Fidelity VIP Consumer Discretionary Portfolio

Transcription

1 Fidelity VIP Consumer Discretionary Portfolio Key Takeaways For the semiannual reporting period ending June 30, 2018, the fund's share classes gained about 10%, roughly in line with the 10.09% result of the MSCI U.S. IMI Consumer Discretionary 25/50 Index, and significantly outperforming the 2.65% return of the broad-market S&P 500 index. The sector benefited from positive business and consumer sentiment. Jobs data trended positive and investors remained confident that the sweeping $1.5 trillion U.S. tax reform plan passed in December could boost consumers' discretionary spending in Versus the MSCI sector index, our positioning in general merchandise stores held back the fund's performance. Here, discount retailer Dollar Tree was the fund's biggest individual detractor the past six months. Our underexposure to index component and mass media giant Twenty-First Century Fox also hurt. Turning to contributors, good stock selection and an underweighting in automobile manufacturers was helpful. Specifically, not owning Ford Motor added value. In addition, being underweighted in Comcast and having no exposure to benchmark component Liberty Global both cable & satellite firms also contributed. Given the positive economic and consumer backdrop, Portfolio Manager Katie Shaw is bullish on the prospects for the sector, despite increases in inflation, interest rates and gasoline prices. In addition, she is finding significant opportunities for stock picking amid the rapid pace of disruption and change within the sector. The fund has big positions in Netflix and Amazon, both at the forefront of this disruption. 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 Katherine Shaw Fund Facts Katherine Shaw Portfolio Manager Start Date: July 18, 2001 Size (in millions): $ Investment Approach Fidelity VIP Consumer Discretionary Portfolio is a sector-based, equity-focused strategy that seeks to outperform its benchmark through active management. The fund is constructed to maximize ownership of companies with characteristics that we believe should drive outperformance: a tailwind from improving consumer macro trends; market-share gains; a technology lead relative to peers; improving margins; increasing returns of capital to shareholders; and reasonable valuation. We look to invest when the stock prices do not yet reflect our higher-than-consensus expectations for long-term earnings growth. Position sizes and fund concentration are a function of our conviction level in our investment ideas, weighed against the probability of upside to a stock's intrinsic (fair) value and the time horizon needed to capture it. Stock selection and idea generation come from bottomup research that leverages Fidelity's deep and experienced global consumer team. We consider attractive consumer stocks outside of the benchmark that offer the potential for favorable risk-adjusted returns. Sector strategies could be used by investors as alternatives to individual stocks for either tactical- or strategic-allocation purposes. Q: Katie, how did the fund and sector perform for the six months ending June 30, 2018 The fund's share classes gained about 10%, roughly in line with the 10.09% result of the MSCI U.S. IMI Consumer Discretionary 25/50 Index, but well ahead of the broadmarket S&P 500 index and peer group average. The fund's absolute and relative results were stronger for the trailing 12-month period, as the fund returned about 23%, outperforming both the MSCI sector index, broad market and peer group average. Looking at the sector's performance, positive business and consumer sentiment continued to provide a supportive backdrop for consumer discretionary stocks during the sixmonth period. Jobs data also trended positive, as a tight labor market, near historically low unemployment, and wage growth supported the U.S. consumer and continued overall economic expansion. Investors remained confident that the sweeping $1.5 trillion tax reform plan passed in December could boost consumers' discretionary spending in Indeed, the U.S. Census Bureau's June sales report revealed that total sales increased by a healthy clip from June Nevertheless, fierce retail competition hurt profit margins for some companies, while changing consumer preferences also challenged some of the sector's industries. Q: Would you describe your investment process, along with some of the stocks that influenced fund performance versus the MSCI sector index the past six months I choose stocks using a bottom-up process with a thematic backdrop that aligns with company-specific fundamentals as well as valuation. Specifically, I seek to maximize exposure to the following six characteristics: a tailwind from improving consumer macro trends; market-share gains or exposure to an increase in consumer preference and popularity; a technology lead versus competitors; improving profit margins; improving return of cash to shareholders; and reasonable valuation. Overall, I'm looking for companies that are driving faster-than-average top- and bottom-line growth. Dollar Tree is one stock that fits this description. I am increasingly upbeat on the prospects of lower-/middle income consumers, as a substantial number of Americans 2 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

3 recently received their first pay raise, on a real basis, in 20+ years and the pace of wage gains has accelerated. In addition, recent personal tax reform should further boost take-home pay. To take advantage of this trend, the fund has exposure to discount retailers, such as Dollar Tree, one of the fund's largest holdings. Unfortunately for the fund, Dollar Tree returned -21% the past six months, largely due to two consecutive quarters of disappointing financial results. Despite its poor performance this period, I'm confident the longer-term trend should support the business and remained invested in the stock. Elsewhere, I continued to view prospects for traditional media unfavorably and remained underweight most companies in the industry. Being underexposed to index component and mass media giant Twenty-First Century Fox (+45%) hindered the fund's relative result this period. The stock rallied in June ahead of the U.S. Department of Justice's decision to approve Walt Disney's acquisition of most of Fox's assets. The Fox-Disney deal was agreed upon in December 2017, but still has more regulatory hurdles to overcome before it is completed. Q: What other stocks materially influenced relative results the past six months Though I'm negative on traditional media, I am optimistic about the potential for companies here with the best content and strongest distribution networks to grow faster than the sector, especially when such firms demonstrate an ability to monetize their content in numerous ways. I believe demand for faster internet connections is going to continue increasing as technology evolves. Charter Communications is one stock we own that should benefit from this trend. The stock returned about -14% this period, though, with a sharp tumble in April after the firm reported a bigger-thanexpected loss of video subscribers for the previous quarter. Charter was a notable relative detractor for the fund, but I remain confident in my thesis here and the stock continued to be one of the fund's largest holdings at period end. A number of our investments in the hotel, resorts & cruise lines industry also proved disappointing. Among these was Royal Caribbean Cruises (-12%), where fears of higher operating and fuel costs, as well as the potential for slowing demand, crimped the fund's relative performance. Turning to contributors, being underweighted in U.S.-based Comcast (-17%) and having no exposure to benchmark component and London-based Liberty Global (-22%) both cable & satellite firms lifted relative performance. In addition to broader industry concerns, such as cord cutting, shares of both companies suffered as investors negatively viewed their M&A activity. For Comcast, it was its bid to purchase European pay-tv giant Sky, while Liberty agreed to sell some of its assets to Vodafone. Although an underweighting, Comcast was one of the fund's largest absolute holdings this period. Q: Aside from Comcast and Liberty, what else helped Not owning automaker Ford Motor and largely avoiding apparel retailer L Brands, whose flagship brands include Victoria's Secret and Bath & Body Works, were big contributors. We owned a very small stake in L Brands early in the year, but sold it from the fund by June 30. Both stocks lack exposure to the investment characteristics I look for, and it helped to avoid these stocks as they declined during the past six months. I'll also mention Amazon.com, as another contributor and a name we did own. This is a stock I remain very excited about, though its valuation is high and investment cycles can be costly, so I remain mindful of both factors after such a good run. Shares of Amazon gained 45% the past six months, rising largely due to the company's sustained dominance in its core e-commerce and cloud markets. The stock was our biggest holding during the past six months. Q: What's your outlook as of June 30, Katie The macro backdrop is positive, in my view, and I am more bullish on the prospects for the consumer sector today than I have been for the past several years. With unemployment continuing to drop, we are seeing lower rates of "underemployment"; also, companies have ceased to announce large job cuts. In fact, the opposite has begun to occur, with previously disenfranchised workers being drawn back into the workforce. Additionally, companies are now announcing bonuses and wage increases for a large portion of the population. While the political backdrop remains uncertain, it seems the consumer continues to accept this state of affairs, and current levels of geopolitical tension and uncertainty are now "normal." Other areas of the world, such as the U.K. and emerging markets, seem to be improving as well and, for the first time in a long while, I believe we are in a period of global albeit relatively muted growth. Overall, I believe this provides a favorable backdrop for active investment management strategies in the consumer discretionary sector. Somewhat tempering my enthusiasm is that fact that inflation has ticked up along with interest rates and gasoline prices. However, I believe the positives outweigh the negatives, and I am bullish on the U.S. consumer. 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 Katie Shaw on disruption in the consumer discretionary sector: "Balancing the tailwinds benefiting U.S. consumers and the negatives from potential recession or geopolitical unrest, I remain selective in choosing consumer discretionary stocks, and I see the gap between 'winners' and 'losers' growing at an increasing rate. The pace of disruption and change within the sector is fascinating and provides significant opportunities for stock picking. "Take mall-based retailers versus online shopping, for example. Traditional shopping patterns in America have been turned on their heads in the past decade at an ever-increasing rate, and stocks skewed to malls are significantly underperforming those geared toward online shopping. I do not see this pattern of behavior changing. It is worth noting that many brick-and-mortar retailers are changing their behavior by better controlling inventory levels and introducing more experiences into their retail locations to entice consumers. Price cuts are sometimes being used to drive customer traffic. Deflation overall is another theme to watch among retail companies. "Positions in Netflix and Amazon, both at the forefront of this disruption, are some of the primary examples of owning the 'winners' in the space. Both were large fund holdings during the past six months. Conversely, I am underexposed to mallbased specialty retailers, department stores and casual-dining sit-down restaurants. "The auto marketplace is experiencing similar trends of disruption. The traditional auto market has been undergoing a shift toward technologically-based offerings. The potential for semi-autonomous driving or even a driverless car has moved to the forefront of possibility. I see the auto industry overall as slow to adapt to this change and am largely underweight the group. Tesla is the only auto stock the fund is overweight, though its valuation and lack of cash-flow generation prompt me to keep our ownership in the stock limited." Holding Market Segment Average Relative Weight Relative Contribution (basis points)* Comcast Corp. Class A Cable & Satellite -1.14% 35 Liberty Global PLC Class A Ford Motor Co. Cable & Satellite -0.66% 24 Automobile Manufacturers -1.16% 24 L Brands, Inc. Apparel Retail -0.27% 19 Amazon.com, Inc. * 1 basis point = 0.01%. Internet & Direct Marketing Retail LARGEST DETRACTORS VS. BENCHMARK Holding Dollar Tree, Inc. Twenty-First Century Fox, Inc. Class A Charter Communications, Inc. Class A Royal Caribbean Cruises Ltd. Wyndham Destinations, Inc. * 1 basis point = 0.01%. Market Segment General Merchandise Stores Movies & Entertainment 0.50% 19 Average Relative Weight Relative Contribution (basis points)* 2.20% % -49 Cable & Satellite 1.59% -35 Hotels, Resorts & Cruise Lines Hotels, Resorts & Cruise Lines 1.04% % 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 95.19% 97.91% -2.72% 0.93% International Equities 4.95% 2.09% 2.86% 0.55% Developed Markets 2.17% 0.90% 1.27% 0.50% Emerging Markets 2.78% 1.13% 1.65% 0.11% Tax-Advantaged Domiciles 0.00% 0.06% -0.06% -0.06% Bonds 0.00% 0.00% 0.00% 0.00% Cash & Net Other Assets -0.14% 0.00% -0.14% -1.48% 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 Internet & Direct Marketing Retail 27.10% 27.31% -0.21% -1.08% Home Improvement Retail 10.19% 8.33% 1.86% -0.71% Restaurants 8.82% 8.20% 0.62% -0.60% Hotels, Resorts & Cruise Lines 7.97% 3.90% 4.07% -0.07% Cable & Satellite 5.83% 7.04% -1.21% -0.50% Apparel Retail 5.41% 3.98% 1.43% 0.44% Movies & Entertainment 4.30% 7.79% -3.49% 0.69% General Merchandise Stores 3.80% 2.47% 1.33% -0.15% Casinos & Gaming 3.49% 2.34% 1.15% -0.80% Apparel, Accessories & Luxury Goods 3.14% 3.00% 0.14% 0.66% Other 20.09% 23.63% -3.54% 1.83% 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 Amazon.com, Inc. Internet & Direct Marketing Retail 19.18% 14.97% Home Depot, Inc. Home Improvement Retail 7.23% 8.39% Netflix, Inc. Internet & Direct Marketing Retail 4.60% 2.47% McDonald's Corp. Restaurants 3.67% 4.11% The Walt Disney Co. Movies & Entertainment 3.64% 4.37% Comcast Corp. Class A Cable & Satellite 2.94% 4.00% Lowe's Companies, Inc. Home Improvement Retail 2.86% 2.77% The Booking Holdings, Inc. Internet & Direct Marketing Retail 2.78% 2.67% Charter Communications, Inc. Class A Cable & Satellite 2.68% 4.02% NIKE, Inc. Class B Footwear 2.56% 2.47% 10 Largest Holdings as a % of Net Assets 52.15% 51.69% 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 Consumer Discretionary Portfolio - Initial Class Gross Expense Ratio: 0.71% % 10.00% 23.12% 11.90% 13.94% 14.44% VIP Consumer Discretionary Portfolio - Investor Class Gross Expense Ratio: 0.79% % 9.92% 22.98% 11.80% 13.84% 14.34% S&P 500 Index 2.65% 2.65% 14.37% 11.93% 13.42% 10.17% MSCI US IMI Consumer Discretionary 25/ % 10.09% 21.75% 13.02% 15.07% 15.99% Morningstar Insurance Consumer Cyclical 7.16% 7.16% 17.64% 9.00% 11.88% 12.71% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 07/18/ 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 13.53% 9.56% 9.56% 22.14% 11.01% 13.02% 13.53% Fidelity Income Advantage B 13.30% 9.45% 9.45% 21.89% 10.78% 12.80% 13.30% 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+) 14.05% 9.79% 9.79% 22.68% 11.52% 13.55% 14.05% 14.03% 9.79% 9.79% 22.68% 11.52% 13.55% 14.03% 14.23% 9.87% 9.87% 22.86% 11.69% 13.73% 14.23% 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. FUND RISKS Stock markets, especially foreign markets, are volatile and can decline significantly in response to issuer, political, regulatory, market, or economic developments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. The consumer discretionary industries can be significantly affected by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes. 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 450, and Small 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. 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 Consumer Discretionary 25/50 Index is a modified market-capitalization-weighted index of stocks designed to measure the performance of Consumer Discretionary 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 9

10 Manager Facts Katherine Shaw is a sector leader 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, Ms. Shaw serves as sector leader of the Global Consumer team and is responsible for providing research coverage for the consumer discretionary sector. Additionally, she manages Fidelity Select Consumer Discretionary Portfolio, Fidelity Advisor Consumer Discretionary Fund, and Fidelity VIP Consumer Discretionary Portfolio, as well as Fidelity Select Leisure Portfolio and Fidelity Consumer Discretionary Central Fund. She also co-manages Fidelity Stock Selector All Cap Fund. Prior to joining Fidelity in 2008, Ms. Shaw served as a private equity associate at TA Associates and as an investment banking analyst at Salomon Smith Barney. She has been in the financial industry since Ms. Shaw earned her bachelor of arts degree in economics and government from The University of Virginia and her master of business administration degree from Harvard Business School. She is also a CFA charterholder. 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 13.53% 22.14% 11.01% 13.02% 13.53% Fidelity Income Advantage 13.30% 21.89% 10.78% 12.80% 13.30% 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+) 14.05% 22.68% 11.52% 13.55% 14.05% 14.03% 22.68% 11.52% 13.55% 14.03% 14.23% 22.86% 11.69% 13.73% 14.23% 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.