As filed with the SEC on April 15, 1999
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. 10 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ ]
Amendment No. 11 [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)
_________________________________________
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, 1998 was filed March 30, 1999.
It is proposed that this filing will become effective (check
appropriate space):
immediately upon filing pursuant to paragraph (b) of rule 485
X on April 30, 1999, pursuant to paragraph (b) (1) (iii) of rule
485
60 days after filing pursuant to paragraph (a) (1) of rule 485
on , pursuant to paragraph (a) (1) of rule 485
75 days after filing pursuant to paragraph (a) (2) of rule 485
on , pursuant to paragraph (a) (2) of rule 485
Page _ of _
Exhibit Index Appears on Page __
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
Part A
Item N-4 Item Heading in Prospectus.
Item 1. Cover Page Cover Page
Item 2. Definitions Glossary
Item 3. Synopsis or Highlights Summary of the Contract
Item 4. Condensed Financial Information Not Applicable
Item 5. General Description of Facts About Empire Fidelity
Registrant, Depositor, and Investments Life, The
The Portfolio Companies 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 Charges
deductions and 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 Changes in Investment Options
operations
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 Investment Allocation of Your
or transfer contract value Purchase 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 Units
accumulation unit value
d) Principal underwriter Selling the Contracts
Item 11. Redemptions
a) Redemptions procedures Withdrawals
b) Texas Optional Retirement Not Applicable
Program
c) Delay Postponement of Payment
d) Lapse Not Applicable
e) Revocation rights Free Look Privilege
Item 12. Taxes
a) Tax Consequences Tax Considerations; Contract
Values and Proceeds;
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 Table of Contents for
Statement of Additional Statement of Additional
Information Information
Part B
Item N-4 Item Heading in Statement of Additional Information.
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History
a) Name Change 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 Service Agreements
services
c) Custodian and independent Independent Accountants
public accountant
d) Other custodianship Safekeeping of Account Assets
e) Administrative servicing Service Agreements; Empire
agent 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
principal underwriter (Prospectus)
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
PROSPECTUS
RETIREMENT RESERVES
INTRODUCTION
This prospectus describes a variable annuity contract (the "Contract")
offered by Empire Fidelity Investments Life Insurance Company ("Empire
Fidelity Investments Life," "we," or "us"), the life insurance company
that is part of the group of financial service companies known as
Fidelity Investments. The Contract is designed for individual
investors who desire to accumulate capital on a tax-deferred basis for
retirement or other long-term purposes.
You may purchase the Contract (1) on a non-qualified basis or (2) on a
qualified basis as an individual retirement annuity ("IRA") under
Section 408(b) of the Internal Revenue Code of 1986, as amended. You
may choose to receive amounts in a single payment or as a series of
annuity payments, including payments guaranteed for your lifetime.
INVESTMENT OPTIONS
You may direct your money to one or more of the twenty-eight
Subaccounts of Empire Fidelity Investments Variable Annuity Account A
(the "Variable Account"). You may also direct part or all of your
money to a fixed-rate investment option funded through our general
account (the "Guaranteed Account").
The variable Subaccounts invest in the mutual fund portfolios of
Variable Insurance Products Fund, Variable Insurance Products Fund II,
and Variable Insurance Products Fund III (the "Fidelity Funds").
FIDELITY MANAGEMENT & RESEARCH COMPANY ("FMR") manages each of the
Fidelity Funds.
The variable Subaccounts also invest in the portfolios of other mutual
funds managed by MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
("MSDW INVESTMENT MANAGEMENT"), PILGRIM BAXTER & ASSOCIATES, LTD. or
PILGRIM BAXTER VALUE INVESTORS, INC. ("PBHG"), STRONG CAPITAL
MANAGEMENT, INC. ("STRONG"), and WARBURG PINCUS ASSET MANAGEMENT, INC.
("WARBURG PINCUS") ("Other Funds").
All mutual fund portfolios available in this prospectus are
collectively known as the "Funds."
We may add additional Subaccounts and portfolios in the future. We
credit interest on amounts allocated to the Fixed Account at specified
interest rates that vary from time to time.
LEGAL INFORMATION
This prospectus provides information that a prospective investor
should know before investing. We have filed additional information
about the Contract and the Variable Account with the U.S. Securities
and Exchange Commission in a Statement of Additional Information dated
April 30, 1999. The Statement of Additional Information is
incorporated by reference in this prospectus and is available without
charge by calling Empire Fidelity Investments Life at 1-800-544-2442
or by accessing the SEC Internet website at (http://www.sec.gov). The
table of contents of the Statement of Additional Information appears
on page 57.
NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS
NOT VALID UNLESS ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR ALL THE
INVESTMENT OPTIONS AVAILABLE IN THE CONTRACT.
THE CONTRACT IS NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT BE LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS.
FOR FURTHER INFORMATION CALL EMPIRE FIDELITY INVESTMENTS LIFE
Nationally 1-800-544-2442
Date: April 3 0, 1999
PROSPECTUS CONTENTS
GLOSSARY 10
Summary of the Contract 10
FACTS ABOUT EMPIRE FIDELITY
INVESTMENTS LIFE, THE
VARIABLE ACCOUNT, AND THE
FUNDS
Empire Fidelity Investments 21
Life
The Variable Account 22
The Funds 22
FACTS ABOUT THE CONTRACT
Purchase of a Contract 30
Free Look Privilege 30
Investment Allocation of Your 30
Purchase Payments
Accumulation Units 31
Withdrawals 31
Signature Guarantee 32
Charges 32
Death Benefit 33
Required Distributions Upon 34
Death
Annuity Date 34
Selection of Annuity Income 34
Options
Fixed, Variable, or 34
Combination Annuity Income
Options
Types of Annuity Income 34
Options
Reports to Owners 35
The Guaranteed Account 36
MORE ABOUT THE CONTRACT
Tax Considerations 37
Other Contract Provisions 38
Selling the Contracts 39
Automatic Deduction Plan 39
Availability of Unisex 39
Dollar Cost Averaging 39
Automatic Rebalancing 39
Postponement of Payment 39
MORE ABOUT THE VARIABLE
ACCOUNT AND THE FUNDS
Changes in Investment Options 39
Total Return for a Subaccount 39
Voting Rights 40
Resolving Material Conflicts 40
Performance 40
Litigation 40
Appendix A: Accumulation Units 41
Table of Contents of the 57
Statement of Additional
Information
GLOSSARY
ACCUMULATION UNIT - A unit of measure used prior to the Annuity Date
to calculate the value of your Contract in the Subaccounts.
ANNUITANT - The person designated by the Contract Owner, upon whose
life annuity 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.
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.
TOTAL RETURN - An index used to measure the investment performance of
a Subaccount from one Valuation Period to the next.
VALUATION PERIOD - The period of time from one determination of
Accumulation Unit Values and Annuity Unit Values to the next
determination of such values. Such determinations are made as of the
close of business (normally 4:00 p.m. Eastern Time) each day the New
York Stock Exchange is open for trading.
VARIABLE ACCOUNT - Empire Fidelity Investments Variable Annuity
Account A.
SUMMARY OF THE CONTRACT
PURPOSE
(small solid bullet) This variable annuity contract allows you, the
Owner(s), to accumulate funds on a tax-deferred basis by investing in
one or more variable Subaccounts.
(small solid bullet) The Contract also permits the Annuitant to
receive annuity income payments commencing on the Annuity Date, a date
the Owner selects. The Owner designates the Annuitant, the person upon
whose life annuity payments are based. The Annuitant may be an Owner
or someone else.
(small solid bullet) There is no assurance that values invested in the
Subaccounts will increase. As the Contract Owner(s), you bear the
investment risk with respect to those values.
(small solid bullet) The Contract also allows you to allocate funds to
a fixed-rate investment option funded through our general account (the
"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.
(small solid bullet) We designed the Contract to provide income for
retirement or to meet other long-term goals. You may purchase the
Contract as follows:
(1) on a NON-QUALIFIED basis; or
(2) on a QUALIFIED basis as an individual retirement annuity ("IRA")
under Section 408(b) of the Code in connection with the "rollover" of
contributions from other qualified plans, tax sheltered annuities, or
IRAs.
NON-QUALIFIED CONTRACT
We require an initial minimum of $2,500 to purchase a Non-qualified
Contract. You may also make additions to a Non-qualified Contract
before annuity payments begin (the "Annuity Date"). Each addition must
be at least $250 and the Annuitant must still be living. We may
reduce these minimums for automatic deduction plans.
QUALIFIED CONTRACT
We require an initial minimum of $10,000 to purchase a Qualified
Contract. You may make additions to a Qualified Contract as long as
each addition is at least $2,500. Some Contracts may have lower
minimums.
INVESTMENT OPTIONS
You may direct your net purchase payments to the Guaranteed Account
and 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. Also, we reserve the right to
deduct a charge to recover a portion of our Federal income tax expense
that is determined solely from the amount of premiums received. See
INVESTMENT ALLOCATION OF YOUR PURCHASE PAYMENTS on page 30.
There are currently twenty-eight variable Subaccounts.
(small solid bullet) Five Subaccounts invest in shares of one of the
mutual fund portfolios of Fidelity Variable Insurance Products Fund.
The Variable Insurance Products Fund currently offers Money Market
Portfolio, High Income Portfolio, Equity-Income Portfolio, Growth
Portfolio, and Overseas Portfolio.
(small solid bullet) Five Subaccounts invest in shares of one of the
mutual fund portfolios of Fidelity Variable Insurance Products Fund
II. The Variable Insurance Products Fund II currently offers
Investment Grade Bond Portfolio, Asset Manager Portfolio, Index 500
Portfolio, Asset Manager: Growth Portfolio, and Contrafund Portfolio.
(small solid bullet) Three Subaccounts invest in shares of one of the
mutual fund portfolios of Fidelity Variable Insurance Products Fund
III. The Variable Insurance Products Fund III currently offers Growth
& Income Portfolio, Balanced Portfolio, and Growth Opportunities
Portfolio.
(small solid bullet) The remaining Investment Options invest in shares
of one of the mutual fund portfolios of Morgan Stanley Dean Witter,
PBHG, Strong, or Warburg Pincus.
Empire Fidelity Investments Life credits interest on amounts allocated
to the Guaranteed Account at interest rates that vary from time to
time.
WITHDRAWALS
You may withdraw all or part of your Contract's Cash Surrender Value
before the Annuity Date and while the Annuitant is still living. The
Cash Surrender Value of your Contract is the amount payable before the
deduction of taxes if you surrender your Contract.
During the first five Contract Years, we may subject the withdrawal to
a contingent deferred sales charge. This charge is a maximum of 5% of
the amount of purchase payments withdrawn in the first Contract Year.
The contingent deferred sales charge decreases 1% per year until it
disappears after five Contract Years.
However, in each of the first five Contract years you may withdraw up
to 10% of your purchase payments without incurring such a charge. In
certain circumstances, Fidelity Investments Life may waive the
contingent deferred sales charge. See WITHDRAWAL CHARGE on page 32.
The maximum partial withdrawal is one that, along with any applicable
withdrawal charge, would reduce your Contract Value to $2,500. Certain
withdrawals may be subject to a Federal penalty tax as well as Federal
income tax. See TAX CONSIDERATIONS on page 37.
ANNUITY INCOME OPTIONS
You may select from a number of annuity income options, including
annuity income payments for the life of the Annuitant, with or without
a guaranteed number of payments. See TYPES OF ANNUITY INCOME OPTIONS
on page 34. You may choose any of these annuity income options to be
paid on (1) a FIXED basis, (2) a VARIABLE basis, or (3) a COMBINATION
of both. See FIXED, VARIABLE, OR COMBINATION ANNUITY INCOME OPTIONS on
page 34.
(small solid bullet) If you elect a FIXED income, your Contract's
participation in the investment experience of the Variable Account
will cease when the annuity income payments begin.
(small solid bullet) If you elect a VARIABLE income, annuity income
payments will vary in accordance with the investment experience of the
Subaccounts you select during the payout period.
(small solid bullet) If you elect a COMBINATION OF FIXED AND VARIABLE
income, a portion of your income payment will be fixed, and a portion
will vary in accordance with the investment performance of the
selected Subaccounts.
On the Annuity Date, the Annuitant becomes the Owner of the Contract.
DEATH BENEFIT
In the event that the 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 33. 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 34 .
CHARGES
In addition to the contingent deferred sales charge, we assess the
following charges.
(1) ANNUAL MAINTENANCE CHARGE. This charge is currently set at $30 per
year and guaranteed not to exceed $50 per year. We deduct this charge
from your Contract Value. We currently waive this annual charge if
total purchase payments less any withdrawals equal at least $25,000.
(2) DAILY ADMINISTRATIVE CHARGE. We also make a daily charge
(equivalent to an effective annual rate of .05%) against the assets of
each variable Subaccount for administrative expenses.
(3) MORTALITY AND EXPENSE RISK CHARGE. We assess a daily asset charge
(equivalent to an effective annual rate of not more than 0.75%) for
mortality and expense risks. These daily asset charges are not
assessed against amounts allocated to the Guaranteed Account.
ADDITIONAL MORTALITY RISK CHARGE. We may offer the Owner the
opportunity to elect a Death Benefit Rider. If the Rider is
elected by the Owner, we will deduct a mortality charge once each
quarter. The amount of the charge for each quarter will not exceed
0.10% of the Contract Value on the date of the quarterly charge. There
will be no charges made once the Annuitant reaches their 85th
birthday.
(4) PREMIUM TAXES. Our current practice is generally to deduct any
applicable premium taxes from your Contract Value on the Annuity Date
or upon payment of proceeds. We reserve the right to deduct premium
taxes when we incur such taxes. See CHARGES on page 32.
(5) FUNDS' EXPENSES. The portfolios in the Funds pay monthly
management fees and other expenses which are described in the
accompanying prospectuses for the Funds.
FREE LOOK PRIVILEGE
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
31.
IMPORTANT
This summary provides only an overview of the more significant aspects
of the Contract. More detailed information is provided in the
subsequent sections of this prospectus and in your Contract. The
Contract together with its attached application constitutes the entire
agreement between you and us and should be retained.
Following are the various investment options available to you
under the Contract.
RETIREMENT RESERVES
<TABLE>
<CAPTION>
<S> <C> <C>
Guaranteed Account Company Variable Account
Guaranteed Interest Fidelity Asset Manager Portfolio
Money Market Portfolio
Investment Grade Bond Portfolio
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Overseas Portfolio
Index 500 Portfolio
Asset Manager: Growth Portfolio
Contrafund Portfolio
Growth Opportunities Portfolio
Balanced Portfolio
Growth & Income Portfolio
MSDW Investment Management Emerging Markets Debt Portfolio
Emerging Markets Equity
Portfolio
Global Equity Portfolio
International Magnum Portfolio
PBHG Select 20 Portfolio
Growth II Portfolio
Large Cap Value Portfolio
Small Cap Value Portfolio
Technology & Communications
Portfolio
Strong Discovery Fund II Portfolio
Mid Cap Growth Fund II
Portfolio
Opportunity Fund II Portfolio
Warburg Pincus International Equity Portfolio
Post-Venture Capital Portfolio
Small Company Growth Portfolio
</TABLE>
FEE TABLE
This information may assist you in understanding the various costs and
expenses that a Contract Owner will bear directly or indirectly. It
reflects expenses of the Separate Account as well as the Portfolios.
The tables below do not reflect any deductions for premium taxes or
Federal income tax expenses that are determined solely from the amount
of premiums received. We 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 33 of the prospectus for additional information.
CONTRACT OWNER EXPENSES
(as a percentage of purchase
payments)
Sales Charge Imposed on 0.00%
Purchases
Maximum Contingent Deferred 5.00%
Sales ChargeA
Surrender Charge 0.00%
Exchange Fee 0.00%
Annual Maintenance ChargeB $ 30.00
Separate Account Annual
Expenses (as a percentage of
average account value)
Separate Account Annual
Expenses (as a percentage of
average account value)
Mortality and Expense Risk 0.75%
Charge
Account Fees and Expenses:
Administrative Charge 0.05%
Total Separate Account Annual 0.80%
Expenses
A THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE DECREASES 1% EACH YEAR
SO THERE IS NO CHARGE AFTER 5 YEARS. EACH YEAR YOU MAY WITHDRAW UP TO
10% OF THE TOTAL PURCHASE PAYMENTS 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.
B THE ANNUAL MAINTENANCE CHARGE IS A SINGLE $30 CHARGE ON A CONTRACT.
WE DEDUCT THIS CHARGE 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 0.01% ANNUAL ASSET CHARGE
BASED ON THE EXPERIENCE OF THE CONTRACTS.
PORTFOLIO ANNUAL EXPENSES
(as a percentage of Portfolio average net assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FIDELITYA Management Fees Other Expenses Total Annual Expenses (after
reimbursement)
Asset Manager 0.54% 0.09% 0.63%
Money Market 0.20% 0.10% 0.30%
Investment Grade Bond 0.43% 0.14% 0.57%
High Income 0.58% 0.12% 0.70%
Equity-Income 0.49% 0.08% 0.57%
Index 500 0.24% 0.04% 0.28%B
Growth 0.59% 0.07% 0.66%
Overseas 0.74% 0.15% 0.89%
Asset Manager: Growth 0.59% 0.13% 0.72%
Contrafund 0.59% 0.07% 0.66%
Growth Opportunities 0.59% 0.11% 0.70%
Balanced 0.44% 0.14% 0.58%
Growth & Income 0.49% 0.11% 0.60%
MSDW INVESTMENT MANAGEMENT
Emerging Markets Debt 0.27% 1.25% 1.52%C
Emerging Markets Equity 0.00% 1.95% 1.95%C
Global Equity 0.32% 0.83% 1.15%C
International Magnum 0.15% 1.00% 1.15%C
PBHG
Select 20 0.84% 0.36% 1.20%D
Growth II 0.51% 0.69% 1.20%D
Large Cap Value 0.18% 0.82% 1.00%D
Small Cap Value 0.74% 0.46% 1.20%D
Technology & Communications 0.49% 0.71% 1.20%D
STRONG
Discovery Fund II 1.00% 0.18% 1.18%
Growth Fund II* 1.00% 0.20% 1.20%E
Opportunity Fund II 1.00% 0.16% 1.16%
WARBURG PINCUS
International Equity 1.00% 0.33% 1.33%F
Post-Venture Capital 1.08% 0.32% 1.40%F
Small Company Growth 0.90% 0.24% 1.14%F
</TABLE>
A A PORTION OF THE BROKERAGE COMMISSIONS THAT CERTAIN FUNDS PAY WAS
USED TO REDUCE FUND EXPENSES. IN ADDITION, CERTAIN FUNDS, OR FMR ON
BEHALF OF CERTAIN FUNDS, HAVE ENTERED INTO ARRANGEMENTS WITH THEIR
CUSTODIAN WHEREBY CREDITS REALIZED AS A RESULT OF UNINVESTED CASH
BALANCES WERE USED TO REDUCE CUSTODIAN EXPENSES. WITHOUT THESE
REDUCTIONS, THE TOTAL OPERATING EXPENSES PRESENTED IN THE TABLE WOULD
HAVE BEEN .58% FOR EQUITY-INCOME PORTFOLIO, .6 8 % FOR GROWTH
PORTFOLIO, .91% FOR OVERSEAS PORTFOLIO, .6 4 % FOR ASSET MANAGER
PORTFOLIO, .70% FOR CONTRAFUND PORTFOLIO, .73% FOR ASSET MANAGER:
GROWTH PORTFOLIO, .71% FOR GROWTH OPPORTUNITIES PORTFOLIO, . 59 %
FOR BALANCED PORTFOLIO, AND . 61 % FOR GROWTH AND INCOME
PORTFOLIO.
B FMR AGREED TO REIMBURSE A PORTION OF INDEX 500 PORTFOLIO'S EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S MANAGEMENT
FEE, OTHER EXPENSES, AND TOTAL EXPENSES WOULD HAVE BEEN .24%, .11% AND
.3 5 %, RESPECTIVELY.
C MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC., WITH RESPECT
TO THE PORTFOLIOS, HAS VOLUNTARILY AGREED TO WAIVE RECEIPT OF ITS
MANAGEMENT FEES AND AGREED TO REIMBURSE CERTAIN EXPENSES OF THE
PORTFOLIO, IF NECESSARY . MSDW INVESTMENT MANAGEMENT MAY
TERMINATE THIS VOLUNTARY WAIVER AND REIMBURSEMENT AT ANY TIME
AT ITS SOLE DISCRETION. WITHOUT WAIVERS AND REIMBURSEMENTS,
"MANAGEMENT FEES," "OTHER EXPENSES" AND "TOTAL ANNUAL EXPENSES,"
RESPECTIVELY, WOULD BE AS FOLLOWS: EMERGING MARKETS DEBT PORTFOLIO
(0.80%, 1.2 5 %, 2.0 5 %); EMERGING MARKETS EQUITY PORTFOLIO
(1.25%, 2.20%, 3.45 %); GLOBAL EQUITY PORTFOLIO (0.80%, 0.83%,
1. 6 3%); INTERNATIONAL MAGNUM PORTFOLIO (0.80%, 1. 00 %,
1.80 %).
D PILGRIM BAXTER & ASSOCIATES, LTD. (THE "ADVISER") HAS VOLUNTARILY
AGREED TO WAIVE OR LIMIT ITS ADVISORY FEES OR ASSUME OTHER EXPENSES IN
AN AMOUNT THAT OPERATES TO LIMIT TOTAL OPERATING EXPENSES OF THE
PORTFOLIOS TO NOT MORE THAN 1.20% OF THE AVERAGE DAILY NET ASSETS OF
THE GROWTH II, SMALL CAP VALUE, TECHNOLOGY & COMMUNICATIONS AND SELECT
20 PORTFOLIOS AND TO NOT MORE THAN 1.00% OF THE AVERAGE DAILY NET
ASSETS OF THE LARGE CAP VALUE PORTFOLIO, THROUGH DECEMBER 31, 1999.
TOTAL OPERATING EXPENSES INCLUDE, BUT ARE NOT LIMITED TO, EXPENSES
SUCH AS INVESTMENT ADVISORY FEES, TRANSFER AGENT FEES AND LEGAL FEES.
SUCH WAIVERS OF ADVISORY FEES AND POSSIBLE ASSUMPTIONS OF OTHER
EXPENSES BY THE ADVISER IS SUBJECT TO A POSSIBLE REIMBURSEMENT BY THE
PORTFOLIOS IN FUTURE YEARS IF SUCH REIMBURSEMENT CAN BE ACHIEVED
WITHIN FOREGOING ANNUAL EXPENSE LIMITS. SUCH FEE WAIVER/EXPENSE
REIMBURSEMENT ARRANGEMENTS MAY BE MODIFIED OR TERMINATED AT ANY TIME
AFTER DECEMBER 31, 199 9 . ABSENT SUCH FEE WAIVERS/EXPENSE
REIMBURSEMENTS THE ADVISORY FEES AND ESTIMATED TOTAL OPERATING
EXPENSES FOR THE GROWTH II, SMALL CAP VALUE, LARGE CAP VALUE,
TECHNOLOGY & COMMUNICATIONS AND SELECT 20 PORTFOLIOS WOULD BE
0.85 % AND 1.54%; 1. 00 % AND 1.46%; 0.65 % AND
1.47 %; 0.85 % AND 1.56 %; AND 0.8 5 % AND
1. 21 %, RESPECTIVELY.
E STRONG CAPITAL MANAGEMENT, INC., THE INVESTMENT ADVISER, HAS
VOLUNTARILY AGREED TO CAP THE FUND'S TOTAL OPERATING EXPENSES AT
1.20%. THE ADVISER HAS NO CURRENT INTENTION TO, BUT MAY IN THE FUTURE,
DISCONTINUE OR MODIFY ANY WAIVER OF FEES OR ABSORPTION OF EXPENSES AT
ITS DISCRETION WITH APPROPRIATE NOTIFICATION TO ITS SHAREHOLDERS.
MANAGEMENT FEES, OTHER EXPENSES, AND TOTAL ANNUAL EXPENSES FOR
DISCOVERY II, OPPORTUNITY II, AND GROWTH FUND II ARE CALCULATED ON AN
ANNUALIZED BASIS FROM THE BEGINNING OF THE FISCAL YEAR THROUGH THE
CURRENT QUARTER END. THE ADVISOR FOR THE GROWTH FUND II PORTFOLIO IS
ABSORBING EXPENSES OF 0. 35%. WITHOUT THESE ABSORPTIONS THE EXPENSE
RATIO WOULD HAVE BEEN 1.55%. *GROWTH FUND II IS CUR RENTLY CALLED
MID CAP GROWTH FUND II.
F MANAGEMENT FEES, OTHER EXPENSES AND TOTAL ANNUAL EXPENSES F OR THE
INTERNATIONAL EQUITY, POST-VENTURE CAPITAL AND SMALL COMPANY GROWTH
PORTFOLIOS ARE BASED ON ACTUAL EXPENSES FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998, NET ANY FEE WAIVERS OR EXPENSE REIMBURSEMENTS.
WITHOUT SUCH WAIVERS OR REIMBURSEMENTS, MANAGEMENT FEES WOULD HAVE
EQUALED 1.00%, 1.25% AND 0.90%; OTHER EXPENSES WOULD HAVE EQUALLED
0.33%, 0.45% AND 0.24%; AND TOTAL ANNUAL EXPENSES WOULD HAVE EQUALLED
1.33%, 1.70% AND 1.14% FOR THE INTERNATIONAL EQUITY, POST-VENTURE
CAPITAL AND SMALL COMPANY GROWTH PORTFOLIOS, RESPECTIVELY. FEE WAIVERS
AND EXPENSE REIMBURSEMENTS OR CREDITS MAY BE DISCONTINUED AT ANY
TIME.
EXAMPLES
If you assume that Contract Owner expenses are as shown above, and
that each Portfolio's annual return is 5% annually and its operating
expenses are just as described above, then for every $1,000 of
purchase payments, here's how much you would have paid in total
expenses if you surrendered your Contract after the number of years
indicated, or if you annuitize d your Contract during the first
year.
One Year Three Years Five Years Ten Years
FIDELITY
Asset Manager $ 61 $ 76 $ 89 $ 172
Money Market 58 65 71 135
Investment Grade Bond 61 74 86 166
High Income 62 78 92 180
Equity-Income 61 74 86 166
Growth 62 76 90 176
Overseas 64 84 102 201
Index 500 58 65 70 133
Asset Manager: Growth 62 78 93 182
Contrafund 62 76 90 176
Growth Opportunities 62 78 92 180
Balanced 61 74 86 167
Growth & Income 61 75 87 169
MSDW INVESTMENT MANAGEMENT
Emerging Markets Debt 70 102 135 267
Emerging Markets Equity 74 115 156 309
Global Equity 66 91 116 229
International Magnum 66 91 116 229
PBHG
Growth II 67 93 118 234
Large Cap Value 65 87 108 213
Select 20 67 93 118 234
Small Cap Value 67 93 118 234
Technology & Communications 67 93 118 234
STRONG
Discovery Fund II 67 92 117 232
Growth Fund II* 67 93 118 234
Opportunity Fund II 67 92 116 230
WARBURG PINCUS
International Equity 68 97 125 247
Post-Venture Capital 69 99 128 254
Small Company Growth 66 91 115 227
* C URRENTLY CALLED MID CAP GROWTH FUND II.
If you do not surrender your Contract or if you annuitize after the
first Contract year, here is what your total expenses would be on a
$1,000 investment, assuming a 5% annual return on your assets.
One Year Three Years Five Years Ten Years
FIDELITY
Asset Manager $ 15 $ 46 $ 79 $ 172
Money Market 11 35 61 135
Investment Grade Bond 14 44 76 166
High Income 15 48 82 180
Equity-Income 14 44 76 166
Growth 15 46 80 176
Overseas 17 54 92 201
Index 500 11 35 60 133
Asset Manager: Growth 16 48 83 182
Contrafund 15 46 80 176
Growth Opportunities 15 48 82 180
Balanced 14 44 76 167
Growth & Income 14 45 77 169
MSDW INVESTMENT MANAGEMENT
Emerging Markets Debt 24 73 125 267
Emerging Markets Equity 28 86 146 309
Global Equity 20 62 106 229
International Magnum 20 62 106 229
PBHG
Growth II 20 63 108 234
Large Cap Value 18 57 98 213
Select 20 20 63 108 234
Small Cap Value 20 63 108 234
Technology & Communications 20 63 108 234
STRONG
Discovery Fund II 20 62 107 232
Growth Fund II* 20 63 108 234
Opportunity Fund II 20 62 106 230
WARBURG PINCUS
International Equity 22 67 115 247
Post-Venture Capital 22 69 118 254
Small Company Growth 20 61 105 227
* CURRENTLY CALLED MID CAP GROWTH FUND II.
(small solid bullet) T he above figures illustrate the combined
effect of all current charges. The examples should not be considered a
representation of past or future expenses. Actual expenses may be
greater or less than those shown.
(small solid bullet) The Other Funds' annual expenses and these
examples are based on data provided by the Other Funds. The company
has no reason to doubt the accuracy or completeness of that data, but
the company has not verified the Other Funds' figures. In preparing
the Other Funds' expense table and examples above, the company has
relied on the figures provided by the Other Funds.
FACTS ABOUT EMPIRE FIDELITY INVESTMENTS LIFE,
THE VARIABLE ACCOUNT, AND THE FUNDS
EMPIRE FIDELITY INVESTMENTS LIFE
Empire Fidelity Investments Life 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, the
Johnson family members, and various key employees of FMR Corp.
own the voting common stock of 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 are the legal owner of the assets in the Variable Account. As
required by law, however, the assets of the Variable Account are kept
separate from our general account assets and from any other separate
accounts we may have, and may not be charged with liabilities from any
other business we conduct. The assets in the Variable Account will
always be at least equal to the reserves and other liabilities of the
Variable Account. If the assets exceed the required reserves and other
liabilities, we may transfer the excess to our general account. We are
obligated to pay all benefits provided under the Contracts.
There are currently twenty-eight Subaccounts in the Variable Account.
Five Subaccounts invest exclusively in shares of a specific portfolio
of Fidelity Variable Insurance Products Fund. Five Subaccounts invest
exclusively in shares of a specific portfolio of Fidelity Variable
Insurance Products Fund II. Three portfolios invest exclusively in
shares of a specific portfolio of Fidelity Variable Insurance Products
Fund III. There are currently 15 other investment options offered by
four different mutual fund investment Advisers.
THE FUNDS
FIDELITY:
The Fidelity Funds are Variable Insurance Products Fund, Variable
Insurance Products Fund II, and Variable Insurance Products Fund III.
Each is an open-end ed , diversified management investment
company organized by Fidelity Management & Research Company. Each is
the type of investment company commonly known as a series mutual fund.
The investment objectives of the Funds are described below. There is,
of course, no assurance that any portfolio will meet its investment
objective.
VARIABLE INSURANCE PRODUCTS FUND
VIP MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE. Money Market Portfolio seeks as high a level of
current income as is consistent with the preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing in U.S. dollar-denominated money market
securities, including U.S. Government securities and repurchase
agreements, and entering into reverse repurchase agreements.
(small solid bullet) Investing more than 25% of total assets in the
financial services industry.
(small solid bullet) Investing in compliance with industry-standard
requirements for money market funds for the quality, maturity, and
diversification of investments.
INVESTOR PROFILE. The fund may be appropriate for investors who would
like to earn income at current money market rates while preserving the
value of their investment. An investment in the fund is not a deposit
of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the
fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
VIP HIGH INCOME PORTFOLIO
INVESTMENT OBJECTIVE. High Income Portfolio seeks a high level of
current income. Growth of capital may also be considered.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing at least 65% of total assets in
income-producing debt securities, preferred stocks and convertible
securities, with an emphasis on lower-quality debt securities.
(small solid bullet) Potentially investing in non-income producing
securities, including defaulted securities and common stocks.
(small solid bullet) Investing in companies in troubled or uncertain
financial condition.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
INVESTOR PROFILE. The fund is for long-term, aggressive investors who
understand the potential risks and rewards of investing in
lower-quality debt, including defaulted securities. Investors must be
willing to accept the fund's greater price movements and credit risks.
VIP EQUITY-INCOME PORTFOLIO
INVESTMENT OBJECTIVE. Equity-Income Portfolio seeks reasonable income.
The fund will consider the potential for capital appreciation. The
fund seeks a yield for its shareholders that exceeds the yield on the
securities comprising the S&P 500.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing at least 65% of total assets in
income-producing equity securities, which tends to lead to investments
in large cap "value" stocks.
(small solid bullet) Potentially investing in other types of equity
securities and debt securities, including lower-quality debt
securities.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
INVESTOR PROFILE. The fund may be appropriate for investors who are
willing to ride out stock market fluctuations in pursuit of
potentially above-average long-term returns. The fund is designed for
those who want some income from equity and bond securities, but also
want to be invested in the stock market for its long-term growth
potential.
VIP GROWTH PORTFOLIO
INVESTMENT OBJECTIVE. Growth Portfolio seeks capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing primarily in common stocks.
(small solid bullet) Investing in companies that it believes have
above-average growth potential, measured by factors such as earnings
or revenue (stocks of these companies are often called "growth
stocks").
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
INVESTOR PROFILE. The fund may be appropriate for investors who are
willing to ride out stock market fluctuations in pursuit of
potentially above-average long-term returns. The fund is designed for
those who want to pursue growth potential, and who understand that
this strategy often leads to investments in smaller, less well-known
companies with higher than average price/earnings ratios. The fund
invests for growth and does not pursue an income strategy.
VIP OVERSEAS PORTFOLIO
INVESTMENT OBJECTIVE. Overseas Portfolio seeks long-term growth of
capital.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing at least 65% of total assets in foreign
securities.
(small solid bullet) Investing primarily in common stocks.
(small solid bullet) Allocating investments across countries and
regions considering the size of the market in each country and region
relative to the size of the international market as a whole.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition, industry position, and market and economic
conditions to select investments.
INVESTOR PROFILE AND RISK:
(small solid bullet) Overseas Portfolio provides a means for investors
to diversify their own portfolios by participating in companies and
economies outside of the United States. The fund may be appropriate
for investors who want to pursue their investment goals in markets
outside of the United States. By including international investments
in your portfolio, you can achieve additional diversification and
participate in growth opportunities around the world.
(small solid bullet) It is important to note that investments in
foreign securities involve risks in addition to those of U.S.
investments. In addition to general risks, international investing
involves different or increased risks. The performance of
international funds depends upon currency values, the political and
regulatory environment, and overall economic factors in the countries
in which the fund invests.
VARIABLE INSURANCE PRODUCTS FUND II
VIP II ASSET MANAGER PORTFOLIO
INVESTMENT OBJECTIVE. Asset Manager Portfolio seeks high total return
with reduced risk over the long term by allocating its assets among
stocks, bonds, and short-term instruments.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.
(small solid bullet) Maintaining a neutral mix over time of 50% of
assets in stocks, 40% of assets in bonds, and 10% of assets in
short-term and money market instruments.
(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (30% - 70%), bond
class (20% - 60%), and short-term/money market class (0% - 50%).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors and evaluating each security's current
price relative to estimated long-term value in selecting investments.
INVESTOR PROFILE. The fund may be appropriate for investors who want
to diversify among stocks, bonds, short-term instruments , and
other types of securities. The fund's assets may also be invested in
other instruments that do not fall within these classes.
VIP II INVESTMENT GRADE BOND PORTFOLIO
INVESTMENT OBJECTIVE. Investment Grade Bond Portfolio seeks a high
level of current income.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing in U.S. dollar-denominated
investment-grade bonds.
(small solid bullet) Managing the fund to have similar overall
interest rate risk to the Lehman Brothers Aggregate Bond Index.
(small solid bullet) Allocating assets across different market sectors
and maturities.
(small solid bullet) Analyzing a security's structural features,
current pricing and trading opportunities, and the credit quality of
its issuer in selecting investments.
INVESTOR PROFILE. The fund may be appropriate for investors who want
the potential for high current income from a portfolio of
investment-grade debt securities. The fund's level of risk and
potential reward depend on the quality and maturity of its
investments, and has overall interest rate risk similar to the index.
VIP II INDEX 500 PORTFOLIO
INVESTMENT OBJECTIVE. Index 500 Portfolio seeks investment results
that correspond to the total return (i.e., the combination of capital
changes and income) of common stocks publicly traded in the United
States, as represented by the S&P 500, while keeping transaction costs
and other expenses low.
PRINCIPAL INVESTMENT STRATEGIES:
Bankers Trust Company's ( "BT," a New York banking
corporation serving as sub-adviser and custodian for VIP II Index
500 ) principal investment strategies include:
(small solid bullet) Investing at least 80% of assets in common stocks
included in the S&P 500.
(small solid bullet) Lending securities to earn income for the fund.
(small solid bullet) Because the fund seeks to track, rather than
beat, the performance of the S&P 500, it is not managed in the same
manner as other funds. The fund is managed by FMR, which handles its
business affairs. BT, Index 500 Portfolio's sub-adviser, chooses the
fund's investments. FMR supervises the sub-adviser and, in conjunction
with the Board of Trustees, reviews the sub-adviser's performance of
its duties. BT also acts as Index 500 Portfolio's custodian.
INVESTOR PROFILE. The fund may be appropriate for investors who are
willing to ride out stock market fluctuations in pursuit of
potentially above-average long-term returns in relation to the S&P
500.
VIP II ASSET MANAGER: GROWTH PORTFOLIO
INVESTMENT OBJECTIVE. Asset Manager: Growth Portfolio seeks to
maximize total return over the long term by allocating its assets
among stocks, bonds, short-term instruments, and other investments.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.
(small solid bullet) Maintaining a neutral mix over time of 70% of
assets in stocks, 25% of assets in bonds, and 5% of assets in
short-term and money market instruments.
(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (50% - 100%), bond
class (0% - 50%), and short-term/money market class (0% - 50%).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors and evaluating each security's current price
relative to estimated long-term value in selecting investments.
INVESTOR PROFILE. The fund may be appropriate for investors who want
to diversify among domestic and foreign stocks, bonds, short-term
instruments , and other types of securities. The fund, while
spreading its assets among all three asset classes, uses a more
aggressive approach by focusing on stocks for a higher potential
return. The value of each fund's investments and the income they
generate will vary.
VIP II CONTRAFUND PORTFOLIO
INVESTMENT OBJECTIVE. Contrafund Portfolio seeks capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing primarily in common stocks.
(small solid bullet) Investing in securities of companies whose value
it believes is not fully recognized by the public.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position, and market and economic
conditions to select investments.
INVESTOR PROFILE. The fund may be appropriate for investors who are
willing to ride out stock market fluctuations in pursuit of
potentially above-average long-term returns.
VARIABLE INSURANCE PRODUCTS FUND III
VIP III GROWTH & INCOME PORTFOLIO
INVESTMENT OBJECTIVE. Growth & Income Portfolio seeks high total
return through a combination of current income and capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing a majority of assets in common stocks
with a focus on those that pay current dividends and show potential
for capital appreciation.
(small solid bullet) Potentially investing in bonds, including
lower-quality debt securities, as well as stocks that are not
currently paying dividends, but offer prospects for future income or
capital appreciation.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position, and market and economic
conditions to select investments.
INVESTOR PROFILE. The fund may be appropriate for investors who are
willing to ride out stock market fluctuations in pursuit of
potentially high long-term returns. The fund is designed for those who
seek a combination of growth and income from equity and some bond
investments.
VIP III GROWTH OPPORTUNITIES PORTFOLIO
INVESTMENT OBJECTIVE. Growth Opportunities Portfolio seeks to provide
capital growth.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing primarily in common stocks.
(small solid bullet) Potentially investing in other types of
securities, including bonds which may be lower-quality debt
securities. These securities can be more volatile due to increased
sensitivity to interest rate increases and adverse issuer, political,
regulatory, market or economic developments.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" stocks or "value"
stocks or both. The value of the fund's investments will vary and can
decline in response to adverse issuer, political, regulatory, market
or economic developments.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position, and market and economic
conditions to select investments.
INVESTOR PROFILE. The fund may be appropriate for investors seeking
growth of capital. The investment philosophy is not constrained by any
particular investment style. The fund's assets may be invested in
securities of foreign issuers in addition to securities of domestic
issuers.
VIP III BALANCED PORTFOLIO
INVESTMENT OBJECTIVE. Balanced Portfolio seeks both income and growth
of capital.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing approximately 60% of assets in stocks
and other equity securities and the remainder in bonds and other debt
securities, including lower-quality debt securities when its outlook
is neutral.
(small solid bullet) Investing at least 25% of total assets in
fixed-income senior securities (including debt securities and
preferred stock).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) With respect to equity investments, emphasizing
above-average income-producing equity securities, which tends to lead
to investments in stocks that have more "value" characteristics than
"growth" characteristics.
(small solid bullet) Analyzing a security's issuer using fundamental
factors and evaluating each security's current price relative to
estimated long-term value in selecting investments. The value of the
fund's investments will vary from day to day, and can decline in
response to interest rate increases, adverse issuer, political,
regulatory , or economic developments.
INVESTOR PROFILE. The fund may be appropriate for investors who seek a
balance between stocks and bonds. The fund may invest its assets in
securities of foreign issuers in addition to domestic issuers.
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
EMERGING MARKETS DEBT PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks high total return by
investing primarily in Fixed Income Securities of government and
government-related issuers and, to a lesser extent, of corporate
issuers located in emerging market countries.
(small solid bullet) APPROACH. MSDW Investment Management seeks
high total return by investing in a portfolio of emerging market debt
that offers low correlation to many other asset classes. Using
macroeconomic and fundamental analysis, MSDW Investment Management
seeks to identify developing countries that are undervalued and have
attractive or improving fundamentals. After the country allocation is
determined, the sector and security selection is made within each
country.
(small solid bullet) PROCESS. MSDW Investment Management's global
allocation team analyzes the global economic environment and its
impact on emerging markets. MSDW Investment Management focuses on
investing in countries that show signs of positive fundamental change.
This analysis considers macroeconomic factors, such as GDP growth,
inflation, monetary policy, fiscal policy and interest rates and
sociopolitical factors such as political risk, leadership, social
stability, and commitment to reform. In selecting securities, MSDW
Investment Management first examines yield curves with respect to a
country and then considers instrument-specific criteria, including:
(1) spread duration; (2) real interest rates; and (3) liquidity. The
Portfolio's holdings may range in maturity from overnight to 30 years
or more and will not be subject to any minimum credit rating standard.
MSDW Investment Management may, when or if available, use hedging
strategies, including the use of derivatives to protect the Portfolio
from overvalued currencies or to take advantage of undervalued
currencies.
EMERGING MARKETS EQUITY PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term capital
appreciation by investing primarily in Equity Securities of issuers
in emerging market countr ies.
(small solid bullet) AP PROACH. MSDW Investment Management seeks to
maximize returns by investing primarily in growth-oriented equity
securities in undervalued emerging markets and, from time to time, in
fixed income securities. MSDW Investment Management's investment
approach combines top-down country allocation with bottom-up stock
selection. Investment selection criteria include attractive growth
characteristics, reasonable valuations and managements that focus on
shareholder value.
(small solid bullet) PROCESS. MSDW Investment Management's
global allocation team analyzes the global economic environment,
particularly its impact on emerging markets and allocates the
Portfolio's assets among emerging markets based on relative economic,
political, and social fundamentals, stock valuations and investor
sentiment. MSDW Investment Management invests within countries based
on the work of country specialists who conduct extensive fundamental
analysis of issuers within these markets and seek to identify issuers
with strong earnings growth prospects. To manage risk, MSDW Investment
Management emphasizes thorough macroeconomic and fundamental
research.
GLOBAL EQUITY PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term capital
appreciation by investing primarily in Equity Securities of issuers
throughout the world, including U.S. issuers.
(small solid bullet) APP ROACH. MSDW Investment Management seeks to
maintain a diversified portfolio of global equity securities based on
individual stock selection. MSDW Investment Management emphasizes a
bottom-up approach to investing that seeks to identify securities of
undervalued issuers. The investment process is value driven and
considers value criteria with an emphasis on cash flow and the
intrinsic value of company assets. Securities which appear undervalued
according to these criteria are then subjected to in-depth fundamental
analysis. MSDW Investment Management conducts a thorough investigation
of the issuer's balance sheet, cash flow and income statement and
assesses the company's business franchise, including product,
competitiveness, market positioning, and industry structure. Meetings
with senior company management are integral to the investment
process.
(small solid bullet) PROCESS. MSDW Investment Management
selects securities for investment from a universe of eligible issuers
consisting of approximately 3,200 companies in the Morgan Stanley
Capital International (MSCI) World Index. MSDW Investment Management
expects to invest at least 20% of the Portfolio's total assets in the
common stocks of U.S. issuers.
INTERNATIONAL MAGNUM PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term capital
appreciation by investing primarily in Equity Securities of non-U.S.
issuers domiciled in EAFE countries.
(small solid bullet) APPROACH. M SDW Investment Management seeks to
achieve superior long-term returns by creating a diversified portfolio
of undervalued international equity securities. To achieve this goal,
MSDW Investment Management uses a combination of strategic geographic
asset allocation and fundamental, value oriented stock selection.
(small solid bullet) PROCESS. The Portfolio is managed using
a two-part process combining the expertise of investment teams based
in New York, London, Tokyo, and Singapore. The New York-based
portfolio management team decides upon the appropriate allocation of
the Portfolio's assets among Europe, Japan and developed Asia,
including Australia and New Zealand. Regional allocation decisions are
based on variety of factors, including relative valuations, earnings
expectations, macroeconomic factors, as well as input from the
regional stock selection teams from the MSDW Investment Management's
Asset Allocation Committee, which is made up of several of the MSDW
Investment Management's most senior investment officers. Once the
allocations to Europe, Asia, and Japan have been determined, three
overseas investment teams in London (for European stocks), Tokyo (for
Japanese stocks) and Singapore (for Asian stocks) decide which stocks
to purchase for their respective geographic regions. The regional
portfolio management teams look for stocks that they believe to be
undervalued by the market. The regional specialists analyze each
company's management before a stock is purchased for the Portfolio.
The Portfolio invests primarily in countries comprising the MSCI
Europe, Australiasia, Far East (EAFE) Index (the "EAFE Index"). EAFE
countries include Japan, most nations in Western Europe, and the more
developed nations of Asia, such as Australia, New Zealand, Hong Kong,
and Singapore. However, the Portfolio also may invest up to 5% of its
assets in countries not included in the EAFE Index.
PBHG
SELECT 20 PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Select 20 Portfolio, a non-diversified
Portfolio, seeks long-term growth of capital.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in growth
securities of a limited number (i.e., no more than 20 stocks) of
large capitalization companies that, in Pilgrim Baxter & Associates,
Ltd.'s (the "Adviser") opinion, have strong earnings growth and
capital appreciation potential. These companies will generally have
market capitalization in excess of $1 billion.
(small solid bullet) The growth securities in the Portfolio
are primarily common stocks, but may also include other equity
securities such as warrants and rights to purchase common stocks,
and convertible securities.
(small solid bullet) The Portfolio is non-diversified, which means its
performance is dependent upon the securities of a smaller number of
companies. As a result, the impact of a single change in value
(positive or negative) of a single holding may be magnified.
GROWTH II PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks capital appreciation.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in g rowth
securities of small and medium sized companies that, in the Adviser's
opinion, have strong earnings growth and capital appreciation
potential. These companies will generally have market capitalizations
or annual revenues between $500 million and $10 billion .
(small solid bullet) The growth securities in the Portfolio are
primarily common stocks, but may also include other equity securities
such as warrants and rights to purchase common stocks, and convertible
securities.
(small solid bullet) The Portfolio emphasizes small and medium
sized growth companies, so it may be more volatile than the stock
market in general, as measured by the S&P 500.
LARGE CAP VALUE PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term growth of capital
and income. Current income is a secondary objective.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in value
securities of large capitalization companies that , in the
opinion of the Adviser and Pilgrim Baxter Value Investors, Inc. (the
"Sub-Adviser"), are currently underpriced using certain financial
measurements, such as their price-to-earnings ratios.
(small solid bullet) The value securities in the Portfolio are
primarily common stocks that, in the opinion of the Adviser and the
Sub-Adviser, are currently underpriced using certain financial
measurements, such as their price-to-earnings ratios, but may also
include other equity securities such as warrants and rights to
purchase common stocks and convertible securities.
SMALL CAP VALUE PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks to achieve above-average
total return over a market cycle of three to five years, consistent
with reasonable risk.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in value securities
of companies whose market capitalizations are within the range of
the Russell 2000 index.
(small solid bullet) The value securities in the Portfolio are
primarily common stocks that, in the opinion of the Adviser and the
Sub-Adviser, are currently underpriced using certain financial
measurements, such as their price-to-earnings ratios, but may also
include other equity securities such as warrants and rights to
purchase common stocks and convertible securities.
(small solid bullet) The Portfolio's sector weightings are
generally within 10% of the Russell 2000's sector weightings. In
addition, the Portfolio generally has lower price-to-earnings ratios
than the Russell 2000.
(small solid bullet) The Portfolio emphasizes value securities of
smaller sized companies, so it is likely to be more volatile than the
stock market in general, as measured by the S&P 500 Index.
TECHNOLOGY & COMMUNICATIONS PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term growth of capital.
Current income is incidental to the Portfolio's objective.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in common stocks of
companies that rely extensively on technology or communications in
their product development or operations, are expected to benefit from
technological advances and improvements, or may be experiencing
exceptional growth in sales and earnings driven by technology- or
communication-related products and services.
These companies may be in different industries, including computer
software and hardware, electronic components and systems, network and
cable broadcasting, telecommunications, mobile communications,
satellite communications, defense and aerospace, transportation
systems, data storage and retrieval, biotechnology and medical, and
environmental.
(small solid bullet) The Portfolio offers investors significant growth
potential because it invests in companies that may be responsible for
breakthrough products or technologies or are positioned to take
advantage of cutting-edge developments.
(small solid bullet) The Portfolio's holdings may range from small
companies developing new technologies or pursuing scientific
breakthroughs to large, blue chip firms with established track records
in developing and marketing scientific advances.
(small solid bullet) Securities of technology companies are
strongly affected by worldwide scientific and technological
developments and governmental policies and, therefore, are generally
more volatile than securities of companies not dependent upon or
associated with technology issues.
STRONG
DISCOVERY FUND II
OBJECTIVE AND STRATEGY
(small solid bullet) Discovery Fund II seeks capital growth.
(small solid bullet) The Fund invests in securities that the Adviser
believes represent attractive growth opportunities.
(small solid bullet) The Fund normally emphasizes equity securities,
although it has the flexibility to invest in any type of security that
the Adviser believes has the potential for capital appreciation.
(small solid bullet) The Fund may invest up to 100% of its total
assets in equity securities, including (a) common stocks, (b)
preferred stocks, and (c) securities that are convertible into common
or preferred stocks, such as warrants and convertible bonds.
(small solid bullet) The Fund may also invest up to 100% of its assets
in debt obligations, including intermediate-to-long term corporate or
U.S. government debt securities. Although the debt obligations in
which it invests will be primarily investment-grade, the Fund may
invest up to 5% of its net assets in non-investment grade debt
obligations.
(small solid bullet) When the Adviser determines that market
conditions warrant a temporary defensive position, the Fund may invest
without limitation in cash and short-term fixed-income securities.
(small solid bullet) The Fund may also invest up to 25% of its net
assets in foreign securities, including both direct investments and
investments made through depository receipts.
(small solid bullet) The Adviser attempts to identify companies that
are poised for accelerated earnings growth due to innovative products
or services, new management, or favorable economic or market cycles.
These companies may be small, unseasoned firms in early stages of
development, or they may be mature organizations.
MID CAP GROWTH FUND II (FORMERLY GROWTH FUND II)
OBJECTIVE AND STRATEGY
(small solid bullet) Mid Cap Growth Fund II seeks capital
growth through investments in mid-sized companies .
(small solid bullet) The Fund invests primarily in equity securities
that the Adviser believes have above-average growth prospects.
(small solid bullet) Under normal market conditions, the Fund will
invest at least 65% of its total assets in equity securities,
including (a) common stocks, (b) preferred stocks, and (c) securities
that are convertible into common or preferred stocks, such as warrants
and convertible bonds.
(small solid bullet) While the emphasis of the Fund is clearly on
equity securities, the Fund may invest a limited portion of its assets
in debt obligations when the Adviser perceives that they are more
attractive than stocks on a long-term basis.
(small solid bullet) The Fund may invest up to 35% of its total assets
in debt obligations, including intermediate-to-long term corporate or
U.S. government debt securities. Although the debt obligations in
which it invests will be primarily investment grade, the Fund may
invest up to 5% of its net assets in non-investment grade debt
obligations.
(small solid bullet) When the Adviser determines that market
conditions warrant a temporary defensive position, the Fund may invest
without limitation in cash and short-term fixed-income securities.
(small solid bullet) The Fund may invest up to 25% of its assets in
foreign securities, including both direct investments and investments
made through depository receipts.
(small solid bullet) The Fund generally will invest in mid-sized
companies whose earnings are believed to be in a relatively strong
growth trend, and, to a lesser extent, in companies in which
significant further growth is not anticipated but whose market value
is thought to be undervalued.
(small solid bullet) In identifying companies with favorable growth
prospects, the Adviser ordinarily looks to certain characteristics,
such as (a) prospects for above-average sales and earnings growth; (b)
high return on invested capital; (c) overall financial strength,
including sound financial and accounting policies and a strong balance
sheet; (d) competitive advantages, including innovative products and
services; (e) effective research, product development and marketing;
and (f) stable, capable management.
OPPORTUNITY FUND II
OBJECTIVE AND STRATEGY
(small solid bullet) Opportunity Fund II seeks capital growth.
(small solid bullet) The Fund invests primarily in equity securities
and currently emphasizes investments in medium-sized companies the
Adviser believes are under-researched and attractively valued.
(small solid bullet) The Fund will invest at least 70% of its total
assets in equity securities, including (a) common stocks, (b)
preferred stocks, and (c) securities that are convertible into common
or preferred stocks, such as warrants and convertible bonds.
(small solid bullet) Under normal market conditions, the Fund expects
to be fully invested in equities.
(small solid bullet) The Fund may, however, invest up to 30% of its
net assets in debt obligations, including intermediate- to long-term
corporate or U.S. government debt securities. Although the debt
obligations in which it invests will be primarily investment grade,
the Fund may invest up to 5% of its net assets in non-investment grade
debt obligations.
(small solid bullet) When the Adviser determines that market
conditions warrant a temporary defensive position, it may use that
allowance to invest up to 30% of its net assets in cash and short-term
fixed-income securities.
(small solid bullet) The Fund may invest up to 25% of its assets in
foreign securities, including both direct investments and investments
made through depository receipts.
(small solid bullet) In selecting its equity investments, the Adviser
seeks to identify attractive investment opportunities that have not
become widely recognized by other stock analysts or the financial
press. Through first-hand research that often includes on-site visits
with the leaders of companies, the Adviser looks for companies with
fundamental value or growth potential that is not yet reflected in
their current market prices. In many cases, companies in the small-
and medium-capitalization markets are under-followed and, as a result,
less efficiently priced than their larger, better known counterparts.
(small solid bullet) The Fund's investments are therefore likely to
consist, in part, of securities in small- and medium-sized companies.
Many of these companies may have successfully emerged from the
start-up phase and have potential for future growth. Because of their
longer track records and more seasoned management, they generally pose
less investment uncertainty than do the smallest companies. In
general, smaller-capitalization companies often involve greater risks
than investments in established companies.
WARBURG PINCUS
INTERNATIONAL EQUITY PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term capital
appreciation.
(small solid bullet) The Portfolio pursues its investment objective by
investing in equity securities of companies located or conducting
business outside the United States.
(small solid bullet) The Portfolio will ordinarily invest
substantially all of its assets in common stocks, warrants and
securities convertible into or exchangeable for common stocks, and
will generally invest in at least three countries other than the
United States.
(small solid bullet) The Portfolio intends to be widely diversified
across securities of many corporations located in a number of foreign
countries, but from time to time may invest a significant portion of
its assets in a single country.
(small solid bullet) Although the Portfolio emphasizes developed
countries, it may also invest in emerging markets.
(small solid bullet) In choosing equity securities, the Portfolio
managers look for companies of any size whose securities appear to be
discounted relative to earnings, assets, or projected growth. The
Portfolio managers determine value based on research and analysis,
taking all relevant factors into account.
(small solid bullet) The Portfolio intends to invest principally in
the securities of financially strong companies with opportunities for
growth within growing international economies and markets through
increased earning power and improved utilization or recognition of
assets.
RISK. In addition to risks associated with equity securities,
international investment entails special risk considerations including
currency fluctuations, lower liquidity, economic instability,
political uncertainty, and differences in accounting methods.
POST-VENTURE CAPITAL PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) Post-Venture Capital Portfolio seeks long-term
growth of capital.
(small solid bullet) The Portfolio pursues an aggressive investment
strategy by investing primarily in equity securities of U.S. companies
considered to be in their post-venture capital stage of development.
(small solid bullet) Under normal market conditions, the Portfolio
will invest up to at least 65% of its total assets in equity
securities of "post-venture capital companies." A post-venture capital
company is a company that has received venture capital financing
either (a) during the early stages of the company's existence or the
early stages of the development of a new product or service or (b) as
part of a restructuring or recapitalization of the company. In
addition, the investment of venture capital financing, distribution of
such company's securities to venture capital investors, or initial
public offering ("IPO"), will have been made within ten years prior to
the Portfolio's purchase of the company's securities.
(small solid bullet) Up to 10% of the Portfolio's assets may be
invested in private equity portfolios that invest in venture capital
companies.
(small solid bullet) A portion of of the Portfolio's assets may
be invested in assets of companies expected to experience "special
situations," such as mergers or reorganizations.
(small solid bullet) Up to 20% of the Portfolio's assets may be
invested in foreign securities.
RISK. The main risks associated with the portfolio include risks
associated with equity securities, particularly small, start-up and
special-situation companies. The Portfolio employs aggressive
strategies and may not be appropriate for all investors.
SMALL COMPANY GROWTH PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks capital growth by investing
primarily in equity securities of small sized U.S. companies that
represent attractive opportunities for capital growth.
(small solid bullet) The Portfolio considers a "small" company to be
one that has a market capitalization, measured at the time the
Portfolio purchases a security of that company, within the range of
capitalizations of companies represented in the Russell 2000 Index. As
of January 31, 1998, the Russell 2000 Index included companies with
market capitalizations between $23.7 million and $2.7 billion.
Companies that outgrow the definition of small company after the
Portfolio has purchased its securities continue to be considered small
for purposes of the Portfolio's investment policies.
(small solid bullet) Small companies may (1) still be in the
development stage, (2) be older companies that appear to be entering a
new stage of growth, or (3) be companies providing products or
services with a high unit volume growth rate.
(small solid bullet) The Portfolio may also invest in securities of
emerging growth companies, which can be either small- or medium-sized
companies that have passed their start up phase and that show positive
earnings and prospects of achieving significant profit and gain in a
relatively short period of time.
(small solid bullet) Emerging growth companies generally stand to
benefit from new products or services, technological developments or
changes in management and other factors and include smaller companies
experiencing unusual developments affecting their market value.
(small solid bullet) T he Portfolio is non-diversified and may
i nvest a greater portion of its assets in the securities of a
smaller number of issuers.
RISK. The Portfolio's main risks are the risks associated with equity
securities, particularly small, start-up, and special-situation
companies. The Portfolio may be subject to volatility resulting
from its non-diversified status.
FUNDS' AVAILABILITY TO SEPARATE ACCOUNTS
Shares of the Funds may also be sold to a variable life separate
account of 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 Funds available to such other
separate accounts, see RESOLVING MATERIAL CONFLICTS on page 48.
THE INVESTMENT ADVISERS
FIDELITY
The investment Adviser for the Fidelity Funds is Fidelity Management &
Research Company, a registered adviser under the investment Advisers
Act of 1940. Fidelity Management & Research Company is the original
Fidelity company and was founded in 1946. It provides a number of
mutual funds and other clients with investment research and portfolio
management services. It maintains a large staff of experienced
investment personnel and a full complement of related support
facilities. As of December 31, 199 8 , it advised funds having
more than 3 9 million shareholder accounts with a total value of
more than $6 94 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 subsid i ary of FMR, chooses investments for Money
Market Port f olio and Investment Grade Bond Portfolio. 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. BT is a wholly-owned
subsidiary of Bankers Trust Corporation (formerly Bankers Trust New
York Corporation). BT currently serves as sub-adviser and custodian
for the Index 500 Portfolio . BT chooses Index 500 Porfolio's
investments and places orders to buy, sell, and lend the fund's
investments.
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
The investment Adviser for the Morgan Stanley Dean Witter
Universal Funds, Inc. is Morgan Stanley Dean Witter Investment
Management, Inc., a wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co., which is a preeminent global financial services firm
that maintains leading market positions in each of its three primary
businesses: securities, asset management and credit services. MSDW
Investment Management, a registered Investment Adviser under the
Investment Advisers Act of 1940, as amended, serves as investment
Adviser to numerous open-end and closed-end investment companies, as
well as to employee benefit plans, endowment funds, foundations and
other institutional investors. MSDW Investment Management's principal
business office is located at 1221 Avenue of the Americas, New York,
New York 10020.
PBHG
The investment Adviser for the PBHG Insurance Series Fund, Inc. is
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter"), a professional
investment management firm and registered investment Adviser that,
along with its predecessors, has been in business since 1982. The
controlling shareholder of Pilgrim Baxter is United Asset Management
Corporation ("UAM"), a New York stock exchange listed holding company
principally engaged through affiliated firms, in providing
institutional investments management services and acquiring
institutional investment management firms. UAM's headquarters are
located at One International Place, Boston, Massachusetts 02110. The
principal business address of the Adviser is 825 Dupertail Road,
Wayne, Pennsylvania 19087. Pilgrim Baxter Value Investors, Inc., the
Sub-Adviser, is a wholly owned subsidiary of Pilgrim Baxter and is a
registered investment Adviser that was formed in 1940. As with the
Adviser, the controlling shareholder of the Sub-Adviser is UAM. The
principal business address of the Sub-Adviser is 825 Dupertail Road,
Wayne, Pennsylvania 19087.
STRONG
The investment Adviser for the Strong Funds is Strong Capital
Management, Inc. The Adviser began conducting business in 1974. Since
then, its principal business has been providing continuous investment
supervision for individuals and institutional accounts, such as
pension funds and profit-sharing plans, as well as mutual funds,
several of which are funding vehicles for variable insurance products.
The Adviser's principal mailing address is P.O. Box 2936, Milwaukee,
Wisconsin 53201. Mr. Richard S. Strong, the Chairman of the Board of
the Fund, is the controlling shareholder of the Adviser.
WARBURG PINCUS
The investment Adviser for the Warburg Pincus Funds is Warburg Pincus
Asset Management, Inc. Incorporated in 1970, Warburg Pincus is
indirectly controlled by Warburg, Pincus & Co.("WP&Co."), with
which Warburg G.P. has no business other than being a holding
company of Warburg Pincus and its affiliates. Lionel I. Pincus, the
managing partner of WP&Co., may be deemed to control both WP&Co. and
Warburg Pincus. Warburg Pincus' address is 466 Lexington Avenue, New
York, New York 10017-3147.
On February 15, 1999, WP & Co. and Credit Suisse Group announced that
they reached an agreement for Credit Suisse Group to acquire Warburg
Pincus. It is expected that Warburg Pincus will be combined with
Credit Suisse Asset Management (New York), the institutional asset
management and mutual fund arm of Credit Suisse Group. As of December
31, 1998, Credit Suisse Asset Management had global assets under
management of $210 billion. Under the terms of the arrangement, no
immediate changes are planned to Warburg's investment portfolio
managers and investment professionals.
IMPORTANT
You will find more complete information about the Funds, including the
risks associated with each portfolio, in their respective
prospectuses. You should read them in conjunction with this
prospectus.
FACTS ABOUT THE CONTRACT
PURCHASE OF A CONTRACT
We offer the Contracts only in states in which we have obtained the
necessary approval. The Contracts are available on (1) a non-qualified
basis ("Non-qualified Contracts"), and (2) as Individual Retirement
Annuities ("IRAs") that qualify for special Federal income tax
treatment ("Qualified Contracts").
(small solid bullet) Generally, you may purchase a Qualified Contract
only in connection with a "rollover" of funds from a qualified plan,
tax sheltered annuity, or IRA. To purchase a Qualified Contract you
must make a purchase payment of at least $10,000 and complete an
application form. There are other restrictive provisions limiting the
timing and amount of payments to and distributions from the Qualified
Contract. See TAX CONSIDERATIONS on page 46.
(small solid bullet) To purchase a Non-qualified Contract, you must
make a purchase payment of at least $2,500 and complete an application
form. The proposed Annuitant must be no older than 80 years old (for
Contracts purchased through a 1035 exchange, the Annuitant must be no
older than 85 years old).
(small solid bullet) APPLICATION AND INITIAL PURCHASE PAYMENTS
If we can accept your application and initial purchase payment in the
form received, we will apply the payment to the purchase of a Contract
within two business days after receipt at the Annuity Service Center.
The date that we credit the payment and issue your Contract is called
the Contract Date.
If we receive an incomplete application, we will request the
information necessary to complete the application. Once we receive the
completed application, we will apply the initial payment to the
purchase of a Contract within two business days. If the application
remains incomplete for five business days, we will return your payment
unless we obtain your specific permission to retain the payment
pending completion of the application.
(small solid bullet) ADDITIONAL PAYMENTS TO CONTRACTS
You may add money to a NON-QUALIFIED CONTRACT during the life of the
Annuitant and before the Annuity Date. The smallest such payment we
will accept is generally $250.
You may make additional payments to a QUALIFIED CONTRACT of additional
rollover contributions from a qualified plan, tax sheltered annuity,
or IRA. See TAX CONSIDERATIONS on page 46. The smallest such payment
we will accept is generally $2,500.
You may make a telephone request to add an additional payment to
the Contract from either your Fidelity Mutual Fund or Brokerage "core"
account. Additional payment requests by telephone are currently
limited to $100,000 or less with the transfer coming from identical
registrations.
We will credit net purchase payments allocated to the variable
Subaccounts 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 40. We will credit net
purchase payments allocated to the Guaranteed Account to your Contract
as of the date the payment is received at our Annuity Service Center.
See THE GUARANTEED ACCOUNT on page 45 .
We may limit the maximum amount of initial or subsequent payments that
we will accept.
FREE LOOK PRIVILEGE
You may return your Contract for a refund within 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. We will cancel the Contract and 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
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
We will direct the portion of your net purchase payment allocated to
the Variable Account 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. If you elect to
invest in a particular investment option, you must allocate at least
10% of your purchase payment to that option. All percentage
allocations must be in whole numbers.
On the date we receive your payment at the Annuity Service Center, we
will credit the portion of your net purchase payments allocated to the
Guaranteed Account. 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. We reserve the right to limit
amounts allocated (including transfers) to the Guaranteed Account to
$50,000 per Contract Year.
(small solid bullet) EXCHANGE AMONG VARIABLE SUBACCOUNTS
You may currently exchange amounts among the variable
Subaccounts before the Annuity Date as often as you wish without
charge. However, excessive exchange activity can disrupt
portfolio management strategy and increase portfolio expenses, which
are borne by all Contract Owners participating in the portfolio
regardless of their exchange activity. Therefore, we reserve
the right to limit the number of exchanges permitted, but not
to fewer than six per Contract Year. Empire Fidelity Investments Life
also reserves the right to charge no more than $15 for each
exchange 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
exchange $5,000 from one Subaccount to another, or may be in
terms of a percentage reallocation among Subaccounts. In the latter
case, the percentages must be in whole numbers. The minimum amount you
may exchange is $250 or, if less, the entire portion of your
Contract Value allocated to a particular Subaccount. You may
exchange amounts or change your investment allocation with
respect to future payments by providing the Annuity Service Center
with instructions in writing or by telephone , or, when available at
a future date, on our Internet web site. If your instructions are
incomplete (e.g. unclear or percentages do not equal 100%), your
payments will be allocated to the VIP Money Market Portfolio until we
receive your complete instructions.
(small solid bullet) TRANSACTIONS BY TELEPHONE OR INTERNET
(AVAILABLE AT A FUTURE DATE)
Empire Fidelity Investments Life reserves the right to revise or
terminate the telephone or Internet exchange provisions, limit
the amount of or reject any exchange, as deemed necessary, at any
time. We will limit telephone /Internet exchange authorizations
to a combined total of eighteen per calendar year. After
this total is reached, you will only be permitted to complete
exchanges in writing. We will not accept exchange requests via
fax.
We will not be responsible for any losses resulting from unauthorized
telephone or Internet exchanges if we follow reasonable
procedures designed to verify the identity of the caller or
Internet user . We may record calls. You should verify the accuracy
of your confirmation statements immediately after you receive them.
(small solid bullet) USE OF MARKET TIMING SERVICES
In some cases, we may sell contracts to individuals who independently
utilize the services of a firm or individual engaged in market timing.
Generally, market timing services obtain authorization from Contract
Owner(s) to make exchanges among the Subaccounts on the basis of
perceived market trends. Because the large exchange of assets
associated with market timing services may disrupt the management of
the portfolios of the Funds, such transactions may become a detriment
to Contract Owners not utilizing the market timing service.
The right to exchange Contract Values among Subaccounts may be subject
to modification if such rights are executed by a market timing firm or
similar third party authorized to initiate exchange transactions on
behalf of a Contract Owner(s). In modifying such rights, we may, among
other things, decline to accept (1) the exchange instructions of any
agent acting under a power of attorney on behalf of more than one
Contract Owner, or (2) the exchange instructions of individual
Contract Owners who have executed pre-authorized exchange forms which
are submitted by market timing firms or other third parties on behalf
of more than one Contract Owner at the same time. We will impose such
restrictions only if we believe that doing so will prevent harm to
other Contract Owners.
(small solid bullet) EFFECTIVE DATE OF EXCHANGES AMONG VARIABLE
SUBACCOUNTS
When you request a n exchange between variable Subaccounts, the
redemption of the requested amount from the Subaccount will always be
effected as of the end of the Valuation Period in which we receive the
request at our Annuity Service Center. We will generally credit that
amount to the new Subaccount at the same time.
However, when (1) you are making a n exchange to a Subaccount
which invests in a portfolio that accrues dividends on a daily basis
and requires Federal funds before accepting a purchase order, and (2)
the Subaccount from which the exchange is being made is
investing in an equity portfolio in an illiquid position due to
substantial redemptions or exchanges that require it to sell
portfolio securities in order to make funds available, then the
crediting of the amount exchanged to the new Subaccount may be
delayed. This delay will be until the Subaccount from which the
exchange is being made obtains liquidity through the earliest
of the portfolio's receipt of proceeds from sales of portfolio
securities, new contributions by Contract Owners, or otherwise, but no
longer than seven days. During this period, the amount exchanged
will be uninvested.
(small solid bullet) GUARANTEED ACCOUNT TRANSFERS
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 us, at our 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. We do not permit a transfer into the Guaranteed Account
during the 12 months following a transfer out of the Guaranteed
Account.
When you withdraw or transfer amounts out of the Guaranteed Account,
the amounts that have been credited to the Guaranteed Account for the
shortest time are withdrawn first. At the end of the current renewal
interest guarantee period, January 31, 2000, the amount that
may be transferred for the month of February will be declared and will
not be less than the minimums specified above. See THE GUARANTEED
ACCOUNT on page 47.
(small solid bullet) IMPORTANT
The portion of your Contract Value allocated to the variable
Subaccounts will change with the investment performance of the
selected Subaccounts. You should periodically review your allocation
of the Contract Value in light of market conditions and your
financial objectives. Exchanges or t ransfers after the Annuity
Date are subject to different limitations. See FIXED, VARIABLE, OR
COMBINATION ANNUITY INCOME OPTIONS on page 45.
ACCUMULATION UNITS
When you allocate your net purchase payments to a selected variable
Subaccount, we credit a particular number of Accumulation Units to
your Contract. An Accumulation Unit is a unit of measure used prior to
the Annuity Date to calculate the value of your Contract in the
Subaccounts.
We determine the number of Accumulation Units credited by dividing the
dollar amount allocated to each Subaccount by the value of an
Accumulation Unit for that Subaccount as of the end of the Valuation
Period in which the payment is received at the Annuity Service Center.
The value of each Subaccount's Accumulation Units varies each
Valuation Period (i.e. each day that there is trading on the New York
Stock Exchange) with the Total Return of the Subaccount. The
Total Return reflects the investment performance of the
Subaccount for the Valuation Period and is net of the asset charges to
the Subaccount. See TOTAL RETURN FOR A SUBACCOUNT on page 50.
WITHDRAWALS
You may at any time prior to the Annuity Date surrender your Contract
for its Cash Surrender Value. You may also make partial withdrawals of
$500 or more.
You may request a partial withdrawal by telephone. Withdrawals by
telephone are limited to the following criteria: 1) withdrawals of
$500 to $25,000 with no more than $25,000 dollars being withdrawn
during a seven day period; 2) for Contracts that have had an address
change in the last 30 days, the limit is $10,000; and 3) the check
must be made payable to all registered Owners. You may request to have
the money wired to your Fidelity Mutual fund or Brokerage account with
identical registration. We reserve the right to change telephone
withdrawal requirements or limitations.
Certain withdrawals, however, are subject to a penalty tax. See TAX
CONSIDERATIONS on page 48. 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 withdrawal amount exceeds your Contract Value invested in
the Variable Account, we will deduct the excess from the Guaranteed
Account. Unless you request otherwise, the amount deducted from the
Variable Account will be allocated to 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 withdrawal request. We may defer payment from the Variable Account
under certain limited circumstances for a longer period, and we
reserve the right to defer payment from the Guaranteed Account under
any circumstances for not more than six months. See POSTPONEMENT OF
PAYMENT on page 50.
(small solid bullet) SYSTEMATIC WITHDRAWALS
Contract Owner(s) may elect in writing on a form we provide to take
systematic withdrawals of a specified dollar amount (of at least $100)
on a monthly, quarterly, semi-annual, or annual basis. We will require
a $10,000 minimum Contract Value to begin this program. Systematic
withdrawals will be taken proportionately from all of your selected
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 44. If a systematic
withdrawal would bring the Contract Value below $2,500, the systematic
withdrawal will be made only for the amount that will reduce the
Contract Value to $2,500, and the systematic withdrawal option will
automatically terminate.
Each systematic withdrawal is subject to Federal income taxes,
including any penalty tax that may apply, the same as for any other
withdrawal. We reserve the right to modify or discontinue the
systematic withdrawal program.
SIGNATURE GUARANTEE
A signature guarantee is designed to protect you and 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 or from a Fidelity account
with different Owner(s) than your annuity Contract.
7. In other circumstances where we deem it necessary for your
protection (e.g. the signature does not resemble the signature we
have on file).
You should be able to obtain a signature guarantee from a bank, broker
dealer (including Fidelity Investor Centers), credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
CHARGES
The following are all the charges we make under your Contract.
1. PREMIUM TAXES. In general, we do not currently deduct any amount
from your payments for premium taxes. 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, we currently
allocate the entire amount of your purchase payments 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.
(small solid bullet) ANNUAL MAINTENANCE CHARGE. Currently, on each
Contract Anniversary before the Annuity Date, we deduct an annual
maintenance charge of $30 from your Contract Value. We currently waive
this annual charge prior to the Annuity Date if your total purchase
payments, less any withdrawals, equal at least $25,000. 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, we will deduct the annual maintenance
charge from each investment option in proportion to the amount of your
total Contract Value invested in that option on the date of deduction.
We will deduct a pro rata portion of the charge when the Contract is
surrendered.
(small solid bullet) DAILY ADMINISTRATIVE CHARGE. Each day, we deduct
from the assets of the Subaccounts, but not the Guaranteed Account, a
percentage of those assets equivalent to an effective annual rate of
0.05%. We guarantee to never increase this charge above an effective
annual rate of 0.25%.
4. MORTALITY AND EXPENSE RISK CHARGE. We deduct a daily asset charge
for our assumption of mortality and expense risks. We make this charge
by deducting daily from the assets of each Subaccount a percentage
equal to an effective annual rate of 0.75%. As with the daily
administrative charge, this charge does not apply to the Guaranteed
Account. We guarantee to never 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 85 . This Death Benefit may be greater than the Contract
Value. See DEATH BENEFIT on page 46. The expense risk we assume is the
risk that the costs of issuing and administering the Contracts will be
greater than we expected when setting the administrative charges.
ADDITIONAL MORTALITY RISK CHARGE. We may offer the Owner the
opportunity to elect a Death Benefit R ider. If th e Rider
is elected by the Owner, we will deduct a mortality charge once each
quarter. The amount of the charge for each quarter will not exceed
0.10% of the Contract Value on the date of the quarterly charge. There
will be no charges made once the Annuitant reaches their 85th
birthday.
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:
Contract Year Withdrawal Charge As
Percentage of Amount of
Purchase Payments Withdrawn
1 5%
2 4%
3 3%
4 2%
5 1%
6 and later 0%
For purposes of determining this withdrawal charge, 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.
Subject to regulatory approval, we intend to begin to eliminate the
withdrawal charge during the next sixteen months. Elimination
would be effective on the first Contract Anniversary after we send you
notice of the change. We will send you notice on a date determined by
us, but not before (1) the insurance department of the state in which
the Contract was issued has approved the elimination, and (2) similar
approvals have been granted by substantially all other states. We will
not send you notification of elimination of the withdrawal charge if
you have owned your Contract for more than five years, since the
withdrawal charge will have already expired.
6. EXCHANGE 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 52.
DEATH BENEFIT
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 85th birthday, the Death Benefit will equal the
greater of: (1) the purchase payments paid, less any partial
withdrawals and charges thereon; or (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 85th 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.
Upon regulatory approval, we will offer a one time opportunity to
purchase an optional Death Benefit Rider, and if elected, the Death
Benefit will be the benefit described above or the enhanced death
benefit described below, whichever is greater.
The enhanced death benefit is the highest Contract Value on any
Contract Anniversary, on or after the Contract Anniversary when this
Rider is added to the Contract and before the Annuitant reaches age
80, plus any purchase payments received by the company after such
Contract Anniversary, reduced for any withdrawals after such Contract
Anniversary as described in the next sentence. Any withdrawals after
such Contract Anniversary will reduce the amount otherwise payable
under this paragraph proportionately to the reduction in the Contract
Value caused by the withdrawal.
For Contracts with net purchase payments greater than $4 million, this
value can never exceed the amount calculated above, multiplied by $4
million, divided by the net purchase payments.
If the death of the Annuitant occurs after his or her 85th birthday,
the Death Benefit will be the Contract Value on the date that proof of
death is received by the Company at the Annuity Service Center.
If the Rider is available when the Owner submits an application for
the Contract, the Owner must choose at that time whether or not to
purchase the Death Benefit Rider. There will be a charge for the Death
Benefit Rider, as described on page .
The Owner may elect to terminate the Death Benefit rider by providing
advance written notice to the company. Termination will be effective
as of the date the next charge is scheduled after the company receives
such notice at the Annuity Service Center.
REQUIRED DISTRIBUTIONS UPON DEATH
Federal tax law requires that if any Owner dies before the Annuity
Date, the entire interest in the Contract must be distributed within 5
years after the death of the Owner (including any Owner who is also
the Annuitant). However, this requirement does not apply if (1) the
entire interest is payable over the lifetime (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 (2) 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 to be the first day of the calendar month
following the Annuitant's 85th birthday or, if later, the first day of
the calendar month following the Contract's fifth Contract
Anniversary. You may request that we allow the Annuity Date to be as
late as the first day of the calendar month following the Annuitant's
90th birthday. You may change the Annuity Date by written notice
received at the Annuity Service Center at least 30 days prior to the
current Annuity Date then in effect. The Annuity Date must be the
first day of a month. The earliest permissible Annuity Date is the
first day of the calendar month following the expiration of the free
look period.
SELECTION OF ANNUITY INCOME OPTIONS
While the Annuitant is living and at least 30 days prior to the
Annuity Date, you may elect any one of the annuity income options
described in the Contract. You may also change your election to a
different annuity income option by notifying us in writing at least 30
days prior to the Annuity Date.
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. 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 49.
FIXED, VARIABLE, OR COMBINATION ANNUITY INCOME OPTIONS
You may elect to have annuity income payments made on a FIXED basis, a
VARIABLE basis, or a COMBINATION OF BOTH.
(small solid bullet) FIXED ANNUITY INCOME PAYMENTS
If you choose a fixed annuity, the amount of each payment will be set
and will not change. Upon selection of a fixed annuity, we will
transfer your Contract Value to the Guaranteed Account. The annuity
income payments will be fixed in amount and duration by (1) the fixed
annuity provisions selected, (2) the sex (except Contracts utilizing
unisex purchase rates) and adjusted age of the Annuitant, and (3) the
then current interest rates used to determine fixed annuity income
payments. In no event will the interest rate be less than 3.5%.
(small solid bullet) VARIABLE ANNUITY INCOME PAYMENTS
If you select a variable annuity, we will transfer your Contract Value
to the Variable Account. The dollar amount of the first variable
annuity income payment will be determined in accordance with (1) the
applicable annuity payment rates, (2) the sex (except Contracts
utilizing unisex purchase rates) and adjusted age of the Annuitant,
and (3) an assumed annual investment return of 3.5% (unless we also
offer an alternative assumed investment return on the Annuity Date and
you select that alternative).
We calculate all subsequent variable annuity income payments based on
the Subaccount Annuity Units credited to the Contract. Annuity Units
are similar to Accumulation Units except that built into the
calculation of Annuity Unit Values is the assumption that the Total
Return of a Subaccount will equal the assumed investment return.
Thus, with a 3.5% assumed investment return, the Subaccount Annuity
Unit Value will not change if the daily Total Return of the
Subaccount is equivalent to an annual rate of return of 3.5%. If the
Total Return is greater than the assumed investment return, the
Subaccount Annuity Unit Value will increase; if the Total
Return is less than the assumed investment return, the Subaccount
Annuity Unit Value will decrease.
When variable annuity income payments commence, the number of Annuity
Units credited to the Contract in a particular Subaccount is
determined by dividing that portion of the first variable 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.
(small solid bullet) COMBINATION FIXED AND VARIABLE ANNUITY INCOME
PAYMENTS
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.
(small solid bullet) IMPORTANT
After the Annuity Date, transfers between the Variable Account and the
Guaranteed Account are not permitted. Exchanges among the
variable Subaccounts, however, are permitted subject to some
limitations. See EXCHANGES AMONG SUBACCOUNTS AFTER THE ANNUITY
DATE in the Statement of Additional Information.
TYPES OF ANNUITY INCOME OPTIONS
The Contract provides for three types of annuity income options. All
are available on a FIXED, VARIABLE , or COMBINATION basis. You
may not select more than one option. If your Contract Value 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. We will make annuity income payments 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. Under this option we will provide
monthly annuity income payments during the joint lifetimes of the
Annuitant, a designated second person , and during the lifetime
of the survivor. There are some limitations on the use of this option
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. Under
this option we provide 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 by you. In
the case of a Qualified Contract, the guarantee period may not exceed
the life expectancy of the Annuitant.
In the event of the death of the Annuitant under this option, the
Contract provides that we will pay any guaranteed monthly income
payments to the 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.
(small solid bullet) 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, we will
send you 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.
You should verify the accuracy of your transaction confirmations and
monthly sta t ements immediately after you receive them.
Information contained on transaction co n firmations and account
statements is conclusive unless you object in writing within five
and ten days, respectively.
In addition, we will send you semiannual reports containing financial
statements for the Variable Account and a list of portfolio securities
of the Funds, as required by the Investment Company Act of 1940.
THE 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.
FACTS ABOUT THE GUARANTEED ACCOUNT
(small solid bullet) 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 our
general account (the "Guaranteed Account"). The Guaranteed Account may
also be referred to as the "Fixed Account."
(small solid bullet) Funds in the Guaranteed Account do not fluctuate
with the investment experience of our general account.
(small solid bullet) 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%.
(small solid bullet) 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.
MORE ABOUT THE CONTRACT
TAX CONSIDERATIONS
We do not intend the following discussion to be tax advice. For tax
advice you should consult a tax adviser. Although the following
discussion is based on our understanding of Federal income tax laws as
currently interpreted, there is no guarantee that those laws or
interpretations will not change. The following discussion does not
take into account state or local income tax or other considerations
which may be involved in the purchase of a Contract or the exercise of
options under the Contract. In addition, the following discussion
assumes that the Contract is owned by an individual, and we do not
intend to offer the Contracts to "non natural" persons such as
corporations, unless the Contract is held by such person as a nominee
for an individual. (If the Contract is not owned by or held for a
natural person, the Contract will generally not be treated as an
annuity for tax purposes.)
The following discussion assumes that the Contract will be treated as
an annuity for Federal income tax purposes. Section 817(h) of the Code
provides that the investments of a separate account underlying a
variable annuity contract (or the investments of a mutual fund, the
shares of which are owned by the variable annuity separate account)
must be "adequately diversified" in order for the Contract to be
treated as an annuity for tax purposes. The Treasury Department has
issued regulations prescribing such diversification requirements. The
Variable Account, through each of the portfolios of the Funds, intends
to comply with these requirements. We have entered into agreements
with the Funds that require the Funds to operate in compliance with
the Treasury Department's requirements.
In connection with the issuance of prior regulations relating to
diversification requirements, the Treasury Department announced that
such regulations do not provide guidance concerning the extent to
which owners may direct their investments to particular divisions of a
separate account. 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
You may use the Contract as an individual retirement annuity. Under
Section 408(b) of the Code, eligible individuals may contribute to an
individual retirement annuity ("IRA"). The Code permits certain
"rollover" contributions to be made to an IRA. In particular, certain
qualifying distributions from another qualified plan, tax sheltered
annuity , or IRA may be received tax-free if rolled over to an
IRA within 60 days of receipt. Because the Contract's minimum initial
payment 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.
(small solid bullet) A distribution may occur in the form of a
withdrawal, death benefit payment, or payments under an annuity income
option.
(small solid bullet) An amount received as a loan under, or the
assignment or pledge of any portion of the value of, a Contract may
also be treated as a distribution. In the case of a Qualified
Contract, you may not receive or make any such loan or pledge. Any
such loan or pledge will result in disqualification of the Contract
and inclusion of the value of the entire Contract in income.
(small solid bullet) Additionally, a transfer of a Non-qualified
Contract for less than full and adequate consideration will result in
a deemed distribution, unless the transfer is to your spouse (or to a
former spouse pursuant to a divorce decree).
(small solid bullet) The taxable portion of a distribution is
generally taxed as ordinary income.
(small solid bullet) TAXES ON SURRENDER OF CONTRACT BEFORE ANNUITY
INCOME PAYMENTS BEGIN
If you fully surrender your Contract before annuity income payments
commence, you will be taxed on the portion of the distribution that
exceeds your cost basis in your Contract.
For NON-QUALIFIED CONTRACTS, the cost basis is generally the amount of
your payments, and the taxable portion of the proceeds is taxed as
ordinary income.
For QUALIFIED CONTRACTS, the cost basis is generally zero, and the
entire amount of the surrender payment is generally taxed as ordinary
income.
In addition, for both QUALIFIED and NON-QUALIFIED CONTRACTS, amounts
received as the result of the death of the Owner or Annuitant that are
in excess of your cost basis will also be taxed.
(small solid bullet) TAXES ON PARTIAL WITHDRAWALS
Partial withdrawals under a NON-QUALIFIED CONTRACT are treated for tax
purposes as first being taxable withdrawals of investment income,
rather than as return of purchase payments, until all investment
income earned by your Contract has been withdrawn. You will be taxed
on the amount withdrawn to the extent that your Contract Value at that
time, unreduced by the withdrawal charge, exceeds your payments.
Partial withdrawals under a QUALIFIED CONTRACT are prorated between
taxable income and non-taxable return of investment. Generally, the
cost basis of a qualified Contract is zero, and the partial withdrawal
will be fully taxed.
All annuity contracts issued by the same company (or an affiliated
company) to the same contract owner during any calendar year are
treated as one annuity contract for purposes of determining the amount
includible in income of any distribution that is not received as an
annuity payment. In the case of a QUALIFIED CONTRACT, the tax law
requires for all post-1986 contributions and distributions that all
individual retirement accounts and annuities be treated as one
contract.
(small solid bullet) TAXES ON INCOME PAYMENTS
Although the tax consequences may vary depending on the form of
annuity selected under the Contract, the recipient of an annuity
income payment under the Contract generally is taxed on the portion of
such income payment that exceeds the cost basis in the Contract. For
variable annuity income payments, the taxable portion is determined by
a formula that establishes a specific dollar amount that is not taxed.
This dollar amount is determined by dividing the Contract's cost basis
by the total number of expected periodic income payments. However, the
entire distribution will be fully taxable once the recipient is deemed
to have recovered the dollar amount of the investment in the Contract.
For QUALIFIED CONTRACTS, the cost basis is generally zero and each
annuity income payment is fully taxed.
(small solid bullet) 10% PENALTY TAX ON EARLY WITHDRAWALS OR
DISTRIBUTIONS
A penalty tax equal to 10% of the amount treated as taxable income may
be imposed on distributions. The penalty tax applies to early
withdrawals or distributions. The penalty tax is not imposed on:
(1) distributions made to persons on or after age 59 1/2;
(2) distributions made after death of the Owner;
(3) distributions to a recipient who has become disabled;
(4) distributions in substantially equal installments made for the
life of the taxpayer or the lives of the taxpayer and a designated
second person; and
(5) in the case of QUALIFIED CONTRACTS, distributions received from
the rollover of the Contract into another qualified contract or IRA.
(small solid bullet) OTHER TAX INFORMATION
In the case of a Contract held in custody for a minor under the
Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act, a
distribution under the Contract ordinarily is taxable to the minor.
Whether the penalty tax applies to such a distribution ordinarily is
determined by the circumstance or characteristics of the minor, not
the custodian. Thus, for example, a distribution taxable to a minor
will not qualify for the exception to the penalty tax for
distributions made on or after age 59 1/2, even if the custodian is 59
1/2 or older.
In addition, in the case of a Qualified Contract, a 50% excise tax is
imposed on the amount by which minimum required annuity or death
benefit distributions exceed actual distributions.
Penalty taxes also are imposed on aggregate distributions from
specified retirement programs (including IRAs) in excess of a
specified amount annually and in certain other circumstances.
We will withhold and remit to the U.S. Government a part of the
taxable portion of each distribution made under the Contract, unless
the Owner, Annuitant , or Beneficiary files a written election
prior to the distribution stating that he or she chooses not to have
any amounts withheld.
EMPIRE FIDELITY INVESTMENTS LIFE'S TAXES
The earnings of the Variable Account are taxed as part of our
operations. Under the current provisions of the Code, we do not expect
to incur Federal income taxes on earnings of the Variable Account to
the extent the earnings are credited under the Contracts. Based on
this, no charge is being made currently to the Variable Account for
our Federal income taxes. We will periodically review the need for a
charge to the Variable Account for company Federal income taxes. Such
a charge may be made in future years for any Federal income taxes that
would be attributable to the Contracts.
Under current laws we may incur state and local taxes (in addition to
premium taxes) in several states. At present, these taxes are not
significant and are not charged against the Contracts or the Variable
Account. If the amount of these taxes changes substantially, we may
make charges for such taxes against the Variable Account.
OTHER CONTRACT PROVISIONS
You should also be aware of the following important provisions of your
Contract.
1. OWNER. As 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; or (2) if we made any underpayments, the balance plus
interest at the rate of 6% per year compounded annually will be paid
in a single sum.
6. ASSIGNMENT. You may assign a NON-QUALIFIED CONTRACT at any time
during the lifetime of the Annuitant and before the Annuity Date. See
TAX CONSIDERATIONS on page . No assignment will be binding on us
unless it is written in a form acceptable to us and received at our
Annuity Service Center. Your rights and the rights of any Beneficiary
will be affected by an assignment. We will not be responsible for the
validity of any assignment. No assignment may be made of a QUALIFIED
CONTRACT. An ASSIGNMENT is (1) a change of Owner and Beneficiary to
the Assignee, or (2) a change of the Contract by the Owner(s) which is
not a change of Owner or Beneficiary, but their rights will be subject
to the terms of the assignment.
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
Fidelity Brokerage Services, Inc. and Fidelity Insurance Agency, Inc.,
affiliates of FMR Corp., our ultimate parent company, will distribute
the Contracts. Fidelity Brokerage Services, Inc. is the principal
underwriter (distributor) of the Contracts. Fidelity Distributors
Corporation is the distributor of the Fidelity family of funds,
including the 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.
AUTOMATIC DEDUCTION PLAN
Under the automatic deduction plan ("Automatic Annuity Builder")
you can make regular payments by pre-authorized transfers from a
checking account. Your checking account must be at a banking
institution which is a member of ACH (Automatic Clearing House). The
minimum regular payment is $100. Transactions pursuant to an automatic
deduction plan will be confirmed in your quarterly statement. We
reserve the right to restrict your participation in the automatic
deduction plan if your checking account has insufficient funds to
cover the transfer.
AVAILABILITY OF UNISEX
We base annuity income payments, 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 exchange s 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 exchange s are allowed from one Source Account
only and are not permitted to the Fixed Account. Dollar cost averaging
will not be allowed in conjunction with the Automatic Rebalance
feature described in this prospectus.
These monthly exchange s will take effect on the same day each
month. You may select any date from the 1st to the 28th as the date
for your dollar cost averaging exchange s (the
Exchange Date). If the New York Stock Exchange is not open on
your selected date in a particular month, the exchange will be
made at the close of the Valuation Period that includes the date you
selected. Your exchange s will continue until the balance in the
Source Account is exhausted or you notify us to cancel dollar cost
averaging for your Contract.
The minimum monthly exchange allowed to any variable Subaccount
is $250.
Dollar cost averaging is available at no charge. Empire Fidelity
Investments Life reserves the right to modify or terminate the dollar
cost averaging feature.
AUTOMATIC REBALANCING
Automatic Rebalancing is available to you. Automatic Rebalancing is
designed to help you maintain your specified allocation mix between
the Investment Options. You can direct 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 exchange s will be made on
the same day of each month. You may select any date from the 1st to
the 28th as the date for your automatic rebalancing
exchange s. If the New York Stock Exchange is not open on your
selected date in a particular month, the exchange s will be made
at the close of the Valuation Period that includes the date you
selected. Your exchange s will continue until you notify us to
cancel Automatic Rebalancing for your Contract.
Automatic Rebalancing will be available at no charge. Empire Fidelity
Investments Life reserves the right to modify or terminate the
automatic rebalancing feature.
(small solid bullet) You may not participate in Automatic Rebalancing
and the Dollar Cost Averaging program at the same time.
POSTPONEMENT OF PAYMENT
(small solid bullet) In general, we will ordinarily pay any partial or
full cash withdrawal within seven days after we receive your request.
(small solid bullet) We will usually pay any Death Benefit within
seven days after we receive proof of the Annuitant's death.
(small solid bullet) However, we may delay payment if (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.
(small solid bullet) 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.
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.
TOTAL RETURN FOR A SUBACCOUNT
A Subaccount's Total Return depends on how the investments of the
Subaccount perform. We determine the Total Return of a Subaccount at
the end of each Valuation Period. Such determinations are made as of
the close of business each day the New York Stock Exchange is open for
business. The Total Return reflects the investment performance of the
Subaccount for the Valuation Period and is net of the asset charges to
the Subaccounts.
Shares of the Funds are valued at net asset value. Any dividends or
capital gains distributions of a portfolio of the Funds are reinvested
in shares of that portfolio.
VOTING RIGHTS
We will vote shares of the Funds owned by the Variable Account
according to your instructions. However, if the Investment Company Act
of 1940 or any related regulations or interpretations should change,
and we decide that we are permitted to vote the shares of the Funds in
our own right, we may decide to do so.
Before the Annuity Date, we calculate the number of shares that you
may instruct us to vote by dividing your Contract Value in a
Subaccount by the net asset value of one share of the corresponding
portfolio. If variable annuity income payments have commenced, we
calculate the number of shares that the payee may instruct us to vote
by dividing the reserve maintained in each Subaccount to meet the
obligations under the Contract by the net asset value of one share of
the corresponding portfolio. Fractional votes will be counted. We
reserve the right to modify the manner in which we calculate the
weight to be given to your voting instructions where such a change is
necessary to comply with then current Federal regulations or
interpretations of those regulations.
We will determine the number of shares you can instruct us to vote 90
days or less before the applicable Fund shareholder meeting. At least
14 days before the meeting, we will send you material by mail for
providing us with your voting instructions.
If your voting instructions are not received in time, we will vote the
shares in the same proportion as the instructions received from other
Contract Owners. We will also vote shares we hold in the Variable
Account that are not attributable to Contract Owners in the same
proportionate manner.
Under certain circumstances, we may be required by state regulatory
authorities to disregard voting instructions. This may happen if
following such instructions would change the sub-classification or
investment objectives of the portfolios, or result in the approval or
disapproval of an investment advisory contract.
Under Federal regulations, we may also disregard instructions to vote
for Contract Owner-initiated changes in investment policies or the
investment Adviser if we disapprove of the proposed changes. We would
disapprove a proposed change only if it were contrary to state law,
prohibited by state regulatory authorities, or if we decided that the
change would result in overly speculative or unsound investments. If
we ever disregard voting instructions, we will include a summary of
our actions in the next semiannual report.
RESOLVING MATERIAL CONFLICTS
The investment portfolios of the Fidelity Funds are available to
registered separate accounts offering variable annuity and variable
life products of other participating insurance companies, as well as
to the Variable Account and other separate accounts we establish.
Other Funds may be offered to qualified plans as well.
Although we do not anticipate any disadvantages to this, there is a
possibility that a material conflict may arise between the interest of
the Variable Account and one or more of the other separate accounts
participating in the Funds. A conflict may occur due to a change in
law affecting the operations of variable life and variable annuity
separate accounts, differences in the voting instructions of our
Contract Owners and those of other companies, or some other reason. In
the event of a conflict, we will take any steps necessary to protect
our Contract Owners and variable annuity payees.
PERFORMANCE
Performance information for the variable Subaccounts may appear in
reports and advertising to current and prospective Contract Owners.
The performance information is based on historical investment
experience of the Funds and does not indicate or represent future
performance.
(small solid bullet) TOTAL RETURNS are based on the overall dollar or
percentage change in value of a hypothetical investment. Total return
quotations reflect changes in fund share price, the automatic
reinvestment by the separate account of all distributions and the
deduction of applicable annuity charges (including any contingent
deferred sales charges that would apply if a Contract Owner
surrendered the Contract at the end of the period indicated).
Quotations of total return may also be shown that do not take into
account certain contractual charges such as a maintenance charge or a
contingent deferred sales load. The total return percentage will be
higher under this method than under the standard method described
above.
(small solid bullet) A CUMULATIVE TOTAL RETURN reflects a Subaccount's
performance over a stated period of time.
(small solid bullet) An AVERAGE ANNUAL TOTAL RETURN reflects the
hypothetical annually compounded return that would have produced the
same cumulative total return if the 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.
(small solid bullet) Some Subaccounts may also advertise YIELD. These
measures reflect the income generated by an investment in the
Subaccount over a specified period of time. This income is annualized
and shown as a percentage. Yields do not take into account capital
gains or losses or the contingent deferred sales load. The standard
quotations of yield reflect the maintenance charge. Quotations of
yield may also be shown that do not reflect the maintenance charge.
The yield calculation will be higher under this method than under the
standard method.
(small solid bullet) The MONEY MARKET SUBACCOUNT may advertise its
CURRENT and EFFECTIVE YIELD. Current yield reflects the income
generated by an investment in the Subaccount over a 7 day period.
Effective yield is calculated in a similar manner except that income
earned is assumed to be reinvested. The INVESTMENT GRADE BOND, HIGH
INCOME and EMERGING MARKETS DEBT SUBACCOUNTS may advertise a 30 DAY
YIELD which reflects the income generated by an investment in the
Subaccount over a 30 day period.
LITIGATION
No litigation is pending that would have a material effect on us or
the Variable Account.
APPENDIX A
Accumulation Unit Values
Empire Fidelity Investments Variable Annuity Account A
Condensed Financial Information
Money Market Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 15.98 16.72 3,614,051
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
</TABLE>
* JUNE 3, 1992 TO DECEMBER 31, 1992
High Income Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 29.00 27.53 854,157
1997 24.89 29.00 868,993
1996 22.05 24.89 820,013
1995 18.47 22.05 605,822
1994 18.94 18.47 413,916
1993 15.88 18.94 315,623
1992* 14.95 15.88 66,583
</TABLE>
* JUNE 3, 1992 TO DECEMBER 31, 1992
Equity-Income Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 39.39 43.62 3,922,539
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
</TABLE>
* JUNE 3, 1992 TO DECEMBER 31, 1992
Growth Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Unit
Beginning of Period End of Period at End of Period
1998 42.76 59.17 2,171,438
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
</TABLE>
* JUNE 3, 1992 TO DECEMBER 31, 1992
Overseas Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 23.52 26.31 967,204
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
</TABLE>
* JUNE 3, 1992 TO DECEMBER 31, 1992
Investment Grade Bond Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 18.75 20.24 986,932
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
</TABLE>
* JUNE 3, 1992 TO DECEMBER 31, 1992
Asset Manager Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Unit
Beginning of Period End of Period at End of Period
1998 24.80 28.30 3,305,949
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
</TABLE>
* JUNE 3, 1992 TO DECEMBER 31, 1992
Index 500 Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 24.83 31.60 3,273,507
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
</TABLE>
* NOVEMBER 2, 1992 TO DECEMBER 31, 1992
Asset Manager: Growth Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 17.95 20.93 1,483,958
1997 14.50 17.95 1,760,200
1996 12.20 14.50 1,163,007
1995* 10.00 12.20 396,158
</TABLE>
* PERIOD FROM 1/3/95 (COMMENCEMENT OF OPERATIONS) TO 12/31/95
Contrafund Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 20.47 26.40 6,211,520
1997 16.66 20.47 6,419,636
1996 13.87 16.66 5,882,023
1995* 10.00 13.87 3,685,097
</TABLE>
* PERIOD FROM 1/3/95 (COMMENCEMENT OF OPERATIONS) TO 12/31/95
Growth Opportunities Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 12.63 15.62 2,691,359
1997* 10.00 12.63 2,558,459
</TABLE>
* PERIOD FROM 1/27/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Balanced Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 11.98 13.98 537,166
1997* 10.00 11.98 371,377
</TABLE>
* PERIOD FROM 1/27/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Growth & Income Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 12.68 16.29 3,974,242
1997* 10.00 12.68 2,163,555
</TABLE>
* PERIOD FROM 1/27/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Emerging Markets Debt Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.48 7.44 36,909
1997* 10.00 10.48 32,130
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Emerging Markets Equity Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.05 7.56 71,567
1997* 10.00 10.05 20,806
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Global Equity Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.25 11.54 152,473
1997* 10.00 10.25 29,979
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
International Magnum Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 9.86 10.65 75,635
1997* 10.00 9.86 17,042
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
PBHG Growth II Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.15 10.90 38,979
1997* 10.00 10.15 11,877
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Large Cap Value Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.27 14.05 154,968
1997* 10.00 10.27 18,440
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Select 20 Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.42 16.80 1,691,752
1997* 10.00 10.42 54,758
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Small Cap Value Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.43 11.48 248,781
1997* 10.00 10.43 51,781
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Technology & Communications Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 9.87 12.94 221,015
1997* 10.00 9.87 34,037
</TABLE>
Discovery Fund II Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 9.69 10.31 25,260
1997* 10.00 9.69 8,046
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Growth Fund II ** Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.25 13.08 67,817
1997* 10.00 10.25 15,649
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
** CURRENTLY CALLED MID CAP GROWTH FUND II
Opportunity Fund II Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.15 11.43 267,972
1997* 10.00 10.15 31,571
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
International Equity Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 9.89 10.33 29,229
1997* 10.00 9.89 3,206
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Post-Venture Capital Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.25 10.83 45,815
1997* 10.00 10.25 6,514
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
Small Company Growth Subaccount
<TABLE>
<CAPTION>
<S> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1998 10.19 9.82 93,472
1997* 10.00 10.19 28,265
</TABLE>
* PERIOD FROM 11/24/97 (COMMENCEMENT OF OPERATIONS) TO 12/31/97
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 age 70 1/2. Subsequent distributions must be made by
December 31 of each year.
12. You may select one of the following methods of distribution for
the assets of this IRA:
(a) Distribution over your life or your life and the life of a second
person designated by you;
(b) Distribution over a period certain not to exceed your life
expectancy or your life expectancy and that of a second person
designated by you;
(c) Single sum payment; or
(d) Partial withdrawals that, together with withdrawals from your
other IRAs, satisfy the minimum distribution requirements discussed
below.
(See Contract and Endorsement for a full description of these
distribution methods.)
13. Once distributions are required to begin, they must not be less
than the amount each year (determined by actuarial tables) which would
exhaust the value of all your IRAs over the required distribution
period, which is generally your life expectancy or the joint life and
last survivor expectancy of you and your spouse. You will be subject
to a 50% excise tax on the amount by which the distribution you
actually received in any year falls short of the minimum distribution
required for the year.
14. If you die after distribution of the IRA has commenced, the
remaining balance must continue to be distributed under the same or a
more rapid method of distribution.
15. If you die before distribution of the IRA commences, the entire
balance must be distributed to the beneficiary within five (5) years
unless:
(a) The beneficiary is your surviving spouse and the beneficiary
either treats the IRA as his or her own IRA or elects within a five
(5) year period to receive payments over his or her own life
expectancy commencing at any date prior to the date you would have
reached age 70 1/2; or
(b) The beneficiary is not your surviving spouse and the beneficiary
elects to have the IRA distributed over his or her life expectancy
commencing within one (1) year of your death.
16. You may rollover all or a portion of your IRA into another IRA or
individual retirement annuity and maintain the tax-deferred status of
these assets. Tax-free rollovers between IRAs may be made no more than
once every twelve months.
OTHER TAX CONSIDERATIONS
17. Distributions are taxed as ordinary income under Federal income
tax laws.
18. The tax treatment of single sum distributions under Section 402(e)
of the Code is not applicable to distributions from IRAs.
19. Reporting to the IRS will be required by you in the event that
special taxes or penalties described herein are due. You must file
Treasury Form 5329 with the IRS for each taxable year in which a
premature distribution takes place or less than the required minimum
amount is distributed from your IRA. The Tax Reform Act of 1986 also
requires you to report the amount of all distributions you received
from your IRA and the aggregate balance of all IRAs as of the end of
the calendar year.
PROHIBITED TRANSACTIONS
20. If any of the events prohibited by Section 4975 of the Code (such
as any sale, exchange or leasing of any property between you and your
IRA) occur during the existence of your IRA, your account will be
disqualified and the entire balance in your account will be treated as
if distributed to you, as of the first day of the year in which the
prohibited event occurs. This "distribution" would be subject to
ordinary income tax and, if you were under age 59 1/2 at the time, to
the 10% penalty tax on premature distributions.
21. If you or your beneficiary borrow any money under, or by use of,
all or a portion of your IRA, then the portion pledged will be treated
as if distributed to you, and will be taxable to you as ordinary
income and subject to the 10% penalty during the year in which you
make such a pledge.
FINANCIAL INFORMATION
22. The value of your investment will depend on how you allocate funds
between the 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.
23. 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.
PART B
INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
RETIREMENT RESERVES
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30 , 1999
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,
1999, without charge by calling 1-8 00-544-2442, or by accessing
the SEC Internet website at (http://www.sec.gov).
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
SHOULD BE READ TOGETHER WITH THE PROSPECTUS FOR THE CONTRACT.
TABLE OF CONTENTS PAGE
Service Agreements 49
Accumulation Units 49
Fixed Annuity Income Payments 49
Variable Annuity Income 49
Payments
Hypothetical Illustrations of 51
Annuity Income Payouts
General Information 55
Performance 55
Exchanges Among Subaccounts 70
After the Annuity Date
Unavailability of Annuity 70
Income Options in Certain
Circumstances
IRS Required Distributions 70
Safekeeping of Variable 71
Account Assets
Distribution of the Contracts 71
State Regulation 71
Legal Matters 71
Registration Statement 71
Independent Accountants 71
Financial Statements 71
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 " Total Return"). The Net Investment Factor is an index
that measures the investment performance of a Subaccount from one
Valuation Period to the next. The Net Investment Factor for each
Subaccount for a Valuation Period is determined by adding (a) and (b),
subtracting (c) and then dividing the result by (a) where:
(a) Is the value of the assets at the end of the preceding Valuation
Period;
(b) Is the investment income and capital gains, realized or
unrealized, credited during the current valuation period;
(c) Is the sum of:
(1) The capital losses, realized or unrealized, charged during the
current valuation period plus any amount charged or set aside for
taxes during the current Valuation Period; plus
(2) The deduction from the Subaccount during the current Valuation
Period representing a daily charge equivalent to an effective annual
rate of 0.80%.
The Net Investment Factor may be greater than or less than one. If it
is greater than one, the Accumulation Unit Value will increase; if
less than one, the Accumulation Unit Value will decrease.
FIXED ANNUITY INCOME PAYMENTS
The amount of monthly annuity income payments for a selected fixed
annuity income option or the fixed portion of a selected combination
annuity income option is calculated by applying the proceeds payable
to the income payment rates for the option selected. Annuity income
payments will be the larger of:
(a) The income based on the rates shown in the Contract's Annuity
Tables for the option chosen; and
(b) The income calculated by applying the proceeds as a single premium
to our single premium annuity rates in effect on the date of the first
income payment for the same 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 $282. 50 . The
investment selection is 50% in Portfolio A and 50% in Portfolio B.
At Annuitization Portfolio A Portfolio B
(a) Initial Monthly Annuity $ 141.25 $ 141.25
Income Payment
(b) Annuity Unit Value 1.23456 1.32465
(c) Income in Units 114.413 106.632
The monthly annuity income payment allocated to each Subaccount is
translated into Annuity Units using the Annuity Unit Value at the time
of annuitization. Since each Subaccount is likely to have a different
Annuity Unit Value, the total number of Annuity Units is not
informative, rather you need to look at:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
# Annuity Units X Annuity Unit Value = Annuity Income Payment
Portfolio A 114.413 1.23456 141.25
Portfolio B 106.632 1.32465 141.25
$ 282.50
</TABLE>
Assume that during the next month, the investment results for each
subaccount are:
Portfolio A Portfolio B
(d) Actual Net Investment Results .4074% .1652%
(e) Assumed Investment Results .2871% .2871%
(f) Relative Performance Factor 1.00120 .99878
Line (d) shows the net investment result after the charge for assuming
mortality and expense risks and the administrative charge
(0. 8 0% 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 114.413 106.632
(g) Annuity Unit Value (current) 1.23604 1.32303
(h) Monthly Income (in dollars) $ 141.42 $ 141.08
Note that the Annuity Unit Value and the Monthly Income for the
Portfolio A portion of the payment has increased whereas the opposite
is true for the Portfolio B portion. The second monthly annuity income
payment would be the sum for each Subaccount, or $282.5 0 .
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 114.413 106.632
(k) Annuity Unit Value (current) 1.42353 1.14774
(l) Monthly Income (in dollars) $ 162.87 $ 122.39
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 5.26 .
An illustration of annuity income payments under various rates appears
in the tables on pages 83 and 84 . The monthly
equivalents of the annual net returns of -1.7 5 %, 3.50%,
4.1 4 %, 6.1 1 %, 8.0 7 % and 10.0 4 % shown in
the tables are -0.15%, 0.29%, 0.34%, 0. 50 %, 0.65% and 0.80%.
HYPOTHETICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS
The following tables have been prepared to show how variable annuity
income payments under the Contract change with investment performance
over an extended period of time. The tables illustrate how monthly
annuity income payments would vary over time if the return on the
assets in the selected portfolios were a uniform gross annual rate of
0%, 5.3 5 %, 6%, 8%, 10% and 12%. The values would be different
from those shown if the returns averaged 0%, 5.3 5 %, 6%, 8%, 10%
or 12% but fluctuated over and under those averages throughout the
years.
The tables reflect the fact that the Total Return of the
Subaccounts is lower than the gross return of the selected portfolios.
The tables reflect the daily charge to the Subaccounts for assuming
mortality and expense risks, which is equivalent to an effective
annual charge of 0.75% and the daily administrative charge which is
equivalent to an effective annual charge of 0.05%. The amounts shown
in the tables also take into account the portfolios' management fees
and operating expenses which are assumed to be at an annual rate of
0.9 6 % of the average daily net assets of the selected
portfolios. This 0.9 6 % figure consists of assumed management
fees of 0. 57 % and assumed operating expenses of 0.3 9 %,
figures based on the average of current management fees and operating
expenses. Actual fees and expenses of the portfolios associated with
your Contract may be more or less than 0.9 6 %, will vary from
year to year, and will depend on how you allocate your investment
base. See the current prospectuses for the Funds for more complete
information. The monthly annuity income payments illustrated are on a
pre-tax basis. The Federal income tax treatment of annuity income
payments is generally described in the section of your current
prospectus entitled "Tax Considerations."
The tables show both the gross rate and the net rate. The difference
between gross and net rates represent the 0.80% risk and
administrative charges and the assumed 0.9 6 % 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 Subaccounts' Total Return will be 3.5% per year. Thus,
actual performance greater than a net return of 3.5% will result in
increasing annuity income payments and performance less than 3.5% per
year will result in decreasing annuity income payments. We may offer
alternative Assumed Investment Returns from which you may select.
Fixed annuity income payments remain constant. Initial monthly annuity
income payments under a fixed annuity income payout are generally
higher than initial payments under a variable income payout option.
These tables show the monthly income payments for several hypothetical
constant rates of return. Of course, actual investment performance
will not be constant and may be volatile. Actual monthly income
amounts would differ from those shown if the actual rate of return
averaged the rate shown over a period of years, but also fluctuated
above or below those averages for individual contract years. Upon
request and when you are considering an annuity income option, we will
furnish a comparable illustration based on your individual
circumstances.
ANNUITY PAY-OUT ILLUSTRATION
(100% VARIABLE PAYOUT)
ANNUITANT: John Doe
GROSS AMOUNT OF CONTRACT VALUE APPLIED: $50,000
DATE OF BIRTH: 2/1/3 4 STATE PREMIUM TAX: 0%
SEX: Male DATE OF ILLUSTRATION: 2/1/9 9
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: $311.0 0
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 YEAR CALENDAR YEAR AGE Net(2): -1.75% 3.50% 4.14% 6.11% 8.07% 10.04%
1 1999 65 283 283 283 283 283 283
2 2000 66 268 283 284 290 295 300
3 2001 67 255 283 286 297 308 319
4 2002 68 242 283 288 304 322 340
5 2003 69 229 283 290 312 336 361
10 2008 74 177 283 299 353 417 490
15 2013 79 136 283 308 400 517 666
20 2018 84 105 283 318 453 642 905
</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.
ANNUITY PAY-OUT ILLUSTRATION
(50% VARIABLE - 50% FIXED PAYOUT)
ANNUITANT: John Doe
GROSS AMOUNT OF CONTRACT VALUE APPLIED: $50,000
DATE OF BIRTH: 2 /1/34 STATE PREMIUM TAX: 0%
SEX: Male DATE OF ILLUSTRATION: 2 /1/99
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: $ 311.00
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 50% OF THE CONTRACT VALUE IS
ALLOCATED TO THE VARIABLE PAYOUT AND 50% TO THE FIXED PAYOUT
NET RETURN AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE, BUT
WILL NEVER BE LESS THAN $155.50. THE MONTHLY GUARANTEED PAYMENT OF
$155.50 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 YEAR CALENDAR YEAR AGE Net(2): -1.75% 3.50% 4.14% 6.11% 8.07% 10.04%
1 1999 65 297 297 297 297 297 297
2 2000 66 290 297 298 300 303 306
3 2001 67 283 297 299 304 309 315
4 2002 68 276 297 299 308 316 325
5 2003 69 270 297 300 312 323 336
10 2008 74 244 297 305 332 364 401
15 2013 79 224 297 309 356 414 489
20 2018 84 208 297 314 382 477 608
</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. Investments by the Subaccounts in
securities of foreign issuers may result in a foreign investment tax
credit which we will claim on our federal income tax filings.
PERFORMANCE
Performance information for any Subaccount may be compared, in reports
and advertising to: (1) the Standard & Poor's 500 Composite Stock
Price Index ("S & P 500"), Dow Jones Industrial Average ("DJIA"),
Donoghue's Money Market Institutional Averages; (2) other variable
annuity separate accounts or other investment products tracked by
Lipper Analytical Services, Morningstar, or the Variable Annuity
Research and Data Service, widely used independent research firms
which rank mutual funds and other investment companies by overall
performance, investment objectives, and assets; and (3) the Consumer
Price Index (measure for inflation) to assess the real rate of return
from an investment in a contract Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
annuity charges and investment management costs.
Total returns, yields and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising may also contain other information including (i) the
ranking of any subaccount derived from rankings of variable annuity
separate accounts or other investment products tracked by Lipper
Analytical Series or by rating services, companies, publications or
other persons who rank separate accounts or other investment products
on overall performance or other criteria, and (ii) the effect of tax
deferred compounding on a subaccount's investment returns, or returns
in general, which may be illustrated by graphs, charts, or otherwise,
and which may include a comparison, at various points in time, of the
return from an investment in a Contract (or returns in general) on a
tax-deferred basis (assuming one or more tax rates) with the return on
a taxable basis.
The tables below provide performance results for each Subaccount
through 12/31/9 8 . The performance information is based on the
historical investment experience of the Subaccounts and of the
Portfolios. It does not indicate or represent future performance.
TOTAL RETURN
Total returns quoted in advertising reflect all aspects of a
Subaccount's return, including the automatic reinvestment by the
separate account of all distributions and any change in the
Subaccount's value over the period. Average annual returns are
calculated by determining the growth or decline in value of a
hypothetical historical investment in the Subaccount over a stated
period, and then calculating the annually compounded percentage rate
that would have produced the same result if the rate of growth or
decline in value had been constant over the period. For example, a
cumulative return of 100% over ten years would produce an average
annual return of 7.18%, which is the steady rate that would equal 100%
growth on a compounded basis in ten years. While average annual
returns are a convenient means of comparing investment alternatives,
investors should realize that the subaccount's performance is not
constant over time, but changes from year to year, and that average
annual returns represent averaged figures as opposed to the actual
year-to-year performance of a subaccount.
Table 1 shows the average annual total return on a hypothetical
investment in the Subaccounts for the last year, from the date that
the Portfolios began operations, and, for Portfolios in existence for
five years or more, for five years, assuming that the Contract was
surrendered December 31, 199 8 . 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
12/31/98
(a) One Year Average Annual Total Return For Contracts Issued on
December 31, 1997:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Fidelity
Asset Manager 9.11% 14.11% 14.13%
Money Market (0.13)% 4.60% 4.62%
Investment Grade Bond 3.06% 7.96% 7.98%
Equity-Income 5.71% 10.71% 10.73%
Growth 33.35% 38.35% 38.37%
High Income (9.36)% (5.11)% (5.09)%
Overseas 6.83% 11.83% 11.85%
Index 500 22.28% 27.28% 27.30%
Asset Manager: Growth 11.61% 16.61% 16.63%
Contrafund 23.92% 28.92% 28.94%
Growth opportunities 18.60% 23.60% 23.62%
Balanced 11.68% 16.68% 16.70%
Growth & Income 23.53% 28.53% 28.55%
Strong
Discovery Fund II 1.56% 6.38% 6.40%
Opportunity Fund II 7.61% 12.61% 12.63%
Growth Fund II1 22.63% 27.63% 27.65%
Warburg Pincus
International Equity (.24)% 4.48% 4.50%
Small Company Growth (7.97)% (3.65)% (3.63)%
Post-Venture Capital .86% 5.64% 5.66%
PBHG
Growth II 2.44% 7.30% 7.32%
Large Cap Value 31.84% 36.84% 36.80%
Select 20 56.20% 61.20% 61.22%
Small Cap Value 5.03% 10.03% 10.05%
Technology & Communications 26.12% 31.12% 31.14%
Morgan Stanley Dean Witter
Emerging Markets Equity (28.06)% (24.80)% (24.78)%
Emerging Markets Debt (32.02)% (28.97)% (28.95)%
Global Equity 7.55% 12.55% 12.57%
International Magnum 3.17% 8.07% 8.09%
</TABLE>
(b) Average Annual Total Return If Contract Issued at Commencement
of Portfolio:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
Fidelity
Money Market 4/1/82 5.67% 5.67%
High Income 9/19/85 9.93% 9.93%
Equity-Income 10/9/86 13.22% 13.22%
Growth 10/9/86 16.14% 16.14%
Asset Manager 9/6/89 11.84% 11.84%
Investment Grade Bond 12/5/88 7.25% 7.25%
Overseas 1/28/87 7.46% 7.46%
Index 500 8/27/92 19.97% 19.97%
Asset Manager: Growth 1/3/95 19.97% 20.26%
Contrafund 1/3/95 27.15% 27.39%
Growth Opportunities 1/3/95 24.80% 25.06%
Balanced 1/3/95 14.42% 14.76%
Growth & Income 12/30/96 26.82% 27.99%
Strong
Discovery Fund II 5/8/92 10.23% 10.23%
Growth Fund II1 12/31/96 26.89% 28.06%
Opportunity Fund II 5/8/92 17.87% 17.87%
Warburg Pincus
International l Equity 6/30/95 4.19% 4.70%
Post-Venture Capital 9/30/96 5.33% 6.57%
Small Company Growth 6/30/95 12.86% 13.28%
PBHG
Select 20 9/26/97 43.02% 45.88%
Growth II 5/1/97 6.22% 8.51%
Large Cap Value 10/29/97 31.85% 35.09%
Small Cap Value 10/29/97 9.33% 12.67%
Technology & Communications 5/1/97 17.89% 20.02%
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Fidelity
Money Market 5.75%
High Income 10.00%
Equity-Income 13.29%
Growth 16.20%
Asset Manager 11.88%
Investment Grade Bond 7.29%
Overseas 7.52%
Index 500 20.00%
Asset Manager: Growth 20.29%
Contrafund 27.41%
Growth Opportunities 25.08%
Balanced 14.78%
Growth & Income 28.01%
Strong
Discovery Fund II 10.26%
Growth Fund II1 28.08%
Opportunity Fund II 17.90%
Warburg Pincus
International l Equity 4.72%
Post-Venture Capital 6.59%
Small Company Growth 13.30%
PBHG
Select 20 45.91%
Growth II 8.53%
Large Cap Value 35.11%
Small Cap Value 12.69%
Technology & Communications 20.04%
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
Morgan Stanley Dean Witter
Emerging Markets Debt 6/16/97 (21.75)% (19.95)%
Emerging Markets Equity 10/1//96 (13.88)% (12.87)%
Global Equity 1/2/97 16.60% 18.31%
International Magnum 1/2/97 5.90% 7.78%
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Morgan Stanley Dean Witter
Emerging Markets Debt (19.93)%
Emerging Markets Equity (12.85)%
Global Equity 18.33%
International Magnum 7.80%
</TABLE>
(c) Five Year Average Annual Total Return If Contract Issued on
December 31, 1993:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Fidelity
Asset Manager 10.58% 10.72% 10.74%
Money Market 4.09% 4.26% 4.29%
Investment Grade Bond 5.50% 5.66% 5.68%
Equity-Income 17.51% 17.62% 17.63%
Growth 20.46% 20.54% 20.57%
High Income 7.59% 7.73% 7.75%
Overseas 8.49% 8.62% 8.65%
Index 500 22.43% 22.50% 22.53%
Strong
Discovery Fund II 7.77% 7.92% 7.94%
Opportunity Fund II 15.76% 15.86% 15.88%
</TABLE>
(d) Ten Year Average Annual Total For Contracts Issued on December 31,
198 8 :
<TABLE>
<CAPTION>
<S> <C> <C> <C>
If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Money Market 4.60% 4.60% 4.64%
Investment Grade Bond 7.25% 7.25% 7.29%
High Income 9.94% 9.94% 9.98%
Equity-Income 14.44% 14.44% 14.48%
Growth 18.18% 18.18% 18.22%
Overseas 8.96% 8.96% 9.00%
</TABLE>
Average Annual Total Return from Separate Account Inception Date,
7/15/91:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subaccount Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Money Market 3.79% 3.79% 3.82%
High Income 11.90% 11.90% 11.93%
Equity Income 17.33% 17.33% 17.36%
Growth 19.63% 19.63% 19.66%
Overseas 9.19% 9.19% 9.22%
Investment Grade Bond 7.12% 7.12% 7.15%
Asset Manager 12.14% 12.14% 12.17%
</TABLE>
In addition to average annual returns, the Subaccounts may quote
unaveraged or cumulative total returns reflecting the simple change in
value of an investment over a stated period. Table 2 shows the
cumulative total return on a hypothetical investment in the
Subaccounts from the date the Portfolios began operations, and
assuming that the Contract was surrendered December 31, 199 8 .
For any Portfolio in existence five years or more, five year figures
are also shown. For any Portfolio in existence ten years or more,
figures are shown for a ten year period rather than for the life of
the Portfolio. The returns reflect the risk and administrative charge
0.80% on an annual basis (1% prior to November 1, 1997) and the
maintenance charge. Since the Contract is intended as a long-term
product, the table also shows the cumulative total return assuming
that no money was withdrawn from the Contract. The cumulative total
return is also shown for Contracts with at least $25,000 of premium
and assuming no money is withdrawn from the Contract. The cumulative
total return for these Contracts would be larger because there is
currently no maintenance charge on these larger Contracts. The first
column shows the cumulative total return if you surrender the Contract
at the end of the period, the second column shows the cumulative total
return if you do not surrender the Contract and the third column shows
the cumulative total return if you do not surrender the Contract and
no maintenance charge is applied to the Contract.
Table 2: Cumulative Total Return For Periods Beginning at Commencement
of Portfolios and Ending on 12/31/9 8 :
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
Fidelity
Money Market 4/1/82 151.86% 151.86%
Asset Manager 9/6/89 183.90% 183.90%
Investment Grade Bond 12/5/88 102.41% 102.41%
High Income 9/19/85 251.91% 251.91%
Overseas 1/28/87 136.02% 136.02%
Index 500 8/27/92 217.65% 217.65%
Growth Opportunities 1/3/95 142.30% 144.30%
Balanced 1/3/95 71.31% 73.31%
Equity Income 10/9/86 357.05% 357.05%
Growth 10/9/86 523.62% 523.62%
Contrafund 1/3/95 161.02% 163.02%
Asset Manager: Growth 1/3/95 106.97% 108.97%
Growth & Income 12/30/9 60.92% 63.92%
Morgan Stanley Dean Witter
Emerging Markets Debt 6/16/97 (31.49)% (29.05)%
Emerging Markets Equity 10/1/96 (28.55)% (26.65)%
Global Equity 1/2/97 35.84% 39.84%
International Magnum 1/2/97 12.12% 16.12%
PBHG
Growth II 5/1/97 10.60% 14.60%
Large Cap Value 10/29/97 38.40% 42.40%
Small Cap Value 10/29/97 11.05% 15.05%
Technology & Communications 5/1/97 31.59% 35.59%
Select 20 9/26/97 57.29% 61.29%
Strong
Discovery Fund II 5/8/92 91.16% 91.16%
Growth Fund II1 12/31/96 61.00% 64.00%
Opportunity Fund II 5/8/92 198.60% 198.60%
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Fidelity
Money Market 155.40%
Asset Manager 184.78%
Investment Grade Bond 103.21%
High Income 254.97%
Overseas 137.65%
Index 500 218.10%
Growth Opportunities 144.43%
Balanced 73.42%
Equity Income 360.27%
Growth 527.94%
Contrafund 163.21%
Asset Manager: Growth 109.13%
Growth & Income 63.98%
Morgan Stanley Dean Witter
Emerging Markets Debt (29.03)%
Emerging Markets Equity (26.61)%
Global Equity 39.89%
International Magnum 16.16%
PBHG
Growth II 14.63%
Large Cap Value 42.43%
Small Cap Value 15.08%
Technology & Communications 35.63%
Select 20 61.31%
Strong
Discovery Fund II 91.46%
Growth Fund II1 64.06%
Opportunity Fund II 199.05%
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
Warburg Pincus
International Equity 6/30/95 15.49% 17.49%
Post-Venture Capital 9/30/96 12.41% 15.41%
Small Company Growth 6/30/95 52.85% 54.85%
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Warburg Pincus
International Equity 17.57%
Post-Venture Capital 15.46%
Small Company Growth 54.95%
</TABLE>
(c) Cumulative Total Return For Five Year Period From 12/31/9 3
Through 12/31/9 8 :
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subaccount Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Asset Manager 65.37% 66.37% 66.55%
Money Market 22.22% 23.22% 23.36%
Investment Grade Bond 30.69% 31.69% 31.84%
Equity-Income 124.10% 125.10% 125.33%
Growth 153.63% 154.63% 154.89%
High Income 44.13% 45.13% 45.30%
Overseas 50.28% 51.28% 51.45%
Index 500 175.09% 176.09% 176.36%
Strong
Discovery Fund II 45.37% 46.37% 46.53%
Opportunity Fund II 107.85% 108.85% 109.07%
</TABLE>
(d) Cumulative Total Return For Ten Year Period From 12/31/8 8
Through 12/31/9 8
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Money Market 56.80% 56.80% 57.41%
High Income 158.12% 158.12% 159.12%
Equity-Income 285.73% 285.73% 287.16%
Growth 431.95% 431.95% 433.84%
Overseas 135.95% 135.95% 136.85%
Investment Grade Bond 101.53% 101.53% 102.30%
</TABLE>
1 Strong Growth Fund II is currently called Strong Mid Cap Growth
Fund II.
Cumulative Total Return From Separate Account Inception Date,
7/15/91:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subaccount Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Asset Manager 135.38% 135.38% 135.84%
Investment Grade Bond 67.18% 67.18% 67.52%
High Income 131.62% 131.62% 132.07%
Money Market 32.05% 32.05% 32.32%
Overseas 92.89% 92.89% 93.28%
Equity Income 229.96% 229.96% 230.57%
Growth 281.38% 281.38% 282.08%
</TABLE>
YIELDS
Some Subaccounts may also advertise yields. Yields quoted in
advertising reflect the change in value of a hypothetical investment
in the Subaccount over a stated period of time, not taking into
account capital gains or losses. Yields are annualized and stated as a
percentage. Yields do not reflect the impact of any contingent
deferred sales load. Yields quoted in advertising may be based on
historical seven day periods.
Current yield for Money Market Subaccount reflects the income
generated by a Subaccount over a 7 day period. Current yield is
calculated by determining the net change, exclusive of capital
changes, in the value of a hypothetical account having one
Accumulation Unit at the beginning of the period adjusting for the
maintenance charge, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period
return, and multiplying the base period return by (365/7). The
resulting yield figure is carried to the nearest hundredth of a
percent. Effective yield for the Money Market Subaccount is calculated
in a similar manner to current yield except that investment income is
assumed to be reinvested throughout the year at the 7 day rate.
Effective yield is obtained by taking the base period returns as
computed above, and then compounding the base period return by adding
1, raising the sum to a power equal to (365/7) and subtracting one
from the result, according the formula Effective Yield = [(Base Period
Return + 1) 365/7] - 1. Since the reinvestment of income is assumed in
the calculation of effective yield, it will generally be higher than
current yield. For the 7 day period ending on 12/31/9 8 , the
Money Market Subaccount had a current yield of 4. 24 % and an
effective yield of 4.3 3%. For Contracts on which there is
currently no maintenance charge, the current yield would be
4. 26 % and the effective yield would be 4. 35 %.
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 8 was
4. 77 % for the Investment Grade Bond Subaccount, 9.57 %
for the High Income Subaccount and 12.16 % for the Emerging
Markets Debt Subaccount. For Contracts on which there is no
maintenance charge, the 30 day yield would be 4. 79 % for the
Investment Grade Bond Subaccount, 9.59 % for the High Income
Subaccount and 12.18 % for the Emerging Markets Debt Subaccount.
EXCHANGES AMONG SUBACCOUNTS AFTER THE ANNUITY DATE
After the Annuity Date, you may instruct us to exchange the
value of some or all of the Annuity Units of a variable Subaccount
then credited to your Contract into an equal value of Annuity Units of
one or more other Subaccounts. The exchange shall be based on
the relative value of the Subaccount Annuity Units at the end of the
Valuation Period in which the request is received and will affect
income payments determined after that Valuation Period. To make such
an exchange , you must contact the Annuity Service Center. The
value of the Annuity Units exchanged must provide at least a $50
annuity income payment at the time of the exchange, unless all of the
Annuity Units of a Subaccount are being exchanged. We reserve the
right to limit ex changes af ter 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 balance sheets of Empire Fidelity Investments Life Insurance
Company as of December 31, 1998 and 1997, and the related statements
of income and comprehensive income, of stockholder's equity, and of
cash flows for each of the three years in the period ended December
31, 1998, and the statement of assets and liabilities of the Empire
Fidelity Investments Variable Annuity Account A as of December 31,
1998, and the related statements of operations and changes in net
assets for the years ended December 31, 1998 and 1997 included in this
registration statement have been included herein in reliance on the
reports of PricewaterhouseCoopers LLP, 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, 1998, 1997 AND 1996
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
FINANCIAL STATEMENTS
for the years ended December 31, 1998, 1997 and 1996
Page(s)
Report of Independent 1
Accountants
Balance Sheets 2
Statements of Income and 3
Comprehensive Income
Statements of Stockholder's 4
Equity
Statements of Cash Flows 5
Notes to Financial Statements 6-14
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Empire Fidelity Investments Life Insurance Company:
In our opinion, the accompanying balance sheets and the related
Statements of income and comprehensive income, of stockholder's equity
and of cash flows present fairly, in all material respects, the
financial position of Empire Fidelity Investments Life Insurance
Company (a wholly-owned ultimate subsidiary of FMR Corp.) at December
31, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
BOSTON, MASSACHUSETTS
January 25, 1999
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
BALANCE SHEETS
(in thousands, except share data)
December 31, 1998 and 1997
ASSETS 1998 1997
Debt securities available for $19,386 $19,176
sale
Cash and cash equivalents 2,363 629
Accrued investment income 331 325
Deferred policy acquisition 16,253 12,960
costs
Other assets 36 76
Separate account assets 1,018,128 793,336
Total assets $1,056,497 $826,502
LIABILITIES
Future contract and policy 4,919 7,183
benefits
Net deferred tax liability 3,508 2,663
Payable to parent and 1,903 1,021
affiliates
Other liabilities and accrued 200 148
expenses
Separate account liabilities 1,017,950 793,175
Total liabilities 1,028,480 804,190
Commitments and contingencies
(Note 8)
STOCKHOLDER'S EQUITY
Common stock, par value $10
per share
- - 200,000 shares authorized,
issued
- - and outstanding 2,000 2,000
Additional paid-in capital 12,500 11,500
Accumulated other 395 289
comprehensive income
Retained earnings 13,122 8,523
Total stockholder's equity 28,017 22,312
Total liabilities and $1,056,497 $826,502
stockholder's equity
The accompanying notes are an integral part of the financial
statements.
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands)
for the years ended December 31, 1998, 1997 and 1996
1998 1997 1996
Revenues:
Fees charged to contractholders $7,461 $6,933 $5,324
Net investment income 1,007 1,131 948
Net realized gains (losses) 205 123 (1)
Premium revenue 19 - -
8,692 8,187 6,271
Benefits and expenses:
Contract and policy benefits
and
expenses 220 357 336
Underwriting, acquisition and
insurance expenses (1) 1,187 3,997 1,679
1,407 4,354 2,015
Income before provision for
income
taxes 7,285 3,833 4,256
Provision for income taxes 2,686 1,452 1,595
Net income 4,599 2,381 2,661
Other comprehensive income,
before tax:
Unrealized gains (losses) on
securities:
Unrealized holding gains
(losses) arising
during the period 369 285 (365)
Less: reclassification
adjustment for
(gains) losses included in (205) (123) (1)
net income
Benefit (provision) for
income taxes
related to items of other
comprehensive
income (58) (57) 128
Other comprehensive income, 106 105 (238)
net of tax
Comprehensive income $4,705 $2,486 $2,423
(1) Includes affiliated party transactions (Note 6)
The accompanying notes are an integral part of the financial
statements.
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, 1998, 1997 and 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Accumulated
Additional Other Total
Common Paid-In Comprehensive Retained Stockholder's
Stock Capital Income Earnings Equity
Balance at December
31, 1995 $2,000 $10,000 $422 $3,481 $15,903
Capital contribution
from parent 1,500 1,500
Comprehensive income:
Net income 2,661 2,661
Other comprehensive
income (238) (238)
Balance at December
31, 1996 2,000 11,500 184 6,142 19,826
Comprehensive income:
Net income 2,381 2,381
Other comprehensive
income 105 105
Balance at December
31, 1997 2,000 11,500 289 8,523 22,312
Capital contribution
from parent 1,000 1,000
Comprehensive income:
Net income 4,599 4,599
Other comprehensive
income 106 106
Balance at December
31, 1998 $2,000 $12,500 $395 $13,122 $28,017
</TABLE>
The accompanying notes are an integral part of the financial
statements.
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, 1998, 1997 and 1996
1998 1997 1996
Cash flows from operating
activities:
Net income $4,599 $2,381 $2,661
Adjustments to reconcile net
income
to net cash provided by
operating
activities:
Amortization of bond discount
and
Premium 124 116 101
Realized (gain) loss on (205) (123) 1
investments
Depreciation 6 8 10
Change in deferred taxes 787 (172) 590
Change in assets and
liabilities:
Accrued investment income (6) (60) (4)
Addition to deferred policy
acquisition costs, net of
amortization (3,293) (371) (2,949)
Transfer (to) from separate (17) 89 253
accounts
Increase in future contract and
policy benefits (2,264) 126 (575)
Payable to parent and 882 477 31
affiliates, net
Other assets and liabilities 86 (153) (123)
Net cash provided by operating
activities 699 2,318 (4)
Cash flows from investing
activities:
Purchase of investments (9,043) (15,707) (5,060)
Proceeds from disposal of 9,078 13,078 4,265
investments
Net cash used in investing 35 (2,629) (795)
activities
Cash flows from financing
activities:
Capital contribution from 1,000 - 1,500
parent
Net cash provided by financing
activities 1,000 - 1,500
Net increase (decrease) in
cash and
cash equivalents 1,734 (311) 701
Cash and cash equivalents:
Beginning of year 629 940 239
End of year $2,363 $629 $940
The accompanying notes are an integral part of the financial
statements
1.Organization:
Empire Fidelity Investments Life Insurance Company (the "Company") is
a wholly-owned subsidiary of Fidelity Investments 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.
Beginning in 1998, the Company also offers a term life insurance
product with level premium paying periods of one, five, ten, fifteen
and twenty years.
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
reported as other comprehensive income. The discount or premium on
debt securities, excluding loan-backed bonds and structured
securities, is amortized using the effective interest method.
Amortization of loan-backed bonds and structured securities includes
anticipated prepayments over the estimated economic life of the
security. When actual prepayments differ significantly from
anticipated prepayments, the effective yield is recalculated to
reflect actual payments to date and anticipated future payments and
any resulting adjustment is included in investment income.
Investment income is recognized on the accrual basis. Realized gains
or losses on investments sold are determined by the specific
identification method. Unrealized and realized gains or losses on the
Company's funds retained in the separate account are reflected in
income.
Cash Equivalents
The Company considers all highly liquid instruments purchased with an
original maturity date of three months or less to be cash equivalents.
Cash equivalents represent amounts in demand deposit accounts and
money market mutual funds and are reported at fair value.
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 for variable annuity
contractholders. Premium revenues for term life insurance policies
are recognized as revenue over the premium-paying period.
Future Contract and Policy Benefits
Future contract and policy benefits are liabilities for fixed annuity
and life products. Such liabilities are established in amounts
adequate to meet the estimated future obligations of policies in
force. Future contract benefits for annuity products are computed
using interest rates ranging from 3.5% to 6.45% and approximate the
contractholder's account balance. The liabilities for future policy
benefits for traditional life insurance products are computed using
the natural reserve method and are based upon estimates as to future
investment yield, mortality and withdrawals that include provisions
for adverse deviation.
Deferred Policy Acquisition Costs
The costs of acquiring new business, principally first-year
commissions paid to Fidelity Insurance Agency, Inc. in accordance with
a contractual agreement as described in Note 6 and certain expenses
for traditional life policy issue and underwriting have been deferred.
These acquisition costs are being amortized in proportion to the
present value of expected future gross profits or expected future
policy premiums.
Income Taxes
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 current enacted tax rates.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments," requires disclosure of
fair value information about certain financial instruments (insurance
contracts, real estate, goodwill and taxes are excluded) for which it
is practicable to estimate such values, whether or not these
instruments are included in the balance sheet. The fair values and
methods used to estimate fair values of financial instruments are
disclosed throughout the notes to financial statements.
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.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (Statement No. 130). Statement No. 130
establishes standards for the reporting and display of comprehensive
income and its components in a full set of general-purpose financial
statements. All items that are required to be recognized under
accounting standards as components of comprehensive income are to be
reported in a financial statement that is displayed with the same
prominence as other financial statements. This statement stipulates
that comprehensive income reflect the change in equity of an
enterprise during a period from transactions and other events and
circumstances from non-owner sources. The Company adopted Statement
No. 130 for 1998, which resulted in reporting unrealized gains and
losses on investments available for sale in comprehensive income.
In December 1997, the AICPA issued Statement of Position 97-3,
"Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments" (SOP No. 97-3"). SOP No. 97-3 provides guidance on when
a liability should be recognized for guaranty fund and other
assessments and how to measure the liability. This statement allows
for the discounting of the liability if the amount and timing of the
cash payments are fixed and determinable. In addition, it provides
criteria for when an asset may be recognized for a portion or all of
the assessment liability or paid assessment that can be recovered
through premium tax offsets or policy surcharges. This statement is
effective for fiscal years beginning after December 15, 1998. The
Company believes that the adoption of this statement will not have a
material effect on the results of operations or financial position.
3. Investments:
The components of net investment income were as follows:
Years ended December 31,
1998 1997 1996
(in thousands)
Debt securities $1,182 $1,187 $1,029
Cash and cash equivalents 39 24 24
Investment in separate account 20 56 16
Total investment income 1,241 1,267 1,069
Investment expenses 234 136 121
Net investment income $1,007 $1,131 $ 948
Gross realized gains and losses from the sale of debt securities were
as follows:
Years ended December 31,
1998 1997 1996
(in thousands)
Gross realized gains $207 $131
Gross realized losses $ 2 $ 8 $1
The amortized cost and estimated fair value of debt securities, by
type of issuer, were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
December 31, 1998
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
U.S. Treasury securities $ 6,092 $401 $ (7) $ 6,486
Corporate securities 11,531 194 (8) 11,717
Loan-backed bonds and
structured securities 1,153 30 - 1,183
Total debt securities $18,776 $625 $(15) $19,386
December 31, 1997
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
U.S. Treasury securities $ 7,188 $311 $ 7,499
Corporate securities 10,008 116 $(1) 10,123
Loan-backed bonds and
structured securities 1,534 20 - 1,554
Total debt securities $18,730 $447 $(1) $19,176
</TABLE>
The amortized cost and estimated fair value of debt securities at
December 31, 1998, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
or prepayment penalties.
Estimated
Amortized Fair
Cost Value
(in thousands)
Due in 1 year or less $ 1,875 $ 1,887
Due after 1 year through 5 9,850 10,024
years
Due after 5 years through 10 5,466 5,836
years
Due after 10 years 432 456
Subtotal 17,623 18,203
Loan-backed bonds and
structured securities 1,153 1,183
$18,776 $19,386
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 income taxes attributable to
operations were as follows:
Years ended December 31,
1998 1997 1996
(in thousands)
Current $1,899 $1,624 $1,005
Deferred 787 (172) 590
Provision for income taxes $2,686 $1,452 $1,595
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:
Years ended December 31,
1998 1997
(in thousands)
Deferred income tax
liabilities:
Deferred policy $3,800 $2,813
acquisition costs
Unrealized gain on
securities
available for sale 214 156
Contractholder reserves (517) (325)
Other, net 11 19
Net deferred tax liability $3,508 $2,663
The Company paid FILI federal income taxes of $1,287,000, $1,136,000,
and $816,000 in 1998, 1997 and 1996, respectively, related to the
Company's separate-company basis net operating results for the year.
Payables to FILI of $392,000 and $427,000 have been recorded in 1998
and 1997, respectively. Intercompany tax balances are settled within
30 days of the actual tax payments. State premium taxes of $67,000,
$234,000, and $205,000 were paid in 1998, 1997, and 1996,
respectively. State income tax (payable) recoverable of ($85,000) and
$50,000 have been recorded in 1998 and 1997, respectively.
The effective tax rates approximate the statutory federal income tax
rates for the years ended 1998, 1997 and 1996.
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. Under the Insurance Code of the State of New York, the
Company may pay dividends only from profits arising from the business.
The Superintendent of Insurance must be notified 30 days prior to any
declaration of the dividend.
Net income and capital stock and surplus as determined in accordance
with statutory accounting practices were as follows:
Years ended December 31,
1998 1997 1996
(in thousands)
Statutory net income $ 1,933 $ 1,707 $ 305
Statutory capital stock
and surplus $14,276 $11,348 $9,641
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 an
agreement with FIA under which the Company pays FIA sales compensation
of 3% of payments received. The Company also pays FIA 37.5% of term
life insurance first-year premiums. The Company compensated FIA in
the amount of $2,888,000, $2,978,000 and $3,531,000 in 1998, 1997 and
1996, respectively.
The Company has administrative services agreements with FILI and FMR
Corp. and its subsidiaries whereby certain administrative and special
services are provided for the Company. The Company paid FILI and FMR
Corp. and its subsidiaries $961,000, $683,000 and $405,000 in 1998,
1997 and 1996, 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 $24,000, $20,000 and $9,000 were
charged to the Company in 1998, 1997 and 1996, 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 $74,000, $63,000 and $47,000 in 1998, 1997
and 1996, respectively.
The Company participates in various FMR Corp. stock-based compensatory
plans. The compensation is based on the change in the net asset value
of FMR Corp. common stock, as defined. The aggregate expenses related
to these plans charged to the Company were $18,000 in 1998.
7. Underwriting, Acquisition and Insurance Expenses:
Underwriting, acquisition and insurance expenses were as follows:
Years ended December 31,
1998 1997 1996
(in thousands)
Commissions, gross $2,888 $2,978 $3,531
Capitalization of deferred
policy acquisition costs (2,903) (2,978) (3,531)
Amortization of deferred
policy acquisition costs (390) 2,607 582
Taxes, licenses and fees 41 31 168
General insurance expenses 1,551 1,359 929
$1,187 $3,997 $1,679
Amortization of deferred policy acquisition costs is adjusted
periodically when estimates of future gross profits are revised to
reflect actual experience. In 1998 and 1997, the Company adjusted
amortization by $(1,095,000) and $1,850,000, respectively, to reflect
actual experience for investment performance, persistency and
inflation assumptions. This adjustment has been reflected in
amortization expense.
8. Commitment and Contingencies:
Reinsurance
The Company reinsures certain of its life insurance products risks
with other companies. The Company retains a maximum coverage per
individual life of $25,000 plus 30% of the excess over $25,000; the
maximum initial retention not to exceed $100,000.
The Company has entered into agreements to reinsure certain guarantee
provisions and mortality losses on its annuity contracts. Premiums
and deposits ceded under these reinsurance contracts were not material
to the financial statements.
The Company is contingently liable for claims reinsured that the
assuming company is unable to pay.
The Company is, from time to time, involved in various legal actions
concerning policy benefits and certain other matters. Those actions
are considered by the Company in estimating policy reserves and other
liabilities. The Company believes that the resolution of those
actions
should not have a material adverse effect on stockholder's equity.
STATEMENT OF ASSETS AND LIABILITIES
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
OF
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
ASSETS DECEMBER 31, 1998
Investments at current market
value:
Variable Insurance Products
Fund (VIP)
Money Market Portfolio - $ 60,823,021
60,823,021 shares (cost
$60,823,021)
High Income Portfolio - 25,486,247
2,210,429 shares (cost
$27,252,453)
Equity-Income Portfolio - 177,382,220
6,978,057 shares (cost
$130,450,090)
Growth Portfolio - 131,593,217
2,932,766 shares (cost
$90,335,204)
Overseas Portfolio - 25,641,874
1,278,896 shares (cost
$23,329,182)
Variable Insurance Products
Fund II (VIP II)
Investment Grade Bond 21,364,595
Portfolio - 1,648,503 shares
(cost $20,776,732)
Asset Manager Portfolio - 96,618,357
5,320,394 shares (cost
$81,938,604)
Index 500 Portfolio - 107,512,920
761,153 shares (cost
$81,401,449)
Asset Manager: Growth 32,946,100
Portfolio - 1,934,592 shares
(cost $27,563,473)
Contrafund Portfolio - 169,057,561
6,917,249 shares (cost
$109,536,191)
Variable Insurance Products
Fund III (VIP III)
Balanced Portfolio - 8,601,349
533,914 shares (cost
$7,858,475)
Growth & Income Portfolio - 69,111,358
4,279,341 shares (cost
$55,681,217)
Growth Opportunities 44,311,264
Portfolio - 1,936,681 shares
(cost $35,121,684)
Morgan Stanley Universal
Funds (MSUF)
Emerging Markets Equity 546,742
Portfolio - 76,898 shares
(cost $646,521)
Emerging Markets Debt 282,550
Portfolio - 46,320 shares
(cost $387,085)
Global Equity Portfolio - 1,999,162
152,143 shares (cost
$1,976,648)
International Magnum 912,330
Portfolio - 81,240 shares
(cost $1,007,344)
PBHG Insurance Series Funds
(PBHG)
Growth II Portfolio - 431,049
37,064 shares (cost $417,316)
Small Cap Value Portfolio - 2,937,388
253,005 shares (cost
$2,907,922)
Large Cap Value Portfolio - 2,347,270
164,490 shares (cost
$2,112,479)
Technology & Communications 2,932,095
Portfolio - 213,088 shares
(cost $2,507,953)
Select 20 Portfolio - 29,117,879
1,786,373 shares (cost
$24,291,775)
Strong Variable Insurance
Funds (SVIF)
Discovery Fund II Portfolio 279,046
- - 21,938 shares (cost
$278,044)
Growth Fund II Portfolio - 915,824
57,168 shares (cost $804,922)
Opportunity Fund II 3,225,067
Portfolio - 148,484 shares
(cost $3,295,369)
Warburg Pincus Trust (WPT)
Small Company Growth 953,257
Portfolio - 59,541 shares
(cost $1,002,111)
International Equity 301,996
Portfolio - 27,479 shares
(cost $337,693)
Post-Venture Capital 496,313
Portfolio - 42,132 shares
(cost $519,777)
Total Assets $ 1,018,128,051
NET ASSETS COMPRISED OF:
Variable Annuity Contracts $ 981,357,735
Annuity Reserves 36,592,039
Retained in Variable Account 178,277
by Empire Fidelity
Investments Life Insurance
Company
NET ASSETS $ 1,018,128,051
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
OF
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
VIP - MONEY MARKET VIP - HIGH INCOME
12/31/98 12/31/97 12/31/98 12/31/97
INCOME:
Dividends $ 2,645,742 $ 2,313,764 $ 1,889,480 $ 1,511,599
EXPENSES:
Mortality risk, expense 399,788 421,031 215,198 226,931
risk and adminis-
trative charges
Net investment income (loss) 2,245,954 1,892,733 1,674,282 1,284,668
Realized gain (loss) on sale 0 0 357,137 525,904
of fund shares
Realized gain distributions 0 0 1,200,608 186,827
Unrealized appreciation 0 0 (4,611,108) 1,549,932
(depreciation)
Net increase (decrease) in 2,245,954 1,892,733 (1,379,081) 3,547,331
net assets from operations
Payments received from 24,969,171 23,195,744 3,637,653 3,390,097
contract owners
Transfers between sub- (2,491,417) (29,837,690) (2,092,976) (936,028)
accounts and the fixed
account, net
Transfers for contract (4,418,522) (3,370,058) (945,611) (646,453)
benefits and terminations
Other transfers (to) from (11,185) (14,328) (26,576) (8,290)
Empire Fidelity
Investments Life Insurance
Co., net
Net increase (decrease) in 18,048,047 (10,026,332) 572,490 1,799,326
net assets from contract
transactions
Retained in (returned from) 5,829 (18,302) 6 (6,399)
Variable Annuity Account
A, net
Total increase (decrease) 20,299,830 (8,151,901) (806,585) 5,340,258
in net assets
Net assets at beginning of 40,523,191 48,675,092 26,292,832 20,952,574
year
Net assets at end of year $ 60,823,021 $ 40,523,191 $ 25,486,247 $ 26,292,832
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP - EQUITY-INCOME VIP - GROWTH
12/31/98 12/31/97 12/31/98 12/31/97
INCOME:
Dividends $ 2,627,503 $ 2,564,769 $ 474,706 $ 585,360
EXPENSES:
Mortality risk, expense 1,522,723 1,644,530 849,776 884,156
risk and adminis-
trative charges
Net investment income (loss) 1,104,780 920,239 (375,070) (298,796)
Realized gain (loss) on sale 13,591,971 5,142,383 5,631,524 6,114,534
of fund shares
Realized gain distributions 9,350,819 12,895,090 12,417,303 2,620,184
Unrealized appreciation (6,201,694) 20,917,615 17,537,413 9,612,136
(depreciation)
Net increase (decrease) in 17,845,876 39,875,327 35,211,170 18,048,058
net assets from operations
Payments received from 6,486,521 10,018,315 3,501,089 3,969,223
contract owners
Transfers between sub- (29,920,538) (8,413,443) (1,451,810) (11,918,863)
accounts and the fixed
account, net
Transfers for contract (6,382,415) (3,514,413) (2,742,013) (1,865,313)
benefits and terminations
Other transfers (to) from (27,652) (51,098) (65,813) (27,180)
Empire Fidelity
Investments Life Insurance
Co., net
Net increase (decrease) in (29,844,084) (1,960,639) (758,547) (9,842,133)
net assets from contract
transactions
Retained in (returned from) 1,014 (35,093) 2,670 (14,603)
Variable Annuity Account
A, net
Total increase (decrease) (11,997,194) 37,879,595 34,455,293 8,191,322
in net assets
Net assets at beginning of 189,379,414 151,499,819 97,137,924 88,946,602
year
Net assets at end of year $ 177,382,220 $ 189,379,414 $ 131,593,217 $ 97,137,924
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
VIP - OVERSEAS
12/31/98 12/31/97
INCOME:
Dividends $ 474,801 $ 426,309
EXPENSES:
Mortality risk, expense 211,685 260,337
risk and adminis-
trative charges
Net investment income (loss) 263,116 165,972
Realized gain (loss) on sale 1,010,697 1,113,127
of fund shares
Realized gain distributions 1,399,412 1,692,320
Unrealized appreciation (181,229) (306,443)
(depreciation)
Net increase (decrease) in 2,491,996 2,664,976
net assets from operations
Payments received from 693,445 1,594,379
contract owners
Transfers between sub- (1,856,247) (2,962,833)
accounts and the fixed
account, net
Transfers for contract (755,511) (875,577)
benefits and terminations
Other transfers (to) from (5,559) (7,253)
Empire Fidelity
Investments Life Insurance
Co., net
Net increase (decrease) in (1,923,872) (2,251,284)
net assets from contract
transactions
Retained in (returned from) 654 (7,153)
Variable Annuity Account
A, net
Total increase (decrease) 568,778 406,539
in net assets
Net assets at beginning of 25,073,096 24,666,557
year
Net assets at end of year $ 25,641,874 $ 25,073,096
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
VIP II - INVESTMENT GRADE VIP II - ASSET MANAGER
BOND
12/31/98 12/31/97 12/31/98 12/31/97
INCOME:
Dividends $ 486,031 $ 398,252 $ 2,869,728 $ 2,832,588
EXPENSES:
Mortality risk, expense 112,172 68,030 745,573 843,527
risk and adminis-
trative charges
Net investment income (loss) 373,859 330,222 2,124,155 1,989,061
Realized gain (loss) on sale 246,114 59,791 2,157,446 1,851,291
of fund shares
Realized gain distributions 57,665 0 8,609,183 7,105,476
Unrealized appreciation 349,622 150,894 (655,336) 4,465,968
(depreciation)
Net increase (decrease) in 1,027,260 540,907 12,235,448 15,411,796
net assets from operations
Payments received from 1,728,629 547,746 2,409,672 2,619,931
contract owners
Transfers between sub- 10,779,615 939,267 (4,609,720) (5,488,171)
accounts and the fixed
account, net
Transfers for contract (693,541) (446,731) (5,190,564) (3,352,040)
benefits and terminations
Other transfers (to) from (2,636) (4,655) (46,825) (17,911)
Empire Fidelity
Investments Life Insurance
Co., net
Net increase (decrease) in 11,812,067 1,035,627 (7,437,437) (6,238,191)
net assets from contract
transactions
Retained in (returned from) 213 (2,182) 746 (18,089)
Variable Annuity Account
A, net
Total increase (decrease) 12,839,540 1,574,352 4,798,757 9,155,516
in net assets
Net assets at beginning of 8,525,055 6,950,703 91,819,600 82,664,084
year
Net assets at end of year $ 21,364,595 $ 8,525,055 $ 96,618,357 $ 91,819,600
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP II - INDEX 500 VIP II - ASSET MANAGER:
GROWTH
12/31/98 12/31/97 12/31/98 12/31/97
INCOME:
Dividends $ 1,020,047 $ 487,160 $ 655,208 $ 0
EXPENSES:
Mortality risk, expense 786,442 591,939 258,975 254,365
risk and adminis-
trative charges
Net investment income (loss) 233,605 (104,779) 396,233 (254,365)
Realized gain (loss) on sale 10,983,929 2,915,326 2,050,502 505,357
of fund shares
Realized gain distributions 2,362,610 988,503 3,064,065 31,544
Unrealized appreciation 9,112,387 11,740,910 (667,729) 5,087,508
(depreciation)
Net increase (decrease) in 22,692,531 15,539,960 4,843,071 5,370,044
net assets from operations
Payments received from 7,795,761 9,783,621 2,687,915 4,997,152
contract owners
Transfers between sub- 5,150,893 16,761,121 (6,145,972) 5,149,974
accounts and the fixed
account, net
Transfers for contract (4,898,551) (2,103,893) (774,181) (364,345)
benefits and terminations
Other transfers (to) from (20,771) (19,321) (18,649) (8,770)
Empire Fidelity
Investments Life Insurance
Co., net
Net increase (decrease) in 8,027,332 24,421,528 (4,250,887) 9,774,011
net assets from contract
transactions
Retained in (returned from) 1,138 (1,164) 932 16,275
Variable Annuity Account
A, net
Total increase (decrease) 30,721,001 39,960,324 593,116 15,160,330
in net assets
Net assets at beginning of 76,791,919 36,831,595 32,352,984 17,192,654
year
Net assets at end of year $ 107,512,920 $ 76,791,919 $ 32,946,100 $ 32,352,984
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
VIP II - CONTRAFUND
12/31/98 12/31/97
INCOME:
Dividends $ 921,708 $ 908,559
EXPENSES:
Mortality risk, expense 1,164,617 1,148,575
risk and adminis-
trative charges
Net investment income (loss) (242,909) (240,016)
Realized gain (loss) on sale 7,420,537 4,737,833
of fund shares
Realized gain distributions 6,781,142 2,401,192
Unrealized appreciation 23,314,910 16,812,677
(depreciation)
Net increase (decrease) in 37,273,680 23,711,686
net assets from operations
Payments received from 9,833,935 12,859,035
contract owners
Transfers between sub- (9,187,032) 430,459
accounts and the fixed
account, net
Transfers for contract (3,689,396) (2,031,744)
benefits and terminations
Other transfers (to) from (34,791) (35,583)
Empire Fidelity
Investments Life Insurance
Co., net
Net increase (decrease) in (3,077,284) 11,222,167
net assets from contract
transactions
Retained in (returned from) 1,591 (17,981)
Variable Annuity Account
A, net
Total increase (decrease) 34,197,987 34,915,872
in net assets
Net assets at beginning of 134,859,574 99,943,702
year
Net assets at end of year $ 169,057,561 $ 134,859,574
</TABLE>
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS - CONTINUED
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
OF
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
VIP III - BALANCED VIP III - GROWTH &
INCOME
12/31/98 12/31/97* 12/31/98 12/31/97*
INCOME:
Dividends $ 118,737 $ 2,385 $ 0 $ 174,550
EXPENSES:
Mortality risk, expense 53,067 28,408 373,426 148,409
risk and adminis- trative
charges
Net investment income (loss) 65,670 (26,023) (373,426) 26,141
Realized gain (loss) on 450,249 171,319 1,665,467 139,286
sale of fund shares
Realized gain distributions 181,404 0 176,254 567,288
Unrealized appreciation 373,537 369,337 10,346,320 3,083,821
(depreciation)
Net increase (decrease) in 1,070,860 514,633 11,814,615 3,816,536
net assets from operations
Payments received from 1,250,792 1,763,874 14,497,348 10,522,938
contract owners
Transfers between sub- 1,823,584 2,425,981 15,938,572 14,682,913
accounts and the fixed
account, net
Transfers for contract (219,835) (27,898) (1,973,918) (163,575)
benefits and terminations
Other transfers (to) from (2,736) (2,344) (20,133) (10,836)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 2,851,805 4,159,613 28,441,869 25,031,440
net assets from contract
transactions
Retained in (returned from) 847 3,591 1,729 5,169
Variable Annuity Account
A, net
Total increase (decrease) in 3,923,512 4,677,837 40,258,213 28,853,145
net assets
Net assets at beginning of 4,677,837 0 28,853,145 0
year
Net assets at end of year $ 8,601,349 $ 4,677,837 $ 69,111,358 $ 28,853,145
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP III - GROWTH MSUF - EMERGING
OPPORTUNITIES MARKETS EQUITY
12/31/98 12/31/97* 12/31/98 12/31/97**
INCOME:
Dividends $ 380,494 $ 28,023 $ 2,945 $ 1,084
EXPENSES:
Mortality risk, expense 314,105 178,840 2,732 93
risk and adminis- trative
charges
Net investment income (loss) 66,389 (150,817) 213 991
Realized gain (loss) on 1,816,418 215,977 8,643 (41)
sale of fund shares
Realized gain distributions 1,322,669 39,232 0 4,793
Unrealized appreciation 4,981,718 4,207,862 (98,190) (1,589)
(depreciation)
Net increase (decrease) in 8,187,194 4,312,254 (89,334) 4,154
net assets from operations
Payments received from 6,213,014 12,056,601 113,147 113,615
contract owners
Transfers between sub- (1,374,459) 16,961,634 314,261 91,436
accounts and the fixed
account, net
Transfers for contract (1,936,492) (98,075) (399) 0
benefits and terminations
Other transfers (to) from (10,659) (6,260) (107) (30)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 2,891,404 28,913,900 426,902 205,021
net assets from contract
transactions
Retained in (returned from) 1,458 5,054 (1) 0
Variable Annuity Account
A, net
Total increase (decrease) in 11,080,056 33,231,208 337,567 209,175
net assets
Net assets at beginning of 33,231,208 0 209,175 0
year
Net assets at end of year $ 44,311,264 $ 33,231,208 $ 546,742 $ 209,175
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MSUF - EMERGING
MARKETS DEBT
12/31/98 12/31/97**
INCOME:
Dividends $ 28,061 $ 8,109
EXPENSES:
Mortality risk, expense 1,769 167
risk and adminis- trative
charges
Net investment income (loss) 26,292 7,942
Realized gain (loss) on (5,315) (1,346)
sale of fund shares
Realized gain distributions 0 3,519
Unrealized appreciation (92,451) (12,084)
(depreciation)
Net increase (decrease) in (71,474) (1,969)
net assets from operations
Payments received from 87,141 13,063
contract owners
Transfers between sub- (69,071) 331,693
accounts and the fixed
account, net
Transfers for contract (606) (6,182)
benefits and terminations
Other transfers (to) from (46) (1)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 17,418 338,573
net assets from contract
transactions
Retained in (returned from) 2 0
Variable Annuity Account
A, net
Total increase (decrease) in (54,054) 336,604
net assets
Net assets at beginning of 336,604 0
year
Net assets at end of year $ 282,550 $ 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>
SUBACCOUNTS INVESTING IN:
MSUF - GLOBAL EQUITY MSUF - INTERNATIONAL
MAGNUM
12/31/98 12/31/97** 12/31/98 12/31/97**
INCOME:
Dividends $ 13,192 $ 1,780 $ 5,184 $ 4,724
EXPENSES:
Mortality risk, expense 10,616 129 6,535 86
risk and adminis- trative
charges
Net investment income (loss) 2,576 1,651 (1,351) 4,638
Realized gain (loss) on 61,905 1 48,096 25
sale of fund shares
Realized gain distributions 12,573 3,801 3,219 315
Unrealized appreciation 25,498 (2,984) (89,038) (5,976)
(depreciation)
Net increase (decrease) in 102,552 2,469 (39,074) (998)
net assets from operations
Payments received from 768,755 191,357 374,546 86,824
contract owners
Transfers between sub- 826,399 113,505 411,166 82,134
accounts and the fixed
account, net
Transfers for contract (5,584) 0 (2,657) 0
benefits and terminations
Other transfers (to) from (277) (15) 391 (1)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 1,589,293 304,847 783,446 168,957
net assets from contract
transactions
Retained in (returned from) 1 0 (1) 0
Variable Annuity Account
A, net
Total increase (decrease) in 1,691,846 307,316 744,371 167,959
net assets
Net assets at beginning of 307,316 0 167,959 0
year
Net assets at end of year $ 1,999,162 $ 307,316 $ 912,330 $ 167,959
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PBHG - GROWTH II PBHG - SMALL CAP VALUE
12/31/98 12/31/97** 12/31/98 12/31/97**
INCOME:
Dividends $ 0 $ 0 $ 523 $ 0
EXPENSES:
Mortality risk, expense 1,846 47 17,718 158
risk and adminis- trative
charges
Net investment income (loss) (1,846) (47) (17,195) (158)
Realized gain (loss) on 18,137 (115) 100,408 106
sale of fund shares
Realized gain distributions 0 0 3,159 0
Unrealized appreciation 13,190 543 20,879 8,587
(depreciation)
Net increase (decrease) in 29,481 381 107,251 8,535
net assets from operations
Payments received from 133,860 58,005 500,142 102,904
contract owners
Transfers between sub- 141,208 68,703 1,799,420 436,360
accounts and the fixed
account, net
Transfers for contract (609) 0 (17,248) 0
benefits and terminations
Other transfers (to) from 23 (3) 9 15
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 274,482 126,705 2,282,323 539,279
net assets from contract
transactions
Retained in (returned from) (2) 2 (5) 5
Variable Annuity Account
A, net
Total increase (decrease) in 303,961 127,088 2,389,569 547,819
net assets
Net assets at beginning of 127,088 0 547,819 0
year
Net assets at end of year $ 431,049 $ 127,088 $ 2,937,388 $ 547,819
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
PBHG - LARGE CAP VALUE
12/31/98 12/31/97**
INCOME:
Dividends $ 5,924 $ 0
EXPENSES:
Mortality risk, expense 7,023 80
risk and adminis- trative
charges
Net investment income (loss) (1,099) (80)
Realized gain (loss) on 128,101 (61)
sale of fund shares
Realized gain distributions 12,521 0
Unrealized appreciation 232,358 2,433
(depreciation)
Net increase (decrease) in 371,881 2,292
net assets from operations
Payments received from 393,417 63,807
contract owners
Transfers between sub- 1,491,601 129,665
accounts and the fixed
account, net
Transfers for contract (103,177) 0
benefits and terminations
Other transfers (to) from (2,330) (2)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 1,779,511 193,470
net assets from contract
transactions
Retained in (returned from) 113 3
Variable Annuity Account
A, net
Total increase (decrease) in 2,151,505 195,765
net assets
Net assets at beginning of 195,765 0
year
Net assets at end of year $ 2,347,270 $ 195,765
</TABLE>
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS - CONTINUED
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
OF
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SUBACCOUNTS INVESTING IN:
PBHG - TECHNOLOGY & PBHG - SELECT 20
COMMUNICATIONS
12/31/98 12/31/97** 12/31/98 12/31/97**
INCOME:
Dividends $ 180 $ 0 $ 280 $ 0
EXPENSES:
Mortality risk, expense 9,548 144 76,660 202
risk and adminis- trative
charges
Net investment income (loss) (9,368) (144) (76,380) (202)
Realized gain (loss) on sale 60,345 (593) 837,116 1
of fund shares
Realized gain distributions 0 0 0 0
Unrealized appreciation 424,975 (833) 4,809,171 16,933
(depreciation)
Net increase (decrease) in 475,952 (1,570) 5,569,907 16,732
net assets from operations
Payments received from 505,953 138,324 4,096,805 115,860
contract owners
Transfers between sub- 1,590,028 228,607 19,231,620 437,871
accounts and the fixed
account, net
Transfers for contract (4,960) 0 (343,605) 0
benefits and terminations
Other transfers (to) from (208) (32) (7,357) (10)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 2,090,813 366,899 22,977,463 553,721
net assets from contract
transactions
Retained in (returned from) (24) 25 57 (1)
Variable Annuity Account
A, net
Total increase (decrease) in 2,566,741 365,354 28,547,427 570,452
net assets
Net assets at beginning of 365,354 0 570,452 0
year
Net assets at end of year $ 2,932,095 $ 365,354 $ 29,117,879 $ 570,452
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SVIF - DISCOVERY FUND II SVIF - GROWTH FUND II
12/31/98 12/31/97** 12/31/98 12/31/97**
INCOME:
Dividends $ 0 $ 0 $ 3 $ 1,828
EXPENSES:
Mortality risk, expense 1,761 48 4,395 66
risk and adminis- trative
charges
Net investment income (loss) (1,761) (48) (4,392) 1,762
Realized gain (loss) on sale 2,413 (44) 21,237 (79)
of fund shares
Realized gain distributions 3,035 0 0 3,930
Unrealized appreciation 2,341 (1,339) 112,638 (1,736)
(depreciation)
Net increase (decrease) in 6,028 (1,431) 129,483 3,877
net assets from operations
Payments received from 151,061 32,805 412,502 94,312
contract owners
Transfers between sub- 33,076 60,817 214,261 62,188
accounts and the fixed
account, net
Transfers for contract (2,353) 0 (1,040) 0
benefits and terminations
Other transfers (to) from (948) (10) 201 38
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 180,836 93,612 625,924 156,538
net assets from contract
transactions
Retained in (returned from) (9) 10 39 (37)
Variable Annuity Account
A, net
Total increase (decrease) in 186,855 92,191 755,446 160,378
net assets
Net assets at beginning of 92,191 0 160,378 0
year
Net assets at end of year $ 279,046 $ 92,191 $ 915,824 $ 160,378
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SVIF - OPPORTUNITY FUND
II
12/31/98 12/31/97**
INCOME:
Dividends $ 7,009 $ 324
EXPENSES:
Mortality risk, expense 17,744 156
risk and adminis- trative
charges
Net investment income (loss) (10,735) 168
Realized gain (loss) on sale (23,495) 0
of fund shares
Realized gain distributions 207,970 0
Unrealized appreciation (72,627) 2,325
(depreciation)
Net increase (decrease) in 101,113 2,493
net assets from operations
Payments received from 1,769,534 152,948
contract owners
Transfers between sub- 1,047,647 171,182
accounts and the fixed
account, net
Transfers for contract (19,037) 0
benefits and terminations
Other transfers (to) from (906) 87
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 2,797,238 324,217
net assets from contract
transactions
Retained in (returned from) (32) 38
Variable Annuity Account
A, net
Total increase (decrease) in 2,898,319 326,748
net assets
Net assets at beginning of 326,748 0
year
Net assets at end of year $ 3,225,067 $ 326,748
</TABLE>
** FOR THE PERIOD NOVEMBER 24, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WPT - SMALL COMPANY WPT - INTERNATIONAL
GROWTH EQUITY
12/31/98 12/31/97** 12/31/98 12/31/97**
INCOME:
Dividends $ 0 $ 0 $ 1,849 $ 256
EXPENSES:
Mortality risk, expense 6,633 143 2,721 16
risk and adminis- trative
charges
Net investment income (loss) (6,633) (143) (872) 240
Realized gain (loss) on sale 24,269 305 21,892 0
of fund shares
Realized gain distributions 0 0 0 1,767
Unrealized appreciation (56,918) 8,064 (33,271) (2,426)
(depreciation)
Net increase (decrease) in (39,282) 8,226 (12,251) (419)
net assets from operations
Payments received from 331,697 74,156 181,100 11,805
contract owners
Transfers between sub- 353,786 230,810 103,508 20,304
accounts and the fixed
account, net
Transfers for contract (6,083) 0 (1,957) 0
benefits and terminations
Other transfers (to) from (69) 17 1,965 (2,059)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 679,331 304,983 284,616 30,050
net assets from contract
transactions
Retained in (returned from) 16 (17) (2,058) 2,058
Variable Annuity Account
A, net
Total increase (decrease) in 640,065 313,192 270,307 31,689
net assets
Net assets at beginning of 313,192 0 31,689 0
year
Net assets at end of year $ 953,257 $ 313,192 $ 301,996 $ 31,689
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WPT - POST-VENTURE TOTAL
CAPITAL
12/31/98 12/31/97** 12/31/98 12/31/97
INCOME:
Dividends $ 0 $ 8 $ 14,629,335 $ 12,251,431
EXPENSES:
Mortality risk, expense 2,960 44 7,178,208 6,700,657
risk and adminis- trative
charges
Net investment income (loss) (2,960) (36) 7,451,127 5,550,774
Realized gain (loss) on sale 21,703 (281) 48,707,446 23,490,006
of fund shares
Realized gain distributions 0 0 47,165,611 28,545,781
Unrealized appreciation (24,571) 1,107 58,872,795 77,703,242
(depreciation)
Net increase (decrease) in (5,828) 790 162,196,979 135,289,803
net assets from operations
Payments received from 337,029 18,680 95,861,634 98,587,121
contract owners
Transfers between sub- 119,403 47,306 2,170,806 306,902
accounts and the fixed
account, net
Transfers for contract (21,038) 0 (35,150,903) (18,866,297)
benefits and terminations
Other transfers (to) from (26) (3) (303,670) (215,838)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 435,368 65,983 62,577,867 79,811,888
net assets from contract
transactions
Retained in (returned from) (5) 5 16,918 (88,786)
Variable Annuity Account
A, net
Total increase (decrease) in 429,535 66,778 224,791,764 215,012,905
net assets
Net assets at beginning of 66,778 0 793,336,287 578,323,382
year
Net assets at end of year $ 496,313 $ 66,778 $ 1,018,128,051 $ 793,336,287
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1998 and 1997
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
OF
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
1. 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. Under applicable
insurance law, the assets and liabilities of the Account are clearly
identified and distinguished from other assets and liabilities of
EFILI. The Account cannot be charged with liabilities arising out of
any other business of EFILI.
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.
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.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
consistently by the Account in preparation of the financial statements
in conformity with generally accepted accounting principles.
INVESTMENT VALUATION
Investments are made in the subaccounts and are valued at the reported
net asset values of such subaccounts.
ACCOUNTING FOR INVESTMENTS
Investment transactions are recorded on the trade date. Income from
dividends is recorded on the ex-dividend date. Realized gains and
losses on the sales of investments are computed on the basis of the
identified cost of the investment sold.
ANNUITY RESERVES
Annuity reserves are computed for contracts in the 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.
FEDERAL INCOME TAXES
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").
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.
ESTIMATES
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.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with the
current year presentation.
3. 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 1, 1997, the daily charge was
equivalent to an annual effective rate of 1% of net assets. On
November 1, 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.
4. 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 Company, Inc., an affiliate of
FMR Corp., is the transfer and shareholder servicing agent for the
VIP, VIP II and VIP III portfolios.
5. PURCHASES AND SALES OF INVESTMENTS
The following table shows aggregate cost of shares purchased and
proceeds from sales of each subaccount for the year ended December 31,
1998:
PURCHASES SALES
VIP - Money Market $ 76,265,550 $ 55,965,720
VIP - High Income 13,163,157 9,715,771
VIP - Equity-Income 17,832,276 37,219,747
VIP - Growth 25,775,182 14,488,826
VIP - Overseas 6,599,234 6,859,924
VIP II - Investment Grade Bond 18,791,983 6,548,179
VIP II - Asset Manager 16,434,342 13,137,695
VIP II - Index 500 40,667,222 30,042,537
VIP II - Asset Manager: Growth 8,260,163 9,049,820
VIP II - Contrafund 20,784,360 17,321,820
VIP III - Balanced 8,589,421 5,489,695
VIP III - Growth & Income 35,158,428 6,912,002
VIP III - Growth Opportunities 13,293,328 9,011,408
MSUF - Emerging Markets Equity 591,131 164,017
MSUF - Emerging Markets Debt 466,037 422,325
MSUF - Global Equity 2,259,900 655,457
MSUF - International Magnum 1,956,900 1,171,587
PBHG - Growth II 541,591 268,957
PBHG - Small Cap Value 3,795,436 1,527,154
PBHG - Large Cap Value 2,671,707 880,661
PBHG - Technology & 2,752,500 671,079
Communications
PBHG - Select 20 33,444,117 10,542,977
SVIF - Discovery Fund II 317,309 135,208
SVIF - Growth Fund II 964,942 343,371
SVIF - Opportunity Fund II 3,640,439 645,998
WPT - Small Company Growth 1,255,237 582,523
WPT - International Equity 866,700 585,014
WPT - Post-Venture Capital 873,109 440,706
6. UNIT VALUES
A summary of changes in accumulation units and ending unit and
contract values for variable annuity contracts at December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING PAYMENTS TRANSFERS CONTRACT UNITS ENDING DOLLARS
BALANCE RECEIVED BETWEEN TERMINATIONS BALANCE
UNITS FROM SUBACCOUNTS, UNIT
CONTRACT NET VALUE
OWNERS
JANUARY 1, 1998 TO DECEMBER
31, 1998
VIP - Money Market 2,510,803 1,647,401 (220,944) (323,209) 3,614,051 $ 16.72 $ 60,421,297
VIP - High Income 868,993 133,979 (69,329) (79,486) 854,157 $ 27.53 23,511,486
VIP - Equity-Income 4,666,312 172,712 (732,658) (183,827) 3,922,539 $ 43.62 171,099,633
VIP - Growth 2,229,721 79,040 (61,187) (76,136) 2,171,438 $ 59.17 128,489,157
VIP - Overseas 1,059,560 32,658 (88,408) (36,606) 967,204 $ 26.31 25,446,085
VIP II - Investment Grade Bond 442,121 96,445 553,565 (105,199) 986,932 $ 20.24 19,978,293
VIP II - Asset Manager 3,604,315 100,308 (164,174) (234,500) 3,305,949 $ 28.30 93,567,756
VIP II - Index 500 3,001,334 296,359 206,144 (230,330) 3,273,507 $ 31.60 103,456,330
VIP II - Asset Manager: Growth 1,760,200 154,243 (337,931) (92,554) 1,483,958 $ 20.93 31,065,071
VIP II - Contrafund 6,419,636 443,789 (451,601) (200,304) 6,211,520 $ 26.40 163,982,487
VIP III - Balanced 371,377 100,999 145,380 (80,590) 537,166 $ 13.98 7,511,155
VIP III - Growth & Income 2,163,555 1,107,895 1,071,230 (368,438) 3,974,242 $ 16.29 64,760,113
VIP III - Growth Opportunities 2,558,459 468,112 (96,266) (238,946) 2,691,359 $ 15.62 42,029,696
MSUF - Emerging Markets Equity 20,806 12,500 39,057 (796) 71,567 $ 7.56 541,172
MSUF - Emerging Markets Debt 32,130 9,702 (3,800) (1,123) 36,909 $ 7.44 274,713
MSUF - Global Equity 29,979 70,359 75,573 (23,438) 152,473 $ 11.54 1,759,437
MSUF - International Magnum 17,042 35,893 36,135 (13,435) 75,635 $ 10.65 805,735
PBHG - Growth II 11,877 13,257 13,845 0 38,979 $ 10.90 424,700
PBHG - Small Cap Value 51,781 45,359 159,664 (8,023) 248,781 $ 11.48 2,855,455
PBHG - Large Cap Value 18,440 34,250 123,327 (21,049) 154,968 $ 14.05 2,177,563
PBHG - Technology & 34,037 46,836 143,175 (3,033) 221,015 $ 12.94 2,860,409
Communications
PBHG - Select 20 54,758 310,910 1,419,936 (93,852) 1,691,752 $ 16.80 28,413,465
SVIF - Discovery Fund II 8,046 16,676 3,995 (3,457) 25,260 $ 10.31 260,538
SVIF - Growth Fund II 15,649 36,533 18,029 (2,394) 67,817 $ 13.08 887,378
SVIF - Opportunity Fund II 31,571 165,753 90,042 (19,394) 267,972 $ 11.43 3,062,422
WPT - Small Company Growth 28,265 33,486 33,545 (1,824) 93,472 $ 9.82 917,883
WPT - International Equity 3,206 16,976 9,236 (189) 29,229 $ 10.33 301,996
WPT - Post-Venture Capital 6,514 30,180 11,079 (1,958) 45,815 $ 10.83 496,313
$ 981,357,735
</TABLE>
6. UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING PAYMENTS TRANSFERS CONTRACT UNITS ENDING DOLLARS
BALANCE RECEIVED BETWEEN TERMINATIONS BALANCE
UNITS FROM SUBACCOUNTS, UNIT
CONTRACT NET VALUE
OWNERS
JANUARY 1, 1997 TO DECEMBER
31, 1997
VIP - Money Market 3,144,313 1,192,450 (1,961,731) 135,771 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) (50,211) 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 (42,969) 1,760,200 $ 17.95 31,593,890
VIP II - Contrafund 5,882,023 702,932 (5,288) (160,031) 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 (132,532) 2,163,555 $ 12.68 27,424,348
VIP III - Growth 1,076,440 1,563,569 (81,550) 2,558,459 $ 12.63 32,320,770
Opportunities *
MSUF - Emerging Markets 11,511 9,298 (3) 20,806 $ 10.05 209,175
Equity **
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 (743) 51,781 $ 10.43 540,062
PBHG - Large Cap Value ** 6,302 12,765 (627) 18,440 $ 10.27 189,335
PBHG - Technology & 14,091 22,932 (2,986) 34,037 $ 9.87 335,899
Communications **
PBHG - Select 20 ** 11,265 43,493 0 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
* 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:
In our opinion, the accompanying statement of assets and liabilities
and the related statements of operations and changes in net assets
present fairly, in all material respects, the financial position 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 at
December 31, 1998, and the results of its operations and the changes
in its net assets for each of the periods indicated therein, in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of Empire Fidelity
Investments Life Insurance Company's management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits, which include confirmation of investments at December
31, 1998 by correspondence with the funds, provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 25, 1999
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, 1998.
Statements of Operations and Changes in Net Assets for Empire
Fidelity Investments Variable Annuity Account A for Years ended
December 31, 1998 and 1997.
Report of PricewaterhouseCoopers LLP 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, 1998 and 1997.
Statements of Income for Empire Fidelity Investments Life Insurance
Company for the Years Ended December 31, 1998 and 1997.
Statements of Changes in Stockholder's Equity for Empire Fidelity
Investments Life Insurance Company for the Years Ended December 31,
1998 and 1997.
Statements of Cash Flows for Empire Fidelity Investments Life
Insurance Company for the Years Ended December 31, 1998 and 1997.
Notes to Financial Statements of Empire Fidelity Investments Life
Insurance Company.
Report of PricewaterhouseCoopers LLP 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 6)
(10) (a) Written consent of PricewaterhouseCoopers LLP. (Note 6)
(b) Written consent of Jorden Burt Boros Cicchetti Berenson & Johnson
LLP. (Note 6)
(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) Power of Attorney for Lena
Goldberg (Note 7) Powers of Attorney for Allan Brandon and Stephen P.
Jonas (Note 5)
(Note 1) Incorporated by reference from Post-Effective Amendment No.
5 to this Registration Statement filed electronically on April 27,
1997.
(Note 2) Incorporated by reference from Post-Effective Amendment No.
11 to Registration Statement No. 33-24400 filed April 24, 1997.
(Note 3) Incorporated by reference from Post-Effective Amendment No.
4 to this Registration Statement filed April 26, 1996.
(Note 4) Incorporated by reference from Post-Effective Amendment No. 7
to this Registration Statement filed April 28, 1998.
(Note 5) Incorporated by reference from Post-Effective Amendment No.
8 to this Registration Statement filed January 19, 1999.
(Note 6) Filed herein.
(Note 7) Incorporated by reference from Post-Effective Amendment No. 6
to Registration Statement No. 33-42376, filed on August 29, 1997, on
behalf of Empire Fidelity Investments Variable Annuity Account A.
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
ALLAN BRANDON, Director
STEPHEN P. JONAS, Director
DAVID C. WEINSTEIN, 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 Allan Brandon is One World Financial
Center, 200 Liberty Street, Tower A, New York, New York 10281. 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.
MELANIE CALZETTI-SPAHR, Executive Vice President, Operations
DAVID J. PEARLMAN, Vice President, Secretary and General Counsel
JOSEPH L. KURTZER Jr., Treasurer
The principal business address of Melanie Calzetti-Spahr, David J.
Pearlman, and Joseph L. Kurtzer Jr. 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, 1998 there were 724 Qualified Contracts and 10,688
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
Thomas G. McNichols Vice President, Operations
Lawrence G. Smith Vice President
(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 1998, 1997 and 1996 were
$607,200, $514,800 and $343,376, 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. 10 to the
Registration Statement to be signed on its behalf in the city of
Boston and the Commonwealth of Massachusetts, on this 15th day of
April, 1999.
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
(Registrant)
By: EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Rodney R. Rohda Attest: /s/ David J. Pearlman
Rodney R. Rohda, President David J. Pearlman
Chairman Secretary
Chief Executive Officer and Chief
Operating Officer
As required by the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities
indicated on this 15th day of April, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Signature Title
_/s/ Rodney R. Rohda__ President, Chairman and )
Director
Rodney R. Rohda (Chief Executive Officer) )
(Chief Operating Officer) )
_______________ )
Joseph L. Kurtzer Jr. Treasurer )
________________ )
J. Gary Burkhead Director )
________________ )
James C. Curvey Director )
) By:__/s/ David J. Pearlman
) David J. Pearlman
________________ ) (Attorney-in-Fact)
John J. Remondi Director )
________________ )
Lena G. Goldberg Director )
_______________ )
Roy Ballentine Director )
_______________ )
Peter Johannsen Director )
_______________ )
Stephen P. Jonas Director )
_______________ )
Malcolm MacKay Director )
_______________ )
Joshua Berman Director )
) By: __/s/ David J. Pearlman
_______________ ) David J. Pearlman
Allan Brandon Director ) (Attorney-in-Fact)
_______________ )
Floyd L. Smith Director )
_______________ )
David Weinstein Director )
</TABLE>
EXHIBIT INDEX
Exhibit
(9) Opinion and consent of David J. Pearlman, as to the legality of
securities being issued.
(10) (a) Written consent of PricewaterhouseCoopers LLP
(b) Written consent of Jorden Burt Boros Cicchetti Berenson & Johnson
LLP
FIDELITY (LOGO) FMR Corp. 82 Devonshire
INVESTMENTS(registered Street Boston MA 02109-3614
trademark) 617 563 7000
April 15, 1999
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. 10 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 12, 1999
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. 10 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 hereby consent to the use in the Statement of Additional
Information constituting part of this Post-Effective Amendment No. 10
to the registration statement on Form N-4 of our reports dated January
25, 1999, relating to the consolidated financial statements of Empire
Fidelity Investments Life Insurance Company and the financial
statements of Empire Fidelity Investments Variable Annuity Account A,
both of which appear in such Statement of Additional Information. We
also consent to the reference to us under the heading "Independent
Accountants" in such Statement of Additional Information.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
April 13, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000878467
<NAME> Empire Fidelity Investments Variable Annuity Account A
<SERIES>
<NUMBER> 1
<NAME> Empire Fidelity Investments Variable Annuity Account A
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> dec-31-1998
<PERIOD-END> dec-31-1998
<INVESTMENTS-AT-COST> 794,561
<INVESTMENTS-AT-VALUE> 1,018,128
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,018,128
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,018,128
<DIVIDEND-INCOME> 14,629
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 7,178
<NET-INVESTMENT-INCOME> 7,451
<REALIZED-GAINS-CURRENT> 75,873
<APPREC-INCREASE-CURRENT> 58,873
<NET-CHANGE-FROM-OPS> 162,197
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 224,792
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
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