Fidelity VIP Energy Portfolio

Transcription

1 Fidelity VIP Energy Portfolio Key Takeaways For the 12-month period ending December 31, 2017, the fund's share classes performed close to in line with the -2.33% return of the MSCI U.S. IMI Energy 25/50 Index. Although crude oil prices rose about 12% in 2017 amid rapidly declining inventories, energy stocks were pressured by general skepticism about the sustainability of higher oil prices and the sector's long-term outlook. Versus the MSCI sector index, notable contributors included Portfolio Manager John Dowd's stock picks in the three largest industry groups integrated oil & gas, oil & gas exploration & production (E&P), and oil & gas equipment & services. Conversely, industry positioning detracted from relative results, especially an overweighting in lagging E&Ps and an underweighting in better-performing integrated oil & gas companies. Among individual stocks, underexposure to integrated oil & gas giant Chevron was the fund's biggest detractor versus the sector index, as the stock rallied after the company completed some major projects. The fund's largest contributor was a sizable stake in E&P Diamondback Energy, which reported surprisingly strong earnings. Looking ahead, John believes energy stocks should be supported by a healthy backdrop that includes renewed capital discipline among companies in many industries, which should lead to constrained supply growth and improved returns on capital. On December 8, 2017, shareholders approved proposals from the Board of Trustees to eliminate each sector/industry fund's fundamental "invests primarily" policy and to modify the fundamental concentration policy for certain funds. The changes took effect on January 1, 2018, and do not impact how the funds are managed. MARKET RECAP U.S. equities gained 21.83% in 2017, as the S&P 500 index rose steadily and closed the year just shy of an alltime high after a particularly strong three-month finish. Early on, equities rallied on optimism for President Trump's pro-business agenda but leveled off in March amid fading optimism and stalled efforts by Congress to repeal and replace the Affordable Care Act. Upward momentum soon returned and continued through year-end with consumer sentiment and other market indicators staying positive. The lone exception was a brief cooldown in August, when geopolitical tension escalated and uncertainty grew regarding the future of health care, tax reform and the debt ceiling. Sectorwise, information technology fared best by a wide margin, rising 39% amid strong earnings growth from several major index constituents. A 24% gain in materials was spurred by increased demand, especially from China. Consumer discretionary gained 23%, despite many brick-and-mortar retailers suffering from online competition, and financials edged the broader market on an uptick in bond yields. Conversely, the defensive energy and telecom services sectors returned about -1% each. Rising interest rates held back real estate (+11%), while consumer staples (+13%) and utilities (+12%) struggled due to investors' general preference for risk assets. Not FDIC Insured May Lose Value No Bank Guarantee

2 Q&A An interview with Portfolio Manager John Dowd Fund Facts John Dowd Portfolio Manager Start Date: July 19, 2001 Size (in millions): $ Investment Approach Fidelity VIP Energy Portfolio is a sector-based, equityfocused strategy that seeks to outperform its benchmark through active management. We believe that energy stocks can become mispriced relative to their long-term intrinsic value due to either overemphasis on short-term commodity price swings, underappreciation of changes in technology or cost structures, or geopolitical events. Supported by in-depth fundamental research, we seek to uncover investment opportunities by analyzing the drivers of supply and demand for energy commodities, in combination with valuations and growth potential for energy stocks. Our process is grounded in the belief that earnings growth drives stock performance, and those companies with differentiated technologies, business models, cost positions or restructuring opportunities are bestpositioned to deliver superior earnings. Sector strategies could be used by investors as alternatives to individual stocks for either tactical- or strategic-allocation purposes. Q: John, how did the fund perform for the year ending December 31, 2017 The fund's share classes performed close to in line with the -2.33% return of the MSCI U.S. IMI Energy 25/50 Index but significantly trailed the 21.83% result of the broadmarket S&P 500 index. The fund topped its peer group average by a sizable margin. Against a backdrop of improving global economic growth and generally weak sentiment toward energy stocks, my positioning of the fund held back its performance versus the MSCI sector benchmark, despite good stock picking overall. In particular, overweighting lagging E&Ps and underweighting better-performing integrated oil & gas companies hindered the fund's relative return. Q: Please describe some key factors that drove the performance of energy stocks in 2017 Among the 11 market sectors in the S&P 500, energy was the second-worst-performing sector, finishing the year with a return of -1%. Improving global economic growth and optimism around the pro-growth policy agenda of the President and of congressional Republicans in Washington set the stage for a rally in economically sensitive sectors, such as information technology, consumer discretionary, and financials. At the same time, although per-barrel domestic crude oil prices (West Texas Intermediate spot price) rose about 12% during the year amid rapidly declining inventories, energy stocks were pressured by weak sentiment and general skepticism about the sustainability of higher oil prices and the sector's longer-term outlook. Amid this lack of confidence, investors favored energy companies that returned capital to shareholders in the form of share buybacks or dividends, notably in integrated oil & gas (+2%) and oil & gas refining & marketing (+30%). Q: What was your strategy in this environment, and how did it play out the past year I was pleased that stock selection overall contributed to the fund's performance relative to the sector index, led by our holdings in the index's three largest industry groups 2 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

3 integrated oil & gas, oil & gas exploration & production, and oil & gas equipment & services. However, positioning in the first two of these industries served to offset the benefit of my picks. This positioning reflected my focus on companies with differentiated business models that I felt could grow earnings faster than the market's expectations, which generally wasn't rewarded the past year. In particular, our large overweighting in oil & gas exploration and production companies (E&Ps) at nearly double the index weighting was our biggest relative detractor because the -8% return of E&P stocks lagged the MSCI index. Good stock selection among E&Ps offset our positioning weakness here. My focus on what I felt were higher-quality E&P holdings with the ability to grow profits regardless of the level of oil prices resulted in the fund having nearly double the cash-flow-per-share growth than the E&P constituents in the index. I believe this higher growth was a key factor in helping our E&P stake outperform the index's E&P constituents by about two percentage points. Elsewhere, the fund's significant underweighting in the relatively strong-performing integrated oil & gas industry proved disappointing. Here, once again, the fund's positioning overwhelmed the benefits from good stock picking, as our industry holdings (+6%) outperformed the index components (+2%). Lastly, good stock picking in oil & gas storage & transportation and oil & gas equipment & services provided a sizable boost to the fund's return versus the sector index. Q: What specific stocks had the biggest influence on the fund's relative performance Underweighting integrated oil & gas giant Chevron was the fund's biggest detractor versus the sector index. I maintained underexposure to Chevron a sizable component of the benchmark because I felt more optimistic about growth prospects for other companies in the sector. However, investors rewarded Chevron (+11%) for increasing cash-flow generation, driven by the completion of capital projects, and for its capital spending discipline. I'll note that Chevron was among the fund's largest holdings on an absolute basis. Another disappointment was Anadarko Petroleum, an E&P company that returned -23% for the year, in part due to its weaker-than-expected earnings. I significantly reduced the fund's position in the stock during the period and redeployed those assets elsewhere. Refining company Valero Energy was another major relative detractor. I sold our stake in January 2017 and the stock went on to gain 40% for the year. I favored other refining stocks, such as Delek US Holdings, which also performed well. Overall, I maintained a modest underweighting in oil & gas refining & marketing. Our holdings in this industry edged those in the index. Contributors here included nonindex stakes in refining firms Reliance Industries (+41%) and LyondellBasell Industries (+33%). Lyondell is classified as a commodity chemicals company but had what I viewed as an attractive refining business, management team and valuation. In general, I continued to be impressed with the shareholder-friendly activity and capital discipline among refiners; demand for refining capabilities surprised to the upside the past year, and these firms generally are being managed better today than in the past. Our biggest contributor was a large stake in Diamondback Energy, an E&P operating in the Permian-Texas basin. Diamondback produced surprisingly strong cash flow and earnings throughout the year, and the stock gained 25%. The fund also got a relative boost from its significant underweighting in energy-services giant Schlumberger, which returned about -17% due primarily to weak earnings revisions and the company's sizable exposure to offshore drilling, which was generally viewed as more cashconstrained than onshore U.S. shale drilling. Q: Any final thoughts for shareholders, John I think the long-term health of the oil industry improved dramatically in A year ago, oil prices were near a cyclical low and the consensus view was that the bearish trends pressuring oil prices would continue. These trends included deflationary pressures caused by low-cost U.S. shale oil production amid new drilling technologies, as well as the advent of replacement energy sources, such as electric vehicles, solar, wind and long-life battery technology. By and large, these bearish concerns for oil failed to materialize in We've had a fairly healthy backdrop: Global demand for oil has remained strong, and many companies have been more disciplined with capital spending, which has led to constrained supply growth and improved returns on capital a key trend I see continuing in While new drilling technologies can be deflationary over an extended period, there are feedback mechanisms in the oil market that can prevent oil prices from declining indefinitely. The cyclical lows seen in crude oil prices a year ago or so were likely more of an extreme than the new normal. In my view, we are more likely to continue to experience cyclicality in oil pricing going forward, which should provide ample opportunities for stock picking. 3 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

4 LARGEST CONTRIBUTORS VS. BENCHMARK John Dowd on how shortages of drilling services may influence the prices of oil and E&P stocks: "Oil-services costs within the U.S. onshore E&P industry have been going up, and that could be supportive of oil prices going forward and, ultimately, E&P stock prices. In recent months, we've seen a tightening of U.S. oil-services capacity, which has caused logistical bottlenecks in the Permian Basin of west Texas, where many E&P companies are successfully extracting crude oil from shale rock formations. The tightening of oil-services capacity has led to price inflation for U.S. drilling rigs, pressure pumping equipment and other ancillary services that are used by E&Ps. "Rising wages and services costs put constraints on E&P budgets, and tightening services capacity makes it more challenging for E&Ps to achieve their production goals. However, over a longer period, this tightening of oil-services capacity could be inflationary for crude oil prices. That's because services cost inflation historically has led to higher oil prices, and E&P stocks have generally performed quite well during such periods. The benefit E&Ps have obtained from rising oil prices has typically outweighed the pressure absorbed from increased services costs. "It's quite possible that during the first half of 2018, there will be growing investor concerns over rising oil-services costs. But during the second half of the year or later, higher costs could be passed through to consumers. Inefficiencies in shale oil production due to shortages of services create a favorable supply and demand dynamic for the industry, pushing up the commodity price. E&Ps tend to be operationally leveraged to rising oil prices, so they could be well-positioned relative to other energy companies if this inflationary cost/rising-oil-price dynamic plays out. That said, I still expect to be positioned in the higher-quality E&Ps, meaning those with the best strategic land acreage, most efficient drilling techniques, and that have what I believe are the most compelling growth prospects." Holding Diamondback Energy, Inc. Schlumberger Ltd. Market Segment Oil & Gas Equipment & Services Average Relative Weight Relative Contribution (basis points)* 3.91% % 65 Exxon Mobil Corp. Integrated Oil & Gas % 54 Apache Corp. Rice Energy, Inc. * 1 basis point = 0.01%. LARGEST DETRACTORS VS. BENCHMARK Holding Market Segment -1.20% % 42 Average Relative Weight Relative Contribution (basis points)* Chevron Corp. Integrated Oil & Gas -7.00% -84 Valero Energy Corp. Anadarko Petroleum Corp. Seven Generations Energy Ltd. PDC Energy, Inc. * 1 basis point = 0.01%. Oil & Gas Refining & Marketing -2.16% % % % For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

5 10 LARGEST HOLDINGS Holding Market Segment Portfolio Weight Portfolio Weight Six Months Ago EOG Resources, Inc. 7.32% 6.75% Chevron Corp. Integrated Oil & Gas 6.83% 8.07% Diamondback Energy, Inc. 5.95% 4.50% Halliburton Co. Oil & Gas Equipment & Services 5.57% 4.92% Exxon Mobil Corp. Integrated Oil & Gas 4.43% 7.38% Pioneer Natural Resources Co. 4.38% 5.30% Phillips 66 Co. Oil & Gas Refining & Marketing 3.35% 2.93% Encana Corp. 3.11% 1.05% RSP Permian, Inc. 3.03% 2.40% Devon Energy Corp. 2.64% 0.85% 10 Largest Holdings as a % of Net Assets 46.62% 50.46% Total Number of Holdings 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. MARKET-SEGMENT DIVERSIFICATION Market Segment Portfolio Weight Portfolio Weight Six Months Ago 51.48% 47.50% Integrated Oil & Gas 14.40% 16.32% Oil & Gas Equipment & Services 13.16% 17.34% Oil & Gas Storage & Transportation 7.60% 8.24% Oil & Gas Refining & Marketing 7.28% 6.55% Oil & Gas Drilling 2.15% 1.60% Commodity Chemicals 1.89% 1.52% Gas Utilities 0.48% 0.38% Semiconductor Equipment 0.23% -- ASSET ALLOCATION Asset Class Portfolio Weight Portfolio Weight Six Months Ago Domestic Equities 89.89% 92.52% International Equities 8.79% 7.02% Developed Markets 5.19% 3.48% Emerging Markets 3.60% 3.54% Tax-Advantaged Domiciles 0.00% 0.00% Bonds 0.00% 0.00% Cash & Net Other Assets 1.32% 0.46% 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. "Tax-Advantaged Domiciles" represent countries whose tax policies may be favorable for company incorporation. 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 December 31, 2017 Cumulative Annualized Total Returns for the Fund 6 Month YTD / LOF 1 VIP Energy Portfolio - Initial Class Gross Expense Ratio: 0.68% % -2.47% -2.47% 1.22% 2.46% -0.94% VIP Energy Portfolio - Investor Class Gross Expense Ratio: 0.76% % -2.57% -2.57% 1.14% 2.38% -1.03% S&P 500 Index 11.42% 21.83% 21.83% 11.41% 15.79% 8.50% MSCI US IMI Energy 25/ % -2.33% -2.33% -0.95% 2.00% 0.74% Morningstar Insurance Equity Energy 14.15% -8.67% -8.67% -4.26% -1.80% -2.64% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 07/19/ 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 December 31, 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 -1.74% 17.45% -3.25% -3.25% 0.41% 1.63% -1.74% Fidelity Income Advantage B -1.94% 17.34% -3.45% -3.45% 0.21% 1.42% -1.94% 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+) -1.28% 17.73% -2.81% -2.81% 0.89% 2.11% -1.28% -1.30% 17.73% -2.81% -2.81% 0.89% 2.11% -1.30% -1.13% 17.82% -2.66% -2.66% 1.04% 2.26% -1.13% Fidelity Retirement Reserves - Subaccount Inception: July 30, 2001; New York Only Inception: July 30, Fidelity Income Advantage - Subaccount Inception: July 30, 2001; New York Only Inception: July 30, 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 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. 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. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. The energy industries can be significantly affected by fluctuations in energy prices and supply and demand of energy fuels, energy conservation, the success of exploration projects, and tax and other government regulations. The fund may have additional volatility because it can invest a significant portion of assets in securities of a small number of individual issuers. Cap 1750 Indices. S&P 500 is a market-capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. 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 2018 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. RELATIVE WEIGHTS Relative weights represents the % of fund assets in a particular market segment, asset class or credit quality relative to the benchmark. A positive number represents an overweight, and a negative number is an underweight. The fund's benchmark is listed immediately under the fund name in the Performance Summary. 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. The Board of Trustees unanimously approved a proposal to shareholders for trustee election that would combine oversight of Fidelity's sector funds with Fidelity's broader equity and high income funds under a single Board of Trustees. If approved, the unified Board would be effective on or about 3/1/18. Effective 12/18/17, the fund's redemption fee has been removed. VIP refers to Variable Insurance Products 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. MSCI US IMI Energy 25/50 Index is a modified marketcapitalization-weighted index of stocks designed to measure the performance of Energy companies in the MSCI U.S. Investable Market 2500 Index. The MSCI U.S. Investable Market 2500 Index is the aggregation of the MSCI U.S. Large Cap 300, Mid Cap 450, and Small 8

9 Manager Facts John Dowd is a portfolio manager at Fidelity Management & Research Company (FMR Co.), 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. Dowd manages Fidelity Select Energy Portfolio, Fidelity Select Natural Resources Portfolio, Fidelity Advisor Energy Fund, and VIP Energy Portfolio. Additionally, he co-manages Fidelity Series Broad Market Opportunities Fund, Fidelity Stock Selector All Cap Fund, and Fidelity Advisor Stock Selector All Cap Fund. Prior to assuming his current responsibilities, Mr. Dowd managed Select Energy Service Portfolio and previously served as an equity research analyst. Before joining Fidelity in 2005, Mr. Dowd was a senior research analyst covering oil service companies at Sanford C. Bernstein & Co. Previously, he followed energy companies and developed risk management tools for Lawhill Capital Partners, LLC, an energyfocused investment management firm. Mr. Dowd also worked as an analyst and as a junior analyst at Sanford C. Bernstein & Co. following oil refinery, oil service, and integrated oil companies. He has been in the investments industry since joining Value Line as an equity analyst in Mr. Dowd earned his bachelor of science degree in mechanical engineering from Carnegie Mellon University. He has also served as an expert witness on energy and has testified before Congress, the House Subcommittee on International Terrorism and Non- Proliferation, and the Senate Committee on Energy and Natural Resources. 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 -1.74% -3.25% 0.41% 1.63% -1.74% Fidelity Income Advantage -1.94% -3.45% 0.21% 1.42% -1.94% 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+) -1.28% -2.81% 0.89% 2.11% -1.28% -1.30% -2.81% 0.89% 2.11% -1.30% -1.13% -2.66% 1.04% 2.26% -1.13% 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.