Fidelity VIP Utilities Portfolio

Transcription

1 Fidelity VIP Utilities Portfolio Key Takeaways For the semiannual reporting period ending June 30, 2018, the fund's share classes returned roughly 8%, far exceeding the 1.12% return of the sector benchmark MSCI U.S. IMI Utilities 25/50 Index and the 2.65% result of the broadly based S&P 500 index. Utilities has a generally lackluster period, but as market volatility increased, investors became more cautious, benefiting the sector, which is often considered a more-defensive and conservative area of the market. Versus the MSCI index, a significant overweighting among independent power producers and energy traders led by strong performance from NRG Energy, AES Corp. and Vistra Energy delivered the biggest boost to the fund's result. Stock selection in multi-utilities and electric utilities also proved additive. Conversely, out-of-index positions in cable giant Comcast and telecommunication services provider AT&T detracted. Given the Federal Reserve has just started raising rates, the yield curve is flattening and trade wars are a real possibility, Portfolio Manager Douglas Simmons believes the macroeconomic market is flashing yellow. Against this backdrop, he thinks utilities look very attractive as a defensive play in what could be a turbulent market ahead. 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 The U.S. equity bellwether S&P 500 index gained 2.65% for the first half of 2018, as a resurgence in volatility challenged the multiyear bull market. The steady growth seen throughout 2017 extended into the new year, as investors remained upbeat on hopes of continued strong economic and earnings growth. Stocks surged 5.73% in January alone. February was a decidedly different story, though, as volatility spiked amid concern that rising inflation would prompt the U.S. Federal Reserve to pick up the pace of interest rate hikes. The index returned -3.69% for the month, its first negative result since October 2016, and lost further ground in March on fear of a global trade war. The market stabilized in April and went on to achieve a solid gain for May. The uptrend continued through roughly mid-june, when escalating trade tension between the U.S. and China soured investor sentiment, and the index ended the six months with a two-week slump. By sector, consumer discretionary led the way, its roughly 12% gain driven by a 27% advance among retailers. Information technology rose 11%, boosted by strong earnings growth from several major index constituents. Energy gained 7% alongside higher oil prices. Conversely, notable laggards included some defensive groups consumer staples (-9%) and telecommunication services (-8%) that struggled amid rising interest rates and a general preference for risk. Financials, industrials and materials fared a bit better but each still lost ground. Not FDIC Insured May Lose Value No Bank Guarantee

2 Q&A An interview with Portfolio Manager Douglas Simmons Fund Facts Douglas Simmons Portfolio Manager Start Date: July 19, 2001 Size (in millions): $ Investment Approach Fidelity VIP Utilities Portfolio is a sector-based, equityfocused strategy that seeks to outperform its benchmark through active management. Within the utilities sector, we believe buying companies with superior business models that are growing their dividends and trading at discounts can outperform the index over time. We perform bottom-up, fundamental research to form a view on utilities regulation and power prices to complement our stock selection process. Our investment approach focuses on stocks with lower valuations and that have the best total-return potential. This includes utilities stocks that have been overly discounted due to more-volatile and less-predictable earnings streams. We test our price assumptions through collaborations with Fidelity's experienced research team, while leveraging a network of industry contacts. Sector strategies could be used by investors as alternatives to individual stocks for either tactical- or strategic-allocation purposes. Q: Douglas, how did the fund perform for the six months ending June 30, 2018 The fund performed very well this period. For the six months ending June 30, 2018, the fund's share classes gained roughly 8%, well ahead of the 1.12% return of the sector benchmark MSCI U.S. IMI Utilities 25/50 Index and the 2.65% result of the broadly based S&P 500 index. Results also showed well versus peers. Looking at the trailing 12 months, the fund performed in line with the S&P 500, but outpaced the sector benchmark and peer average. Q: What was the market environment like for utilities stocks the past six months Coming into the period, investors had anticipated Federal Reserve policy interest rates rising, which they did, peaking on May 17. The 10-year U.S. Treasury yield briefly crested over 3% this period, rising from 2.46% at the start of the new year and ending at 2.85% on June 30. Rising interest rates likely made some investors focused primarily on highyielding securities less interested in utility stocks, which had been viewed as an alternative to bonds amid the historically low bond-yield environment seen in recent years. Despite solid economic growth and a favorable corporate backdrop, investors turned more cautious as the period progressed, mainly due to political turmoil and an escalating trade conflict with China, which stoked volatility. Still, the market rallied higher in May and June. Against this backdrop, the S&P 500 performed fairly well, but utilities stocks generally lagged due to their perception as being moredefensive and conservative investments. Q: How did you position the fund Throughout the period, I remained true to my investment process. The utilities sector is valued for its return of capital in the form of dividends. Utilities with the strongest fundamentals, therefore, often reward their investors with the fastest dividend growth. As such, I sought to emphasize companies that were increasing their dividends faster than the sector average, which I believe led me to companies with improving or better-than-average fundamentals and more secure yields. In my view, these types of companies have a higher likelihood of seeing their stock-valuation multiples increase over time. With this strategy in mind, I positioned 2 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

3 the fund in companies that I felt not only had solid fundamentals propelling dividend growth, but also those that would be less susceptible to rising rates. This view led me to largely avoid the higher-yielding dividend stocks that are growing earnings in the low single digits, and instead look for stocks with attractive total returns and a mix of current yield, above-average growth and low valuations. These were the types of stocks that performed best this period and gave the fund an edge over the MSCI index. Q: What other specific factors helped the fund outperform the MSCI sector index The fund benefited from our significant overweighting within the strong-performing independent power producers & energy traders segment, in which I had identified several companies with solid-to-improving fundamentals and healthy dividend growth profiles. In fact, the fund's top three individual contributors relative to the MSCI index came from this group: NRG Energy (+8%), AES Corp. (+27%) and Vistra Energy (+29%). I considered each of these independent power producers as deep-value investments, especially given their solid free-cash-flow yields and improving balance sheets. As interest rates and commodity prices rose, shares of each of these stocks rose strongly. Although I remained positive on the long-term prospects for NRG Energy and AES, I trimmed the fund's positions in each stock to lock in profits and fund new positions in other companies I liked whose valuations had fallen steeply. I retained the fund's stake in Vistra at period end. Q: What else contributed to the fund's relative performance Stock selection among multi-utilities and electric utilities also aided our result this period. In multi-utilities, the fund's underweighting, on average, in Dominion Resources (renamed Dominion Energy, -14%), a weak-performing index component, proved especially beneficial. Dominion has historically been a "blue chip" name within the utilities sector given its exposure to the pipeline segment. With the recent change to federal tax laws, however, these pipeline companies did not receive any benefits, which weighed on Dominion's stock. Additionally, in January, Dominion bid to acquire SCANA, a utility provider that had run into numerous issues building its nuclear projects, including abandoning one in South Carolina due to ballooning construction costs. On paper, this purchase would help propel Dominion's earnings growth and increase its dividend. However, South Carolina began pursuing SCANA to pay for the failed project, which put Dominion's acquisition bid in jeopardy. In all, shares of Dominion fell steeply this period, and I took that opportunity to significantly boost the fund's stake, making it one of the 10 largest holdings as of June 30. On a risk-adjusted basis, I still believed the company could be a reliable grower, as its fundamentals remained solid. The company's share price hit a bottom in early June and rose through period end. Q: What hurt the fund's relative performance Out-of-index positions in the cable & satellite and integrated telecommunication services groups held back the fund's relative result. In addition to electric, gas and water utilities, I closely monitor what I consider 21 st century utilities offering services such as wireless telecommunications and internet, including broadband. This period, two of the fund's positions in these areas cable giant Comcast and wireless telecom provider AT&T were among the fund's biggest detractors. Both companies were trading at a material discount compared with other utilities within the sector benchmark. The stocks of both Comcast (-22%) and AT&T (-2%) struggled this period. Concerns about Comcast's aggressive bidding for Twenty-First Century Fox's movie and television assets and Britain's cable provider Sky weighed on shares of the company. Meanwhile, a federal judge approved AT&T's acquisition of Time Warner in June. While the acquisition will serve to further diversify the telecom company's offerings beyond mobile service and satellite cable television, which the company acquired through its 2015 DirecTV purchase, AT&T's balance sheet is now highly levered, which unsettled some investors. From my standpoint, at period end, the valuations of AT&T and Comcast were extremely cheap for their growth prospects. As with many value opportunities, these stories will take time to play out and require some patience in the short term. Q: Any final thoughts for shareholders, Douglas Given the Federal Reserve has just started raising rates, the yield curve is flattening and trade wars are a real possibility, the macroeconomic picture is flashing yellow. Against this backdrop, utilities look very attractive as a defensive play in what could be a turbulent market ahead. Utilities are considered one of the most defensive areas of the equity market and historically have been strong performers when the market weakens. Additionally, the sector has meaningfully underperformed the broadly based S&P 500 index since interest rates bottomed in the summer of 2016, and I believe a lot of concerns and fears about rising rates have already been priced into the sector. A big surprise in the coming year could be that long-term interest rates have already peaked and actually may trend lower as macroeconomic fears rise. 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 Douglas Simmons makes a case for utilities stocks: "After one of the longest economic expansions in recorded history, the investors I've been speaking with are concerned about the likelihood of a U.S. recession within the next two years. "Uncertainty around the potential impact of a trade war, a slowdown in global growth and a flattening yield curve have precipitated much of the volatility we've experienced since the beginning of Additionally, quantitative tightening through policy interest rate increases has really just begun. I consider all of these factors to be flashing yellow indicators that investors should heed when investing in the equity market. "With these factors in play, I believe the case for owning utilities has never been stronger, and I am cautiously optimistic about the growing strength of the sector. Utilities can provide valuable risk insurance in a diversified portfolio of investments. Utilities securities have the second-highest yield on average among equity sectors (behind telecommunication services stocks), the lowest beta, and no foreign-exchange risk. The utilities sector also is the one that is least correlated with the economy. Lastly, utilities have performed best in down markets on a historical basis. "Utilities have been out of favor since interest rates bottomed in 2016, broadly underperforming the S&P 500 index. From my perspective, given the current environment, utilities are poised to rebound and rotate back into a market leadership position, especially as the likelihood of an economic slowdown or recession increases. "However, regardless of the economic and investment backdrop, I intend to continue following my investment process to uncover utilities with solid fundamentals and above-average dividend growth at reasonable prices." Holding NRG Energy, Inc. The AES Corp. Vistra Energy Corp. Dominion Resources, Inc. Market Segment Independent Power Producers & Energy Traders Independent Power Producers & Energy Traders Independent Power Producers & Energy Traders Average Relative Weight Relative Contribution (basis points)* 4.46% % % 75 Multi-Utilities -1.74% 73 NextEra Energy, Inc. Electric Utilities 4.04% 60 * 1 basis point = 0.01%. LARGEST DETRACTORS VS. BENCHMARK Holding Market Segment Average Relative Weight Relative Contribution (basis points)* Comcast Corp. Class A Cable & Satellite 3.43% -79 AT&T, Inc. Integrated Telecommunication Services 0.27% -22 Eversource Energy Electric Utilities 1.38% -21 UGI Corp. Gas Utilities -1.04% -11 Edison International Electric Utilities -1.46% -7 * 1 basis point = 0.01%. 4 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

5 ASSET ALLOCATION Asset Class Portfolio Weight Index Weight Relative Weight Relative Change From Six Months Ago Domestic Equities 98.44% % -1.56% -0.45% International Equities 0.29% 0.00% 0.29% -0.23% Developed Markets 0.29% 0.00% 0.29% -0.23% Emerging Markets 0.00% 0.00% 0.00% 0.00% Tax-Advantaged Domiciles 0.00% 0.00% 0.00% 0.00% Bonds 0.00% 0.00% 0.00% 0.00% Cash & Net Other Assets 1.27% 0.00% 1.27% 0.68% 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. MARKET-SEGMENT DIVERSIFICATION Market Segment Portfolio Weight Index Weight Relative Weight Relative Change From Six Months Ago Electric Utilities 53.78% 56.87% -3.09% 2.56% Multi-Utilities 18.13% 29.35% % -3.97% Independent Power Producers & Energy Traders 7.95% 3.45% 4.50% -6.77% Oil & Gas Storage & Transportation 5.37% % 2.50% Integrated Telecommunication Services 3.29% % 3.29% Gas Utilities 2.43% 5.96% -3.53% -3.53% Cable & Satellite 2.38% % -2.48% Renewable Electricity 2.24% 0.85% 1.39% -1.10% Specialized Reits 2.08% % 1.91% Movies & Entertainment 1.00% % 1.00% Other 0.08% 0.00% 0.08% 0.08% 5 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

6 10 LARGEST HOLDINGS Holding Market Segment Portfolio Weight Portfolio Weight Six Months Ago NextEra Energy, Inc. Electric Utilities 8.38% 18.22% Evergy, Inc. Electric Utilities 6.95% -- Exelon Corp. Electric Utilities 6.78% 10.98% FirstEnergy Corp. Electric Utilities 6.14% 3.69% Public Service Enterprise Group, Inc. Multi-Utilities 5.96% 3.81% Dominion Resources, Inc. Multi-Utilities 5.92% 3.79% American Electric Power Co., Inc. Electric Utilities 5.39% -- Entergy Corp. Electric Utilities 4.71% -- Sempra Energy Multi-Utilities 4.19% 9.82% Eversource Energy Electric Utilities 3.32% Largest Holdings as a % of Net Assets 57.73% 72.38% 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. 6 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

7 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, 2018 Cumulative Annualized Total Returns for the Fund 6 Month YTD / LOF 1 VIP Utilities Portfolio - Initial Class Gross Expense Ratio: 0.69% % 8.24% 14.40% 12.59% 11.54% 7.06% VIP Utilities Portfolio - Investor Class Gross Expense Ratio: 0.77% % 8.15% 14.27% 12.48% 11.46% 6.96% S&P 500 Index 2.65% 2.65% 14.37% 11.93% 13.42% 10.17% MSCI US IMI Utilities 25/ % 1.12% 4.88% 12.56% 10.90% 7.24% Morningstar Insurance Utilities 2.38% 2.38% 7.09% 7.20% 7.81% 5.30% 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. It does not include any fee waivers or reimbursements, which would be reflected in the fund's net expense ratio. Performance and disclosure information continued on next page. 7 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

8 PERFORMANCE SUMMARY (continued): Fiscal periods ending June 30, 2018 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 6.20% 7.81% 7.81% 13.49% 11.69% 10.65% 6.20% Fidelity Income Advantage B 5.99% 7.70% 7.70% 13.26% 11.46% 10.42% 5.99% 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+) 6.70% 8.01% 8.01% 13.98% 12.20% 11.18% 6.70% 6.67% 8.01% 8.01% 13.98% 12.20% 11.18% 6.67% 6.86% 8.10% 8.10% 14.15% 12.37% 11.35% 6.86% 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. 8 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

9 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. 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. 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 utilities industries can be significantly affected by government regulation, financing difficulties, supply and demand of services or fuel, and natural resource conservation. The fund may have additional volatility because it can invest a significant portion of assets in securities of a small number of individual issuers. 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. Effective 12/18/17, the fund's redemption fee has been removed. VIP refers to Variable Insurance Products At a shareholder meeting on 12/8/17, a proposal was approved to combine the oversight of Fidelity's sector funds with Fidelity's broader equity and high income funds under a single Board of Trustees. The unified Board will be effective on 3/1/18. 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 Utilities 25/50 Index is a modified marketcapitalization-weighted index of stocks designed to measure the performance of Utilities 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 Cap 1750 Indices. 9

10 Manager Facts Douglas Simmons 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. Simmons manages Fidelity Telecom and Utilities Fund, Fidelity Select Utilities Portfolio, Fidelity VIP Utilities Portfolio, and the Fidelity Advisor Utilities Fund. As a member of Fidelity's Stock Selector Large Cap Group, he is also responsible for managing the telecom and utilities sleeves for various diversified sector-based portfolios. Prior to assuming his current responsibilities in September 2005, Mr. Simmons served as a utilities analyst covering the electric and gas utility stocks. Before joining Fidelity in 2003, Mr. Simmons worked as a financial analyst at the private equity firm Hicks, Muse, Tate & Furst. Previously, Mr. Simmons was an investment banking analyst at Morgan Stanley. He has been in the investments industry since Mr. Simmons earned his bachelor of business administration degree in finance from The University of Texas at Austin, where he graduated with highest honors, and his master of business administration degree from Harvard Business School. 10 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

11 PERFORMANCE SUMMARY Quarter ending June 30, 2018 Total Returns for the Variable Subaccount New York Only: 10 /Life of Subaccount 1 Annualized /Life of Subaccount Fidelity Retirement Reserves 6.20% 13.49% 11.69% 10.65% 6.20% Fidelity Income Advantage 5.99% 13.26% 11.46% 10.42% 5.99% 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+) 6.70% 13.98% 12.20% 11.18% 6.70% 6.67% 13.98% 12.20% 11.18% 6.67% 6.86% 14.15% 12.37% 11.35% 6.86% 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. Diversification does not ensure a profit or guarantee against a loss. 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