Annuity Fund Options

Fidelity's Variable Annuity	\|	Allocating Annuity Assets	\|	VIP Sector Funds in an Annuity

Allocating Annuity Assets

The goal of asset allocation is to diversify your investments across different types of investment classes in order to balance potential rewards and probable risks. Studies have shown that what investments you choose or when you invest in them isn't nearly as important as how you diversify your money across different asset classes.

Equities

Historically, equities provide higher returns with the most volatility. To balance reward and risk, you may want to diversify among asset classes. Once you determine the right mix of assets across equities, fixed-income securities and short-term instruments, you may want to consider further diversifying the equity portion of your annuity assets across sub-classes, namely large-cap, small/mid-cap, and international equities.

When selecting domestic equity portfolios, two factors to consider are market capitalization and valuation.

Market capitalization reflects the value of the companies' stock in which the portfolio invests, Domestic equity portfolios are divided into three capitalization ranges:

Range	Companies' stock value
Large cap	$5 billion+
Mid cap	$1 - 5 billion
Small cap	less than $1 billion

Valuation indicates whether the majority of the portfolio's assets are invested in growth stocks, value stocks, or a blend of the two.

As the illustration below shows, the two factors, capitalization and valuation, combine to create different equity blends:

Your variable annuity also offers you access to a family of VIP sector funds. These are equity funds that focus their holdings within a specific industry sector – such as healthcare, financial services, or natural resources. If you are a long-term investor with an interest in specific industry sectors and have a high risk tolerance, you may want to consider including these specialized equity funds in your variable annuity.

Fixed Income funds are typically part of the more conservative, income-oriented portion of a diversified portfolio. Also, bond returns and stock returns historically have had a somewhat inverse relationship - when bonds have done well, stocks have fared less well, and vice versa. Bonds and stocks can be combined to create a diversified portfolio that can result in lower relative volatility than a single asset class investment may provide. Bond funds' yield, share price, and total return change daily and are based on interest rates, market conditions, and other economic and political news.

The short-term portion of a portfolio is made up of liquid investments, such as money market instruments, that offer low volatility. The shortest-term fixed income securities with maturities of less than one year, such as Treasury bills and short-term certificates of deposit also belong in this category. Typically, short-term investments will make up a small part of a portfolio, increasing gradually the closer you are to your investment goal.

How much you diversify across different asset classes and equity subclasses depends on three factors:

1. Your goals
2. How long you will maintain your annuity
3. Your comfort with risk

Generally, the longer you have to maintain your annuity, and the greater your comfort with risk, the more you may want to weight your allocation toward equities.

You can diversify your equity allocation by:


•		Market Capitalization and Valuation: indicates whether the majority of the fund's assets are invested in growth stocks, value stocks, or a blend of the two.
•		Concentrated funds: limits the fund manager's holdings to 20-40 companies. These funds may be subject to more dramatic shifts in performance. PBHG Select Value and PBHG Select 20 are examples of concentrated funds.
•		Geographical emphasis: complement domestic equity funds by choosing global funds that invest in the U.S. and around the world, and international funds that invest outside the U.S.
•		Investing in sectors: invest in a particular industry sector that you believe may offer the potential for long-term growth. Sector funds are not appropriate for every annuity owner, and should not comprise your entire annuity allocation.

To help you decide which annuity funds may be right for you, complete the Annuity Asset Allocation Worksheet. You will receive:


•		A model asset allocation strategy to help you determine what percentage to allocate to each investment type.
•		A list of annuity fund options.
•		More detailed information on how to determine which annuity funds to choose.

Contact an annuity specialist.

1 VIP refers to Variable Insurance Products

Fidelity Annuity Specialists are licensed annuity agents.

Investing in sector funds may be more volatile due to their narrow investment concentration. Investments in VIP sector funds transferred or withdrawn in less than 60 days will be assessed a 1% redemption fee, which is retained by the fund.

Foreign investments involve risks in addition to those U.S. investments, including political and economic risks as well as the risk of currency fluctuations. These risks may be magnified in emerging markets.

Investments in the Fidelity VIP Money Market Portfolio are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the underlying fund seeks to preserve the value of investments at $1.00 per share, it is possible to lose money in the fund.

Variable annuity values and investment returns will fluctuate and you will have a gain or loss when money is withdrawn.

For more complete information on variable annuities, including charges and expenses, review the prospectus. Please read it carefully before you invest or send money.