As filed with the SEC on April 24, 2000
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. 11 [ X ]
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ ]
Amendment No. 12 [ 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, 1999 was filed March 30, 2000.
It is proposed that this filing will become effective (check
appropriate space):
immediately upon filing pursuant to paragraph (b) of rule 485
X on April 30, 2000, pursuant to paragraph (b) (1) (v) of rule 485
60 days after filing pursuant to paragraph (a) (1) of rule 485
on , pursuant to paragraph (a) (1) of rule 485
75 days after filing pursuant to paragraph (a) (2) of rule 485
on , pursuant to paragraph (a) (2) of rule 485
Page _ of _
Exhibit Index Appears on Page __
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-4
Part A
Item N-4 Item Heading in Prospectus.
Item 1. Cover Page Cover Page
Item 2. Definitions Glossary
Item 3. Synopsis or Highlights Summary of the Contract
Item 4. Condensed Financial Information 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 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 ASSET MANAGEMENT (" MORGAN
STANLEY "), PILGRIM BAXTER & ASSOCIATES, LTD. or PILGRIM BAXTER
VALUE INVESTORS, INC. ("PBHG"), STRONG CAPITAL MANAGEMENT, INC.
("STRONG"), and CREDIT SUISSE ASSET MANAGEMENT, LLC for the
WARBURG PINCUS TRUST PORTFOLIOS ("WARBURG PINCUS") ("Other Funds").
All mutual fund portfolios available in this prospectus are
collectively known as the "Funds."
We may add additional Subaccounts and portfolios in the future. We
credit interest on amounts allocated to the Guaranteed Account
at specified interest rates that vary from time to time.
LEGAL INFORMATION
This prospectus provides information that a prospective investor
should know before investing. We have filed additional information
about the Contract and the Variable Account with the U.S. Securities
and Exchange Commission in a Statement of Additional Information dated
April 30, 2000. The Statement of Additional Information is
incorporated by reference in this prospectus and is available without
charge by calling 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 30, 2000
PROSPECTUS CONTENTS
GLOSSARY 8
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 21
The Funds 21
FACTS ABOUT THE CONTRACT
Purchase of a Contract 32
Free Look Privilege 32
Investment Allocation of Your 32
Purchase Payments
Trading Among Variable 32
Subaccounts
Accumulation Units 33
Withdrawals 33
Signature Guarantee 34
Charges 34
Death Benefit 35
Required Distributions Upon 36
Death
Annuity Date 36
Selection of Annuity Income 36
Options
Fixed, Variable, or 36
Combination Annuity Income
Options
Types of Annuity Income 36
Options
Reports to Owners 38
The Guaranteed Account 38
MORE ABOUT THE CONTRACT
Tax Considerations 38
Other Contract Provisions 40
Selling the Contracts 41
Automatic Deduction Plan 41
Availability of Unisex 41
Dollar Cost Averaging 41
Automatic Rebalancing 41
Postponement of Payment 41
MORE ABOUT THE VARIABLE
ACCOUNT AND THE FUNDS
Changes in Investment Options 42
Total Return for a Subaccount 42
Voting Rights 42
Resolving Material Conflicts 42
Performance 42
Litigation 43
Appendix A: Accumulation Units 44
Table of Contents of the 56
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 - Used to measure the investment performance of a
Subaccount from one Valuation Period to the next.
TRADING AMONG VARIABLE SUBACCOUNTS - Transfers of amounts
among the investment options.
VALUATION PERIOD - The period of time from one determination of
Accumulation Unit Values and Annuity Unit Values to the next
determination of such values. Such determinations are made as of the
close of business (normally 4:00 p.m. Eastern Time) each day the New
York Stock Exchange is open for trading.
VARIABLE ACCOUNT - Empire Fidelity Investments Variable Annuity
Account A.
THIS PAGE INTENTIONALLY LEFT BLANK
SUMMARY OF THE CONTRACT
PURPOSE
(small solid bullet) This variable annuity Contract allows you, the
Owner(s), to accumulate funds on a tax-deferred basis by investing in
one or more variable Subaccounts.
(small solid bullet) The Contract also permits the Annuitant to
receive annuity income payments commencing on the Annuity Date, a date
the Owner selects. The Owner designates the Annuitant, the person upon
whose life annuity payments are based. The Annuitant may be an Owner
or someone else.
(small solid bullet) There is no assurance that values invested in the
Subaccounts will increase. As the Contract Owner(s), you bear the
investment risk with respect to those values.
(small solid bullet) The Contract also allows you to allocate funds to
a fixed-rate investment option funded through our general account (the
"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 33.
There are currently twenty-eight variable Subaccounts available as
investment options .
(small solid bullet) Five Subaccounts invest in shares of one of the
mutual fund portfolios of Fidelity Variable Insurance Products Fund.
The Variable Insurance Products Fund currently offers Money Market
Portfolio, High Income Portfolio, Equity-Income Portfolio, Growth
Portfolio, and Overseas Portfolio.
(small solid bullet) Five Subaccounts invest in shares of one of the
mutual fund portfolios of Fidelity Variable Insurance Products Fund
II. The Variable Insurance Products Fund II currently offers
Investment Grade Bond Portfolio, Asset Manager Portfolio, Index 500
Portfolio, Asset Manager: Growth Portfolio, and Contrafund Portfolio.
(small solid bullet) Four Subaccounts invest in shares of one
of the mutual fund portfolios of Fidelity Variable Insurance Products
Fund III. The Variable Insurance Products Fund III currently offers
Growth & Income Portfolio, Balanced Portfolio, Growth Opportunities
Portfolio and Mid Cap Portfolio .
(small solid bullet) The remaining Subaccounts invest in shares
of one of the mutual fund portfolios of Morgan Stanley, PBHG, Strong,
or Warburg Pincus.
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. The maximum partial
withdrawal is one that would reduce your Contract Value to $2,500.
Certain withdrawals may be subject to a federal penalty tax as well as
federal income tax. See TAX CONSIDERATIONS on page 40.
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 38. 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 38.
(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 37. 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 38.
CHARGES
We assess the following charges:
(1) ANNUAL MAINTENANCE CHARGE. This charge is currently set at $30 per
year and is guaranteed not to exceed $50 per year. 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 0 .05 %) against the
assets of each variable Subaccount for administrative expenses.
(3) MORTALITY AND EXPENSE RISK CHARGE. We assess a daily asset charge
(equivalent to an effective annual rate of 0.75%) for mortality and
expense risks. These daily asset charges are not assessed against
amounts allocated to the Guaranteed Account.
ADDITIONAL MORTALITY RISK CHARGE. We offer the Owner the opportunity
to elect a Death Benefit Rider at the time of purchase . 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 be
0.05% o f 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 36.
(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 calendar
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 34.
IMPORTANT
This summary provides only an overview of the more significant aspects
of the Contract. More detailed information is provided in the
subsequent sections of this prospectus and in your Contract. The
Contract constitutes the entire agreement between you and us and
should be retained.
Following are the various investment options available to you under
the Contract.
RETIREMENT RESERVES
Guaranteed Account Company Variable Account
Guaranteed Interest Fidelity Asset Manager Portfolio
Money Market Portfolio
Investment Grade Bond Portfolio
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
Overseas Portfolio
Index 500 Portfolio
Asset Manager: Growth Portfolio
Contrafund Portfolio
Growth Opportunities Portfolio
Balanced Portfolio
Growth & Income Portfolio
Mid Cap Portfolio
Morgan Stanley Emerging Markets Debt Portfolio
Emerging Markets Equity
Portfolio
Global Equity Portfolio
International Magnum Portfolio
PBHG Select 20 Portfolio
Growth II Portfolio
Select Value Portfolio
Small Cap Value Portfolio
Technology & Communications
Portfolio
Strong Mid Cap Growth Fund II
Portfolio
Opportunity Fund II Portfolio
Warburg Pincus International Equity Portfolio
Global Post-Venture Capital
Portfolio
Small Company Growth Portfolio
FEE TABLE
This information may assist you in understanding the various costs and
expenses that a Contract Owner will bear directly or indirectly. It
reflects expenses of the Separate Account as well as the Portfolios.
The tables below do not reflect any deductions for premium taxes or
federal income tax expenses that are determined solely from the amount
of premiums received. We 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 36 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 CONTRACTS ISSUED ON OR AFTER SEPTEMBER 13, 1999 DO NOT HAVE A
CONTINGENT DEFERRED SALES CHARGE . CONTRACTS ISSUED PRIOR TO
APRIL 30, 1995 NO LONGER HAVE A CONTINGENT DEFERRED SALES CHARGE.
CONTRACTS ISSUED BETWEEN APRIL 30, 1995 AND SEPTEMBER 10, 1999 NO
LONGER HAVE A CONTINGENT DEFERRED SALES CHARGE ON THEIR NEXT CONTRACT
ANNIVERSARY FOLLOWING SEPTEMBER 29, 1999. THE 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>
Management Fees Other Expenses Total Annual Expenses (after
reimbursement)
<S> <C> <C> <C>
FIDELITYA
Asset Manager 0.53% 0.09% 0.62%
Money Market 0.18% 0.09% 0.27%
Investment Grade Bond 0.43% 0.11% 0.54%
High Income 0.58% 0.11% 0.69%
Equity-Income 0.48% 0.08% 0.56%
Index 500 0.24% 0.04% 0.28%B
Growth 0.58% 0.07% 0.65%
Overseas 0.73% 0.14% 0.87%
Asset Manager: Growth 0.58% 0.12% 0.70%
Contrafund 0.58% 0.07% 0.65%
Growth Opportunities 0.58% 0.10% 0.68%
Balanced 0.43% 0.12% 0.55%
Growth & Income 0.48% 0.11% 0.59%
Mid Cap 0.57% 0.40% 0.97%
MORGAN STANLEY ASSET MANAGEMENT
Emerging Markets Debt 0.45% 0.98% 1.43%C
Emerging Markets Equity 0.42% 1.37% 1.79%C
Global Equity 0.47% 0.68% 1.15%C
International Magnum 0.29% 0.87% 1.16%C
PBHG
Select 20 0.85% 0.20% 1.05%D
Growth II 0.85% 0.35% 1.20%D
Select Value* 0.65% 0.30% 0.95%D
Small Cap Value 0.91% 0.29% 1.20%D
Technology & Communications 0.85% 0.24% 1.09%D
STRONG
Mid Cap Growth Fund II 1.00% 0.15% 1.15%E
Opportunity Fund II 1.00% 0.14% 1.14%E
WARBURG PINCUS
International Equity 1.00% 0.32% 1.32%F
Global Post-Venture Capital** 1.07% 0.33% 1.40%F
Small Company Growth 0.90% 0.24% 1.14%F
</TABLE>
* PREVIOUSLY CALLED LARGE CAP VALUE.
** PREVIOUSLY CALLED SELECT VAL UE.
A A PORTION OF THE BROKERAGE COMMISSIONS THAT CERTAIN FIDELITY
FUNDS PAY WAS USED TO REDUCE FUND EXPENSES. IN ADDITION, CERTAIN
FIDELITY FUNDS, OR FMR ON BEHALF OF CERTAIN
F UNDS, HAVE ENTERED INTO ARRANGEMENTS WITH THEIR CUSTODIAN
WHEREBY CREDITS REALIZED AS A RESULT OF UNINVESTED CASH BALANCES WERE
USED TO REDUCE A PORTION OF FUND EXPENSES. WITHOUT THESE
REDUCTIONS, THE TOTAL OPERATING EXPENSES PRESENTED IN THE TABLE WOULD
HAVE BEEN 0.5 7 % FOR EQUITY-INCOME PORTFOLIO, 0. 66 % FOR
GROWTH PORTFOLIO, 0.91% FOR OVERSEAS PORTFOLIO, 0. 63 % FOR ASSET
MANAGER PORTFOLIO, 0. 67 % FOR CONTRAFUND PORTFOLIO, 0. 70 %
FOR ASSET MANAGER: GROWTH PORTFOLIO, 0. 68 % FOR GROWTH
OPPORTUNITIES PORTFOLIO, 0.5 5 % FOR BALANCED PORTFOLIO,
0. 59 % FOR GROWTH AND INCOME PORTFOLIO AND 3.34% FOR MID CAP
PORTFOLIO.
B FMR AGREED TO REIMBURSE A PORTION OF INDEX 500 PORTFOLIO'S EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S MANAGEMENT
FEE, OTHER EXPENSES, AND TOTAL EXPENSES WOULD HAVE BEEN 0.24%,
0.1 0 % AND 0.3 4 %, RESPECTIVELY.
C MORGAN STANLEY ASSET MANAGEMENT, WITH RESPECT TO THE
PORTFOLIOS, HAS VOLUNTARILY AGREED TO WAIVE RECEIPT OF ITS MANAGEMENT
FEES AND AGREED TO REIMBURSE CERTAIN EXPENSES OF THE PORTFOLIO.
MORGAN STANLEY ASSET MANAGEMENT MAY TERMINATE THIS VOLUNTARY
WAIVER AND REIMBURSEMENT AT ANY TIME AT ITS SOLE DISCRETION. WITHOUT
WAIVERS AND REIMBURSEMENTS, "MANAGEMENT FEES," "OTHER EXPENSES" AND
"TOTAL ANNUAL EXPENSES," RESPECTIVELY, WOULD BE AS FOLLOWS: EMERGING
MARKETS DEBT PORTFOLIO (0.8 0 %, 0.98 %, 1.78 %);
EMERGING MARKETS EQUITY PORTFOLIO (1.25%, 1.37 %, 2.62 %);
GLOBAL EQUITY PORTFOLIO (0.80%, 0. 68 %, 1. 48 %);
INTERNATIONAL MAGNUM PORTFOLIO (0.80%, 0.87 %, 1. 67 %).
D PILGRIM BAXTER & ASSOCIATES, LTD. (THE "ADVISER") HAS VOLUNTARILY
AGREED TO WAIVE OR LIMIT ITS ADVISORY FEES OR ASSUME OTHER EXPENSES IN
AN AMOUNT THAT OPERATES TO LIMIT TOTAL OPERATING EXPENSES OF THE
PORTFOLIOS TO NOT MORE THAN 1.20% OF THE AVERAGE DAILY NET ASSETS OF
THE GROWTH II, SMALL CAP VALUE, TECHNOLOGY & COMMUNICATIONS AND SELECT
20 PORTFOLIOS AND TO NOT MORE THAN 1.00% OF THE AVERAGE DAILY NET
ASSETS OF THE SELECT VALUE PORTFOLIO, THROUGH DECEMBER 31,
1999. TOTAL OPERATING EXPENSES INCLUDE, BUT ARE NOT LIMITED TO,
EXPENSES SUCH AS INVESTMENT ADVISORY FEES, TRANSFER AGENT FEES AND
LEGAL FEES. SUCH WAIVERS OF ADVISORY FEES AND POSSIBLE ASSUMPTIONS OF
OTHER EXPENSES BY THE ADVISER IS SUBJECT TO A POSSIBLE REIMBURSEMENT
BY THE PORTFOLIOS IN FUTURE YEARS IF SUCH REIMBURSEMENT CAN BE
ACHIEVED WITHIN FOREGOING ANNUAL EXPENSE LIMITS. SUCH FEE
WAIVER/EXPENSE REIMBURSEMENT ARRANGEMENTS MAY BE MODIFIED OR
TERMINATED AT ANY TIME AFTER DECEMBER 31, 1999. ABSENT SUCH FEE
WAIVERS/EXPENSE REIMBURSEMENTS THE ADVISORY FEES AND ESTIMATED TOTAL
OPERATING EXPENSES FOR THE SMALL CAP VALUE PORTFOLIO WOULD BE 1.00%
AND 1. 29 %.
E STRONG CAPITAL MANAGEMENT, INC., THE INVESTMENT ADVISER, HAS
VOLUNTARILY AGREED TO CAP THE FUND'S TOTAL OPERATING EXPENSES AT
1.20%. THE ADVISER HAS NO CURRENT INTENTION TO, BUT MAY IN THE FUTURE,
DISCONTINUE OR MODIFY ANY WAIVER OF FEES OR ABSORPTION OF EXPENSES AT
ITS DISCRETION WITH APPROPRIATE NOTIFICATION TO ITS SHAREHOLDERS.
MANAGEMENT FEES, OTHER EXPENSES, AND TOTAL ANNUAL EXPENSES FOR
OPPORTUNITY II AND MID CAP GROWTH FUND II ARE CALCULATED ON AN
ANNUALIZED BASIS FROM THE BEGINNING OF THE FISCAL YEAR THROUGH THE
CURRENT QUARTER END. THE ADVISOR FOR MID CAP GROWTH FUND II IS
ABSORBING EXPENSES OF 0. 02 %. WITHOUT THESE ABSORPTIONS THE
EXPENSE RATIO WOULD HAVE BEEN 1. 17 %.
F MANAGEMENT FEES, OTHER EXPENSES AND TOTAL ANNUAL EXPENSES FOR THE
INTERNATIONAL EQUITY, GLOBAL POST-VENTURE CAPITAL AND SMALL
COMPANY GROWTH PORTFOLIOS ARE BASED ON ACTUAL EXPENSES FOR THE FISCAL
YEAR ENDED DECEMBER 31, 199 9 , NET ANY FEE WAIVERS OR EXPENSE
REIMBURSEMENTS. WITHOUT SUCH WAIVERS OR REIMBURSEMENTS, MANAGEMENT
FEES WOULD HAVE EQUALED 1.00%, 1.25% AND 0.90%; OTHER EXPENSES WOULD
HAVE EQUALLED 0.3 2 %, 0. 33 % AND 0.24%; AND TOTAL ANNUAL
EXPENSES WOULD HAVE EQUALLED 1.3 2 %, 1. 58 % AND 1.14% FOR
THE INTERNATIONAL EQUITY, GLOBAL POST-VENTURE CAPITAL AND SMALL
COMPANY GROWTH PORTFOLIOS, RESPECTIVELY. FEE WAIVERS AND EXPENSE
REIMBURSEMENTS OR CREDITS MAY BE DISCONTINUED AT ANY TIME.
EXAMPLES
If you assume that Contract Owner expenses are as shown above, and
that each Portfolio's annual return is 5% annually and its operating
expenses are just as described above, then for every $1,000 of
purchase payments, here's how much you would have paid in total
expenses if you surrendered your Contract after the number of years
indicated, or if you annuitized your Contract during the first year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
One Year Three Years Five Years Ten Years
FIDELITY
Asset Manager $ 61 $ 75 $ 88 $ 171
Money Market 58 64 70 132
Investment Grade Bond 61 73 84 162
High Income 62 77 92 179
Equity-Income 61 73 85 165
Growth 62 76 90 175
Overseas 64 83 101 199
Index 500 58 65 70 133
Asset Manager: Growth 62 78 92 180
Contrafund 62 76 90 175
Growth Opportunities 62 77 91 178
Balanced 61 73 84 164
Growth & Income 61 74 87 168
Mid Cap 65 86 106 209
MORGAN STANLEY ASSET MANAGEMENT
Emerging Markets Debt 69 100 130 257
Emerging Markets Equity 73 110 148 293
Global Equity 66 91 116 229
International Magnum 67 92 116 230
PBHG
Growth II 67 93 118 234
Select Value* 65 85 105 207
Select 20 65 88 111 218
Small Cap Value 67 93 118 234
Technology & Communications 66 90 113 222
STRONG
Mid Cap Growth Fund II 66 91 116 229
Opportunity Fund II 66 91 115 227
WARBURG PINCUS
International Equity 68 96 124 246
Global Post-Venture Capital** 69 99 128 254
Small Company Growth 66 91 115 227
</TABLE>
If you do not surrender your Contract or if you annuitize after the
first Contract year, here is what your total expenses would be on a
$1,000 investment, assuming a 5% annual return on your assets.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
One Year Three Years Five Years Ten Years
FIDELITY
Asset Manager $ 15 $ 45 $ 78 $ 171
Money Market 11 34 60 132
Investment Grade Bond 14 43 74 162
High Income 15 47 82 179
Equity-Income 14 43 75 165
Growth 15 46 80 175
Overseas 17 53 91 199
Index 500 11 35 60 133
Asset Manager: Growth 15 48 82 180
Contrafund 15 46 80 175
Growth Opportunities 15 47 81 178
Balanced 14 43 74 164
Growth & Income 14 44 77 168
Mid Cap 18 56 96 209
MORGAN STANLEY ASSET MANAGEMENT
Emerging Markets Debt 23 70 120 257
Emerging Markets Equity 26 81 138 293
Global Equity 20 62 106 229
International Magnum 20 62 106 230
PBHG
Growth II 20 63 108 234
Select Value 18 55 95 207
Select 20 19 58 101 218
Small Cap Value 20 63 108 234
Technology & Communications 19 60 103 222
STRONG
Mid Cap Growth Fund II 20 62 106 229
Opportunity Fund II 20 61 105 227
WARBURG PINCUS
International Equity 22 67 114 246
Global Post-Venture Capital** 22 69 118 254
Small Company Growth 20 61 105 227
</TABLE>
* PREVIOUSLY CALLED LARGE CAP VALUE.
** PREVIOUSLY CALLED POST-VENTURE CAPI TAL.
(small solid bullet) The above figures illustrate the combined effect
of all current charges. The examples should not be considered a
representation of past or future expenses. Actual expenses may be
greater or less than those shown.
(small solid bullet) The Other Funds' annual expenses and these
examples are based on data provided by the Other Funds. The company
has no reason to doubt the accuracy or completeness of that data, but
the company has not verified the Other Funds' figures. In preparing
the Other Funds' expense table and examples above, the company has
relied on the figures provided by the Other Funds.
FACTS ABOUT 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-nine Subaccounts in the Variable
Account. One of these Subaccounts, Strong Discovery Fund II Portfolio,
is no longer available as an investment option in the Contract and no
money may be allocated to this Subaccount. On or a bout May 26,
2000, any Contract values remaining in Strong Discovery Fund II
Portfolio will be exchanged to VIP III Mid Cap Portfolio. Five
Subaccounts invest exclusively in shares of a specific portfolio of
Fidelity Variable Insurance Products Fund. Five Subaccounts invest
e xclusively in shares of a specific portfolio of Fidelity Variable
Insurance Products Fund II. Four Subaccounts invest exclusively in
shares of a specific portfolio of Fidelity Variable Insurance Products
Fund III. The other 14 available investment options are offered by
four different mutual fund investment a dvisers.
THE FUNDS
FIDELITY:
The Fidelity Funds are Variable Insurance Products Fund, Variable
Insurance Products Fund II, and Variable Insurance Products Fund III.
Each is an open-end, diversified management investment company
organized by Fidelity Management & Research Company. Each is the type
of investment company commonly known as a series mutual fund. Each
fund includes a number of individual mutual fund portfolios.
The investment objectives of the Fidelity Funds are described
below. There is, of course, no assurance that any portfolio will meet
its investment objective.
VARIABLE INSURANCE PRODUCTS FUND
VIP MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE. Money Market Portfolio seeks as high a level of
current income as is consistent with the preservation of capital and
liquidity.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing in U.S. dollar-denominated money market
securities, including U.S. Government securities and repurchase
agreements, and entering into reverse repurchase agreements.
(small solid bullet) Investing more than 25% of total assets in the
financial services industry.
(small solid bullet) Investing in compliance with industry-standard
requirements for money market funds for the quality, maturity, and
diversification of investments.
INVESTOR PROFILE. The fund may be appropriate for investors who would
like to earn income at current money market rates while preserving the
value of their investment. An investment in the fund is not a deposit
of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the
fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
VIP HIGH INCOME PORTFOLIO
INVESTMENT OBJECTIVE. High Income Portfolio seeks a high level of
current income. Growth of capital may also be considered.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing at least 65% of total assets in
income-producing debt securities, preferred stocks and convertible
securities, with an emphasis on lower-quality debt securities.
(small solid bullet) Potentially investing in non-income producing
securities, including defaulted securities and common stocks.
(small solid bullet) Investing in companies in troubled or uncertain
financial condition.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
INVESTOR PROFILE. The fund is for long-term, aggressive investors who
understand the potential risks and rewards of investing in
lower-quality debt, including defaulted securities. Investors must be
willing to accept the fund's greater price movements and credit risks.
VIP EQUITY-INCOME PORTFOLIO
INVESTMENT OBJECTIVE. Equity-Income Portfolio seeks reasonable income.
The fund will consider the potential for capital appreciation. The
fund seeks a yield for its shareholders that exceeds the yield on the
securities comprising the S&P 500.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing at least 65% of total assets in
income-producing equity securities, which tends to lead to investments
in large cap "value" stocks.
(small solid bullet) Potentially investing in other types of equity
securities and debt securities, including lower-quality debt
securities.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
INVESTOR PROFILE. The fund may be appropriate for investors who are
willing to ride out stock market fluctuations in pursuit of
potentially above-average long-term returns. The fund is designed for
those who want some income from equity and bond securities, but also
want to be invested in the stock market for its long-term growth
potential.
VIP GROWTH PORTFOLIO
INVESTMENT OBJECTIVE. Growth Portfolio seeks to achieve 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 ofte n leads to more volatile investments than the
market as a whole .
VIP OVERSEAS PORTFOLIO
INVESTMENT OBJECTIVE. Overseas Portfolio seeks long-term growth of
capital.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing at least 65% of total assets in foreign
securities.
(small solid bullet) Investing primarily in common stocks.
(small solid bullet) Allocating investments across countries and
regions considering the size of the market in each country and region
relative to the size of the international market as a whole.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition, industry position, and market and economic
conditions to select investments.
INVESTOR PROFILE AND RISK:
(small solid bullet) Overseas Portfolio provides a means for investors
to diversify their own portfolios by participating in companies and
economies outside of the United States. By including international
investments in your portfolio, you can achieve additional
diversification and participate in growth opportunities around the
world.
(small solid bullet) It is important to note that investments in
foreign securities involve risks in addition to those of U.S.
investments. In addition to general risks, international investing
involves different or increased risks. The performance of
international funds depends upon currency values, the political and
regulatory environment, and overall economic factors in the countries
in which the fund invests.
VARIABLE INSURANCE PRODUCTS FUND II
VIP II ASSET MANAGER PORTFOLIO
INVESTMENT OBJECTIVE. Asset Manager Portfolio seeks high total return
with reduced risk over the long term by allocating its assets among
stocks, bonds, and short-term instruments.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Allocating the fund's assets among stocks, bonds,
and short-term and money market instruments.
(small solid bullet) Maintaining a neutral mix over time of 50% of
assets in stocks, 40% of assets in bonds, and 10% of assets in
short-term and money market instruments.
(small solid bullet) Adjusting allocation among asset classes
gradually within the following ranges: stock class (30% - 70%), bond
class (20% - 60%), and short-term/money market class (0% - 50%).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Analyzing an issuer using fundamental and/or
quantitative factors and evaluating each security's current price
relative to estimated long-term value in selecting investments.
INVESTOR PROFILE. The fund may be appropriate for investors who want
to diversify among stocks, bonds, short-term instruments, and other
types of securities. The fund's assets may also be invested in other
instruments that do not fall within these classes.
VIP II INVESTMENT GRADE BOND PORTFOLIO
INVESTMENT OBJECTIVE. Investment Grade Bond Portfolio seeks a s high
a level of current income as is consistent with the preservation
of capi tal.
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 long-term
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.
VIP III BALANCED PORTFOLIO
INVESTMENT OBJECTIVE. Balanced Portfolio seeks both income and growth
of capital.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing approximately 60% of assets in stocks
and other equity securities and the remainder in bonds and other debt
securities, including lower-quality debt securities when its outlook
is neutral.
(small solid bullet) Investing at least 25% of total assets in
fixed-income senior securities (including debt securities and
preferred stock).
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) With respect to equity investments, emphasizing
above-average income-producing equity securities, which tends to lead
to investments in stocks that have more "value" characteristics than
"growth" characteristics.
(small solid bullet) Analyzing a security's issuer using fundamental
factors and evaluating each security's current price relative to
estimated long-term value in selecting investments. The value of the
fund's investments will vary from day to day, and can decline in
response to interest rate increases, adverse issuer, political,
regulatory, or economic developments.
INVESTOR PROFILE. The fund may be appropriate for investors who seek a
balance between stocks and bonds. The fund may invest its assets in
securities of foreign issuers in addition to domestic issuers.
VIP III MID CAP PORTFOLIO
INVESTMENT OBJECTIVE. Mid Cap Portfolio seeks long-term
growth of capital.
PRINCIPAL INVESTMENT STRATEGIES:
(small solid bullet) Investing primarily in common stocks.
(small solid bullet) Investing at least 65% of total assets in
securities of companies with medium market capitalizations (those with
market capitalizations similar to companies in the S&P MidCap
400).
(small solid bullet) Potentially investing in companies with
smaller or larger market capitalizations.
(small solid bullet) Investing in domestic and foreign issuers.
(small solid bullet) Investing in either "growth" or "value" stocks
or both.
(small solid bullet) Using fundamental analysis of each issuer's
financial condition and industry position and market and economic
conditions to select investments.
IN VESTOR PROFILE. The fund may be appropriate for investors seeking
long-term growth of capital through equity securities, including
growth or value stocks, or a combination of both.
MORGAN STANLEY ASSET MANAGEMENT
EMERGING MARKETS DEBT PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks high total return by
investing primarily in Fixed Income Securities of government and
government-related issuers and, to a lesser extent, of corporate
issuers in emerging market countries.
(small solid bullet) APPROACH. Morgan Stanley Asset Management
seeks high total return by investing in a portfolio of emerging market
debt that offers low correlation to many other asset classes. Using
macroeconomic and fundamental analysis, Morgan Stanley Asset
Management seeks to identify developing countries that are
undervalued and have attractive or improving fundamentals. After the
country allocation is determined, the sector and security selection is
made within each country.
(small solid bullet) PROCESS. Morgan Stanley Asset Management's
global allocation team analyzes the global economic environment and
its impact on emerging markets. Morgan Stanley Asset Management
focuses on investing in countries that show signs of positive
fundamental change. This analysis considers macroeconomic factors,
such as GDP growth, inflation, monetary policy, fiscal policy and
interest rates and sociopolitical factors such as political risk,
leadership, social stability, and commitment to reform. In selecting
securities, Morgan Stanley Asset Management first examines
yield curves with respect to a country and then considers
instrument-specific criteria, including: (1) spread duration; (2) real
interest rates; and (3) liquidity. The Portfolio's holdings may range
in maturity from overnight to 30 years or more and will not be subject
to any minimum credit rating standard. Morgan Stanley Asset
Management may, when or if available, use hedging strategies,
including the use of derivatives to protect the Portfolio from
overvalued currencies or to take advantage of undervalued currencies.
EMERGING MARKETS EQUITY PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term capital
appreciation by investing primarily in Equity Securities of issuers in
emerging market countries.
(small solid bullet) APPROACH. Morgan Stanley Asset Management
seeks to maximize returns by investing in growth-oriented equity
securities in emerging markets. Morgan Stanley Asset
Management's investment approach combines top-down country
allocation with bottom-up stock selection. Investment selection
criteria include attractive growth characteristics, reasonable
valuations and managements with a strong shareholder value
orientation .
(small solid bullet) PROCESS. Morgan Stanley Asset Management's
global allocation team analyzes the global economic environment,
particularly its impact on emerging markets and allocates the
Portfolio's assets among emerging markets based on relative economic,
political, and social fundamentals, stock valuations and investor
sentiment. Morgan Stanley Asset Management invests within
countries based on the work of country specialists who conduct
extensive fundamental analysis of issuers within these markets and
seek to identify issuers with strong earnings growth prospects. To
manage risk, Morgan Stanley Asset Management emphasizes
thorough macroeconomic and fundamental research.
GLOBAL EQUITY PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term capital
appreciation by investing primarily in Equity Securities of issuers
throughout the world, including U.S. issuers.
(small solid bullet) APPROACH. Morgan Stanley Asset Management
seeks to maintain a diversified portfolio of global equity securities
based on individual stock selection. Morgan Stanley Asset
Management emphasizes a bottom-up approach to investing that seeks
to identify securities of undervalued issuers.
(small solid bullet) PROCESS. Morgan Stanley Asset Management
selects securities for investment from a universe of eligible issuers
consisting of approximately 3,200 companies in the Morgan Stanley
Capital International (MSCI) World Index. Morgan Stanley Asset
Management expects to invest at least 20% of the Portfolio's total
assets in the common stocks of U.S. issuers. The investment process
is value driven and based on individual stock selection. Morgan
Stanley Asset Management considers value criteria with an emphasis on
cash flow and the intrinsic value of company assets. Securities which
appear undervalued according to these criteria are then subjected to
in-depth fundamental analysis. Morgan Stanley Asset Management
conducts a thorough investigation of the issuer's balance sheet, cash
flow and income statement and assesses the company's business
franchise, including product, competitiveness, market positioning, and
industry structure. Meetings with senior company management are
integral to the investment process.
INTERNATIONAL MAGNUM PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term capital
appreciation by investing primarily in Equity Securities of non-U.S.
issuers domiciled in EAFE countries.
(small solid bullet) APPROACH. Morgan Stanley Asset Management
seeks to achieve superior long-term returns by creating a diversified
portfolio of undervalued international equity securities. To achieve
this goal, Morgan Stanley Asset Management uses a combination
of strategic geographic asset allocation and fundamental, value
oriented stock selection.
(small solid bullet) PROCESS. The Portfolio is managed using a
two-part process combining the expertise of investment teams based in
New York, London, Tokyo, and Singapore. The New York-based portfolio
management team decides upon the appropriate allocation of the
Portfolio's assets among Europe, Japan and developed Asia, including
Australia and New Zealand. Regional allocation decisions are based on
variety of factors, including relative valuations, earnings
expectations, macroeconomic factors, as well as input from the
regional stock selection teams and from the Morgan Stanley
Asset Management's Asset Allocation Committee, which is made up of
several of the Morgan Stanley Asset Management's most senior
investment officers. Once the allocations to Europe, Asia, and Japan
have been determined, three overseas investment teams in London (for
European stocks), Tokyo (for Japanese stocks) and Singapore (for Asian
stocks) decide which stocks to purchase for their respective
geographic regions. The regional portfolio management teams look for
stocks that they believe to be undervalued by the market. The regional
specialists analyze each company's finances, products and
management , typically meeting with each company's management,
before a stock is purchased for the Portfolio. The Portfolio invests
primarily in countries comprising the MSCI Europe, Australiasia, Far
East (EAFE) Index (the "EAFE Index"). EAFE countries include Japan,
most nations in Western Europe, and the more developed nations of
Asia, such as Australia, New Zealand, Hong Kong, and Singapore.
However, the Portfolio also may invest up to 5% of its assets in
countries not included in the EAFE Index.
PBHG
SELECT 20 PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Select 20 Portfolio, a non-diversified
Portfolio, seeks long-term growth of capital.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in growth securities of a
limited number (i.e., no more than 20 stocks) of large capitalization
companies that, in Pilgrim Baxter & Associates, Ltd.'s (the "Adviser")
opinion, have strong business momentum, earnings growth and
capital appreciation potential. These companies will generally have
market capitalization in excess of $1 billion.
(small solid bullet) The growth securities in the Portfolio are
primarily common stocks, but may also include other equity securities
such as warrants and rights to purchase common stocks, and convertible
securities.
(small solid bullet) The Portfolio is non-diversified, which means its
performance is dependent upon the securities of a smaller number of
companies. As a result, the impact of a single change in value
(positive or negative) of a single holding may be magnified.
GROWTH II PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks capital appreciation.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in growth securities of
small and medium sized companies that, in the Adviser's opinion, have
strong business momentum, earnings growth and capital
appreciation potential. These companies will generally have market
capitalizations or annual revenues between $500 million and $10
billion.
(small solid bullet) The growth securities in the Portfolio are
primarily common stocks, but may also include other equity securities
such as warrants and rights to purchase common stocks, and convertible
securities.
(small solid bullet) The Portfolio emphasizes small and medium sized
growth companies, so it may be more volatile than the stock market in
general, as measured by the S&P 500.
SELECT VALUE PORTFOLIO (PREVIOUSLY CALLED LARGE CAP VALUE
PORTFOLIO )
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term growth of capital
and income. Current income is a secondary objective.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in value securities of
no more than 30 large capitalization companies that, in the
opinion of the Adviser and Pilgrim Baxter Value Investors, Inc. (the
"Sub-Adviser"), are currently underpriced using certain financial
measurements, such as their price-to-earnings ratios.
(small solid bullet) The value securities in the Portfolio are
primarily common stocks, but may also include other equity securities
such as warrants and rights to purchase common stocks and convertible
securities. The Portfolio holds a limited number of stocks and the
impact of the change in value (positive or negative) of a single
holding may be magnified.
SMALL CAP VALUE PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks to achieve above-average
total return over a market cycle of three to five years, consistent
with reasonable risk.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in value securities of
companies whose market capitalizations are within the range of the
Russell 2000 index.
(small solid bullet) The value securities in the Portfolio are
primarily common stocks that, in the opinion of the Adviser and the
Sub-Adviser, are currently underpriced using certain financial
measurements, such as their price-to-earnings ratios, but may also
include other equity securities such as warrants and rights to
purchase common stocks and convertible securities.
(small solid bullet) The Portfolio's sector weightings are generally
within 10% of the Russell 2000's sector weightings. In addition, the
Portfolio generally has lower price-to-earnings ratios than the
Russell 2000.
(small solid bullet) The Portfolio emphasizes value securities of
smaller sized companies, so it is likely to be more volatile than the
stock market in general, as measured by the S&P 500 Index.
TECHNOLOGY & COMMUNICATIONS PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio , a non-diversified Portfolio,
seeks long-term growth of capital. Current income is incidental to
the Portfolio's objective.
(small solid bullet) Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in common stock of
companies doing business in the technology and communications
sectors of the market. The Portfolio is concentrated which means it
will invest 25% or more of its total assets in one or more of the
industries within these sectors. These industries may include computer
software and hardware, network and cable broadcasting, semiconductors,
defense and data storage and retrieval, and biotechnology.
(small solid bullet) The Portfolio offers investors significant
growth potential because it invests in companies that may be
responsible for breakthrough products or technologies or positioned to
take advantage of cutting-edge developments.
(small solid bullet) The Portfolio's holdings may range from
smaller companies developing new technologies or pursuing scientific
breakthroughs to large, blue chip firms with established track records
in developing, using or marketing scientific advances.
(small solid bullet) The Portfolio is non-diversified, which means
it its performance is dependent on the securities of a smaller number
or companies. As a result, the impact of a change in value (positive
or negative) of a single holding may be magnified.
(small solid bullet) Securities of technology companies are strongly
affected by worldwide scientific and technological developments and
governmental policies and, therefore, are generally more volatile than
securities of companies not dependent upon or associated with
technology issues.
STRONG
MID CAP GROWTH FUND II
OBJECTIVE AND STRATEGY
(small solid bullet) Mid Cap Growth Fund II seeks capital growth
through investments in mid-sized companies.
(small solid bullet) The Fund invests primarily in equity securities
that the Adviser believes have above-average growth prospects.
(small solid bullet) Under normal market conditions, the Fund will
invest at least 65% of its total assets in equity securities,
including (a) common stocks, (b) preferred stocks, and (c) securities
that are convertible into common or preferred stocks, such as warrants
and convertible bonds.
(small solid bullet) While the emphasis of the Fund is clearly on
equity securities, the Fund may invest a limited portion of its assets
in debt obligations when the Adviser perceives that they are more
attractive than stocks on a long-term basis.
(small solid bullet) The Fund may invest up to 35% of its total assets
in debt obligations, including intermediate-to-long term corporate or
U.S. government debt securities. Although the debt obligations in
which it invests will be primarily investment grade, the Fund may
invest up to 5% of its net assets in non-investment grade debt
obligations.
(small solid bullet) When the Adviser determines that market
conditions warrant a temporary defensive position, the Fund may invest
without limitation in cash and short-term fixed-income securities.
(small solid bullet) The Fund may invest up to 25% of its assets in
foreign securities, including both direct investments and investments
made through depository receipts.
(small solid bullet) The Fund generally will invest in mid-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 a
majority of their business outside the United States.
(small solid bullet) The Portfolio intends to invest
substantially all of its assets in common stocks, warrants and
securities convertible into or exchangeable for common stocks, and
will generally invest in at least three countries other than the
United States.
(small solid bullet) The Portfolio intends to diversif y across
securities of issues located in a number of foreign countries,
but from time to time may invest a significant portion of its assets
in a single country.
(small solid bullet) Although the Portfolio emphasizes developed
countries, it may also invest in emerging markets.
(small solid bullet) In choosing equity securities, the Portfolio
managers look for companies of any size whose securities appear to be
discounted relative to earnings, assets, or projected growth. The
Portfolio managers determine value based on research and analysis,
taking all relevant factors into account.
RISK. In addition to risks associated with equity securities,
international investment entails special risk considerations including
currency fluctuations, lower liquidity, economic instability,
political uncertainty, and differences in accounting methods.
GLOBAL POST-VENTURE CAPITAL PORTFOLIO (PREVIOUSLY CALLED
POST-VENTURE CAPITAL PORTFOLIO )
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks long-term growth of capital.
(small solid bullet) The Portfolio pursues an aggressive investment
strategy by investing primarily in equity securities of U.S. and
foreign companies considered to be in their post-venture capital
stage of development.
(small solid bullet) Under normal market conditions, the Portfolio
will invest up to at least 65% of its total assets in equity
securities of "post-venture capital companies." A post-venture capital
company is a company that has received venture capital financing
either (a) during the early stages of the company's existence or the
early stages of the development of a new product or service or (b) as
part of a restructuring or recapitalization of the company. In
addition, the investment of venture capital financing, distribution of
such company's securities to venture capital investors, or initial
public offering ("IPO"), will have been made within ten years prior to
the Portfolio's purchase of the company's securities.
(small solid bullet) The Portfolio will invest in three countries,
including the U.S.
(small solid bullet) Up to 10% of the Portfolio's assets may be
invested in private equity portfolios that invest in venture capital
companies.
(small solid bullet) A portion of of the Portfolio's assets may be
invested in assets of companies expected to experience "special
situations," such as mergers or reorganizations.
RISK. The main risks associated with the portfolio include risks
associated with equity securities, particularly small, start-up and
special-situation companies. 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. The Portfolio employs aggressive strategies
and may not be appropriate for all investors.
SMALL COMPANY GROWTH PORTFOLIO
OBJECTIVE AND STRATEGY
(small solid bullet) The Portfolio seeks capital growth by investing
primarily in equity securities of small sized U.S. companies that
represent attractive opportunities for capital growth.
(small solid bullet) The Portfolio considers a "small" company to be
one that has a market capitalization, measured at the time the
Portfolio purchases a security of that company, within the range of
capitalizations of companies represented in the Russell 2000 Index. As
of December 31, 199 9 , the Russell 2000 Index included
companies with market capitalizations between $ 17.8 million and
$ 1.3 billion. Companies that outgrow the definition of small
company after the Portfolio has purchased its securities continue to
be considered small for purposes of the Portfolio's investment
policies.
(small solid bullet) Small companies may (1) still be in the
development stage, (2) be older companies that appear to be entering a
new stage of growth, or (3) be companies providing products or
services with a high unit - volume growth rate.
(small solid bullet) The Portfolio may also invest in securities of
emerging - growth companies, which can be either small- or
medium-sized companies that have passed their start up phase and that
show positive earnings and prospects of achieving significant profit
and gain in a relatively short period of time. Emerging growth
companies generally stand to benefit from new products or services,
technological developments or changes in management and other factors
and include smaller companies experiencing unusual developments
affecting their market value.
(small solid bullet) The Portfolio is non-diversified and may invest a
greater portion of its assets in the securities of a smaller number of
issuers.
RISK. The Portfolio's main risks are the risks associated with equity
securities, particularly small, start-up, and special-situation
companies. The Portfolio may be subject to volatility resulting from
its non-diversified status.
FUNDS' AVAILABILITY TO SEPARATE ACCOUNTS
Shares of the Funds may also be sold to a variable life separate
account of 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 49.
THE INVESTMENT ADVISERS
FIDELITY
The investment Adviser for the Fidelity Funds is Fidelity Management &
Research Company, a registered adviser under the investment Advisers
Act of 1940. Fidelity Management & Research Company (FMR) is
the original Fidelity company and was founded in 1946. It provides a
number of mutual funds and other clients with investment research and
portfolio management services. It maintains a large staff of
experienced investment personnel and a full complement of related
support facilities. As of February 29, 2000, FMR managed over $829
billion in assets. The portfolios of the Fidelity Funds, as part
of their operating expenses, pay an investment management fee to
FMR . These fees are part of the Fidelity Funds' expenses. See
the prospectuses for the Fidelity Funds for discussions of the
Fidelity Funds' expenses. Fidelity Investments Money Management,
Inc. , a subsidiary of FMR, chooses certain investments for some of
the Fidelity Funds. Beginning January 1, 2001, FMR Co., Inc., a
subsidiary of FMR, will also choose certain investments for the
Fidelity Funds. Foreign affiliates of FMR may help choose
investments for some of the Fidelity Funds. BT is a wholly-owned
subsidiary of Bankers Trust Corporation . B T currently serves as
sub-adviser and custodian for the Index 500 Portfolio.
MORGAN STANLEY ASSET MANAGEMENT
On December 1, 1998, Morgan Stanley Asset Management Inc. changed
its name to Morgan Stanley Dean Witter Investment Management Inc. but
continues to do business in certain instances using the name Morgan
Stanley Asset Management. The investment Adviser for T he
Universal Institutional Funds, Inc. is Morgan Stanley Asset
Management, which is a wholly-owned subsidiary of Morgan Stanley
Dean Witter & Co., which is a preeminent global financial services
firm that maintains leading market positions in each of its three
primary businesses: securities, asset management and credit services.
Morgan Stanley Asset Management, a registered Investment
Adviser under the Investment Advisers Act of 1940, as amended, serves
as investment Adviser to numerous open-end and closed-end investment
companies, as well as to employee benefit plans, endowment funds,
foundations and other institutional investors. Morgan Stanley Asset
Management's principal business office is located at 1221 Avenue
of the Americas, New York, New York 10020.
PBHG
The investment Adviser for the PBHG Insurance Series Fund, Inc. is
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter"), a professional
investment management firm and registered investment Adviser that,
along with its predecessors, has been in business since 1982. The
controlling shareholder of Pilgrim Baxter is United Asset Management
Corporation ("UAM"), a New York stock exchange listed holding company
principally engaged through affiliated firms, in providing
institutional investments management services and acquiring
institutional investment management firms. UAM's headquarters are
located at One International Place, Boston, Massachusetts 02110. The
principal business address of the Adviser is 825 Dup o rtail
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 Dup o rtail
Road, Wayne, Pennsylvania 19087.
STRONG
The investment Adviser for the Strong Funds is Strong Capital
Management, Inc. The Adviser began conducting business in 1974. Since
then, its principal business has been providing continuous investment
supervision for individuals and institutional accounts, such as
pension funds and profit-sharing plans, as well as mutual funds,
several of which are funding vehicles for variable insurance products.
The Adviser's principal mailing address is P.O. Box 2936, Milwaukee,
Wisconsin 53201. Mr. Richard S. Strong, the Chairman of the Board of
the Fund, is the controlling shareholder of the Adviser.
WARBURG PINCUS
The investment Adviser for the Warburg Pincus Trust is Credit
Suisse Asset Management, LLC. Credit Suisse Asset Management, LLC is a
member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group, one of the
world's leading banks. Credit Suisse Asset Management companies manage
approximately $72 billion in the U.S. and $203 billion globally.
IMPORTANT
You will find more complete information about the Funds, including the
risks associated with each portfolio, in their respective
prospectuses. You should read them in conjunction with this
prospectus.
FACTS ABOUT THE CONTRACT
PURCHASE OF A CONTRACT
We offer the Contracts only in states in which we have obtained the
necessary approval. The Contracts are available on (1) a non-qualified
basis ("Non-qualified Contracts"), and (2) as Individual Retirement
Annuities ("IRAs") that qualify for special federal income tax
treatment ("Qualified Contracts").
(small solid bullet) Generally, you may purchase a Qualified Contract
only in connection with a "rollover" of funds from a qualified plan,
tax sheltered annuity, or IRA. To purchase a Qualified Contract you
must make a purchase payment of at least $10,000 and complete an
application form. There are other restrictive provisions limiting the
timing and amount of payments to and distributions from the Qualified
Contract. See TAX CONSIDERATIONS on page 45.
(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 45. 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 transfer s 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 46.
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 calendar
days after you receive it (the "free look period"). If your free
look period ends on a non-business day, the next business day will be
used. If you choose not to retain your Contract, return it to our
Annuity Service Center 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 o riginal 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. If your future payment allocation
instructions are incomplete (e.g. unclear or percentages do not equal
100%), your payments will be allocated to the VIP Money Market
Portfolio until we receive your complete instructions. In these cases,
we will not be responsible for the results of unit value changes or
lost market opportunity.
TRADING AMONG VARIABLE SUBACCOUNTS
You may currently exchange amounts among the variable Subaccounts
before the Annuity Date as often as you wish without charge. However,
excessive exchange activity can disrupt portfolio management strategy
and increase portfolio expenses, which are borne by all Contract
Owners participating in the portfolio regardless of their exchange
activity. Therefore, we reserve the right to limit the number of
exchanges permitted, but not to fewer than 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 on our Internet website.
(small solid bullet) TRADING BY TELEPHONE OR INTERNET
Empire Fidelity Investments Life reserves the right to revise or
terminate the telephone or Internet exchang es, li mit the amount
of or reject any exchange, as deemed necessary, at any time. We will
limit telephone/Internet exchanges to a total of eighteen per calendar
year. After this total is reached, you will only be permitted
to complete exchanges in writing. Multiple exchanges among the
Subaccounts in a single trading day count as one exchange. We will
not accept exchange requests via fax or e lectronic mail.
We will not be responsible for any losses resulting from unauthorized
telephone or Internet exchanges if we follow reasonable procedures
designed to verify the identity of the caller or Internet user. We may
record calls. You should verify the accuracy of your confirmation
statements immediately after you receive them and notify the
Annuity Service Center promptly of any discrepancies as we will not be
responsible for resulting losses due to unit value changes after 10
calendar days from the mailing of the report.
(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 INVESTMENT
OPTION S
When you request an exchange between variable Subaccounts, the
redemption of the requested amount from the Subaccount will always be
effected as of the end of the Valuation Period in which we receive the
request at our Annuity Service Center. We will generally credit that
amount to the new Subaccount at the same time.
However, when (1) you are making an exchange to a Subaccount which
invests in a portfolio that accrues dividends on a daily basis and
requires federal funds before accepting a purchase order, and (2) the
Subaccount from which the exchange is being made is investing in an
equity portfolio in an illiquid position due to substantial
redemptions or exchanges that require it to sell portfolio securities
in order to make funds available, then the crediting of the amount
exchanged to the new Subaccount may be delayed. This delay will be
until the Subaccount from which the exchange is being made obtains
liquidity through the earliest of the portfolio's receipt of proceeds
from sales of portfolio securities, new contributions by Contract
Owners, or otherwise, but no longer than seven days. During this
period, the amount exchanged will be uninvested.
(small solid bullet) 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, 200 1 , 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 transfers after the Annuity Date are subject
to different limitations. See FIXED, VARIABLE, OR COMBINATION ANNUITY
INCOME OPTIONS on page 45.
ACCUMULATION UNITS
When you allocate your 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 51.
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 51.
(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 $100,000.
3. The check is being mailed to a different address than the one on
your Contract (record address).
4. The check is made payable to someone other than the Owner.
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 any circumstances where we deem it necessary for your
protection .
You should be able to obtain a signature guarantee from a bank, broker
dealer (including Fidelity Investor Centers), credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
CHARGES
The following are all the charges we make under your Contract.
1. PREMIUM TAXES. In general, we do not currently deduct any amount
from your payments for premium taxes. 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 45. The expense risk we assume is the risk
that the costs of issuing and administering the Contracts will be
greater than we expected when setting the administrative charges.
ADDITIONAL MORTALITY RISK CHARGE. We offer the Owner the opportunity
to elect a Death Benefit Rider at the time of the Contract
purchase . If the Rider is elected by the Owner, we will deduct a
mortality charge once each quarter. The amount of the charge for each
quarter will be 0.05% of the Contract Value on the date of the
quarterly charge. There will be no charges made once the Annuitant
reaches their 85th birthday.
5. WITHDRAWAL CHARGE. Contracts issued on or after September 13,
1999 do not have a withdrawal charge (i.e. a contingent deferred sales
charge). Contracts issued prior to April 30, 1995 no longer have a
withdrawal charge. Contracts issued between April 30, 1995 and
September 10, 1999 no longer have a withdrawal charge on their next
Contract Anniversary following September 29, 1999.
The following discussion only applies to Contracts subject to a
withdrawal charge as defined in the preceding paragraph. The
withdrawal charge is assessed to compensate us for the expenses of
selling and distributing the Contracts. In addition, we will impose a
withdrawal charge for sales expenses on certain partial withdrawals
during the first five Contract Years. We do not assess any withdrawal
charge on the death of the Owner or Annuitant. We currently assess a
withdrawal charge upon annuitization if the Contract has been in
existence for less than one year.
Bearing this in mind, the Contract should be viewed as a long-term
investment and insurance product. You may surrender the Contract
without any withdrawal charges for thirty days after notification is
mailed to you of any of the following events: (1) the renewal interest
rate on any portion of your Contract Value allocated to the 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.
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.
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.
We provide the opportunity to purchase an optional Death
Benefit Rider at the time of issuing the Contract. This option is
not available after the purchase of the Contract. There is a charge
for the Death Benefit Rider as described on page .
If elected, the Death Benefit will 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, before the Annuitant reaches age 80, plus any
purchase payments received by the company after such Contract
Anniversary, reduced for any withdrawals after such Contract
Anniversary as described in the next sentence. Any withdrawals after
such Contract Anniversary will reduce the amount otherwise payable
under this paragraph proportionately to the reduction in the Contract
Value caused by the withdrawal.
For Contracts with net purchase payments greater than $4 million, this
value can never exceed the amount calculated above, multiplied by $4
million, divided by the net purchase payments.
If the death of the Annuitant occurs after his or her 85th birthday,
the Death Benefit will be the Contract Value on the date that proof of
death is received by the Company at the Annuity Service Center.
The Owner may elect to terminate the Death Benefit rider by providing
advance written notice to the company. Termination will be effective
as of the date the next charge is scheduled after the company receives
such notice at the Annuity Service Center.
REQUIRED DISTRIBUTIONS UPON DEATH
Federal tax law requires that if any Owner dies before the Annuity
Date, the entire interest in the Contract must be distributed within 5
years after the death of the Owner (including any Owner who is also
the Annuitant). However, this requirement does not apply to
Beneficiaries designated by the Owner if (1) the entire interest
is payable over the lifetime (or over a period not extending beyond
the life expectancy) of the recipient with distributions
beginning within one year of the date of death and the recipient makes
this e lection within 60 days of the date of death; or (2) the
Owner's spouse is the recipient, in which case the spouse may elect to
co ntinue 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%.
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) 97.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 and during the lifetime of the survivor, a designated second
person. 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 statements immediately after you receive them and notify
the Annuity Service Center of any discrepancies as we will not be
responsible for resulting losses due to unit value changes after 10
calendar days from the mailing of the report.
In addition, we will send you semiannual reports containing financial
statements for the Variable Account and a list of portfolio securities
of the Funds, as required by the Investment Company Act of 1940.
THE 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.
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 Fidelity Funds.
The principal business address of Fidelity Brokerage Services, Inc.
and Fidelity Distributors Corporation is 82 Devonshire Street, Boston,
Massachusetts 02109. We pay Fidelity Insurance Agency, Inc. 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 ( Automated 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 exchanges 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 exchanges are allowed from one Source Account only and are
not permitted to the Fixed Account. Dollar cost averaging will not be
allowed in conjunction with the Automatic Re balancing feature
described in this prospectus.
These monthly exchanges will take effect on the same day each month.
You may select any date from the 1st to the 28th as the date for your
dollar cost averaging exchanges (the Exchange Date). If the New York
Stock Exchange is not open on your selected date in a particular
month, the exchange will be made at the close of the Valuation Period
that includes the date you selected. Your exchanges will continue
until the balance in the Source Account is exhausted or you notify us
to cancel dollar cost averaging for your Contract.
The minimum monthly exchange allowed to any variable Subaccount is
$250.
Dollar cost averaging is available at no charge. 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 exchanges will be made on the same
day of each month. You may select any date from the 1st to the 28th as
the date for your automatic rebalancing exchanges. If the New York
Stock Exchange is not open on your selected date in a particular
month, the exchanges will be made at the close of the Valuation Period
that includes the date you selected. Your exchanges will continue
until you notify us to cancel Automatic Rebalancing for your Contract.
Automatic Rebalancing 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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 16.72 17.44 4,136,411
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 27.53 29.53 638,885
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 43.62 46.01 3,107,272
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 59.17 80.67 2,559,285
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 26.31 37.22 932,993
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 20.24 19.87 854,243
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 28.30 31.19 2,929,733
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 31.60 37.78 3,374,350
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 20.93 23.93 1,348,488
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 26.40 32.54 6,109,331
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 15.62 16.15 1,944,990
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 13.98 14.50 618,139
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 16.29 17.65 3,400,637
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 7.44 9.55 29,863
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 7.56 14.68 377,828
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 11.54 11.92 125,106
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 10.65 13.23 76,112
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 10.90 21.42 573,557
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
Select Value** Su baccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 14.05 15.18 225,231
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
** PREVIOUSLY CALLED LARGE CAP VALUE.
Select 20 Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 16.80 33.42 2,059,461
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 11.48 13.20 148,694
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 12.94 42.93 3,541,083
1998 9.87 12.94 221,015
1997* 10.00 9.87 34,037
</TABLE>
Mid Cap Growth Fund II Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 13.08 24.65 867,315
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
Opportunity Fund II Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 11.43 15.29 330,339
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> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 10.33 15.73 123,854
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
Global Post-Venture Capital** S ubaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 10.83 17.57 51,197
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
** PREVIOUSLY CALLED POST-VENTURE CAPIT AL.
Small Company Growth Subaccount
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Accumulation Unit Value at Accumulation Unit Value at Number of Accumulation Units
Beginning of Period End of Period at End of Period
1999 9.82 16.47 258,085
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
Investment Company Act of 1940 File no. 811-6388
EVA-PRO-0400
1.722611.101
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
1. Internal Revenue Service Regulations require you be given this
Disclosure Statement to make certain that you fully understand the
nature of an Individual Retirement Account (IRA). For this reason, it
is important that you read this statement carefully.
REVOCATION
2. You are allowed to revoke or cancel your IRA within 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 ) PORTFOLIO EXPENSES
The portfolios associated with the Variable Account incur operating
expenses and pay monthly management fees. The level of expenses vary
by portfolio. This charge is not made against the Guaranteed Account.
PART B
INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
RETIREMENT RESERVES
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 2000
This Statement of Additional Information supplements the information
found in the current Prospectus for the variable annuity contracts
("Contracts") offered by 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,
2000, without charge by calling 1-800-544-2442, or by accessing the
SEC Internet website at (http://www.sec.gov).
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
SHOULD BE READ TOGETHER WITH THE PROSPECTUS FOR THE CONTRACT.
TABLE OF CONTENTS PAGE
Service Agreements 50
Accumulation Units 50
Fixed Annuity Income Payments 50
Variable Annuity Income 50
Payments
Hypothetical Illustrations of 53
Annuity Income Payouts
General Information 57
Performance 57
Exchanges Among Subaccounts 75
After the Annuity Date
Unavailability of Annuity 75
Income Options in Certain
Circumstances
IRS Required Distributions 75
Safekeeping of Variable 76
Account Assets
Distribution of the Contracts 76
State Regulation 76
Legal Matters 76
Registration Statement 76
Independent Accountants 76
Financial Statements 76
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 $ 281.50 . The
investment selection is 50% in Portfolio A and 50% in Portfolio B.
At Annuitization Portfolio A Portfolio B
(a) Initial Monthly Annuity $ 140.75 $ 140.75
Income Payment
(b) Annuity Unit Value 1.23456 1.32465
(c) Income in Units 114.008 106.254
The monthly annuity income payment allocated to each Subaccount is
translated into Annuity Units using the Annuity Unit Value at the time
of annuitization. Since each Subaccount is likely to have a different
Annuity Unit Value, the total number of Annuity Units is not
informative, rather you need to look at:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
# Annuity Units X Annuity Unit Value = Annuity Income Payment
Portfolio A 114.008 1.23456 140.75
Portfolio B 106.254 1.32465 140.75
$ 281.50
</TABLE>
Assume that during the next month, the investment results for each
subaccount are:
Portfolio A Portfolio B
(d) Actual Net Investment Results .4074% .1652%
(e) Assumed Investment Results .2871% .2871%
(f) Relative Performance Factor 1.00120 .99878
Line (d) shows the net investment result after the charge for assuming
mortality and expense risks and the administrative charge (0.80% on an
annual basis) and the charge for investment advisory fees and fund
expenses. Line (e) shows the investment results that were assumed in
the calculation of the initial monthly annuity income payment, 3.5% on
an annual basis. Line (f) represents how much $1 invested at the start
of the month in each of the subaccounts would have grown relative to
$1 earning 3.5%. The formula for calculating the Relative Performance
Factor is (1+ (d)) divided by (1 + (e)).
Note that since line (f) is more than 1 for Portfolio A and less than
1 for Portfolio B, the Portfolio A subaccount has earned more than
3.5% on an annual basis while the Portfolio B subaccount has earned
less than 3.5% on an annual basis.
The Annuity Unit Value grows with the actual investment performance
relative to the assumption of 3.5%. If a Subaccount earns more than
3.5% on an annual basis, then the Annuity Unit Value will increase.
Conversely, if less than 3.5% is earned, the Annuity Unit Value will
decrease. The Annuity Unit Value at the time of the second monthly
income payment is the Annuity Unit Value for the prior month (line b)
multiplied by the Relative Performance Factor (line f).
Portfolio A Portfolio B
(b) Annuity Unit Value (prior) 1.23456 1.32465
(f) Relative Performance Factor 1.00120 .99878
(g) Annuity Unit Value (current) 1.23604 1.32303
Except for exchanges between Subaccounts, the number of Annuity Units
remains fixed throughout the lifetime of the Annuitant. The value of
each annuity income payment, however, varies because the Annuity Unit
Value is usually changing as a result of investment experience. The
second monthly payment is calculated by multiplying the number of
payment units by the current Annuity Unit Value.
Portfolio A Portfolio B
(c) Monthly Income in Units 114.008 106.254
(g) Annuity Unit Value (current) 1.23604 1.32303
(h) Monthly Income (in dollars) $ 140.92 $ 140.58
Note that the Annuity Unit Value and the Monthly Income for the
Portfolio A portion of the payment has increased whereas the opposite
is true for the Portfolio B portion. The second monthly annuity income
payment would be the sum for each Subaccount, or $28 1 .50.
To illustrate the possible volatility of the annuity income payments,
assume that during the following month, the investment results for
each Subaccount are:
Portfolio A Portfolio B
(i) Actual Net Investment Results 15.50% -13.00%
(e) Assumed Investment Results .2871% .2871%
(j) Relative Performance Factor 1.15169 .86751
The Annuity Unit Value at the time of the third monthly annuity income
payment is the Annuity Unit Value for the prior month (line g)
multiplied by the Relative Performance Factor (line j):
Portfolio A Portfolio B
(g) Annuity Unit Value (prior) 1.23604 1.32303
(j) Relative Performance Factor 1.15169 .86751
(k) Annuity Unit Value (current) 1.42353 1.14774
The third monthly annuity income amount is calculated by multiplying
the number of payment units by the current Annuity Unit Value:
Portfolio A Portfolio B
(c) Income in Units 114.008 106.254
(k) Annuity Unit Value (current) 1.42353 1.14774
(l) Monthly Income (in dollars) $ 162.29 $ 121.95
Note that the Annuity Unit Value and the Monthly Income for Portfolio
A portion of the income amount have again increased but to a much
greater extent than before whereas the opposite is true for the
Portfolio B portion. The third monthly annuity income payment would be
the sum for each subaccount, or $28 4.24 .
An illustration of annuity income payments under various rates appears
in the tables on pages 83 and 83. The monthly equivalents of the
annual net returns of -1.7 1 %, 3.50 %, 4.1 8 %,
6.1 5 %, 8. 12 % and 10. 08 % shown in the tables are
- -0.1 4 %, 0.29%, 0.34%, 0.50%, 0.65% and 0.80%.
HYPOTHETICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS
The following tables have been prepared to show how variable annuity
income payments under the Contract change with investment performance
over an extended period of time. The tables illustrate how monthly
annuity income payments would vary over time if the return on the
assets in the selected portfolios were a uniform gross annual rate of
0%, 5. 30 %, 6%, 8%, 10% and 12%. The values would be different
from those shown if the returns averaged 0%, 5.3 0 %, 6%, 8%, 10%
or 12% but fluctuated over and under those averages throughout the
years.
The tables reflect the fact that the Total Return of the Subaccounts
is lower than the gross return of the selected portfolios. The tables
reflect the daily charge to the Subaccounts for assuming mortality and
expense risks, which is equivalent to an effective annual charge of
0.75% and the daily administrative charge which is equivalent to an
effective annual charge of 0.05%. The amounts shown in the tables also
take into account the portfolios' management fees and operating
expenses which are assumed to be at an annual rate of 0.9 2 % of
the average daily net assets of the selected portfolios. This
0.9 2 % figure consists of assumed management fees of
0. 63 % and assumed operating expenses of 0. 2 9%, figures
based on the average of current management fees and operating
expenses. Actual fees and expenses of the portfolios associated with
your Contract may be more or less than 0.9 2 %, will vary from
year to year, and will depend on how you allocate your investment
base. See the current prospectuses for the Funds for more complete
information. The monthly annuity income payments illustrated are on a
pre-tax basis. The Federal income tax treatment of annuity income
payments is generally described in the section of your current
prospectus entitled "Tax Considerations."
The tables show both the gross rate and the net rate. The difference
between gross and net rates represent the 0.80% risk and
administrative charges and the assumed 0.92 % for investment
management and operating expenses. Since these charges are deducted
daily from assets, the difference between the gross and net rate is
not exactly 1.7 2 %.
Two tables follow. The first table assumes 100% of the Contract Value
is allocated to a variable annuity income option; the second table
assumes 50% of the Contract Value is placed under a fixed annuity
income option, using the fixed crediting rate 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/ 1935 STATE PREMIUM TAX: 0%
SEX: Male DATE OF ILLUSTRATION: 2/1/ 2000
ANNUITY OPTION SELECTED: Lifetime Income with annuity income payments
guaranteed for 10 years(1)
FREQUENCY OF ANNUITY
INCOME PAYMENTS: Monthly payments with first payment the first of
the month after annuitization
FIXED MONTHLY ANNUITY INCOME PAYMENT AVAILABLE ON THE DATE OF THE
ILLUSTRATION IF 100% FIXED ANNUITY OPTION SELECTED: $3 90 .00
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 100% OF THE CONTRACT VALUE IS
ALLOCATED TO THE VARIABLE PAYOUT
NET RETURN AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE,
NO MINIMUM DOLLAR AMOUNT IS GUARANTEED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNT OF FIRST MONTHLY ANNUITY INCOME
PAYMENT IN YEAR SHOWN ASSUMING A
CONSTANT ANNUAL INVESTMENT RETURN OF:
Gross: 0% 5.30% 6% 8% 10% 12%
PAYMENT YEAR CALENDAR YEAR AGE Net(2): -1.71% 3.50% 4.18% 6.15% 8.12% 10.08%
1 2000 65 282 282 282 282 282 282
2 2001 66 267 282 283 289 294 299
3 2002 67 254 282 285 296 307 318
4 2003 68 241 282 287 304 321 339
5 2004 69 229 282 289 311 335 360
10 2009 74 177 282 299 353 417 490
15 2014 79 137 282 309 401 519 667
20 2019 84 106 282 319 455 645 908
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY
AN OWNER AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED.
THE AMOUNT OF THE INCOME PAYMENT WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL GROSS RATES OF RETURN AVERAGED THE RATES SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. SINCE IT IS HIGHLY LIKELY THAT
INVESTMENT RETURNS WILL FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME
(TO THE EXTENT THAT IS BASED ON THE VARIABLE ACCOUNT) WILL ALSO
FLUCTUATE. NO REPRESENTATION CAN BE MADE BY 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/ 1935 STATE PREMIUM TAX: 0%
SEX: Male DATE OF ILLUSTRATION: 2/1/ 2000
ANNUITY OPTION SELECTED: Lifetime Income with annuity income payments
guaranteed for 10 years(1)
FREQUENCY OF ANNUITY
INCOME PAYMENTS: Monthly payments with first payment the first of
the month after annuitization
FIXED MONTHLY ANNUITY INCOME PAYMENT AVAILABLE ON THE DATE OF THE
ILLUSTRATION IF 100% FIXED ANNUITY OPTION SELECTED: $3 90 .00
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 50% OF THE CONTRACT VALUE IS
ALLOCATED TO THE VARIABLE PAYOUT AND 50% TO THE FIXED PAYOUT
NET RETURN AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE, BUT
WILL NEVER BE LESS THAN $ 195.00 . THE MONTHLY GUARANTEED PAYMENT
OF $1 95 . 0 0 IS BEING PROVIDED BY THE $25,000 APPLIED
UNDER THE FIXED ANNUITY OPTION.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMOUNT OF FIRST MONTHLY ANNUITY INCOME
PAYMENT IN YEAR SHOWN ASSUMING A
CONSTANT ANNUAL INVESTMENT RETURN OF:
Gross: 0% 5.30% 6% 8% 10% 12%
PAYMENT YEAR CALENDAR YEAR AGE Net(2): -1.71% 3.50% 4.18% 6.15% 8.12% 10.08%
1 2000 65 336 336 336 336 336 336
2 2001 66 329 336 337 339 342 345
3 2002 67 322 336 338 343 349 354
4 2003 68 316 336 339 347 355 364
5 2004 69 309 336 339 351 363 375
10 2009 74 283 336 344 372 404 440
15 2014 79 263 336 349 396 454 529
20 2019 84 248 336 354 423 518 649
</TABLE>
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN
SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY
AN OWNER AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED.
THE AMOUNT OF THE INCOME PAYMENT WOULD BE DIFFERENT FROM THOSE SHOWN
IF THE ACTUAL GROSS RATES OF RETURN AVERAGED THE RATES SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. SINCE IT IS HIGHLY LIKELY THAT
INVESTMENT RETURNS WILL FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME
(TO THE EXTENT THAT IS BASED ON THE VARIABLE ACCOUNT) WILL ALSO
FLUCTUATE. NO REPRESENTATION CAN BE MADE BY 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. Also,
we receive fees from the funds' Advisers for administrative services
we provide.
PERFORMANCE
Performance information for any Subaccount may be compared, in reports
and advertising to: (1) the Standard & Poor's 500 Composite Stock
Price Index ("S & P 500"), Dow Jones Industrial Average ("DJIA"),
Donoghue's Money Market Institutional Averages and other
indices ; (2) other variable annuity separate accounts or other
investment products tracked by Lipper Analytical Services,
Morningstar, or the Variable Annuity Research and Data Service, widely
used independent research firms which rank mutual funds and other
investment companies by overall performance, investment objectives,
and assets; and (3) the Consumer Price Index (measure for inflation)
to assess the real rate of return from an investment in a contract
Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions for annuity charges and investment
management costs.
Total returns, yields and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising may also contain other information including (i) the
ranking of any subaccount derived from rankings of variable annuity
separate accounts or other investment products tracked by Lipper
Analytical Series or by rating services, companies, publications or
other persons who rank separate accounts or other investment products
on overall performance or other criteria, and (ii) the effect
of tax deferred compounding on a subaccount's investment returns, or
returns in general, which may be illustrated by graphs, charts, or
otherwise, and which may include a comparison, at various points in
time, of the return from an investment in a Contract (or returns in
general) on a tax-deferred basis (assuming one or more tax rates) with
the return on a taxable basis.
The tables below provide performance results for each Subaccount
through De cember 31, 199 9. 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 Dece mber 31, 1999. F or any Portfolio in existence
ten years or more, figures are shown for a ten year period. Life
returns are also shown from the date that each Portfolio began in the
separate account. The average annual total returns shown in Table 1
are computed by finding the average annual compounded rates of return
over the periods shown that would equate the initial amount invested
to the withdrawal value, in accordance with the following formula: P(1
+T)n = ERV where P is a hypothetical investment payment of $1,000, T
is the average annual total return, n is the number of years, and ERV
is the withdrawal value at the end of the periods shown. The returns
reflect the risk and administrative charge of 0.80% (1% on an annual
basis prior to November 1, 1997) and the maintenance charge. Since the
Contract is intended as a long-term product, the table also shows the
average annual total return assuming that no money was withdrawn from
the Contract. The average annual total return is also shown for
Contracts with at least $25,000 of premium and assuming no money is
withdrawn from the Contract. The average annual total return would be
larger for these Contracts because there is currently no maintenance
charge on these larger Contracts. The first column shows the average
annual total return if you surrender the contract at the end of the
period, the second column shows the average annual total return if you
do not surrender the Contract (first and second columns combined in
table showing one year retur n) and the third column shows the
average annual total return if you do not surrender the Contract and
no maintenance charge is applied to the Contract.
Table 1: Average Annual Total Return for Period Ending on December
31, 1999
(a) One Year Average Annual Total Return For Contracts Issued
o n December 31, 1998:
<TABLE>
<CAPTION>
Fidelity Return If Contract Continued Return If Contract Continued
or Surrendered and and Maintenance Charge Not
Maintenance Charge Applied Applicable
<S> <C> <C>
Asset Manager 10.19% 10.20%
Money Market 4.32% 4.33%
Investment Grade Bond (1.85)% (1.84)%
Equity-Income 5.47% 5.48%
Growth 36.33% 36.34%
High Income 7.28% 7.29%
Overseas 41.48% 41.49%
Index 500 19.54% 19.55%
Asset Manager: Growth 14.33% 14.34%
Contrafund 23.25% 23.26%
Growth Opportunities 3.43% 3.44%
Balanced 3.70% 3.71%
Growth & Income 8.28% 8.29%
Mid Cap 47.84% 47.85%
Strong
Opportunity Fund II 33.82% 33.83%
Mid Cap Growth Fund II 88.35% 88.36%
Warburg Pincus
International Equity 52.20% 52.21%
Small Company Growth 67.72% 67.73%
Global Post-Venture Capital1 62.18% 62.19%
PBHG
Growth II 96.60% 96.61%
Select Value2 8.01% 8.02%
Select 20 99.00% 99.01%
Small Cap Value 15.00% 15.01%
Technology & Communications 231.70% 231.71%
Morgan Stanley
Emerging Markets Equity 94.11% 94.12%
Emerging Markets Debt 28.33% 28.34%
Global Equity 3.26% 3.27%
International Magnum 24.18% 24.19%
</TABLE>
(b) Average Annual Total Return If Contract Issued at Commencement of
Portfolio (which in most cases it was not):
<TABLE>
<CAPTION>
<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 5.59% 5.59%
High Income 9/19/85 9.74% 9.74%
Equity-Income 10/9/86 12.62% 12.62%
Growth 10/9/86 17.55% 17.55%
Asset Manager 9/6/89 11.68% 11.68%
Investment Grade Bond 12/5/88 6.39% 6.39%
Overseas 1/28/87 9.77% 9.77%
Index 500 8/27/92 19.91% 19.91%
Asset Manager: Growth 1/3/95 18.95% 18.95%
Contrafund 1/3/95 26.47% 26.47%
Growth Opportunities 1/3/95 20.29% 20.29%
Balanced 1/3/95 12.33% 12.33%
Growth & Income 12/31/96 21.04% 21.04%
Mid Cap 12/28/98 47.89% 51.89%
Strong
Mid Cap Growth Fund II 12/31/96 45.33% 45.64%
Opportunity Fund II 5/8/92 19.84% 19.84%
Warburg Pincus
International Equity 6/30/95 13.62% 13.77%
Global Post-Venture Capital1 9/30/96 20.86% 21.26%
Small Company Growth 6/30/95 23.48% 23.59%
PBHG
Select 20 9/25/97 66.62% 67.31%
Growth II 5/1/97 34.90% 35.58%
Select Value2 10/28/97 20.78% 21.88%
Small Cap Value 10/28/97 12.54% 13.73%
Technology & Communications 5/1/97 75.23% 75.67%
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
Morgan Stanley
Emerging Markets Debt 6/16/97 (4.64)% (3.62)%
Emerging Markets Equity 10/1/96 11.00% 11.49%
Global Equity 1/2/97 12.26% 13.05%
International Magnum 1/2/97 12.21% 13.00%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Fidelity
Money Market 5.67%
High Income 9.81%
Equity-Income 12.68%
Growth 17.61%
Asset Manager 11.72%
Investment Grade Bond 6.43%
Overseas 9.83%
Index 500 19.94%
Asset Manager: Growth 19.07%
Contrafund 26.57%
Growth Opportunities 20.41%
Balanced 12.47%
Growth & Income 21.50%
Mid Cap 51.90%
Strong
Mid Cap Growth Fund II 45.66%
Opportunity Fund II 19.87%
Warburg Pincus
International Equity 13.78%
Global Post-Venture Capital1 21.28%
Small Company Growth 23.61%
PBHG
Select 20 67.33%
Growth II 35.60%
Select Value2 21.90%
Small Cap Value 13.75%
Technology & Communications 75.69%
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Morgan Stanley
Emerging Markets Debt (3.60)%
Emerging Markets Equity 11.51%
Global Equity 13.07%
International Magnum 13.02%
</TABLE>
Average Annual Total Return From Date When Portfolio Began in Separate
Account
<TABLE>
<CAPTION>
Subaccount Date Portfolio Began In Return If Contract Surrendered Return If Contract Continued
Separate Account and Maintenance Charge Applied
<S> <C> <C> <C>
Fidelity
Money Market 6/3/92 3.86% 3.86%
High Income 6/3/92 9.37% 9.37%
Equity-Income 6/3/92 15.58% 15.58%
Growth 6/3/92 22.16% 22.16%
Asset Manager 6/3/92 11.69% 11.69%
Investment Grade Bond 6/3/92 5.31% 5.31%
Overseas 6/3/92 12.30% 12.30%
Index 500 11/2/92 20.08% 20.08%
Asset Manager:Growth 1/9/95 19.04% 19.15%
Contrafund 1/9/95 26.65% 26.74%
Growth Opportunities 1/27/97 17.04% 17.81%
Balanced 1/27/97 12.72% 13.54%
Growth & Income 1/27/97 20.70% 21.41%
Strong
Mid Cap Growth Fund II 11/24/97 52.70% 53.60%
Opportunity Fund II 11/24/97 21.24% 22.40%
Warburg Pincus
International Equity 11/24/97 22.89% 24.03%
Global Post-Venture Capital1 11/24/97 29.68% 30.75%
Small Company Growth 11/24/97 25.68% 26.79%
PBHG
Select 20 11/24/97 76.80% 77.56%
Growth II 11/24/97 42.72% 43.68%
Select Value2 11/24/97 20.80% 21.95%
Small Cap Value 11/24/97 12.87% 14.11%
Technology & Communications 11/24/97 99.36% 100.02%
Morgan Stanley
Emerging Markets Debt 11/24/97 (3.43)% (2.17)%
Emerging Markets Equity 11/24/97 18.85% 20.04%
Global Equity 11/24/97 7.37% 8.69%
International Magnum 11/24/97 12.99% 14.23%
</TABLE>
<TABLE>
<CAPTION>
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
<S> <C>
Fidelity
Money Market 3.88%
High Income 9.39%
Equity-Income 15.60%
Growth 22.18%
Asset Manager 11.71%
Investment Grade Bond 5.34%
Overseas 12.32%
Index 500 20.10%
Asset Manager:Growth 19.16%
Contrafund 26.75%
Growth Opportunities 17.81%
Balanced 13.55%
Growth & Income 21.42%
Strong
Mid Cap Growth Fund II 53.61%
Opportunity Fund II 22.41%
Warburg Pincus
International Equity 24.04%
Global Post-Venture Capital1 30.76%
Small Company Growth 26.80%
PBHG
Select 20 77.58%
Growth II 43.70%
Select Value2 21.97%
Small Cap Value 14.13%
Technology & Communications 100.04%
Morgan Stanley
Emerging Markets Debt (2.16)%
Emerging Markets Equity 20.04%
Global Equity 8.70%
International Magnum 14.25%
</TABLE>
(c) Five Year Average Annual Total Return If Contract Issued on
December 31, 1994:
<TABLE>
<CAPTION>
Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
<S> <C> <C> <C>
Fidelity
Asset Manager 14.56% 14.56% 14.57%
Money Market 4.50% 4.50% 4.51%
Investment Grade Bond 6.31% 6.31% 6.31%
Equity-Income 17.52% 17.52% 17.53%
Growth 28.55% 28.55% 28.55%
High Income 9.84% 9.84% 9.85%
Fidelity continued
Overseas 16.29% 16.29% 16.30%
Index 500 26.99% 26.99% 26.99%
Strong
Opportunity Fund II 22.22% 22.22% 22.23%
</TABLE>
(d) Ten Year Average Annual Total For Contracts Issued on December 31,
1989:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Money Market 4.24% 4.24% 4.27%
Investment Grade Bond 6.13% 6.13% 6.16%
High Income 11.33% 11.33% 11.36%
Equity-Income 13.36% 13.36% 13.40%
Growth 18.76% 18.76% 18.79%
Overseas 10.33% 10.33% 10.36%
Asset Manager 12.04% 12.04% 12.07%
</TABLE>
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, fro m the
date each Portfolio began in the Separate Account, a nd assuming
that the Contract was surrendered December 31, 199 9 . For any
Portfolio in existence five years or more, five year figures are also
shown. For any Portfolio in existence ten years or more, figures are
shown for a ten year period rather than for the life of the Portfolio.
One year cumulative total returns are the same as the average
annual total returns for that period. The returns reflect the risk
and administrative charge 0.80% on an annual basis (1% prior to
November 1, 1997) and the maintenance charge. Since the Contract is
intended as a long-term product, the table also shows the cumulative
total return assuming that no money was withdrawn from the Contract.
The cumulative total return is also shown for Contracts with at least
$25,000 of premium and assuming no money is withdrawn from the
Contract. The cumulative total return for these Contracts would be
larger because there is currently no maintenance charge on these
larger Contracts. The colum n s show the cumulative total return
if you surrender the Contract at the end of the period, if you do not
surrender the Contract and if you do not surrender the Contract and no
maintenance charge is applied to the Contract.
Table 2: Cumulative Total Return For Periods Beginning at Commencement
of Portfolios and Ending on December 31, 1999 :
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
Fidelity
Money Market 4/1/82 163.06% 163.06%
Asset Manager 9/6/89 212.98% 212.98%
Investment Grade Bond 12/5/88 98.88% 98.88%
High Income 9/19/85 277.79% 277.79%
Overseas 1/28/87 234.57% 234.57%
Index 500 8/27/92 280.05% 280.05%
Growth Opportunities 1/3/95 151.72% 152.72%
Balanced 1/3/95 78.76% 79.76%
Equity Income 10/9/86 382.87% 382.87%
Growth 10/9/86 751.98% 751.98%
Contrafund 1/3/95 223.31% 224.31%
Asset Manager: Growth 1/3/95 138.00% 139.00%
Growth & Income 12/31/96 77.33% 79.33%
Mid Cap 12/28/98 48.41% 52.41%
Morgan Stanley
Emerging Markets Debt 6/16/97 (11.39)% (8.96)%
Emerging Markets Equity 10/1/96 40.38% 42.38%
Global Equity 1/2/97 41.40% 44.40%
International Magnum 1/2/97 41.20% 44.20%
PBHG
Growth II 5/1/97 122.30% 125.30%
Select Value2 10/28/97 50.80% 53.80%
Small Cap Value 10/28/97 29.31% 32.31%
Technology & Communications 5/1/97 346.78% 349.78%
Select 20 9/25/97 217.97% 220.97%
Strong
Mid Cap Growth Fund II 12/31/96 206.92% 208.92%
Opportunity Fund II 5/8/92 299.94% 299.94%
Subaccount Portfolio's Start Date Return If Contract Surrendered Return If Contract Continued
and Maintenance Charge Applied
Warburg Pincus
International Equity 6/30/95 77.86% 78.86%
Global Post-Venture Capital1 9/30/96 85.17% 87.17%
Small Company Growth 6/30/95 158.80% 159.80%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Fidelity
Money Market 166.45%
Asset Manager 213.84%
Investment Grade Bond 99.47%
High Income 280.84%
Overseas 236.24%
Index 500 280.27%
Growth Opportunities 152.83%
Balanced 79.86%
Equity Income 385.49%
Growth 756.12%
Contrafund 224.43%
Asset Manager: Growth 139.11%
Growth & Income 79.37%
Mid Cap 52.42%
Morgan Stanley
Emerging Markets Debt (8.91)%
Emerging Markets Equity 42.46%
Global Equity 44.46%
International Magnum 44.27%
PBHG
Growth II 125.38%
Select Value2 53.84%
Small Cap Value 32.35%
Technology & Communications 349.90%
Select 20 221.04%
Strong
Mid Cap Growth Fund II 209.92%
Opportunity Fund II 300.21%
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
Warburg Pincus
International Equity 78.95%
Global Post-Venture Capital1 87.27%
Small Company Growth 159.90%
</TABLE>
Cumulative Total Return From Date When Portfolio Began in Separate
Account.
<TABLE>
<CAPTION>
Subaccount Date Portfolio Began in Return If Contract Surrendered Return If Contract Continued
Separate Account and Maintenance Charge Applied
<S> <C> <C> <C>
Fidelity
Money Market 6/3/92 33.33% 33.33%
Asset Manager 6/3/92 131.34% 131.34%
Investment Grade Bond 6/3/92 48.19% 48.19%
High Income 6/3/92 97.35% 97.35%
Overseas 6/3/92 141.14% 141.14%
Index 500 11/2/92 271.25% 271.25%
Growth Opportunities 1/27/97 58.53% 61.53%
Balanced 1/27/97 42.01% 45.01%
Equity Income 6/3/92 199.88% 199.88%
Growth 6/3/92 356.28% 356.28%
Contrafund 1/9/95 224.28% 225.28%
Asset Manager: Growth 1/9/95 138.24% 139.24%
Growth & Income 1/27/97 73.43% 76.43%
Morgan Stanley
Emerging Markets Debt 11/24/97 (7.08)% (4.51)%
Emerging Markets Equity 11/24/97 43.77% 46.77%
Global Equity 11/24/97 16.13% 19.13%
International Magnum 11/24/97 29.26% 32.26%
PBHG
Growth II 11/24/97 111.17% 114.17%
Select Value2 11/24/97 48.74% 51.74%
Small Cap Value 11/24/97 28.97% 31.97%
Technology & Communications 11/24/97 326.22% 329.22%
Select 20 11/24/97 231.19% 234.19%
Strong
Mid Cap Growth Fund II 11/24/97 143.41% 146.41%
Opportunity Fund II 11/24/97 50.55% 52.92%
Warburg Pincus
International Equity 11/24/97 54.28% 57.26%
Global Post-Venture Capital1 11/24/97 72.70% 75.70%
Small Company Growth 11/24/97 61.74% 64.70%
</TABLE>
<TABLE>
<CAPTION>
Subaccount Return If Contract Continued
and Maintenance Charge Not
Applicable
<S> <C>
Fidelity
Money Market 33.45%
Asset Manager 131.53%
Investment Grade Bond 48.33%
High Income 97.52%
Overseas 141.33%
Index 500 271.45%
Growth Opportunities 61.53%
Balanced 45.02%
Equity Income 200.09%
Growth 356.60%
Contrafund 225.40%
Asset Manager: Growth 139.35%
Growth & Income 76.47%
Morgan Stanley
Emerging Markets Debt (4.47)%
Emerging Markets Equity 46.79%
Global Equity 19.16%
International Magnum 32.30%
PBHG
Growth II 114.22%
Select Value2 51.78%
Small Cap Value 32.00%
Technology & Communications 329.31%
Select 20 234.25%
Strong
Mid Cap Growth Fund II 146.47%
Opportunity Fund II 52.94%
Warburg Pincus
International Equity 57.26%
Global Post-Venture Capital1 75.70%
Small Company Growth 64.71%
</TABLE>
(c) Cumulative Total Return For Five Year Period From 12/31/94 Through
12/31/99:
<TABLE>
<CAPTION>
<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 97.35% 97.35% 97.42%
Money Market 24.64% 24.64% 24.69%
Investment Grade Bond 35.76% 35.76% 35.82%
Equity-Income 124.17% 124.17% 124.22%
Growth 250.99% 250.99% 251.08%
High Income 59.87% 59.87% 59.93%
Overseas 112.70% 112.70% 112.76%
Index 500 230.21% 230.21% 230.27%
Strong
Opportunity Fund II 172.74% 172.74% 172.80%
</TABLE>
(d) Cumulative Total Return For Ten Year Period From 12/31/89 Through
12/31/99:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Return If Contract Surrendered Return If Contract Continued Return If Contract Continued
and Maintenance Charge Applied and Maintenance Charge Not
Applicable
Money Market 51.76% 51.76% 51.97%
High Income 192.80% 192.80% 193.26%
Equity-Income 251.15% 251.15% 251.51%
Growth 459.09% 459.09% 459.47%
Overseas 167.77% 167.77% 168.04%
Investment Grade Bond 81.60% 81.60% 81.85%
</TABLE>
1 Previously called Warburg Pincus Post-Venture Capital.
2 Previously called PBHG Large Cap Value.
YIELDS
Some Subaccounts may also advertise yields. Yields quoted in
advertising reflect the change in value of a hypothetical investment
in the Subaccount over a stated period of time, not taking into
account capital gains or losses. Yields are annualized and stated as a
percentage. Yields do not reflect the impact of any contingent
deferred sales load. Yields quoted in advertising may be based on
historical seven day periods.
Current yield for Money Market Subaccount reflects the income
generated by a Subaccount over a 7 day period. Current yield is
calculated by determining the net change, exclusive of capital
changes, in the value of a hypothetical account having one
Accumulation Unit at the beginning of the period adjusting for the
maintenance charge, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period
return, and multiplying the base period return by (365/7). The
resulting yield figure is carried to the nearest hundredth of a
percent. Effective yield for the Money Market Subaccount is calculated
in a similar manner to current yield except that investment income is
assumed to be reinvested throughout the year at the 7 day rate.
Effective yield is obtained by taking the base period returns as
computed above, and then compounding the base period return by adding
1, raising the sum to a power equal to (365/7) and subtracting one
from the result, according the formula Effective Yield = [(Base Period
Return + 1) 365/7] - 1. Since the reinvestment of income is assumed in
the calculation of effective yield, it will generally be higher than
current yield. For the 7 day period ending on 12/31/9 9 , the
Money Market Subaccount had a current yield of 4. 88 % and an
effective yield of 5.00 %. For Contracts on which there is
currently no maintenance charge, the current yield would be
4. 89 % and the effective yield would be 5.01 %.
A 30 day yield for bond subaccounts reflects the income generated by a
Subaccount over a 30 day period. Yield will be computed by dividing
the net investment income per Accumulation Unit earned during the
period by the maximum offering price per Accumulation Unit on the last
day of the period, according to the following formula: Yield =
2[(a-b/cd + 1)6 - 1] where a= net investment income earned by the
applicable portfolio, b = expenses for the period including expenses
charged to the contract owner accounts, c = the average daily number
of Accumulation Units outstanding during the period, and d = the
maximum offering price per Accumulation Unit on the last day of the
period. The 30 day yield for the period ending on 12/31/9 9 was
5.94 % for the Investment Grade Bond Subaccount, 10.13 %
for the High Income Subaccount and 13.43 % for the Emerging
Markets Debt Subaccount. For Contracts on which there is no
maintenance charge, the 30 day yield would be 5.95 % for the
Investment Grade Bond Subaccount, 10.14 % for the High Income
Subaccount and 13.44 % for the Emerging Markets Debt Subaccount.
EXCHANGES AMONG SUBACCOUNTS AFTER THE ANNUITY DATE
After the Annuity Date, you may instruct us to 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
exchanges after the Annuity Date to six per Contract Year.
UNAVAILABILITY OF ANNUITY INCOME OPTIONS IN CERTAIN CIRCUMSTANCES
We do not offer annuity income options to any corporate beneficiary,
partnership or trustee; any assignee, unless that assignee is a
beneficiary; or the executors or administrators of the Annuitant's
estate.
IRS REQUIRED DISTRIBUTIONS
If the Owner of the Contract dies (or either Joint Owner if the
Contract is owned jointly) before the entire interest in the Contract
is distributed, the value of the Contract must be distributed to the
person entitled to the proceeds as described in this section so
that the Contract qualifies as an annuity under the Internal Revenue
Code.
If the death occurs on or after the Annuity Date, the remaining
portion of the interest in the Contract must be distributed at least
as rapidly as under the method of distribution being used as of the
date of death. If the death occurs before the Annuity Date, the entire
interest in the Contract must be distributed within five years after
the date of death, unless the following conditions are met. 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, 199 9 and 199 8 , 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, 199 9 , and the statement of assets
and liabilities of the Empire Fidelity Investments Variable Annuity
Account A as of December 31, 199 9 , and the related statements
of operations and of changes in net assets for the years ended
December 31, 199 9 and 199 8 included in this registration
statement have been included herein in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
The financial statements of 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, 1999, 1998 AND 1997
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
FINANCIAL STATEMENTS
for the years ended December 31, 1999, 1998 and 1997
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, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility
of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
January 25, 2000
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
BALANCE SHEETS
(in thousands, except share data)
December 31, 1999 and 1998
ASSETS 1999 1998
Debt securities available for $21,076 $19,386
sale
Cash and cash equivalents 1,434 2,363
Accrued investment income 409 331
Deferred policy acquisition 18,981 16,253
costs
Other assets 119 36
Separate account assets 1,387,038 1,018,128
Total assets
$1,429,057 $1,056,497
LIABILITIES
Future contract and policy $4,801 $4,919
benefits
Deferred tax liability 3,357 3,508
Payable to parent and 2,152 1,903
affiliates
Other liabilities and accrued 300 200
expenses
Separate account liabilities 1,387,037 1,017,950
Total liabilities
1,397,647 1,028,480
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 12,500
Accumulated other comprehensive
(loss) income (356) 395
Retained earnings 17,266 13,122
Total stockholder's equity 31,410 28,017
Total liabilities and $1,429,057 $1,056,497
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, 1999, 1998
and 1997
1999 1998 1997
Revenues:
Fees charged to contractholders $9,668 $7,461 $6,933
Net investment income 1,120 1,007 1,131
Net realized gains 15 205 123
Premium revenue 152 19 -
10,955 8,692 8,187
Benefits and expenses:
Contract and policy benefits 543 220 357
and expenses
Underwriting, acquisition and 3,747 1,187 3,997
insurance
expenses (1) 4,290 1,407 4,354
Income before provision for 6,665 7,285 3,833
income taxes
Provision for income taxes 2,521 2,686 1,452
Net income 4,144 4,599 2,381
Other comprehensive (loss)
income, before
tax:
Unrealized (losses) gains on
securities:
Unrealized holding (losses) (1,141) 369 285
gains arising
during the period
Less: reclassification
adjustment for gains
included
in net income (15) (205) (123)
Benefit (provision) for
income taxes related
to items of
other comprehensive (loss) 405 (58) (57)
income
Other comprehensive (loss) (751) 106 105
income, net of tax
Comprehensive income $3,393 $4,705 $2,486
(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, 1999,
1998 and 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Accumulated
Additional Other Total
Common Paid-In Comprehensive Retained Stockholder's
Stock Capital (Loss) Income Earnings Equity
Balance at
December 31, 1996 $2,000 $11,500 $184 $6,142 $19,826
Comprehensive income:
Net income 2,381 2,381
Other 105 105
comprehensive
income
Balance at 2,000 11,500 289 8,523 22,312
December 31, 1997
Capital
contribution
from parent 1,000 1,000
Comprehensive income:
Net income 4,599 4,599
Other 106 106
comprehensive
income
Balance at 2,000 12,500 395 13,122 28,017
Decemebr 31, 1998
Comprehensive income:
Net income 4,144 4,144
Other (751) (751)
comprehensive loss
Balance at
December 31, 1999 $2,000 $12,500 $(356) $17,266 $31,410
The accompanying
notes
are an integral
part of
the financial statements.
</TABLE>
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
(A Wholly-Owned Ultimate Subsidiary of FMR Corp.)
STATEMENTS OF CASH FLOWS
(in thousands)
for the years ended December 31, 1999,
1998 and 1997
1999 1998 1997
Cash flows from operating
activities:
Net income $4,144 $4,599 $2,381
Adjustments to reconcile net
income to net
cash provided by
operating activities:
Amortization of bond discount 171 124 116
and premium
Realized loss on investments (15) (205) (123)
Depreciation 4 6 8
Change in deferred taxes 253 787 (172)
Addition to deferred policy
acquisition
costs, net of amortization (2,728) (3,293) (371)
Change in assets and
liabilities:
Accrued investment income (78) (6) (60)
Transfer from (to) separate 177 (17) 89
accounts
Future contract and policy (118) (2,264) 126
benefits
Payable to parent and 249 882 477
affiliates, net
Other assets and liabilities 14 86 (153)
Net cash provided by operating 2,073 699 2,318
activities
Cash flows from investing
activities:
Purchase of investments (9,913) (9,043) (15,707)
Proceeds from disposal of 6,911 9,078 13,078
investments
Net cash (used in) provided by
investing activities (3,002) 35 (2,629)
Cash flows from financing
activities:
Capital contribution from - 1,000 -
parent
Net cash provided by financing
activities - 1,000 -
Net (decrease) increase in cash
and cash equivalents (929) 1,734 (311)
Cash and cash equivalents:
Beginning of year 2,363 629 940
End of year $1,434 $2,363 $629
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, the
Variable Insurance Products Fund III, the Morgan Stanley Dean Witter
Universal Funds, the PBHG Insurance Series Funds, the Strong Variable
Insurance Funds and the Warburg Pincus Trust Funds, which are reported
at the net asset value of such portfolios.
In 1998, the Company began offering a term life insurance product
with level premium paying periods of five, ten, fifteen and twenty
years.
2. Summary of Significant Accounting Policies:
Basis of Presentation
The accompanying 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. Realized gains or losses on the Company's funds
retained in the separate account are reflected in income.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an
original maturity date of three months or less to be cash equivalents.
Cash and cash equivalents represent amounts in demand deposit accounts
and money market mutual funds and are reported at fair value. Money
market mutual funds used to fund long-term investments and to meet
operating cash requirements were $1,387,000 and $2,358,000, at
December 31, 1999 and 1998, respectively.
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. Differences between separate account assets and
separate account liabilities represent Company funds due to (from) the
separate accounts.
Revenue Recognition
Fees charged to contractholders include mortality and expense risk,
administrative charges and surrender charges for variable annuity
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 6.9% 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.
New Accounting Pronouncements
In 1999, the Company adopted Statement of Position 97-3, "Accounting
by Insurance and Other Enterprises for Insurance-Related Assessments"
(SOP No. 97-3). SOP No. 97-3 provides guidance on when a liability
should be recognized for guaranty fund and other assessments and how
to measure the liability. The adoption of SOP No. 97-3 did not have a
material impact on the results of operations or financial position.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (Statement No. 133),
which establishes accounting and reporting standards for derivative
instruments. Statement No. 133 requires that an entity recognize all
derivatives as either assets or liabilities at fair value in the
statement of financial position. This statement is effective for
fiscal years beginning after June 15, 2000. The Company is currently
assessing the impact of adopting Statement No. 133.
3. Investments:
The components of net investment income were as follows:
Years ended December 31,
1999 1998 1997
(in thousands)
Debt securities $1,284 $1,182 $1,187
Cash and cash equivalents 107 39 24
Investment in separate account 10 20 56
Total investment income 1,401 1,241 1,267
Investment expenses 281 234 136
Net investment income $1,120 $1,007 $1,131
Gross realized gains and losses from the sale of debt securities were
as follows:
Years ended December 31,
1999 1998 1997
(in thousands)
Gross realized gains $47 $207 $131
Gross realized losses $32 $ 2 $ 8
The amortized cost and estimated fair value of debt securities, by
type of issuer, were as follows:
December 31, 1999
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
U.S. Treasury
Securities $ 5,126 $62 $(133) $ 5,055
Corporate 15,474 1 (468) 15,007
securities
Loan-backed bonds
and
structured
securities 1,023 - (9) 1,014
Total debt securities $21,623 $63 $(610) $21,076
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 11,531 194 (8) 11,717
securities
Loan-backed bonds
and
structured
securities 1,153 30 - 1,183
Total debt securities $18,776 $625 $(15) $19,386
The amortized cost and estimated fair value of debt securities at
December 31, 1999, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
or prepayment penalties.
Estimated
Amortized Fair
Cost Value
(in thousands)
Due in 1 year or less $ 436 $ 436
Due after 1 year through 5 13,491 13,266
years
Due after 5 years through 10 5,944 5,705
years
Due after 10 years 729 655
Subtotal 20,600 20,062
Loan-backed bonds and 1,023 1,014
structured securities
$21,623 $21,076
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,
1999 1998 1997
(in thousands)
Current $2,268 $1,899 $1,624
Deferred 253 787 (172)
Provision for income taxes $2,521 $2,686 $1,452
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,
1999 1998
(in thousands)
Deferred income tax
liabilities:
Deferred policy acquisition $4,281 $3,800
costs
Unrealized (loss) gain on
securities available for sale (191) 214
Contractholder reserves (740) (517)
Other, net 7 11
Net deferred tax liability $3,357 $3,508
The Company paid FILI federal income taxes of $1,618,000, $1,287,000,
and $1,136,000 in 1999, 1998 and 1997, respectively, related to the
Company's separate-company basis net operating results for the year.
Payables to FILI of $382,000 and $392,000 have been recorded in 1999
and 1998, respectively. Intercompany tax balances are settled within
30 days of the actual tax payments. State taxes of $371,000, $67,000,
and $234,000 were paid in 1999, 1998, and 1997, respectively. State
income tax payable of $85,000 was recorded in 1998.
The statute of limitations on the Company's federal income tax
returns is open for the taxable years ended December 31, 1994 and
thereafter. A refund to claim for additional dividends received
deduction and foreign tax credit has been filed with the Internal
Revenue Service for the tax years ended 1994 through 1998 and is under
review. In management's opinion, adequate tax liabilities have been
established for all years.
The effective tax rates approximate the statutory federal income tax
rates for the years ended 1999, 1998 and 1997.
5. Stockholder's Equity and Dividend Restrictions:
Generally, the net assets of the Company available for transfer to
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,
1999 1998 1997
(in thousands)
Statutory net income $2,277 $1,933 $1,707
Statutory capital stock
and surplus $16,541 $14,276 $11,348
6. Affiliated Company Transactions:
The Company's insurance contracts are distributed through Fidelity
Brokerage Services, Inc., Fidelity Insurance Agency, Inc. (FIA), and
Fidelity Investments Institutional Services Company, Inc., all of
which are affiliated with FMR Corp. 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 $4,361,000, $2,888,000 and $2,978,000 in 1999, 1998 and
1997, 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 $1,080,000, $961,000 and $683,000 in 1999,
1998 and 1997, 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 $28,000, $24,000 and $20,000 were
charged to the Company in 1999, 1998 and 1997, respectively.
FMR Corp sponsors a trusteed Profit-Sharing Plan and a contributory
401(k) Thrift Plan covering substantially all eligible Company
employees. Payments are made to the trustee by FMR Corp. annually for
the Profit-Sharing Plan and monthly for the 401(k) Thrift Plan. FMR
Corp.'s policy is to fund all costs accrued and to charge each
subsidiary for its share of the cost. The cost charged to the Company
for these plans amounted to $72,000, $74,000 and $63,000 in 1999, 1998
and 1997, respectively.
The Company participates in various FMR Corp. stock-based
compensatory plans. The compensation is based on the change in the net
asset value of FMR Corp. common stock, as defined. The aggregate
expenses related to these plans charged to the Company were $69,000
and $18,000 in 1999 and 1998, respectively.
7. Underwriting, Acquisition and Insurance Expenses:
Underwriting, acquisition and insurance expenses were as follows:
Years ended December 31,
1999 1998 1997
(in thousands)
Commissions, gross $4,361 $2,888 $2,978
Capitalization of deferred
policy acquisition costs (4,462) (2,903) (2,978)
Amortization of deferred
policy
acquisition costs 1,734 (390) 2,607
Taxes, licenses and fees 24 41 31
General insurance expenses 2,090 1,551 1,359
$3,747 $1,187 $3,997
Amortization of deferred policy acquisition costs is adjusted
periodically when estimates of future gross profits are revised to
reflect actual experience. In 1999, 1998 and 1997, the Company
adjusted amortization by $101,000, $(1,095,000) and $1,850,000,
respectively, to reflect actual experience for investment performance,
persistency and inflation assumptions. This adjustment has been
reflected in amortization expense.
8. 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.
Litigation
The Company is, from time to time, involved in various legal actions
concerning policy benefits and certain other matters. Those actions
are considered by the Company in estimating policy reserves and other
liabilities. The Company believes that the resolution of those actions
should not have a material adverse effect on stockholder's equity.
STATEMENT OF ASSETS AND LIABILITIES
EMPIRE FIDELITY INVESTMENTS VARIABLE ANNUITY ACCOUNT A
OF
EMPIRE FIDELITY INVESTMENTS LIFE INSURANCE COMPANY
ASSETS DECEMBER 31, 1999
Investments at current market
value:
Variable Insurance Products
Fund (VIP)
Money Market Portfolio - $ 73,675,888
73,675,888 shares (cost
$73,675,888)
High Income Portfolio - 21,011,435
1,857,775 shares (cost
$23,135,717)
Equity-Income Portfolio - 150,855,334
5,867,574 shares (cost
$120,343,187)
Growth Portfolio - 214,015,765
3,896,154 shares (cost
$141,276,984)
Overseas Portfolio - 35,103,688
1,279,289 shares (cost
$24,960,242)
Variable Insurance Products
Fund II (VIP II)
Investment Grade Bond 18,180,446
Portfolio - 1,495,102 shares
(cost $18,987,875)
Asset Manager Portfolio - 96,167,149
5,150,892 shares (cost
$81,423,921)
Index 500 Portfolio - 133,604,577
798,068 shares (cost
$95,383,210)
Asset Manager: Growth 34,851,182
Portfolio - 1,896,147 shares
(cost $28,952,843)
Contrafund Portfolio - 207,986,592
7,135,046 shares (cost
$127,154,236)
Variable Insurance Products
Fund III (VIP III)
Balanced Portfolio - 10,732,414
670,776 shares (cost
$10,420,411)
Growth & Income Portfolio - 66,659,614
3,853,157 shares (cost
$56,415,076)
Growth Opportunities 34,516,975
Portfolio - 1,491,014 shares
(cost $29,660,954)
Morgan Stanley Dean Witter
Universal Funds (MSDWUF)
Emerging Markets Equity 5,621,270
Portfolio - 404,117 shares
(cost $4,392,090)
Emerging Markets Debt 294,588
Portfolio - 42,632 shares
(cost $373,882)
Global Equity Portfolio - 1,719,496
133,501 shares (cost
$1,775,999)
International Magnum 1,140,269
Portfolio - 82,093 shares
(cost $1,025,884)
PBHG Insurance Series Funds
(PBHG)
Growth II Portfolio - 12,550,555
544,493 shares (cost
$9,705,856)
Small Cap Value Portfolio - 2,083,706
154,807 shares (cost
$1,872,958)
Large Cap Value Portfolio - 3,627,059
238,779 shares (cost
$3,557,541)
Technology & Communications 155,805,105
Portfolio - 3,386,331 shares
(cost $84,660,190)
Select 20 Portfolio - 71,540,974
2,187,797 shares (cost
$37,494,622)
Strong Variable Insurance
Funds (SVIF)
Discovery Fund II Portfolio 283,975
- - - 24,954 shares (cost
$304,153)
Mid Cap Growth Fund II 22,331,219
Portfolio - 735,305 shares
(cost $16,850,066)
Opportunity Fund II 5,527,257
Portfolio - 212,669 shares
(cost $4,824,528)
Warburg Pincus Trust (WPT)
Small Company Growth 4,294,261
Portfolio - 163,903 shares
(cost $3,578,144)
International Equity 1,957,653
Portfolio - 117,225 shares
(cost $1,727,785)
Post-Venture Capital 899,556
Portfolio - 46,706 shares
(cost $663,121)
Total Assets $ 1,387,038,002
NET ASSETS COMPRISED OF:
Variable Annuity Contracts $ 1,323,139,333
Annuity Reserves 63,898,151
Retained in Variable Account 518
by Empire Fidelity
Investments Life Insurance
Company
NET ASSETS $ 1,387,038,002
STATEMENT OF OPERATIONS
For the years ended December 31, 1999 and 1998
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
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 3,357,223 $ 2,645,742 $ 2,099,050 $ 1,889,480
EXPENSES:
Mortality risk, expense risk 539,298 403,367 184,513 217,487
and administrative charges
Net investment income (loss) 2,817,925 2,242,375 1,914,537 1,671,993
Realized gain (loss) on sale 0 0 25,945 357,137
of fund shares
Realized gain distributions 0 0 78,469 1,200,608
Unrealized appreciation 0 0 (358,076) (4,611,108)
(depreciation)
Net increase (decrease) in $ 2,817,925 $ 2,242,375 $ 1,660,875 $ (1,381,370)
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP - EQUITY-INCOME VIP - GROWTH VIP - OVERSEAS
12/31/99 12/31/98 12/31/99 12/31/98 12/31/99
INCOME:
Dividends $ 2,502,500 $ 2,627,503 $ 247,409 $ 474,706 $ 374,181
EXPENSES:
Mortality risk, expense
risk 1,370,374 1,545,117 1,380,231 866,799 208,952
and administrative charges
Net investment income
(loss) 1,132,126 1,082,386 (1,132,822) (392,093) 165,229
Realized gain (loss) on
sale 18,298,450 13,591,971 8,907,460 5,631,524 1,095,549
of fund shares
Realized gain
distributions 5,531,843 9,350,819 15,555,825 12,417,303 603,518
Unrealized appreciation (16,419,983) (6,201,694) 31,480,768 17,537,413 7,830,754
(depreciation)
Net increase (decrease) in $ 8,542,436 $ 17,823,482 $ 54,811,231 $ 35,194,147 $ 9,695,050
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
12/31/98
INCOME:
Dividends $ 474,801
EXPENSES:
Mortality risk, expense risk 215,683
and administrative charges
Net investment income (loss) 259,118
Realized gain (loss) on sale 1,010,697
of fund shares
Realized gain distributions 1,399,412
Unrealized appreciation (181,229)
(depreciation)
Net increase (decrease) in $ 2,487,998
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP II - INVESTMENT GRADE VIP II - ASSET MANAGER
BOND
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 912,986 $ 486,031 $ 3,153,859 $ 2,869,728
EXPENSES:
Mortality risk, expense risk 168,113 113,320 772,222 757,524
and administrative charges
Net investment income (loss) 744,873 372,711 2,381,637 2,112,204
Realized gain (loss) on sale (66,066) 246,114 2,706,295 2,157,446
of fund shares
Realized gain distributions 286,426 57,665 3,994,889 8,609,183
Unrealized appreciation (1,395,292) 349,622 63,475 (655,336)
(depreciation)
Net increase (decrease) in $ (430,059) $ 1,026,112 $ 9,146,296 $ 12,223,497
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP II - INDEX 500 VIP II - ASSET MANAGER:
GROWTH
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 1,093,942 $ 1,020,047 $ 786,181 $ 655,208
EXPENSES:
Mortality risk, expense risk 1,010,291 797,686 273,874 263,271
and administrative charges
Net investment income (loss) 83,651 222,361 512,307 391,937
Realized gain (loss) on sale 9,310,383 10,983,929 2,178,418 2,050,502
of fund shares
Realized gain distributions 742,318 2,362,610 1,303,909 3,064,065
Unrealized appreciation 12,109,896 9,112,387 515,712 (667,729)
(depreciation)
Net increase (decrease) in $ 22,246,248 $ 22,681,287 $ 4,510,346 $ 4,838,775
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
VIP II - CONTRAFUND
12/31/99 12/31/98
INCOME:
Dividends $ 840,467 $ 921,708
EXPENSES:
Mortality risk, expense risk 1,544,696 1,187,967
and administrative charges
Net investment income (loss) (704,229) (266,259)
Realized gain (loss) on sale 12,991,790 7,420,537
of fund shares
Realized gain distributions 6,163,422 6,781,142
Unrealized appreciation 21,310,986 23,314,910
(depreciation)
Net increase (decrease) in $ 39,761,969 $ 37,250,330
net assets from operations
</TABLE>
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
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 203,035 $ 118,737 $ 439,671 $ 0
EXPENSES:
Mortality risk, expense risk 87,047 53,635 609,954 378,860
and administrative charges
Net investment income (loss) 115,988 65,102 (170,283) (378,860)
Realized gain (loss) on 426,821 450,249 8,090,973 1,665,467
sale of fund shares
Realized gain distributions 235,959 181,404 879,341 176,254
Unrealized appreciation (430,871) 373,537 (3,185,603) 10,346,320
(depreciation)
Net increase (decrease) in $ 347,897 $ 1,070,292 $ 5,614,428 $ 11,809,181
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP III - GROWTH MSDWUF - EMERGING
OPPORTUNITIES MARKETS EQUITY
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 439,197 $ 380,494 $ 1,184 $ 2,945
EXPENSES:
Mortality risk, expense risk 338,457 318,261 21,750 2,837
and administrative charges
Net investment income (loss) 100,740 62,233 (20,566) 108
Realized gain (loss) on 4,726,198 1,816,418 298,832 8,643
sale of fund shares
Realized gain distributions 821,107 1,322,669 0 0
Unrealized appreciation (4,333,559) 4,981,718 1,328,959 (98,190)
(depreciation)
Net increase (decrease) in $ 1,314,486 $ 8,183,038 $ 1,607,225 $ (89,439)
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MSDWUF - EMERGING
MARKETS DEBT
12/31/99 12/31/98
INCOME:
Dividends $ 37,429 $ 28,061
EXPENSES:
Mortality risk, expense risk 2,247 1,787
and administrative charges
Net investment income (loss) 35,182 26,274
Realized gain (loss) on 1,909 (5,315)
sale of fund shares
Realized gain distributions 0 0
Unrealized appreciation 25,241 (92,451)
(depreciation)
Net increase (decrease) in $ 62,332 $ (71,492)
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MSDWUF - GLOBAL MSDWUF -
EQUITY INTERNATIONAL MAGNUM
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 19,414 $ 13,192 $ 7,862 $ 5,184
EXPENSES:
Mortality risk, expense risk 15,017 10,698 6,650 6,541
and administrative charges
Net investment income (loss) 4,397 2,494 1,212 (1,357)
Realized gain (loss) on 45,162 61,905 (18,076) 48,096
sale of fund shares
Realized gain distributions 76,125 12,573 4,075 3,219
Unrealized appreciation (79,017) 25,498 209,399 (89,038)
(depreciation)
Net increase (decrease) in $ 46,667 $ 102,470 $ 196,610 $ (39,080)
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PBHG - GROWTH II PBHG - SMALL CAP VALUE
12/31/99 12/31/98 12/31/99 12/31/98
INCOME:
Dividends $ 0 $ 0 $ 0 $ 523
EXPENSES:
Mortality risk, expense risk 21,104 1,850 18,810 17,910
and administrative charges
Net investment income (loss) (21,104) (1,850) (18,810) (17,387)
Realized gain (loss) on 508,570 18,137 114,494 100,408
sale of fund shares
Realized gain distributions 0 0 0 3,159
Unrealized appreciation 2,830,966 13,190 181,282 20,879
(depreciation)
Net increase (decrease) in $ 3,318,432 $ 29,477 $ 276,966 $ 107,059
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
PBHG - LARGE CAP VALUE
12/31/99 12/31/98
INCOME:
Dividends $ 116 $ 5,924
EXPENSES:
Mortality risk, expense risk 31,217 7,069
and administrative charges
Net investment income (loss) (31,101) (1,145)
Realized gain (loss) on 393,569 128,101
sale of fund shares
Realized gain distributions 99,112 12,521
Unrealized appreciation (165,273) 232,358
(depreciation)
Net increase (decrease) in $ 296,307 $ 371,835
net assets from operations
</TABLE>
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
INCOME:
12/31/99 12/31/98 12/31/99 12/31/98
Dividends $ 0 $ 180 $ 0 $ 280
EXPENSES:
Mortality risk, expense 299,125 9,793 323,793 77,525
risk and adminis- trative
charges
Net investment income (loss) (299,125) (9,613) (323,793) (77,245)
Realized gain (loss) on sale 2,304,654 60,345 4,619,284 837,116
of fund shares
Realized gain distributions 0 0 0 0
Unrealized appreciation 70,720,773 424,975 29,220,248 4,809,171
(depreciation)
Net increase (decrease) in $ 72,726,302 $ 475,707 $ 33,515,739 $ 5,569,042
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SVIF - DISCOVERY FUND II SVIF - MID CAP GROWTH
FUND II
INCOME:
12/31/99 12/31/98 12/31/99 12/31/98
Dividends $ 0 $ 0 $ 0 $ 3
EXPENSES:
Mortality risk, expense 1,954 1,778 49,188 4,437
risk and adminis- trative
charges
Net investment income (loss) (1,954) (1,778) (49,188) (4,434)
Realized gain (loss) on sale 1,681 2,413 523,446 21,237
of fund shares
Realized gain distributions 35,470 3,035 2,833 0
Unrealized appreciation (21,180) 2,341 5,370,251 112,638
(depreciation)
Net increase (decrease) in $ 14,017 $ 6,011 $ 5,847,342 $ 129,441
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SVIF - OPPORTUNITY FUND
II
INCOME:
12/31/99 12/31/98
Dividends $ 0 $ 7,009
EXPENSES:
Mortality risk, expense 34,153 17,954
risk and adminis- trative
charges
Net investment income (loss) (34,153) (10,945)
Realized gain (loss) on sale 130,265 (23,495)
of fund shares
Realized gain distributions 373,791 207,970
Unrealized appreciation 773,031 (72,627)
(depreciation)
Net increase (decrease) in $ 1,242,934 $ 100,903
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WPT - SMALL COMPANY WPT - INTERNATIONAL
GROWTH EQUITY
INCOME: 12/31/99 12/31/98 12/31/99 12/31/98
Dividends $ 0 $ 0 $ 10,903 $ 1,849
EXPENSES:
Mortality risk, expense 10,500 6,748 3,259 2,742
risk and adminis- trative
charges
Net investment income (loss) (10,500) (6,748) 7,644 (893)
Realized gain (loss) on sale 164,299 24,269 25,821 21,892
of fund shares
Realized gain distributions 78,799 0 0 0
Unrealized appreciation 764,971 (56,918) 265,565 (33,271)
(depreciation)
Net increase (decrease) in $ 997,569 $ (39,397) $ 299,030 $ (12,272)
net assets from operations
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WPT - POST-VENTURE TOTAL
CAPITAL
INCOME: 12/31/99 12/31/98 12/31/99 12/31/98
Dividends $ 0 $ 0 $ 16,526,609 $ 14,629,335
EXPENSES:
Mortality risk, expense 4,567 2,989 9,331,356 7,291,635
risk and adminis- trative
charges
Net investment income (loss) (4,567) (2,989) 7,195,253 7,337,700
Realized gain (loss) on sale 87,468 21,703 77,893,594 48,707,446
of fund shares
Realized gain distributions 0 0 36,867,231 47,165,611
Unrealized appreciation 259,899 (24,571) 158,873,322 58,872,795
(depreciation)
Net increase (decrease) in $ 342,800 $ (5,857) $ 280,829,400 $ 162,083,552
net assets from operations
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
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
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 2,817,925 $ 2,242,375 $ 1,914,537 $ 1,671,993
Net realized gain (loss) on 0 0 104,414 1,557,745
investments
Unrealized appreciation 0 0 (358,076) (4,611,108)
(depreciation)
Net increase (decrease) in 2,817,925 2,242,375 1,660,875 (1,381,370)
net assets from operations
Payments received from 37,167,034 24,824,193 1,489,749 3,641,195
contract owners
Transfers between (16,492,270) (2,346,439) (6,617,202) (2,096,518)
sub-accounts and the fixed
account, net
Transfers for contract (10,517,625) (4,418,522) (1,006,484) (945,611)
benefits and terminations
Other transfers (to) from (11,196) (7,606) 2,610 (24,287)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 10,145,943 18,051,626 (6,131,327) 574,779
net assets from contract
transactions
Retained in (returned from) (111,001) 5,829 (4,360) 6
Variable Annuity Account A,
net
Total increase (decrease) in 12,852,867 20,299,830 (4,474,812) (806,585)
net assets
Net assets at beginning of year 60,823,021 40,523,191 25,486,247 26,292,832
Net assets at end of year $ 73,675,888 $ 60,823,021 $ 21,011,435 $ 25,486,247
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
VIP - EQUITY-INCOME VIP - GROWTH VIP - OVERSEAS
12/31/99 12/31/98 12/31/99 12/31/98 12/31/99
Net investment income
(loss) $ 1,132,126 $ 1,082,386 $ (1,132,822) $ (392,093) $ 165,229
Net realized gain (loss)
on 23,830,293 22,942,790 24,463,285 18,048,827 1,699,067
investments
Unrealized appreciation (16,419,983) (6,201,694) 31,480,768 17,537,413 7,830,754
(depreciation)
Net increase (decrease) in 8,542,436 17,823,482 54,811,231 35,194,147 9,695,050
net assets from operations
Payments received from 4,284,765 6,551,149 14,741,790 3,512,294 1,131,618
contract owners
Transfers between (32,793,233) (29,985,166) 21,083,332 (1,463,015) (519,781)
sub-accounts and the fixed
account, net
Transfers for contract (6,589,324) (6,382,415) (8,198,054) (2,742,013) (839,044)
benefits and terminations
Other transfers (to) from 35,179 (5,258) (7,105) (48,790) (616)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in (35,062,613) (29,821,690) 27,619,963 (741,524) (227,823)
net assets from contract
transactions
Retained in (returned from) (6,709) 1,014 (8,646) 2,670 (5,413)
Variable Annuity Account A,
net
Total increase (decrease) in (26,526,886) (11,997,194) 82,422,548 34,455,293 9,461,814
net assets
Net assets at beginning of
year 177,382,220 189,379,414 131,593,217 97,137,924 25,641,874
Net assets at end of year $ 150,855,334 $ 177,382,220 $ 214,015,765 $ 131,593,217 $ 35,103,688
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
12/31/98
Net investment income (loss) $ 259,118
Net realized gain (loss) on 2,410,109
investments
Unrealized appreciation (181,229)
(depreciation)
Net increase (decrease) in 2,487,998
net assets from operations
Payments received from 830,995
contract owners
Transfers between (1,993,797)
sub-accounts and the fixed
account, net
Transfers for contract (755,511)
benefits and terminations
Other transfers (to) from (1,561)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in (1,919,874)
net assets from contract
transactions
Retained in (returned from) 654
Variable Annuity Account A,
net
Total increase (decrease) in 568,778
net assets
Net assets at beginning of year 25,073,096
Net assets at end of year $ 25,641,874
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP II - INVESTMENT GRADE VIP II - ASSET MANAGER
BOND
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 744,873 $ 372,711 $ 2,381,637 $ 2,112,204
Net realized gain (loss) on 220,360 303,779 6,701,184 10,766,629
investments
Unrealized appreciation (1,395,292) 349,622 63,475 (655,336)
(depreciation)
Net increase (decrease) in (430,059) 1,026,112 9,146,296 12,223,497
net assets from operations
Payments received from 3,417,334 1,731,754 2,424,950 2,477,177
contract owners
Transfers between (5,330,955) 10,776,490 (7,127,954) (4,677,225)
sub-accounts and the fixed
account, net
Transfers for contract (842,493) (693,541) (4,899,468) (5,190,564)
benefits and terminations
Other transfers (to) from 3,839 (1,488) 9,532 (34,874)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in (2,752,275) 11,813,215 (9,592,940) (7,425,486)
net assets from contract
transactions
Retained in (returned from) (1,815) 213 (4,564) 746
Variable Annuity Account A,
net
Total increase (decrease) in (3,184,149) 12,839,540 (451,208) 4,798,757
net assets
Net assets at beginning of year 21,364,595 8,525,055 96,618,357 91,819,600
Net assets at end of year $ 18,180,446 $ 21,364,595 $ 96,167,149 $ 96,618,357
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP II - INDEX 500 VIP II - ASSET MANAGER:
GROWTH
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 83,651 $ 222,361 $ 512,307 $ 391,937
Net realized gain (loss) on 10,052,701 13,346,539 3,482,327 5,114,567
investments
Unrealized appreciation 12,109,896 9,112,387 515,712 (667,729)
(depreciation)
Net increase (decrease) in 22,246,248 22,681,287 4,510,346 4,838,775
net assets from operations
Payments received from 10,721,198 7,745,488 2,143,156 2,675,973
contract owners
Transfers between (3,895,693) 5,201,166 (3,750,421) (6,134,030)
sub-accounts and the fixed
account, net
Transfers for contract (2,991,968) (4,898,551) (994,680) (774,181)
benefits and terminations
Other transfers (to) from 17,133 (9,527) 2,093 (14,353)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 3,850,670 8,038,576 (2,599,852) (4,246,591)
net assets from contract
transactions
Retained in (returned from) (5,261) 1,138 (5,412) 932
Variable Annuity Account A,
net
Total increase (decrease) in 26,091,657 30,721,001 1,905,082 593,116
net assets
Net assets at beginning of year 107,512,920 76,791,919 32,946,100 32,352,984
Net assets at end of year $ 133,604,577 $ 107,512,920 $ 34,851,182 $ 32,946,100
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
VIP II - CONTRAFUND
12/31/99 12/31/98
Net investment income (loss) $ (704,229) $ (266,259)
Net realized gain (loss) on 19,155,212 14,201,679
investments
Unrealized appreciation 21,310,986 23,314,910
(depreciation)
Net increase (decrease) in 39,761,969 37,250,330
net assets from operations
Payments received from 13,344,538 9,773,186
contract owners
Transfers between (6,147,293) (9,126,283)
sub-accounts and the fixed
account, net
Transfers for contract (8,021,589) (3,689,396)
benefits and terminations
Other transfers (to) from (2,132) (11,441)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in (826,476) (3,053,934)
net assets from contract
transactions
Retained in (returned from) (6,462) 1,591
Variable Annuity Account A,
net
Total increase (decrease) in 38,929,031 34,197,987
net assets
Net assets at beginning of year 169,057,561 134,859,574
Net assets at end of year $ 207,986,592 $ 169,057,561
</TABLE>
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
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 115,988 $ 65,102 $ (170,283) $ (378,860)
Net realized gain (loss) on 662,780 631,653 8,970,314 1,841,721
investments
Unrealized appreciation (430,871) 373,537 (3,185,603) 10,346,320
(depreciation)
Net increase (decrease) in 347,897 1,070,292 5,614,428 11,809,181
net assets from operations
Payments received from 2,277,880 1,191,176 9,622,662 14,567,299
contract owners
Transfers between (193,407) 1,883,200 (11,968,744) 15,868,621
sub-accounts and the fixed
account, net
Transfers for contract (299,146) (219,835) (5,722,591) (1,973,918)
benefits and terminations
Other transfers (to) from 2,358 (2,168) 9,469 (14,699)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 1,787,685 2,852,373 (8,059,204) 28,447,303
net assets from contract
transactions
Retained in (returned from) (4,517) 847 (6,968) 1,729
Variable Annuity Account A,
net
Total increase (decrease) in 2,131,065 3,923,512 (2,451,744) 40,258,213
net assets
Net assets at beginning of year 8,601,349 4,677,837 69,111,358 28,853,145
Net assets at end of year $ 10,732,414 $ 8,601,349 $ 66,659,614 $ 69,111,358
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP III - GROWTH MSDWUF - EMERGING
OPPORTUNITIES MARKETS EQUITY
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 100,740 $ 62,233 $ (20,566) $ 108
Net realized gain (loss) on 5,547,305 3,139,087 298,832 8,643
investments
Unrealized appreciation (4,333,559) 4,981,718 1,328,959 (98,190)
(depreciation)
Net increase (decrease) in 1,314,486 8,183,038 1,607,225 (89,439)
net assets from operations
Payments received from 2,827,238 6,234,421 468,566 113,147
contract owners
Transfers between (12,777,805) (1,395,866) 3,019,428 314,261
sub-accounts and the fixed
account, net
Transfers for contract (1,146,235) (1,936,492) (21,269) (399)
benefits and terminations
Other transfers (to) from (5,432) (6,503) 559 (2)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in (11,102,234) 2,895,560 3,467,284 427,007
net assets from contract
transactions
Retained in (returned from) (6,541) 1,458 19 (1)
Variable Annuity Account A,
net
Total increase (decrease) in (9,794,289) 11,080,056 5,074,528 337,567
net assets
Net assets at beginning of year 44,311,264 33,231,208 546,742 209,175
Net assets at end of year $ 34,516,975 $ 44,311,264 $ 5,621,270 $ 546,742
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MSDWUF - EMERGING
MARKETS DEBT
12/31/99 12/31/98
Net investment income (loss) $ 35,182 $ 26,274
Net realized gain (loss) on 1,909 (5,315)
investments
Unrealized appreciation 25,241 (92,451)
(depreciation)
Net increase (decrease) in 62,332 (71,492)
net assets from operations
Payments received from 80,428 87,141
contract owners
Transfers between (130,259) (69,071)
sub-accounts and the fixed
account, net
Transfers for contract (622) (606)
benefits and terminations
Other transfers (to) from 161 (28)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in (50,292) 17,436
net assets from contract
transactions
Retained in (returned from) (2) 2
Variable Annuity Account A,
net
Total increase (decrease) in 12,038 (54,054)
net assets
Net assets at beginning of year 282,550 336,604
Net assets at end of year $ 294,588 $ 282,550
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MSDWUF - GLOBAL MSDWUF -
EQUITY INTERNATIONAL MAGNUM
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ 4,397 $ 2,494 $ 1,212 $ (1,357)
Net realized gain (loss) on 121,287 74,478 (14,001) 51,315
investments
Unrealized appreciation (79,017) 25,498 209,399 (89,038)
(depreciation)
Net increase (decrease) in 46,667 102,470 196,610 (39,080)
net assets from operations
Payments received from 249,422 758,399 231,733 374,549
contract owners
Transfers between (542,965) 836,755 (181,280) 411,163
sub-accounts and the fixed
account, net
Transfers for contract (33,029) (5,584) (19,339) (2,657)
benefits and terminations
Other transfers (to) from 243 (195) 216 397
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in (326,329) 1,589,375 31,330 783,452
net assets from contract
transactions
Retained in (returned from) (4) 1 (1) (1)
Variable Annuity Account A,
net
Total increase (decrease) in (279,666) 1,691,846 227,939 744,371
net assets
Net assets at beginning of year 1,999,162 307,316 912,330 167,959
Net assets at end of year $ 1,719,496 $ 1,999,162 $ 1,140,269 $ 912,330
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PBHG - GROWTH II PBHG - SMALL CAP VALUE
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ (21,104) $ (1,850) $ (18,810) $ (17,387)
Net realized gain (loss) on 508,570 18,137 114,494 103,567
investments
Unrealized appreciation 2,830,966 13,190 181,282 20,879
(depreciation)
Net increase (decrease) in 3,318,432 29,477 276,966 107,059
net assets from operations
Payments received from 1,200,034 133,860 423,761 500,142
contract owners
Transfers between 7,620,854 141,208 (1,530,331) 1,799,420
sub-accounts and the fixed
account, net
Transfers for contract (20,296) (609) (25,055) (17,248)
benefits and terminations
Other transfers (to) from 449 27 979 201
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 8,801,041 274,486 (1,130,646) 2,282,515
net assets from contract
transactions
Retained in (returned from) 33 (2) (2) (5)
Variable Annuity Account A,
net
Total increase (decrease) in 12,119,506 303,961 (853,682) 2,389,569
net assets
Net assets at beginning of year 431,049 127,088 2,937,388 547,819
Net assets at end of year $ 12,550,555 $ 431,049 $ 2,083,706 $ 2,937,388
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
PBHG - LARGE CAP VALUE
12/31/99 12/31/98
Net investment income (loss) $ (31,101) $ (1,145)
Net realized gain (loss) on 492,681 140,622
investments
Unrealized appreciation (165,273) 232,358
(depreciation)
Net increase (decrease) in 296,307 371,835
net assets from operations
Payments received from 934,429 393,422
contract owners
Transfers between 113,025 1,491,596
sub-accounts and the fixed
account, net
Transfers for contract (63,941) (103,177)
benefits and terminations
Other transfers (to) from 86 (2,284)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 983,599 1,779,557
net assets from contract
transactions
Retained in (returned from) (117) 113
Variable Annuity Account A,
net
Total increase (decrease) in 1,279,789 2,151,505
net assets
Net assets at beginning of year 2,347,270 195,765
Net assets at end of year $ 3,627,059 $ 2,347,270
</TABLE>
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
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ (299,125) $ (9,613) $ (323,793) $ (77,245)
Net realized gain (loss) on 2,304,654 60,345 4,619,284 837,116
investments
Unrealized appreciation 70,720,773 424,975 29,220,248 4,809,171
(depreciation)
Net increase (decrease) in 72,726,302 475,707 33,515,739 5,569,042
net assets from operations
Payments received from 18,048,159 502,534 10,163,549 4,070,084
contract owners
Transfers between 62,532,330 1,593,447 90,503 19,258,341
sub-accounts and the fixed
account, net
Transfers for contract (428,500) (4,960) (1,333,503) (343,605)
benefits and terminations
Other transfers (to) from (5,427) 37 (13,046) (6,492)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 80,146,562 2,091,058 8,907,503 22,978,328
net assets from contract
transactions
Retained in (returned from) 146 (24) (147) 57
Variable Annuity Account A,
net
Total increase (decrease) in 152,873,010 2,566,741 42,423,095 28,547,427
net assets
Net assets at beginning of year 2,932,095 365,354 29,117,879 570,452
Net assets at end of year $ 155,805,105 $ 2,932,095 $ 71,540,974 $ 29,117,879
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SVIF - DISCOVERY FUND II SVIF - MID CAP GROWTH
FUND II
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ (1,954) $ (1,778) $ (49,188) $ (4,434)
Net realized gain (loss) on 37,151 5,448 526,279 21,237
investments
Unrealized appreciation (21,180) 2,341 5,370,251 112,638
(depreciation)
Net increase (decrease) in 14,017 6,011 5,847,342 129,441
net assets from operations
Payments received from 19,122 151,061 3,919,852 402,146
contract owners
Transfers between (27,036) 33,076 11,692,323 224,617
sub-accounts and the fixed
account, net
Transfers for contract (1,271) (2,353) (43,764) (1,040)
benefits and terminations
Other transfers (to) from 100 (931) (344) 243
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in (9,085) 180,853 15,568,067 625,966
net assets from contract
transactions
Retained in (returned from) (3) (9) (14) 39
Variable Annuity Account A,
net
Total increase (decrease) in 4,929 186,855 21,415,395 755,446
net assets
Net assets at beginning of year 279,046 92,191 915,824 160,378
Net assets at end of year $ 283,975 $ 279,046 $ 22,331,219 $ 915,824
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SVIF - OPPORTUNITY FUND
II
12/31/99 12/31/98
Net investment income (loss) $ (34,153) $ (10,945)
Net realized gain (loss) on 504,056 184,475
investments
Unrealized appreciation 773,031 (72,627)
(depreciation)
Net increase (decrease) in 1,242,934 100,903
net assets from operations
Payments received from 627,295 1,769,024
contract owners
Transfers between 473,742 1,048,157
sub-accounts and the fixed
account, net
Transfers for contract (41,900) (19,037)
benefits and terminations
Other transfers (to) from 116 (696)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 1,059,253 2,797,448
net assets from contract
transactions
Retained in (returned from) 3 (32)
Variable Annuity Account A,
net
Total increase (decrease) in 2,302,190 2,898,319
net assets
Net assets at beginning of year 3,225,067 326,748
Net assets at end of year $ 5,527,257 $ ,3,225,067
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WPT - SMALL COMPANY WPT - INTERNATIONAL
GROWTH EQUITY
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ (10,500) $ (6,748) $ 7,644 $ (893)
Net realized gain (loss) on 243,098 24,269 25,821 21,892
investments
Unrealized appreciation 764,971 (56,918) 265,565 (33,271)
(depreciation)
Net increase (decrease) in 997,569 (39,397) 299,030 (12,272)
net assets from operations
Payments received from 298,639 331,697 175,112 181,100
contract owners
Transfers between 2,052,484 353,786 1,181,913 103,508
sub-accounts and the fixed
account, net
Transfers for contract (6,955) (6,083) (69) (1,957)
benefits and terminations
Other transfers (to) from (734) 46 (328) 1,986
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 2,343,434 679,446 1,356,628 284,637
net assets from contract
transactions
Retained in (returned from) 1 16 (1) (2,058)
Variable Annuity Account A,
net
Total increase (decrease) in 3,341,004 640,065 1,655,657 270,307
net assets
Net assets at beginning of year 953,257 313,192 301,996 31,689
Net assets at end of year $ 4,294,261 $ 953,257 $ 1,957,653 $ 301,996
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WPT - POST-VENTURE TOTAL
CAPITAL
12/31/99 12/31/98 12/31/99 12/31/98
Net investment income (loss) $ (4,567) $ (2,989) $ 7,195,253 $ 7,337,700
Net realized gain (loss) on 87,468 21,703 114,760,825 95,873,057
investments
Unrealized appreciation 259,899 (24,571) 158,873,322 58,872,795
(depreciation)
Net increase (decrease) in 342,800 (5,857) 280,829,400 162,083,552
net assets from operations
Payments received from 175,283 337,029 142,609,296 95,861,635
contract owners
Transfers between (114,835) 119,403 (281,530) 2,170,805
sub-accounts and the fixed
account, net
Transfers for contract 0 (21,038) (54,108,214) (35,150,903)
benefits and terminations
Other transfers (to) from (5) 3 38,757 (190,243)
Empire Fidelity Investments
Life Insurance Co., net
Net increase (decrease) in 60,443 435,397 88,258,309 62,691,294
net assets from contract
transactions
Retained in (returned from) 0 (5) (177,758) 16,918
Variable Annuity Account A,
net
Total increase (decrease) in 403,243 429,535 368,909,951 224,791,764
net assets
Net assets at beginning of year 496,313 66,778 1,018,128,051 793,336,287
Net assets at end of year $ 899,556 $ 496,313 $ 1,387,038,002 $ 1,018,128,051
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the years ended December 31, 1999 and 1998
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 New York State
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 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 by the subaccounts in their corresponding mutual
fund portfolios and are valued at the reported net asset values of
such portfolios.
ACCOUNTING FOR INVESTMENTS
Investment transactions are recorded on the trade date. Income from
dividends is recorded on the ex-dividend date. Realized gains and
losses on the sales of investments are computed on the basis of the
identified cost of the investment sold.
ANNUITY RESERVES
Annuity reserves are computed for contracts in the payout stage
according to the 1983 Individual Annuitant Mortality Table. The
assumed investment return is 3.5% unless the annuitant elects
otherwise, in which case the rate may vary from 3.5% to 7%, as
regulated by the laws of the 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 of changes in net assets in accordance
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the related amounts and
disclosures in the financial statements. Actual results could differ
from those estimates.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with the
current year presentation.
3. EXPENSES
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. The daily charge is equivalent to an annual effective
rate of 1% of net assets for Income Advantage contracts and is
equivalent to an annual effective rate of 0.8% of net assets for
Retirement Reserves contracts. EFILI also deducts an annual
maintenance charge of $30 from the Retirement Reserves contract value.
The maintenance charge is waived on certain contracts.
In 1999, EFILI began offering Retirement Reserves contractholders the
opportunity to elect a death benefit rider. If elected, EFILI deducts
a quarterly charge which will not exceed 0.10% of the Retirement
Reserves contract value on the date of the charge. There will be no
charges made once the annuitant reaches their 85th birthday.
4. AFFILIATED COMPANY TRANSACTIONS
The contracts are distributed through Fidelity Brokerage Services,
Inc. (FBSI), Fidelity Insurance Agency, Inc. (FIA), and Fidelity
Investments Institutional Services Company, Inc. (FIIS), all of which
are affiliated with FMR Corp. FBSI, FIA, and FIIS are the distributors
and FBSI is the principal underwriter of the contracts. Fidelity
Management & Research Company, an affiliate of FMR Corp., acts as
investment advisor to the VIP, VIP II and VIP III portfolios. Fidelity
Investments Institutional Operations Company, Inc., an affiliate of
FMR Corp., is the transfer and shareholder servicing agent for the
VIP, VIP II and VIP III portfolios.
5. PURCHASES AND SALES OF INVESTMENTS
The following table shows aggregate cost of shares purchased and
proceeds from sales of each subaccount for the year ended December 31,
1999:
PURCHASES SALES
VIP - Money Market $ 77,848,145 $ 64,995,278
VIP - High Income 8,228,190 12,370,871
VIP - Equity-Income 19,858,230 48,263,583
VIP - Growth 61,163,470 19,129,150
VIP - Overseas 6,887,364 6,351,853
VIP II - Investment Grade Bond 10,059,624 11,782,415
VIP II - Asset Manager 13,434,750 16,655,728
VIP II - Index 500 27,497,084 22,825,706
VIP II - Asset Manager: Growth 8,649,815 9,438,863
VIP II - Contrafund 32,062,582 27,436,327
VIP III - Balanced 6,742,283 4,607,168
VIP III - Growth & Income 18,453,284 25,810,398
VIP III - Growth Opportunities 7,598,913 17,785,841
MSDWUF - Emerging Markets 8,923,362 5,476,625
Equity
MSDWUF - Emerging Markets Debt 404,868 419,980
MSDWUF - Global Equity 779,981 1,025,792
MSDWUF - International Magnum 972,289 935,673
PBHG - Growth II 10,813,154 2,033,184
PBHG - Small Cap Value 2,893,929 4,043,387
PBHG - Large Cap Value 4,526,144 3,474,651
PBHG - Technology & 88,739,222 8,891,639
Communications
PBHG - Select 20 25,440,638 16,857,075
SVIF - Discovery Fund II 175,028 150,600
SVIF - Mid Cap Growth Fund II 17,238,070 1,716,372
SVIF - Opportunity Fund II 2,864,593 1,465,699
WPT - Small Company Growth 4,181,447 1,769,713
WPT - International Equity 2,241,862 877,591
WPT - Post-Venture Capital 481,893 426,017
6. UNIT VALUES
A summary of changes in accumulation units and ending unit and
contract values for variable annuity contracts at December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING PAYMENTS TRANSFERS CONTRACT ENDING ENDING DOLLARS
BALANCE RECEIVED BETWEEN TERMINATIONS BALANCE BALANCE
UNITS FROM SUBACCOUNTS, UNITS UNIT
CONTRACT NET VALUE
OWNERS
JANUARY 1, 1999 TO DECEMBER
31, 1999
VIP - Money Market 3,614,051 1,443,826 (181,549) (739,917) 4,136,411 $ 17.441547 $ 72,145,408
VIP - High Income 854,157 52,504 (237,317) (30,459) 638,885 $ 29.532615 18,867,943
VIP - Equity-Income 3,922,539 97,514 (728,318) (184,463) 3,107,272 $ 46.009566 142,964,243
VIP - Growth 2,171,438 225,585 317,718 (155,456) 2,559,285 $ 80.674535 206,469,135
VIP - Overseas 967,204 37,532 (41,081) (30,662) 932,993 $ 37.223575 34,729,344
VIP II - Investment Grade Bond 986,932 175,271 (285,275) (22,685) 854,243 $ 19.870115 16,973,906
VIP II - Asset Manager 3,305,949 83,932 (233,114) (227,034) 2,929,733 $ 31.190611 91,380,167
VIP II - Index 500 3,273,507 326,979 (111,304) (114,832) 3,374,350 $ 37.781601 127,488,333
VIP II - Asset Manager: Growth 1,483,958 112,031 (173,159) (74,342) 1,348,488 $ 23.934865 32,275,889
VIP II - Contrafund 6,211,520 486,189 (235,173) (353,205) 6,109,331 $ 32.540456 198,800,411
VIP III - Balanced 537,166 162,759 (30,696) (51,090) 618,139 $ 14.501916 8,964,199
VIP III - Growth & Income 3,974,242 579,518 (736,631) (416,492) 3,400,637 $ 17.646534 60,009,454
VIP III - Growth Opportunities 2,691,359 186,624 (821,822) (111,171) 1,944,990 $ 16.153367 31,418,141
MSDWUF - Emerging Markets 71,567 41,964 268,729 (4,432) 377,828 $ 14.679023 5,546,140
Equity
MSDWUF - Emerging Markets Debt 36,909 9,917 (16,957) (6) 29,863 $ 9.552515 285,265
MSDWUF - Global Equity 152,473 21,706 (47,610) (1,463) 125,106 $ 11.916163 1,490,794
MSDWUF - International Magnum 75,635 19,878 (17,275) (2,126) 76,112 $ 13.230131 1,006,980
PBHG - Growth II 38,979 70,277 472,118 (7,817) 573,557 $ 21.422237 12,286,875
PBHG - Small Cap Value 248,781 47,089 (134,867) (12,309) 148,694 $ 13.200297 1,962,814
PBHG - Large Cap Value 154,968 72,840 6,464 (9,041) 225,231 $ 15.178062 3,418,584
PBHG - Technology & 221,015 781,886 2,591,232 (53,050) 3,541,083 $ 42.930574 152,020,736
Communications
PBHG - Select 20 1,691,752 558,820 (82,501) (108,610) 2,059,461 $ 33.424799 68,837,079
SVIF - Discovery Fund II 25,260 2,414 (987) (1,519) 25,168 $ 10.752497 270,623
SVIF - Mid Cap Growth Fund II 67,817 217,770 607,518 (25,790) 867,315 $ 24.646794 21,376,528
SVIF - Opportunity Fund II 267,972 49,443 35,067 (22,143) 330,339 $ 15.294116 5,052,236
WPT - Small Company Growth 93,472 29,094 136,208 (689) 258,085 $ 16.470689 4,250,849
WPT - International Equity 29,229 13,582 81,058 (15) 123,854 $ 15.725838 1,947,701
WPT - Post-Venture Capital 45,815 11,927 (5,604) (941) 51,197 $ 17.570342 899,556
$ 1,323,139,333
</TABLE>
6. UNIT VALUES - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING PAYMENTS TRANSFERS CONTRACT ENDING ENDING DOLLARS
BALANCE RECEIVED BETWEEN TERMINATIONS BALANCE BALANCE
UNITS FROM SUBACCOUNTS, UNITS UNIT
CONTRACT NET VALUE
OWNERS
JANUARY 1, 1998 TO DECEMBER
31, 1998
VIP - Money Market 2,510,803 1,647,401 (220,944) (323,209) 3,614,051 $ 16.718422 $ 60,421,297
VIP - High Income 868,993 133,979 (69,329) (79,486) 854,157 $ 27.525979 23,511,486
VIP - Equity-Income 4,666,312 172,712 (732,658) (183,827) 3,922,539 $ 43.619607 171,099,633
VIP - Growth 2,229,721 79,040 (61,187) (76,136) 2,171,438 $ 59.172379 128,489,157
VIP - Overseas 1,059,560 32,658 (88,408) (36,606) 967,204 $ 26.308910 25,446,085
VIP II - Investment Grade Bond 442,121 96,445 553,565 (105,199) 986,932 $ 20.242828 19,978,293
VIP II - Asset Manager 3,604,315 100,308 (164,174) (234,500) 3,305,949 $ 28.302849 93,567,756
VIP II - Index 500 3,001,334 296,359 206,144 (230,330) 3,273,507 $ 31.604128 103,456,330
VIP II - Asset Manager: Growth 1,760,200 154,243 (337,931) (92,554) 1,483,958 $ 20.933935 31,065,071
VIP II - Contrafund 6,419,636 443,789 (451,601) (200,304) 6,211,520 $ 26.399736 163,982,487
VIP III - Balanced 371,377 100,999 145,380 (80,590) 537,166 $ 13.982944 7,511,155
VIP III - Growth & Income 2,163,555 1,107,895 1,071,230 (368,438) 3,974,242 $ 16.294958 64,760,113
VIP III - Growth 2,558,459 468,112 (96,266) (238,946) 2,691,359 $ 15.616534 42,029,696
Opportunities
MSDWUF - Emerging Markets 20,806 12,500 39,057 (796) 71,567 $ 7.561799 541,172
Equity
MSDWUF - Emerging Markets 32,130 9,702 (3,800) (1,123) 36,909 $ 7.443062 274,713
Debt
MSDWUF - Global Equity 29,979 70,359 75,573 (23,438) 152,473 $ 11.539332 1,759,437
MSDWUF - International Magnum 17,042 35,893 36,135 (13,435) 75,635 $ 10.652996 805,735
PBHG - Growth II 11,877 13,257 13,845 0 38,979 $ 10.895644 424,700
PBHG - Small Cap Value 51,781 45,359 159,664 (8,023) 248,781 $ 11.477768 2,855,455
PBHG - Large Cap Value 18,440 34,250 123,327 (21,049) 154,968 $ 14.051655 2,177,563
PBHG - Technology & 34,037 46,836 143,175 (3,033) 221,015 $ 12.942126 2,860,409
Communications
PBHG - Select 20 54,758 310,910 1,419,936 (93,852) 1,691,752 $ 16.795293 28,413,465
SVIF - Discovery Fund II 8,046 16,676 3,995 (3,457) 25,260 $ 10.314283 260,538
SVIF - Mid Cap Growth Fund II 15,649 36,533 18,029 (2,394) 67,817 $ 13.084892 887,378
SVIF - Opportunity Fund II 31,571 165,753 90,042 (19,394) 267,972 $ 11.428140 3,062,422
WPT - Small Company Growth 28,265 33,486 33,545 (1,824) 93,472 $ 9.819912 917,883
WPT - International Equity 3,206 16,976 9,236 (189) 29,229 $ 10.331959 301,996
WPT - Post-Venture Capital 6,514 30,180 11,079 (1,958) 45,815 $ 10.833075 496,310
$ 981,357,735
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contractholders of Empire Fidelity Investments Variable Annuity
Account A of
Empire Fidelity Investments Life Insurance Company:
In our opinion, the accompanying statement of assets and liabilities
and the related statements of operations and of changes in net assets
present fairly, in all material respects, the financial position of
each of the subaccounts constituting the Empire Fidelity Investments
Variable Annuity Account A of Empire Fidelity Investments Life
Insurance Company at December 31, 1999, and the results of each of
their operations and the changes in each of their net assets for each
of the two years in the period then ended December 31, 1999, in
conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of 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 auditing standards generally accepted in the United
States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of investments at December 31, 1999 by
correspondence with the funds, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 25, 2000
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a) Financial Statements included in Part B
The following financial statements of 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, 1999.
Statements of Operations and Changes in Net Assets for Empire
Fidelity Investments Variable Annuity Account A for Years ended
December 31, 1999 and 1998.
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, 1999 and 1998.
Statements of Income for Empire Fidelity Investments Life Insurance
Company for the Years Ended December 31, 1999 and 1998.
Statements of Changes in Stockholder's Equity for Empire Fidelity
Investments Life Insurance Company for the Years Ended December 31,
1999 and 1998.
Statements of Cash Flows for Empire Fidelity Investments Life
Insurance Company for the Years Ended December 31, 1999 and 1998.
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, 1999 there were 752 Qualified Contracts and 11,774
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
Tracey E. Curvey Executive Vice President, On-Line Brokerage
J. Gary Burkhead Director
Kevin J. Kelly Director
Robert P. Mazzarella Director, Chief Operating Officer and President
Rodney R. Rohda Director
J. Peter Benzie Executive Vice President, National Sales
Edward L. McCartney Executive Vice Pres., Telephone Sales and
Operations
Leonard Stecklow Executive Vice President
Stephen J. Phillips Senior Vice President
Bruce MacAlpine Vice President, Spartan Brokerage
Gary Greenstein Assistant Treasurer
Jeffrey R. Larsen Clerk and Chief Legal Counsel
Jay Freedman Assistant Clerk
Richelle S. Kennedy Assistant Clerk
Joseph T. Castro Compliance Officer
Erica Johnson Compliance Registered Options Principal
(c) Commissions and other compensation 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 1999, 1998 and 1997 were
$710,000, 607,200, and $514,800 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. 11 to the
Registration Statement to be signed on its behalf in the city of
Boston and the Commonwealth of Massachusetts, on this 24th day of
April, 2000.
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 24th day of April, 2000.
Signature Title
/s/ Rodney R. Rohda President, Chairman and Director )
Rodney R. Rohda (Chief Executive Officer) )
(Chief Operating Officer) )
)
_______________ )
Joseph L. Kurtzer Jr. Treasurer )
)
________________ )
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 )
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 24, 2000
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. 11 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 24, 2000
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. 11 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. 11
to the registration statement on Form N-4 of our reports dated January
25, 2000, relating to the 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 the Statement of Additional Information. We also consent to
the reference to us under the heading "Independent Accountants" in
such Statement of Additional Information.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
April 20, 2000
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