Fidelity VIP High Income Portfolio

Transcription

1 Fidelity VIP High Income Portfolio Key Takeaways The fund's share classes gained roughly 4.5% for the semiannual reporting period ending June 30, This result proved competitive versus peers, but fell just shy of the 4.90% gain of the fund's benchmark, The BofA Merrill Lynch SM US High Yield Constrained Index. Portfolio Manager Matt Conti's more-conservative approach toward credit risk which has proven a sound strategy over the longer term held up reasonably well the past six months despite a risk-driven market rally led by lower-quality securities. The fund's core high-yield bond portfolio outpaced the benchmark, due to beneficial security selection across the quality spectrum. Conversely, an underweighting in bonds rated CCC and below modestly hampered relative results, as did a non-benchmark allocation to floating-rate bank loans, which underperformed the index. This positioning was consistent with the fund's moremoderate strategy. At the sector/industry level, security selection was positive overall, led by banks & thrifts, gaming, and food & drug retail. Conversely, selections in a handful of industries detracted, including food/beverage/tobacco and super retail. Matt believes that valuation risk in the market has increased, leading him to position the fund more defensively as of June 30. MARKET RECAP U.S. corporate high-yield bonds gained 4.90% for the first half of 2017, as measured by The BofA Merrill Lynch SM US High Yield Constrained Index. As the year began, high yield was bolstered by the positive fundamental implications of higher oil prices and the potentially supportive fiscal and regulatory policies of the new administration. The uptrend continued through February, aided by investor optimism despite few specifics on President Trump's plans, but retreated a bit in March before heading upward through the end of June. Reflecting a more favorable environment for riskier assets, lowerquality bonds within the index fared best, but by a slim margin, as a defensive tone set in amid lower oil prices and volatility among commodities. Gains were broad-based across industries, with several moredefensive categories finishing ahead of the broader market. These included health care (+8%), telecommunications (+7%), food/beverage/tobacco (+5%) and utilities (+5%). But it was the transportation ex air/rail group among the index's smallest constituents that led the way this quarter, returning about 14%. Other standouts included banks & thrifts (+7%) and aerospace (+6%). By contrast, market heavyweight energy gained 1%, hampered by weak pricing trends for crude oil. Two other groups that tend to move in tandem with commodity prices held up much better, as metals/mining rose 5% and steel advanced 4%. Not FDIC Insured May Lose Value No Bank Guarantee

2 Q&A An interview with Portfolio Manager Matthew Conti Fund Facts Matthew Conti Portfolio Manager Start Date: September 19, 1985 Size (in millions): $1, Investment Approach Fidelity VIP High Income Portfolio is a diversified highyield bond strategy focused on investing primarily in bonds of non-investment-grade companies. We apply a core investment approach, with the majority of the fund concentrated in securities rated B and BB, and typically below-benchmark exposure to the more opportunistic, lower-rated (CCC or below) credit tiers. In particular, we seek companies with strong balance sheets, high free cash flow, improving business/industry fundamentals and solid management teams, focusing on the most attractively valued securities within the capital structure. In doing so, we take a longer-term investment outlook, with an eye to where we are in the credit cycle. We strive to uncover these companies through in-depth fundamental credit analysis, working in concert with Fidelity's high-income and global research teams, with the goal of effectively managing performance volatility. Q: Matt, how did the fund perform for the six months ending June 30, 2017 The fund's share classes gained roughly 4.5%. This result proved competitive versus peers, but fell just shy of the benchmark. I'm nonetheless pleased that my morecautious approach toward credit risk which has proven a sound strategy over the longer term held up reasonably well this period despite a risk-driven market rally led by lower-quality securities. Looking back a full 12 months, the fund gained about 12%, again slightly lagging the BofA Merrill Lynch index but ahead of its peer group average. Q: Tell us more about your strategy and how it played out the past six months In general, I take a conservative approach toward credit risk. Historically, when the market is up strongly, and the rally is led by lower-quality securities as was the case this period and in 2016 the fund has generated solid absolute returns but has tended to lag the benchmark. Relative to the benchmark, the fund's core high-yield bond portfolio outperformed, due to beneficial security selection across the quality spectrum. However, an underweighting in bonds rated CCC and below hampered relative results, but this positioning was consistent with the relatively conservative strategy I follow. An out-of-benchmark allocation to floating-rate bank loans also consistent with my more moderate approach lagged the benchmark and was a further detractor. No matter market conditions, my strategy begins with fundamental, bottom-up research, looking at a company's creditworthiness while trying to find the most attractively valued securities within its capital structure. I manage volatility by working with our seasoned credit analysts to assess the potential volatility of each security, focusing on the issuing company's underlying fundamentals, as well as where the security lies within the firm's capital structure. I invest in companies that I believe are likely to reduce their debt, and that I think can withstand challenges such as a bad quarter, an economic dip, a secular headwind or 2 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

3 increased competition. For that reason, I place great emphasis on free cash flow, which, in my opinion, is the only means by which companies can organically improve their balance sheets. Q: What sector/industry factors had the biggest influence on relative performance Security selection was positive overall, led by banks & thrifts, gaming, and food & drug retail. Conversely, selections in a handful of industries detracted, including food/beverage/tobacco and super retail. Our largest individual detractor versus the benchmark this period came from the food/beverage/tobacco group. Brazil's JBS, the world's largest meat-packing company, missed first-quarter estimates due to weak results in South America. The firm also settled a leniency deal with authorities to pay $10.3 billion over a 25-year period for its part in two corruption scandals, making it the largest fine ever levied in Brazil. What's more, the U.S. bonds were downgraded by Moody's, further punishing our position. Elsewhere, underexposure to the CCC-rated bonds of satellite services provider Intelsat hurt relative results. Intelsat's bonds traded higher this period, as the firm reported in-line financial results and positive guidance, and also announced its intent to merge with OneWeb, another satellite services company. Both announcements rewarded the firm's debt instruments, but I sold the fund's stake in Intelsat in March as part of an effort to manage portfolio risk. The deal was called off in June. Our investment in natural gas exploration & production company Southwestern Energy also hurt, partly due to softening natural gas prices and investor concern about a potential oversupply of natural gas. I held a convertible security issued by Southwestern Energy, which was more volatile than the firm's high-yield bonds due to its junior position in the capital structure and greater sensitivity to the price movement of the firm's common stock. Despite the disappointing results this period, I continue to hold the convertible, given my optimistic outlook for natural gas prices, and view that the convert carries limited credit risk. A sizable overweighting in J.C. Penney, one of our largest holdings this period, also hurt. The retailer's bonds declined on growing concern about changing consumer preferences regarding online versus brick-and-mortar shopping. I continue to have conviction in our position on the basis of J.C. Penney's free-cash-flow outlook. Q: What contributed versus the benchmark My decision to avoid telecom firm and benchmark member Frontier Communications proved our biggest relative contributor this period. Frontier's bonds struggled as the old-line telephone services company faced a number of challenges, including a declining customer base and high levels of debt. I felt the company needed to restructure, which led me to avoid holding its debt in the fund. An overweighting in Nokia bolstered relative results. The company, which provides equipment to both wireless and wireline firms, benefited from a tender offer in May. This development, along with increased demand from wireless customers, helped our stake rise 6% the past six months. Our sizable stake in Barclays Bank benefited the fund as uncertainties surrounding Brexit appeared to settle. The outlook for British banks improved this period because investors believed global banks likely would be able to continue conducting business both at home and abroad. Among our largest holdings this period, the fund's investments in Barclays gained about 9%. Our position in Scientific Games (+16%), which manufactures slot machines and other games, was a notable contributor. The company benefited from the favorable market conditions that have helped the broader casino and gaming industries. Q: What's your outlook as of June 30, Matt The high-yield market has rallied considerably the past 12 months and, in my view, may be due for a pause. While I think the economic backdrop remains supportive, and issuers continue to report earnings growth, credit spreads have tightened to a level that is below the long-term average. As a result, the margin of safety from a valuation standpoint is smaller. Against this backdrop, the fund was more-defensively positioned as of June 30. I accomplished this morecautious risk posture by increasing the fund's overall credit quality adding higher-rated securities within the universe of BB-rated bonds. I also reallocated capital out of the banks & thrifts group and into telecom because cable and wireless providers tend to be more defensive. Our health care allocation is lower at period than at the end of 2016 due to uncertainty surrounding the Affordable Care Act. Additionally, I reduced exposure to lower-quality credits rated CCC or below, and extended the fund's underweighting there. I kept the fund's bank-loan allocation at about 10% of the portfolio, and plan to maintain it near that level for now. I think this allocation provides the fund with a degree of ballast against market volatility. Moreover, if market interest rates move higher, I think demand for bank loans may persist, since loan coupons will continue adjusting upward. 3 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

4 LARGEST HOLDINGS BY ISSUER Matt Conti on high-yield bonds in a low-volatility environment: "VIX, also known colloquially as the 'fear gauge,' is a key measure of market volatility. VIX is the ticker symbol for the Chicago Board of Options (CBOE) Volatility Index. The VIX is constructed using the implied volatilities of a wide range of S&P 500 index options. It is a key indicator of the level of volatility expected in the stock market over the next 30 days. And stock market volatility is normally seen as a proxy for other risk assets, such as highyield bonds. "During the six-month reporting period, the VIX trended lower, and on June 2, 2017, reached 9.75, its lowest level in more than 20 years. This movement lower in the VIX coincided with a continuation of strong performance for high-yield bonds. "Historically, a low VIX level has been correlated with periods of relatively rich valuations for highyield bonds. This is partly explained by investor complacency as the values of risk securities become increasingly elevated. Indeed, as of period end, the valuation of the high-yield market, as measured by the yield advantage offered by the asset class versus U.S. Treasuries, could be characterized as rich or full. "Does a fully valued high-yield market mean that a correction is just around the corner Not necessarily. History has shown that relatively tight spreads and low volatility can persist for extended periods of time. So, while I believe a low VIX implies that a cautious approach to market risk may be prudent, it does not necessarily signal an imminent change in market performance." Issuer ICAHN ENTERPRISES LP/FIN CORP APX GROUP INC ALTICE S.A. BARCLAYS BANK PLC CCO HLDGS LLC/CAP CORP Five Largest Issuers as a % of Net Assets 8.14% Total Number of Holdings 433 The five largest issuers are as of the end of the reporting period, and may not be representative of the fund's current or future investments. Holdings do not include money market investments. 10 LARGEST HOLDINGS Holding Altice SA 7.75% 5/15/22 Barclays Bank PLC 7.625% 11/21/22 Wynn Macau Ltd. 5.25% 10/15/21 Columbus International, Inc % 3/30/21 NSG Holdings II LLC/NSG Holdings, Inc. 7.75% 12/15/25 Credit Agricole SA 6.625% APX Group, Inc % 12/1/19 APX Group, Inc. 8.75% 12/1/20 Sprint Capital Corp % 11/15/28 CCO Holdings LLC/CCO Holdings Capital Corp. 5.5% 5/1/26 10 Largest Holdings as a % of Net Assets Market Segment Cable/Satellite TV Banks & Thrifts Gaming Telecommunications Utilities Banks & Thrifts Services Services Telecommunications Cable/Satellite TV 11.03% Total Number of Holdings 433 The 10 largest holdings are as of the end of the reporting period, and may not be representative of the fund's current or future investments. Holdings do not include money market investments. 4 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

5 MARKET-SEGMENT DIVERSIFICATION Market Segment Portfolio Weight Portfolio Weight Six Months Ago Energy 14.77% 14.85% Telecommunications 11.76% 9.99% Technology 7.13% 8.35% Health Care 6.73% 7.32% Cable TV 6.48% 5.03% Diversified Financial Services 4.70% 4.18% Electric Utilities 4.31% 4.02% Banks & Thrifts 4.28% 5.02% Services 3.32% 5.18% Homebuilding/Real Estate 3.19% 2.42% Gaming 3.05% 3.00% Containers 2.59% 2.50% Air Transportation 2.47% 2.58% Food/Beverage/Tobacco 2.35% 3.55% Metals/Mining 2.17% -- Super Retail 2.10% 2.98% Chemicals 1.93% -- Building Materials 1.86% 2.09% Food & Drug Retail 1.65% 1.37% Restaurants 1.37% -- Aero/Elec/Computer 1.12% -- CREDIT-QUALITY DIVERSIFICATION Credit Quality Portfolio Weight Portfolio Weight Six Months Ago BBB & Above 1.25% 1.06% BB 41.65% 41.87% B 41.27% 36.05% CCC & Below 10.29% 13.85% Not Rated/Not Available 2.09% 1.04% Cash & Net Other Assets 3.45% 6.13% Net Other Assets can include fund receivables, fund payables, and offsets to other derivative positions, as well as certain assets that do not fall into any of the portfolio composition categories. Depending on the extent to which the fund invests in derivatives and the number of positions that are held for future settlement, Net Other Assets can be a negative number. Credit ratings for a rated issuer or security are categorized using Moody's Investors Service (Moody's). If Moody's does not publish a rating for a security or issuer, then the Standard & Poor's Ratings Services (S&P) rating is used. When S&P and Moody's provide different ratings for the same issuer or security, the Moody's rating is used. Securities that are not rated by these NRSROs (e.g. equity securities) are categorized as Not Rated. All U.S. government securities are included in the U.S. Government category. The table information is based on the combined investments of the fund and its pro-rata share of any investments in other Fidelity funds. ASSET ALLOCATION Asset Class Portfolio Weight Portfolio Weight Six Months Ago Bank Debt 10.48% 10.11% Corporate Bond: Cash Pay 85.64% 83.05% Corporate Bond: Deferred Pay 0.00% 0.00% Other Debt 0.00% 0.00% Convertible Bonds 0.00% 0.00% Convertible Preferred Stock 0.19% 0.32% Non-Convertible Preferred Stock 0.00% 0.00% Equities 0.24% 0.01% Cash & Net Other Assets 3.45% 6.51% Net Other Assets can include fund receivables, fund payables, and offsets to other derivative positions, as well as certain assets that do not fall into any of the portfolio composition categories. Depending on the extent to which the fund invests in derivatives and the number of positions that are held for future settlement, Net Other Assets can be a negative number. 5 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

6 PERFORMANCE SUMMARY Variable annuity contracts are issued by insurance companies through separate accounts that are part of the insurer. The value of a variable annuity contract depends on the values of units of subaccounts of the separate account. Each subaccount purchases shares of a corresponding mutual fund. Subaccount investment performance is based on the performance of the mutual fund in which it invests, less insurance company charges made against the assets of the separate account. A subaccount is not a mutual fund. The information provided in this Performance Summary contains performance information for the fund, or class, and each variable subaccount, with comparisons over different time periods to the fund's relevant benchmarks including an appropriate index as well as a group of similar funds whose average returns are compiled and monitored by an independent mutual fund research company. Figures for more than one year assume a steady compounded rate of return and are not a class' year-by-year results, which fluctuated over the periods shown. Fund performance numbers are net of all underlying fund operating expenses, but do not include any insurance charges imposed by your insurance company's separate account. If fund performance information included the effect of these additional charges, the total returns would have been lower. The performance table also contains performance information for certain insurance company subaccounts that invest in the fund. Each variable subaccount's performance, as shown, is net of all fees and expenses, including those charges imposed by your insurance company. Seeing the returns over different time periods can help you assess the performance against relevant measurements and across multiple market environments. The performance information includes average annual total returns and cumulative total returns and is further explained in this section.* Investing in a variable annuity involves risk of loss investment returns, contract value, and, for variable income annuities, payment amounts are not guaranteed and will fluctuate. Withdrawals of taxable amounts from an annuity are subject to ordinary income tax, and, if taken before age 59 1/2, may be subject to a 10% IRS penalty. Current performance may be higher or lower than the performance data quoted below. An investor's shares, when redeemed, may be worth more or less than their original cost. For month-end performance figures, please visit or call Fidelity. The performance data featured represents past performance, which is no guarantee of future results. Fiscal periods ending June 30, 2017 Cumulative Annualized Total Returns for the Fund 6 Month YTD / LOF 1 VIP High Income Portfolio - Initial Class Gross Expense Ratio: 0.68% % 4.48% 12.25% 3.59% 5.69% 6.07% VIP High Income Portfolio - Investor Class Gross Expense Ratio: 0.71% % 4.49% 12.27% 3.63% 5.69% 6.04% The BofA Merrill Lynch US High Yield/US High Yield Constrained Blend 4.90% 4.90% 12.74% 4.49% 6.92% 7.63% Morningstar Insurance High Yield Bond 4.54% 4.54% 11.46% 3.57% 6.15% 6.29% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 09/19/ This expense ratio is from the prospectus in effect as of the date shown above and generally is based on amounts incurred during that fiscal year. Performance and disclosure information continued on next page. 6 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

7 PERFORMANCE SUMMARY (continued): Fiscal periods ending June 30, 2017 Total Returns for the Variable Subaccount** Annualized Cumulative Annualized New York Only: 10 /Life of Subaccount 6 Month YTD /Life of Subaccount Fidelity Retirement Reserves A 5.22% 4.06% 4.06% 11.36% 2.76% 4.85% 5.22% Fidelity Income Advantage B 5.01% 3.95% 3.95% 11.13% 2.56% 4.63% 5.01% Fidelity Personal Retirement Annuity C (for contracts purchased prior to 1/1/09 and on or after 9/7/10) Fidelity Personal Retirement Annuity C (for contracts purchased between 1/1/09 and 9/6/10) Fidelity Personal Retirement Annuity C (for contracts purchased on or after 9/7/10 with an initial purchase payment of $1M+) 5.79% 4.36% 4.36% 11.99% 3.37% 5.42% 5.79% 5.74% 4.36% 4.36% 11.99% 3.37% 5.42% 5.74% 5.93% 4.44% 4.44% 12.16% 3.53% 5.58% 5.93% Fidelity Retirement Reserves - Subaccount Inception: February 29, 1988; New York Only Inception: June 03, Fidelity Income Advantage - Subaccount Inception: February 29, 1988; New York Only Inception: June 03, Fidelity Personal Retirement Annuity - Subaccount Inception: August 15, 2005; New York Only Inception: October 28, Fidelity Retirement Reserves' underlying fund options are Initial Class fund offerings. Fidelity Income Advantage's underlying fund options are Initial Class fund offerings. Fidelity Personal Retirement Annuity's underlying fund options are Investor Class fund offerings. A In NY, Retirement Reserves B In NY, Income Advantage C In NY, Personal Retirement Annuity * Total returns are historical and include changes in share price (for the fund) and unit price (for the variable subaccount) and reinvestment of dividends and capital gains, if any. ** Returns for Fidelity Retirement Reserves include the 0.80% annual annuity charge. For Fidelity Retirement Reserves contracts, returns do not reflect the annual $30 maintenance fee which applies to contracts where purchase payments less any withdrawals are less than $25,000. Returns for Fidelity Income Advantage include the 1.00% annual annuity charge. Returns for Fidelity Personal Retirement Annuity ("FPRA") include the 0.25% annual annuity charge for contracts purchased prior to 1/1/2009, and on or after 9/7/2010. For FPRA contracts purchased between 1/1/2009 and 9/6/2010, returns include a 0.35% annual annuity charge prior to 9/7/2010 and 0.25% thereafter. For FPRA contracts purchased on or after 9/7/2010 with an initial purchase payment of $1,000,000 or more, returns include a 0.10% annual annuity charge. Life of subaccount returns are from the subaccount inception, the date the portfolio was first available in the insurance company's variable product. Please see the last page(s) of this Q&A document for most-recent calendar-quarter performance. 7 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

8 Definitions and Important Information Fidelity Income Advantage (policy form nos. FVIA-92100, et al. and FVIA-99100, et al.), Fidelity Retirement Reserves (policy form no. NRR-96100, et al.), Fidelity Personal Retirement Annuity (policy form no. DVA-2005, et al.), Fidelity Freedom Lifetime Income (policy form nos. FFLI-Q-2005, et al. and FFLI-NQ-2005, et al.), and Fidelity Growth and Guaranteed Income (policy form no. DVA-GWB- 2007, et al.) are issued by Fidelity Investments Life Insurance Company, 100 Salem Street, Smithfield, RI 02917, and for NY residents, Income Advantage (policy form nos. EFVIA-92100, et al. and EFVIA-99100, et al.), Retirement Reserves (policy form no. EVA-91100, et al.), Personal Retirement Annuity (policy form no. EDVA-2005, et al.), Fidelity Freedom Lifetime Income (policy form nos. EFLI-Q-2005, et al. and EFLI-NQ-2005, et al.), and Growth and Guaranteed Income (policy form no. EDVA-GWB-2007, et al.) are issued by Empire Fidelity Investments Life Insurance Company, New York, NY. Annuities are distributed by Fidelity Brokerage Services (Member NYSE, SIPC) and Fidelity Insurance Agency, Inc. FUND RISKS Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Fixed income investments entail interest rate risk (as interest rates rise bond prices usually fall), the risk of issuer default, issuer credit risk and inflation risk. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds. CBOE Volatility Index is a weighted average of prices on S&P 500 index options with a constant maturity of 30 days to expiration. It is designed to measure the market's expectation of near-term stock market volatility. MARKET-SEGMENT WEIGHTS Market-segment weights illustrate examples of sectors or industries in which the fund may invest, and may not be representative of the fund's current or future investments. Should not be construed or used as a recommendation for any sector or industry. MORNINGSTAR INFORMATION 2017 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or redistributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Fidelity does not review the Morningstar data and, for mutual fund performance, you should check the fund's current prospectus for the most up-to-date information concerning applicable loads, fees and expenses. IMPORTANT FUND INFORMATION Relative positioning data presented in this commentary is based on the fund's primary benchmark (index) unless a secondary benchmark is provided to assess performance. VIP refers to Variable Insurance Products Unless otherwise disclosed to you, in providing this information, Fidelity is not undertaking to provide impartial investment advice, act as an impartial adviser, or to give advice in a fiduciary capacity. INDICES It is not possible to invest directly in an index. All indices represented are unmanaged. All indices include reinvestment of dividends and interest income unless otherwise noted. The BofA Merrill Lynch US High Yield/U.S. High Yield Constrained Blend is a modified market-capitalization-weighted index of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. Qualifying securities must have a below investment grade rating (based on an average of Moody's, S&P and Fitch). The country of risk of qualifying issuers must be an FX- G10 member, a Western European nation, or a territory of the U.S. or a Western European nation. The FX-G10 includes all Euro members, the U.S., Japan, the U.K., Canada, Australia, New Zealand, Switzerland, Norway and Sweden. In addition, qualifying securities must have at least one year remaining to final maturity, a fixed coupon schedule and at least $100 million in outstanding face value. Defaulted securities are excluded. The index contains all securities of The BofA Merrill Lynch US High Yield Index but caps issuer exposure at 2%. 8

9 Manager Facts Matt Conti is a portfolio manager at Fidelity Management & Research Company (FMRCo), the investment advisor for Fidelity's family of mutual funds. Fidelity Investments is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and other financial products and services to more than 20 million individuals, institutions and financial intermediaries. In this role, Mr. Conti manages Fidelity Advisor High Income Fund (since 2001), VIP High Income Portfolio (since 2003), Fidelity Focused High Income Fund (since 2004), and Fidelity and Fidelity Advisor Short Duration High Income Fund (since 2013), and FIAM High Yield Bond Discipline (since 2000). He also co-manages Fidelity and Fidelity Advisor Total Bond Fund (since 2007). Prior to assuming his current management responsibilities, Mr. Conti was a high yield analyst at FMRCo from 1995 to He has been in the investments industry since joining Fidelity in Mr. Conti earned his bachelor of science degree in mechanical engineering from Carnegie Mellon University, his master of science degree in mechanical engineering from Rensselaer Polytechnic Institute, and his master of business administration degree from Columbia Business School. 9 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

10 PERFORMANCE SUMMARY Quarter ending December 31, 2017 Total Returns for the Variable Subaccount New York Only: 10 /Life of Subaccount 1 Annualized /Life of Subaccount Fidelity Retirement Reserves 5.49% 6.08% 4.86% 3.99% 5.49% Fidelity Income Advantage 5.28% 5.87% 4.65% 3.78% 5.28% Fidelity Personal Retirement Annuity (for contracts purchased prior to 1/1/09 and on or after 9/7/10) Fidelity Personal Retirement Annuity (for contracts purchased between 1/1/09 and 9/6/10) Fidelity Personal Retirement Annuity (for contracts purchased on or after 9/7/10 with an initial purchase payment of $1M+) 6.06% 6.68% 5.44% 4.56% 6.06% 6.03% 6.68% 5.44% 4.56% 6.03% 6.22% 6.84% 5.60% 4.71% 6.22% Current performance may be higher or lower than the performance data quoted above. For month-end performance figures, please visit or call Fidelity. The performance data featured represents past performance, which is no guarantee of future results. Investing in a variable annuity involves risk of loss investment returns, contract value, and, for variable income annuities, payment amounts are not guaranteed and will fluctuate. Withdrawals of taxable amounts from an annuity are subject to ordinary income tax, and, if taken before age 59 1/2, may be subject to a 10% IRS penalty. Please see the Fiscal Performance Summary section of this Q&A document for performance footnotes and additional information. Before investing, please carefully consider the investment objectives, risks, charges, and expenses of the fund or annuity and its investment options. For this and other information, call or write Fidelity for a free prospectus or, if available, a summary prospectus. Read it carefully before you invest. Past performance is no guarantee of future results. Views expressed are through the end of the period stated and do not necessarily represent the views of Fidelity. Views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund. The securities mentioned are not necessarily holdings invested in by the portfolio manager(s) or FMR LLC. References to specific company securities should not be construed as recommendations or investment advice. Information included on this page is as of the most recent calendar quarter. S&P 500 is a registered service mark of Standard & Poor's Financial Services LLC. Other third-party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR LLC or an affiliated company. Fidelity Brokerage Services LLC, Member NYSE, SIPC., 900 Salem Street, Smithfield, RI Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI FMR LLC. All rights reserved. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee Diversification does not ensure a profit or guarantee against a loss.