT - International Equity 20,011,957 7,683,805
WPT - Post-Venture Capital 5,533,282 3,759,020
6. UNIT VALUES
A summary of changes in accumulation units and ending unit and
contract values for variable annuity contracts at December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
BEGINNING PAYMENTS TRANSFERS CONTRACT ENDING ENDING
BALANCE RECEIVED BETWEEN TERMINATIONS BALANCE BALANCE
UNITS FROM SUBACCOUNTS, UNITS UNIT
CONTRACT NET VALUE
OWNERS
JANUARY 1, 1999 TO DECEMBER
31, 1999
VIP - Money Market 42,335,962 65,024,585 (41,035,176) (8,887,660) 57,437,711 $ 17.441547
VIP - High Income 9,274,597 356,331 (1,152,725) (577,959) 7,900,244 $ 29.532615
VIP - Equity-Income 34,627,026 449,858 (5,652,786) (1,641,911) 27,782,187 $ 46.009566
VIP - Growth 22,783,884 917,019 4,471,613 (1,275,819) 26,896,697 $ 80.674535
VIP - Overseas 9,537,903 253,497 597,373 (505,710) 9,883,063 $ 37.223575
VIP II - Investment Grade Bond 11,642,575 594,181 (2,212,000) (1,098,275) 8,926,481 $ 19.870115
VIP II - Asset Manager 27,415,335 383,845 (1,751,559) (2,091,084) 23,956,537 $ 31.190611
VIP II - Index 500 32,083,136 1,235,693 661,926 (1,547,376) 32,433,379 $ 37.781601
VIP II - Asset Manager: Growth 14,675,155 433,529 (1,260,297) (799,765) 13,048,622 $ 23.934865
VIP II - Contrafund 55,426,745 1,771,928 970,357 (2,703,228) 55,465,802 $ 32.540456
VIP III - Balanced 6,933,405 490,301 166,077 (785,249) 6,804,534 $ 14.501916
VIP III - Growth & Income 32,986,321 1,728,512 (3,180,687) (2,214,891) 29,319,255 $ 17.646534
VIP III - Growth Opportunities 25,247,156 840,484 (6,314,478) (873,262) 18,899,900 $ 16.153367
MSDWUF - Emerging Markets 586,128 192,894 3,620,769 (244,810) 4,154,981 $ 14.679023
Equity
MSDWUF - Emerging Markets Debt 280,904 49,309 27,232 (11,517) 345,928 $ 9.552515
MSDWUF - Global Equity 1,504,399 113,578 (260,807) (55,665) 1,301,505 $ 11.916163
MSDWUF - International Magnum 998,415 34,400 (56,609) (33,180) 943,026 $ 13.230131
PBHG - Growth II 439,863 237,579 4,898,992 (59,641) 5,516,793 $ 21.422237
PBHG - Small Cap Value 3,428,665 226,116 (501,445) (218,824) 2,934,512 $ 13.200297
PBHG - Large Cap Value 1,331,167 249,185 780,998 (157,007) 2,204,343 $ 15.178062
PBHG - Technology & 1,929,033 2,150,661 28,462,505 (976,099) 31,566,100 $ 42.930574
Communications
PBHG - Select 20 16,529,457 1,757,084 1,889,829 (991,944) 19,184,426 $ 33.424799
SVIF - Discovery Fund II 215,120 15,494 32,424 (240) 262,798 $ 10.752497
SVIF - Mid Cap Growth Fund II 832,891 771,508 7,775,504 (185,340) 9,194,563 $ 24.646794
SVIF - Opportunity Fund II 2,219,038 257,304 858,223 (153,946) 3,180,619 $ 15.294116
WPT - Small Company Growth 1,848,787 116,290 791,446 (176,432) 2,580,091 $ 16.470689
WPT - International Equity 374,074 60,831 828,057 (18,380) 1,244,582 $ 15.725838
WPT - Post-Venture Capital 588,128 28,870 90,036 (12,779) 694,255 $ 17.570342
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
JANUARY 1, 1999 TO DECEMBER
31, 1999
VIP - Money Market $ 1,001,802,532
VIP - High Income 233,314,877
VIP - Equity-Income 1,278,246,354
VIP - Growth 2,169,878,531
VIP - Overseas 367,882,944
VIP II - Investment Grade Bond 177,370,216
VIP II - Asset Manager 747,219,001
VIP II - Index 500 1,225,385,001
VIP II - Asset Manager: Growth 312,317,022
VIP II - Contrafund 1,804,882,506
VIP III - Balanced 98,678,783
VIP III - Growth & Income 517,383,238
VIP III - Growth Opportunities 305,297,025
MSDWUF - Emerging Markets 60,991,052
Equity
MSDWUF - Emerging Markets Debt 3,304,486
MSDWUF - Global Equity 15,508,952
MSDWUF - International Magnum 12,476,345
PBHG - Growth II 118,182,069
PBHG - Small Cap Value 38,736,436
PBHG - Large Cap Value 33,457,653
PBHG - Technology & 1,355,150,794
Communications
PBHG - Select 20 641,235,580
SVIF - Discovery Fund II 2,825,743
SVIF - Mid Cap Growth Fund II 226,616,507
SVIF - Opportunity Fund II 48,644,756
WPT - Small Company Growth 42,495,873
WPT - International Equity 19,572,101
WPT - Post-Venture Capital 12,198,288
$ 12,871,054,665
</TABLE>
6. UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
BEGINNING PAYMENTS TRANSFERS CONTRACT ENDING ENDING
BALANCE RECEIVED BETWEEN TERMINATIONS BALANCE BALANCE
UNITS FROM SUBACCOUNTS, UNITS UNIT
CONTRACT NET VALUE
OWNERS
JANUARY 1, 1998 TO DECEMBER
31, 1998
VIP - Money Market 28,256,730 53,473,071 (31,221,377) (8,172,462) 42,335,962 $ 16.718442
VIP - High Income 10,481,116 651,046 (1,222,100) (635,465) 9,274,597 $ 27.525979
VIP - Equity-Income 40,838,032 680,307 (4,883,340) (2,007,973) 34,627,026 $ 43.619607
VIP - Growth 23,048,124 503,652 247,746 (1,015,638) 22,783,884 $ 59.172379
VIP - Overseas 10,512,524 249,861 (808,508) (415,974) 9,537,903 $ 26.308910
VIP II - Investment Grade Bond 5,524,907 601,825 6,493,163 (977,320) 11,642,575 $ 20.242828
VIP II - Asset Manager 30,320,855 477,314 (1,046,747) (2,336,087) 27,415,335 $ 28.302849
VIP II - Index 500 28,695,264 1,600,404 3,712,872 (1,925,404) 32,083,136 $ 31.604128
VIP II - Asset Manager: Growth 17,201,030 608,493 (2,402,390) (731,978) 14,675,155 $ 20.933935
VIP II - Contrafund 57,789,065 1,791,259 (1,947,601) (2,205,978) 55,426,745 $ 26.399736
VIP III - Balanced 4,649,810 524,844 2,527,177 (768,426) 6,933,405 $ 13.982944
VIP III - Growth & Income 18,798,233 2,515,821 14,337,709 (2,665,442) 32,986,321 $ 16.294958
VIP III - Growth 21,154,834 1,669,675 3,510,201 (1,087,554) 25,247,156 $ 15.616534
Opportunities
MSDWUF - Emerging Markets 176,936 69,786 348,445 (9,039) 586,128 $ 7.561799
Equity
MSDWUF - Emerging Markets 270,613 37,746 (18,180) (9,275) 280,904 $ 7.443062
Debt
MSDWUF - Global Equity 214,479 228,308 1,160,084 (98,472) 1,504,399 $ 11.539332
MSDWUF - International Magnum 126,071 175,181 806,757 (109,594) 998,415 $ 10.652996
PBHG - Growth II 198,868 83,110 167,957 (10,072) 439,863 $ 10.895644
PBHG - Small Cap Value 760,923 539,438 2,325,754 (197,450) 3,428,665 $ 11.477768
PBHG - Large Cap Value 71,061 134,930 1,218,750 (93,574) 1,331,167 $ 14.051655
PBHG - Technology & 746,784 277,870 978,928 (74,549) 1,929,033 $ 12.942126
Communications
PBHG - Select 20 551,473 1,714,311 15,088,136 (824,463) 16,529,457 $ 16.795293
SVIF - Discovery Fund II 69,087 49,186 115,355 (18,508) 215,120 $ 10.314283
SVIF - Mid Cap Growth Fund II 139,945 154,865 608,714 (70,633) 832,891 $ 13.084892
SVIF - Opportunity Fund II 277,353 444,329 1,651,011 (153,655) 2,219,038 $ 11.428140
WPT - Small Company Growth 596,845 317,788 1,001,041 (66,887) 1,848,787 $ 9.819912
WPT - International Equity 54,981 62,350 268,596 (11,853) 374,074 $ 10.331959
WPT - Post-Venture Capital 120,198 154,767 349,002 (35,839) 588,128 $ 10.833075
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
DOLLARS
JANUARY 1, 1998 TO DECEMBER
31, 1998
VIP - Money Market $ 707,791,321
VIP - High Income 255,292,340
VIP - Equity-Income 1,510,417,235
VIP - Growth 1,348,176,594
VIP - Overseas 250,931,855
VIP II - Investment Grade Bond 235,678,611
VIP II - Asset Manager 775,932,084
VIP II - Index 500 1,013,959,556
VIP II - Asset Manager: Growth 307,208,746
VIP II - Contrafund 1,463,251,419
VIP III - Balanced 96,949,417
VIP III - Growth & Income 537,510,714
VIP III - Growth 394,273,082
Opportunities
MSDWUF - Emerging Markets 4,432,182
Equity
MSDWUF - Emerging Markets 2,090,788
Debt
MSDWUF - Global Equity 17,359,758
MSDWUF - International Magnum 10,636,111
PBHG - Growth II 4,792,592
PBHG - Small Cap Value 39,353,426
PBHG - Large Cap Value 18,705,104
PBHG - Technology & 24,965,791
Communications
PBHG - Select 20 277,617,062
SVIF - Discovery Fund II 2,218,812
SVIF - Mid Cap Growth Fund II 10,898,297
SVIF - Opportunity Fund II 25,359,470
WPT - Small Company Growth 18,154,923
WPT - International Equity 3,864,918
WPT - Post-Venture Capital 6,371,227
$ 9,364,193,435
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contractholders of Fidelity Investments Variable Annuity
Account I of Fidelity Investments Life Insurance Company:
In our opinion, the accompanying statement of assets and liabilities
and the related statements of operations and of changes in net assets
present fairly, in all material respects, the financial position of
each of the subaccounts constituting the Fidelity Investments Variable
Annuity Account I of Fidelity Investments Life Insurance Company at
December 31, 1999, and the results of each of their operations and the
changes in each of their net assets for each of the two years in the
period then ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial
statements are the responsibility of Fidelity Investments Life
Insurance Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of investments at December 31, 1999 by correspondence with the funds,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 25, 2000
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a) Financial Statements included in Part B
The following financial statements of Fidelity Investments Variable
Annuity Account I and of Fidelity Investments Life Insurance Company
are filed in Part B. (Note 1)
Statement of Assets and Liabilities for Fidelity Investments
Variable Annuity Account I as of December 31, 1999. (Note 1)
Statements of Operations and Changes in Net Assets for Fidelity
Investments Variable Annuity Account I for Years Ended December 31,
1999 and 1998. (Note 1)
Report of PricewaterhouseCoopers LLP on the Financial Statements of
Fidelity Investments Variable Annuity Account I. (Note 1)
Balance Sheets of Fidelity Investments Life Insurance Company as of
December 31, 1999 and 1998. (Note 1)
Consolidated Statements of Income for Fidelity Investments Life
Insurance Company for the Years Ended December 31, 1999, 1998 and
1997. (Note 1)
Consolidated Statements of Changes in Stockholder's Equity for
Fidelity Investments Life Insurance Company for the Years Ended
December 31, 1999, 1998 and 1997. (Note 1)
Consolidated Statements of Cash Flows for Fidelity Investments Life
Insurance Company for the Years Ended December 31, 1999, 1998 and
1997. (Note 1)
Report of PricewaterhouseCoopers L.L.P. on Financial Statements of
Fidelity Investments Life Insurance Company. (Note 1)
There are no financial statements included in Part A, other than
Accumulation Unit Values.
b) Exhibits
(1) Resolution of Board of Directors of Fidelity Investments Life
Insurance Company ("Fidelity Investments Life") establishing the
Fidelity Investments Variable Annuity Account I. (Note 1)
(2) Not Applicable.
(3) (a) Distribution Agreement between Fidelity Investments Life,
Fidelity Insurance Agency and Fidelity Brokerage Services, Inc. (Note
1)
(b) Commission Schedule. (Note 1)
(4) (a) Specimen Variable Annuity Contract. (Note 1)
(b) Specimen Variable Annuity Contract for Use with Sponsored
Arrangements.
(Note 1)
(c) Endorsement for Qualified Contracts. (Note 1)
(5) (a) Application for Variable Annuity Contract. (Note 1)
(b) Application for Variable Annuity Contract for Use
with Sponsored Arrangements. (Note 1)
(6) (i) Articles of Domestication of Fidelity Investments Life.
(Note 1)
(ii) Revised Bylaws of Fidelity Investments Life. (Note 1)
(7) Not Applicable.
(8) Not Applicable
(9) Opinion and consent of David J. Pearlman, as to the legality
of securities being issued.
(Note 6).
(10) Written consent of PricewaterhouseCoopers LLP (Note 6)
Written consent of Jorden Burt Boros Cicchetti Berenson & Johnson
LLP (Note 6)
(11) Not Applicable.
(12) Not Applicable.
(13) Performance Advertising Calculations (Note 1)
(14) (a) Form of Participation Agreement between Fidelity
Investments Life and Variable Insurance Products Fund. (Note 1)
(b) Form of Participation Agreement between Fidelity Investments
Life and Variable Insurance Products Fund II. (Note 1)
`
(c) Form of Participation Agreement between Fidelity Investments
Life and Variable Insurance Products Fund III. (Note 1)
(d) Form of Participation Agreement between Fidelity Investments
Life and Strong Variable Insurance Funds, Inc. on behalf of the
Portfolios, and Strong Opportunity Fund II, Inc., Strong Capital
Management, Inc. (the "Adviser"), (Note 3)
(e) Form of Participation Agreement between Fidelity Investments
Life and PBHG INSURANCE SERIES FUND, INC. ("FUND"), and PILGRIM
BAXTER & ASSOCIATES, LTD. ("ADVISER"). (Note 3)
`
(f) Form of Participation Agreement between Fidelity Investments
Life and MORGAN STANLEY UNIVERSAL FUNDS, INC. (the "Fund"), and MORGAN
STANLEY ASSET MANAGEMENT INC. and MILLER ANDERSON & SHERRERD, LLP (the
"Advisers"). (Note 4)
(g) Form of Participation Agreement between Fidelity Investments
Life and Warburg, Pincus Trust, (the "Fund"); Warburg, Pincus
Counsellors, Inc. (the "Adviser"); and Counsellors Securities Inc.
(Note 4)
(h) Form of Distribution Agreement effective as of August 12, 1999
by and among Fidelity Investments Life Insurance Company, Fidelity
Brokerage Services, Inc. and Pacific Guardian Life Insurance Company,
Limited. (Note 6)
(15) Powers of Attorney
Powers of Attorney (Note 2)
Power of Attorney for Stephen P. Jonas and David C. Weinstein (Note
5)
(Note 1) Incorporated by reference from Post-Effective Amendment No.
11 to this Registration Statement filed electronically on April 27,
1997.
(Note 2) Incorporated by reference from Post-Effective Amendment No.
10 to this Registration Statement filed on April 26, 1996.
(Note 3) Incorporated by reference from Post-Effective Amendment No.
12 to this Registration Statement filed electronically on August 29,
1997.
(Note 4) Incorporated by reference from Post-Effective Amendment No.
13 to this Registration Statement filed electronically on April 29,
1998.
(Note 5) Incorporated by reference from Post-Effective Amendment No.
15 to this Registration Statement filed on January 25, 1999.
(Note 6) Filed herein.
Item 25. Directors and Officers of the Depositor
The directors and officers of Fidelity Investments Life are as
follows:
Directors of Fidelity Investments Life
EDWARD C. JOHNSON 3d, Director
J. GARY BURKHEAD, Director
JAMES C. CURVEY, Director
JOHN J. REMONDI, Director
RODNEY R. ROHDA, Director and Chairman
STEPHEN P. JONAS, Director
DAVID C. WEINSTEIN, Director
Executive Officers Who Are Not Directors
Executive officers of Fidelity Investments Life who are not
directors are as follows:
JOSEPH L. KURTZER, JR., Treasurer
DAVID J. PEARLMAN, Vice President, Senior Legal Counsel and
Secretary
MELANIE CALZETTI-SPAHR, Executive Vice President, Operations
The principal business address of all persons listed in Item 25 is 82
Devonshire Street, Boston, Massachusetts 02109.
Item 26. Persons Controlled By or Under Common Control with the
Depositor or Registrant.
See Exhibit 26 of the original registration statement on Form N-4
filed August 17, 1991, Reg. No. 33-42376, on behalf of Empire Fidelity
Investments Variable Annuity Account A, which is incorporated herein
by reference.
Item 27. Number of Contract Owners.
On December 31, 1999, there were 8,653 Qualified Contracts and
119,292 Non-qualified Contracts.
Item 28. Indemnification
FMR Corp. and its subsidiaries own a directors' and officers'
liability reimbursement contract (the "Policy"), issued by National
Union Fire Insurance Company, that provides coverage for "Loss" (as
defined in the Policy) arising from any claim or claims by reason of
any breach of duty, neglect, error, misstatement, misleading
statement, omission or other act done or wrongfully attempted by a
person while he or she is acting in his or her capacity as a director
or officer. The coverage is provided to these insureds, including
Fidelity Investments Life, to the extent required or permitted
according to applicable law, common or statutory, or under their
respective charters or by-laws, to indemnify directors or officers for
Loss arising from the above-described matters. Coverage is also
provided to the individual directors or officers for such Loss, for
which they shall not be indemnified, subject to relevant contract
exclusions. Loss is essentially the legal liability on claims against
a director or officer, including damages, judgements, settlements,
costs, charges and expenses (excluding salaries of officers or
employees) incurred in the defense of actions, suits or proceedings
and appeals therefrom.
There are a number of exclusions from coverage. Among the matters
excluded are Losses arising as the result of (1) fines or penalties
imposed by law or other matters that may be deemed uninsurable under
the law pursuant to which the Policy is construed, (2) claims brought
about or contributed to by the fraudulent, dishonest, or criminal acts
of a director or officer, (3) any claim made against the directors or
officers for violation of any of the responsibilities, obligations, or
duties imposed upon fiduciaries by the Employee Retirement Income
Security Act of 1974 or amendments thereto, (4) professional errors or
omissions, and (5) claims for an accounting of profits in fact made
from the purchase or sale by a director or officer of any securities
of the insured corporations within the meaning of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any state statutory law.
The limit of coverage of the Policy is $10 million, as an annual
aggregate limit, with 95% co-insurance for the first $1 million of
coverage, and with a deductible of $500,000 in the event that Fidelity
Investments Life indemnifies the director or officer, or a deductible
of $5,000 per individual director or officer (with a maximum aggregate
per loss deductible of $25,000) if Fidelity Investments Life does not
indemnify the director or officer.
Utah law (Revised Business Corporation Act (sub-section)16-10a-901 et
seq.) provides, in substance, that a corporation may indemnify a
director, officer, employee or agent against liability if he acted in
good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
The Text of Article XIV of Fidelity's By-Laws, which relates to
indemnification of the directors and officers, is as follows:
INDEMNIFICATION OF DIRECTORS, OFFICERS AND PERSONS
ADMINISTERING EMPLOYEE BENEFIT PLANS
Each officer or Director or former officer or Director of the
Corporation, and each person who shall, at the Corporation's request,
have served as an officer or director of another corporation or as
trustee, partner or officer of a trust, partnership or association,
and each person who shall, at the Corporation's request, have served
in any capacity with respect to any employee benefit plan, whether or
not then in office then serving with respect to such employee benefit
plan, and the heirs, executors, administrators, successors and assigns
of each of them, shall be indemnified by the Corporation against all
satisfaction of judgements, in compromise and or as fines or penalties
and fees and disbursement of counsel, imposed upon or reasonably
incurred by him or them in connection with or arising out of any
action, suit or proceeding, by reason of his being or having been such
officer, trustee, partner or director, or by reason of any alleged act
or omission by him in such capacity or in serving with respect to an
employee benefit plan, including the cost of reasonable settlements
(other than amounts paid to the Corporation itself) made with a view
to curtailment of costs of litigation.
The Corporation shall not, however, indemnify any such person, or his
heirs, executors, administrators, successors, or assigns, with respect
to any matter as to which his conduct shall be finally adjudged in any
such action, suit, or proceedings to constitute willful misconduct or
recklessness or to the extent that such matter relates to service with
respect to any employee benefit plan, to not be in the best interest
of the participants or beneficiaries of such employee benefit plan.
Such indemnification may include payment by the Corporation of
expenses incurred in defending any such action, suit, or proceeding in
advance of the final disposition thereof, upon receipt of an
undertaking by or on behalf of the person indemnified to repay such
payment if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation. Such undertaking may be
accepted by the corporation without reference to the financial ability
of such person to make repayment.
The foregoing rights of indemnification shall not be exclusive of
other rights to which any such director, officer, trustee, partner or
person serving with respect to an employee benefit plan may be
entitled as a matter of law. These indemnity provisions shall be
separable, and if any portion thereof shall be finally adjudged to be
invalid, such invalidity shall not affect any other portion which can
be given effect.
The Board of Directors may purchase and maintain insurance on behalf
of any persons who is or was a Director, officer, trustee, partner,
employee or other agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, trustee,
partner, employee or other agent of another corporation, association,
trust or partnership, against any liability incurred by him in any
such, whether or not the Corporation would have the power to indemnify
him against such liability.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director or officer, or controlling persons of
the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
its is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 29. Principal Underwriters.
(a) Fidelity Brokerage Services, Inc. acts as distributor for other
variable life and variable annuity contracts registered by separate
accounts of Fidelity Investments Life, Empire Fidelity Investments
Life Insurance Company, and PFL Life Insurance Company.
(b)
Name and Principal Positions and Offices with Underwriter
Business Address
Tracey E. Curvey Executive Vice President, On-Line Brokerage
J. Gary Burkhead Director
Kevin J. Kelly Director
Robert P. Mazzarella Director, Chief Operating Officer and President
Rodney R. Rohda Director
J. Peter Benzie Executive Vice President, National Sales
Edward L. McCartney Executive Vice Pres., Telephone Sales and
Operations
Leonard Stecklow Executive Vice President
Stephen J. Phillips Senior Vice President
Bruce MacAlpine Vice President, Spartan Brokerage
Gary Greenstein Assistant Treasurer
Jeffrey R. Larsen Clerk and Chief Legal Counsel
Jay Freedman Assistant Clerk
Richelle S. Kennedy Assistant Clerk
Joseph T. Castro Compliance Officer
Erica Johnson Compliance Registered Options Principal
(c) Commissions and other compensation received by principal
underwriter.
See Item 24 (b)(3)(b). No compensation was received by the principal
underwriter from the registrant or depositor during the registrant's
or depositor's last fiscal year.
The address for each person named in Item 29 is 82 Devonshire Street,
Boston, Massachusetts 02109.
Item 30. Location of Accounts and Records
The records regarding the Account required to be maintained by
Section 31(a) of the Investment Company Act of 1940, and Rules 31a-1
to 31a-3 promulgated thereunder, are maintained at Fidelity
Investments Life Insurance Company at 82 Devonshire Street, Boston,
Massachusetts 02109.
Item 31. Management Services
Not applicable
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that
the audited financial statements in the Registration Statement are
never more than 16 months old for so long as payments under the
variable annuity contracts may be accepted.
(b) Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a postcard or similar written communication
affixed to or included in the prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request.
(d) Registrant represents that it meets the definition of a "separate
account" under the federal securities laws.
(e) Fidelity Investment Life Insurance Company hereby represents that
the aggregate charges under the variable annuity policy ("the
contract") offered by Fidelity Investment Life Insurance Company are
reasonable in relation to services rendered, the expenses expected to
be incurred, and the risks assumed by Fidelity Investment Life
Insurance Company
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, Fidelity Investments Variable Annuity
Account I, certifies that it meets the requirements of the Securities
Act Rule 485(b) for effectiveness of this Registration Statement and
has caused this Post-Effective Amendment No. 18 to the Registration
Statement to be signed on its behalf in the city of Boston and the
Commonwealth of Massachusetts, on this 24th day of April, 2000.
FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT I
(Registrant)
By: FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Rodney R. Rohda Attest: /s/ David J. Pearlman
Rodney R. Rohda, David J. Pearlman,
President, Chairman, Secretary
Chief Operating Officer and
Chief Executive Officer
As required by the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities
indicated on this 24th day of April, 2000.
Signature Title
/s/ Rodney R. Rohda President, Chairman and Director
Rodney R. Rohda (Chief Executive Officer)
(Chief Operating Officer)
________________ )
Joseph L. Kurtzer Jr. Treasurer )
)
________________ )
Edward C. Johnson 3d Director )
)
________________ )
J. Gary Burkhead Director ) By: /s/ David J. Pearlman
) David J. Pearlman
_________________ ) (Attorney-in-Fact)
James C. Curvey Director )
)
_________________ )
John J. Remondi Director )
)
_________________ )
David C. Weinstein Director )
)
_________________ )
Stephen P. Jonas Director )
EXHIBIT INDEX
Exhibit
(9) Opinion and consent of David J. Pearlman,
as to the legality of securities being issued.
(10)(a) Written consent of PricewaterhouseCoopers LLP.
(10)(b) Written consent of Jorden Burt Boros Cicchetti Berenson &
Johnson LLP.
FIDELITY (LOGO) FMR Corp. 82 Devonshire
INVESTMENTS(registered Street Boston MA 02109-3614
trademark) 617 563 7000
April 24, 2000
Board of Directors
Fidelity Investments Life Insurance Company
82 Devonshire Street
Boston, MA 02109
Ladies and Gentlemen:
In my capacity as Associate General Counsel of FMR Corp., the parent
company of Fidelity Investments Life Insurance Company ("Fidelity
Life"), I have provided legal advice to Fidelity Life with respect to
the establishment of Fidelity Investments Variable Annuity Account I
(the "Account") pursuant to the laws of the Commonwealth of
Pennsylvania, and its continuance following the redomestication of
Fidelity Life under the applicable provisions of the laws of the State
of Utah. The Account was established by unanimous consent of the
Board of Directors of Fidelity Life on July 22, 1987 and its existence
continued without interruption following the redomestication of
Fidelity Life to Utah on November 10, 1992. The Account exists for
the investment of assets under certain variable annuity contracts (the
"Contracts") issued by Fidelity Life. I have participated in the
preparation and review of Post-Effective Amendment No. 18 to the
Registration Statement on Form N-4 for the registration of the
Contracts with the Securities and Exchange Commission under the
Securities Act of 1933, Reg. No. 33-24400, and the registration of the
Account under the Investment Company Act of 1940.
I am of the following opinion:
(1) Fidelity Life is duly organized and validly existing under the
laws of the State of Utah.
(2) The Account is duly organized and validly existing as a separate
account of Fidelity Life under the laws of the State of Utah.
(3) The portion of the assets to be held in the Account equal to the
reserve and other liabilities for variable benefits under the
Contracts is not chargeable with liabilities arising out of any other
business Fidelity Life may conduct.
(4) The Contracts, when issued as set forth in the Registration
Statement, will be legal and binding obligations of Fidelity Life in
accordance with their terms.
In arriving at the foregoing opinion, I have made such examination of
law and examined such records and other documents as I judged to be
necessary or appropriate.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement, and to the reference to my name under the
heading "Legal Matters" in the Statement of Additional Information.
Very truly yours,
/s/ David J. Pearlman
David J. Pearlman
April 24, 2000
Fidelity Investments Life Insurance Company
Fidelity Investments Variable Annuity Account I
82 Devonshire Street
Boston, Massachusetts 02109
Re: Registration No. 33-24400
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption
"Legal Matters" in the Statement of Additional Information contained
in Post-Effective Amendment No. 18 to the Registration Statement on
Form N-4 (File No. 33-24400) for Fidelity Investments Variable Annuity
Account I filed by the Account with the Securities and Exchange
Commission pursuant to the Securities Act of 1933.
Very truly yours,
JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON LLP
By: /s/ Michael Berenson
Michael Berenson
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional
Information constituting part of this Post-Effective Amendment No. 18
to the registration statement on Form N-4 of our reports dated January
25, 2000, relating to the consolidated financial statements of
Fidelity Investments Life Insurance Company and the financial
statements of Fidelity Investments Variable Annuity Account I, both of
which appear in the Statement of Additional Information. We also
consent to the reference to us under the heading "Independent
Accountants" in such Statement of Additional Information.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
April 20, 2000
DISTRIBUTION AGREEMENT
This Agreement is entered into effective as of August 12, 1999 by and
among Fidelity Investments Life Insurance Company ("FILI"), Fidelity
Brokerage Services, Inc. ("FBSI") and Pacific Guardian Life Insurance
Company, Limited ("PGL").
In consideration of the mutual covenants and promises set forth
herein below, the parties do hereby agree as follows:
ARTICLE I. DEFINITIONS
1. "Contracts" means all variable annuity contracts issued by FILI.
2. "Fund" means the mutual fund investment options available under
the Contracts.
3. "1933 Act" means the Securities Act of 1933, as amended.
4. "1934 Act" means the Securities Exchange Act of 1934, as amended.
5. "1940 Act" means the Investment Company Act of 1940, as amended.
6. "Participation Agreement" refers to one or more participation
agreements to which FILI and the Funds are parties. Each
Participation Agreement, whether currently in existence or entered
into in the future, is incorporated herein by this reference.
7. "Payments" means all purchase payments made with respect to any
Contract, including initial and any subsequent purchase payments.
8. "Prospectus" means any prospectus included within any
Registration Statement for any Contract or Fund, including any
prospectus filed pursuant to Rule 424 or Rule 497 under the 1933 Act.
9. "Registration Statement" means the currently effective
registration statement or currently post-effective amendment thereto
relating to any Contract and/or Variable Account, including financial
statements and all exhibits thereto.
10. "SEC" means the United States Securities and Exchange
Commission.
11. "Variable Account" means each separate account of FILI
supporting any Contract, whether now in existence or established by
FILI in the future to support any Contract. A Variable Account may
consist of one or more divisions, each investing in shares of a Fund.
ARTICLE II. AGREEMENTS OF FILI
1. FILI hereby appoints PGL as its independent general agent for
sale of the Contracts in the State of Hawaii.
2. FILI, during the term of this Agreement, will immediately notify
FBSI and PGL in writing of the following:
(a) When the Registration Statement for any Contract has become
effective or when any amendment with respect to the Registration
Statement thereafter becomes effective;
(b) Any request by the SEC for any amendments or supplements to the
Registration Statement for any Contract or of any request for
additional information that must be provided by FBSI;
(c) The issuance by the SEC of any stop order with respect to the
Registration Statement for any Contract or any amendments thereto or
the initiation of any proceedings for that purpose or for any other
purpose relating to the registration and/or offering of the Contracts;
(d) Whether approval of the Contract forms is required under the laws
of Hawaii, and whether and when such approvals have been obtained.
FILI will be responsible for obtaining any and all approvals for
Contract forms in accordance with Hawaii laws, rules and regulations.
3. FILI will compile periodic marketing reports summarizing sales
results to the extent reasonably requested by FBSI or PGL.
4. FILI will provide to FBSI and PGL at least one complete copy of
all currently effective prospectuses, statements of additional
information and reports, that relate to the Contracts or a Variable
Account, after the filing of such document with the SEC.
5. FILI will keep appropriate books and records for FBSI, in
conformity with Rules 17a-3 and 17a-4 under the 1934 Act, showing all
commissions paid, all initial sales of contracts, all subsequent
Payments made by Contract owners, and such other information as may be
required from time to time by the SEC or the NASD. Such books and
records shall be the property of FILI and FBSI, available to each of
them immediately upon demand. Upon reasonable notice to FILI or FBSI,
PGL shall have full and free access, during ordinary business hours,
to such books and records.
ARTICLE III. AGREEMENTS OF FBSI AND PGL
1. FBSI represents and warrants that it is a broker-dealer duly
registered under the 1934 Act and a member of the National Association
of Securities Dealers, Inc. ("NASD").
2. PGL represents and warrants that it is a Hawaii domestic
insurance company, and that it will (i) not solicit sales of the
Contracts anywhere except in the State of Hawaii and (ii) not solicit
sales of the Contracts except through registered representatives of
FBSI. PGL will notify FILI promptly of each sub-agent it appoints to
sell the Contracts under this Agreement.
3. FBSI and PGL each agrees that it will be solely responsible for
carrying out its duties under this Agreement, and that they will do so
in material compliance with all applicable laws and regulations.
4. FBSI will sell the Contracts only through its registered
representatives who hold the requisite federal securities and Hawaii
resident or non-resident agent insurance licenses and have been
appointed as agents by FILI and as sub-agents by PGL. FILI, on behalf
of FBSI, will request of PGL that FBSI registered representatives
holding non-resident agent licenses be appointed as sub-agents of PGL,
and PGL will appoint such persons as its sub-agents, provided that PGL
may refuse to appoint any such person as sub-agent if doing so would
place PGL in violation of any applicable law or regulation, or PGL
Company policy. Once a sub-agent is appointed, PGL reserves the right
to terminate such appointment. FBSI shall use its best efforts to
maintain its registration under the 1934 Act and to continue to be a
member in good standing of the NASD. PGL shall use its best efforts
to maintain its qualification to act as a general agent in Hawaii.
FBSI shall be responsible for ensuring that its registered
representatives soliciting sales of the Contracts pass all necessary
NASD and Hawaii insurance exams, and take all actions necessary to
continue to qualify as registered representatives and insurance agents
in Hawaii, including continuing education requirements. FBSI shall
investigate the business reputation of all registered representatives
offering the Contracts, and their competence to sell the Contracts.
FBSI shall ensure that FBSI's registered representatives are
adequately and diligently trained, and shall be solely responsible for
their supervision. If any registered representative of FBSI fails to
maintain any required license and/or appointment or fails to meet
supervisory standards imposed by FILI, FBSI or PGL, FBSI shall
immediately notify FILI and PGL and shall advise such registered
representative that he or she is no longer authorized to offer or sell
the Contracts. FBSI shall establish any procedures necessary to
ensure that all required licenses, appointments and designations are
maintained by its registered representatives. Upon request by FILI or
PGL, FBSI shall furnish such records as are necessary to establish
that the foregoing requirements are being met.
5. FBSI shall ensure that retail sales of the Contracts made by its
registered representatives are made only where such sales constitute
suitable purchases under all applicable securities and insurance laws
and regulations.
6. FBSI agrees to use its best efforts to solicit applications for
the Contracts.
7. FBSI and PGL shall not engage in servicing the Contract. All
service requests shall be directed to FILI's Service Center in
accordance with such procedures as FILI may adopt from time to time.
8. All Payments and applications for Contracts sold under this
Agreement shall be sent directly to FILI's Service Center. Any money
received by PGL or a FBSI registered representative shall be remitted
promptly in full together with the application and any other forms
received by PGL or the registered representative and any other
documentation to the Service Center. Checks or money orders
representing Payments under the Contracts shall be drawn to the order
of "Fidelity Investments Life Insurance Company". FILI shall have the
unconditional right to reject, in whole or in part, any application
for a Contract. In the event an application is rejected, the amount
of the Payment received by FILI will be returned directly to the
purchaser and FILI will notify FBSI of such action. In the event a
Contract is returned to FILI within the applicable "free look" period,
FILI will return to the purchaser the amount required under the
Contract and will notify FBSI of such action. In the event that FBSI
or PGL has received compensation based on any Contract returned
pursuant to its free look provision, FBSI and PGL agree to repay
promptly such compensation to FILI.
9. PGL shall not develop any sales literature for the sale of the
Contracts. All sales literature will be supplied to sub-agents by
FILI or FBSI. FILI and FBSI are responsible to ensure that all sales
literature is compliant with any applicable laws, rules and
regulations. All sales literature must be provided to PGL at the sole
cost of FILI and FBSI. FBSI and its registered representatives shall
not give any information, nor make any representations on behalf of or
concerning FILI, a Variable Account, or a Contract, other than the
information and representations contained in a currently effective
Registration Statement (or post-effective amendment thereto) for a
Contract, or in reports for the Variable Accounts prepared for
distribution to Contract owners, or in sales literature or other
promotional material approved in writing by FILI. FBSI, in accordance
with its obligations under federal securities laws and regulations,
shall establish and implement reasonable procedures acceptable to FILI
for periodic inspection and ongoing supervision of sales practices of
FBSI's registered representatives, and shall make available to FILI
upon request periodic reports on the results of such inspections and
compliance with such procedures. FBSI is responsible for the
training, supervision and control of its registered representatives.
10. Neither FBSI nor PGL shall have authority on behalf of FILI to
make, alter or discharge any Contract. Neither FBSI nor PGL shall
expend, or contract for the expenditure of, the funds of FILI nor
shall FBSI nor PGL possess or exercise any authority on behalf of FILI
other than that expressly conferred under this Agreement.
11. FBSI and PGL each agree to maintain appropriate books and
records concerning sales of the Contracts under this Agreement as
required by FILI, or by any governmental authority (including without
limitation the SEC, the NASD and the Hawaii Insurance Department).
Such books and records shall be the property of FILI and upon
reasonable notice to FBSI and PGL, shall be made available to FILI
during ordinary business hours. FBSI and PGL shall permit such
governmental authorities reasonable access to such books and records
in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated under this Agreement.
Without limiting the foregoing, FBSI shall be responsible for
confirming purchases and redemptions of units of FILI's separate
accounts by purchasers and/or owners of the Contracts. Such
confirmations shall be the records of FBSI, even if located at the
offices of FILI, and if so located, shall be provided to FBSI upon
reasonable notice. Similarly, all records showing the identity of the
person credited for any retail sale of a Contract, whether maintained
at FBSI's offices or any other location shall be the records of FBSI,
the property of FBSI and shall be furnished to FBSI upon reasonable
notice if located anywhere other than FBSI.
12. FBSI shall pay the expenses associated with the initial
licensing and training of its registered representatives necessary for
the marketing of the Contracts.
ARTICLE IV. COMPENSATION
1. For each Contract that is sold on or after the effective date of
this Agreement, FILI shall pay PGL compensation equal to 2% of each
Payment received by FILI. All compensation payable to PGL will be
made by check payable to PGL. Payment for Payments received during
the previous calendar month should be received by the 10th day of the
following month. PGL shall pay the sub-agents commissions not to
exceed .50% of the Payments received under this Agreement. Commission
schedules will be determined by FILI in its sole discretion and may be
modified by FILI from time to time upon notice to PGL. PGL hereby
authorizes and appoints FBSI as its agent for the limited purposes of
(1) transmitting to the sub-agents the commissions due them from PGL
and (2) within one month of each calendar year end, transmitting to
the sub-agents information concerning the amount of commissions paid
to them during the prior calendar year. FBSI may fulfill the
requirements of the preceding sentence through its own efforts or
through cooperative efforts with any affiliated company in the
Fidelity Investments group of companies.
2. For each Payment received by FILI, it shall pay to FBSI such
compensation as may be mutually agreed to by them from time to time.
Such compensation shall be documented in a separate written agreement.
ARTICLE V. INDEMNIFICATION BY FILI
FILI agrees to indemnify and hold harmless PGL and FBSI, their
directors, officers, employees and agents (the "Indemnified Parties")
against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of FILI) or
litigation in either trial or appellate courts (including legal and
other expenses), or in alternative dispute resolution proceedings to
which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale of Contracts issued by
FILI and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; or
(ii) arise out of or as a result of statements or representations
or wrongful conduct of FILI or persons under its control, with respect
to the sale or distribution of the Contracts;
(iii) arise out of or result from any material breach of any
representation and/or warranty made by FILI in this Agreement or arise
out of or result from any other material breach of this Agreement by
FILI; or
(iv) arise out of or result from PGL and FBSI's compliance with the
instructions, rules, bulletins, manuals or other guidelines issued by
FILI to PGL and FBSI, or arise out of or result from the failure of
any sub-agent appointed in connection with this Agreement to pay the
tax imposed under Section 237-13 of the Hawaii Revised Statutes;
all as limited by and in accordance with the provisions of (v)
through (vii) below.
(v) FILI shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation
or alternative dispute resolution proceedings incurred or assessed
against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under
this Agreement.
(vi) FILI shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified FILI in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure
to notify FILI of any such claim shall not relieve FILI from any
liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified
Parties, FILI shall be entitled to participate, at its own expense, in
the defense of such action. FILI also shall be entitled to assume the
defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from FILI to such party of FILI's
election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it,
and FILI will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
(vii) The Indemnified Parties will promptly notify FILI of the
commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Contracts.
The indemnification provided under this Article V shall survive the
termination of this Agreement.
ARTICLE VI. INDEMNIFICATION BY FBSI
FBSI agrees to indemnify and hold harmless PGL and FILI against any
and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of FBSI) or litigation
(including legal and other expenses), to which PGL or FILI may become
subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale of
the Contracts and arise as a result of any failure by FBSI to provide
the services and furnish the materials under the terms of this
Agreement, or arise out of or result from any material breach of any
representation and/or warranty made by FBSI in this Agreement or
result from any other material breach of this Agreement by FBSI. FBSI
shall not be liable under this indemnification provision with respect
to any claim made against PGL and FILI unless PGL and FILI shall have
notified FBSI in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon PGL or FILI or after PGL or FILI
shall have received notice of such service on any designated agent,
but failure to notify FBSI of any such claim shall not relieve PGL or
FBSI from any liability which it may have to PGL or FILI otherwise
than on account of this indemnification provision. In case any such
action is brought against PGL or FILI, FBSI shall be entitled to
assume the defense thereof, with counsel satisfactory to PGL and FILI.
After notice from FBSI of the election to assume such defense, PGL and
FILI shall bear the fees and expenses of any additional counsel
retained by it, and FBSI will not be liable to PGL or FILI under this
Agreement for any legal or other expenses subsequently incurred by PGL
or FILI independently in connection with the defense thereof other
than reasonable costs of investigation. PGL and FILI will promptly
notify FBSI of the commencement of any litigation or proceedings
against them in connection with the issuance and sale of the
Contracts.
ARTICLE VII. TERM OF AGREEMENT
1. The initial term of this Agreement shall be from the effective
date hereof through December 31, 1999. This Agreement shall renew
automatically from year to year thereafter. This Agreement may be
terminated by any party upon 30 days' prior written notice. Upon
termination of this Agreement, all authorizations, rights and
obligations shall cease except the indemnification provisions, and the
provisions of Article III requiring the maintenance of certain books
and records.
2. FILI's obligation to pay commissions (or other compensation) to
PGL shall continue with respect to those commissions which are due and
owing or which relate to an application taken as of the date of
termination and for which FILI subsequently issues a Contract.
ARTICLE VIII. NON-EXCLUSIVITY OF AGREEMENT
FILI may at any time distribute any Contract through any other proper
party or distribution system of its choice. PGL reserves the right to
sell any variable annuity contracts, either its own or those of
another company.
ARTICLE IX. ASSIGNABILITY
This Agreement may not be assigned without the prior written consent
of all the parties.
ARTICLE X. GOVERNING LAW
This Agreement shall in all respects be governed in accordance with
the laws of the State of Hawaii.
ARTICLE XI. NOTICE
Any notice shall be sufficiently given when personally received by
the other party, or when sent by registered or certified mail to the
other party. Notices to FILI and FBSI may be sent to their respective
Presidents at 82 Devonshire Street, Boston, Massachusetts 02109.
Notices to PGL may be sent to Ken Nishibun, Senior Vice President, at
1440 Kapiolani Boulevard, Suite 1700, Honolulu, Hawaii 96814.
ARTICLE XII. INVESTIGATIONS AND COMPLAINTS
Each party agrees to cooperate fully with all other parties in any
insurance, securities or other regulatory or judicial investigation or
proceeding arising in connection with the Contracts or FBSI's
registered representatives. Each party shall furnish to any
regulatory authority having jurisdiction any information which such
authority may request in order to ascertain whether sales of the
Contracts are made in compliance with applicable laws and/or
regulations. Each party further agrees to cooperate with each of the
others in resolving any customer complaints with respect to the
Contracts, any of the parties, or any of their agents, sub-agents,
registered representatives or employees.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first written above.
FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
Richard C. Murphy
Richard C. Murphy
Senior Vice President
FIDELITY BROKERAGE SERVICES, INC.
Robert P. Mazzarella
Robert P. Mazzarella
President
PACIFIC GUARDIAN LIFE INSURANCE COMPANY
/s/ Kenneth K. Nishibun
Kenneth K. Nishibun
Senior Vice President
PACIFIC GUARDIAN LIFE INSURANCE COMPANY
/s/ Alan M. Goda
Alan M. Goda
Chairman
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