As filed with the SEC on April 28, 1998
Registration No. 33-42376
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 7 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ ]
Amendment No. 8 [ X ]
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
(Exact name of registrant)
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(name of depositor)
One World Financial Center
New York, New York 10281
(Address of depositor's principal executive offices)
Depositor's telephone number: 1-800-544-8888
____________________________________________
RODNEY R. ROHDA
Chairman
Empire Fidelity Investments Life Insurance Company
One World Financial Center
New York, New York 10281
(Name and address of agent for service)
_________________________________________
Copy to:
MICHAEL BERENSON
JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON LLP
1025 Thomas Jefferson Street, Suite 400 East
Washington, D.C. 20007
Individual Variable Annuity Contracts -- Pursuant to Rule 24f-2 under
the Investment Company Act of 1940, the Registrant has registered an
indefinite number of securities. Registrant's Rule 24f-2 Notice for
the fiscal year ending December 31, 1997 was filed March 30, 1998.
It is proposed that this filing will become effective (check
appropriate space):
immediately upon filing pursuant to paragraph (b) of rule 485
x on April 29, 1998, pursuant to paragraph (b) (1) (v) of rule 485
60 days after filing pursuant to paragraph (a) (1) of rule 485
on , pursuant to paragraph (a) (1) of rule 485
75 days after filing pursuant to paragraph (a) (2) of rule 485
on , pursuant to paragraph (a) (2) of rule 485 Page _
of _
Exhibit Index Appears on Page __
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
Part A
Item N-4 Item Heading in Prospectus.
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Item 1. Cover Page Cover Page
Item 2. Definitions Glossary
Item 3. Synopsis or Highlights Summary of the Contract
Item 4. Condensed Financial Information Not Applicable
Item 5. General Description of Registrant, Facts About Empire Fidelity Investments
Depositor, and The Portfolio Companies Life, The Variable Account, and the Funds
(a) Depositor Empire Fidelity Investments Life
(b) Registrant The Variable Account; The Guaranteed
Account
(c) Portfolio Company The Funds
(d) The Funds The Funds
(e) Voting Voting Rights
(f) Administrator Charges
Item 6. Deductions and Expenses Charges
a) Deductions Charges; Premium Taxes
b) Sales Load Withdrawal charge
c) Special purchase plans Dollar Cost Averaging
d) Commissions Selling the Contracts
e) Portfolio company deductions and Charges
expenses
f) Registrant's expenses Charges
g) Organizational expenses Not applicable
Item 7. General Description of Variable Annuity
Contracts
a) Rights Summary of the Contract; Investments
Allocation of Your Purchase Payments;
Withdrawals; Death Benefit; Selection of
Annuity Income Options; Reports to Owners;
Voting Rights; Other Contract Provisions
b) Provisions and limitations Investment Allocation of Your Purchase
Payments
c) Changes in contracts or operations Changes in Investment Options
d) Contract owner inquiries Cover Page
Item 8. Annuity Period
a) Level of benefits Fixed, Variable or Combination Annuity
Income Options; Types of Annuity Income
Options
b) Annuity commencement date Annuity Date
c) Annuity payments Types of Annuity Income Options
d) Assumed investment return Fixed, Variable or Combination Annuity
Income Options
e) Minimums Types of Annuity Income Options
f) Rights to change options or transfer Investment Allocation of Your Purchase
contract value Payments
Item 9. Death Benefit
a) Death benefit Calculation Death Benefit
b) Forms of benefits Death Benefit; Types of Annuity Options
Item 10. Purchases and Contract Values
a) Procedures for purchases Purchase of a Contract
b) Accumulation unit value Accumulation Units
c) Calculation of accumulation unit value Accumulation Units
d) Principal underwriter Selling the Contracts
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Item 11. Redemptions
a) Redemptions procedures Withdrawals
b) Texas Optional Retirement Program Not Applicable
c) Delay Postponement of Payment
d) Lapse Not Applicable
e) Revocation rights Free Look Privilege
Item 12. Taxes
a) Tax Consequences Tax Considerations; Contract Values and
Proceeds; Distributions on Death of Owner
b) Qualified plans Purchase of a Contract; Tax Considerations
c) Impact of taxes Tax Considerations
Item 13. Legal Proceedings Litigation
Item 14. Table of Contents for Statement of Table of Contents for Statement of Additional
Additional Information Information
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Part B
Item N-4 Item Heading in Statement of Additional Information.
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Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History
a) Name Change Not Applicable
b) Attributions of Assets Not Applicable
c) Control of Depositor Empire Fidelity Investments Life
(Prospectus)
Item 18. Services
a) Fees, expenses and costs Service Agreements;
Charges(Prospectus)
b) Management - related services Service Agreements
c) Custodian and independent Independent Accountants
public accountant
d) Other custodianship Safekeeping of Account Assets
e) Administrative servicing agent Service Agreements; Empire
Fidelity Investments Life
(Prospectus); The Variable
Account (Prospectus)
f) Depositor as principal Not Applicable
Underwriter
Item 19. Purchase of Securities Being
Offered
a) Manner of Offering Distribution of the Contracts;
Selling the Contracts; (Prospectus)
b) Sales Load Withdrawal Charge (Prospectus)
Item 20. Underwriters
a) Depositor or affiliate as Selling the Contracts (Prospectus)
principal underwriter
b) Continuous Offering Distributions of Contracts
c) Underwriting commissions Not Applicable
d) Payments to underwriter Not Applicable
Item 21. Not applicable Not applicable
Item 22. Annuity Payments Fixed Annuity Income Payments;
Variable Annuity Income
Payments; Unavailability of
Annuity Income Payments in
Certain Circumstances
Item 23. Financial Statements
a) Registrant Financial Statements
b) Depositor Financial Statements
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PART B
INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
EXHIBIT INDEX
Exhibit
(9) Opinion and consent of David J. Pearlman, as to the legality
of securities being issued.
(10) (a) Written consent of Coopers & Lybrand.
(b) Written consent of Jorden Burt Berenson & Johnson LLP
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 V ariable 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. The
V ariable Subaccounts also 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 a s t he " 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
April 30, 1998 . 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 EITHER THE CURRENT
PROSPECTUS FOR THE MONEY MARKET INVESTMENT OPTION OR THE
PROSPECTUSES FOR ALL THE INVESTMENT OPTIONS AVAILABLE IN THE
CONTRACT.
FOR FURTHER INFORMATION CALL FIDELITY INVESTMENTS
Nationally 1-800-544-2442
Date: April 30, 1998
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
MORE ABOUT THE CONTRACT
Tax Considerations
Other Contract Provisions
Selling the Contracts
Availability of Unisex
Dollar Cost Averaging
Automatic Rebalancing
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 A: 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.
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 Pilgrim
Baxter Value Investors, 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. These
minimum payments maybe reduced for individuals under certain sponsored
arrangements or if the payment is part of an automatic deduction plan.
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.
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 m aximum c ontingent d eferred s ales
c harge 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 1
ASSET MANAGER 0. 55% 0.10% 0.65%
MONEY MARKET 0.21% 0. 10% 0.31 %
INVESTMENT GRADE BOND 0.4 4% 0.14 % 0.58%
HIGH INCOME 0.59% 0.12% 0.71%
EQUITY-INCOME 0.5 0% 0.08 % 0.58%
INDEX 500 0. 24% 0.04 % 0.28%2
GROWTH 0. 60% 0.09 % 0.69%
OVERSEAS 0.7 5% 0.17% 0.92 %
ASSET MANAGER:
GROWTH 0.60% 0.17% 0.7 7%
CONTRAFUND 0.6 0% 0.11% 0.71 %
GROWTH OPPORTUNITIES 0.6 0% 0.14% 0.74 %
BALANCED 0.4 5% 0.16% 0.61 %
GROWTH & INCOME 0. 49% 0.21% 0.70 %
MORGAN STANLEY
EMERGING MARKETS
DEBT 0.09% 1.21% 1.30%3
EMERGING MARKETS
EQUITY 0.00% 1.75% 1.75%3
GLOBAL EQUITY 0.00% 1.15% 1.15%3
INTERNATIONAL
MAGNUM 0.00% 1.15% 1.15%3
PBHG
SELECT 20 0. 61% 0.59 % 1.20%4
GROWTH II 0. 61% 0.59% 1.20 %4
LARGE CAP VALUE 0. 05% 0.95 % 1.00%4
SMALL CAP VALUE 0.74% 0.46 % 1.20%4
TECHNOLOGY &
COMMUNICATIONS 0. 58% 0.62 % 1.20%4
STRONG
DISCOVERY FUND II 1.00% 0.1 8% 1.18 %
GROWTH FUND II 1.00% 0.20% 1.20%5
OPPORTUNITY FUND II 1.00% 0. 15% 1.15 %
WARBURG PINCUS
INTERNATIONAL EQUITY 1.00% 0.35% 1.35 %6
POST-VENTURE CAPITAL 1.07% 0.33% 1.40%6
SMALL COMPANY GROWTH 0.90% 0. 24% 1.14 %6
1) A portion of the brokerage commissions that certain Funds pay was
used to reduce Fund expenses. In addition, certain Funds have entered
into arrangements with their custodian and transfer agent whereby
interest earned on uninvested cash balances was used to reduce
custodian expenses. Including these reductions, the total operating
expenses presented in the table would have been .5 7 % for
Equity-Income Portfolio, .67% for Growth Portfolio, .9 0 % for
Overseas Portfolio, . 64 % for Asset Manager Portfolio,
. 68 % for Contrafund Portfolio, . 76 % for Asset Manager:
Growth Portfolio, .7 3 % for Growth Opportunities Portfolio,
. 60 % for Balanced Portfolio and .71% for High Income
Portfolio .
2) FMR agreed to reimburse a portion of Index 500 Portfolio's expenses
during the period. Without this reimbursement, the Fund's management
fee, other expenses and total expenses would have been .2 7 %,
. 13 % and .4 0 %, respectively.
3) Morgan Stanley Asset Management, Inc. ("MSAM") 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. MSAM
may terminate this voluntary waiver at any time at its sole
discretion. Absent such reductions, "Management Fees", "Other
Expenses" and "Total Annual Expenses", respectively, would be as
follows: Emerging Markets Debt Portfolio - 0.80%, 1.26%, 2.06%;
Emerging Markets Equity Portfolio - 1.25%, 2.62%, 4.12%%; Global
Equity Portfolio - 0.80%, 1.63%, 2.43%; International Magnum Portfolio
- - 0.80%, 1.98%, 2.78%.
4) Pilgrim Baxter & Associates, Ltd. (the "Adviser") has
voluntarily agreed to waive or limit it's Advisory Fees or assume
Other Expenses in an amount that operates to limit Total Operating
Expenses of the Portfolios to not more than of the 1.20% of the
average daily net assets of the Growth II, Small Cap Value, Technology
& Communications and Select 20 Portfolios and to not more than 1.00%
of the average daily net assets of the Large Cap Value Portfolio,
through December 31, 1998. Total Operating Expenses include, but are
not limited to, expenses such as investment advisory fees, transfer
agent fees and legal fees. Such waivers of Advisory fees and possible
assumptions of Other Expenses by the Adviser is subject to a possible
reimbursement by the Portfolios in future years if such reimbursement
can be achieved within foregoing annual expense limits. Such fee
waiver/expense reimbursement arrangements may be modified or
terminated at any time after December 31, 1998. Absent such fee
waivers/expense reimbursements the Advisory Fees and estimated Total
Operating Expenses for the Growth II, Small Cap Value, Large Cap
Value, Technology & Communications and Select 20 Portfolios would be
0.85%, and 1.44%; 1.00% and 1.46%; .65% and 1.60%; .85% and 1.47%; and
.85% and 1.44%, respectively.
5) Strong Capital Management, Inc., the investment Adviser, has
voluntarily agreed to cap the Fund's total operating expenses at
1.20%. The Adviser has no current intention to, but may in the future,
discontinue or modify any waiver of fees or absorption of expenses at
its discretion with appropriate notification to its shareholders.
6) Management Fees, Other Expenses and Total Annual Expenses for
the International Equity, Post-Venture Capital and Small Company
Growth Portfolios are based on actual expenses for the fiscal year
ended December 31, 1997, net any fee waivers or expense
reimbursements. Without such waivers or reimbursements, Management
Fees would have equaled 1.00%, 1.25% and 0.90%; Other Expenses would
have equalled 0.40%, 0.33% and 0.27%; and Total Annual Expenses would
have equalled 1.40%, 1.58% and 1.15% for the International Equity and
Small Company Growth Portfolios, respectively. The Portfolios'
investment Adviser and co-administrator have undertaken to limit each
Portfolio's Total Annual Expenses to the limits shown in the table
above through December 31, 1998.
EXAMPLES
If you assume that Contract Owner expenses are as shown above, and
that each Portfolio's annual return is 5% annually and its operating
expenses are just as described above, then for every $1,000 of
purchase payments, here's how much you would have paid in total
expenses if you surrendered your Contract after the number of years
indicated, or if you annuitize your contract during the first year.
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
FIDELITY
ASSET MANAGER $62 $76 $90 $176
MONEY MARKET 58 66 72 137
INVESTMENT GRADE BOND 61 74 87 168
HIGH INCOME 62 78 93 182
EQUITY-INCOME 61 74 87 168
GROWTH 62 78 92 180
OVERSEAS 64 85 104 205
INDEX 500 58 65 71 134
ASSET MANAGER: GROWTH 63 80 97 189
CONTRAFUND 62 78 93 182
GROWTH OPPORTUNITIES 63 79 95 186
BALANCED 61 75 88 171
GROWTH & INCOME 62 78 93 181
MORGAN STANLEY
EMERGING MARKETS DEBT 68 96 124 245
EMERGING MARKETS EQUITY 72 109 147 290
GLOBAL EQUITY 67 92 116 230
INTERNATIONAL MAGNUM 67 92 116 230
PBHG
GROWTH II 67 93 119 235
LARGE CAP VALUE 65 87 109 214
SELECT 20 67 93 119 235
SMALL CAP VALUE 67 93 119 235
TECHNOLOGY &
COMMUNICATIONS 67 93 119 235
STRONG
DISCOVERY FUND II 67 93 118 233
GROWTH FUND II 67 93 119 235
OPPORTUNITY FUND II 67 92 116 230
WARBURG PINCUS
INTERNATIONAL EQUITY 68 98 126 250
POST-VENTURE CAPITAL 69 99 129 255
SMALL COMPANY GROWTH 66 91 116 229
If you do not surrender your Contract or if you annuitize after the
first contract year, here is what your total expenses would be on a
$1,000 investment, assuming a 5% annual return on your assets:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
FIDELITY
ASSET MANAGER $15 $46 $80 $176
MONEY MARKET 12 36 62 137
INVESTMENT GRADE BOND 14 44 77 168
HIGH INCOME 16 48 83 182
EQUITY-INCOME 14 44 77 168
GROWTH 15 48 82 180
OVERSEAS 18 55 94 205
INDEX 500 11 35 61 134
ASSET MANAGER: GROWTH 16 50 87 189
CONTRAFUND 16 48 83 182
GROWTH OPPORTUNITIES 16 49 85 186
BALANCED 15 45 78 171
GROWTH & INCOME 15 48 83 181
MORGAN STANLEY
EMERGING MARKETS DEBT 22 66 114 245
EMERGING MARKETS EQUITY 26 80 137 290
GLOBAL EQUITY 20 62 106 230
INTERNATIONAL MAGNUM 20 62 106 230
PBHG
GROWTH II 21 63 109 235
LARGE CAP VALUE 18 57 99 214
SELECT 20 21 63 109 235
SMALL CAP VALUE 21 63 109 235
TECHNOLOGY &
COMMUNICATIONS 21 63 109 235
STRONG
DISCOVERY FUND II 20 63 108 233
GROWTH FUND II 21 63 109 235
OPPORTUNITY FUND II 20 62 106 230
WARBURG PINCUS
INTERNATIONAL EQUITY 22 68 116 250
POST-VENTURE CAPITAL 23 69 119 255
SMALL COMPANY GROWTH 20 62 106 229
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 A dvisers.
THE FUNDS
FIDELITY
The Fidelity Funds are Variable Insurance Products Fund,
Variable Insurance Products Fund II, and Variable Insurance Products
Fund III, each is an open-end, diversified management investment
company organized by Fidelity Management & Research Company. Each is
the type of investment company commonly known as a series mutual fund.
The investment objectives of the Funds are described below. There is,
of course, no assurance that any portfolio will meet its investment
objective.
VARIABLE INSURANCE PRODUCTS FUND
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 . T he 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 portfolio may not always hold all
of the same securities as the S&P 500. The Adviser may choose, if
extraordinary circumstances warrant, to exclude an index stock from
the fund and substitute a similar stock if doing so will help the fund
achieve its objective. 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. The Fund is managed by
FMR, which handles its business affairs. Bankers Trust Company, (BT),
Index 500 Portfolio's sub-adviser, chooses the Fund's investments. FMR
supervises the sub-adviser and, in conjunction with the Board of
Trustees, reviews the sub-adviser's performance of its duties. BT also
acts as Index 500 Portfolio's custodian.
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 normally invests
primarily in Common Stock and Securities Convertible into Common
Stock, but it has the flexibility to invest in other types of
Securities. 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 s 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 marke t s in other
countries develop, the Portfolio expects to expand and further
diversify the emerging market countries in which it invests.
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 issuer ' s 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 primarily
will invest are those comprising the Morgan Stanley Capital
International EAFE Index, which includ e 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"). The Portfolio may
invest up to 5% of its total assets in the securities of issuers
domiciled in non-EAFE countries. Under normal market conditions, a
large percentage of the total assets of the Portfolio will be invested
in Equity Securities of issuers in at least three different EAFE
countries.
PBHG
SELECT 20 PORTFOLIO seeks long-term growth of capital. 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. 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, p ortfolio 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 at least 65% of its total assets
in a diversified Portfolio of equity securities of large
capitalization companies which, in the opinion of the Adviser and
Pilgrim Baxter Value Investors, Inc. (the "Sub-Adviser"), are
undervalued or overlooked by the market. 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; continuing dividend income and the potential for
increasing dividend growth; a strong balance sheet 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 the 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
Portfolio's 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 s ; 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 Adviser looks for companies with fundamental
value or growth potential that is not yet reflected in their current
market prices. In many cases, companies in the small- and
medium-capitalization markets are under-followed and, as a result,
less efficiently priced than their larger, better-known counterparts.
The Fund's investments are therefore likely to consist, in part, of
securities in small- and medium-sized companies. Many of these
companies may have successfully emerged from the start-up phase and
have potential for future growth. Because of their longer track
records and more seasoned management, they generally pose less
investment uncertainty than do the smallest companies. In general,
smaller-capitalization companies often involve greater risks than
investments in established companies.
WARBURG PINCUS
INTERNATIONAL EQUITY PORTFOLIO 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 may 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 PORTFOLIO 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 securitie s 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 PORTFOLIO seeks capital growth by investing
primarily in equity securities of small sized domestic
companie s that represent attractive opportunities for capital
growth. The Portfolio considers a "small" company to be one that
has a market capitalization, measured at the time of the Portfolio
purchases a security of that company, within the range of
capitalizations of companies represented in the Russell 2000 Index.
(As of January 31, 1998, the Russell 2000 Index included companies
with market capitalizations between $23.7 million and $2.7 billion.)
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 A dviser for the Fidelity Funds is Fidelity
Management & Research Company, a registered adviser under the
i nvestment 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, 199 7 , it advised funds
having more than 34 million shareholder accounts with a total
value of more than $ 529 billion. The portfolios of the Fidelity
Funds, as part of their operating expenses, pay an investment
management fee to Fidelity Management & Research Company. These fees
are part of the Funds' expenses. See the prospectuses for the Funds
for discussions of the Funds' expenses. . Fidelity Investments Money
Management, Inc. (FIMM), a subsidiary of FMR, chooses investments for
Money Market Portfolio. Beginning January 1, 1999, FIMM will choose
investments for Investment Grade Bond Portfolio. Beginning January 1,
1999, FIMM will choose certain types of investments for Asset Manager,
Asset Manager: Growth, and Balanced Portfolios. Foreign affiliates of
FMR may help choose investments for some of the Funds. Bankers Trust
Company (BT) is a wholly-owned subsidiary of Bankers Trust New York
Corporation, the seventh largest bank holding company in the United
States. BT currently serves as sub-adviser to Index 500 Portfolio and
manages the Fund's portfolio.
The investment Adviser for the Morgan Stanley Universal Funds, Inc.
is Morgan Stanley Asset Management Inc., which is a wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co., which is a preeminent
global financial services firm that maintains leading market positions
in each of its three primary businesses - securities, asset management
and credit services. 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 to employee benefit plans, endowment funds, foundations and
other institutional investors. 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. ("Pilgrim Baxter"), a professional
investment management firm and registered investment Adviser that,
along with its predecessors, has been in business since 1982. The
controlling shareholder of Pilgrim Baxter is United Asset Management
Corporation ("UAM"), a New York stock exchange listed holding company
principally engaged through affiliated firms, in providing
institutional investments management services and acquiring
institutional investment management firms. UAM's headquarters are
located at One International Place, Boston, Massachusetts 02110. The
principal business address of the Adviser is 825 Dupertail Road,
Wayne, Pennsylvania 19087. Pilgrim Baxter Value Investors, Inc., the
Sub-Adviser, is a wholly owned subsidiary of Pilgrim Baxter and is a
registered investment Adviser that was formed in 1940. As with the
Adviser, the controlling shareholder of the Sub-Adviser is UAM. The
principal business address of the Sub-Adviser is 825 Dupertail Road,
Wayne, Pennsylvania 19087.
The investment A dviser 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 A dviser for the Warburg Pincus Funds is Warburg
Pincus Asset Management, Inc . Incorporated in 1970, Warburg
Pincus is indirectly controlled by Warburg, Pincus & Co.("WP&Co."),
which Warburg G.P has no business other than being a holding
company of Warburg Pincus and its affiliates. Lionel I. Pincus, the
managing partner of WP&Co., may be deemed to control both WP&Co. and
Warburg Pincus. Warburg Pincus' address is 466 Lexington Avenue, New
York, New York 10017-3147.
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 (for Contracts purchased through a 1035 exchange,
the annuitant must be no older than 85 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 may 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.
The amount that may be transferred from the Guaranteed Account will
be determined by the company, at its sole discretion, but will not be
less than 25% of the amount invested in the Guaranteed Account. When
the maximum amount is less than $1000 we permit a transfer of up to
$1000. You may make one transfer out of the guaranteed account during
each Contract Year. A transfer into the Guaranteed Account is not
permitted during the 12-months following a transfer out of the
Guaranteed Account. When amounts are withdrawn or transferred out of
the Guaranteed Account the amounts that have been credited to the
Guaranteed Account for the shortest time are withdrawn first. For the
month of May 1998, up to 100% of the amounts in the Guaranteed Account
may be transferred even if you have already made a Guaranteed Account
transfer in this Contract Year. Beginning in June 1998 the maximum
withdrawal amount will again be 25% of the amount invested in the
Guaranteed Account. At the end of the current renewal interest
guarantee period, January 31, 1999 the amount that may be transferred
for the month of February will be declared and will not be less than
the minimums specified above. See THE 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 w i thdrawal 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 .
At some future date a Contract Owner may elect in writing on a form
provided by the Company to take systematic withdrawals of a specified
dollar amount (of at least $100) on a monthly, quarterly, semi-annual,
or annual basis. A $10,000 minimum Contract Value will be required to
begin this program. Systematic withdrawals will be taken
proportionately from all of your selected Subaccounts at the time of
each withdrawal. If the systematic withdrawal amount exceeds your
Contract Value invested in the Variable Account, the excess will be
deducted from the Guaranteed Account. The withdrawal charge may also
apply to systematic withdrawals as set forth in the Withdrawal
Charge section on page . If a systematic withdrawal would bring the
Contract Value below $2,500, the systematic withdrawal will be made
only for the amount that will reduce the Contract Value to $2,500, and
the systematic withdrawal option will automatically terminate.
Each systematic withdrawal is subject to federal income taxes,
including any penalty tax that may apply, the same as for any other
withdrawal.
Empire Fidelity Investments Life reserves the right to modify or
discontinue the systematic withdrawal program.
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 contract 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 contract (record address).
4. The check is made payable to someone other than the Owner.
5. The address of record on the contract has changed in the past 30
days and the request is for $10,000 or more.
6. The proceeds are being wired to a Fidelity account with
different owner(s) than your annuity Contract.
7 . 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.
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.
Under certain circumstances, we may waive the withdrawal charge for
certain Owners who have previously exchanged out of a Retirement
Reserves Contract and have since purchased a Retirement Reserves
Contract through a 1035 exchange.
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.
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
life time (or over a period not extending beyond the life
expectancy) by electing within 60 days of the date of death 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 85t h 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 26. 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 either the Money Market Subaccount or at some
future date, from the Investment Grade Bond Subaccount (the "Source
Account") to any of the other variable Subaccounts. Dollar cost
averaging transfers are allowed from one Source Account only and are
not permitted to the Fixed Account. Dollar cost averaging will not be
allowed in conjunction with the Auto Rebalance feature described in
this prospectus.
These monthly transfers will take effect on the same day each
month. You may select any date from the 1st to the 28th as the date of
your dollar cost averaging transfers (the Transfer Date). If the New
York Stock Exchange is not open on your selected date in a particular
month, the transfer will be made at the close of the Valuation Period
that includes the date you selected. Your transfers will continue
until the balance in the Source Account is exhausted or you notify us
to cancel dollar cost averaging for your Contract.
The minimum monthly transfer allowed to any variable Subaccount is
$250.
Dollar cost averaging will be available at no charge. Empire
Fidelity Investments Life reserves the right to modify or terminate
the dollar cost averaging feature.
12AUTOMATIC REBALANCING
At some future date, Automatic Rebalancing will be made available
to you. Automatic Rebalancing is designed to help you maintain your
specified allocation mix between the Investment Options. You can
direct Empire Fidelity Investments Life to readjust your allocations
on a quarterly, semi-annual, or annual basis to return to the
allocations you select on the rebalancing instruction form. These
transfers will be made on the same day of each month. You may select
any date from the 1st to the 28th as the date of your automatic
rebalancing transfers. If the New York Stock Exchange is not open on
your selected date in a particular month, the transfers will be made
at the close of the Valuation Period that includes the date you
selected. Your transfers will continue until you notify us to cancel
Automatic Rebalancing for your Contract.
You may not participate in Automatic Rebalancing and the Dollar
Cost Averaging program at the same time.
Automatic Rebalancing will be available at no charge. Empire
Fidelity Investments Life reserves the right to modify or terminate
the automatic rebalancing feature.
POSTPONEMENT OF PAYMENT
In general, we will ordinarily pay any partial or full cash withdrawal
within seven days after we receive your reque st. 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 A dviser if we disapprove of the proposed changes. We
would disapprove a proposed change only if it were contrary to state
law, prohibited by state regulatory authorities, or if we decided that
the change would result in overly speculative or unsound investments.
If we ever disregard voting instructions, we will include a summary of
our actions in the next semiannual report.
RESOLVING MATERIAL CONFLICTS
The investment portfolios of the Fidelity Funds are available
to registered separate accounts offering variable annuity and variable
life products of other participating insurance companies, as well as
to the Variable Account and other separate accounts we establish.
Other Funds may be offered to qualified plans as well.
Although we do not anticipate any disadvantages to this, there is a
possibility that a material conflict may arise between the interest of
the Variable Account and one or more of the other separate accounts
participating in the Funds. A conflict may occur due to a change in
law affecting the operations of variable life and variable annuity
separate accounts, differences in the voting instructions of our
Contract Owners and those of other companies, or some other reason. In
the event of a conflict, we will take any steps necessary to protect
our Contract Owners and variable annuity payees.
PERFORMANCE
Performance information for the variable Subaccounts may appear in
reports and advertising to current and prospective Contract Owners.
The performance information is based on historical investment
experience of the 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 Subaccounts may advertise a 30 day yield which reflects the
income generated by an investment in the Subaccount over a 30 day
period.
LITIGATION
No litigation is pending that would have a material effect on us or
the Variable Account.
APPENDIX A
Accumulation Unit Values
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
1997 15.30 15.98 2,510,803
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
19 97 24.89 29.00 868,993
19 96 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
1997 31.05 39.39 4,666,312
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
1997 34.97 42.76 2,229,721
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
1997 21.30 23.52 1,059,560
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
1997 17.36 18.75 442,121
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
1997 20.76 24.80 3,604,315
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
1997 18.90 24.83 3,001,334
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
1997 14.50 17.95 1,760,200
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
1997 16.66 20.47 6,419,636
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
Growth Opportunities Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 12.63 2,558,459
* Period from 1/27/97 (commencement of operations) to 12/31/97
Balanced Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 11.98 371,377
* Period from 1/27/97 (commencement of operations) to 12/31/97
Growth & Income Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 12.68 2,163,555
* Period from 1/27/97 (commencement of operations) to 12/31/97
Emerging Markets Debt Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 10.48 32,130
* Period from 11/24/97 (commencement of operations) to 12/31/97
Emerging Markets Equity Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 10.05 20,806
* Period from 11/24/97 (commencement of operations) to 12/31/97
Global Equity Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 10.25 29,979
* Period from 11/24/97 (commencement of operations) to 12/31/97
International Magnum Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 9.86 17,042
* Period from 11/24/97 (commencement of operations) to 12/31/97
PBHG Growth II Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 10.15 11,877
* Period from 11/24/97 (commencement of operations) to 12/31/97
Large Cap Value Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 10.27 18,440
* Period from 11/24/97 (commencement of operations) to 12/31/97
Select 20 Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 10.42 54,758
* Period from 11/24/97 (commencement of operations) to 12/31/97
Small Cap Value Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 10.43 51,781
* Period from 11/24/97 (commencement of operations) to 12/31/97
Technology & Communications Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 9.87 34,037
* Period from 11/24/97 (commencement of operations) to 12/31/97
Discovery Fund II Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 9.69 8,046
* Period from 11/24/97 (commencement of operations) to 12/31/97
Growth Fund II Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 10.25 15,649
* Period from 11/24/97 (commencement of operations) to 12/31/97
Opportunity Fund II Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 10.15 31,571
* Period from 11/24/97 (commencement of operations) to 12/31/97
International Equity Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 9.89 3,206
* Period from 11/24/97 (commencement of operations) to 12/31/97
Post-Venture Capital Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 10.25 6,514
* Period from 11/24/97 (commencement of operations) to 12/31/97
Small Company Growth Subaccount
Accumulation Accumulation Number of
Unit Value at Unit Value at Accumulation Units
Beginning of Period End of Period at End of Period
1997* 10.00 10.19 28,265
* Period from 11/24/97 (commencement of operations) to 12/31/97
14.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 0.05%. 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.
RETIREMENT RESERVES
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 1998
This Statement of Additional Information supplements the information
found in the current Prospectus for the variable annuity contracts
("Contracts") offered by Empire Fidelity Investments Life Insurance
Company through its Variable Annuity Account A (the "Variable
Account"). You may obtain a copy of the Prospectus dated April 30,
1998 , without charge by calling 800-544-2442.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
SHOULD BE READ TOGETHER WITH THE PROSPECTUS FOR THE CONTRACT.
TABLE OF CONTENTS PAGE
Service Agreements 41
Accumulation Units 41
Fixed Annuity Income Payments 41
Variable Annuity Income Payments 41
Hypothetical Illustrations of Annuity Income Payouts 43
General Information 47
Performance 47
Transfers Among Subaccounts After the Annuity Date 53
Unavailability of Annuity Income Options in Certain Circumstances 53
IRS Required Distributions 53
Safekeeping of Variable Account Assets 53
Distribution of the Contracts 53
State Regulation 53
Legal Matters 53
Registration Statement 53
Independent Accountants 53
Financial Statements 53
SERVICE AGREEMENTS
We have entered into a service agreement with Fidelity Investments
Life Insurance Company ("FILI"), our parent. FILI may provide
accounting, underwriting, claims, actuarial and data processing
services.
ACCUMULATION UNITS
We credit your payments allocated to the variable Subaccounts in the
form of Accumulation Units. The number of Accumulation Units credited
to each Subaccount is determined by dividing the net payment allocated
to that Subaccount by the Accumulation Unit Value for that Subaccount
for the Valuation Period during which the payment is received. In the
case of the initial payment, we credit Accumulation Units as explained
in the Prospectus. Accumulation Units are adjusted for any transfers
into or out of a Subaccount.
For each variable Subaccount, the Accumulation Unit Value for the
first Valuation Period of the Subaccount was set at the Accumulation
Unit Value of the comparable subaccount of similar contracts offered
by an affiliated company. The Accumulation Unit Value for each
subsequent Valuation Period is the Net Investment Factor for that
period, multiplied by the Accumulation Unit Value for the immediately
preceding Valuation Period. The Accumulation Unit Value may increase
or decrease from one Valuation Period to the next.
Each variable Subaccount has a Net Investment Factor (also referred to
as the "Net Rate of Return"). The Net Investment Factor is an index
that measures the investment performance of a Subaccount from one
Valuation Period to the next. The Net Investment Factor for each
Subaccount for a Valuation Period is determined by adding (a) and (b),
subtracting (c) and then dividing the result by (a) where:
(a) Is the value of the assets at the end of the preceding Valuation
Period;
(b) Is the investment income and capital gains, realized or
unrealized, credited during the current valuation period;
(c) Is the sum of:
(1) The capital losses, realized or unrealized, charged during the
current valuation period plus any amount charged or set aside for
taxes during the current Valuation Period; plus
(2) The deduction from the Subaccount during the current Valuation
Period representing a daily charge equivalent to an effective annual
rate of 0.80%).
The Net Investment Factor may be greater than or less than one. If it
is greater than one, the Accumulation Unit Value will increase; if
less than one, the Accumulation Unit Value will decrease.
FIXED ANNUITY INCOME PAYMENTS
The amount of monthly annuity income payments for a selected fixed
annuity income option or the fixed portion of a selected combination
annuity income option is calculated by applying the proceeds payable
to the income payment rates for the option selected. Annuity income
payments will be the larger of:
(a) The income based on the rates shown in the Contract's Annuity
Tables for the option chosen; and
(b) The income calculated by applying the proceeds as a single premium
to our single premium annuity rates in effect on the date of the first
income payment for the same option.
Annuity income payments under a fixed annuity or fixed portion of a
combination annuity will not vary in dollar amount and will not be
affected by the investment performance of the Variable Account.
Amounts used to purchase a fixed annuity may not be later transferred
to a variable annuity.
VARIABLE ANNUITY INCOME PAYMENTS
If a variable annuity is selected, annuity income payments will vary
in amount in accordance with the investment performance of the elected
Subaccounts of the Variable Account. If a combination annuity is
selected, annuity income payments attributable to the variable portion
of the annuity will likewise vary. On the Annuity Date, the amount of
the first annuity income payment is calculated by applying the
proceeds payable to the annuity table shown in the Contract (or any
more favorable annuity rates we may offer on the Annuity Date) for the
option chosen.
The dollar amount of the first annuity income payment attributable to
each variable Subaccount is then divided by each Subaccount's then
current Annuity Unit Value (Annuity Units are explained in the
Prospectus) to establish the total number of Annuity Units that will
be the basis for determining later annuity income payments. Annuity
income payments after the first will be equal to the sum of the number
of Annuity Units determined in this manner for each Subaccount
multiplied by the then current Annuity Unit Value for each Subaccount,
which (as explained in the Prospectus) depends upon the Net Investment
Factor for the Subaccount adjusted by a factor to neutralize the
assumed rate of return used in the calculation of annuity income
payments. The number of Annuity Units remains fixed for all annuity
income payments, unless a transfer is made. The dollar amount of the
annuity income payments may change from payment to payment. We
guarantee that the dollar amount of each annuity income payment after
the first will not be affected by variations in mortality experience
from the mortality assumptions used to determine the first annuity
income payment.
To illustrate the above description of how annuity income payments are
determined, consider the following example. A male age 65 applies
$50,000 to purchase a lifetime income for himself with payments to be
made for at least 10 years (even if the Annuitant dies shortly after
payments have begun). Annuity income payments are to be made on a
monthly basis with the first annuity income payment to be made
immediately. The variable pay-out option is chosen with the amount of
each income payment dependent on the actual investment performance of
the Subaccounts that are selected. Using an Assumed Investment Rate of
3.5%, the initial monthly income amount is $28 2.86. The
investment selection is 50% in Portfolio A and 50% in Portfolio B.
At Annuitization Portfolio A Portfolio B
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(a) Initial Monthly Annuity Income Payment $ 141. 43 $ 141. 43
(b) Annuity Unit Value 1.23456 1.32465
(c) Income in Units 114. 559 10 6.768
</TABLE>
The monthly annuity income payment allocated to each Subaccount is
translated into Annuity Units using the Annuity Unit Value at the time
of annuitization. Since each Subaccount is likely to have a different
Annuity Unit Value, the total number of Annuity Units is not
informative -- rather you need to look at:
# Annuity X Annuity = Annuity
Units Unit Value Income
Payment
Portfolio A 114. 559 1.23456 141. 43
Portfolio B 10 6.768 1.32465 141. 43
$ 28 2.86
Assume that during the next month, the investment results for each
subaccount are:
Portfolio A Portfolio B
(d) Actual Net Investment Results .4074% .1652%
(e) Assumed Investment Results .2871% .2871%
(f) Relative Performance Factor 1.00120 .99878
Line (d) shows the net investment result after the charge for assuming
mortality and expense risks and the administrative charge
( 0.80 % on an annual basis) and the charge for investment
advisory fees and fund expenses. Line (e) shows the investment results
that were assumed in the calculation of the initial monthly annuity
income payment, 3.5% on an annual basis. Line (f) represents how much
$1 invested at the start of the month in each of the subaccounts would
have grown relative to $1 earning 3.5%. (The formula for calculating
the Relative Performance Factor is 1+ (d) divided by 1 + (e)).
Note that since line (f) is more than 1 for Portfolio A and less than
1 for Portfolio B, the Portfolio A subaccount has earned more than
3.5% on an annual basis while the Portfolio B subaccount has earned
less than 3.5% on an annual basis.
The Annuity Unit Value grows with the actual investment performance
relative to the assumption of 3.5%. If a Subaccount earns more than
3.5% on an annual basis, then the Annuity Unit Value will increase.
Conversely, if less than 3.5% is earned, the Annuity Unit Value will
decrease. The Annuity Unit Value at the time of the second monthly
income payment is the Annuity Unit Value for the prior month (line b)
multiplied by the Relative Performance Factor (line f).
Portfolio A Portfolio B
(b) Annuity Unit Value (prior) 1.23456 1.32465
(f) Relative Performance Factor 1.00120 .99878
(g) Annuity Unit Value (current) 1.23604 1.32303
Except for exchanges between Subaccounts, the number of Annuity Units
remains fixed throughout the lifetime of the Annuitant. The value of
each annuity income payment, however, varies because the Annuity Unit
Value is usually changing as a result of investment experience. The
second monthly payment is calculated by multiplying the number of
payment units by the current Annuity Unit Value.
Portfolio A Portfolio B
(c) Monthly Income in Units 114. 559 10 6.768
(g) Annuity Unit Value (current) 1.23604 1.32303
(h) Monthly Income (in dollars) $ 14 1.60 $ 147.26
Note that the Annuity Unit Value and the Monthly Income for the
Portfolio A portion of the payment has increased whereas the opposite
is true for the Portfolio B portion. The second monthly annuity income
payment would be the sum for each Subaccount, or
$28 2 . 86 .
To illustrate the possible volatility of the annuity income payments,
assume that during the following month, the investment results for
each Subaccount are:
Portfolio A Portfolio B
(i) Actual Net Investment Results 15.50% -13.00%
(e) Assumed Investment Results .2871% .2871%
(j) Relative Performance Factor 1.15169 .86751
The Annuity Unit Value at the time of the third monthly annuity income
payment is the Annuity Unit Value for the prior month (line g)
multiplied by the Relative Performance Factor (line j):
Portfolio A Portfolio B
(g) Annuity Unit Value (prior) 1.23604 1.32303
(j) Relative Performance Factor 1.15169 .86751
(k) Annuity Unit Value (current) 1.42353 1.14774
The third monthly annuity income amount is calculated by multiplying
the number of payment units by the current Annuity Unit Value:
Portfolio A Portfolio B
(c) Income in Units 114. 559 10 6.768
(k) Annuity Unit Value (current) 1.42353 1.14774
(l) Monthly Income (in dollars) $ 163. 08 $ 122. 5 4
Note that the Annuity Unit Value and the Monthly Income for Portfolio
A portion of the income amount have again increased but to a much
greater extent than before whereas the opposite is true for the
Portfolio B portion. The third monthly annuity income payment would be
the sum for each subaccount, or $28 5.62 .
An illustration of annuity income payments under various rates appears
in the tables on pages 6 and 7. The monthly equivalents of the annual
net returns of -1. 7 5%, 3.50%, 4. 14 %, 6.21 % ,
8.0 7 % and 10. 04 % shown in the tables are -0.1 5 %,
0.29%, 0.3 4 %, 0.50%, 0.6 5 % and 0.8 0 %.
HYPOTHETICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS
The following tables have been prepared to show how variable annuity
income payments under the Contract change with investment performance
over an extended period of time. The tables illustrate how monthly
annuity income payments would vary over time if the return on the
assets in the selected portfolios were a uniform gross annual rate of
0%, 5. 35 %, 6%, 8%, 10% and 12%. The values would be different
from those shown if the returns averaged 0%, 5. 35 %, 6%, 8%, 10%
or 12% but fluctuated over and under those averages throughout the
years.
The tables reflect the fact that the Net Investment Return on the
assets held in the Subaccounts is lower than the gross return of the
selected portfolios. The tables reflect the daily charge to the
Subaccounts for assuming mortality and expense risks, which is
equivalent to an effective annual charge of 0.75% and the daily
administrative charge which is equivalent to an effective annual
charge of 0.05%. The amounts shown in the tables also take into
account the portfolios' management fees and operating expenses which
are assumed to be at an annual rate of 0.96% of the average daily net
assets of the selected portfolios. This 0.96% figure consists of
assumed management fees of 0.60% and assumed operating expenses of
0.36%, figures based on the average of current management fees and
operating expenses. Actual fees and expenses of the portfolios
associated with your Contract may be more or less than 0.96%, will
vary from year to year, and will depend on how you allocate your
investment base. See the current prospectuses for the Funds for more
complete information. The monthly annuity income payments illustrated
are on a pre-tax basis. The federal income tax treatment of annuity
income payments is generally described in the section of your
current prospectus entitled "Tax Considerations."
The tables show both the gross rate and the net rate. The difference
between gross and net rates represent the 0.80 % risk and
administrative charges and the assumed 0.96% for investment management
and operating expenses. Since these charges are deducted daily from
assets, the difference between the gross and net rate is not
exactly 1.76%.
Two tables follow. The first table assumes 100% of the Contract Value
is allocated to a variable annuity income option; the second table
assumes 50% of the Contract Value is placed under a fixed annuity
income option, using the fixed crediting rate Empire Fidelity
Investments Life offered on the fixed annuity income option at the
date of the illustration. Both illustrations assume that the final
value of the accumulation account is $50,000 and is applied at age 65
to purchase a life annuity for a guaranteed period of 10 years certain
and life thereafter. When part of the Contract Value has been
allocated to the fixed annuity income option, the guaranteed minimum
annuity income payment resulting from this allocation is also shown.
The illustrated variable annuity income payments are determined
through the use of standard mortality tables and the assumption that
the net investment return will be 3.5% per year. Thus, actual
performance greater than a net return of 3.5% will result in
increasing annuity income payments and performance less than 3.5% per
year will result in decreasing annuity income payments. We may offer
alternative Assumed Investment Returns from which you may select.
Fixed annuity income payments remain constant. Initial monthly annuity
income payments under a fixed annuity income payout are generally
higher than initial payments under a variable income payout option.
These tables show the monthly income payments for several hypothetical
constant rates of return. Of course, actual investment performance
will not be constant and may be volatile. Actual monthly income
amounts would differ from those shown if the actual rate of return
averaged the rate shown over a period of years, but also fluctuated
above or below those averages for individual contract years. Upon
request and when you are considering an annuity income option, we will
furnish a comparable illustration based on your individual
circumstances.
ANNUITY PAY-OUT ILLUSTRATION
(100% VARIABLE PAYOUT)
ANNUITANT: John Doe GROSS AMOUNT OF CONTRACT VALUE
APPLIED: $50,000
DATE OF BIRTH: 3/1/3 3 STATE PREMIUM TAX: 0%
SEX: Male DATE OF ILLUSTRATION: 3/1/9 8
ANNUITY OPTION SELECTED: Lifetime Income with annuity income
payments
guaranteed for 10 years(1)
FREQUENCY OF ANNUITY
INCOME PAYMENTS: Monthly payments with first payment the
first of
the month after annuitization
FIXED MONTHLY ANNUITY INCOME PAYMENT AVAILABLE ON THE DATE OF THE
ILLUSTRATION IF 100% FIXED ANNUITY OPTION SELECTED: $311.85
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 100% OF THE CONTRACT VALUE IS
ALLOCATED TO THE VARIABLE PAYOUT
NET RETURN AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE,
NO MINIMUM DOLLAR AMOUNT IS GUARANTEED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNT OF FIRST MONTHLY ANNUITY INCOME
PAYMENT IN YEAR SHOWN ASSUMING A
CONSTANT ANNUAL INVESTMENT RETURN OF:
Gross: 0% 5.35% 6% 8% 10% 12%
PAYMENT CALENDAR AGE Net(2): -1. 7 5% 3.50% 4. 14% 6.11 % 8.07 % 10.04 %
YEAR YEAR
1 1998 65 283 283 283 283 283 283
2 1999 66 2 69 283 28 5 29 0 29 5 30 1
3 2000 67 2 55 283 28 6 297 3 08 32 0
4 2001 68 24 2 283 2 88 30 5 3 22 34 0
5 2002 69 23 0 283 2 90 3 12 3 36 36 1
10 2007 74 1 77 283 299 3 54 4 17 491
15 2012 79 1 36 283 308 401 5 18 6 67
20 2017 84 1 05 283 3 18 4 54 6 43 9 06
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY
AN OWNER AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED.
THE AMOUNT OF THE INCOME PAYMENT WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL GROSS RATES OF RETURN AVERAGED THE RATES SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. SINCE IT IS HIGHLY LIKELY THAT
INVESTMENT RETURNS WILL FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME
(TO THE EXTENT THAT IS BASED ON THE VARIABLE ACCOUNT) WILL ALSO
FLUCTUATE. NO REPRESENTATION CAN BE MADE BY EMPIRE FIDELITY
INVESTMENTS LIFE OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
(1) Monthly annuity income payments cease upon the death of the
Annuitant if the Annuitant dies after the 10 year Guarantee Period. If
the Annuitant dies during the Guarantee period, annuity income
payments will continue until the end of the Period. The cumulative
amount of annuity income payments received under the annuity depends
on how long the Annuitant lives after the Guarantee Period. An annuity
pools the mortality experience of annuitants. Annuitants who die
earlier, in effect, subsidize the payments for those who live longer.
(2) The illustrated net return reflects the deduction of average fund
expenses and the 0.8 0 % risk/administrative charge from the
gross return.
ANNUITY PAY-OUT ILLUSTRATION
(50% VARIABLE - 50% FIXED PAYOUT)
ANNUITANT: John Doe GROSS AMOUNT OF CONTRACT
VALUE APPLIED: $50,000
DATE OF BIRTH: 3/1 /33 STATE PREMIUM TAX: 0%
SEX: Male DATE OF ILLUSTRATION: 3/1/9 8
ANNUITY OPTION SELECTED: Lifetime Income with annuity income
payments
guaranteed for 10 years(1)
FREQUENCY OF ANNUITY
INCOME PAYMENTS: Monthly payments with first payment the
first of
the month after annuitization
FIXED MONTHLY ANNUITY INCOME PAYMENT AVAILABLE ON THE DATE OF THE
ILLUSTRATION IF 100% FIXED ANNUITY OPTION SELECTED: $311.85.
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 50% OF THE CONTRACT VALUE IS
ALLOCATED TO THE VARIABLE PAYOUT AND 50% TO THE FIXED PAYOUT
NET RETURN AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE, BUT
WILL NEVER BE LESS THAN $155.93. THE MONTHLY GUARANTEED PAYMENT OF
$311.85 IS BEING PROVIDED BY THE $25,000 APPLIED UNDER THE FIXED
ANNUITY OPTION.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNT OF FIRST MONTHLY ANNUITY INCOME PAYMENT
IN YEAR SHOWN ASSUMING A CONSTANT ANNUAL
INVESTMENT RETURN OF:
Gross: 0% 5.35% 6% 8% 10% 12%
PAYMENT CALENDAR AGE Net(2): -1.75% 3.50% 4.14% 6.11% 8.07% 10.04%
YEAR YEAR
1 1998 65 297 297 297 297 297 297
2 1999 66 290 297 298 301 304 306
3 2000 67 283 297 299 305 310 316
4 2001 68 277 297 300 308 317 326
5 2002 69 271 297 301 312 324 337
10 2007 74 244 297 305 333 365 401
15 2012 79 224 297 310 356 415 489
20 2017 84 209 297 315 383 477 609
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY
AN OWNER AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED.
THE AMOUNT OF THE INCOME PAYMENT WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL GROSS RATES OF RETURN AVERAGED THE RATES SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. SINCE IT IS HIGHLY LIKELY THAT
INVESTMENT RETURNS WILL FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME
(TO THE EXTENT THAT IS BASED ON THE VARIABLE ACCOUNT) WILL ALSO
FLUCTUATE. NO REPRESENTATION CAN BE MADE BY EMPIRE FIDELITY
INVESTMENTS LIFE OR THE FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN
CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
(1) Monthly annuity income payments cease upon the death of the
Annuitant if the Annuitant dies after the 10 year Guarantee Period. If
the Annuitant dies during the Guarantee period, annuity income
payments will continue until the end of the Period. The cumulative
amount of annuity income payments received under the annuity depends
on how long the Annuitant lives after the Guarantee Period. An annuity
pools the mortality experience of annuitants. Annuitants who die
earlier, in effect, subsidize the payments for those who live longer.
(2) The illustrated net return reflects the deduction of average fund
expenses and the 0.80 % risk/administrative charge from the
gross return.
GENERAL INFORMATION
We may advertise quotes of Contract Owners discussing ways to use
Retirement Reserves in retirement planning, its efficiency and ease of
use, and the level of service provided by Empire Fidelity Investments
Life. Any such advertisements will not include testimonials concerning
the Funds or the Funds' investment adviser. We may also advertise
examples of the effects of periodic investment plans, including the
principle of dollar cost averaging. In such a plan, a policyowner
invests a fixed dollar amount in a Subaccount thereby purchasing fewer
units when prices are high and more units when prices are low. While
such a strategy does not assure a profit nor guard against a loss in a
declining market, the Contract Owner's average cost per unit can be
lower than if fixed numbers of units had been purchased at those
intervals. In evaluating such a plan, Contract Owners should consider
their ability to continue purchasing units through periods of low
price levels. In addition, we may from time to time use statistics in
advertising to support the growth of annuity sales. Information to
support these statistics may be obtained from the Life Insurance
Marketing Research Association, A.M. Best, American Council of Life
Insurance or the Variable Annuity Research and Data Service.
From time to time, we may reprint and use as advertising and sales
literature, articles or quotes from financial or business publications
and periodicals. In addition, we may reference or discuss the products
and services of other affiliated companies, which may include:
Fidelity funds; retirement investing; brokerage products and services;
saving for college; and charitable giving .
We may also provide information to help individuals understand their
investment goals and explore various financial strategies. In
communicating these strategies, we may:
(solid bullet) compare the differences between tax deferred and
taxable investments;
(solid bullet) discuss factors to consider when purchasing the
contract;
(solid bullet) discuss the effects of probate when transferring the
contract to heirs;
(solid bullet) discuss traditional sources of retirement income and
products which may be used to supplement that income;
(solid bullet) discuss effects of inflation on fixed-income sources
and how the variable investment options may be used as a potential
hedge against inflation during the deferral and income periods;
(solid bullet) illustrate and compare the effects additional payments
have on a contract;
(solid bullet) discuss strategies of reducing risk through
diversification of purchase payments and providing hypothetical
investment mixes;
(solid bullet) discuss past returns of different classes of
investments based on data supplied through various sources such as
Ibbotson Associates of Chicago, Illinois; and
(solid bullet) assist policyholders with inquiries regarding their
annuity.
This information may be obtained from various sources such as The U.S.
Department of the Treasury, U.S. Department of Labor, Statistical
Abstract of the U.S. and Individual Annuitant Mortality Table. We may
present this information through various methods such as charts,
graphs, illustrations, and tables.
You may purchase the contract with proceeds from various sources such
as transactions qualifying for a tax-free exchange under Section 1035
of the Internal Revenue Code.
PERFORMANCE
Performance information for any Subaccount may be compared, in reports
and advertising to: (1) the Standard & Poor's 500 Composite Stock
Price Index ("S & P 500"), Dow Jones Industrial Average ("DJIA"),
Donoghue's Money Market Institutional Averages; (2) other variable
annuity separate accounts or other investment products tracked by
Lipper Analytical Services, Morningstar, or the Variable Annuity
Research and Data Service, widely used independent research firms
which rank mutual funds and other investment companies by overall
performance, investment objectives, and assets; and (3) the Consumer
Price Index (measure for inflation) to assess the real rate of return
from an investment in a contract Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
annuity charges and investment management costs.
Total returns, yields and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising may also contain other information including (i) the
ranking of any subaccount derived from rankings of variable annuity
separate accounts or other investment products tracked by Lipper
Analytical Series or by rating services, companies, publications or
other persons who rank separate accounts or other investment products
on overall performance or other criteria, and (ii) the effect of tax
deferred compounding on a subaccount's investment returns, or returns
in general, which may be illustrated by graphs, charts, or otherwise,
and which may include a comparison, at various points in time, of the
return from an investment in a Contract (or returns in general) on a
tax-deferred basis (assuming one or more tax rates) with the return on
a taxable basis.
The tables below provide performance results for each Subaccount
through 12/31/ 97. The performance information is based on the
historical investment experience of the Subaccounts and of the
Portfolios. It does not indicate or represent future performance.
Total Return
Total returns quoted in advertising reflect all aspects of a
Subaccount's return, including the automatic reinvestment by the
separate account of all distributions and any change in the
Subaccount's value over the period. Average annual returns are
calculated by determining the growth or decline in value of a
hypothetical historical investment in the Subaccount over a stated
period, and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or
decline in value had been constant over the period. For example, a
cumulative return of 100% over ten years would produce an average
annual return of 7.18%, which is the steady rate that would equal 100%
growth on a compounded basis in ten years. While average annual
returns are a convenient means of comparing investment alternatives,
investors should realize that the subaccount's performance is not
constant over time, but changes from year to year, and that average
annual returns represent averaged figures as opposed to the actual
year-to-year performance of a subaccount.
Table 1 shows the average annual total return on a hypothetical
investment in the Subaccounts for the last year, from the date that
the Portfolios began operations, and, for Portfolios in existence for
five years or more, for five years, assuming that the Contract was
surrendered December 31, 1997 . For any Portfolio in existence
ten years or more, figures are shown for a ten year period rather than
for the life of the Portfolio. The average annual total returns shown
in Table 1 are computed by finding the average annual compounded rates
of return over the periods shown that would equate the initial amount
invested to the withdrawal value, in accordance with the following
formula: P(1 +T)n = ERV where P is a hypothetical investment payment
of $1,000, T is the average annual total return, n is the number of
years, and ERV is the withdrawal value at the end of the periods
shown. The returns reflect the risk and administrative charge of 0.80%
(1% on an annual basis prior to November 1, 1997) and the
maintenance charge. Since the Contract is intended as a long-term
product, the table also shows the average annual total return assuming
that no money was withdrawn from the Contract. The average annual
total return is also shown for Contracts with at least $25,000 of
premium and assuming no money is withdrawn from the Contract. The
average annual total return would be larger for these Contracts
because there is currently no maintenance charge on these larger
Contracts. The first column shows the average annual total return if
you surrender the contract at the end of the period, the second column
shows the average annual total return if you do not surrender the
Contract and the third column shows the average annual total return if
you do not surrender the Contract and no maintenance charge is applied
to the Contract.
Table 1: Average Annual Total Return for Period Ending on 12/31/97
(a) One Year Average Annual Total Return For Contracts Issued on
December 31, 1996
Return Return Return
If Contract If Contract If Contract
Surrendered Continued and Continued and
Maintenance Maintenance
Charge Applied Charge Not
Applicable
Fidelity
Asset Manager 14.47% 19.47% 19.49%
Money Market (0.28)% 4.44% 4.46%
Investment Grade Bond 3.09% 7.99% 8.01%
Equity-Income 21.85% 26.85% 26.87%
Growth 17.27% 22.27% 22.29%
High Income 11.51% 16.51% 16.53%
Overseas 5.46% 10.46% 10.48%
Index 500 26.40% 31.40% 31.42%
Asset Manager: Growth 18.84% 23.84% 23.86%
Contrafund 17.92% 22.92% 22.94%
Growth Opportunities 23.68% 28.68% 28.70%
Balanced 15.98% 20.98% 21.00%
Growth & Income 23.82% 28.82% 28.84%
Strong
Discovery Fund II 5.01% 10.01% 10.03%
Opportunity Fund II 19.21% 24.21% 24.23%
Growth Fund II 23.50% 28.50% 28.52%
Warburg Pincus
International Equity (7.56)% (3.22)% (3.20)%
Small Company Growth 9.61% 14.61% 14.63%
Post-Venture Capital 7.23% 12.23% 12.25%
Morgan Stanley
Emerging Markets Equity (4.67)% (0.18)% (0.16)%
(b) Average Annual Total Return If Contract Issued at Commencement
of Portfolio
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Subaccount Portfolio's Return Return Return
Start Date If Contract If Contract If Contract
Surrendered Continued and Continued and
Maintenance Maintenance
Charge Charge Not
Applied Applicable
Fidelity
Money Market 4/1/82 5.73% 5.73% 5.83%
High Income 9/19/85 11.25% 11.25% 11.33%
Equity-Income 10/9/86 13.45% 13.45% 13.52%
Growth 10/9/86 14.34% 14.34% 14.41%
Asset Manager 9/6/89 1 1.57 % 1 1.57 % 1 1.61 %
Investment Grade 12/5/88 7. 17 % 7. 17 % 7.2 1 %
Bond
Overseas 1/28/87 7.07 % 7.07 % 7.14 %
Index 500 8/27/92 1 8.65 % 1 8.65 % 1 8.68 %
Asset Manager: 1/3/95 20.83 % 2 1.51 % 2 1.53 %
Growth
Contrafund 1/3/95 2 6.26 % 2 6.89 % 2 6.91 %
Growth Opportunities 1/3/95 24.90% 25.54% 25.57%
Balanced 1/3/95 13.35% 14.12% 14.14%
Growth & Income 12/30/96 23.46% 27.45% 27.47%
Strong
Discovery Fund II 5/8/92 10.93% 10.93% 10.95%
Growth Fund II 12/31/96 24.50% 28.50% 28.52%
Opportunity Fund II 5/8/92 18.83% 18.83% 18.86%
Warburg Pincus
International l Equity 6/30/95 3.67% 4.79% 4.81%
Post-Venture Capital 9/30/96 4.20% 7.32% 7.34%
Small Company 6/30/95 19.93% 20.84% 20.86%
Growth
PBHG
Select 20 9/25/97 NA NA NA
Growth II 5/1/97 NA NA NA
Large Cap Value 10/28/97 NA NA NA
Small Cap Value 10/28/97 NA NA NA
Technology & 5/1/97 NA NA NA
Communications
Morgan Stanley
Emerging Markets 6/16/97 NA NA NA
Debt
Emerging Markets 10/1//96 (4.80)% (1 . 97) % (1 . 95) %
Equity
Global Equity 1/2/97 NA NA NA
International Magnum 1/2/97 NA NA NA
</TABLE>
(c) Five Year Average Annual Total Return If Contract Issued on
December 31, 1992
If Contract Return Return
Surrendered If Contract If Contract
Continued and Continued and
Maintenance Maintenance
Charge Applied Charge Not
Applicable
Fidelity
Asset Manager 11.67% 11.79% 11.82%
Money Market 3.60% 3.77% 3.80%
Investment Grade Bond 5.86% 6.02% 6.05%
Equity-Income 18.82% 18.91% 18.94%
Growth 16.70% 16.80% 16.82%
High Income 12.65% 12.77% 12.80%
Overseas 12.82% 12.93% 12.96%
Index 500 18.59% 18.68% 18.71%
Strong
Discovery Fund II 10.56% 10.68% 10.71%
Opportunity Fund II 18.00% 18.09% 18.12%
(d) Ten Year Average Annual Total For Contracts Issued on December
31, 1987
If Contract Return Return
Surrendered If Contract If Contract
Continued and Continued and
Maintenance Maintenance
Charge Applied Charge Not
Applicable
Money Market 4.75% 4.75% 4.80%
High Income 11.62% 11.62% 11.68%
Equity-Income 15.49% 15.49% 15.55%
Growth 15.95% 15.95% 16.00%
Overseas 8.46% 8.46% 8.52%
In addition to average annual returns, the Subaccounts may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Table 2 shows the
cumulative total return on a hypothetical investment in the
Subaccounts for from the date the Portfolios began operations, and
assuming that the Contract was surrendered December 31, 1997.
For any Portfolio in existence five years or more, five year
figures are also shown. For any Portfolio in existence ten years or
more, figures are shown for a ten year period rather than for the life
of the Portfolio. The returns reflect the risk and administrative
charge 0.80% on an annual basis (1% prior to November 1, 1997)
and the maintenance charge. Since the Contract is intended as a
long-term product, the table also shows the cumulative total return
assuming that no money was withdrawn from the Contract. The cumulative
total return is also shown for Contracts with at least $25,000 of
premium and assuming no money is withdrawn from the Contract. The
cumulative total return for these Contracts would be larger because
there is currently no maintenance charge on these larger Contracts.
The first column shows the cumulative total return if you surrender
the Contract at the end of the period, the second column shows the
cumulative total return if you do not surrender the Contract and the
third column shows the cumulative total return if you do not surrender
the Contract and no maintenance charge is applied to the Contract.
Table 2: Cumulative Total Return For Periods Beginning at Commencement
of Port folios and Ending on 12/31/97
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Subaccount Portfolio's Return Return Return
Start Date If Contract If Contract If Contract
Surrendered Continued and Continued and
Maintenance Maintenance
Charge Applied Charge Not
Applicable
Fidelity
Asset Manager 9/6/89 148.80% 148.80% 149.52%
Investment Grade 12/5/88 87.50% 87.50% 88.20%
Bond
High Income 9/19/85 270.88% 270.88% 274.02%
Overseas 1/28/87 111.05% 111.05% 112.47%
Index 500 8/27/92 149.57% 149.57% 149.88%
Growth Opportunities 1/3/95 94.62% 97.62% 97.73%
Balanced 1/3/95 45.52% 48.52% 48.61%
Equity Income 10/9/86 312.82% 312.82% 315.66%
Growth 10/9/86 350.74% 350.74% 353.79%
Balanced 1/3/95 45.52 % 48.52 % 48.61 %
Contrafund 1/3/95 101.02% 104.02% 104.13%
Asset Manager: Growth 1/3/95 76.21% 79.21% 79.31%
Growth & Income 12/30/9 23.53% 27.53% 27.55%
Morgan Stanley
Emerging Markets 6/16/97 (5.12)% (0.12)% (0.10)%
Debt
Emerging Markets 10/1/96 (6.46)% (2.46)% (2.43)%
Equity
Global Equity 1/2/97 19.25% 24.25% 24.27%
International Magnum 1/2/97 2.45% 7.45% 7.47%
PBHG
Growth II 5/1/97 1.80% 6.80% 6.81%
Large Cap Value 10/2 9 /97 (0.93)% 4.07% 4.07%
Small Cap Value 10/2 9 /97 (0.43)% 4.57% 4.57%
Technology & 5/1/97 (1.59)% 3.41% 3.42%
Communications
Select 20 9/2 6 /97 (4.95)% 0.05% 0.06%
</TABLE>
Table 2: Cumulative Total Return For Periods Beginning at Commencement
of Port folios and Ending on 12/31/97 (Continued)
Strong
Discovery Fund II 5/8/92 79.69% 79.69% 79.95%
Growth Fund II 12/31/96 24.50% 28.50% 28.52%
Opportunity Fund II 5/8/92 165.15% 165.15% 165. 50 %
Warburg Pincus
International Equity 6/30/95 9.45% 12.45% 12.51%
Post-Venture Capital 9/30/96 5.25% 9.25% 9.28%
Small Company 6/30/95 57.71% 60.71% 60.79%
Growth
(c) Cumulative Total Return For Five Year Period From 12/31/92 Through
12/31/97
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subaccount Return Return Return
If Contract If Contract If Contract
Surrendered Continued and Continued and
Maintenance Maintenance
Charge Applied Charge Not
Applicable
Asset Manager 73.68% 74.68% 74.88%
Money Market 19.36% 20.36% 20.51%
Investment Grade Bond 32.97% 33.97% 34.14%
Equity-Income 1 3 6. 86 % 1 3 7. 86 % 1 38 . 13 %
Growth 1 16.44 % 1 17.44 % 1 17.68 %
High Income 81.44% 82.44% 82.65%
Overseas 82.75% 83.75% 83.96%
Index 500 134.60% 135.60% 135.86%
Strong
Discovery Fund II 6 5 .1 6 % 66.16% 66.35%
Opportunity Fund II 128.76% 129.76% 130.02%
</TABLE>
(d) Cumulative Total Return For Ten Year Period From 12/31/87 Through
12/31/97
Return Return Return
If Contract If Contract If Contract
Surrendered Continued and Continued and
Maintenance Maintenance
Charge Applied Charge Not
Applicable
Money Market 59.11% 59.11% 59.95%
High Income 200.47% 200.47% 202.01%
Equity-Income 322.73% 322.73 % 324.79 %
Growth 339.7 4% 339.74 % 341.86 %
Overseas 125.50% 125.50% 126.66%
Yields
Some Subaccounts may also advertise yields. Yields quoted in
advertising reflect the change in value of a hypothetical investment
in the Subaccount over a stated period of time, not taking into
account capital gains or losses. Yields are annualized and stated as a
percentage. Yields do not reflect the impact of any contingent
deferred sales load. Yields quoted in advertising may be based on
historical seven day periods.
Current yield for Money Market Subaccount reflects the income
generated by a Subaccount over a 7 day period. Current yield is
calculated by determining the net change, exclusive of capital
changes, in the value of a hypothetical account having one
Accumulation Unit at the beginning of the period adjusting for the
maintenance charge, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period
return, and multiplying the base period return by (365/7). The
resulting yield figure is carried to the nearest hundredth of a
percent. Effective yield for the Money Market Subaccount is calculated
in a similar manner to current yield except that investment income is
assumed to be reinvested throughout the year at the 7 day rate.
Effective yield is obtained by taking the base period returns as
computed above, and then compounding the base period return by adding
1, raising the sum to a power equal to (365/7) and subtracting one
from the result, according the formula Effective Yield = [(Base Period
Return + 1) 365/7] - 1. Since the reinvestment of income is assumed in
the calculation of effective yield, it will generally be higher than
current yield. For the 7 day period ending on 12/31/97, the Money
Market Subaccount had a current yield of 4.71% and an effective yield
of 4.82%. For Contracts on which there is currently no maintenance
charge, the current yield would be 4.73% and the effective yield would
be 4.84%.
A 30 day yield for bond subaccounts reflects the income generated by a
Subaccount over a 30 day period. Yield will be computed by dividing
the net investment income per Accumulation Unit earned during the
period by the maximum offering price per Accumulation Unit on the last
day of the period, according to the following formula: Yield =
2[(a-b/cd + 1)6 - 1] where a= net investment income earned by the
applicable portfolio, b = expenses for the period including expenses
charged to the contract owner accounts, c = the average daily number
of Accumulation Units outstanding during the period, and d = the
maximum offering price per Accumulation Unit on the last day of the
period. The 30 day yield for the period ending on 12/31/9 7 was
4.95% for the Investment Grade Bond Subaccount, 7.55% for the High
Income Subaccount and 9.15 % for the Emerging Markets Debt
Subaccount. For Contracts on which there is no maintenance charge, the
30 day yield would be 4.97 % for the Investment Grade Bond
Subaccount, 7.5 7% for the High Income Subaccount and
9 .1 7 % for the Emerging Markets Debt Subaccount.
TRANSFERS AMONG SUBACCOUNTS AFTER THE ANNUITY DATE
After the Annuity Date, you may instruct us to reallocate the value
of some or all of the Annuity Units of a variable Subaccount then
credited to your Contract into an equal value of Annuity Units of one
or more other Subaccounts. The transfer shall be based on the relative
value of the Subaccount Annuity Units at the end of the Valuation
Period in which the request is received and will affect income
payments determined after that Valuation Period. To make such a
transfer, you must contact the Annuity Service Center. The value of
the Annuity Units exchanged must provide at least a $50 annuity income
payment at the time of the exchange, unless all of the Annuity Units
of a Subaccount are being exchanged. We reserve the right to limit
transfers after the Annuity Date to six per Contract Year.
UNAVAILABILITY OF ANNUITY INCOME OPTIONS IN CERTAIN
CIRCUMSTANCES
We do not offer annuity income options to any corporate
beneficiary, partnership or trustee; any assignee, unless that
assignee is a beneficiary; or the executors or administrators of the
Annuitant's estate.
IRS REQUIRED DISTRIBUTIONS
If the Owner of the Contract dies (or either Joint Owner if the
Contract is owned jointly) before the entire interest in the Contract
is distributed, the value of the Contract must be distributed to the
designated beneficiary as described in this section so that the
Contract qualifies as an annuity under the Internal Revenue Code.
If the death occurs on or after the Annuity Date, the remaining
portion of the interest in the Contract must be distributed at least
as rapidly as under the method of distribution being used as of the
date of death. If the death occurs before the Annuity Date, the entire
interest in the Contract must be distributed within five years after
the date of death, unless the following conditions are met. If an
annuity income option is selected by the designated beneficiary and if
annuity income payments begin within one year of the Owner's death,
the value of the Contract may be distributed over the beneficiary's
life or a period not exceeding the beneficiary's life expectancy.
However, for Qualified Contracts where the owner's spouse is the
beneficiary, annuity income payments need not begin within one year
after the Owner's death, rather they need only begin on or before
April 1 of the calendar year following the calendar year in which the
Owner would have attained age 70 1/2. The Owner's designated
beneficiary is the person to whom proceeds of the Contract pass by
reason of the death of the Owner.
If the Contract Owner is a trust or other "non-natural person", and
the Annuitant dies before the Annuity Date, the required distribution
upon death rules will apply.
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
The assets of the Variable Account are held by Empire Fidelity
Investments Life. The assets of the Variable Account are held apart
from our general account assets and any other separate accounts we may
establish. We maintain records of all purchases and redemptions of the
shares of the Funds held by the variable Subaccounts. We maintain
Fidelity bond coverage for the acts of our officers and employees.
DISTRIBUTION OF THE CONTRACTS
As explained in the Prospectus, the Contracts are distributed
through Fidelity Brokerage Services, Inc. and Fidelity Insurance
Agency, Inc., which are affiliated with FMR Corp. and Empire Fidelity
Investments Life. The offering of the contracts is continuous, and we
do not anticipate discontinuing offering the Contracts. However, we
reserve the right to discontinue offering the Contracts.
STATE REGULATION
Empire Fidelity Investments Life is subject to regulation by the
Department of Insurance of the State of New York, which periodically
examines our financial condition and operations. We are also subject
to the insurance laws and regulations of all jurisdictions where we do
business. The Contract described in the Prospectus and Statement of
Additional Information has been filed with and, where required,
approved by, insurance officials in those jurisdictions where it is
sold.
We are required to submit annual statements of our operations,
including financial statements, to the insurance departments of the
various jurisdictions where we do business to determine solvency and
compliance with applicable insurance laws and regulations.
LEGAL MATTERS
The legal validity of the Contracts described in the Prospectus and
Statement of Additional Information has been passed on by David J.
Pearlman. General Counsel of EFILI Jorden Burt Boros Cicchetti
Berenson & Johnson LLP of Washington, D.C. has passed on matters
relating to federal securities laws.
REGISTRATION STATEMENT
We have filed a Registration Statement under the Securities Act of
1933 with the SEC relating to the Contracts. The Prospectus and
Statement of Additional Information do not include all the information
in the Registration Statement. We have omitted certain portions
pursuant to SEC rules. You may obtain the omitted information from the
SEC's main office in Washington, D.C. by paying the SEC's prescribed
fees.
INDEPENDENT ACCOUNTANTS
The statements of financial condition of Empire Fidelity
Investments Life Insurance Company as of December 31, 1997 and 1996,
and the related statements of income, stockholder's equity, and cash
flows for each of the three years in the period ended December 31,
1997, and the statement of assets and liabilities of the Empire
Fidelity Investments Variable Annuity Account A as of December 31,
1997, and the related statements of operations and changes in net
assets included in this registration statement have been included
herein in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, on the authority of that firm as experts in
accounting and auditing.
FINANCIAL STATEMENTS
The financial statements of Empire Fidelity Investments Life
included herein should be distinguished from the financial statements
of the Variable Account and should be considered only as bearing upon
our ability to meet our obligations under the Contracts.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(a wholly-owned ultimate subsidiary of FMR Corp.)
___________________________________
FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(a wholly-owned ultimate subsidiary of FMR Corp.)
FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
Report of Independent Accountants 1
Statements of Financial Condition 2
Statements of Income 3
Statements of Stockholder's Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-13
Report of Independent Accountants
To the Board of Directors and Stockholder of Empire Fidelity
Investments Life Insurance Company:
We have audited the accompanying statements of financial condition of
Empire Fidelity Investments Life Insurance Company (a wholly-owned
ultimate subsidiary of FMR Corp.) as of December 31, 1997 and 1996,
and the related statements of income, stockholder's equity, and cash
flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial condition of Empire
Fidelity Investments Life Insurance Company as of December 31, 1997
and 1996, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
Boston, Massachusetts
January 28, 1998
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(a wholly-owned ultimate subsidiary of FMR Corp.)
STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share data)
December 31, 1997 and 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ASSETS 1997 1996
Debt securities available-for-sale $ 19,176 $ 16,378
Cash 629 940
Accrued investment income 325 265
Deferred policy acquisition costs 12,960 12,598
Other assets 76 122
Separate account assets 793,336 578,323
Total assets 826,502 608,617
LIABILITIES
Future contract benefits $ 7,183 $ 7,057
Payable to affiliates 1,021 544
Other liabilities and accrued expenses 148 338
Deferred tax liability 2,663 2,779
Separate account liabilities 793,175 578,073
Total liabilities 804,190 588,791
Commitments and contingencies (Note 8)
STOCKHOLDER'S EQUITY
Common stock, par value $10 per share - 2,000 2,000
authorized, 2,000,000 shares; issued and
outstanding,
Additional paid-in capital 11,500 11,500
Unrealized gain (loss) on securities available-for-sale, 289 184
net of tax
Retained earnings 8,523 6,142
Total stockholder's equity 22,312 19,826
Total liabilities and stockholder's equity $ 826,502 $ 608,617
</TABLE>
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(a wholly-owned ultimate subsidiary of FMR Corp.)
STATEMENTS OF INCOME
(in thousands)
for the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
REVENUES 1997 1996 1995
Fees charged to contractholders $ 6,933 $ 5,324 $ 3,499
Net investment income 1,131 948 1,060
Realized gains (losses), net 123 (1) 1
8,187 6,271 4,560
BENEFITS AND EXPENSES
Return credited to contractholders and 357 336 442
other benefits
Underwriting, acquisition and 3,997 1,679 1,293
insurance expenses (1)
4,354 2,015 1,735
Income before provision for income taxes 3,833 4,256 2,825
Provision for income taxes 1,452 1,595 1,040
Net income $ 2,381 $ 2,661 $ 1,785
</TABLE>
(1) Includes affiliated party transactions (Note 6)
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(a wholly-owned ultimate subsidiary of FMR Corp.)
STATEMENTS OF STOCKHOLDER'S EQUITY
(in thousands)
for the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Common Additional Unrealized Retained Total
stock paid-in gain (loss) on earnings stockholder's
capital securities equity
available-for-
sale
Balance at January 1, 1995 $ 2,000 $ 10,000 $ (165) $ 1,696 $ 13,531
Net income 1,785 1,785
Change in unrealized gain (loss), 587 587
net of tax $316
Balance at December 31, 1995 2,000 10,000 422 3,481 15,903
Capital contribution from parent 1,500 1,500
Net income 2,661 2,661
Change in unrealized gain (loss), (238) (238)
net of tax benefit of $128
Balance at December 31, 1996 2,000 11,500 184 6,124 19,826
Net income 2,381 2,381
Change in unrealized gain (loss), 105 105
net of tax of $57
$ 2,000 $ 11,500 $ 289 $ 8,523 $ 22,312
Balance at December 31, 1997
</TABLE>
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(a wholly-owned ultimate subsidiary of FMR Corp.)
STATEMENTS OF CASH FLOWS
(in thousands)
for the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1997 1996 1995
Cash flows from operating activities:
Net income $ 2,381 $ 2,661 $ 1,785
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of bond discount and premium 116 101 62
Realized (gain) loss on investments (123) 1 (1)
Depreciation and amortization 2,615 592 433
Change in deferred taxes (172) 590 484
Increase in future contract benefits 310 285 325
Addition to deferred policy acquisition costs (2,978) (3,531) (2,614)
Changes in assets and liabilities:
Accrued investment income (60) (4) (55)
Amounts due to (from) separate accounts 89 253 (96)
Payable to parent and affiliates, net 477 31 332
Other assets and liabilities (153) (123) 232
Net cash provided by (used in) operating activities 2,502 856 887
Cash flows from investing activities:
Purchase of investments (15,707) (5,060) (5,352)
Proceeds from disposal of investments 13,078 4,265 2,078
Additions to separate accounts (80,008) (105,763) (76,952)
Additions to fixed assets -- -- (8)
Net cash used in investing activities (82,637) (106,558) (80,234)
Cash flows from financing activities:
Considerations and deposits on variable 99,257 117,681 87,118
annuity products
Payments to contractholders (19,433) (12,778) (8,229)
Capital contribution from parent -- 1,500 --
Net cash provided by financing activities 79,824 106,403 78,889
Net (decrease) increase in cash (311) 701 (458)
Cash:
Beginning of year 940 239 697
End of year $ 629 $ 940 $ 239
</TABLE>
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(a wholly-owned ultimate subsidiary of FMR Corp.)
Notes to Consolidated Financial Statements
1. ORGANIZATION:
Empire Fidelity Investments Life Insurance Company (the "Company") is
a wholly-owned subsidiary of Fidelity Investment Life Insurance
Company (FILI), which is a wholly-owned subsidiary of FMR Corp. The
Company operates exclusively in the State of New York.
The Company issues variable deferred and immediate annuity contracts.
Amounts invested in the fixed option of the contracts are allocated to
the general account of the Company. Amounts invested in the variable
option of the contracts are allocated to the Variable Annuity Account
A, a separate account of the Company. The assets of the Variable
Annuity Account A are invested in the portfolios of the Variable
Insurance Products Fund, the Variable Insurance Products Fund II and,
beginning in 1997, the Variable Insurance Products Fund III, the
Morgan Stanley Universal Funds, the PBGH Insurance Series Funds, the
Strong Variable Insurance Funds and the Warburg Pincus Trust Funds,
which are reported at the net asset value of such portfolios.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying financial statements of the Company have been
prepared on the basis of generally accepted accounting principles,
which vary in certain respects from reporting practices prescribed or
permitted by state insurance regulatory authorities.
INVESTMENTS
Investments in debt securities available for sale are reported at
fair value. Fair values are derived from external market quotations.
Unrealized gains or losses on debt securities are excluded from
earnings and reported as a separate component of stockholder's equity,
net of taxes, until realized. The discount or premium on debt
securities, excluding loan-backed bonds and structured securities, is
amortized using the effective interest method. Amortization of
loan-backed bonds and structured securities includes anticipated
prepayments over the estimated economic life of the security. When
actual prepayments differ significantly from anticipated prepayments,
the effective yield is recalculated to reflect actual payments to date
and anticipated future payments and any resulting adjustment is
included in investment income.
Investment income is recognized on the accrual basis. Realized gains
or losses on investments sold are determined on the basis of specific
identification method. Unrealized and realized gains or losses on the
Company's funds retained in the separate account are reflected in
income.
SEPARATE ACCOUNT
Separate account assets represent funds held for the exclusive
benefit of variable annuity contractholders and are reported at fair
value. Since the contractholders receive the full benefit and bear the
full risk of the separate account investments, the income and realized
and unrealized gains and losses from such investments are offset by an
increase or decrease in the amount of liabilities related to the
separate account. The excess of separate account assets over separate
account liabilities represents funds of the Company retained in the
separate account.
REVENUE RECOGNITION
Fees charged to contractholders include mortality risk, expense risk,
administrative charges and surrender charges.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(a wholly-owned ultimate subsidiary of FMR Corp.)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued)
FUTURE CONTRACT BENEFITS
Future contract benefits represent the reserve liability which
approximates the contractholder's account balance.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally first-year
commissions, all of which vary with and are related to the production
of new business, have been deferred. These acquisition costs are being
amortized in proportion to the present value of expected future gross
profits from interest margins, mortality and other elements of
performance under the contracts.
INCOME TAXES
The Company is included in the consolidated federal income tax return
filed by FILI. Under a tax sharing agreement, each company is charged
or credited its share of taxes as determined on a separate-company
basis.
The liability method is used in accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based
on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted rates and laws that
will be in effect when the differences are expected to reverse.
USE OF ESTIMATES
The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the related amounts and
disclosures in the financial statements. Actual results could differ
from those estimates.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with
the current year presentation.
3. Investments:
The components of net investment income were as follows:
Years ended December 31,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1997 1996 1995
(in thousands)
Debt securities $ 1,118 $ 1,029 $ 1,051
Cash 24 24 22
Investment in separate accounts 56 16 94
Total investment income 1,267 1,069 1,167
Investment expenses 136 121 107
Net investment income $ 1,131 $ 948 $ 1,060
</TABLE>
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(a wholly-owned ultimate subsidiary of FMR Corp.)
Notes to Consolidated Financial Statements (continued)
3. Investments: (continued)
Gross realized gains and losses from the sale of debt securities were
as follows:
Years ended December 31,
1997 1996 1995
(in thousands)
Gross realized gains $ 131 $ -- $ 3
Gross realized losses $ 8 $ 1 $ 2
The amortized cost and estimated fair value of debt securities, by
type of issuer, were as follows:
December 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Amortized Gross Gross Estimated
cost unrealized unrealized Fair
gains losses value
U.S. Treasury securities $ 7,188 $ 311 $ 7,499
Corporate securities $ 10,008 $ 116 $ (1) 10,123
Loan-backed bonds and 1,534 20 1,554
structured securities
Totals debt securities $ 18,730 $ 447 $ (1) $ 19,176
</TABLE>
December 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Amortized Gross Gross Estimated
cost unrealized unrealized Fair
gains losses value
U.S. Treasury securities $ 8,687 $ 216 $ (19) $ 8,886
Corporate securities $ 6,043 $ 70 6,113
Loan-backed bonds and 1,363 16 1,379
structured securities
Totals debt securities $ 16,095 $ 302 $ (19) $ 16,378
</TABLE>
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(a wholly-owned ultimate subsidiary of FMR Corp.)
Notes to Consolidated Financial Statements (continued)
3. Investments: (continued)
The amortized cost and estimated fair value of debt securities at
December 31, 1997, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amortized Estimated
cost Fair
value
(in thousands)
Due in 1 year or less $ 848 $ 851
Due after 1 year through 5 years 7,894 7,988
Due after 5 years through 10 years 8,015 8,317
Due after 10 years 439 466
Subtotal 17,196 17,622
Loan-backed bonds and structured securities 1,534 1,554
$ 18,730 $ 19,176
</TABLE>
All debt securities are investment grade and there are no significant
concentrations by issuer or by industry other than U.S. Treasury
securities.
4. INCOME TAXES:
The components of the provision for federal and state income taxes
attributable to operations were as follows:
Years ended December 31,
1997 1996 1995
Current $ 1,624 $ 1,005 $ 556
Deferred (172) 590 484
Net tax provision $ 1,452 $ 1,595 $ 1,040
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
liability were as follows:
Year ended December 31,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1997 1996
(in thousands)
Deferred income tax liabilities:
Deferred policy acquisition costs $ 2,813 $ 2,855
Unrealized gain on securities available for sale 156 99
Reserves (352) (187)
Other, net $ 19 $ 12
Total net deferred tax assets $ 2,663 $ 2,779
</TABLE>
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(a wholly-owned ultimate subsidiary of FMR Corp.)
Notes to Consolidated Financial Statements (continued)
4. INCOME TAXES: (continued)
The Company paid FILI federal income taxes of $1,136,000, $816,000
and $356,000 in 1997, 1996 and 1995, respectively, related to the
Company's separate-company basis net operating results for the year.
Payables to FILI of $427,000 and $86,000 have been recorded in 1997
and 1996, respectively. Intercompany tax balances are settled within
30 days of the actual tax payments. State income taxes of $234,000,
$205,000 and $33,000 were paid in 1997, 1996 and 1995, respectively.
State income tax recoverables (payables) of $50,000 and $(36,000) have
been recorded in 1997 and 1996, respectively.
The effective tax rates approximate the statutory federal income tax
rates for the years ended 1997, 1996 and 1995.
5. Stockholder's Equity and Dividend Restrictions:
Generally, the net assets of the Company available for transfer to
FILI are limited to the excess of the Company's net assets, as
determined in accordance with statutory accounting practices, over
minimum statutory capital requirements; however, payments of such
amounts as dividends may be subject to approval by regulatory
authorities.
Net income and capital stock and surplus as determined in accordance
with statutory accounting practices were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Years ended December 31,
1997 1996 1995
Statutory net income $ 1,707 $ 305 $ 101
Statutory capital stock and surplus $ 11,348 $ 9,641 $ 7,834
</TABLE>
6. AFFILIATED COMPANY TRANSACTIONS:
The Company's insurance contracts are distributed through Fidelity
Brokerage Services, Inc. (FBSI) and Fidelity Insurance Agency, Inc.
(FIA), both of which are affiliated with FMR Corp. The Company has
entered into an agreement with FIA under which the Company pays FIA
sales compensation of 3% of payments received. The Company compensated
FIA in the amount of $3,011,000, $3,521,000 and $2,618,000 in 1997,
1996 and 1995, respectively.
The Company has entered into an administrative services agreement
with FMR Corp. and its subsidiaries whereby certain administrative and
special services are provided for the Company. The Company paid FMR
Corp. and its subsidiaries $683,000, $405,000 and $338,000 in 1997,
1996 and 1995, respectively, for such services.
FMR Corp. maintains a noncontributory trusteed defined benefit
pension plan covering substantially all eligible Company employees.
The benefits earned are based on years of service and the employees'
compensation during the last five years of employment. FMR Corp.'s
policy for the plan is to fund the maximum amount deductible for
income tax purposes, and to charge each subsidiary for its share of
such contributions. Pension costs of $20,000, $9,000 and $10,000 were
charged to the Company in 1997, 1996 and 1995, respectively.
FMR Corp. sponsors a trusteed Profit-Sharing Plan and a contributory
401(k) Thrift Plan covering substantially all eligible Company
employees. Payments are made to the trustee by FMR Corp. annually for
the Profit-Sharing Plan and monthly for the 401(k) Thrift Plan. FMR
Corp.'s policy is to fund all costs accrued and to charge each
subsidiary for its share of the cost. The cost charged to the Company
for these plans amounted to $63,000, $47,000 and $45,000 in 1997, 1996
and 1995, respectively.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(a wholly-owned ultimate subsidiary of FMR Corp.)
Notes to Consolidated Financial Statements (continued)
7. UNDERWRITING, ACQUISITION AND INSURANCE EXPENSES:
Underwriting, acquisition and insurance expenses were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Years ended December 31,
1997 1996 1995
Commissions $ 3,011 $ 3,521 $ 2,618
Amortization of deferred (404) (2,939) (2,198)
policy acquisition costs
Taxes, licenses and fees 31 168 70
General insurance expenses 1,359 929 803
$ 3,997 $ 1,679 $ 1,293
</TABLE>
During 1997, the Company amortized an additional $1,850,000 of
deferred policy acquisition costs. Amortization is adjusted
periodically when estimates of future gross profits are revised to
reflect actual experience. This adjustment has been reflected in
underwriting, acquisition and insurance expenses.
8. COMMITMENT AND CONTINGENCIES:
Reinsurance
The Company has entered into agreements to reinsure certain guarantee
provisions and mortality losses on its annuity contracts. The Company
is contingently liable for claims reinsured that the assuming company
is unable to pay. Premiums and deposits ceded under these reinsurance
contracts were not material to the financial statements.
STATEMENT OF ASSETS AND LIABILITIES
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
OF
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
<S> <C>
ASSETS DECEMBER 31, 1997
Investments at current market value:
Variable Insurance Products Fund (VIP)
Money Market Portfolio - 40,523,191 shares (cost $40,523,191) $ 40,523,191
High Income Portfolio - 1,936,144 shares (cost $23,447,930) 26,292,832
Equity-Income Portfolio - 7,799,811 shares (cost $136,245,590) 189,379,414
Growth Portfolio - 2,618,273 shares (cost $73,417,324) 97,137,924
Overseas Portfolio - 1,305,890 shares (cost $22,579,175) 25,073,096
Variable Insurance Products Fund II (VIP II)
Investment Grade Bond Portfolio - 678,746 shares (cost $8,286,814) 8,525,055
Asset Manager Portfolio - 5,098,256 shares (cost $76,484,511) 91,819,600
Index 500 Portfolio - 671,317 shares (cost $59,792,835) 76,791,919
Asset Manager: Growth Portfolio - 1,977,566 shares (cost $26,302,628) 32,352,984
Contrafund Portfolio - 6,763,269 shares (cost $98,653,114) 134,859,574
Variable Insurance Products Fund III (VIP III)
Balanced Portfolio - 320,839 shares (cost $4,308,500) 4,677,837
Growth & Income Portfolio - 2,302,725 shares (cost $25,769,324) 28,853,145
Growth Opportunities Portfolio - 1,724,505 shares (cost $29,023,346) 33,231,208
Morgan Stanley Universal Funds (MSUF)
Emerging Markets Equity Portfolio - 22,182 shares (cost $210,764) 209,175
Emerging Markets Debt Portfolio - 34,809 shares (cost $348,688) 336,604
Global Equity Portfolio - 26,177 shares (cost $310,300) 307,316
International Magnum Portfolio - 16,181 shares (cost $173,935) 167,959
PBHG Insurance Series Funds (PBHG)
Growth II Portfolio - 11,822 shares (cost $126,545) 127,088
Small Cap Value Portfolio - 52,273 shares (cost $539,232) 547,819
Large Cap Value Portfolio - 18,769 shares (cost $193,332) 195,765
Technology & Communications Portfolio - 35,096 shares (cost $366,187) 365,354
Select 20 Portfolio - 56,875 shares (cost $553,519) 570,452
Strong Variable Insurance Funds (SVIF)
Discovery Fund II Portfolio - 7,663 shares (cost $93,530) 92,191
Growth Fund II Portfolio - 12,882 shares (cost $162,114) 160,378
Opportunity Fund II Portfolio - 15,058 shares (cost $324,423) 326,748
Warburg Pincus Trust (WPT)
Small Company Growth Portfolio - 19,004 shares (cost $305,128) 313,192
International Equity Portfolio - 3,021 shares (cost $34,115) 31,689
Post-Venture Capital Portfolio - 6,038 shares (cost $65,671) 66,778
Total Assets $ 793,336,287
NET ASSETS
Variable Annuity Contracts $ 772,540,862
Annuity Reserves 20,634,066
Retained in Variable Account by Empire Fidelity Investments Life Insurance Company 161,359
Total Net Assets $ 793,336,287
</TABLE>
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
OF
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
VIP - VIP - VIP -
MONEY MARKET HIGH INCOME EQUITY-INCOME
12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96
Income:
Dividends $ 2,313,764 $ 1,786,770 $ 1,698,426 $ 1,344,293 $ 15,459,859 $ 5,937,083
Expenses:
Mortality risk,
expense risk
and adminis- 421,031 369,246 226,931 173,493 1,644,530 1,445,756
trative charges
Net investment
income (loss) 1,892,733 1,417,524 1,471,495 1,170,800 13,815,329 4,491,327
Realized gain (loss) 0 0 525,904 234,379 5,142,383 4,329,089
Unrealized
appreciation
(depreciation) 0 0 1,549,932 650,495 20,917,615 8,576,967
during the period
Net increase (decrease)
in net assets from 1,892,733 1,417,524 3,547,331 2,055,674 39,875,327 17,397,383
operations
Payments
received from 23,195,744 27,250,681 3,390,097 4,106,021 10,018,315 21,584,759
contract owners
Transfers
between sub- (29,837,690) (9,795,253) (936,028) 1,458,992 (8,413,443) (9,221,157)
accounts and the
fixed account, net
Transfers
for contract
benefits and (3,370,058) (1,159,047) (646,453) (381,564) (3,514,413) (3,177,333)
terminations
Other transfers
(to) from
Empire Fidelity
Investments Life (14,328) 6,590 (8,290) (4,989) (51,098) (35,670)
Insurance Co., net
Net increase
(decrease) in
net assets (10,026,332) 16,302,971 1,799,326 5,178,460 (1,960,639) 9,150,599
from contract
transactions
Retained in
(returned from)
Variable Annuity (18,302) (6,995) (6,399) (6,253) (35,093) (78,836)
Account A, net
Total increase (8,151,901) 17,713,500 5,340,258 7,227,881 37,879,595 26,469,146
(decrease) in
net assets
Net assets at
beginning of period 48,675,092 30,961,592 20,952,574 13,724,693 151,499,819 125,030,673
Net assets at end
of period $ 40,523,191 $ 48,675,092 $ 26,292,832 $ 20,952,574 $ 189,379,414 $ 151,499,819
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
VIP - VIP -
GROWTH OVERSEAS
12/31/97 12/31/96 12/31/97 12/31/96
Income:
Dividends $ 3,205,544 $ 4,634,819 $ 2,118,629 $ 525,818
Expenses:
Mortality risk,
expense risk
and adminis- 884,156 811,476 260,337 231,350
trative charges
Net investment
income (loss) 2,321,388 3,823,343 1,858,292 294,468
Realized gain (loss) 6,114,534 3,059,832 1,113,127 484,088
Unrealized
appreciation
(depreciation) 9,612,136 2,520,593 (306,443) 1,781,995
during the period
Net increase (decrease)
in net assets from 18,048,058 9,403,768 2,664,976 2,560,551
operations
Payments
received from 3,969,223 16,074,279 1,594,379 3,046,601
contract owners
Transfers
between sub- (11,918,863) 2,515,925 (2,962,833) 1,632,798
accounts and the
fixed account, net
Transfers
for contract
benefits and (1,865,313) (1,354,750) (875,577) (312,776)
terminations
Other transfers
(to) from
Empire Fidelity
Investments Life (27,180) (30,252) (7,253) (20,485)
Insurance Co., net
Net increase
(decrease) in
net assets (9,842,133) 17,205,202 (2,251,284) 4,346,138
from contract
transactions
Retained in
(returned from)
Variable Annuity (14,603) (40,650) (7,153) (7,308)
Account A, net
Total increase 8,191,322 26,568,320 406,539 6,899,381
(decrease) in
net assets
Net assets at
beginning of period 88,946,602 62,378,282 24,666,557 17,767,176
Net assets at end
of period $ 97,137,924 $ 88,946,602 $ 25,073,096 $ 24,666,557
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
VIP II - VIP II - VIP II -
INVESTMENT ASSET MANAGER INDEX 500
GRADE BOND
12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96
Income:
Dividends $ 398,252 $ 337,043 $ 9,938,064 $ 5,293,835 $ 1,475,663 $ 620,782
Expenses:
Mortality risk,
expense risk
and adminis- 68,068 843,527 815,364 591,939 242,314
trative charges 68,030
Net investment
income (loss) 330,222 268,975 9,094,537 4,478,471 883,724 378,468
Realized gain (loss) 59,791 75,367 1,851,291 1,663,095 2,915,326 702,643
Unrealized
appreciation
(depreciation) (227,009) 4,465,968 4,022,895 11,740,910 3,762,268
during the period 150,894
Net increase (decrease)
in net assets from 117,333 15,411,796 10,164,461 15,539,960 4,843,379
operations 540,907
Payments
received from 1,204,243 2,619,931 3,467,114 9,783,621 9,153,239
contract owners 547,746
Transfers
between sub- (5,488,171) (11,063,577) 16,761,121 10,692,005
accounts and the (177,798)
fixed account, net 939,267
Transfers
for contract
benefits and (443,215) (3,352,040) (2,267,357) (2,103,893) (760,330)
terminations (446,731)
Other transfers
(to) from
Empire Fidelity
Investments Life 1,167 (17,911) (18,904) (19,321) (4,432)
Insurance Co., net (4,655)
Net increase
(decrease) in
net assets 584,397 (6,238,191) (9,882,724) 24,421,528 19,080,482
from contract
transactions 1,035,627
Retained in
(returned from)
Variable Annuity (4,101) (18,089) (59,436) (1,164) (8,563)
Account A, net (2,182)
Total increase 9,155,516 222,301 39,960,324 23,915,298
(decrease) in 697,629
net assets 1,574,352
Net assets at
beginning of period 6,950,703 6,253,074 82,664,084 82,441,783 36,831,595 12,916,297
Net assets at end
of period $ 8,525,055 $ 6,950,703 $ 91,819,600 $ 82,664,084 $ 76,791,919 $ 36,831,595
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP II - VIP II -
ASSET MANAGER: CONTRAFUND
GROWTH
12/31/97 12/31/96 12/31/97 12/31/96
Income:
Dividends $ 31,544 $ 862,945 $ 3,309,751 $ 526,257
Expenses:
Mortality risk,
expense risk
and adminis- 254,365 98,994 1,148,575 786,431
trative charges
Net investment
income (loss) (222,821) 763,951 2,161,176 (260,174)
Realized gain (loss) 505,357 239,532 4,737,833 1,823,791
Unrealized
appreciation
(depreciation) 5,087,508 801,887 16,812,677 13,273,286
during the period
Net increase (decrease)
in net assets from 5,370,044 1,805,370 23,711,686 14,836,903
operations
Payments
received from 4,997,152 5,577,602 12,859,035 25,690,735
contract owners
Transfers
between sub- 5,149,974 5,074,653 430,459 9,364,673
accounts and the
fixed account, net
Transfers
for contract
benefits and (364,345) (154,535) (2,031,744) (1,779,161)
terminations
Other transfers
(to) from
Empire Fidelity
Investments Life (8.770) (3,396) (35,583) (71,396)
Insurance Co., net
Net increase
(decrease) in
net assets 9,774,011 10,494,324 11,222,167 33,204,851
from contract
transactions
Retained in
(returned from)
Variable Annuity 16,275 (16,199) (17,981) (24,192)
Account A, net
Total increase 15,160,330 12,283,495 34,915,872 48,017,562
(decrease) in
net assets
Net assets at
beginning of period 17,192,654 4,909,159 99,943,702 51,926,140
Net assets at end
of period $ 32,352,984 $ 17,192,654 $ 134,859,574 $ 99,943,702
</TABLE>
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
OF
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
VIP III - VIP III - VIP III - MSUF - MSUF -
BALANCED* GROWTH & GROWTH EMERGING EMERGING
INCOME* OPPORTUNITIES* MARKETS MARKETS
EQUITY** DEBT**
12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
</TABLE>
INCOME:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Dividends $ 2,385 $ 741,838 $ 67,255 $ 5,877 $ 11,628
EXPENSES:
Mortality risk, 28,408 148,409 178,840 93 167
expense risk
and adminis-
trative charges
Net investment (26,023) 593,429 (111,585) 5,784 11,461
income (loss)
Realized gain (loss) 171,319 139,286 215,977 (41) (1,346)
Unrealized
appreciation
(depreciation) 369,337 3,083,821 4,207,862 (1,589) (12,084)
during the period
Net increase (decrease)
in net assets
from operations 514,633 3,816,536 4,312,254 4,154 (1,969)
Payments
received from
contract owners 1,763,874 10,522,938 12,056,601 113,615 13,063
Transfers
between sub- 2,425,981 14,682,913 16,961,634 91,436 331,693
accounts and the
fixed account, net
Transfers
for contract
benefits and (27,898) (163,575) (98,075) 0 (6,182)
terminations
Other transfers
(to) from
Empire Fidelity
Investments Life (2,344) (10,836) (6,260) (30) (1)
Insurance Co., net
Net increase
(decrease) in
net assets 4,159,613 25,031,440 28,913,900 205,021 338,573
from contract
transactions
Retained in
(returned from)
Variable Annuity 3,591 5,169 5,054 0 0
Account A, net
Total increase 4,677,837 28,853,145 33,231,208 209,175 336,604
(decrease) in
net assets
Net assets at
beginning 0 0 0 0 0
of period
Net assets at end
of period $ 4,677,837 $ 28,853,145 $ 33,231,208 $ 209,175 $ 336,604
</TABLE>
* FOR THE PERIOD JANUARY 27, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997.
** FOR THE PERIOD NOVEMBER 24, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
PBHG - PBHG -
SMALL CAP LARGE CAP
MSUF - MSUF - PBHG - VALUE** VALUE**
GLOBAL INTERNATIONAL GROWTH II**
EQUITY** MAGNUM**
12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
</TABLE>
INCOME:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Dividends $ 5,581 $ 5,039 $ 0 $ 0 $ 0
EXPENSES:
Mortality risk, 129 86 47 158 80
expense risk
and adminis-
trative charges
Net investment 5,452 4,953 (47) (158) (80)
income (loss)
Realized gain (loss) 1 25 (115) 106 (61)
Unrealized
appreciation
(depreciation) (2,984) (5,976) 543 8,587 2,433
during the period
Net increase (decrease)
in net assets
from operations 2,469 (998) 381 8,535 2,292
Payments
received from
contract owners 191,357 86,824 58,005 102,904 63,807
Transfers
between sub- 113,505 82,134 68,703 436,360 129,665
accounts and the
fixed account, net
Transfers
for contract
benefits and 0 0 0 0 0
terminations
Other transfers
(to) from
Empire Fidelity
Investments Life (15) (1) (3) 15 (2)
Insurance Co., net
Net increase
(decrease) in
net assets 304,847 168,957 126,705 539,279 193,470
from contract
transactions
Retained in
(returned from)
Variable Annuity 0 0 2 5 3
Account A, net
Total increase 307,316 167,959 127,088 547,819 195,765
(decrease) in
net assets
Net assets at
beginning 0 0 0 0 0
of period
Net assets at end
of period $ 307,316 $ 167,959 $ 127,088 $ 547,819 $ 195,765
</TABLE>
* FOR THE PERIOD JANUARY 27, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997.
** FOR THE PERIOD NOVEMBER 24, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PBHG - SVIF - SVIF - SVIF -
SELECT 20** DISCOVERY GROWTH OPPORTUNITY
PBHG - FUND II** FUND II** FUND II**
TECHNOLOGY &
COM-
M UNICATIONS**
12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
</TABLE>
INCOME:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Dividends $ 0 $ 0 $ 0 $ 5,758 $ 324
EXPENSES:
Mortality risk, 202 48 66 156
expense risk
and adminis-
trative charges 144
Net investment (202) (48) 5,692 168
income (loss) (144)
Realized gain (loss) (593) 1 (44) (79) 0
Unrealized
appreciation
(depreciation) 16,933 (1,339) (1,736) 2,325
during the period (833)
Net increase (decrease)
in net assets
from operations (1,570) 16,732 (1,431) 3,877 2,493
Payments
received from
contract owners 138,324 115,860 32,805 94,312 152,948
Transfers
between sub- 437,871 60,817 62,188 171,182
accounts and the
fixed account, net 228,607
Transfers
for contract
benefits and 0 0 0 0
terminations 0
Other transfers
(to) from
Empire Fidelity
Investments Life (10) (10) 38 87
Insurance Co., net (32)
Net increase
(decrease) in
net assets 553,721 93,612 156,538 324,217
from contract
transactions 366,899
Retained in
(returned from)
Variable Annuity (1) 10 (37) 38
Account A, net 25
Total increase 570,452 92,191 160,378 326,748
(decrease) in
net assets 365,354
Net assets at
beginning 0 0 0 0
of period 0
Net assets at end
of period $ 365,354 $ 570,452 $ 92,191 $ 160,378 $ 326,748
</TABLE>
WPT - WPT - WPT -
SMALL INTERNATIONAL POST-
COMPANY EQUITY** VENTURE
GROWTH** CAPITAL**
TOTAL
12/31/97 12/31/97 12/31/97 12/31/97 12/31/96
INCOME:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Dividends $ 0 $ 2,023 $ 8 $ 40,797,212 $ 21,869,645
EXPENSES:
Mortality risk, 143 16 44 6,700,657
expense risk
and adminis- 5,042,492
trative charges
Net investment (143) 2,007 (36) 34,096,555 16,827,153
income (loss)
Realized gain (loss) 305 0 (281) 23,490,006 12,611,816
Unrealized
appreciation
(depreciation) 8,064 (2,426) 1,107 77,703,242 35,163,377
during the period
Net increase (decrease)
in net assets
from operations 8,226 (419) 790 135,289,803 64,602,346
Payments
received from
contract owners 74,156 11,805 18,680 98,587,121 117,155,274
Transfers
between sub- 230,810 20,304 47,306 306,902 481,261
accounts and the
fixed account, net
Transfers
for contract
benefits and 0 0 0 (18,866,297) (11,790,068)
terminations
Other transfers
(to) from
Empire Fidelity
Investments Life 17 (2,059) (3) (215,838) (181,767)
Insurance Co., net
Net increase
(decrease) in
net assets 304,983 30,050 65,983 79,811,888 105,664,700
from contract
transactions
Retained in
(returned from)
Variable Annuity (17) 2,058 5 (88,786) (252,533)
Account A, net
Total increase 313,192 31,689 66,778 215,012,905
(decrease) in 170,014,513
net assets
Net assets at
beginning 0 0 0 578,323,382 408,308,869
of period
Net assets at end
of period $ 313,192 $ 31,689 $ 66,778 $ 793,336,287 $ 578,323,382
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
OF
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
15. ORGANIZATION.
Empire Fidelity Investments Variable Annuity Account A (the
"Account"), a unit investment trust registered under the Investment
Company Act of 1940 as amended, was established by Empire Fidelity
Investments Life Insurance Company (EFILI) on July 15, 1991 and exists
in accordance with the regulations of the State of New York Insurance
Department. The Account is a funding vehicle for individual Retirement
Reserves and Income Advantage variable annuity contracts. EFILI is a
wholly-owned subsidiary of Fidelity Investments Life Insurance Company
which is a wholly-owned subsidiary of FMR Corp.
In 1997, EFILI added eighteen new subaccounts to the Account; VIP III
- - Balanced, VIP III - Growth & Income, VIP III - Growth Opportunities,
MSUF - Emerging Markets Equity, MSUF - Emerging Markets Debt, MSUF -
Global Equity, MSUF - International Magnum, PBHG - Growth II, PBHG -
Small Cap Value, PBHG - Large Cap Value, PBHG - Technology &
Communications, PBHG - Select 20, SVIF - Discovery Fund II, SVIF -
Growth Fund II, SVIF - Opportunity Fund II, WPT - Small Company
Growth, WPT - International Equity, WPT - Post-Venture Capital.
16. SIGNIFICANT ACCOUNTING POLICIES.
Investments are made in the portfolios of the subaccounts and are
valued at the reported net asset values of such portfolios.
Transactions are recorded on the trade date. Income from dividends is
recorded on the ex-dividend date. Realized gains and losses on the
sales of investments are computed on the basis of the identified cost
of the investment sold.
In addition to the Account, a contractholder may also allocate funds
to the Fixed Account, which is part of EFILI's general account.
Because of exemptive and exclusionary provisions, interests in the
Fixed Account have not been registered under the Securities Act of
1933 and EFILI's general account has not been registered as an
investment company under the Investment Company Act of 1940.
Annuity reserves are computed for contracts in the income stage
according to the 1983 Individual Annuitant Mortality Table. The
assumed investment return is 3.5% unless the annuitant elects
otherwise, in which case the rate may vary from 3.5% to 7%, as
regulated by the laws of the State of New York. The mortality risk is
fully borne by EFILI and may result in additional amounts being
transferred into the Account by EFILI.
The operations of the Account are included in the federal income tax
return of EFILI, which is taxed as a life insurance company under the
provisions of the Internal Revenue Code (the "Code").
The preparation of the statement of assets and liabilities and the
statements of operations and changes in net assets in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the related amounts and
disclosures in the financial statements. Actual results could differ
from those estimates.
17. EXPENSES.
EFILI deducts a daily charge from the net assets of the Account for
administrative expenses and for the assumption of mortality risk and
expense risk. Prior to November 3, 1997, the daily charge was
equivalent to an annual effective rate of 1% of net assets. On
November 3, 1997, EFILI reduced the daily charge on the Retirement
Reserves contracts to an annual effective rate of 0.8% of net assets.
EFILI also deducts an annual maintenance charge of $30 from the
Retirement Reserves contract value. The maintenance charge is waived
on certain contracts.
Under the current provisions of the Code, EFILI does not expect to
incur federal income taxes on the earnings of the Account to the
extent the earnings are credited under the contracts. EFILI incurs
federal income taxes on the difference between the financial statement
carrying value of reserves for contracts in the income stage and those
reserves held for federal income tax purposes. The tax effect of this
temporary difference is expected to be recovered by EFILI. As such, no
charge is being made currently to the Account for federal income
taxes. EFILI will review periodically the status of such decision
based on changes in the tax law. Such a charge may be made in future
years for any federal income taxes that would be attributable to the
contracts.
18. AFFILIATED COMPANY TRANSACTIONS.
The contracts are distributed through Fidelity Brokerage Services,
Inc. (FBSI) and Fidelity Insurance Agency, Inc. (FIA), both of which
are affiliated with FMR Corp. FBSI and FIA are the distributors and
FBSI is the principal underwriter of the contracts. Fidelity
Management & Research Company, an affiliate of FMR Corp., acts as
investment advisor to the VIP, VIP II and VIP III portfolios. Fidelity
Investments Institutional Operations Co., an affiliate of FMR Corp.,
is the transfer and shareholder servicing agent for the VIP, VIP II
and VIP III portfolios.
19. PURCHASES AND SALES OF INVESTMENTS.
The following table shows aggregate cost of shares purchased and
proceeds from sales of each subaccount for the year ended December 31,
1997:
PURCHASES SALES
VIP - Money Market $ 40,626,139 $ 48,778,040
VIP - High Income 9,153,878 5,889,456
VIP - Equity-Income 27,763,208 15,943,611
VIP - Growth 9,847,941 17,383,289
VIP - Overseas 5,901,185 6,301,330
VIP II - Investment Grade Bond 3,949,956 2,586,289
VIP II - Asset Manager 13,777,280 10,939,023
VIP II - Index 500 33,411,864 8,107,776
VIP II - Asset Manager: Growth 11,990,962 2,423,497
VIP II - Contrafund 25,483,875 12,118,513
VIP III - Balanced 5,869,577 1,732,396
VIP III - Growth & Income 26,331,732 701,694
VIP III - Growth Opportunities 30,203,470 1,396,101
MSUF - Emerging Markets Equity 215,459 4,654
MSUF - Emerging Markets Debt 411,823 61,789
MSUF - Global Equity 310,342 43
MSUF - International Magnum 175,996 2,086
PBHG - Growth II 132,705 6,045
PBHG - Small Cap Value 548,054 8,928
PBHG - Large Cap Value 198,280 4,887
PBHG - Technology & Communications 374,984 8,204
PBHG - Select 20 553,556 38
SVIF - Discovery Fund II 108,570 14,996
SVIF - Growth Fund II 170,452 8,259
SVIF - Opportunity Fund II 324,476 53
WPT - Small Company Growth 317,505 12,682
WPT - International Equity 34,128 13
WPT - Post-Venture Capital 83,646 17,694
20. UNIT VALUES.
A summary of changes in accumulation units and ending unit and
contract values for variable annuity contracts at December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PAYMENTS
BEGINNING RECEIVED TRANSFERS CONTRACT
BALANCE FROM BETWEEN TERMINATIONS ENDING BALANCE
UNITS CONTRACT SUBACCOUNTS, UNITS UNIT VALUE DOLLARS
OWNERS NET
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1997 TO DECEMBER 31, 1997
VIP - Money Market 3,144,313 1,192,450 (1,961,731) 135,772 2,510,803 $ 15.98 $ 40,122,752
VIP - High Income 820,013 125,044 (36,435) (39,629) 868,993 $ 29.00 25,203,764
VIP - Equity-Income 4,755,212 283,630 (254,145) (118,385) 4,666,312 $ 39.39 183,811,551
VIP - Growth 2,503,391 102,300 (325,759) (50,212) 2,229,721 $ 42.76 95,348,269
VIP - Overseas 1,151,640 68,604 (123,259) (37,425) 1,059,560 $ 23.52 24,922,843
VIP II - Investment Grade Bond 382,801 18,247 64,575 (23,502) 442,121 $ 18.75 8,288,748
VIP II - Asset Manager 3,900,514 115,925 (240,287) (171,837) 3,604,315 $ 24.80 89,382,163
VIP II - Index 500 1,887,371 443,549 793,394 (122,980) 3,001,334 $ 24.83 74,512,753
VIP II - Asset Manager: Growth 1,163,007 308,312 331,850 (42,970) 1,760,200 $ 17.95 31,593,890
VIP II - Contrafund 5,882,023 702,932 (5,288) (160,091) 6,419,636 $ 20.47 131,438,645
VIP III - Balanced * 154,849 243,840 (27,312) 371,377 $ 11.98 4,449,837
VIP III - Growth & Income * 936,634 1,359,453 (132,531) 2,163,555 $ 12.68 27,424,348
VIP III - Growth Opportunities * 1,076,440 1,563,569 (81,549) 2,558,459 $ 12.63 32,320,770
MSUF - Emerging Markets Equity ** 11,511 9,298 (3) 20,806 $ 10.05 209,175
MSUF - Emerging Markets Debt ** 1,251 31,482 (603) 32,130 $ 10.48 336,604
MSUF - Global Equity ** 18,774 11,206 (1) 29,979 $ 10.25 307,316
MSUF - International Magnum ** 8,767 8,275 0 17,042 $ 9.86 167,959
PBHG - Growth II ** 5,767 6,751 (641) 11,877 $ 10.15 120,577
PBHG - Small Cap Value ** 10,032 42,492 (744) 51,781 $ 10.43 540,062
PBHG - Large Cap Value ** 6,302 12,765 (626) 18,440 $ 10.27 189,335
PBHG - Technology & Communications ** 14,091 22,932 (2,985) 34,037 $ 9.87 335,899
PBHG - Select 20 ** 11,265 43,493 (1) 54,758 $ 10.42 570,453
SVIF - Discovery Fund II ** 3,308 6,202 (1,464) 8,046 $ 9.69 77,996
SVIF - Growth Fund II ** 9,503 6,146 0 15,649 $ 10.25 160,415
SVIF - Opportunity Fund II ** 15,195 17,006 (630) 31,571 $ 10.15 320,324
WPT - Small Company Growth ** 7,472 23,269 (2,476) 28,265 $ 10.19 288,010
WPT - International Equity ** 1,196 2,010 0 3,206 $ 9.24 29,631
WPT - Post-Venture Capital ** 1,875 4,639 0 6,514 $ 10.25 66,773
$ 772,540,862
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1996 TO DECEMBER 31, 1996
VIP - Money Market 2,086,339 1,396,811 (671,222) 332,385 3,144,313 $ 15.30 $ 48,101,350
VIP - High Income 605,822 175,020 61,177 (22,006) 820,013 $ 24.89 20,409,560
VIP - Equity-Income 4,481,146 751,876 (315,456) (162,354) 4,755,212 $ 31.05 147,641,357
VIP - Growth 2,004,576 487,213 73,706 (62,104) 2,503,391 $ 34.97 87,540,085
VIP - Overseas 930,291 154,412 85,133 (18,195) 1,151,640 $ 21.29 24,519,804
VIP II - Investment Grade Bond 358,773 71,690 (12,681) (34,981) 382,801 $ 17.36 6,644,585
VIP II - Asset Manager 4,435,615 181,581 (584,908) (131,774) 3,900,514 $ 20.75 80,953,438
VIP II - Index 500 802,405 537,084 624,968 (77,086) 1,887,371 $ 18.89 35,655,373
VIP II - Asset Manager: Growth 396,158 419,484 378,254 (30,890) 1,163,007 $ 14.49 16,853,490
VIP II - Contrafund 3,685,097 1,742,216 631,751 (177,041) 5,882,023 $ 16.65 97,957,527
$ 566,276,569
* FOR THE PERIOD JANUARY 27, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1997.
** FOR THE PERIOD NOVEMBER 24, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1997.
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE CONTRACT OWNERS OF EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY
ACCOUNT A:
We have audited the accompanying statement of assets and liabilities
of Empire Fidelity Investments Variable Annuity Account A (comprised
of VIP - Money Market, VIP - High Income, VIP - Equity-Income, VIP -
Growth, VIP - Overseas, VIP II - Investment Grade Bond, VIP II - Asset
Manager , VIP II - Index 500, VIP II - Asset Manager: Growth, VIP II -
Contrafund, VIP III - Balanced , VIP III - Growth & Income, VIP III -
Growth Opportunities, MSUF - Emerging Markets Equity, MSUF - Emerging
Markets Debt, MSUF - Global Equity, MSUF - International Magnum, PBHG
- - Growth II, PBHG - Small Cap Value, PBHG - Large Cap Value, PBHG -
Technology & Communications, PBHG - Select 20, SVIF- Discovery Fund
II, SVIF - Growth Fund II, SVIF - Opportunity Fund II, WPT - Small
Company Growth, WPT - International Equity and WPT - Post-Venture
Capital) of Empire Fidelity Investments Life Insurance Company as of
December 31, 1997, and the related statements of operations and
changes in net assets for each of the periods indicated therein. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the
aforementioned subaccounts comprising Empire Fidelity Investments
Variable Annuity Account A of Empire Fidelity Investments Life
Insurance Company as of December 31, 1997, and the results of their
operations and the changes in their net assets for each of the periods
indicated therein, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 28, 1998
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a) Financial Statements included in Part B
The following financial statements of Empire Fidelity Investments
Life Insurance Company are filed in Part B. There are no financial
statements included in Part A, other than Accumulation Unit Values.
Statement of Assets and Liabilities for Empire Fidelity Investments
Variable Annuity Account A as of December 31, 1997.
Statements of Operations and Changes in Net Assets for Empire
Fidelity Investments Variable Annuity Account A for Years ended
December 31, 1997 and 1996.
Report of Coopers & Lybrand on the Financial Statements of Empire
Fidelity Investments Variable Annuity Account A.
Balance Sheets of Empire Fidelity Investments Life Insurance Company
as of December 31, 199 and 1996.
Statements of Income for Empire Fidelity Investments Life Insurance
Company for the Year Ended December 31, 1997 and 1996.
Statements of Changes in Stockholder's Equity for Empire Fidelity
Investments Life Insurance Company for the Year Ended December 31,
1997 and 1996.
Statements of Cash Flows for Empire Fidelity Investments Life
Insurance Company for the Year Ended December 31, 1997 and 1996.
Notes to Financial Statements of Empire Fidelity Investments Life
Insurance Company.
Report of Coopers & Lybrand on Financial Statements of Empire
Fidelity Investments Life Insurance Company.
b) Exhibits
(1) Resolution of Board of Directors of Empire Fidelity Investments
Life Insurance Company ("Empire Fidelity Investments Life")
establishing the Empire Fidelity Investments Variable Annuity Account
A. (Note 1).
(2) Not Applicable.
(3) (a) Distribution Agreement between Empire Fidelity Investments
Life
and Fidelity Brokerage Services, Inc. (Note 1).
(4) (a) Specimen Variable Annuity Contract. (Note 1)
(b) Endorsement for Unisex Contract. (Note 1)
(c) Endorsement for Qualified Contracts. (Note 1)
(5) (a) Application for Variable Annuity Contract. (Note 1)
(6) (a) Charter of Empire Fidelity Investments Life. (Note 1)
(b) Amended Bylaws of Empire Fidelity Investments Life. (Note 1)
(7) Not Applicable.
(8) (a) Service Agreement between Empire Fidelity
Investments Life and Fidelity Investments Life. (Note 1)
(b) Service Agreement between Empire Fidelity
Investments Life and Fidelity Investments
Corporate Services. (Note 1)
(9) Opinion and consent of David J. Pearlman, as to the legality of
securities being issued. (Note 4)
(10) (a) Written consent of Coopers & Lybrand. (Note 4)
(b) Written consent of Jorden Burt Berenson & Johnson LLP
(Note 4)
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculations (Note 2)
(14) (a) Participation Agreement among Empire Fidelity
Investments Life, Variable Insurance Products Fund and Fidelity
Distributors Corporation. (Note 1)
(b) Participation Agreement among Empire Fidelity
Investments Life, Variable Insurance Products Fund II and
Fidelity Distributors Corporation (Note 1)
(c) Participation Agreement among Empire Fidelity
Investments Life, Variable Insurance Products Fund III and
Fidelity Distributors Corporation (Note 1)
(d) Form of Participation Agreement between Empire Fidelity
Investments Life and Strong Variable Insurance Funds, Inc. on behalf
of the Portfolios, and Strong Opportunity Fund II, Inc., Strong
Capital Management, Inc. (the "Adviser"), (Note 4)
(e) Form of Participation Agreement between Empire Fidelity
Investments Life and PBHG INSURANCE SERIES FUND, INC. ("FUND"), and
PILGRIM BAXTER & ASSOCIATES, LTD. ("ADVISER"). (Note 4)
`
(f) Form of Participation Agreement between Empire Fidelity
Investments Life and MORGAN STANLEY UNIVERSAL FUNDS, INC. (the
"Fund"), and MORGAN STANLEY ASSET MANAGEMENT INC. and MILLER ANDERSON
& SHERRERD, LLP (the "Advisers"). (Note 4)
(g) Form of Participation Agreement between Empire Fidelity
Investments Life and Warburg, Pincus Trust, (the "Fund"); Warburg,
Pincus Counsellors, Inc. (the "Adviser"); and Counsellors Securities
Inc. (Note 4)
(15) (a) Powers of Attorney (Note 3)
Powers of Attorney for Lena G. Goldberg and Paul J. Hondros (Note
4)
(Note 1) Incorporated by reference to Post-Effective Amendment No. 5
to this Registration Statement filed electronically on April 27, 1997.
(Note 2) Incorporated by reference to Post-Effective Amendment No. 11
to Registration Statement No.33-24400 filed April 24, 1997.
(Note 3) Incorporated by reference to Post-Effective Amendment No. 4
to this Registration Statement filed April 26, 1996.
(Note 4) Filed herein.
Item 25. Directors and Officers of the Depositor
The Directors and officers of Empire Fidelity
Investments Life are as follows:
Directors of Empire Fidelity Investments Life
J. GARY BURKHEAD, Director
JAMES C. CURVEY, Director
LENA G. GOLDBERG, Director
JOHN J. REMONDI, Director
RODNEY R. ROHDA, Director and Chairman
PAUL J. HONDROS, Director
DAVID C. WEINSTEIN, Director
DENIS M. McCARTHY, Director
ROY BALLENTINE, Director
PETER JOHANNSEN, Director
JOSHUA BERMAN, Director
MALCOLM MACKAY, Director
FLOYD L. SMITH, Director
The addresses of Roy Ballentine, Joshua Berman, Peter Johannsen,
Malcolm MacKay, and Floyd L. Smith are 11 Depot Street, P. O. Box
1860, Wolfboro, New Hampshire 03894; 919 Third Avenue, New York, New
York 10022; One Post Office Square, Boston, Massachusetts 02109; and
4 Peter Cooper Road, # 9G, New York, New York 10010, respectively.
The principal business address of each of the other above persons is
82 Devonshire Street, Boston, Massachusetts 02109.
Executive Officers Who Are not Directors
Executive officers of Empire Fidelity Investments Life who are not
directors are as follows.
ALLAN BRANDON, Vice President and Chief Administrative Officer
DAVID J. PEARLMAN, Vice President, Secretary and General Counsel
JOSEPH L. KURTZER Jr., Treasurer
The principal business address of Allan Brandon is One World Financial
Center, 200 Liberty Street, Tower A, New York, New York 10281. The
principal business address of Messrs. Kurtzer and Pearlman is 82
Devonshire Street, Boston, Massachusetts 02109.
Item 26. Persons Controlled By or Under Common control with the
Depositor or Registrant.
See Exhibit 26 of the original registration statement filed on Form
N-4 on August 17, 1991, Reg. No. 33-42376, on behalf of Empire
Fidelity Investments Variable Annuity Account A.
Item 27. Number of Contract Owners.
As of December 31, 1997 there were 548 Qualified Contracts and 9,468
Non-qualified Contracts outstanding.
Item 28. Indemnification
FMR Corp. and its subsidiaries own a directors' and officers'
liability reimbursement contract (the "Policy"), issued by National
Union Fire Insurance Company, that provides coverage for "Loss" (as
defined in the Policy) arising from any claim or claims by reason of
any breach of duty, neglect, error, misstatement, misleading
statement, omission or other act done or wrongfully attempted by a
person while he or she is acting in his or her capacity as a director
or officer. The coverage is provided to these insureds, including
Empire Fidelity Investments Life, to the extent required or permitted
by applicable law, common or statutory, or under their respective
charters or by-laws, to indemnify directors or officers for Loss
arising from the above-described matters. Coverage is also provided
to the individual directors or officers for such Loss, for which they
shall not be indemnified, subject to relevant contract exclusions.
Loss is essentially the legal liability on claims against a director
or officer, including damages, judgments, settlements, costs, charges
and expenses (excluding salaries of officers or employees) incurred in
the defense of actions, suits or proceedings and appeals therefrom.
There are a number of exclusions from coverage. Among the matters
excluded are Losses arising as a result of (1) fines or penalties
imposed by law or other matters that may be deemed uninsurable under
the law pursuant to which Policy is construed, (2) claims brought
about or contributed to by the fraudulent, dishonest, or criminal acts
of a director or officer, (3) any claim made against the directors or
officers for violation of any of the responsibilities, obligations, or
duties imposed upon fiduciaries by the Employee Retirement Income
Security Act of 1974 or amendments thereto, (4) professional errors or
omission, and (5) claims for an accounting or profits in fact made
from the purchase or sale by a director or officer of any securities
of the insured corporations within the meaning of section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any state law.
The limit of coverage of the Policy is $10 million, as an annual
aggregate limit, with 95% co-insurance for the first $1 million of
coverage, and with a deductible of $500,000 in the event that Empire
Fidelity Investments Life indemnifies the director or officer (with a
maximum aggregate per loss deductible of $25,000) if Empire Fidelity
Investments Life does not indemnify the director or officer.
New York law (N.Y. Bus. Corp. 722) provides, in part, that a
corporation may indemnify a director, officer, employee or agent
against liability if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the corporation
and, in respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
The text of Article VI of Empire Fidelity Investment Life's By-Laws,
which relates to indemnification of the directors and officers, is as
follows:
Section 6.1. Indemnification of Directors, Officers, Employees and
Agents. Any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(including any action or suit by or in the right of the Corporation to
procure a judgment in its favor) by reason of the fact that he is or
was a director, officer, employee or agent of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall be
indemnified to the extent permitted by the laws of the State of New
York, against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him
in connection with the defense of settlement of such action, suit or
proceeding. The indemnification expressly provided by statute in a
specific case shall not be deemed entitled under any lawful agreement,
vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another
capacity while holding such office, and shall continue as a person who
has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of
such person.
The Board of Directors may purchase and maintain insurance on behalf
on any person who is or was a director, officer, employee of agent of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture or trust or other enterprise
against any liability incurred by him in any such capacity or arising
out of his status as such, whether or not the Corporation would have
the power to indemnify against such liability.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person in
connection with the securities being registered), the Registrant will,
unless in the opinion of is counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by its against is against
public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 29. Principal Underwriters.
(a) Fidelity Brokerage Services, Inc. acts as distributor for other
variable life and variable annuity contracts registered by separate
accounts of Empire Fidelity Investments Life Insurance Company,
Fidelity Investments Life Insurance Company and PFL Life Insurance
Company.
(b)
Name and Principal Positions and Offices with Underwriter
Business Address
Roger T. Servison Director
Robert P. Mazzarella Director and President
Rodney R. Rohda Director
Edward L. McCartney Executive Vice President
J. Peter Benzie Executive Vice President
Bruce MacAlpine Vice President
Kenneth Klipper Treasurer
Gary Greenstein Assistant Treasurer
Jeffrey R. Larsen Legal Counsel & Clerk
Linda Holland Compliance Officer
Richard Blades Compliance Registered Options Principal
Jay Freedman Assistant Clerk
(c) Commissions and other compensation was received by the principal
underwriter.
See Item 24 (b) (3). No compensation was received by the principal
underwriter from the registrant or depositor during the registrant's
or depositor's last fiscal year.
Item 30. Location of Accounts and Records
The records regarding the Account required to be maintained by
Section 31(a) of the Investment Company Act of 1940, and Rules 31a-1
to 31a-3 promulgated thereunder, are maintained at Empire Fidelity
Investments Life Insurance Company at One World Financial Center New
York, New York 10281.
Item 31. Management Services
The contracts for management-related services between (a) Fidelity
Investments Life and Empire Fidelity Investments Life is summarized in
Part B. Payments under these contracts for 1996 and 1995 were $
343,376 and $297,600, respectively.
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that
the audited financial statements in the Registration Statement are
never than 16 months old for so long as payments under the variable
annuity contracts may be accepted.
(b) Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space
that an applicant can check to request a Statement of Additional
Information, or (2) a postcard or similar written communication
affixed to or included in a prospectus that the applicant can remove
to send for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request.
(d) Registrant represents that it meets the definition of a "separate
account" under the federal securities laws.
(e) Empire Fidelity Investment Life Insurance Company hereby
represents that the aggregate charges under the variable annuity
policy ("the contract") offered by Empire Fidelity Investment Life
Insurance Company are reasonable in relation to services rendered, the
expenses expected to be incurred, and the risks assumed by Empire
Fidelity Investment Life Insurance Company
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, Empire Fidelity Investments Variable
Annuity Account A, certifies that it meets the requirements of the
Securities Act Rule 485(b) for effectiveness of this Registration
Statement and has caused this Post-Effective Amendment No.7 to the
Registration Statement to be signed on its behalf in the city of
Boston and the Commonwealth of Massachusetts, on this 28th day of
April, 1998.
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
(Registrant)
By: EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(Depositor)
By: _/s/Rodney R. Rhoda Attest:_/s/David J. Pearlman
Rodney R. Rohda, President Chairman David J. Pearlman,
Chief Executive Officer and Chief Operating Officer Secretary
As required by the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the
capacities indicated on this 28th day of April, 1998.
Signature Title
_/s/Rodney R. Rhoda President, Chairman and Director
Rodney R. Rohda (Chief Executive Officer)
(Chief Operating Officer) )
By:_/s/David J. Pearlman
) David J. Pearlman
________________ Director ) (Attorney-in-Fact)
J. Gary Burkhead )
)
________________ Director )
James C. Curvey )
)
________________ Director )
John J. Remondi )
)
________________ Director )
Lena G. Goldberg )
)
_______________ Director )
Roy Ballentine )
)
_______________ Director )
Peter Johannsen )
)By_/s/David J. Pearlman
) David J. Pearlman
_______________ Director ) (Attorney-in-Fact)
Malcolm MacKay )
)
_______________ Director 0
Joshua Berman 0
)
_______________ Director )
Denis M. McCarthy )
)
_______________ Director )
Floyd L. Smith )
)
_______________ Director )
David Weinstein )
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1997 and 1996
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
OF
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
21. ORGANIZATION.
Empire Fidelity Investments Variable Annuity Account A (the
"Account"), a unit investment trust registered under the Investment
Company Act of 1940 as amended, was established by Empire Fidelity
Investments Life Insurance Company (EFILI) on July 15, 1991 and exists
in accordance with the regulations of the State of New York Insurance
Department. The Account is a funding vehicle for individual Retirement
Reserves and Income Advantage variable annuity contracts. EFILI is a
wholly-owned subsidiary of Fidelity Investments Life Insurance Company
which is a wholly-owned subsidiary of FMR Corp.
In 1997, EFILI added eighteen new subaccounts to the Account; VIP III
- - Balanced, VIP III - Growth & Income, VIP III - Growth Opportunities,
MSUF - Emerging Markets Equity, MSUF - Emerging Markets Debt, MSUF -
Global Equity, MSUF - International Magnum, PBHG - Growth II, PBHG -
Small Cap Value, PBHG - Large Cap Value, PBHG - Technology &
Communications, PBHG - Select 20, SVIF - Discovery Fund II, SVIF -
Growth Fund II, SVIF - Opportunity Fund II, WPT - Small Company
Growth, WPT - International Equity, WPT - Post-Venture Capital.
22. SIGNIFICANT ACCOUNTING POLICIES.
Investments are made in the portfolios of the subaccounts and are
valued at the reported net asset values of such portfolios.
Transactions are recorded on the trade date. Income from dividends is
recorded on the ex-dividend date. Realized gains and losses on the
sales of investments are computed on the basis of the identified cost
of the investment sold.
In addition to the Account, a contractholder may also allocate funds
to the Fixed Account, which is part of EFILI's general account.
Because of exemptive and exclusionary provisions, interests in the
Fixed Account have not been registered under the Securities Act of
1933 and EFILI's general account has not been registered as an
investment company under the Investment Company Act of 1940.
Annuity reserves are computed for contracts in the income stage
according to the 1983 Individual Annuitant Mortality Table. The
assumed investment return is 3.5% unless the annuitant elects
otherwise, in which case the rate may vary from 3.5% to 7%, as
regulated by the laws of the State of New York. The mortality risk is
fully borne by EFILI and may result in additional amounts being
transferred into the Account by EFILI.
The operations of the Account are included in the federal income tax
return of EFILI, which is taxed as a life insurance company under the
provisions of the Internal Revenue Code (the "Code").
The preparation of the statement of assets and liabilities and the
statements of operations and changes in net assets in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the related amounts and
disclosures in the financial statements. Actual results could differ
from those estimates.
23. EXPENSES.
EFILI deducts a daily charge from the net assets of the Account for
administrative expenses and for the assumption of mortality risk and
expense risk. Prior to November 3, 1997, the daily charge was
equivalent to an annual effective rate of 1% of net assets. On
November 3, 1997, EFILI reduced the daily charge on the Retirement
Reserves contracts to an annual effective rate of 0.8% of net assets.
EFILI also deducts an annual maintenance charge of $30 from the
Retirement Reserves contract value. The maintenance charge is waived
on certain contracts.
Under the current provisions of the Code, EFILI does not expect to
incur federal income taxes on the earnings of the Account to the
extent the earnings are credited under the contracts. EFILI incurs
federal income taxes on the difference between the financial statement
carrying value of reserves for contracts in the income stage and those
reserves held for federal income tax purposes. The tax effect of this
temporary difference is expected to be recovered by EFILI. As such, no
charge is being made currently to the Account for federal income
taxes. EFILI will review periodically the status of such decision
based on changes in the tax law. Such a charge may be made in future
years for any federal income taxes that would be attributable to the
contracts.
24. AFFILIATED COMPANY TRANSACTIONS.
The contracts are distributed through Fidelity Brokerage Services,
Inc. (FBSI) and Fidelity Insurance Agency, Inc. (FIA), both of which
are affiliated with FMR Corp. FBSI and FIA are the distributors and
FBSI is the principal underwriter of the contracts. Fidelity
Management & Research Company, an affiliate of FMR Corp., acts as
investment advisor to the VIP, VIP II and VIP III portfolios. Fidelity
Investments Institutional Operations Co., an affiliate of FMR Corp.,
is the transfer and shareholder servicing agent for the VIP, VIP II
and VIP III portfolios.
25. PURCHASES AND SALES OF INVESTMENTS.
The following table shows aggregate cost of shares purchased and
proceeds from sales of each subaccount for the year ended December 31,
1997:
PURCHASES SALES
VIP - Money Market $ 40,626,139 $ 48,778,040
VIP - High Income 9,153,878 5,889,456
VIP - Equity-Income 27,763,208 15,943,611
VIP - Growth 9,847,941 17,383,289
VIP - Overseas 5,901,185 6,301,330
VIP II - Investment Grade Bond 3,949,956 2,586,289
VIP II - Asset Manager 13,777,280 10,939,023
VIP II - Index 500 33,411,864 8,107,776
VIP II - Asset Manager: Growth 11,990,962 2,423,497
VIP II - Contrafund 25,483,875 12,118,513
VIP III - Balanced 5,869,577 1,732,396
VIP III - Growth & Income 26,331,732 701,694
VIP III - Growth Opportunities 30,203,470 1,396,101
MSUF - Emerging Markets Equity 215,459 4,654
MSUF - Emerging Markets Debt 411,823 61,789
MSUF - Global Equity 310,342 43
MSUF - International Magnum 175,996 2,086
PBHG - Growth II 132,705 6,045
PBHG - Small Cap Value 548,054 8,928
PBHG - Large Cap Value 198,280 4,887
PBHG - Technology & Communications 374,984 8,204
PBHG - Select 20 553,556 38
SVIF - Discovery Fund II 108,570 14,996
SVIF - Growth Fund II 170,452 8,259
SVIF - Opportunity Fund II 324,476 53
WPT - Small Company Growth 317,505 12,682
WPT - International Equity 34,128 13
WPT - Post-Venture Capital 83,646 17,694
26. UNIT VALUES.
A summary of changes in accumulation units and ending unit and
contract values for variable annuity contracts at December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PAYMENTS
BEGINNING RECEIVED TRANSFERS CONTRACT
BALANCE FROM BETWEEN TERMINATIONS ENDING BALANCE
UNITS CONTRACT SUBACCOUNTS, UNITS UNIT VALUE DOLLARS
OWNERS NET
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1997 TO DECEMBER 31, 1997
VIP - Money Market 3,144,313 1,192,450 (1,961,731) 135,772 2,510,803 $ 15.98 $ 40,122,752
VIP - High Income 820,013 125,044 (36,435) (39,629) 868,993 $ 29.00 25,203,764
VIP - Equity-Income 4,755,212 283,630 (254,145) (118,385) 4,666,312 $ 39.39 183,811,551
VIP - Growth 2,503,391 102,300 (325,759) (50,212) 2,229,721 $ 42.76 95,348,269
VIP - Overseas 1,151,640 68,604 (123,259) (37,425) 1,059,560 $ 23.52 24,922,843
VIP II - Investment Grade Bond 382,801 18,247 64,575 (23,502) 442,121 $ 18.75 8,288,748
VIP II - Asset Manager 3,900,514 115,925 (240,287) (171,837) 3,604,315 $ 24.80 89,382,163
VIP II - Index 500 1,887,371 443,549 793,394 (122,980) 3,001,334 $ 24.83 74,512,753
VIP II - Asset Manager: Growth 1,163,007 308,312 331,850 (42,970) 1,760,200 $ 17.95 31,593,890
VIP II - Contrafund 5,882,023 702,932 (5,288) (160,091) 6,419,636 $ 20.47 131,438,645
VIP III - Balanced * 154,849 243,840 (27,312) 371,377 $ 11.98 4,449,837
VIP III - Growth & Income * 936,634 1,359,453 (132,531) 2,163,555 $ 12.68 27,424,348
VIP III - Growth Opportunities * 1,076,440 1,563,569 (81,549) 2,558,459 $ 12.63 32,320,770
MSUF - Emerging Markets Equity ** 11,511 9,298 (3) 20,806 $ 10.05 209,175
MSUF - Emerging Markets Debt ** 1,251 31,482 (603) 32,130 $ 10.48 336,604
MSUF - Global Equity ** 18,774 11,206 (1) 29,979 $ 10.25 307,316
MSUF - International Magnum ** 8,767 8,275 0 17,042 $ 9.86 167,959
PBHG - Growth II ** 5,767 6,751 (641) 11,877 $ 10.15 120,577
PBHG - Small Cap Value ** 10,032 42,492 (744) 51,781 $ 10.43 540,062
PBHG - Large Cap Value ** 6,302 12,765 (626) 18,440 $ 10.27 189,335
PBHG - Technology & Communications ** 14,091 22,932 (2,985) 34,037 $ 9.87 335,899
PBHG - Select 20 ** 11,265 43,493 (1) 54,758 $ 10.42 570,453
SVIF - Discovery Fund II ** 3,308 6,202 (1,464) 8,046 $ 9.69 77,996
SVIF - Growth Fund II ** 9,503 6,146 0 15,649 $ 10.25 160,415
SVIF - Opportunity Fund II ** 15,195 17,006 (630) 31,571 $ 10.15 320,324
WPT - Small Company Growth ** 7,472 23,269 (2,476) 28,265 $ 10.19 288,010
WPT - International Equity ** 1,196 2,010 0 3,206 $ 9.24 29,631
WPT - Post-Venture Capital ** 1,875 4,639 0 6,514 $ 10.25 66,773
$ 772,540,862
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1996 TO DECEMBER 31, 1996
VIP - Money Market 2,086,339 1,396,811 (671,222) 332,385 3,144,313 $ 15.30 $ 48,101,350
VIP - High Income 605,822 175,020 61,177 (22,006) 820,013 $ 24.89 20,409,560
VIP - Equity-Income 4,481,146 751,876 (315,456) (162,354) 4,755,212 $ 31.05 147,641,357
VIP - Growth 2,004,576 487,213 73,706 (62,104) 2,503,391 $ 34.97 87,540,085
VIP - Overseas 930,291 154,412 85,133 (18,195) 1,151,640 $ 21.29 24,519,804
VIP II - Investment Grade Bond 358,773 71,690 (12,681) (34,981) 382,801 $ 17.36 6,644,585
VIP II - Asset Manager 4,435,615 181,581 (584,908) (131,774) 3,900,514 $ 20.75 80,953,438
VIP II - Index 500 802,405 537,084 624,968 (77,086) 1,887,371 $ 18.89 35,655,373
VIP II - Asset Manager: Growth 396,158 419,484 378,254 (30,890) 1,163,007 $ 14.49 16,853,490
VIP II - Contrafund 3,685,097 1,742,216 631,751 (177,041) 5,882,023 $ 16.65 97,957,527
$ 566,276,569
* FOR THE PERIOD JANUARY 27, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1997.
** FOR THE PERIOD NOVEMBER 24, 1997 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1997.
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE CONTRACT OWNERS OF EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY
ACCOUNT A:
We have audited the accompanying statement of assets and liabilities
of Empire Fidelity Investments Variable Annuity Account A (comprised
of VIP - Money Market, VIP - High Income, VIP - Equity-Income, VIP -
Growth, VIP - Overseas, VIP II - Investment Grade Bond, VIP II - Asset
Manager , VIP II - Index 500, VIP II - Asset Manager: Growth, VIP II -
Contrafund, VIP III - Balanced , VIP III - Growth & Income, VIP III -
Growth Opportunities, MSUF - Emerging Markets Equity, MSUF - Emerging
Markets Debt, MSUF - Global Equity, MSUF - International Magnum, PBHG
- - Growth II, PBHG - Small Cap Value, PBHG - Large Cap Value, PBHG -
Technology & Communications, PBHG - Select 20, SVIF- Discovery Fund
II, SVIF - Growth Fund II, SVIF - Opportunity Fund II, WPT - Small
Company Growth, WPT - International Equity and WPT - Post-Venture
Capital) of Empire Fidelity Investments Life Insurance Company as of
December 31, 1997, and the related statements of operations and
changes in net assets for each of the periods indicated therein. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the
aforementioned subaccounts comprising Empire Fidelity Investments
Variable Annuity Account A of Empire Fidelity Investments Life
Insurance Company as of December 31, 1997, and the results of their
operations and the changes in their net assets for each of the periods
indicated therein, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 28, 1998
FIDELITY (LOGO) INVESTMENTS(registered trademark) FMR Corp.
82 Devonshire Street
Boston MA 02109-3614
617 563 7000
April 28, 1998
Board of Directors
Empire Fidelity Investments Life Insurance Company
200 Liberty Street
One World Financial Center
New York, N.Y. 10281
Ladies and Gentlemen:
In my capacity as Associate General Counsel of FMR Corp., I have
provided legal advice to Empire Fidelity Investments Life Insurance
Company ("Empire Fidelity Life") with respect to the establishment of
Empire Fidelity Investments Variable Annuity Account A (the "Account")
pursuant to section 4240 of the New York Insurance Law. The Account
was established by Empire Fidelity Life on July 15, 1991 for the
investment of assets held under certain variable annuity contracts
(the "Contracts"). I have participated in the preparation and review
of Post-Effective Amendment No. 7 to the Registration Statement on
Form N-4 for the registration of the Contracts with the Securities and
Exchange Commission under the Securities Act of 1933, Reg. No.
33-42376 and the registration of the Account under the Investment
Company Act of 1940.
I am of the following opinion:
(1) Empire Fidelity Life is duly organized and validly existing under
the laws of the State of New York.
(2) The Account is duly created and validly existing as a separate
account of Empire Fidelity Life under the laws of New York.
(3) The portion of the assets to be held in the Account equal to the
reserve and other liabilities for variable benefits under the
Contracts is not chargeable with liabilities arising out of any other
business Empire Fidelity Life may conduct.
(4) The Contracts, when issued as set forth in the Registration
Statement, will be legal and binding obligations of Empire Fidelity
Life in accordance with their terms.
In arriving at the foregoing opinion, I have made such examination of
law and examined such records and other documents as I judged to be
necessary or appropriate.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement, and to the reference to my name under the
heading "Legal Matters" in the Statement of Additional Information.
Very truly yours,
/S/David J. PearlmaN
David J. Pearlman
April 10, 1998
Empire Fidelity Investments Life Insurance Company
Empire Fidelity Investments Variable Annuity Account A
82 Devonshire Street
Boston, Massachusetts 02109
Re: Registration No. 33-42376
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption
"Legal Matters" in the Statement of Additional Information contained
in Post-Effective Amendment No. 7 to the Registration Statement on
Form N-4 (File No. 33-42376) for Empire Fidelity Investments Variable
Annuity Account A filed by the Account with the Securities and
Exchange Commission pursuant to the Securities Act of 1933.
Very truly yours,
JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON LLP
By: /s/Michael Berenson
Michael Berenson
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form N-4
(File No. 33-42376) of our reports dated January 28, 1998, on our
audits of the financial statements of Empire Fidelity Investments Life
Insurance Company and Empire Fidelity Investments Variable Annuity
Account A. We also consent to the reference of our Firm under the
caption "Independent Accountants" in the Statement of Additional
Information.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 24, 1998
<TABLE> <S> <C>
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<NAME> Empire Fidelity Investments Variable Annuity Account A
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<NAME> Empire Fidelity Investments Variable Annuity Account A
<MULTIPLIER> 1,000
<S>
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<PERIOD-TYPE> year
<FISCAL-YEAR-END> dec-31-1997
<PERIOD-END> dec-31-1997
<INVESTMENTS-AT-COST> 628,642
<INVESTMENTS-AT-VALUE> 793,336
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<NUMBER-OF-SHARES-SOLD> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 215,013
<ACCUMULATED-NII-PRIOR> 0
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