PROSPECTUS
1.RETIREMENT RESERVES
This prospectus describes a variable annuity contract (the "Contract")
offered by Empire Fidelity Investments Life Insurance Company ("Empire
Fidelity Investments Life", "We" or "Us"), a 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. It may be purchased on a
non-qualified basis. It may also be purchased on a qualified basis as
an individual retirement annuity ("IRA") under Section 408(b) of the
Internal Revenue Code of 1986, as amended, in connection with a
"rollover" of contributions from other qualified plans, tax sheltered
annuities or IRAs.
You may choose to have amounts paid out in a single payment or as a
series of annuity income payments, including income payments
guaranteed for your lifetime. You may purchase a Non-qualified
Contract by making a payment of at least $2,500. You may make
additional payments to a Non-qualified Contract as long as each
payment is at least $250. You may purchase a Qualified Contract by
making a payment of at least $10,000. You may make additional payments
to a Qualified Contract as long as each payment is at least $2,500.
Your payments will be invested as you direct in one or more of the
twenty-eight Subaccounts of the Empire Fidelity Investments Variable
Annuity Account A (the "Variable Account") and/or allocated to a
fixed-rate investment option funded through and guaranteed by Empire
Fidelity Investments Life's general account (the "Guaranteed
Account"). The Guaranteed Account may also be referred to as the
"Fixed Account". Your initial net purchase payment will be allocated
to the Variable and Guaranteed Accounts according to the instructions
on your application. The variable Subaccounts invest in the mutual
fund portfolios of the Variable Insurance Products Fund, the Variable
Insurance Products Fund II, and the Variable Insurance Products Fund
III (the "Fidelity Funds"). The Fidelity Funds are each managed by
Fidelity Management & Research Company. Also The variable Subaccounts
invest in the mutual fund portfolios of corresponding portfolios of
other eligible funds (the "Other Funds") All mutual fund portfolios
available in this prospectus are collectively known as ("The Funds").
Additional Subaccounts and portfolios may be added in the future.
Fidelity Investments Life credits interest on amounts allocated to the
Fixed Account at specified interest rates that vary from time to time.
You may select a date on which annuity income payments may commence.
Prior to that Annuity Date, you may withdraw all or part of the Cash
Surrender Value of your Contract. The value allocated to the Variable
Account will vary with the investment performance of the Subaccounts
you select, and the value allocated to the Guaranteed Account will
increase as interest is credited. In certain circumstances,
withdrawals are subject to a contingent deferred sales charge and a
tax penalty. Annuity income payments may be fixed, variable, or a
combination of both. If you elect to receive fixed income, the value
of your Contract on the Annuity Date will be applied to provide fixed
annuity income payments. If you elect variable income, the amount of
your annuity income payments will increase or decrease according to
the investment performance of the Subaccounts you select. If you elect
a combination of fixed and variable income, a portion of your income
payment will be fixed and a portion will vary according to investment
performance.
This prospectus provides information that a prospective investor
should know before investing. Additional information about the
Contract and the Variable Account has been filed with the Securities
and Exchange Commission in a Statement of Additional Information dated
August 29, 1997. The Statement of Additional Information is
incorporated by reference in this prospectus and is available without
charge by calling Empire Fidelity Investments Life at 800-544-2442.
The table of contents of the Statement of Additional Information
appears on page .
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
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 THE CURRENT PROSPECTUS FOR THE MONEY MARKET OR
OTHER FUNDS AVAILABLE IN THE CONTRACT.
FOR FURTHER INFORMATION CALL FIDELITY INVESTMENTS
Nationally 1-800-544-2442
Date: August 29, 1997
PROSPECTUS CONTENTS
GLOSSARY
Summary of the Contract
FACTS ABOUT EMPIRE FIDELITY INVESTMENTS LIFE, THE VARIABLE ACCOUNT
AND THE FUNDS
Empire Fidelity Investments Life
The Variable Account
The Funds
FACTS ABOUT THE CONTRACT
Purchase of a Contract
Free Look Privilege
Investment Allocation of Your Purchase Payments
Accumulation Units
Withdrawals
Signature Guarantee
Charges
Death Benefit
Required Distributions Upon Death
Annuity Date
Selection of Annuity Income Options
Fixed, Variable, or Combination
Annuity Income Options
Types of Annuity Income Options
Reports to Owners
THE GUARANTEED ACCOUNT
The Guaranteed AccounT
MORE ABOUT THE CONTRACT
Tax Considerations
Other Contract Provisions
Selling the Contracts
Availability of Unisex
Dollar Cost Averaging
Postponement of Payment
MORE ABOUT THE VARIABLE ACCOUNT AND THE FUNDS
Changes in Investment Options
Net Rate of Return for a Subaccount
Voting Rights
Resolving Material Conflicts
Performance
Litigation
Appendix I: Accumulation Units
Table of Contents of the Statement
of Additional Information
THE CONTRACT IS NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS.
2.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 income payments are based.
ANNUITANT'S BENEFICIARY - The person who receives the proceeds in the
event of the death of the last surviving Annuitant.
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 income payments begin.
ANNUITY UNIT - A unit of measure used after the Annuity Date to
calculate the amount of variable annuity income payments.
CASH SURRENDER VALUE - The amount payable to you upon surrender of
the Contract prior to the Annuity Date during the Annuitant's
lifetime.
CODE - The Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT - The person who becomes the Annuitant upon the
death or removal of the Annuitant prior to the Annuity Date.
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 OR YOU - The person or persons who may exercise the
rights and privileges under the Contract.
CONTRACT VALUE - The total amount attributable to your Contract at any
time prior to the Annuity Date, representing amounts in the
Subaccounts and the Guaranteed Account.
CONTRACT YEAR - A year that starts on the Contract Date or on a
Contract Anniversary.
DEATH BENEFIT - Amount payable to the Annuitant's Beneficiary upon the
death of the last surviving Annuitant before the Annuity Date.
GUARANTEED ACCOUNT - A fixed-rate investment option funded through
Empire Fidelity Investments Life's general account. Empire Fidelity
Investments Life credits interest to the amount allocated to the
Guaranteed Account at a rate declared periodically in advance. The
Guaranteed Account may also be referred to as the "Fixed Account".
INVESTMENT OPTIONS - The Subaccounts and the Guaranteed Account.
IRA - Refers generally to both an individual retirement account and an
individual retirement annuity as defined in Sections 408(a) and (b),
respectively, of the Code. When used to refer to a Qualified Contract
described herein, it means a Contract that qualifies as an individual
retirement annuity as defined in Section 408(b) of the Code.
NET RATE OF RETURN - An index used to measure the investment
performance of a Subaccount from one Valuation Period to the next.
NON-QUALIFIED CONTRACT - A Contract other than a Qualified Contract.
QUALIFIED CONTRACT - A Contract that qualifies as an individual
retirement annuity under Section 408(b) of the Code.
OWNER'S BENEFICIARY - The person who receives the proceeds in the
event of the death of the Owner (if no joint Owner survives) prior to
the Annuity Date.
SUBACCOUNT - A division of the Variable Account, the assets of
which are invested in the shares of the corresponding portfolio of the
Funds available in this prospectus.
VALUATION PERIOD - The period of time from one determination of
Accumulation Unit Values and Annuity Unit Values to the next
determination of such values. Such determinations are made as of the
close of business (normally 4:00 p.m. Eastern Time) each day the New
York Stock Exchange is open for trading.
VARIABLE ACCOUNT - Empire Fidelity Investments Variable Annuity
Account A.
3.SUMMARY OF THE CONTRACT
The purpose of this variable annuity contract is to allow you, the
Owner, to accumulate funds on a tax-deferred basis by investing in one
or more investment portfolios managed by Fidelity Management &
Research Company ("FMR"), Morgan Stanley Asset Management Inc.,
("Morgan Stanley"), Pilgrim Baxter & Associates, Ltd. or Newbold's
Asset Management, Inc., ("PBHG"), Strong Capital Management, Inc.
("Strong") and Warburg Pincus Asset Management, Inc. ("Warburg
Pincus") and to permit the Annuitant (who may or may not be the
Owner) to receive annuity income payments commencing on the Annuity
Date. There is no assurance that values invested in the Subaccounts
will increase. As the Contract Owner, you bear the investment risk
with respect to those values. The Contract also allows you to allocate
funds to a fixed-rate investment option funded through Empire Fidelity
Investments Life's general account (the "Guaranteed Account"). (The
Guaranteed Account may also be referred to as the "Fixed Account".) We
guarantee that amounts allocated to the Guaranteed Account will earn
interest at declared rates.
The Contract is designed to provide income for retirement or to meet
other long-term investment goals. It may be purchased on a
non-qualified basis or, if you so choose, it may be purchased 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. The minimum initial payment required to purchase a Non-qualified
Contract is generally $2,500. You may also make additional payments to
a Non-qualified Contract prior to the Annuity Date as long as each
payment is not less than $250 and the Annuitant is living. The minimum
initial payment required to purchase a Qualified Contract is generally
$10,000. You may make additional payments to a Qualified Contract as
long as each payment is at least $2,500. Empire Fidelity Investments
Life may consent to lower minimums. Your net purchase payments will be
invested as you direct in the Guaranteed Account and in the
Subaccounts of the Variable Account. A net purchase payment is a
purchase payment less any premium tax assessed by the jurisdiction in
which the Contract is delivered. In addition, Empire Fidelity
Investments Life reserves the right to deduct a charge for the purpose
of recovering a portion of Empire Fidelity Investments Life's Federal
income tax expense that is determined solely from the amount of
premiums received. See INVESTMENT ALLOCATION OF YOUR PURCHASE PAYMENTS
on page . There are currently twenty-eight variable Subaccounts. Five
Subaccounts invest in the shares of one of the mutual fund portfolios
of Variable Insurance Products Fund. The Variable Insurance Products
Fund currently offers a Money Market Portfolio, High Income Portfolio,
Equity-Income Portfolio, Growth Portfolio and Overseas Portfolio. Five
Subaccounts invest exclusively in shares of one of the mutual fund
portfolios of Variable Insurance Products Fund II. The Variable
Insurance Products Fund II currently offers an Investment Grade Bond
Portfolio, Asset Manager Portfolio, Index 500 Portfolio, Asset
Manager: Growth Portfolio and Contrafund Portfolio. Three Subaccounts
invest exclusively in shares of one of the mutual fund portfolios of
Variable Insurance Products Fund III. The Variable Insurance Products
Fund III currently offers a Growth & Income Portfolio, Balanced
Portfolio, and Growth Opportunities Portfolio. The remaining
subaccounts invest in shares of one of the mutual fund portfolios of
Morgan Stanley, PBHG, Strong or Warburg Pincus.
Empire Fidelity Investments Life credits interest on amounts allocated
to the Guaranteed Account at interest rates that vary from time to
time.
Prior to the Annuity Date, you may withdraw all or part of the Cash
Surrender Value of your Contract. During the first five Contract
Years, the withdrawal may be subject to a contingent deferred sales
charge. This charge is a maximum of 5% of the amount of purchase
payments withdrawn in the first Contract Year and decreases 1% per
year until it disappears after five Contract Years. However, in each
of the first five Contract years you may withdraw up to 10% of your
purchase payments without incurring such a charge. In certain
circumstances, Empire Fidelity Investments Life may waive the
contingent deferred sales charge. See WITHDRAWAL CHARGE on page . The
maximum partial withdrawal is one that, along with any applicable
withdrawal charge, would reduce your Contract Value to $2,500. Certain
withdrawals may be subject to a Federal penalty tax as well as to
Federal income tax. See TAX CONSIDERATIONS on page .
You may select from a number of annuity income options, including
annuity income payments for the life of the Annuitant, with or without
a guaranteed number of payments. See TYPES OF ANNUITY INCOME OPTIONS
on page . You may choose any of these annuity income options to be
paid on a fixed basis, a variable basis, or a combination of both. See
FIXED, VARIABLE, OR COMBINATION ANNUITY INCOME OPTIONS on page . If
you elect a fixed income, your Contract's participation in the
investment experience of the Variable Account will cease with the
commencement of the annuity income payments. 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. If you elect a combination of fixed and variable income, a
portion of your income payment will be fixed, and a portion will vary
according to investment performance of the selected Subaccounts. On
the Annuity Date, the Annuitant becomes the Owner of the Contract.
In the event that the last surviving Annuitant dies prior to the
Annuity Date, we will pay a Death Benefit to the Annuitant's
Beneficiary you select. See DEATH BENEFIT on page . 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 .
In addition to the contingent deferred sales charge applicable to
withdrawals within the first five Contract Years (other than
withdrawals in each year of up to 10% of your purchase payments), we
assess an annual maintenance charge prior to the Annuity Date
currently set at $30 per year and guaranteed not to exceed $50 per
year. This charge is deducted from your Contract Value. We currently
waive this annual charge if total purchase payments less any
withdrawals equal at least $25,000. 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 and 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 Guaranteed Account. Our
current practice is generally to deduct any applicable premium taxes
from your Contract Value on the Annuity Date or upon payment of
proceeds. We reserve the right to deduct premium taxes when we incur
such taxes. See CHARGES on page . Further, the portfolios in the Funds
pay monthly management fees and other expenses which are described in
the accompanying prospectuses for the Funds.
You may return your Contract for a refund within 30 days after you
receive the Contract. We will refund your Contract Value plus any
amount deducted from your payment prior to allocation to the variable
Subaccounts or the Guaranteed Account. See FREE LOOK PRIVILEGE on page
.
This summary is intended to provide only an overview of the more
significant aspects of the Contract. More detailed information is
provided in the subsequent sections of this prospectus and in your
Contract. The Contract together with its attached application
constitutes the entire agreement between you and us and should be
retained.
Following are the various investment options available to you under
the Contract.
FIDELITY RETIREMENT RESERVES
Guaranteed Account Company Variable Account
Guaranteed Interest FIDELITY Asset Manager Portfolio
Money Market Portfolio
Investment Grade Bond Portfolio
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Overseas Portfolio
Index 500 Portfolio
Asset Manager: Growth Portfolio
Contrafund Portfolio
Growth Opportunities Portfolio
Balanced Portfolio
Growth & Income Portfolio
MORGAN
STANLEY Emerging Markets Debt Portfolio
Emerging Markets Equity Portfolio
Global Equity Portfolio
International Magnum Portfolio
PBHG Select 20 Portfolio
Growth II Portfolio
Large Cap Value Portfolio
Small Cap Value Portfolio
Technology & Communications Portfolio
STRONG Discovery Fund II Portfolio
Growth Fund II Portfolio
Opportunity Fund II Portfolio
WARBURG
PINCUS International Equity Portfolio
Post-Venture Capital Portfolio
Small Company Growth Portfolio
4.FEE TABLE
This information is intended to 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 currently deduct any
applicable premium taxes from your Contract Value on the Annuity Date
or when proceeds are paid. We do not currently deduct any Federal
income tax expense. See CHARGES on page of the prospectus for
additional information.
CONTRACT OWNER EXPENSES (as a percentage of purchase payments)
Sales Charge Imposed on Purchases 0.00%
Maximum Contingent Deferred Sales Charge (1) 5.00%
Surrender Charge 0.00%
Exchange Fee 0.00%
ANNUAL MAINTENANCE CHARGE (2) $30.00
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Fees 0.75%
Account Fees and Expenses:
Administrative Charge 0.05%
Total Separate Account Annual Expenses 0.80%
(1) The Maximum Contingent Deferred Sales Charge decreases 1% each
year so there is no charge after 5 years. Each year up to 10% of total
purchase payments may be withdrawn without a contingent deferred sales
charge. The contingent deferred sales charge is based solely on the
Contract Year - additional purchase payments do not cause the
contingent deferred sales charge percentages to start over.
(2) The annual maintenance charge is a single $30 charge on a
Contract. It is deducted proportionally from the investment options in
use at the time of the charge. The annual maintenance charge is
currently waived for Contracts with at least $25,000 of accumulated
purchase payments less any withdrawals. In the Examples, the annual
maintenance charge is approximated as a 0.02% annual asset charge
based on the experience of the contracts.
PORTFOLIO ANNUAL EXPENSES
(as a percentage of Portfolio average net assets)
MANAGEMENT OTHER TOTAL ANNUAL
FEES EXPENSES EXPENSES
FIDELITY
ASSET MANAGER 0.64% 0.10% 0.74%1
MONEY MARKET 0.21% 0.09% 0.30%
INVESTMENT GRADE BOND 0.45% 0.13% 0.58%
HIGH INCOME 0.59% 0.12% 0.71%
EQUITY-INCOME 0.51% 0.07% 0.58%1
INDEX 500 0.13% 0.15% 0.28%2
GROWTH 0.61% 0.08% 0.69%1
OVERSEAS 0.76% 0.17% 0.93%1
ASSET MANAGER: GROWTH 0.65% 0.22% 0.87%1
CONTRAFUND 0.61% 0.13% 0.74%1
GROWTH OPPORTUNITIES 0.61% 0.16% 0.77%1
BALANCED 0.48% 0.24% 0.72%1
GROWTH & INCOME 0.64% 0.10% 0.74%1
MORGAN STANLEY
EMERGING MARKETS DEBT 0.80% 0.50% 1.30%3
EMERGING MARKETS EQUITY 1.25% 0.50% 1.75%3
GLOBAL EQUITY 0.80% 0.35% 1.15%3
INTERNATIONAL MAGNUM 0.80% 0.35% 1.15%3
PBHG
SELECT 20 0.61% 0.59% 1.20%4
GROWTH II 0.85% 0.30% 1.15%4
LARGE CAP VALUE 0.41% 0.59% 1.00%4
SMALL CAP VALUE 0.77% 0.43% 1.20%4
TECHNOLOGY &
COMMUNICATIONS 0.61% 0.59% 1.20%4
STRONG
DISCOVERY FUND II 1.00% 0.21% 1.21%
GROWTH FUND II 1.00% 0.20% 1.20%5
OPPORTUNITY FUND II 1.00% 0.20% 1.20%
WARBURG PINCUS
INTERNATIONAL EQUITY 0.96% 0.40% 1.36%6
POST-VENTURE CAPITAL 0.62% 0.78% 1.40%7
SMALL COMPANY GROWTH 0.90% 0.26% 1.16%6
1) A portion of the brokerage commissions that certain Funds pay was
used to reduce Funds expenses. In addition, certain Funds have entered
into arrangements with their custodian and transfer agent whereby
interest earned on uninvested cash balances was used to reduce
custodian and transfer agent expenses. Including these reductions, the
total operating expenses presented in the table would have been .56%
for Equity-Income Portfolio, .67% for Growth Portfolio, .92% for
Overseas Portfolio, .73% for Asset Manager Portfolio, .71% for
Contrafund Portfolio, .85% for Asset Manager: Growth Portfolio, .76%
for Growth Opportunities Portfolio, and .71% for Balanced Portfolio.
2) FMR agreed to reimburse a portion of Index 500 Portfolio's expenses
during the period. Without this reimbursement, the Fund's management
fee, other expenses and total expenses would have been .28%, .15% and
.43%, respectively.
3) Morgan Stanley Asset Management, Inc. with respect to the
Portfolios, has voluntarily waived receipt of its management fees and
agreed to reimburse the Portfolio, if necessary, if such fees would
cause the total annual operating expenses of the Portfolio to exceed
the respective percentage of average daily net assets.
4) Pilgrim Baxter & Associates, Ltd. (the "Adviser") has voluntarily
agreed to waive or limit its Advisory Fees or assume Other Expenses in
an amount that operates to limit Total Operating Expenses of the
Portfolios to not more than of the 1.20% of the average daily net
assets of the Growth II, Small Cap Value, Technology & Communications
and Select 20 Portfolios and to not more than 1.00% of the average
daily net assets of the Large Cap Value Portfolio, through December
31, 1997. 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, 1997. Absent such fee
waivers/expense reimbursements. the Advisory Fees and estimated Total
Operating Expenses for the Small Cap Value, Large Cap Value,
Technology & Communications and Select 20 Portfolios would be 1.00%
and 1.43%;.65% and 1.24%; .85% and 1.44%; and .85% and 1.44%,
respectively. Given the projected asset size of the Growth II
Portfolio, it is not anticipated that a fee waiver or expense
reimbursement will be necessary with respect to that Portfolio.
5) Strong Capital Management, Inc., the investment adviser, has
voluntarily agreed to cap the Fund's total operating expenses at
1.20%. The Adviser has no current intention to, but may in the future,
discontinue or modify any waiver of fees or absorption of expenses at
its discretion with appropriate notification to its shareholders.
6) Management Fees, Other Expenses and Total Annual Expenses for the
International Equity and Small Company Growth Portfolios are based on
actual expenses for the fiscal year ended December 31, 1996, net any
fee waivers or expense reimbursements. Without such waivers or
reimbursements, Management Fees would have equaled 1.00% and 0.90%,
Other Expenses would have equalled 0.40% and 0.27% and Total Annual
Expenses would have equalled 1.40% and 1.17% for the International
Equity and Small Company Growth Portfolios, respectively. The
Portfolios' investment adviser and co-administrator have undertaken to
limit each Portfolio's Total Annual Expenses to the limits shown in
the table above through December 31, 1997.
7) Absent the waiver of fees by the Post-Venture Capital Portfolio's
investment adviser and co-administrator, Management Fees for the
Post-Venture Capital Portfolio would equal 1.25%; Other Expenses would
equal 0.82%; and Total Annual Expenses would equal 2.07%. Other
Expenses for the Post-Venture Capital Portfolio are based on
annualized estimates of expenses for the fiscal year ending December
31, 1997, net of any fee waivers or expense reimbursements. The
Portfolio's investment adviser and co-administrator have undertaken to
limit the Portfolio's Expenses to the limits shown in the table above
through December 31, 1997.
EXAMPLES
If you assume that Contract Owner expenses are as shown above, and
that each Portfolio's annual return is 5% annually and its operating
expenses are just as described above, then for every $1,000 of
purchase payments, here's how much you would have paid in total
expenses if you surrendered your Contract after the number of years
indicated, or if you annuitize your contract during the first year.
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
FIDELITY
ASSET MANAGER $63 $79 $95 $186
MONEY MARKET 58 66 72 136
INVESTMENT GRADE BOND 61 74 87 168
HIGH INCOME 62 78 93 182
EQUITY-INCOME 61 74 87 168
GROWTH 62 78 92 180
OVERSEAS 64 85 105 206
INDEX 500 58 65 71 134
ASSET MANAGER: GROWTH 64 83 102 200
CONTRAFUND 63 79 95 186
GROWTH OPPORTUNITIES 63 80 97 189
BALANCED 62 79 94 183
GROWTH & INCOME 62 78 93 181
MORGAN STANLEY
EMERGING MARKETS DEBT 68 96 124 245
EMERGING MARKETS EQUITY 72 109 147 290
GLOBAL EQUITY 67 92 116 230
INTERNATIONAL MAGNUM 67 92 116 230
PBHG
SELECT 20 67 93 119 235
GROWTH II 67 92 116 230
LARGE CAP VALUE 65 87 109 214
SMALL CAP VALUE 67 93 119 235
TECHNOLOGY &
COMMUNICATIONS 67 93 119 235
STRONG
DISCOVERY FUND II 67 93 119 236
GROWTH FUND II 67 93 110 235
OPPORTUNITY FUND II 67 93 119 235
WARBURG PINCUS
INTERNATIONAL EQUITY 69 98 127 251
POST-VENTURE CAPITAL 69 99 129 255
SMALL COMPANY GROWTH 67 92 117 231
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:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
FIDELITY
ASSET MANAGER $16 $49 $85 $186
MONEY MARKET 11 36 62 136
INVESTMENT GRADE BOND 14 44 77 168
HIGH INCOME 16 48 83 182
EQUITY-INCOME 14 44 77 168
GROWTH 15 48 82 180
OVERSEAS 18 55 95 206
INDEX 500 11 35 61 134
ASSET MANAGER: GROWTH 17 53 92 200
CONTRAFUND 16 49 85 186
GROWTH OPPORTUNITIES 16 50 87 189
BALANCED 16 49 84 183
GROWTH & INCOME 15 48 83 181
MORGAN STANLEY
EMERGING MARKETS DEBT 22 66 114 245
EMERGING MARKETS EQUITY 26 80 137 290
GLOBAL EQUITY 20 62 106 260
INTERNATIONAL MAGNUM 20 62 106 260
PBHG
GROWTH II 20 62 106 260
LARGE CAP VALUE 18 57 99 214
SELECT 20 21 63 109 235
SMALL CAP VALUE 21 63 109 235
TECHNOLOGY &
COMMUNICATIONS 21 63 109 235
STRONG
DISCOVERY FUND II 21 64 109 236
GROWTH FUND II 21 63 109 235
OPPORTUNITY FUND II 21 63 109 235
WARBURG PINCUS
INTERNATIONAL EQUITY 22 68 117 251
POST-VENTURE CAPITAL 23 69 119 255
SMALL COMPANY GROWTH 20 62 107 231
THESE FIGURES ILLUSTRATE THE COMBINED EFFECT OF ALL CURRENT CHARGES.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
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.
5.FACTS ABOUT EMPIRE FIDELITY INVESTMENTS LIFE,
THE VARIABLE ACCOUNT AND THE FUNDS
EMPIRE FIDELITY INVESTMENTS LIFE
Empire Fidelity Investments Life Insurance Company is a stock life
insurance company that was organized under the laws of the State of
New York on May 1, 1991, and commenced operations on June 1, 1992.
Empire Fidelity Investments Life is part of Fidelity Investments, a
group of companies that provides investment management and other
financial services. Empire Fidelity Investments Life is a wholly-owned
subsidiary of Fidelity Investments Life Insurance Company. Fidelity
Investments Life Insurance Company is a wholly-owned subsidiary of FMR
Corp., the parent company of the Fidelity companies. Edward C. Johnson
3d, together with the various trusts for the benefit of Johnson family
members, through their ownership of voting common stock form a
controlling group with respect to FMR Corp.
THE VARIABLE ACCOUNT
The Empire Fidelity Investments Variable Annuity Account A is a
separate investment account of Empire Fidelity Investments Life
established pursuant to New York law on July 15, 1991. The Variable
Account commenced operations on June 3, 1992. It is used to support
the variable annuity contracts described herein, 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").
We own the assets in the Variable Account. As required by law,
however, the assets of the Variable Account are kept separate from our
general account assets and from any other separate accounts we may
have and may not be charged with liabilities from any other business
we conduct. The assets in the Variable Account will always be at least
equal to the reserves and other liabilities of the Variable Account.
If the assets exceed the required reserves and other liabilities, we
may transfer the excess to our general account. We are obligated to
pay all benefits provided under the Contracts. There are currently
twenty-eight Subaccounts in the Variable Account. Five Subaccounts
invest exclusively in shares of a specific portfolio of the Variable
Insurance Products Fund. Five Subaccounts invest exclusively in shares
of a specific portfolio of the Variable Insurance Products Fund II.
Three portfolios invest exclusively in shares of a specific portfolio
of the Variable Insurance Products Fund III. There are currently 15
other investment options offered by four different mutual fund
investment advisers.
1THE FUNDS
FIDELITY
The Variable Insurance Products Fund, the Variable Insurance Products
Fund II, and the Variable Insurance Products Fund III, each is an
open-end, diversified management investment company organized by
Fidelity Management & Research Company. Each is the type of investment
company commonly known as a series mutual fund.
The investment objectives of the Funds are described below. There is,
of course, no assurance that any portfolio will meet its investment
objective.
VARIABLE INSURANCE PRODUCTS FUND
MONEY MARKET PORTFOLIO seeks to obtain as high a level of current
income as is consistent with preserving capital and providing
liquidity. It invests only in high-quality money market instruments.
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. The Fund is managed to keep its share price stable
at $1.00. The rate of income will vary from day to day, generally
reflecting short-term interest rates.
HIGH INCOME PORTFOLIO seeks to obtain a high level of current income
by investing primarily in high-yielding, lower-rated, fixed-income
securities. In choosing these securities growth of capital will also
be considered. A Fund's level of risk and potential reward depend on
the quality and maturity of its investments. 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.
EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily
in income-producing equity securities. In choosing these securities
the portfolio will also consider the potential for capital
appreciation. The portfolio's goal is to achieve a yield which exceeds
the composite yield on the securities comprising the Standard & Poor's
500 Composite Stock Price Index. 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 want some income from equity and bond investments, but
also want to be invested in the stock market for its long-term growth
potential.
GROWTH PORTFOLIO seeks to achieve capital appreciation normally
through the purchase of common stocks (although the portfolio's
investments are not restricted to any one type of security). Capital
appreciation may also be found in other types of securities, including
bonds and preferred stocks. 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
want to pursue growth wherever it may arise, and who understand that
this strategy often leads to investments in smaller, less well-known
companies. The Fund invests for growth and does not pursue an income
strategy.
OVERSEAS PORTFOLIO seeks long-term growth of capital primarily through
investments in foreign securities. Overseas Portfolio provides a means
for investors to diversify their own portfolios by participating in
companies and economies outside of the United States. The Fund may be
appropriate for investors who want to pursue their investment goals in
markets outside of the United States. By including international
investments in your portfolio, you can achieve additional
diversification and participate in growth opportunities around the
world. However, 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
ASSET MANAGER PORTFOLIO seeks high total return with reduced risk over
the long-term by allocating its assets among domestic and foreign
stocks, bonds and short-term, fixed income instruments. 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 spreads its assets among all three asset classes
moderating both its risk and return potential. Because the Fund owns
different types of investments, the performance is affected by a
variety of factors. The value of each Fund's investments and the
income generated will vary from day to day, and generally reflect
interest rates, market conditions, and other company, political and
economic news. Performance also depends on FMR's skills in allocating
assets.
INVESTMENT GRADE BOND PORTFOLIO seeks as high a level of current
income as is consistent with the preservation of capital by investing
in a broad range of investment-grade fixed-income securities. The Fund
may be appropriate for investors who want high current income from a
portfolio of investment-grade debt securities. A Fund's level of risk
and potential reward depend on the quality and maturity of its
investments. With its focus on medium- to high-quality investments,
the Fund has a moderate risk level and yield potential.
INDEX 500 PORTFOLIO seeks to provide 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. In seeking this objective, the portfolio attempts to duplicate
the composition and total return of the Standard & Poor's 500
Composite Stock Price Index. 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
want to pursue growth of capital and current income through a
portfolio of securities that broadly represents the U.S. stock market,
as measured by the S&P 500. The Fund seeks to keep expenses low as it
attempts to match the return of the S&P 500. 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.
ASSET MANAGER: GROWTH PORTFOLIO seeks maximum total return over the
long-term by allocating its assets among an aggressive mix of domestic
and foreign stocks, bonds and short-term fixed income instruments. 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, in one fund. 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. Because the Fund
owns different types of investments, their performance is affected by
a variety of factors. The value of each Fund's investments and the
income they generate will vary from day to day, and generally reflect
interest rates, market conditions, and other company, political and
economic news. Performance also depends on FMR's skills in allocating
assets.
CONTRAFUND PORTFOLIO seeks long-term capital appreciation by investing
in equity securities of companies considered undervalued or
out-of-favor by the Fund's Adviser. 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 are looking for an investment approach that follows a
contrarian philosophy.
VARIABLE INSURANCE PRODUCTS FUND III
GROWTH & INCOME PORTFOLIO seeks high total return through a
combination of current income and capital appreciation by investing
mainly in equity securities. The Fund may also invest in equity
securities that are not paying dividends, but offer the potential for
capital appreciation of future income. 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 investment.
GROWTH OPPORTUNITIES PORTFOLIO seeks capital growth by
investing in a wide range of common domestic and foreign stocks, and
securities convertible into common stocks. Although the Fund invests
primarily in common stock, it has the ability to purchase securities,
such as preferred stock and bonds that may produce capital growth. The
value of the Fund's investments and, as applicable, the income they
generate will vary from day to day, and generally reflect changes in
market conditions, interest rates, and other company, political, or
economic news. In the short-term, stock prices can fluctuate
dramatically in response to these factors.
BALANCED PORTFOLIO seeks both income and growth of capital by
investing in a broad selection of stocks, bonds, and convertible
securities. When FMR's outlook is neutral, it will invest
approximately 60% of the Fund's assets in equity securities and will
always invest at least 25% of the Fund's assets in fixed income
securities. The value of the Fund's investments and, as applicable,
the income they generate will vary from day to day, and generally
reflect changes in market conditions, interest rates, and other
company, political, or economic news. In the short-term, stock prices
can fluctuate dramatically in response to these factors.
MORGAN STANLEY ASSET MANAGEMENT INC.
EMERGING MARKETS DEBT PORTFOLIO seeks high total return by investing
primarily in Fixed Income Securities of government and
government-related issuers located in emerging market countries, which
securities provide a high level of current income, while at the same
time holding the potential for capital appreciation if the perceived
credit worthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in
which the issuer is located. Under normal market conditions, the
Portfolio will invest a large portion of its total assets in
Government Fixed Income Securities, including Loan Participations and
Assignments between governments and financial institutions, securities
issued by government owned, controlled or sponsored entities and
securities of entities organized to restructure outstanding debt of
such issuers. In selecting Emerging Market Country Fixed Income
Securities for the Portfolio, Morgan Stanley Asset Management Inc.
("MSAM") will apply a market risk analysis contemplating assessment of
factors such as liquidity, volatility, tax implications, interest rate
sensitivity, counterparty risks and technical market considerations.
As opportunities to invest in debt securities in other countries
develop, the Portfolio expects to expand and further diversify the
universe of emerging market countries in which it invests. The
Portfolio maybe appropriate for those who seek a high level of current
income from Emerging Market Country Securities that are Fixed Income
Securities, while holding the potential for capital appreciation.
EMERGING MARKETS EQUITY PORTFOLIO seeks long-term capital appreciation
by investing primarily in Equity Securities of emerging market country
issuers with a focus on those in which MSAM believes the economies are
developing strongly and in which the markets are becoming more
sophisticated. The Portfolio may be appropriate for those who seek to
achieve long-term capital appreciation by investing in Emerging Market
Country Securities. By including emerging market country investments
in their portfolio, investors can achieve additional diversification
and participate in growth opportunities in emerging market countries.
Under normal market conditions, a large percentage of the total assets
of the Portfolio will be invested in Emerging Market Country Equity
Securities. There are currently over 130 countries which, in the
opinion of MSAM, are generally considered to be emerging or developing
countries by the international financial community, approximately 40
of which currently have stock markets. As markets in other countries
develop, the Portfolio expects to expand and further diversify the
emerging market countries in which it invests. In selecting industries
and particular issuers, MSAM will evaluate costs of labor and raw
materials, access to technology, export of products and government
regulation. Although the Portfolio seeks to invest in larger
companies, it may invest in small-and medium size companies that, in
MSAM's view, have potential for growth.
GLOBAL EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in Equity Securities of issuers throughout the
world, including U.S. issuers and issuers in emerging market
countries, using an approach that is oriented to the selection of
individual stocks that MSAM believes are undervalued. The Portfolio
may be appropriate for investors who seek to pursue their investment
goals in markets throughout the world, including the United States. By
including international investments in their portfolio, investors can
achieve additional diversification and participate in growth
opportunities around the world. Under normal circumstances, a
substantial amount of the total assets of the Portfolio will be
invested in Equity Securities, and a lesser percentage of the
Portfolio's assets will be invested in Common Stocks of U.S. issuers
and the remaining equity position will be invested in at least three
countries other than the United States. MSAM's approach is oriented to
individual stock selection and is value driven. In selecting stocks
for the Portfolio, MSAM initially identifies those stocks that it
believes to be undervalued in relation to the issuers assets, cash
flow, earnings and revenues, and then evaluates the future value of
such stocks by running the results of an in-depth study of the issuer
through a dividend discount model. In selecting investments, MSAM
utilizes the research of a number of sources, including Morgan Stanley
Capital International, an affiliate of MSAM located in Geneva,
Switzerland.
INTERNATIONAL MAGNUM PORTFOLIO seeks long-term capital appreciation by
investing primarily in Equity Securities of non U.S. issuers domiciled
in EAFE countries, pursuant to weightings determined by MSAM. The
Portfolio may be appropriate for investors who seek to pursue their
investment goals in markets outside of the United States. By including
international investments in their portfolio, investors can achieve
additional diversification and participate in growth opportunities
around the world. The countries in which the Portfolio will invest are
those comprising the Morgan Stanley Capital International EAFE Index,
which includes Australia, Japan, New Zealand, most nations located in
Western Europe and certain developed countries in Asia, such as Hong
Kong and Singapore (each an "EAFE country", and collectively the "EAFE
countries"). Under normal market conditions, a large percentage of the
total assets of the Portfolio will be invested in Equity Securities of
issuers in at least three different EAFE countries.
PBHG
SELECT 20 PORTFOLIO seeks long-term growth of capital and
income. The Portfolio will normally be substantially invested in
equity securities (including ADRs and foreign equity securities). The
equity securities in which the Portfolio will invest are common
stocks, warrants and rights to purchase common stocks, and debt
securities and preferred stocks that are convertible into common
stocks. Under normal market conditions, the Portfolio will invest at
least 65%of its total assets in equity securities of a limited number
(i.e., no more than 20 stocks) of large capitalization companies that,
in Pilgrim Baxter & Associates, Ltd.'s (the "Adviser") opinion, have a
strong earnings growth outlook and potential for capital appreciation.
Such large companies have market capitalization in excess of $1
billion. Because the Portfolio focuses on equity securities of a small
number of companies, the impact of a change in value of a single stock
holding may be magnified.
GROWTH II PORTFOLIO seeks capital appreciation and will
normally be as fully invested as practicable in common stocks and
securities convertible into common stocks. Under normal market
conditions, the Portfolio will invest at least 65%of its total assets
in common stocks and convertible securities of small and medium sized
growth companies (market capitalization or annual revenues up to $4
billion). The Portfolio will seek to achieve its objective by
investing in companies believed by the Adviser to have an outlook for
strong earnings growth and the potential for significant capital
appreciation. The Securities will be sold when the Adviser believes
that anticipated appreciation is no longer probable, alternative
investments offer superior appreciation prospects, or the risk of a
decline in market price is too great. The Portfolio will likely have
somewhat greater volatility than the stock market in general. Because
the investment techniques employed by the Adviser are responsive to
near-term earnings trends of the companies whose securities are owned
by the Portfolio, the Portfolio turnover can be expected to be fairly
high.
LARGE CAP VALUE PORTFOLIO seeks long-term growth of capital and
income. Current income is a secondary objective. Under normal market
conditions, the Portfolio will invest a majority percentage of its
total assets in a diversified Portfolio of equity securities of large
capitalization companies which, in the opinion of the Adviser and
Newbold's Asset Management, Inc. ("the Sub-Adviser"), are undervalued
or overlooked by the market. In selecting investments for the
Portfolio, the Adviser and Sub-Adviser emphasize fundamental
investment value and consider the following factors, among others, in
identifying and analyzing a security's fundamental value: the
relationship of a company's potential earnings power to its current
stock price; current dividend income and potential for current
dividends, strong balance sheet with with low financial leverage; low
price/earnings ratio relative to other similar companies; and
potential for favorable business developments.
SMALL CAP VALUE PORTFOLIO seeks to achieve above-average total
return over a market cycle of three to five years, consistent with
reasonable risk, by investing primarily in a diversified Portfolio of
common stocks of small companies with market capitalizations in the
range of companies represented in the Russell 2000 Index which are
considered to be relatively undervalued based on certain proprietary
measures of value. In selecting investments for the Portfolio, the
Adviser and Sub-Adviser emphasize fundamental investment value and
consider the following factors, among others, in identifying and
analyzing a security's fundamental value: the relationship of a
company's potential earnings power to its current stock price; current
dividend income and potential for current dividends; low
price/earnings ratio relative to other similar companies; strong
competitive advantages, including a recognized brand or trade name or
niche market position; sufficient resources for expansion; capability
of management; and favorable overall business prospects.
TECHNOLOGY & COMMUNICATIONS PORTFOLIO seeks long-term growth of
capital. Current income is incidental to the Portfolio's objective.
Under normal market conditions, the Portfolio will invest at least 65%
of its total assets in common stocks of companies which rely
extensively on technology or communications in their product
development or operations, or which are expected to benefit from
technological advances and improvements, and that may be experiencing
exceptional growth in sales and earnings driven by technology- or
communication-related products and services. Such technology and
communications companies may be in different industries or fields,
including computer software and hardware, electronic components and
systems, network and cable broadcasting, telecommunications, mobile
communications, satellite communications, defense and aerospace,
transportation systems, data storage and retrieval, biotechnology and
medical, and environmental. As a result of this focus, the Portfolio
offers investors the significant growth potential of companies that
may be responsible for breakthrough products or technologies or that
are positioned to take advantage of cutting-edge developments. The
Portfolios stock holdings can range from small companies developing
new technologies or pursuing scientific breakthroughs to large, blue
chip firms with established track records in developing and marketing
such scientific advances.
STRONG
DISCOVERY FUND II PORTFOLIO seeks capital growth. The Fund invests in
securities that the Adviser believes represent attractive growth
opportunities. The Fund normally emphasizes equity securities,
although it has the flexibility to invest in any type of security that
the Adviser believes has the potential for capital appreciation. The
Fund may invest up to 100% of its total assets in equity securities,
including common stocks, preferred stocks, and securities that are
convertible into common or preferred stocks, such as warrants and
convertible bonds. The Fund may also invest up to 100% of its assets
in debt obligations, including intermediate-to-long term corporate or
U.S. government debt securities. 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. 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. The Fund may also
invest up to 25% of its net assets in foreign securities, including
both direct investments and investments made through depository
receipts. The Adviser attempts to identify companies that are poised
for accelerated earnings growth due to innovative products or
services, new management, or favorable economic or market cycles.
These companies may be small, unseasoned firms in early stages of
development, or they may be mature organizations.
GROWTH FUND II PORTFOLIO seeks capital growth. The Fund invests
primarily in equity securities that the Adviser believes have
above-average growth prospects. Under normal market conditions, the
Fund will invest at least 65% of its total assets in equity
securities, including common stocks, preferred stocks, and securities
that are convertible into common or preferred stocks, such as warrants
and convertible bonds. 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. 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. 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. 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. The Fund may invest up to 25% of its assets in
foreign securities, including both direct investments and investments
made through depository receipts. The Fund generally will invest in
companies whose earnings are believed to be in a relatively strong
growth trend, and, to a lesser extent, in companies in which
significant further growth is not anticipated but whose market value
is thought to be undervalued. In identifying companies with favorable
growth prospects, the Adviser ordinarily looks to certain other
characteristics, such as prospects for above-average sales and
earnings growth; high return on invested capital; overall financial
strength, including sound financial and accounting policies and a
strong balance sheet; competitive advantages, including innovative
products and service; effective research, product development and
marketing; and stable, capable management.
OPPORTUNITY FUND II PORTFOLIO seeks capital growth. The Fund invests
primarily in equity securities and currently emphasizes investments in
medium-sized companies the Adviser believes are under researched and
attractively valued. The Fund will invest at least 70% of its total
assets in equity securities, including common stocks, preferred
stocks, and securities that are convertible into common or preferred
stocks, such as warrants and convertible bonds. Under normal market
conditions, the Fund expects to be fully invested in equities. 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, and 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. 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. The Fund may also invest up to 25% of its assets in
foreign securities, including both direct investments and investments
made through depository receipts. 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 Advisers 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. 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 P ORTFOLIO seeks long-term capital
appreciation by investing in equity securities of non-U.S. issuers.
The Portfolio pursues its investment objective by investing primarily
in a broadly diversified portfolio of equity securities of companies,
wherever organized, that in the judgement of the Adviser, have their
principal business activities and interests outside of the United
States. The Portfolio will ordinarily invest substantially all of its
assets in common stocks, warrants and securities convertible into or
exchangeable for common stocks, and will generally invest in at least
three countries other than the United States. The Portfolio intends to
be widely diversified across securities of many corporations located
in a number of foreign countries. The Adviser anticipates, however,
that the Portfolio from time to time invest a significant portion of
its assets in a single country such as Japan, which may involve
special risks. In appropriate circumstances, such as when a direct
investment by the Portfolio in the securities of a particular country
cannot be made or when the securities of an investment company are
more liquid than the underlying portfolio securities, the Portfolio
may invest in the securities of closed-end investment companies that
invest in foreign securities. The Portfolio intends to invest
principally in the securities of financially strong companies with
opportunities for growth within growing international economies and
markets through increased earning power and improved utilization or
recognition of assets. International investment entails special risk
considerations, including currency fluctuations, lower liquidity,
economic instability, political uncertainty and differences in
accounting methods.
POST-VENTURE CAPITAL P ORTFOLIO seeks long-term growth of
capital. The Portfolio pursues an aggressive investment strategy by
investing primarily in equity securities of companies considered by
the Adviser to be in their post-venture capital stage of development.
Although the Portfolio may invest up to 10% of its assets in venture
capital and other investment Funds, the Portfolio is not designed
primarily to provide venture capital financing. Rather, 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. The investment of venture capital financing, distribution of
such company's securities to venture capital investors, or initial
public offering ("IPO"), whichever is later, will have been made
within ten years prior to the Portfolio's purchase of the company's
securities. The Adviser believes that venture capital participation in
a company's capital structure can lead to revenue/earnings growth
rates above those of older, public companies such as those in the Dow
Jones Industrial Average or the Fortune 500. Up to 10% of the
Portfolio's assets may be invested in United States or foreign private
limited partnerships or other investment Funds ("Private Funds") that
themselves invest in equity or debt securities of (a) companies in the
venture capital or post-venture capital stages of development or (b)
companies engaged in special situations or changes in corporate
control, including buyouts. Because of the nature of the Portfolio's
investments and certain strategies it may use, such as investing in
Private Funds, an investment in the Portfolio should be considered
only for the aggressive portion of an investor's portfolio and may not
be appropriate for all investors.
SMALL COMPANY GROWTH P ORTFOLIO seeks capital growth by
investing primarily in equity securities of small sized domestic
companies (i.e., companies having stock market capitalizations of
between $25 million and $1 billion at the time of purchase) that
represent attractive opportunities for capital growth. It is
anticipated that the Portfolio will invest primarily in companies
whose securities are traded on domestic stock exchanges or in the
over-the -counter market. Small companies may still be in the
development stage, may be older companies that appear to be entering a
new stage of growth progress owing to factors such as management
changes or development of new technology, products or markets or may
be companies providing products or services with a high unit volume
growth rate. The Portfolio's investments will be made on the basis of
their equity characteristics and securities ratings generally will not
be a factor in the selection process. 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.
Shares of the Funds may also be sold to a variable life separate
account of Empire Fidelity Investments Life and to variable annuity
and variable life separate accounts of other affiliated and
unaffiliated insurance companies. For a discussion of the possible
consequences associated with having the Fidelity Funds available to
such other separate accounts, see RESOLVING MATERIAL CONFLICTS on page
.
The investment adviser for the Fidelity Funds is Fidelity Management &
Research Company, a registered adviser under the Investment Advisers
Act of 1940. Fidelity Management & Research Company is the original
Fidelity company and was founded in 1946. It provides a number of
mutual funds and other clients with investment research and portfolio
management services. It maintains a large staff of experienced
investment personnel and a full complement of related support
facilities. As of December 31, 1996, it advised funds having more than
29 million shareholder accounts with a total value of more than $432
billion. The portfolios of the Fidelity Funds, as part of their
operating expenses, pay an investment management fee to Fidelity
Management & Research Company. These fees are part of the Funds'
expenses. See the prospectuses for the Funds for discussions of the
Funds' expenses.
The investment adviser for the Morgan Stanley Universal Funds is
Morgan Stanley Asset Management Inc., a wholly-owned subsidiary of
Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"), which is a
publicly owned financial services corporation listed on the New York
stock exchange. MSAM, 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 many institutions, pension plans and individuals. MSAM's
principal business office is located at 1221 Avenue of the Americas,
New York, New York 10020.
The investment adviser for the PBHG Insurance Series Fund, Inc. is
Pilgrim Baxter & Associates, Ltd. (the "Adviser"), a professional
investment management firm and registered investment adviser that,
along with its predecessors, has been in business since 1982. The
controlling shareholder of the Adviser 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 1255 Drummers Lane, Suite
300, Wayne, Pennsylvania 19087. Newbold's Asset Management, Inc., the
Sub-Adviser, 950 Haverford Road, Bryn Mawr, Pennsylvania 19010, is a
registered investment Adviser that was formed in 1940. As with the
Adviser, the controlling shareholder of the Sub-Adviser is UAM.
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.
The investment adviser for the Warburg Pincus Funds is Warburg Pincus.
Incorporated in 1970, Warburg Pincus is indirectly controlled by
Warburg, Pincus & Co.("WP&Co."), Warburg G.P has no business other
than being a holding company of Warburg Pincus and its affiliates.
Lionel I. Pincus, the managing partner of WP&Co., may be deemed to
control both WP&Co. and Warburg Pincus. Warburg Pincus' address is 466
Lexington Avenue, New York, New York 10017-3147.
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.
6.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 a non-qualified
basis ("Non-qualified Contracts") and as individual retirement
annuities ("IRAs") that qualify for special Federal income tax
treatment ("Qualified Contracts"). Generally, Qualified Contracts may
be purchased only in connection with a "rollover" of funds from
another qualified plan, tax sheltered annuity or IRA and contain
certain other restrictive provisions limiting the timing and amount of
payments to and distributions from the Qualified Contract. See TAX
CONSIDERATIONS on page .
To purchase a Non-qualified Contract you must generally make a
purchase payment of at least $2,500 and complete an application form.
To purchase a Qualified Contract you must generally make a purchase
payment of at least $10,000 (unless we consent to a lower minimum) and
complete an application form. The proposed Annuitant must be no older
than 80 years old. If your application and initial purchase payment
can be accepted in the form received, the payment will be applied to
the purchase of a Contract within two business days after receipt at
the Annuity Service Center. The date that the payment is credited and
your Contract issued is called the Contract Date. If an incomplete
application is received, we will request the information necessary to
complete the application. Once the completed application is received,
the initial payment will be applied 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.
You may make additional payments 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 make additional
payments to a Qualified Contract of additional rollover contributions
from another qualified plan, tax sheltered annuity or IRA. See TAX
CONSIDERATIONS on page . The smallest such payment we will accept is
generally $2,500. Net purchase 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
. Net purchase payments allocated to the Guaranteed Account will be
credited under your Contract as of the date the payment is received at
our Annuity Service Center. See THE GUARANTEED ACCOUNT on page . We
may limit the maximum amount of initial or subsequent payments that we
will accept from an individual Contract Owner.
FREE LOOK PRIVILEGE
You may return your Contract for a refund within 30 days after you
receive it (the "free look period"). If you choose not to retain your
Contract, return it to our Annuity Service Center or any authorized
representative of Empire Fidelity Investments Life within the free
look period. The Contract will be canceled and we will refund promptly
your Contract Value plus any amount deducted from your payment prior
to allocation to the variable Subaccounts or the Guaranteed Account.
If you are replacing an existing insurance product with the Contract
and if you choose not to retain your Contract, it is considered a
surrender and any gain since you first purchased your old Contract is
taxable.
INVESTMENT ALLOCATION OF YOUR PURCHASE PAYMENTS
The portion of your net purchase payment allocated to the Variable
Account will be invested in the variable Subaccounts according to the
instructions on your application, based on the next computed
respective Accumulation Unit Values of the Subaccounts following
receipt of your payment at the Annuity Service Center.
The portion of your net purchase payments allocated to the Guaranteed
Account will be credited to the Guaranteed Account on the date your
payment is received at the Annuity Service Center.
If you elect to invest in a particular investment option, at least 10%
of your purchase payment must be allocated to that option. 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 Guaranteed Account during any one Contract Year.
Empire Fidelity Investments Life reserves the right to limit amounts
allocated (including transfers) to the Guaranteed Account to $50,000
per Contract Year.
You may currently transfer amounts among variable Subaccounts before
the Annuity Date as often as you wish without charge. However,
excessive trading activity can disrupt portfolio management strategy
and increase portfolio expenses, which are borne by all Contract
Owners participating in the portfolio regardless of their transfer
activity. Therefore, we reserve the right to limit the number of
transfers permitted, but not to fewer than six per Contract Year.
Empire Fidelity Investments Life also reserves the right to charge no
more than $15 for each transfer in excess of six per Contract Year.
Currently there is no such charge. The request may be in terms of
dollars, such as a request to transfer $5,000 from one Subaccount to
another, or may be in terms of a percentage reallocation among
Subaccounts. In the latter case, the percentages must be in whole
numbers. The minimum amount you may transfer is $250 or, if less, the
entire portion of your Contract Value allocated to a particular
Subaccount. You may transfer amounts or change your investment
allocation with respect to future payments by providing the Annuity
Service Center with instructions either in writing or by telephone.
Empire Fidelity Investments Life and the Fund reserve the right to
revise or terminate the telephone exchange provisions, limit the
amount of or reject any exchange, as deemed necessary, at any time.
Telephone exchange authorizations will be limited to eighteen per
calendar year. Empire Fidelity Invesments Life will not accept
exchange requests via fax.
Empire Fidelity Investments Life will not be responsible for any
losses resulting from unauthorized telephone reallocations if it
follows reasonable procedures designed to verify the identity of the
caller. Empire Fidelity Investments Life will request your Personal
Identification Number and may also record calls. You should verify the
accuracy of your confirmation statements immediately after you receive
them.
In some cases, contracts may be sold to individuals who independently
utilize the services of a firm or individual engaged in market timing.
Generally, market timing services obtain authorization from Contract
Owner(s) to make transfers and exchanges among the sub-accounts on the
basis of perceived market trends. Because the large transfers of
assets associated with market timing services may disrupt the
management of the portfolios of the Funds, such transactions may
become a detriment to Contract Owners not utilizing the market timing
service.
The right to exchange contract values among sub-accounts may be
subject to modification if such rights are executed by a market timing
firm or similar third party authorized to initiate transfers or
exchange transactions on behalf of a Contract Owner(s). In modifying
such rights, the Company may, among other things, decline to accept
(1) the transfer or exchange instructions of any agent acting under a
power of attorney on behalf of more than one Contract Owner, or (2)
the transfer or exchange instructions of individual Contract Owners
who have executed pre-authorized transfer or exchange forms which are
submitted by market timing firms or other third parties on behalf of
more than one Contract Owner at the same time. The Company will impose
such restrictions only if it believes that doing so will prevent harm
to other Contract Owners.
When a transfer between variable Subaccounts is requested, the
redemption of the requested amount from the Subaccount will always be
effected as of the end of the Valuation Period in which the request is
received at our Annuity Service Center. That amount will generally be
credited to the new Subaccount at the same time. However, when (1) you
are making a transfer to a Subaccount which invests in a portfolio
that accrues dividends on a daily basis and requires Federal funds
before accepting a purchase order and (2) the Subaccount from which
the transfer is being made is investing in an equity portfolio in an
illiquid position due to substantial redemptions or transfers that
require it to sell portfolio securities in order to make funds
available, then the crediting of the amount transferred to the new
Subaccount may be delayed until the Subaccount from which the transfer
is being made obtains liquidity through the earliest of the
portfolio's receipt of proceeds from sales of portfolio securities,
new contributions by Contract Owners, or otherwise, but no longer than
seven days. During this period, the amount transferred will be
uninvested. You may currently transfer amounts from the variable
Subaccounts to the Guaranteed 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.
Transfers from the Guaranteed Account before the Annuity Date are
currently subject to the following limitations. The maximum amount
that currently may be transferred out of the Guaranteed Account is 25%
of the amount invested in the Guaranteed Account or, if larger, the
amount that you transferred from the Guaranteed Account in the prior
Contract Year. The 25% limitation will be reviewed monthly and may be
updated. When this maximum amount is less than $1,000 we permit a
transfer of up to $1,000. You may make one transfer or withdrawal out
of the Guaranteed Account during each Contract Year. A transfer or
allocation of a purchase payment into the Guaranteed Account is not
permitted during the 12 months following a transfer out of or
withdrawal from the Guaranteed Account. When amounts are withdrawn
from or transferred out of the Guaranteed Account, the amounts that
have been credited to the Guaranteed Account for the shortest time are
withdrawn first. These limits are subject to change in the future;
however, you will always be permitted to make one transfer from the
Guaranteed Account per Contract Year in an amount equal to 15% of the
portion of your Contract Value invested in the Guaranteed Account. See
THE GUARANTEED ACCOUNT on page .
The portion of your Contract Value allocated to the variable
Subaccounts will change with the investment performance of the
selected Subaccounts. You should periodically review your allocation
of Contract Value in light of market conditions and your financial
objectives. Transfers after the Annuity Date are subject to different
limitations. See FIXED, VARIABLE, OR COMBINATION ANNUITY INCOME
OPTIONS on page .
ACCUMULATION UNITS
When your net purchase payments are allocated to a selected variable
Subaccount, they result in a particular number of Accumulation Units
being credited to your Contract. The number of Accumulation Units
credited is determined by dividing the dollar amount allocated to each
Subaccount by the value of an Accumulation Unit for that Subaccount as
of the end of the Valuation Period in which the payment is received at
the Annuity Service Center. The value of each Subaccount's
Accumulation Units varies each Valuation Period (i.e., each day that
there is trading on the New York Stock Exchange) with the Net Rate of
Return of the Subaccount. The Net Rate of Return reflects the
investment performance of the Subaccount for the Valuation Period and
is net of the asset charges to the Subaccount. See NET RATE OF RETURN
FOR A SUBACCOUNT on page .
WITHDRAWALS
You may at any time prior to the Annuity Date surrender your Contract
for its Cash Surrender Value. You may also make partial withdrawals of
$500 or more. Certain withdrawals, however, are subject to a penalty
tax. See TAX CONSIDERATIONS on page . You may not make a partial
withdrawal that, including the appropriate withdrawal charge, would
reduce your Contract Value to less than $2,500. Partial withdrawals
(plus any applicable withdrawal charge) will be taken from your
Contract Value invested in the Variable Account. If the total amount
exceeds your Contract Value invested in the Variable Account, the
excess will be deducted from the Guaranteed Account. Unless you
request otherwise, the amount deducted from the Variable Account will
be allocated in the variable Subaccounts in the same proportion as the
value in each bears to the Variable Account Contract Value on the date
of the partial 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 properly completed 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 Guaranteed Account under any circumstances for not
more than six months. See POSTPONEMENT OF PAYMENT on page .
SIGNATURE GUARANTEE
A signature guarantee is designed to protect you and Empire Fidelity
Investments Life from fraud. Disbursement requests must include a
signature guarantee if any of the following situations apply:
1. Your account registration has changed within the last 30 days.
2. You wish to withdraw more than $25,000.
3. The check is being mailed to a different address than the one on
your account (record address).
4. The check is made payable to someone other than the Owner.
5. In other circumstances where we deem it necessary for the
protection of you, the customer (e.g. the signature does not resemble
the signature we have on file).
You should be able to obtain a signature guarantee from a bank, broker
dealer (including Fidelity Investor Centers), credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
CHARGES
The following are all the charges we make under your Contract.
1. PREMIUM TAXES. In general, we do not currently deduct any amount
from your payments for premium taxes. 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 payments and
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. FEDERAL INCOME TAXES. We reserve the right to deduct a
charge for the purpose of recovering a portion of our Federal income
tax expense that is determined solely from the amount of premiums
received. No such charge is currently being deducted. Therefore, the
entire amount of your purchase payments are currently being allocated
to the investment options you select.
3. 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 a daily administrative charge.
Currently, on each Contract Anniversary before the Annuity Date an
annual maintenance charge of $30 is deducted 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. However, we also reserve the right to assess this charge
against all Contracts. 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.
Prior to the Annuity Date, the annual maintenance charge will be
deducted 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 when the
Contract is surrendered.
Each day, we also deduct from the assets of the Subaccounts a
percentage of those assets equivalent to an effective annual rate of
0.05%. As a charge against the Subaccounts, this administrative charge
is not assessed against your Contract Value allocated to the
Guaranteed Account. This charge is guaranteed never to be increased
above an effective annual rate of 0.25%.
4. MORTALITY AND EXPENSE RISK CHARGE. We deduct a daily asset charge
for our assumption of mortality and expense risks. This charge is made
by deducting daily from the assets of each Subaccount a percentage of
those assets equal to an effective annual rate of 0.75%. As with the
daily administrative charge, this charge is not assessed against your
Contract Value allocated to the Guaranteed 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 last surviving Annuitant dies prior to the Annuity Date and prior
to age 70. This Death Benefit may be greater than the Contract Value.
See DEATH BENEFIT on page . 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. Of
this 0.75% charge, it is estimated that 0.65% is for assuming
mortality risks and it is estimated that 0.10% is for assuming expense
risks. We will realize a gain from the charge for these risks to the
extent that it is not needed to provide for benefits and expenses
under the Contracts.
7.5. WITHDRAWAL CHARGE. We do not assess any sales charge if you keep
your Contract in force for more than five years. If you surrender your
Contract within the first five Contract Years, we will reduce the
amount payable to you by a withdrawal charge (i.e., a contingent
deferred sales charge) to compensate us for the expenses of selling
and distributing the Contracts. In addition, we will impose a
withdrawal charge for sales expenses on certain partial withdrawals
during the first five Contract Years. We do not assess any withdrawal
charge on the death of the Owner or Annuitant. We currently assess a
withdrawal charge upon annuitization if the Contract has been in
existence for less than one year. Bearing this in mind, the Contract
should be viewed as a long-term investment and insurance product. You
may surrender the Contract without any withdrawal charges for thirty
days after notification is mailed to you of any of the following
events: (1) the renewal interest rate on any portion of your Contract
Value allocated to the Guaranteed 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:
Withdrawal Charge
As Percentage of Amount of
Contract Year Purchase Payments Withdrawn
1 5%
2 4%
3 3%
4 2%
5 1%
6 and later 0%
For purposes of determining this withdrawal charge, any amount you
withdraw in excess of amounts entitled to the 10% exception will be
considered as a withdrawal of purchase payments until you have
withdrawn an amount equal to all your payments. Amounts withdrawn
after an amount equal to your aggregate purchase payments has been
withdrawn are considered to be withdrawals of investment earnings and
are not subject to any withdrawal charge.
Additional purchase payments during the first five Contract Years will
increase the dollar amount of the potential withdrawal charge by
increasing the amount of payments that may be withdrawn while the
withdrawal charge is in effect. Additional payments do not, however,
cause the schedule of possible withdrawal charges to start over again.
For example, if an additional payment is made during the fifth
Contract Year and withdrawn later during that same year, it and all
payments withdrawn that year will be subject to a 1% withdrawal
charge. Additional payments after the fifth Contract Year will not be
subject to any possible withdrawal charge.
Free withdrawals are not cumulative. For example, let us assume that
you (1) make an initial purchase payment of $10,000; (2) make no
withdrawals during the first Contract Year; (3) make no additional
purchase payments; and (4) make a withdrawal of $1,500 in the second
Contract Year. Given this example, $1,000 would be free from a
withdrawal charge, but $500 would be subject to a withdrawal charge.
We will waive the withdrawal charge during the free look period if (a)
you purchased your contract (1) by exchanging another annuity contract
or life insurance policy, or (2) by trustee to trustee transfer or
direct rollover from an IRA or other qualified plan, and (b) (1) you
are exchanging the Contract for another annuity contract, or (2) you
are making a trustee to trustee transfer or direct rollover of the
money in a Qualified Contract to another IRA or a qualified plan.
Since the Contract is intended to be long-term, we expect that the
withdrawal charge will not be sufficient to cover our expenses in
selling the Contracts. To the extent that the withdrawal charges are
not sufficient, we will pay these expenses from our general assets.
These assets may include proceeds from the mortality and expense risk
charge described above.
6. TRANSFER CHARGE. We reserve the right to charge no more than $15.00
for each transfer in excess of 6 per Contract Year.
7. FUNDS' EXPENSES. The expenses and charges incurred by the
Funds are described in their respective prospectuses.
8. OTHER TAXES. We reserve the right to charge for certain taxes
(other than premium taxes) that we may have to pay. See EMPIRE
FIDELITY INVESTMENTS LIFE'S TAXES on page .
DEATH BENEFIT
If the Owner is not the Annuitant and dies before the Annuity Date, we
will upon receipt of proof of death at the Annuity Service Center, pay
the Contract Value to the Owner's Beneficiary. If no Owner's
Beneficiary survives, the Contract Value will be paid to the Owner's
estate. If the Owner is the Annuitant and dies prior to the Annuity
Date, the entire interest will be paid as if the last surviving
Annuitant had died.
If the last surviving 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 Annuitant's Beneficiary you have
designated. If the death of the last surviving Annuitant occurs on or
before his or her 70th birthday, the Death Benefit will equal the
greater of: (1) the purchase payments paid, less any partial
withdrawals and charges thereon; and (2) the Contract Value as of the
end of the Valuation Period in which proof of death is received at our
Annuity Service Center. If the death of the last surviving Annuitant
occurs after his or her 70th birthday, the Death Benefit will equal
the Contract Value as of the end of the Valuation Period in which
proof of death is received at our Annuity Service Center.
No withdrawal charge is made in connection with the payment of a Death
Benefit. The Death Benefit may be paid in a single sum or applied
under a fixed, variable or combination annuity.
During the lifetime of the Annuitant, you may elect that the Death
Benefit be applied under any one of the annuity income options
available under the Contract or under any other annuity income option
acceptable to us. If you have not selected an annuity income option
and the death of the last surviving Annuitant occurs prior to the
Annuity Date, the Annuitant's Beneficiary may choose an available
annuity income option for the Death Benefit.
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 5
years after the death of the Owner (including any Owner who is also
the Annuitant), unless: the entire interest is payable over the
lifetime (or over a period not extending beyond the life expectancy)
of the recipient with distributions beginning within one year of the
date of death; or, the Owner's spouse is the recipient, in which case
the spouse may elect to continue the Contract and become the Owner.
If the Owner is a trust or other "non-natural person" 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 Owner was a living person who died prior to the Annuity Date.
If the Contract is owned jointly and either Owner dies before the
Annuity Date, we will upon receipt of proof of death at the Annuity
Service Center, pay the Contract Value to the surviving Owner. If
prior to the Annuity Date either Owner dies and the deceased Owner is
also the last surviving Annuitant, the entire interest will be paid to
the Annuitant's Beneficiary.
The rules regarding required distributions after the Owner's death are
described in the Statement of Additional Information. We intend to
administer the Contracts to comply with Federal tax law.
ANNUITY DATE
When your Contract is issued, it will generally provide for the latest
permissible Annuity Date. The latest permissible date is 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. When a Contingent Annuitant becomes the
Annuitant, Empire Fidelity Investments Life will change the Annuity
Date to the later of the first day of the month immediately following
the latest of the three following dates: (a) the Annuitant's 85th
birthday (b) the fifth Contract Anniversary, and (c) the date the
Contingent Annuitant becomes the Annuitant. You may change the Annuity
Date by written notice to the Annuity Service Center at least 30 days
prior to the current Annuity Date. The Annuity Date must be the first
day of a month. For both Qualified and Non-qualified Contracts, 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.
If 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 Guaranteed Account, less any
applicable taxes, will be applied to the purchase of the fixed portion
of the annuity and the Contract Value allocated to the Variable
Account, less any applicable taxes, will be applied to the purchase of
the variable portion of the annuity. See Annuity Option No. 3 under
TYPES OF ANNUITY INCOME OPTIONS on page .
FIXED, VARIABLE, OR COMBINATION ANNUITY INCOME OPTIONS
You may elect to have annuity income payments made on a fixed basis, a
variable basis, or a combination of both. 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 Guaranteed Account. The annuity income payments
will be fixed in amount and duration by the fixed annuity provisions
selected, the sex (except Contracts utilizing unisex purchase rates)
and adjusted age of the Annuitant, and the then current guaranteed
interest rate used to determine fixed annuity income payments. In no
event will the guaranteed interest rate be less than 3.5%.
If you select a variable annuity, your Contract Value will be
transferred to the Variable Account. The dollar amount of the first
variable annuity income payment will be determined in accordance with
the applicable annuity payment rates, the sex (except Contracts
utilizing unisex purchase rates), the adjusted age of the Annuitant
and an assumed annual interest rate of 3.5% (unless we also offer an
alternative assumed interest rate on the Annuity Date and you select
that alternative). All subsequent variable annuity income payments are
calculated based on the Subaccount Annuity Units credited to the
Contract. Annuity Units are similar to Accumulation Units except that
built into the calculation of Annuity Unit Values is the assumption
that the Net Rate of Return of a Subaccount will equal the assumed
interest rate. Thus, with a 3.5% assumed interest rate, the Subaccount
Annuity Unit Value will not change if the daily Net Rate of Return of
the Subaccount is equivalent to an annual rate of return of 3.5%. If
the Net Rate of Return is greater than the assumed interest rate, the
Subaccount Annuity Unit Value will increase; if the Net Rate of Return
is less than the assumed interest rate, 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 annuity
income payment attributable to that Subaccount by the Annuity Unit
Value of that Subaccount for the Valuation Period in which the Annuity
Date occurs. The number of Annuity Units of each Subaccount credited
to the Contract then remains fixed unless there is a subsequent
transfer involving the Subaccount. The dollar amount of each variable
annuity income payment after the first may increase, decrease or
remain constant. The income payment is equal to the sum of the amounts
determined by multiplying the number of Annuity Units of each
Subaccount credited to the Contract by the Annuity Unit Value for the
particular Subaccount for the Valuation Period in which each
subsequent annuity income payment is due.
If you select a combination annuity, your Contract Value will be split
between the Guaranteed 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.
After the Annuity Date, transfers between the Variable Account and the
Guaranteed Account are not permitted. Transfers among the variable
Subaccounts, however, are permitted subject to some limitations. See
TRANSFERS AMONG SUBACCOUNTS AFTER THE ANNUITY DATE in the Statement of
Additional Information.
TYPES OF ANNUITY INCOME OPTIONS
The Contract provides for three types of annuity income options. All
are available on a fixed, variable or combination basis. You may not
select more than one option. If your Contract Value would provide less
than $20 of monthly income, we may pay the proceeds in a single sum
rather than pursuant to the selected option. In addition, we may
require that annuity income payments be made entirely on a fixed
basis, if the amount to be applied on a variable basis would provide
an initial monthly income of less than $50.
1. LIFE ANNUITY. Annuity income payments will be made monthly during
the Annuitant's lifetime ceasing with the last income 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
income payments.
2. JOINT AND SURVIVOR ANNUITY. This option provides monthly annuity
income payments during the joint lifetimes of the Annuitant and a
designated second person and during the lifetime of the survivor.
There are some limitations on the use of this option for 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. This
option provides monthly annuity income payments during the lifetime of
the Annuitant, and in any event for one hundred twenty (120) or two
hundred forty (240) months certain as elected. In the case of a
Qualified Contract, the guarantee period may not exceed the life
expectancy of the Annuitant. In the event of the death of the
Annuitant under this option, the Contract provides that any guaranteed
monthly income payments will be paid to the Annuitant's Beneficiary
during the remaining months of the term selected. However, the
Annuitant's 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 the Annuitant's Beneficiary receiving
annuity benefits under this option, the present value of the
guaranteed benefits remaining after we receive notice of the death of
the Annuitant's Beneficiary, computed at the applicable interest rate,
shall be paid in a single sum to the estate of the Annuitant's
Beneficiary. The present value is computed as of the Valuation Period
during which notice of the death of the Annuitant's Beneficiary is
received at the Annuity Service Center.
You may choose to have annuity 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 you will
receive a statement of your Contract Value and any other information
required by state law, including a summary of all transactions since
the preceding quarterly statement.
In addition, you will receive 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.
8.THE GUARANTEED ACCOUNT
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE
GUARANTEED ACCOUNT OPTION UNDER THE CONTRACT 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 GUARANTEED ACCOUNT OPTION ARE
NOT SUBJECT TO THE PROVISIONS OF THOSE ACTS, AND EMPIRE 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 GUARANTEED ACCOUNT OPTION. DISCLOSURES
REGARDING THE GUARANTEED ACCOUNT OPTION 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.
As noted earlier, you may allocate net purchase payments or transfer
all or a part of your Contract Value to a fixed-rate investment option
funded through and guaranteed by Empire Fidelity Investments Life's
general account (the "Guaranteed Account"). The Guaranteed Account may
also be referred to as the "Fixed Account". Funds allocated or
transferred to the Guaranteed Account do not fluctuate with the
investment experience of Empire Fidelity Investments Life's general
account. We guarantee that the portion of your Contract Value that is
held in the Guaranteed Account will accrue interest daily at an annual
rate that will never be less than 3.5%. When a purchase payment is
received or an amount is transferred into the Guaranteed 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 Guaranteed 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 Guaranteed
Account depending on when the amount was initially allocated.
Furthermore, the interest rate applicable to any particular amount may
vary from time to time.
9.MORE ABOUT THE CONTRACT
10.TAX CONSIDERATIONS
The following discussion is not intended as tax advice. For tax advice
you should consult a tax adviser. Although the following discussion is
based on our understanding of Federal income tax laws as currently
interpreted, there is no guarantee that those laws or interpretations
will not change. The following discussion does not take into account
state or local income tax or other considerations which may be
involved in the purchase of a Contract or the exercise of options
under the Contract. In addition, the following discussion assumes that
the Contract is owned by an individual, and we do not intend to offer
the Contracts to "non natural" persons such as corporations, unless
the Contract is held by such person as a nominee for an individual.
(If the Contract is not owned by or held for a natural person, the
contract will generally not be treated as an annuity for tax
purposes.)
The following discussion assumes that the Contract will be treated as
an annuity for Federal income tax purposes. Section 817(h) of the Code
provides that the investments of a separate account underlying a
variable annuity contract (or the investments of a mutual fund, the
shares of which are owned by the variable annuity separate account)
must be "adequately diversified" in order for the Contract to be
treated as an annuity for tax purposes. The Treasury Department has
issued regulations prescribing such diversification requirements. The
Variable Account, through each of the portfolios of the Funds, intends
to comply with these requirements. We have entered into agreements
with the Funds that require the Funds to operate in compliance with
the Treasury Department's requirements. In connection with the
issuance of prior regulations relating to diversification
requirements, the Treasury Department announced that such regulations
do not provide guidance concerning the extent to which owners may
direct their investments to particular divisions of a separate
account. Additional guidance relating to this subject is expected in
the near future. It is not clear what this guidance will provide or
whether it will be prospective only. It is possible that when this
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 any 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 the Owner or the Annuitant dies.
QUALIFIED CONTRACTS
The Contract may be used as a qualified 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 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 another qualified plan, tax
sheltered annuity or IRA. IN ADDITION, QUALIFIED CONTRACTS WILL NOT
ACCEPT ANY SUBSEQUENT CONTRIBUTIONS OTHER THAN ADDITIONAL ROLLOVER
CONTRIBUTIONS FROM ANOTHER 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. A distribution may occur in
the form of a withdrawal, death benefit payment, or payments under an
annuity income option. 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.
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). The taxable portion of a distribution is
generally taxed as ordinary income.
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.
Partial withdrawals under a Non-qualified Contract are treated for tax
purposes as first being taxable withdrawals of investment income,
rather than as return of purchase payments, until all investment
income earned by your Contract has been withdrawn. You will be taxed
on the amount withdrawn to the extent that your Contract Value at that
time, unreduced by the withdrawal charge, exceeds your payments.
Partial withdrawals under a Qualified Contract are prorated between
taxable income and non-taxable return of investment. Generally, the
cost basis of a qualified Contract is zero, and the partial withdrawal
will be fully taxed.
All annuity contracts issued by the same company (or an affiliated
company) to the same contract owner during any calendar year are
treated as one annuity contract for purposes of determining the amount
includible in income of any distribution that is not received as an
annuity payment. In the case of a qualified contract, the tax law
requires for all post-1986 contributions and distributions that all
individual retirement accounts and annuities be treated as one
contract.
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.
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. In the case of a
Contract held in custody for a minor under the Uniform Gifts to Minors
Act or the Uniform Transfers to Minors Act, a distribution under the
Contract ordinarily is taxable to the minor. Whether the penalty tax
applies to such a distribution ordinarily is determined by the
circumstance or characteristics of the minor, not the custodian. Thus,
for example, a distribution taxable to a minor will not qualify for
the exception to the penalty tax for distributions made on or after
age 59 1/2, even if the custodian is 59 1/2 or older. In addition, in
the case of a Qualified Contract, a 50% excise tax is imposed on the
amount by which minimum required annuity or death benefit
distributions exceed actual distributions. Penalty taxes also are
imposed on aggregate distributions from specified retirement programs
(including IRAs) in excess of a specified amount annually and in
certain other circumstances.
We will withhold and remit to the U.S. Government a part of the
taxable portion of each distribution made under the Contract, unless
the Owner, Annuitant or Beneficiary files a written election prior to
the distribution stating that he or she chooses not to have any
amounts withheld.
EMPIRE FIDELITY INVESTMENTS LIFE'S TAXES
The earnings of the Variable Account are taxed as part of the
operations of Empire Fidelity Investments Life. 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.
11.12.OTHER CONTRACT PROVISIONS
You should also be aware of the following important provisions of your
Contract.
1. OWNER. As the Owner named in the application, you have the rights
and privileges specified in the Contract.
Prior to the Annuity Date and during the lifetime of the Annuitant,
you may change the Owner, Annuitant or any beneficiary by notifying us
in writing. The Annuitant may only be changed once. You may not,
however, change the Owner or Annuitant 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
made by us before the request was received and recorded at the Annuity
Service Center. On the Annuity Date, all of the Owner's rights pass to
the Annuitant.
2. ANNUITANT'S BENEFICIARY. The Annuitant's Beneficiary is named on
the application unless later changed. The Death Benefit will be paid
to the Annuitant's Beneficiary upon the death of the last surviving
Annuitant prior to the Annuity Date. If no Annuitant's Beneficiary
survives, the Death Benefit will be paid to the Owner or the Owner's
estate.
3. OWNER'S BENEFICIARY. The Owner's Beneficiary is named on the
application unless later changed. The Contract Value will be paid to
the joint Owner, if any, otherwise to the Owner's Beneficiary upon the
death of any Owner (unless such Owner is also the last surviving
Annuitant) prior to the Annuity Date. If no Owner's Beneficiary
survives, the Contract Value will be paid to the Owner's estate. If at
the time of the death of any Owner prior to the Annuity Date, that
Owner is also the last surviving Annuitant, proceeds will be paid to
the Annuitant's Beneficiary. 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.
4. CONTINGENT ANNUITANT. Once prior to the Annuity Date, the Owner
may name a Contingent Annuitant. If a Contingent Annuitant has been
named, the Owner may remove either the Annuitant or the Contingent
Annuitant. If the Contingent Annuitant dies or is removed, another
Contingent Annuitant cannot be named. Upon the death (if the Annuitant
is not an Owner) or removal of the Annuitant prior to the Annuity
Date, the Contingent Annuitant, if any, becomes the Annuitant. When a
Contingent Annuitant becomes the Annuitant, we will change the Annuity
Date to the later of the first day of the month immediately following
the latest of the three following dates: (a) the Annuitant's 85th
birthday (b) the Contract's fifth anniversary; and (c) the date the
Contingent Annuitant becomes the Annuitant. A Contingent Annuitant
cannot be named for Qualified Contracts or if a Non-Qualified Contract
is owned by a non-natural person.
5. 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; (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.
6. 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. Your rights and the rights of any Beneficiary
will be affected by an assignment. We will not be responsible for the
validity of any assignment. No assignment may be made of a Qualified
Contract.
7. 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
The Contracts will be distributed through Fidelity Brokerage Services,
Inc. and Fidelity Insurance Agency, Inc., both of which are affiliated
with FMR Corp., the ultimate parent company of Empire Fidelity
Investments Life. 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 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. sales
compensation of no more than 3% of payments received.
AVAILABILITY OF UNISEX
Annuity income payments are based, in part, on the sex of the
Annuitant. For certain situations where the Contracts are to be used
in connection with an employer sponsored benefit plan or arrangement,
Federal law may require that annuity income payments be determined
without regard to sex. A special endorsement to the Contract is
available for this purpose. For questions regarding unisex
requirements, you should consult with qualified counsel.
DOLLAR COST AVERAGING
Dollar cost averaging allows you to make automatic monthly dollar
amount transfers from the Money Market Subaccount to any of the other
variable Subaccounts. Dollar cost averaging transfers are not
permitted to the Guaranteed Account. These monthly transfers will take
effect on the same day each month. You may select any date between the
1st and 28th as the date of your dollar cost averaging transfers (the
"Transfer Date"). If the Transfer Date occurs on a day the New York
Stock Exchange is closed (i.e., weekend or holiday), the dollar cost
averaging transfer will take effect as of the next business day that
the New York Stock Exchange is open. Your transfers will continue
until the balance in the Money Market Subaccount is exhausted or you
notify us of cancellation of dollar cost averaging for your Contract.
The minimum monthly transfer allowed to any variable Subaccount is
$250.
Dollar cost averaging is currently available at no charge to the
Contract Owner. Empire Fidelity Investments Life reserves the right to
modify or terminate the dollar cost averaging feature.
POSTPONEMENT OF PAYMENT
In general, we will ordinarily pay any partial or full cash withdrawal
within seven days after we receive your written request at our Annuity
Service Center. We will usually pay any Death Benefit within seven
days after we receive proof of the Annuitant's death.
However, we may delay payment if (1) 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 (2) the SEC by order permits postponement of
payment to protect our Contract Owners. In addition, we reserve the
right to delay payment of any partial or full cash withdrawal from the
Guaranteed Account for not more than six months. If payment from the
Guaranteed Account is delayed for more than 30 days or if less, the
period required by law, it will be credited with interest from the
date of withdrawal at a rate not less than 3.5% per year compounded
annually or, if greater, the rate required by law.
13.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, or a change in a portfolio's investment objectives or
restrictions, or because the portfolio is no longer available for
investment, or for some other reason. We would obtain prior approval
from the SEC and any other required approvals before making such a
substitution.
We also reserve the right to operate the Variable Account as a
management investment company under the 1940 Act or any other form
permitted by law or to deregister the Variable Account under such Act
in the event such registration is no longer required.
NET RATE OF RETURN FOR A SUBACCOUNT
A Subaccount's Net Rate of Return depends on how the investments of
the Subaccount perform. We determine the Net Rate of Return of a
Subaccount at the end of each Valuation Period. Such determinations
are made as of the close of business each day the New York Stock
Exchange is open for business. The Net Rate of Return reflects the
investment performance of the Subaccount for the Valuation Period and
is net of the asset charges to the Subaccounts.
Shares of the Funds are valued at net asset value. Any dividends or
capital gains distributions of a portfolio of the Funds are reinvested
in shares of that portfolio.
VOTING RIGHTS
We will vote shares of the Funds owned by the Variable Account
according to your instructions. However, if the Investment Company Act
of 1940 or any related regulations or interpretations should change,
and we decide that we are permitted to vote the shares of the Funds in
our own right, we may decide to do so.
Before the Annuity Date, we calculate the number of shares that you
may instruct us to vote by dividing your Contract Value in a
Subaccount by the net asset value of one share of the corresponding
portfolio. If variable annuity income payments have commenced, we
calculate the number of shares that the payee may instruct us to vote
by dividing the reserve maintained in each Subaccount to meet the
obligations under the Contract by the net asset value of one share of
the corresponding portfolio. Fractional votes will be counted. We
reserve the right to modify the manner in which we calculate the
weight to be given to your voting instructions where such a change is
necessary to comply with then current Federal regulations or
interpretations of those regulations.
We will determine the number of shares you can instruct us to vote 90
days or less before the applicable Fund shareholder meeting. At least
14 days before the meeting, we will send you material by mail for
providing us with your voting instructions.
If your voting instructions are not received in time, we will vote the
shares in the same proportion as the instructions received from other
Contract Owners. We will also vote shares we hold in the Variable
Account that are not attributable to Contract Owners in the same
proportionate manner.
Under certain circumstances, we may be required by state regulatory
authorities to disregard voting instructions. This may happen if
following such instructions would change the sub-classification or
investment objectives of the portfolios, or result in the approval or
disapproval of an investment advisory contract.
Under Federal regulations, we may also disregard instructions to vote
for Contract Owner-initiated changes in investment policies or the
investment adviser if we disapprove of the proposed changes. We would
disapprove a proposed change only if it were contrary to state law,
prohibited by state regulatory authorities, or if we decided that the
change would result in overly speculative or unsound investments. If
we ever disregard voting instructions, we will include a summary of
our actions in the next semiannual report.
RESOLVING MATERIAL CONFLICTS
The investment portfolios of the 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. 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 Funds and does not indicate or represent future
performance.
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.
A cumulative total return reflects a Subaccount's performance over a
stated period of time. An average annual total return reflects the
hypothetical annually compounded return that would have produced the
same cumulative total return if the Subaccount's 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.
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.
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 and the High Income and Emerging Markets
Debt Subaccountss 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.
14.APPENDIX I
Accumulation Unit Values
Empire Fidelity Investments Variable Annuity Account A
Condensed Financial Information
Money Market Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1996 14.66 15.30 3,144,313
1995 13.99 14.66 2,086,339
1994 13.55 13.99 1,840,618
1993 13.26 13.55 644,024
1992* 13.07 13.26 458,774
* June 3, 1992 to December 31, 1992
High Income Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1996 22.05 24.89 820,013
1995 18.47 22.05 605,822
1994 18.94 18.47 413,916
1993 15.88 18.94 315,623
1992* 14.95 15.88 66,583
* June 3, 1992 to December 31, 1992
Equity-Income Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1996 27.44 31.05 4,755,212
1995 20.52 27.44 4,481,146
1994 19.36 20.52 3,148,692
1993 16.54 19.36 2,020,649
1992* 15.33 16.54 516,594
* June 3, 1992 to December 31, 1992
Growth Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1996 30.80 34.97 2,503,391
1995 22.98 30.80 2,004,576
1994 23.22 22.98 1,448,467
1993 19.64 23.22 938,534
1992* 17.67 19.64 300,602
* June 3, 1992 to December 31, 1992
Overseas Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1996 19.00 21.30 1,151,640
1995 17.50 19.00 930,291
1994 17.37 17.50 1,472,775
1993 12.79 17.37 863,085
1992* 15.42 12.79 57,728
* June 3, 1992 to December 31, 1992
Investment Grade Bond Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1996 16.99 17.36 382,801
1995 14.63 16.99 358,773
1994 15.35 14.63 270,642
1993 13.98 15.35 346,042
1992* 13.40 13.98 184,492
* June 3, 1992 to December 31, 1992
Asset Manager Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1996 18.29 20.76 3,900,514
1995 15.80 18.29 4,435,615
1994 16.99 15.80 6,284,783
1993 14.18 16.99 5,376,522
1992* 13.47 14.18 1,765,922
* June 3, 1992 to December 31, 1992
Index 500 Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1996 15.54 18.90 1,887,371
1995 11.44 15.54 802,405
1994 11.44 11.44 210,179
1993 10.53 11.44 166,568
1992* 10.17 10.53 57,596
* November 2, 1992 to December 31, 1992
Asset Manager: Growth Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1996 12.20 14.50 1,163,007
1995* 10.00 12.20 396,158
* Period from 1/3/95 (commencement of operations) to 12/31/95
Contrafund Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1996 13.87 16.66 5,882,023
1995* 10.00 13.87 3,685,097
* Period from 1/3/95 (commencement of operations) to 12/31/95
15.TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
Accumulation Units
Fixed Annuity Income Payments
Variable Annuity Income Payments
Hypothetical Illustrations of Annuity Income Payouts
General Information
Performance
Transfers Among Subaccounts After the Annuity Date
Unavailability of Annuity Income Options in Certain Circumstances
IRS Required Distributions
Safekeeping of Variable Account Assets
Distribution of the Contracts
State Regulation
Legal Matters
Registration Statement
Independent Accountants
Financial Statements
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 thirty (30)
days of 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
contract value at the time of revocation plus any amount deducted from
your contribution prior to such time. If you revoke within the first
seven (7) days you will receive the entire amount you paid if it is
greater than the contract value.
You may revoke your IRA by mailing or delivering a notice of
revocation to:
Empire Fidelity Investments Life Insurance Company
Annuity Service Center
P.O. Box 3767
New York, NY 10277-0433
Any question regarding this procedure may be directed to a Fidelity
Insurance Specialist at 1-800-544-2442.
CONTRIBUTIONS
3. You may establish an IRA for the purpose of rolling over all or a
portion of your distribution from a qualified plan, tax sheltered
annuity or other IRA. If you retire, terminate your employment prior
to retirement age, or become disabled, and you are entitled to a
single sum distribution, all or a portion of the distribution may be
transferred to a qualifying IRA tax-free if done within 60 days of
receipt of the single sum distribution. The amount of your rollover
IRA contribution will not be included in your taxable income for the
year in which you receive the qualified plan distribution.
4. Subsequent contributions, other than additional rollover
contributions from another qualified plan, tax sheltered annuity or
IRA, will not be accepted.
5. No deduction is allowed for a rollover contribution which is not
treated as income to the individual.
INVESTMENTS
6 The assets in your IRA are nonforfeitable, subject to the surrender
charges specified in the IRA contract.
7. The assets in your IRA cannot be commingled with other property
except in a common trust fund or common investment fund.
8. No part of the IRA may be invested in life insurance or endowment
contracts.
DISTRIBUTIONS
9. Distributions from your IRA will be included in your gross income
for federal income tax purposes for the year in which you receive
them.
10. To the extent they are included in taxable income, distribution
from your IRA made before age 59 1/2 will be subject to a 10%
non-deductible penalty tax (in addition to being taxable as ordinary
income) unless the distribution is rolled over to another qualified
plan, tax sheltered annuity or IRA, or the distribution is made on
account of your death or disability, or the distribution is one of a
scheduled series of payments over your life or life expectancy or the
joint life expectancies of yourself and the second person designated
by you.
11. You must begin receiving distributions of the assets in your IRAs
by April 1 of the calendar year following the calendar year in which
you reach 70 1/2. Subsequent distributions must be made by December 31
of each year.
12. You may select one of the following methods of distribution for
the assets of this IRA:
(a) Distribution over your life or your life and the life of a second
person designated by you;
(b) Distribution over a period certain not to exceed your life
expectancy or your life expectancy and that of a second person
designated by you;
(c) Single sum payment; or
(d) Partial withdrawals that, together with withdrawals from your
other IRAs, satisfy the minimum distribution requirements discussed
below.
(See Contract and Endorsement for a full description of these
distribution methods.)
13. Once distributions are required to begin, they must not be less
than the amount each year (determined by actuarial tables) which would
exhaust the value of all your IRAs over the required distribution
period, which is generally your life expectancy or the joint life and
last survivor expectancy of you and your spouse. You will be subject
to a 50% excise tax on the amount by which the distribution you
actually received in any year falls short of the minimum distribution
required for the year.
14. If you die after distribution of the IRA has commenced, the
remaining balance must continue to be distributed under the same or a
more rapid method of distribution.
15. If you die before distribution of the IRA commences, the entire
balance must be distributed to the beneficiary within five (5) years
unless:
(a) The beneficiary is your surviving spouse and the beneficiary
either treats the IRA as his or her own IRA or elects within a five
(5) year period to receive payments over his or her own life
expectancy commencing at any date prior to the date you would have
reached age 70 1/2; or
(b) The beneficiary is not your surviving spouse and the beneficiary
elects to have the IRA distributed over his or her life expectancy
commencing within one (1) year of your death.
16. There is a 15% excise tax assessed against annual distribution
from tax-favored retirement plans, including IRAs, which exceed the
greater of (a) $150,000; and (b) $112,500 adjusted after 1988 to
reflect cost-of-living increases. To determine whether you have
distributions in excess of this limit you must aggregate the amounts
of all distributions received by you during the calendar year from all
retirement plans, including IRAs. Please consult with your tax advisor
for more complete information including favorable elections.
17. You may rollover all or a portion of your IRA into another IRA or
individual retirement annuity and maintain the tax-deferred status of
these assets. Tax-free rollovers between IRAs may be made no more than
once every twelve months.
OTHER TAX CONSIDERATIONS
18. Distributions are taxed as ordinary income under federal income
tax laws.
19. The tax treatment of single sum distributions under Section 402(e)
of the Code is not applicable to distributions from IRAs.
20. Reporting to the IRS will be required by you in the event that
special taxes or penalties described herein are due. You must file
Treasury Form 5329 with the IRS for each taxable year in which a
premature distribution takes place or less than the required minimum
amount is distributed from your IRA. The Tax Reform Act of 1986 also
requires you to report the amount of all distributions you received
from your IRA and the aggregate balance of all IRAs as of the end of
the calendar year.
PROHIBITED TRANSACTIONS
21. If any of the events prohibited by Section 4975 of the Code (such
as any sale, exchange or leasing of any property between you and your
IRA) occurs during the existence of your IRA, your account will be
disqualified and the entire balance in your account will be treated as
if distributed to you, as of the first day of the year in which the
prohibited event occurs. This "distribution" would be subject to
ordinary income tax and, if you were under age 59 1/2 at the time, to
the 10% penalty tax on premature distributions.
22. If you or your beneficiary borrow any money under, or by use of,
all or a portion of your IRA, then the portion pledged will be treated
as if distributed to you, and will be taxable to you as ordinary
income and subject to the 10% penalty during the year in which you
make such a pledge.
FINANCIAL INFORMATION
23. The value of your investment will depend on how you allocate funds
between the Guaranteed Account and the subaccounts of the Variable
Account. The Company guarantees that the portion of your contract
value that is held in the Guaranteed Account will accrue interest
daily at specified interest rates that vary from time to time. With
respect to funds allocated to the Variable Account, the value will
depend upon the actual investment performance of the subaccounts that
you choose; no minimum value is guaranteed. See your prospectus for a
more detailed description.
24. As further described in the prospectus, the following are all the
charges that the Company currently makes:
(a) ADMINISTRATIVE CHARGE
The Company currently deducts an annual maintenance charge of $30 on
each contract anniversary. This charge is currently waived if total
payments, less any withdrawals, equal at least $25,000.
The Company also deducts a daily charge from the assets of the
subaccounts equivalent to an effective annual rate of 0.25%. This
charge is not made against the Guaranteed Account.
(b) MORTALITY AND EXPENSE RISK CHARGE
The Company deducts a daily charge from the assets of the subaccounts
equivalent to an effective annual rate of 0.75%. This charge is not
made against the Guaranteed Account.
(c) WITHDRAWAL CHARGE
During the first five contract years the Company assesses a charge
upon the surrender of the contract or the withdrawal of more than the
Exempt Withdrawal Amount. This charge in the first year is 5% of the
purchase payments withdrawn. The factor decreases by 1% per year so
that no withdrawal charge is made after the fifth contract year.
(d) PORTFOLIO EXPENSES
The portfolios associated with the Variable Account incur operating
expenses and pay monthly management fees to Fidelity Management &
Research Company. The level of expenses vary by portfolio. This charge
is not made against the Guaranteed Account.
