UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-03759
Variable Insurance Products Fund IV
(Exact name of registrant as specified in charter)
245 Summer St., Boston, MA 02210
(Address of principal executive offices) (Zip code)
Cynthia Lo Bessette, Secretary
245 Summer St.
Boston, Massachusetts 02210
(Name and address of agent for service)
Registrant's telephone number, including area code:
617-563-7000
| |
Date of fiscal year end: | December 31 |
|
|
Date of reporting period: | June 30, 2021 |
Item 1.
Reports to Stockholders
Fidelity® Variable Insurance Products:
Technology Portfolio
Semi-Annual Report
June 30, 2021
Contents
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov.
You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity® Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
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. © 2021 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Note to Shareholders:
Early in 2020, the outbreak and spread of a new coronavirus emerged as a public health emergency that had a major influence on financial markets, primarily based on its impact on the global economy and the outlook for corporate earnings. The virus causes a respiratory disease known as COVID-19. On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a pandemic, citing sustained risk of further global spread.
In the weeks following, as the crisis worsened, we witnessed an escalating human tragedy with wide-scale social and economic consequences from coronavirus-containment measures. The outbreak of COVID-19 prompted a number of measures to limit the spread, including travel and border restrictions, quarantines, and restrictions on large gatherings. In turn, these resulted in lower consumer activity, diminished demand for a wide range of products and services, disruption in manufacturing and supply chains, and – given the wide variability in outcomes regarding the outbreak – significant market uncertainty and volatility. Amid the turmoil, global governments and central banks took unprecedented action to help support consumers, businesses, and the broader economies, and to limit disruption to financial systems.
The situation continues to unfold, and the extent and duration of its impact on financial markets and the economy remain highly uncertain. Extreme events such as the coronavirus crisis are “exogenous shocks” that can have significant adverse effects on mutual funds and their investments. Although multiple asset classes may be affected by market disruption, the duration and impact may not be the same for all types of assets.
Fidelity is committed to helping you stay informed amid news about COVID-19 and during increased market volatility, and we’re taking extra steps to be responsive to customer needs. We encourage you to visit our websites, where we offer ongoing updates, commentary, and analysis on the markets and our funds.
Investment Summary (Unaudited)
Top Ten Stocks as of June 30, 2021
| | % of fund's net assets |
| Apple, Inc. | 21.5 |
| Microsoft Corp. | 18.1 |
| NVIDIA Corp. | 6.3 |
| Salesforce.com, Inc. | 4.0 |
| Marvell Technology, Inc. | 3.7 |
| Cisco Systems, Inc. | 3.4 |
| Adobe, Inc. | 2.9 |
| PayPal Holdings, Inc. | 2.5 |
| Twilio, Inc. Class A | 2.5 |
| Zoom Video Communications, Inc. Class A | 2.4 |
| | 67.3 |
Top Industries (% of fund's net assets)
| As of June 30, 2021 |
| | Software | 34.3% |
| | Technology Hardware, Storage & Peripherals | 22.1% |
| | Semiconductors & Semiconductor Equipment | 17.1% |
| | IT Services | 13.0% |
| | Communications Equipment | 4.5% |
| | All Others* | 9.0% |
* Includes short-term investments and net other assets (liabilities).
Schedule of Investments June 30, 2021 (Unaudited)
Showing Percentage of Net Assets
| Preferred Securities - 0.1% | | | |
| | | Shares | Value |
| Electronic Equipment & Components - 0.1% | | | |
| Electronic Equipment & Instruments - 0.1% | | | |
| Enevate Corp. 0% 1/29/23 (a)(b) | | 1,514,278 | $1,514,278 |
| Semiconductors & Semiconductor Equipment - 0.0% | | | |
| Semiconductors - 0.0% | | | |
| Tenstorrent, Inc. 0% (a)(b)(c) | | 130,000 | 130,000 |
| TOTAL PREFERRED SECURITIES | | | |
| (Cost $1,644,278) | | | 1,644,278 |
|
| Common Stocks - 98.1% | | | |
| Capital Markets - 0.0% | | | |
| Financial Exchanges & Data - 0.0% | | | |
| Coinbase Global, Inc. (d) | | 1,300 | 329,290 |
| Chemicals - 0.3% | | | |
| Commodity Chemicals - 0.3% | | | |
| LG Chemical Ltd. | | 6,230 | 4,686,283 |
| Communications Equipment - 4.5% | | | |
| Communications Equipment - 4.5% | | | |
| Cisco Systems, Inc. | | 1,069,800 | 56,699,400 |
| F5 Networks, Inc. (d) | | 101,700 | 18,983,322 |
| | | | 75,682,722 |
| Diversified Financial Services - 0.1% | | | |
| Other Diversified Financial Services - 0.1% | | | |
| Ant International Co. Ltd. Class C (a)(b)(d) | | 567,730 | 1,652,094 |
| Electronic Equipment & Components - 0.7% | | | |
| Electronic Manufacturing Services - 0.7% | | | |
| Flex Ltd. (d) | | 725,800 | 12,970,046 |
| Entertainment - 0.9% | | | |
| Movies & Entertainment - 0.9% | | | |
| Netflix, Inc. (d) | | 27,932 | 14,753,962 |
| Health Care Equipment & Supplies - 0.0% | | | |
| Health Care Equipment - 0.0% | | | |
| China Medical Technologies, Inc. sponsored ADR (b)(d) | | 300 | 0 |
| Hotels, Restaurants & Leisure - 0.8% | | | |
| Hotels, Resorts & Cruise Lines - 0.8% | | | |
| Airbnb, Inc. Class A | | 87,800 | 13,445,692 |
| Interactive Media & Services - 1.1% | | | |
| Interactive Media & Services - 1.1% | | | |
| Snap, Inc. Class A (d) | | 266,900 | 18,186,566 |
| Internet & Direct Marketing Retail - 0.2% | | | |
| Internet & Direct Marketing Retail - 0.2% | | | |
| Deliveroo PLC (d)(e) | | 112,900 | 450,407 |
| Deliveroo PLC | | 842,200 | 3,191,909 |
| | | | 3,642,316 |
| IT Services - 12.9% | | | |
| Data Processing & Outsourced Services - 8.6% | | | |
| Genpact Ltd. | | 275,900 | 12,534,137 |
| MasterCard, Inc. Class A | | 89,700 | 32,748,573 |
| PayPal Holdings, Inc. (d) | | 146,500 | 42,701,820 |
| Square, Inc. (d) | | 108,300 | 26,403,540 |
| Visa, Inc. Class A | | 131,100 | 30,653,802 |
| | | | 145,041,872 |
| Internet Services & Infrastructure - 3.7% | | | |
| Okta, Inc. (d) | | 31,700 | 7,756,356 |
| Shopify, Inc. (d) | | 8,800 | 12,856,624 |
| Snowflake Computing, Inc. | | 712 | 172,162 |
| Twilio, Inc. Class A (d) | | 107,700 | 42,451,032 |
| | | | 63,236,174 |
| IT Consulting & Other Services - 0.6% | | | |
| Capgemini SA | | 54,300 | 10,430,568 |
|
| TOTAL IT SERVICES | | | 218,708,614 |
|
| Life Sciences Tools & Services - 0.0% | | | |
| Life Sciences Tools & Services - 0.0% | | | |
| JHL Biotech, Inc. (b)(d) | | 94,814 | 0 |
| Oil, Gas & Consumable Fuels - 0.8% | | | |
| Oil & Gas Refining & Marketing - 0.8% | | | |
| Reliance Industries Ltd. | | 451,600 | 12,817,448 |
| Reliance Industries Ltd. | | 29,286 | 585,582 |
| | | | 13,403,030 |
| Pharmaceuticals - 0.0% | | | |
| Pharmaceuticals - 0.0% | | | |
| Chime Biologics Ltd. (b)(d) | | 94,814 | 49,382 |
| Road & Rail - 2.6% | | | |
| Trucking - 2.6% | | | |
| Lyft, Inc. (d) | | 262,497 | 15,875,819 |
| TuSimple Holdings, Inc. (d) | | 31,800 | 2,265,432 |
| Uber Technologies, Inc. (d) | | 506,024 | 25,361,923 |
| | | | 43,503,174 |
| Semiconductors & Semiconductor Equipment - 17.1% | | | |
| Semiconductor Equipment - 1.9% | | | |
| ASML Holding NV (Netherlands) | | 16,000 | 11,045,107 |
| Lam Research Corp. | | 33,500 | 21,798,450 |
| | | | 32,843,557 |
| Semiconductors - 15.2% | | | |
| Marvell Technology, Inc. | | 1,074,404 | 62,669,985 |
| Microchip Technology, Inc. | | 125,000 | 18,717,500 |
| NVIDIA Corp. | | 132,900 | 106,333,290 |
| NXP Semiconductors NV | | 198,713 | 40,879,238 |
| ON Semiconductor Corp. (d) | | 496,200 | 18,994,536 |
| Taiwan Semiconductor Manufacturing Co. Ltd. | | 434,000 | 9,329,091 |
| | | | 256,923,640 |
|
| TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT | | | 289,767,197 |
|
| Software - 34.0% | | | |
| Application Software - 14.9% | | | |
| Adobe, Inc. (d) | | 82,600 | 48,373,864 |
| Autodesk, Inc. (d) | | 75,000 | 21,892,500 |
| Confluent, Inc. | | 4,100 | 194,750 |
| DiDi Global, Inc. ADR | | 40,600 | 574,084 |
| HubSpot, Inc. (d) | | 31,300 | 18,239,136 |
| Intuit, Inc. | | 54,700 | 26,812,299 |
| Pine Labs Private Ltd. (a)(b) | | 1,314 | 489,938 |
| Procore Technologies, Inc. (d) | | 1,600 | 151,920 |
| Salesforce.com, Inc. (d) | | 278,165 | 67,947,365 |
| UiPath, Inc. | | 13,500 | 825,350 |
| Workday, Inc. Class A (d) | | 105,780 | 25,253,917 |
| Zoom Video Communications, Inc. Class A (d) | | 106,300 | 41,141,289 |
| | | | 251,896,412 |
| Systems Software - 19.1% | | | |
| Microsoft Corp. | | 1,134,500 | 307,336,050 |
| Rapid7, Inc. (d) | | 104,300 | 9,869,909 |
| Tenable Holdings, Inc. (d) | | 181,900 | 7,521,565 |
| | | | 324,727,524 |
|
| TOTAL SOFTWARE | | | 576,623,936 |
|
| Technology Hardware, Storage & Peripherals - 22.1% | | | |
| Technology Hardware, Storage & Peripherals - 22.1% | | | |
| Apple, Inc. | | 2,663,760 | 364,828,571 |
| Samsung Electronics Co. Ltd. | | 140,180 | 10,011,085 |
| | | | 374,839,656 |
| TOTAL COMMON STOCKS | | | |
| (Cost $846,534,370) | | | 1,662,243,960 |
|
| Preferred Stocks - 1.2% | | | |
| Convertible Preferred Stocks - 1.0% | | | |
| Aerospace & Defense - 0.2% | | | |
| Aerospace & Defense - 0.2% | | | |
| Relativity Space, Inc. Series E (a)(b) | | 174,268 | 3,979,427 |
| Communications Equipment - 0.0% | | | |
| Communications Equipment - 0.0% | | | |
| Xsight Labs Ltd. Series D (a)(b) | | 37,800 | 302,249 |
| Electronic Equipment & Components - 0.2% | | | |
| Electronic Equipment & Instruments - 0.2% | | | |
| Enevate Corp. Series E (a)(b) | | 3,556,678 | 3,943,232 |
| Internet & Direct Marketing Retail - 0.3% | | | |
| Internet & Direct Marketing Retail - 0.3% | | | |
| GoBrands, Inc. Series G (a)(b) | | 5,260 | 1,313,513 |
| Instacart, Inc. Series I (a)(b) | | 10,890 | 1,361,250 |
| Reddit, Inc.: | | | |
| Series D (a)(b)(d) | | 33,900 | 1,439,875 |
| Series E (a)(b) | | 1,982 | 84,184 |
| | | | 4,198,822 |
| IT Services - 0.1% | | | |
| Internet Services & Infrastructure - 0.1% | | | |
| ByteDance Ltd. Series E1 (a)(b) | | 9,903 | 1,175,783 |
| Metals & Mining - 0.1% | | | |
| Precious Metals & Minerals - 0.1% | | | |
| Diamond Foundry, Inc. Series C (a)(b) | | 56,576 | 1,357,824 |
| Road & Rail - 0.0% | | | |
| Trucking - 0.0% | | | |
| Convoy, Inc. Series D (a)(b)(d) | | 28,479 | 375,923 |
| Semiconductors & Semiconductor Equipment - 0.0% | | | |
| Semiconductors - 0.0% | | | |
| SiMa.ai Series B(a)(b) | | 85,000 | 435,829 |
| Tenstorrent, Inc. Series C1 (a)(b) | | 2,400 | 142,690 |
| | | | 578,519 |
| Software - 0.1% | | | |
| Application Software - 0.1% | | | |
| Databricks, Inc. Series G (a)(b) | | 4,700 | 833,629 |
| Systems Software - 0.0% | | | |
| Nuvia, Inc. Series B (a) | | 257,301 | 210,272 |
| TOTAL SOFTWARE | | | 1,043,901 |
|
| TOTAL CONVERTIBLE PREFERRED STOCKS | | | 16,955,680 |
|
| Nonconvertible Preferred Stocks - 0.2% | | | |
| Software - 0.2% | | | |
| Application Software - 0.2% | | | |
| Pine Labs Private Ltd.: | | | |
| Series 1 (a)(b) | | 3,140 | 1,170,780 |
| Series A (a)(b) | | 785 | 292,695 |
| Series B (a)(b) | | 854 | 318,422 |
| Series B2 (a)(b) | | 690 | 257,273 |
| Series C (a)(b) | | 1,284 | 478,752 |
| Series C1 (a)(b) | | 271 | 101,045 |
| Series D (a)(b) | | 289 | 107,757 |
| | | | 2,726,724 |
| TOTAL PREFERRED STOCKS | | | |
| (Cost $18,896,710) | | | 19,682,404 |
|
| Money Market Funds - 0.8% | | | |
| Fidelity Cash Central Fund 0.06% (f) | | 13,223,436 | 13,226,081 |
| Fidelity Securities Lending Cash Central Fund 0.06% (f)(g) | | 424,958 | 425,000 |
| TOTAL MONEY MARKET FUNDS | | | |
| (Cost $13,651,081) | | | 13,651,081 |
| TOTAL INVESTMENT IN SECURITIES - 100.2% | | | |
| (Cost $880,726,439) | | | 1,697,221,723 |
| NET OTHER ASSETS (LIABILITIES) - (0.2)% | | | (2,594,432) |
| NET ASSETS - 100% | | | $1,694,627,291 |
Legend
(a) Restricted securities (including private placements) - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $23,468,714 or 1.4% of net assets.
(b) Level 3 security
(c) Security is perpetual in nature with no stated maturity date.
(d) Non-income producing
(e) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities amounted to $450,407 or 0.0% of net assets.
(f) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
(g) Investment made with cash collateral received from securities on loan.
Additional information on each restricted holding is as follows:
| Security | Acquisition Date | Acquisition Cost |
| Ant International Co. Ltd. Class C | 5/16/18 | $3,184,965 |
| ByteDance Ltd. Series E1 | 11/18/20 | $1,085,113 |
| Convoy, Inc. Series D | 10/30/19 | $385,606 |
| Databricks, Inc. Series G | 2/1/21 | $833,629 |
| Diamond Foundry, Inc. Series C | 3/15/21 | $1,357,824 |
| Enevate Corp. Series E | 1/29/21 | $3,943,236 |
| Enevate Corp. 0% 1/29/23 | 1/29/21 | $1,514,278 |
| GoBrands, Inc. Series G | 3/2/21 | $1,313,513 |
| Instacart, Inc. Series I | 2/26/21 | $1,361,250 |
| Nuvia, Inc. Series B | 3/16/21 | $210,270 |
| Pine Labs Private Ltd. | 6/30/21 | $489,938 |
| Pine Labs Private Ltd. Series 1 | 6/30/21 | $1,170,780 |
| Pine Labs Private Ltd. Series A | 6/30/21 | $292,695 |
| Pine Labs Private Ltd. Series B | 6/30/21 | $318,422 |
| Pine Labs Private Ltd. Series B2 | 6/30/21 | $257,273 |
| Pine Labs Private Ltd. Series C | 6/30/21 | $478,752 |
| Pine Labs Private Ltd. Series C1 | 6/30/21 | $101,045 |
| Pine Labs Private Ltd. Series D | 6/30/21 | $107,757 |
| Reddit, Inc. Series D | 2/4/19 | $735,166 |
| Reddit, Inc. Series E | 5/18/21 | $84,184 |
| Relativity Space, Inc. Series E | 5/27/21 | $3,979,427 |
| SiMa.ai Series B | 5/10/21 | $435,829 |
| Tenstorrent, Inc. Series C1 | 4/23/21 | $142,690 |
| Tenstorrent, Inc. 0% | 4/23/21 | $130,000 |
| Xsight Labs Ltd. Series D | 2/16/21 | $302,249 |
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| Fidelity Cash Central Fund | $886 |
| Fidelity Securities Lending Cash Central Fund | 7,163 |
| Total | $8,049 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable. Amount for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Fund | Value, beginning of period | Purchases | Sales Proceeds | Realized Gain/Loss | Change in Unrealized appreciation (depreciation) | Value, end of period | % ownership, end of period |
| Fidelity Cash Central Fund 0.06% | $11,354,108 | $113,770,152 | $111,898,292 | $113 | $-- | $13,226,081 | 0.0% |
| Fidelity Securities Lending Cash Central Fund 0.06% | -- | 49,715,048 | 49,290,048 | -- | -- | 425,000 | 0.0% |
| Total | $11,354,108 | $163,485,200 | $161,188,340 | $113 | $-- | $13,651,081 | |
Investment Valuation
The following is a summary of the inputs used, as of June 30, 2021, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| Investments in Securities: | | | | |
| Common Stocks | $1,662,243,960 | $1,635,661,089 | $24,391,457 | $2,191,414 |
| Preferred Stocks | 19,682,404 | 210,272 | -- | 19,472,132 |
| Money Market Funds | 13,651,081 | 13,651,081 | -- | -- |
| Preferred Securities | 1,644,278 | -- | -- | 1,644,278 |
| Total Investments in Securities: | $1,697,221,723 | $1,649,522,442 | $24,391,457 | $23,307,824 |
| Net unrealized appreciation on unfunded commitments | $848,330 | $-- | $848,330 | $-- |
The following is a reconciliation of Investments in Securities for which Level 3 inputs were used in determining value:
| Investments in Securities: | |
| Convertible Preferred Stocks | |
| Beginning Balance | $6,486,891 |
| Total Realized Gain (Loss) | -- |
| Total Unrealized Gain (Loss) | (457,526) |
| Cost of Purchases | 16,480,556 |
| Proceeds of Sales | -- |
| Amortization/Accretion | -- |
| Transfers in to Level 3 | -- |
| Transfers out of Level 3 | (3,037,789) |
| Ending Balance | $19,472,132 |
| The change in unrealized gain (loss) for the period attributable to Level 3 securities held at June 30, 2021 | $(457,526) |
| Other Investments in Securities | |
| Beginning Balance | $4,931,860 |
| Total Realized Gain (Loss) | -- |
| Total Unrealized Gain (Loss) | (3,230,384) |
| Cost of Purchases | 2,134,216 |
| Proceeds of Sales | -- |
| Amortization/Accretion | -- |
| Transfers in to Level 3 | -- |
| Transfers out of Level 3 | -- |
| Ending Balance | $3,835,692 |
| The change in unrealized gain (loss) for the period attributable to Level 3 securities held at June 30, 2021 | $(3,230,384) |
The information used in the above reconciliations represents fiscal year to date activity for any Investments in Securities identified as using Level 3 inputs at either the beginning or the end of the current fiscal period. Cost of purchases and proceeds of sales may include securities received and/or delivered through in-kind transactions. Transfers in or out of Level 3 represent the beginning value of any Security or Instrument where a change in the pricing level occurred from the beginning to the end of the period. The cost of purchases and the proceeds of sales may include securities received or delivered through corporate actions or exchanges. Realized and unrealized gains (losses) disclosed in the reconciliations are included in Net Gain (Loss) on the Fund's Statement of Operations.
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| | | June 30, 2021 (Unaudited) |
| Assets | | |
Investment in securities, at value (including securities loaned of $398,410) — See accompanying schedule:
Unaffiliated issuers (cost $867,075,358) | $1,683,570,642 | |
| Fidelity Central Funds (cost $13,651,081) | 13,651,081 | |
| Total Investment in Securities (cost $880,726,439) | | $1,697,221,723 |
| Foreign currency held at value (cost $34,753) | | 34,751 |
| Unrealized appreciation on unfunded commitments | | 865,196 |
| Receivable for fund shares sold | | 2,158,016 |
| Dividends receivable | | 254,286 |
| Distributions receivable from Fidelity Central Funds | | 203 |
| Prepaid expenses | | 3,535 |
| Other receivables | | 15,331 |
| Total assets | | 1,700,553,041 |
| Liabilities | | |
| Payable for investments purchased | $3,785,061 | |
| Unrealized depreciation on unfunded commitments | 16,866 | |
| Payable for fund shares redeemed | 28,004 | |
| Accrued management fee | 707,872 | |
| Other affiliated payables | 213,820 | |
| Other payables and accrued expenses | 749,127 | |
| Collateral on securities loaned | 425,000 | |
| Total liabilities | | 5,925,750 |
| Net Assets | | $1,694,627,291 |
| Net Assets consist of: | | |
| Paid in capital | | $719,353,955 |
| Total accumulated earnings (loss) | | 975,273,336 |
| Net Assets | | $1,694,627,291 |
| Net Asset Value and Maximum Offering Price | | |
| Initial Class: | | |
| Net Asset Value, offering price and redemption price per share ($292,963,184 ÷ 9,060,587 shares) | | $32.33 |
| Investor Class: | | |
| Net Asset Value, offering price and redemption price per share ($1,401,664,107 ÷ 44,086,126 shares) | | $31.79 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| | | Six months ended June 30, 2021 (Unaudited) |
| Investment Income | | |
| Dividends | | $4,375,790 |
| Income from Fidelity Central Funds (including $7,163 from security lending) | | 8,049 |
| Total income | | 4,383,839 |
| Expenses | | |
| Management fee | $4,261,299 | |
| Transfer agent fees | 1,029,516 | |
| Accounting fees | 251,278 | |
| Custodian fees and expenses | 16,644 | |
| Independent trustees' fees and expenses | 2,723 | |
| Audit | 21,406 | |
| Legal | 3,342 | |
| Interest | 1,745 | |
| Miscellaneous | 4,412 | |
| Total expenses before reductions | 5,592,365 | |
| Expense reductions | (28,700) | |
| Total expenses after reductions | | 5,563,665 |
| Net investment income (loss) | | (1,179,826) |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 162,568,493 | |
| Fidelity Central Funds | 113 | |
| Foreign currency transactions | 231 | |
| Total net realized gain (loss) | | 162,568,837 |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated issuers (net of decrease in deferred foreign taxes of $234,493) | 17,086,302 | |
| Unfunded commitments | 848,330 | |
| Assets and liabilities in foreign currencies | (897) | |
| Total change in net unrealized appreciation (depreciation) | | 17,933,735 |
| Net gain (loss) | | 180,502,572 |
| Net increase (decrease) in net assets resulting from operations | | $179,322,746 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| | Six months ended June 30, 2021 (Unaudited) | Year ended December 31, 2020 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $(1,179,826) | $(1,098,759) |
| Net realized gain (loss) | 162,568,837 | 145,401,433 |
| Change in net unrealized appreciation (depreciation) | 17,933,735 | 492,541,584 |
| Net increase (decrease) in net assets resulting from operations | 179,322,746 | 636,844,258 |
| Distributions to shareholders | (116,942,367) | (22,697,446) |
| Share transactions - net increase (decrease) | (19,811,746) | 129,732,809 |
| Total increase (decrease) in net assets | 42,568,633 | 743,879,621 |
| Net Assets | | |
| Beginning of period | 1,652,058,658 | 908,179,037 |
| End of period | $1,694,627,291 | $1,652,058,658 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
VIP Technology Portfolio Initial Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $30.99 | $19.08 | $15.76 | $18.43 | $12.76 | $11.91 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | (.01) | (.01) | .09 | .05 | .01 | .02 |
| Net realized and unrealized gain (loss) | 3.56 | 12.36 | 6.72 | (1.34) | 6.41 | 1.22 |
| Total from investment operations | 3.55 | 12.35 | 6.81 | (1.29) | 6.42 | 1.24 |
| Distributions from net investment income | – | (.02) | (.08) | – | –B | (.02) |
| Distributions from net realized gain | (2.21) | (.42) | (3.42) | (1.38) | (.75) | (.37) |
| Total distributions | (2.21) | (.44) | (3.49)C | (1.38) | (.75) | (.39) |
| Redemption fees added to paid in capitalA | – | – | – | – | –B | –B |
| Net asset value, end of period | $32.33 | $30.99 | $19.08 | $15.76 | $18.43 | $12.76 |
| Total ReturnD,E,F | 11.95% | 64.95% | 51.32% | (7.62)% | 50.78% | 11.37% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .63%I | .63% | .65% | .66% | .68% | .70% |
| Expenses net of fee waivers, if any | .63%I | .63% | .65% | .66% | .68% | .70% |
| Expenses net of all reductions | .62%I | .63% | .64% | .64% | .67% | .69% |
| Net investment income (loss) | (.08)%I | (.03)% | .52% | .27% | .03% | .17% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $292,963 | $286,967 | $175,680 | $123,867 | $154,984 | $75,480 |
| Portfolio turnover rateJ | 40%I | 52% | 20% | 139% | 68% | 67% |
A Calculated based on average shares outstanding during the period.
B Amount represents less than $.005 per share.
C Total distributions per share do not sum due to rounding.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Technology Portfolio Investor Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $30.51 | $18.80 | $15.57 | $18.23 | $12.63 | $11.79 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | (.02) | (.02) | .07 | .04 | (.01) | .01 |
| Net realized and unrealized gain (loss) | 3.50 | 12.16 | 6.64 | (1.34) | 6.35 | 1.21 |
| Total from investment operations | 3.48 | 12.14 | 6.71 | (1.30) | 6.34 | 1.22 |
| Distributions from net investment income | – | (.02) | (.06) | – | –B | (.01) |
| Distributions from net realized gain | (2.20) | (.41) | (3.42) | (1.36) | (.74) | (.37) |
| Total distributions | (2.20) | (.43) | (3.48) | (1.36) | (.74) | (.38) |
| Redemption fees added to paid in capitalA | – | – | – | – | –B | –B |
| Net asset value, end of period | $31.79 | $30.51 | $18.80 | $15.57 | $18.23 | $12.63 |
| Total ReturnC,D,E | 11.93% | 64.76% | 51.26% | (7.73)% | 50.67% | 11.34% |
| Ratios to Average Net AssetsF,G | | | | | | |
| Expenses before reductions | .70%H | .71% | .73% | .74% | .76% | .78% |
| Expenses net of fee waivers, if any | .70%H | .71% | .73% | .73% | .76% | .78% |
| Expenses net of all reductions | .70%H | .71% | .72% | .72% | .75% | .77% |
| Net investment income (loss) | (.16)%H | (.11)% | .44% | .20% | (.05)% | .09% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $1,401,664 | $1,365,091 | $732,499 | $488,235 | $537,227 | $254,287 |
| Portfolio turnover rateI | 40%H | 52% | 20% | 139% | 68% | 67% |
A Calculated based on average shares outstanding during the period.
B Amount represents less than $.005 per share.
C Total returns for periods of less than one year are not annualized.
D Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
E Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
F Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
H Annualized
I Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements (Unaudited)
For the period ended June 30, 2021
1. Organization.
VIP Technology Portfolio (the Fund) is a non-diversified fund of Variable Insurance Products Fund IV (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the investing fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense Ratio(a) |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% to .01% |
(a) Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds which contain the significant accounting policies (including investment valuation policies) of those funds, and are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events, changes in interest rates and credit quality. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, ETFs and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy. Securities, including private placements or other restricted securities, for which observable inputs are not available are valued using alternate valuation approaches, including the market approach, the income approach and cost approach, and are categorized as Level 3 in the hierarchy. The market approach considers factors including the price of recent investments in the same or a similar security or financial metrics of comparable securities. The income approach considers factors including expected future cash flows, security specific risks and corresponding discount rates. The cost approach considers factors including the value of the security's underlying assets and liabilities.
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. Preferred securities are valued by pricing vendors who utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
The following provides information on Level 3 securities held by the Fund that were valued at period end based on unobservable inputs. These amounts exclude valuations provided by a broker.
| Asset Type | Fair Value | Valuation Technique(s) | Unobservable Input | Amount or Range/Weighted Average | Impact to Valuation from an Increase in Input(a) |
| Equities | $ 21,663,546 | Market comparable | Enterprise value/Sales multiple (EV/S) | 2.2 – 2.7 / 2.6 | Increase |
| | | | Discount rate | 32.5% - 57.1% / 51.2% | Decrease |
| | | | Discount for lack of marketability | 15.0% | Decrease |
| | | | Price/Earnings multiple (P/E) | 10.7 | Increase |
| | | Recovery value | Recovery value | 0.0% | Increase |
| | | Market approach | Transaction price | $1.11 - $372.86 / $111.41 | Increase |
| | | | Discount rate | 75.0% | Decrease |
| Preferred Securities | $ 1,644,278 | Market approach | Transaction price | $100.00 | Increase |
(a) Represents the directional change in the fair value of the Level 3 investments that could have resulted from an increase in the corresponding input as of period end. A decrease to the unobservable input would have had the opposite effect. Significant changes in these inputs may have resulted in a significantly higher or lower fair value measurement at period end.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of June 30, 2021, as well as a roll forward of Level 3 investments, is included at the end of the Fund's Schedule of Investments.
Foreign Currency. Certain Funds may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Gains and losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received, and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost and include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of a fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of a fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred, as applicable. Certain expense reductions may also differ by class, if applicable. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests. The Fund is subject to a tax imposed on capital gains by certain countries in which it invests. An estimated deferred tax liability for net unrealized appreciation on the applicable securities is included in Other payables and accrued expenses on the Statement of Assets & Liabilities.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, passive foreign investment companies (PFIC), capital loss carryforwards and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $824,913,688 |
| Gross unrealized depreciation | (8,112,282) |
| Net unrealized appreciation (depreciation) | $816,801,406 |
| Tax cost | $881,268,647 |
Restricted Securities (including Private Placements). Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities held at period end is included at the end of the Schedule of Investments, if applicable.
Special Purpose Acquisition Companies. Funds may invest in stock, warrants, and other securities of special purpose acquisition companies (SPACs) or similar special purpose entities. A SPAC is a publicly traded company that raises investment capital via an initial public offering (IPO) for the purpose of acquiring the equity securities of one or more existing companies via merger, business combination, acquisition or other similar transactions within a designated time frame.
Private Investment in Public Equity. Funds may acquire equity securities of an issuer through a private investment in a public equity (PIPE) transaction, including through commitments to purchase securities on a when-issued basis. A PIPE typically involves the purchase of securities directly from a publicly traded company in a private placement transaction. Securities purchased through PIPE transactions will be restricted from trading and considered illiquid until a resale registration statement for the shares is filed and declared effective.
At period end, the Fund had commitments to purchase when-issued securities through PIPE transactions with SPACs. The commitments are contingent upon the SPACs acquiring the securities of target companies. Unrealized appreciation (depreciation) on these commitments is separately presented in the Statements of Assets and Liabilities as Unrealized appreciation (depreciation) on unfunded commitments, and in the Statement of Operations as Change in unrealized appreciation (depreciation) on unfunded commitments.
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Technology Portfolio | 320,832,397 | 456,433,560 |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .23% during the period. The group fee rate is based upon the monthly average net assets of a group of registered investment companies with which the investment adviser has management contracts. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annualized management fee rate was .53% of the Fund's average net assets.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company LLC (FIIOC), an affiliate of the investment adviser, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class pays a fee for transfer agent services, typesetting and printing and mailing of shareholder reports, excluding mailing of proxy statements. For the period, transfer agent fees for each class were as follows:
| | Amount | % of Class-Level Average Net Assets(a) |
| Initial Class | $87,851 | .06 |
| Investor Class | 941,665 | .14 |
| | $1,029,516 | |
(a) Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. For the period, the fees were equivalent to the following annualized rates:
| | % of Average Net Assets |
| VIP Technology Portfolio | .03 |
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount |
| VIP Technology Portfolio | $4,273 |
Interfund Lending Program. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the Fund, along with other registered investment companies having management contracts with Fidelity Management & Research Company LLC (FMR), or other affiliated entities of FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from, or lend money to, other participating affiliated funds. At period end, there were no interfund loans outstanding. Activity in this program during the period for which loans were outstanding was as follows:
| | Borrower or Lender | Average Loan Balance | Weighted Average Interest Rate | Interest Expense |
| VIP Technology Portfolio | Borrower | $7,690,640 | .31% | $1,745 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note and are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Technology Portfolio | 20,814,357 | 10,888,610 |
6. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro-rata portion of the line of credit, which are reflected in Miscellaneous expenses on the Statement of Operations, and are listed below. During the period, there were no borrowings on this line of credit.
| | Amount |
| VIP Technology Portfolio | $1,581 |
7. Security Lending.
Funds lend portfolio securities from time to time in order to earn additional income. Lending agents are used, including National Financial Services (NFS), an affiliate of the investment adviser. Pursuant to a securities lending agreement, NFS will receive a fee, which is capped at 9.9% of a fund's daily lending revenue, for its services as lending agent. A fund may lend securities to certain qualified borrowers, including NFS. On the settlement date of the loan, a fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of a fund and any additional required collateral is delivered to a fund on the next business day. A fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund may apply collateral received from the borrower against the obligation. A fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. Any loaned securities are identified as such in the Schedule of Investments, and the value of loaned securities and cash collateral at period end, as applicable, are presented in the Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Affiliated security lending activity, if any, was as follows:
| | Total Security Lending Fees Paid to NFS | Security Lending Income From Securities Loaned to NFS | Value of Securities Loaned to NFS at Period End |
| VIP Technology Portfolio | $760 | $– | $– |
8. Expense Reductions.
Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset expenses. This amount totaled $26,287 for the period.
In addition, during the period the investment adviser or an affiliate reimbursed and/or waived a portion of fund-level operating expenses in the amount of $2,413.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| | Six months ended
June 30, 2021 | Year ended
December 31, 2020 |
| VIP Technology Portfolio | | |
| Distributions to shareholders | | |
| Initial Class | $19,620,229 | $4,053,162 |
| Investor Class | 97,322,138 | 18,644,284 |
| Total | $116,942,367 | $22,697,446 |
10. Share Transactions.
Transactions for each class of shares were as follows and may contain in-kind transactions:
| | Shares | Shares | Dollars | Dollars |
| | Six months ended June 30, 2021 | Year ended December 31, 2020 | Six months ended June 30, 2021 | Year ended December 31, 2020 |
| VIP Technology Portfolio | | | | |
| Initial Class | | | | |
| Shares sold | 636,252 | 3,374,962 | $19,384,761 | $73,004,745 |
| Reinvestment of distributions | 650,107 | 142,507 | 19,620,229 | 4,053,162 |
| Shares redeemed | (1,486,876) | (3,463,586) | (44,117,583) | (73,265,972) |
| Net increase (decrease) | (200,517) | 53,883 | $(5,112,593) | $3,791,935 |
| Investor Class | | | | |
| Shares sold | 1,247,872 | 14,192,097 | $37,790,031 | $306,661,313 |
| Reinvestment of distributions | 3,279,048 | 663,655 | 97,322,138 | 18,644,284 |
| Shares redeemed | (5,179,751) | (9,084,249) | (149,811,322) | (199,364,723) |
| Net increase (decrease) | (652,831) | 5,771,503 | $(14,699,153) | $125,940,874 |
11. Other.
Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.
At the end of the period, the investment adviser or its affiliates were owners of record of more than 10% of the outstanding shares as follows:
| Fund | Affiliated % |
| VIP Technology Portfolio | 99% |
12. Coronavirus (COVID-19) Pandemic.
An outbreak of COVID-19 first detected in China during December 2019 has since spread globally and was declared a pandemic by the World Health Organization during March 2020. Developments that disrupt global economies and financial markets, such as the COVID-19 pandemic, may magnify factors that affect the Fund's performance.
Shareholder Expense Example
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2021 to June 30, 2021).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
January 1, 2021 | Ending
Account Value
June 30, 2021 | Expenses Paid
During Period-B
January 1, 2021
to June 30, 2021 |
| VIP Technology Portfolio | | | | |
| Initial Class | .63% | | | |
| Actual | | $1,000.00 | $1,119.50 | $3.31 |
| Hypothetical-C | | $1,000.00 | $1,021.67 | $3.16 |
| Investor Class | .70% | | | |
| Actual | | $1,000.00 | $1,119.30 | $3.68 |
| Hypothetical-C | | $1,000.00 | $1,021.32 | $3.51 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
C 5% return per year before expenses
Board Approval of Investment Advisory Contracts and Management Fees
VIP Technology Portfolio
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
Approval of Stub Period Continuation. At its January 2021 meeting, the Board of Trustees voted to continue the fund's management contract with FMR, and the sub-advisory agreements and sub-subadvisory agreements, in each case, where applicable (together, the Advisory Contracts), without modification, for four months from February 1, 2021 through May 31, 2021, in connection with changes to the Board's meeting calendar. The Board considered that the approval of the fund's Advisory Contracts will not result in any changes in (i) the investment process or strategies employed in the management of the fund's assets; (ii) the fees and expenses paid by shareholders; (iii) the nature, extent or quality of services provided under the fund's Advisory Contracts; or (iv) the day-to-day management of the fund or the persons primarily responsible for such management. The Board also considered that since its last approval of the fund's Advisory Contracts, FMR had provided additional information on the fund in support of the annual contract renewal process, including competitive analyses on total expenses and management fees and in-depth reviews of fund performance and fund profitability information. The Board also considered the findings of certain ad hoc committees that had been previously formed to discuss matters relevant to all of the Fidelity funds, including economies of scale, fall-out benefits and retail vs. institutional funds. The Board concluded that the fund's Advisory Contracts are fair and reasonable, and that the fund's Advisory Contracts should be renewed, without modification, through May 31, 2021, with the understanding that the Board will consider the annual renewal for a full one year period in May 2021.
At its May 2021 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process. The Board also considered Fidelity's investments in business continuity planning, and its success in continuously providing services to the fund notwithstanding the severe disruptions caused by the COVID-19 pandemic.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
The Board noted that, in the past, it and the boards of certain other Fidelity funds had formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest, and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and ETFs with innovative structures, strategies and pricing and making other enhancements to meet client needs; (iv) launching new share classes of existing funds; (v) eliminating purchase minimums and broadening eligibility requirements for certain funds and share classes; (vi) approving the reduction in the holding period for the Class C to Class A conversion policy; (vii) reducing management fees and total expenses for certain target date funds and classes and index funds; (viii) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (ix) rationalizing product lines and gaining increased efficiencies from fund mergers, liquidations, and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (xi) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including retirement income goals.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history. The Board noted that there were portfolio management changes for the fund in July 2018, December 2018, July 2020, and January 2021. The Board will continue to monitor closely the fund's performance, taking into account the portfolio management changes.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index). In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative total return information for the fund and an appropriate benchmark index for the most recent one-, three-, and five-year periods ended September 30, 2020, as shown below.
VIP Technology Portfolio
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable investment mandates. For this purpose, all sector focused equity variable annuity funds are grouped in the same mapped group. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods ended September 30 (June 30 for periods ended 2019 and 2018 and December 31 for periods prior to 2018) shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates (i.e., sector equities), regardless of whether their management fee structures also are comparable. Funds with comparable management fee structures have similar management fee contractual arrangements (
e.g., flat rate charged for advisory services, all-inclusive fee rate,
etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and was considered by the Board.
VIP Technology Portfolio
The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for the 12-month period ended September 30, 2020.
The Board noted that, in the past, it and the boards of other Fidelity funds had formed an ad hoc Committee on Group Fee to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of a representative class of the fund compared to competitive fund median expenses. The fund's representative class is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure (SLTG). The Board also considered a total expense ASPG comparison for the representative class, which focuses on the total expenses of the representative class relative to a subset of non-Fidelity funds within the total expense SLTG. The total expense ASPG is limited to 15 larger and 15 smaller classes in fund average assets for a total of 30 classes, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
The Board noted that the total expense ratio of the Initial Class ranked below the SLTG competitive median and below the ASPG competitive median for the 12-month period ended September 30, 2020.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board also considered that in 2019 a joint ad hoc committee created by it and the boards of other Fidelity funds evaluated potential fall-out benefits (PFOB Committee). The Board noted that it considered the PFOB Committee's findings in connection with its consideration of the renewal of the Advisory Contracts.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund, including the conclusions of the PFOB Committee, and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total "group assets" increase, and for higher group fee rates as total "group assets" decrease ("group assets" as defined in the management contract). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board further considered that Fidelity agreed to impose a temporary fee waiver in the form of additional breakpoints to the current breakpoint schedule. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as "group assets" increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) consideration of expanding the use of performance fees for additional funds; (iii) Fidelity's pricing philosophy compared to competitors; (iv) metrics for evaluating index fund and ETF performance and information about ETF trading characteristics; (v) the methodology with respect to evaluating competitive fund data and peer group classifications and fee and expense comparisons; (vi) the expense structures for different funds and classes and information about the differences between various expense structures; (vii) group fee breakpoints; (viii) information regarding other accounts managed by Fidelity and sub-advisory arrangements; and (ix) Fidelity's philosophies and strategies for evaluating funds and classes with lower or declining asset levels.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Liquidity Risk Management Program
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program pursuant to the Liquidity Rule (the Program) effective December 1, 2018. The Program is reasonably designed to assess and manage the Fund’s liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund’s Board of Trustees (the Board) has designated the Fund’s investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund’s liquidity risk based on a variety of factors including (1) the Fund’s investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) in the case of exchange-traded funds, certain additional factors including the effect of the Fund’s prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund’s portfolio, as applicable.
In accordance with the Program, each of the Fund’s portfolio investments is classified into one of four liquidity categories described below based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments – cash or convertible to cash within three business days or less
- Moderately liquid investments – convertible to cash in three to seven calendar days
- Less liquid investments – can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments – cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund’s illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund’s net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund’s Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the annual period from December 1, 2019 through November 30, 2020. The report concluded that the Program has been implemented and is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk.
VTECIC-SANN-0821
1.817388.116
Fidelity® Variable Insurance Products:
Energy Portfolio
Semi-Annual Report
June 30, 2021
Contents
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov.
You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity® Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
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. © 2021 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Note to Shareholders:
Early in 2020, the outbreak and spread of a new coronavirus emerged as a public health emergency that had a major influence on financial markets, primarily based on its impact on the global economy and the outlook for corporate earnings. The virus causes a respiratory disease known as COVID-19. On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a pandemic, citing sustained risk of further global spread.
In the weeks following, as the crisis worsened, we witnessed an escalating human tragedy with wide-scale social and economic consequences from coronavirus-containment measures. The outbreak of COVID-19 prompted a number of measures to limit the spread, including travel and border restrictions, quarantines, and restrictions on large gatherings. In turn, these resulted in lower consumer activity, diminished demand for a wide range of products and services, disruption in manufacturing and supply chains, and – given the wide variability in outcomes regarding the outbreak – significant market uncertainty and volatility. Amid the turmoil, global governments and central banks took unprecedented action to help support consumers, businesses, and the broader economies, and to limit disruption to financial systems.
The situation continues to unfold, and the extent and duration of its impact on financial markets and the economy remain highly uncertain. Extreme events such as the coronavirus crisis are “exogenous shocks” that can have significant adverse effects on mutual funds and their investments. Although multiple asset classes may be affected by market disruption, the duration and impact may not be the same for all types of assets.
Fidelity is committed to helping you stay informed amid news about COVID-19 and during increased market volatility, and we’re taking extra steps to be responsive to customer needs. We encourage you to visit our websites, where we offer ongoing updates, commentary, and analysis on the markets and our funds.
Investment Summary (Unaudited)
Top Ten Stocks as of June 30, 2021
| | % of fund's net assets |
| Exxon Mobil Corp. | 14.2 |
| Chevron Corp. | 9.7 |
| Royal Dutch Shell PLC Class B sponsored ADR | 5.8 |
| Cheniere Energy, Inc. | 5.4 |
| Pioneer Natural Resources Co. | 4.5 |
| ConocoPhillips Co. | 3.8 |
| BP PLC sponsored ADR | 3.4 |
| Canadian Natural Resources Ltd. | 3.3 |
| Devon Energy Corp. | 3.2 |
| EOG Resources, Inc. | 3.2 |
| | 56.5 |
Top Industries (% of fund's net assets)
| As of June 30, 2021 |
| | Oil, Gas & Consumable Fuels | 87.5% |
| | Energy Equipment & Services | 9.0% |
| | Independent Power and Renewable Electricity Producers | 2.1% |
| | Food Products | 0.5% |
| | All Others* | 0.9% |
* Includes short-term investments and net other assets (liabilities).
Schedule of Investments June 30, 2021 (Unaudited)
Showing Percentage of Net Assets
| Common Stocks - 99.1% | | | |
| | | Shares | Value |
| Energy Equipment & Services - 9.0% | | | |
| Oil & Gas Drilling - 0.8% | | | |
| Nabors Industries Ltd. (a) | | 7,480 | $854,515 |
| Nabors Industries Ltd. warrants 6/11/26 (a) | | 2,992 | 29,920 |
| Odfjell Drilling Ltd. (a) | | 439,010 | 1,220,641 |
| Shelf Drilling Ltd. (a)(b) | | 334,023 | 196,686 |
| | | | 2,301,762 |
| Oil & Gas Equipment & Services - 8.2% | | | |
| Baker Hughes Co. Class A | | 270,300 | 6,181,761 |
| Cactus, Inc. | | 21,300 | 782,136 |
| Championx Corp. (a) | | 43,370 | 1,112,441 |
| Nextier Oilfield Solutions, Inc. (a) | | 476,270 | 2,267,045 |
| Oceaneering International, Inc. (a) | | 118,810 | 1,849,872 |
| ProPetro Holding Corp. (a) | | 272,380 | 2,495,001 |
| Schlumberger Ltd. | | 121,689 | 3,895,265 |
| Technip Energies NV (a) | | 94,742 | 1,298,654 |
| TechnipFMC PLC (a) | | 474,600 | 4,295,130 |
| | | | 24,177,305 |
|
| TOTAL ENERGY EQUIPMENT & SERVICES | | | 26,479,067 |
|
| Food Products - 0.5% | | | |
| Agricultural Products - 0.5% | | | |
| Darling Ingredients, Inc. (a) | | 22,780 | 1,537,650 |
| Independent Power and Renewable Electricity Producers - 2.1% | | | |
| Independent Power Producers & Energy Traders - 2.1% | | | |
| The AES Corp. | | 15,040 | 392,093 |
| Vistra Corp. | | 300,910 | 5,581,881 |
| | | | 5,973,974 |
| Oil, Gas & Consumable Fuels - 87.5% | | | |
| Coal & Consumable Fuels - 0.2% | | | |
| Enviva Partners LP | | 11,370 | 595,902 |
| Integrated Oil & Gas - 37.2% | | | |
| BP PLC sponsored ADR | | 379,140 | 10,016,879 |
| Chevron Corp. | | 271,206 | 28,406,116 |
| Exxon Mobil Corp. | | 659,528 | 41,603,025 |
| Occidental Petroleum Corp. | | 203,110 | 6,351,250 |
| Occidental Petroleum Corp. warrants 8/3/27 (a) | | 11,000 | 153,010 |
| Royal Dutch Shell PLC Class B sponsored ADR | | 435,640 | 16,915,901 |
| Suncor Energy, Inc. | | 226,460 | 5,424,006 |
| Total SA sponsored ADR | | 6,320 | 286,043 |
| | | | 109,156,230 |
| Oil & Gas Exploration & Production - 32.4% | | | |
| Antero Resources Corp. (a) | | 194,980 | 2,930,549 |
| APA Corp. | | 393,910 | 8,520,273 |
| Callon Petroleum Co. (a)(c) | | 18,145 | 1,046,785 |
| Canadian Natural Resources Ltd. | | 264,060 | 9,585,915 |
| Cimarex Energy Co. | | 50,920 | 3,689,154 |
| ConocoPhillips Co. | | 184,569 | 11,240,252 |
| Devon Energy Corp. | | 324,030 | 9,458,436 |
| Diamondback Energy, Inc. | | 26,680 | 2,504,985 |
| EOG Resources, Inc. | | 113,042 | 9,432,224 |
| Extraction Oil & Gas, Inc. (a) | | 15,800 | 867,578 |
| Hess Corp. | | 78,920 | 6,891,294 |
| Magnolia Oil & Gas Corp. Class A (a) | | 114,140 | 1,784,008 |
| National Energy Services Reunited Corp. (a) | | 234,020 | 3,334,785 |
| Northern Oil & Gas, Inc. | | 32,230 | 669,417 |
| Ovintiv, Inc. | | 34,600 | 1,088,862 |
| PDC Energy, Inc. | | 161,194 | 7,381,073 |
| Pioneer Natural Resources Co. | | 81,404 | 13,229,778 |
| SM Energy Co. | | 29,700 | 731,511 |
| Viper Energy Partners LP | | 48,730 | 917,586 |
| | | | 95,304,465 |
| Oil & Gas Refining & Marketing - 8.8% | | | |
| Marathon Petroleum Corp. | | 147,166 | 8,891,770 |
| Phillips 66 Co. | | 89,382 | 7,670,763 |
| Renewable Energy Group, Inc. (a) | | 9,320 | 581,009 |
| Valero Energy Corp. | | 111,050 | 8,670,784 |
| | | | 25,814,326 |
| Oil & Gas Storage & Transport - 8.9% | | | |
| Cheniere Energy, Inc. (a) | | 181,850 | 15,773,669 |
| Golar LNG Ltd. (a) | | 95,580 | 1,266,435 |
| Targa Resources Corp. | | 68,100 | 3,027,045 |
| Teekay LNG Partners LP | | 87,000 | 1,312,830 |
| The Williams Companies, Inc. | | 181,330 | 4,814,312 |
| | | | 26,194,291 |
|
| TOTAL OIL, GAS & CONSUMABLE FUELS | | | 257,065,214 |
|
| TOTAL COMMON STOCKS | | | |
| (Cost $240,725,374) | | | 291,055,905 |
|
| Money Market Funds - 1.4% | | | |
| Fidelity Cash Central Fund 0.06% (d) | | 3,581,115 | 3,581,832 |
| Fidelity Securities Lending Cash Central Fund 0.06% (d)(e) | | 711,705 | 711,776 |
| TOTAL MONEY MARKET FUNDS | | | |
| (Cost $4,293,608) | | | 4,293,608 |
| TOTAL INVESTMENT IN SECURITIES - 100.5% | | | |
| (Cost $245,018,982) | | | 295,349,513 |
| NET OTHER ASSETS (LIABILITIES) - (0.5)% | | | (1,550,111) |
| NET ASSETS - 100% | | | $293,799,402 |
Legend
(a) Non-income producing
(b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities amounted to $196,686 or 0.1% of net assets.
(c) Security or a portion of the security is on loan at period end.
(d) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
(e) Investment made with cash collateral received from securities on loan.
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| Fidelity Cash Central Fund | $773 |
| Fidelity Securities Lending Cash Central Fund | 916 |
| Total | $1,689 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable. Amount for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Fund | Value, beginning of period | Purchases | Sales Proceeds | Realized Gain/Loss | Change in Unrealized appreciation (depreciation) | Value, end of period | % ownership, end of period |
| Fidelity Cash Central Fund 0.06% | $180,256 | $65,020,912 | $61,619,270 | $(66) | $-- | $3,581,832 | 0.0% |
| Fidelity Securities Lending Cash Central Fund 0.06% | 187,133 | 5,672,463 | 5,147,820 | -- | -- | 711,776 | 0.0% |
| Total | $367,389 | $70,693,375 | $66,767,090 | $(66) | $-- | $4,293,608 | |
Investment Valuation
The following is a summary of the inputs used, as of June 30, 2021, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| Investments in Securities: | | | | |
| Common Stocks | $291,055,905 | $291,055,905 | $-- | $-- |
| Money Market Funds | 4,293,608 | 4,293,608 | -- | -- |
| Total Investments in Securities: | $295,349,513 | $295,349,513 | $-- | $-- |
Other Information
Distribution of investments by country or territory of incorporation, as a percentage of Total Net Assets, is as follows (Unaudited):
| United States of America | 79.6% |
| United Kingdom | 10.7% |
| Canada | 5.1% |
| Curacao | 1.3% |
| Bermuda | 1.1% |
| British Virgin Islands | 1.1% |
| Others (Individually Less Than 1%) | 1.1% |
| | 100.0% |
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| | | June 30, 2021 (Unaudited) |
| Assets | | |
Investment in securities, at value (including securities loaned of $715,356) — See accompanying schedule:
Unaffiliated issuers (cost $240,725,374) | $291,055,905 | |
| Fidelity Central Funds (cost $4,293,608) | 4,293,608 | |
| Total Investment in Securities (cost $245,018,982) | | $295,349,513 |
| Foreign currency held at value (cost $38) | | 37 |
| Receivable for investments sold | | 656,966 |
| Receivable for fund shares sold | | 657,598 |
| Dividends receivable | | 194,044 |
| Distributions receivable from Fidelity Central Funds | | 170 |
| Prepaid expenses | | 1,221 |
| Other receivables | | 14,107 |
| Total assets | | 296,873,656 |
| Liabilities | | |
| Payable to custodian bank | $1 | |
| Payable for investments purchased | 1,878,963 | |
| Payable for fund shares redeemed | 276,215 | |
| Accrued management fee | 128,598 | |
| Distribution and service plan fees payable | 23,303 | |
| Other affiliated payables | 34,880 | |
| Other payables and accrued expenses | 22,394 | |
| Collateral on securities loaned | 709,900 | |
| Total liabilities | | 3,074,254 |
| Net Assets | | $293,799,402 |
| Net Assets consist of: | | |
| Paid in capital | | $347,856,378 |
| Total accumulated earnings (loss) | | (54,056,976) |
| Net Assets | | $293,799,402 |
| Net Asset Value and Maximum Offering Price | | |
| Initial Class: | | |
| Net Asset Value, offering price and redemption price per share ($30,906,159 ÷ 2,075,493 shares) | | $14.89 |
| Service Class 2: | | |
| Net Asset Value, offering price and redemption price per share ($109,735,153 ÷ 7,409,147 shares) | | $14.81 |
| Investor Class: | | |
| Net Asset Value, offering price and redemption price per share ($153,158,090 ÷ 10,308,893 shares) | | $14.86 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| | | Six months ended June 30, 2021 (Unaudited) |
| Investment Income | | |
| Dividends | | $3,958,410 |
| Special dividends | | 1,007,263 |
| Income from Fidelity Central Funds (including $916 from security lending) | | 1,689 |
| Total income | | 4,967,362 |
| Expenses | | |
| Management fee | $620,933 | |
| Transfer agent fees | 120,396 | |
| Distribution and service plan fees | 117,184 | |
| Accounting fees | 45,920 | |
| Custodian fees and expenses | 8,213 | |
| Independent trustees' fees and expenses | 349 | |
| Audit | 21,250 | |
| Legal | 212 | |
| Miscellaneous | 523 | |
| Total expenses before reductions | 934,980 | |
| Expense reductions | (14,070) | |
| Total expenses after reductions | | 920,910 |
| Net investment income (loss) | | 4,046,452 |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | (2,275,617) | |
| Fidelity Central Funds | (66) | |
| Foreign currency transactions | 800 | |
| Total net realized gain (loss) | | (2,274,883) |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 71,033,804 | |
| Assets and liabilities in foreign currencies | (700) | |
| Total change in net unrealized appreciation (depreciation) | | 71,033,104 |
| Net gain (loss) | | 68,758,221 |
| Net increase (decrease) in net assets resulting from operations | | $72,804,673 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| | Six months ended June 30, 2021 (Unaudited) | Year ended December 31, 2020 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $4,046,452 | $5,155,651 |
| Net realized gain (loss) | (2,274,883) | (25,245,460) |
| Change in net unrealized appreciation (depreciation) | 71,033,104 | (39,051,800) |
| Net increase (decrease) in net assets resulting from operations | 72,804,673 | (59,141,609) |
| Distributions to shareholders | (1,017,646) | (3,740,182) |
| Share transactions - net increase (decrease) | 70,422,160 | 17,968,607 |
| Total increase (decrease) in net assets | 142,209,187 | (44,913,184) |
| Net Assets | | |
| Beginning of period | 151,590,215 | 196,503,399 |
| End of period | $293,799,402 | $151,590,215 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
VIP Energy Portfolio Initial Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $10.41 | $15.91 | $14.78 | $19.86 | $20.72 | $15.57 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .24B | .41 | .29 | .22 | .32C | .13 |
| Net realized and unrealized gain (loss) | 4.31 | (5.62) | 1.18 | (5.09) | (.85) | 5.14 |
| Total from investment operations | 4.55 | (5.21) | 1.47 | (4.87) | (.53) | 5.27 |
| Distributions from net investment income | (.07) | (.29) | (.33) | (.19) | (.32) | (.12) |
| Distributions from net realized gain | – | – | (.01) | (.02) | (.01) | – |
| Total distributions | (.07) | (.29) | (.34) | (.21) | (.33) | (.12) |
| Redemption fees added to paid in capitalA | – | – | – | – | –D | –D |
| Net asset value, end of period | $14.89 | $10.41 | $15.91 | $14.78 | $19.86 | $20.72 |
| Total ReturnE,F,G | 43.87% | (32.76)% | 10.08% | (24.58)% | (2.47)% | 33.84% |
| Ratios to Average Net AssetsH,I | | | | | | |
| Expenses before reductions | .65%J | .69% | .67% | .67% | .69% | .68% |
| Expenses net of fee waivers, if any | .65%J | .69% | .67% | .67% | .68% | .68% |
| Expenses net of all reductions | .64%J | .68% | .66% | .66% | .67% | .67% |
| Net investment income (loss) | 3.53%B,J | 3.98% | 1.83% | 1.12% | 1.73%C | .71% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $30,906 | $16,336 | $27,957 | $28,999 | $43,633 | $63,955 |
| Portfolio turnover rateK | 37%J | 71% | 58% | 58% | 66% | 87% |
A Calculated based on average shares outstanding during the period.
B Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.06 per share. Such dividends are not annualized in the ratio of net investment income (loss) to average net assets. Excluding such non-recurring dividend(s) the ratio of net investment income (loss) to average net assets would have been 2.69%.
C Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.21 per share. Excluding such non-recurring dividend(s), the ratio of net investment income (loss) to average net assets would have been .62%.
D Amount represents less than $.005 per share.
E Total returns for periods of less than one year are not annualized.
F Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
G Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
H Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
J Annualized
K Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Energy Portfolio Service Class 2
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $10.37 | $15.84 | $14.71 | $19.75 | $20.62 | $15.51 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .22B | .37 | .25 | .17 | .27C | .08 |
| Net realized and unrealized gain (loss) | 4.28 | (5.58) | 1.18 | (5.05) | (.86) | 5.12 |
| Total from investment operations | 4.50 | (5.21) | 1.43 | (4.88) | (.59) | 5.20 |
| Distributions from net investment income | (.06) | (.26) | (.29) | (.14) | (.27) | (.09) |
| Distributions from net realized gain | – | – | (.01) | (.02) | (.01) | – |
| Total distributions | (.06) | (.26) | (.30) | (.16) | (.28) | (.09) |
| Redemption fees added to paid in capitalA | – | – | – | – | –D | –D |
| Net asset value, end of period | $14.81 | $10.37 | $15.84 | $14.71 | $19.75 | $20.62 |
| Total ReturnE,F,G | 43.60% | (32.88)% | 9.82% | (24.77)% | (2.78)% | 33.51% |
| Ratios to Average Net AssetsH,I | | | | | | |
| Expenses before reductions | .90%J | .94% | .92% | .92% | .94% | .93% |
| Expenses net of fee waivers, if any | .90%J | .94% | .92% | .92% | .93% | .93% |
| Expenses net of all reductions | .89%J | .93% | .91% | .91% | .93% | .92% |
| Net investment income (loss) | 3.29%B,J | 3.73% | 1.58% | .88% | 1.48%C | .47% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $109,735 | $64,986 | $90,208 | $90,093 | $128,346 | $150,744 |
| Portfolio turnover rateK | 37%J | 71% | 58% | 58% | 66% | 87% |
A Calculated based on average shares outstanding during the period.
B Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.06 per share. Such dividends are not annualized in the ratio of net investment income (loss) to average net assets. Excluding such non-recurring dividend(s) the ratio of net investment income (loss) to average net assets would have been 2.44%.
C Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.20 per share. Excluding such non-recurring dividend(s), the ratio of net investment income (loss) to average net assets would have been .37%.
D Amount represents less than $.005 per share.
E Total returns for periods of less than one year are not annualized.
F Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
G Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
H Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
J Annualized
K Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Energy Portfolio Investor Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $10.39 | $15.88 | $14.75 | $19.82 | $20.68 | $15.55 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .23B | .39 | .28 | .21 | .30C | .11 |
| Net realized and unrealized gain (loss) | 4.31 | (5.60) | 1.18 | (5.09) | (.85) | 5.13 |
| Total from investment operations | 4.54 | (5.21) | 1.46 | (4.88) | (.55) | 5.24 |
| Distributions from net investment income | (.07) | (.28) | (.32) | (.17) | (.30) | (.11) |
| Distributions from net realized gain | – | – | (.01) | (.02) | (.01) | – |
| Total distributions | (.07) | (.28) | (.33) | (.19) | (.31) | (.11) |
| Redemption fees added to paid in capitalA | – | – | – | – | –D | –D |
| Net asset value, end of period | $14.86 | $10.39 | $15.88 | $14.75 | $19.82 | $20.68 |
| Total ReturnE,F,G | 43.84% | (32.80)% | 9.98% | (24.65)% | (2.57)% | 33.70% |
| Ratios to Average Net AssetsH,I | | | | | | |
| Expenses before reductions | .72%J | .76% | .75% | .75% | .77% | .76% |
| Expenses net of fee waivers, if any | .72%J | .76% | .75% | .75% | .77% | .76% |
| Expenses net of all reductions | .71%J | .75% | .74% | .74% | .76% | .75% |
| Net investment income (loss) | 3.46%B,J | 3.90% | 1.75% | 1.05% | 1.65%C | .63% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $153,158 | $70,268 | $78,339 | $91,936 | $120,946 | $162,235 |
| Portfolio turnover rateK | 37%J | 71% | 58% | 58% | 66% | 87% |
A Calculated based on average shares outstanding during the period.
B Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.06 per share. Such dividends are not annualized in the ratio of net investment income (loss) to average net assets. Excluding such non-recurring dividend(s) the ratio of net investment income (loss) to average net assets would have been 2.61%.
C Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.20 per share. Excluding such non-recurring dividend(s), the ratio of net investment income (loss) to average net assets would have been .54%.
D Amount represents less than $.005 per share.
E Total returns for periods of less than one year are not annualized.
F Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
G Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
H Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
J Annualized
K Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements (Unaudited)
For the period ended June 30, 2021
1. Organization.
VIP Energy Portfolio (the Fund) is a non-diversified fund of Variable Insurance Products Fund IV (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares, Service Class 2 shares and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the investing fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense Ratio(a) |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% to .01% |
(a) Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds which contain the significant accounting policies (including investment valuation policies) of those funds, and are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, Exchange-Traded Funds (ETFs) and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of June 30, 2021 is included at the end of the Fund's Schedule of Investments.
Foreign Currency. Certain Funds may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Gains and losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received, and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost and include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Large, non-recurring dividends recognized by the Fund are presented separately on the Statement of Operations as "Special Dividends" and the impact of these dividends is presented in the Financial Highlights. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of a fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of a fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred, as applicable. Certain expense reductions may also differ by class, if applicable. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, certain foreign taxes, partnerships, capital loss carryforwards, and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $56,429,279 |
| Gross unrealized depreciation | (11,458,723) |
| Net unrealized appreciation (depreciation) | $44,970,556 |
| Tax cost | $250,378,957 |
Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited. The capital loss carryforward information presented below, including any applicable limitation, is estimated as of prior fiscal period end and is subject to adjustment.
| No expiration | |
| Short-term | $(59,754,481) |
| Long-term | (40,099,017) |
| Total capital loss carryforward | $(99,853,498) |
Restricted Securities (including Private Placements). Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities held at period end is included at the end of the Schedule of Investments, if applicable.
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Energy Portfolio | 112,245,715 | 41,162,680 |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .23% during the period. The group fee rate is based upon the monthly average net assets of a group of registered investment companies with which the investment adviser has management contracts. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annualized management fee rate was .52% of the Fund's average net assets.
Distribution and Service Plan Fees. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted a separate 12b-1 Plan for Service Class 2 shares. Service Class 2 pays Fidelity Distributors Company LLC (FDC), an affiliate of the investment adviser, a service fee. For the period, the service fee is based on an annual rate of .25% of Service Class 2's average net assets.
For the period, total fees for Service Class 2, all of which was re-allowed to insurance companies for the distribution of shares and providing shareholder support services were $117,184.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company LLC (FIIOC), an affiliate of the investment adviser, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class pays a fee for transfer agent services, typesetting and printing and mailing of shareholder reports, excluding mailing of proxy statements. For the period, transfer agent fees for each class were as follows:
| | Amount | % of Class-Level Average Net Assets(a) |
| Initial Class | $7,798 | .06 |
| Service Class 2 | 29,838 | .06 |
| Investor Class | 82,760 | .14 |
| | $120,396 | |
(a) Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. For the period, the fees were equivalent to the following annualized rates:
| | % of Average Net Assets |
| VIP Energy Portfolio | .04 |
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount |
| VIP Energy Portfolio | $2,588 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note and are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Energy Portfolio | 7,078,813 | 2,770,326 |
6. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. During the period, there were no borrowings on this line of credit.
| | Amount |
| VIP Energy Portfolio | $167 |
7. Security Lending.
Funds lend portfolio securities from time to time in order to earn additional income. Lending agents are used, including National Financial Services (NFS), an affiliate of the investment adviser. Pursuant to a securities lending agreement, NFS will receive a fee, which is capped at 9.9% of a fund's daily lending revenue, for its services as lending agent. A fund may lend securities to certain qualified borrowers, including NFS. On the settlement date of the loan, a fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of a fund and any additional required collateral is delivered to a fund on the next business day. A fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund may apply collateral received from the borrower against the obligation. A fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. Any loaned securities are identified as such in the Schedule of Investments, and the value of loaned securities and cash collateral at period end, as applicable, are presented in the Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Affiliated security lending activity, if any, was as follows:
| | Total Security Lending Fees Paid to NFS | Security Lending Income From Securities Loaned to NFS | Value of Securities Loaned to NFS at Period End |
| VIP Energy Portfolio | $96 | $– | $– |
8. Expense Reductions.
Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset expenses. This amount totaled $13,840 for the period.
In addition, during the period the investment adviser or an affiliate reimbursed and/or waived a portion of fund-level operating expenses in the amount of $230.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| | Six months ended
June 30, 2021 | Year ended
December 31, 2020 |
| VIP Energy Portfolio | | |
| Distributions to shareholders | | |
| Initial Class | $110,527 | $451,849 |
| Service Class 2 | 405,650 | 1,605,723 |
| Investor Class | 501,469 | 1,682,610 |
| Total | $1,017,646 | $3,740,182 |
10. Share Transactions.
Transactions for each class of shares were as follows and may contain in-kind transactions:
| | Shares | Shares | Dollars | Dollars |
| | Six months ended June 30, 2021 | Year ended December 31, 2020 | Six months ended June 30, 2021 | Year ended December 31, 2020 |
| VIP Energy Portfolio | | | | |
| Initial Class | | | | |
| Shares sold | 842,249 | 442,191 | $11,544,266 | $4,158,166 |
| Reinvestment of distributions | 9,569 | 42,530 | 110,527 | 451,849 |
| Shares redeemed | (344,814) | (673,690) | (4,502,886) | (6,731,980) |
| Net increase (decrease) | 507,004 | (188,969) | $7,151,907 | $(2,121,965) |
| Service Class 2 | | | | |
| Shares sold | 2,799,667 | 2,768,595 | $37,281,885 | $24,844,902 |
| Reinvestment of distributions | 35,274 | 153,876 | 405,650 | 1,605,723 |
| Shares redeemed | (1,693,663) | (2,349,525) | (22,885,762) | (23,077,431) |
| Net increase (decrease) | 1,141,278 | 572,946 | $14,801,773 | $3,373,194 |
| Investor Class | | | | |
| Shares sold | 4,850,204 | 3,468,491 | $65,531,406 | $32,837,914 |
| Reinvestment of distributions | 43,530 | 161,691 | 501,469 | 1,682,610 |
| Shares redeemed | (1,345,216) | (1,802,759) | (17,564,395) | (17,803,146) |
| Net increase (decrease) | 3,548,518 | 1,827,423 | $48,468,480 | $16,717,378 |
11. Other.
Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.
At the end of the period, the investment adviser or its affiliates were owners of record of more than 10% and certain otherwise unaffiliated shareholders were owners of record of more than 10% of the outstanding shares as follows:
| Fund | Affiliated % | Number of
Unaffiliated Shareholders | Unaffiliated Shareholders % |
| VIP: Energy Portfolio | 63% | 1 | 29% |
12. Coronavirus (COVID-19) Pandemic.
An outbreak of COVID-19 first detected in China during December 2019 has since spread globally and was declared a pandemic by the World Health Organization during March 2020. Developments that disrupt global economies and financial markets, such as the COVID-19 pandemic, may magnify factors that affect the Fund's performance.
Shareholder Expense Example
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2021 to June 30, 2021).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
January 1, 2021 | Ending
Account Value
June 30, 2021 | Expenses Paid
During Period-B
January 1, 2021
to June 30, 2021 |
| VIP Energy Portfolio | | | | |
| Initial Class | .65% | | | |
| Actual | | $1,000.00 | $1,438.70 | $3.93 |
| Hypothetical-C | | $1,000.00 | $1,021.57 | $3.26 |
| Service Class 2 | .90% | | | |
| Actual | | $1,000.00 | $1,436.00 | $5.44 |
| Hypothetical-C | | $1,000.00 | $1,020.33 | $4.51 |
| Investor Class | .72% | | | |
| Actual | | $1,000.00 | $1,438.40 | $4.35 |
| Hypothetical-C | | $1,000.00 | $1,021.22 | $3.61 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
C 5% return per year before expenses
Board Approval of Investment Advisory Contracts and Management Fees
VIP Energy Portfolio
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
Approval of Stub Period Continuation. At its January 2021 meeting, the Board of Trustees voted to continue the fund's management contract with FMR, and the sub-advisory agreements and sub-subadvisory agreements, in each case, where applicable (together, the Advisory Contracts), without modification, for four months from February 1, 2021 through May 31, 2021, in connection with changes to the Board's meeting calendar. The Board considered that the approval of the fund's Advisory Contracts will not result in any changes in (i) the investment process or strategies employed in the management of the fund's assets; (ii) the fees and expenses paid by shareholders; (iii) the nature, extent or quality of services provided under the fund's Advisory Contracts; or (iv) the day-to-day management of the fund or the persons primarily responsible for such management. The Board also considered that since its last approval of the fund's Advisory Contracts, FMR had provided additional information on the fund in support of the annual contract renewal process, including competitive analyses on total expenses and management fees and in-depth reviews of fund performance and fund profitability information. The Board also considered the findings of certain ad hoc committees that had been previously formed to discuss matters relevant to all of the Fidelity funds, including economies of scale, fall-out benefits and retail vs. institutional funds. The Board concluded that the fund's Advisory Contracts are fair and reasonable, and that the fund's Advisory Contracts should be renewed, without modification, through May 31, 2021, with the understanding that the Board will consider the annual renewal for a full one year period in May 2021.
At its May 2021 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process. The Board also considered Fidelity's investments in business continuity planning, and its success in continuously providing services to the fund notwithstanding the severe disruptions caused by the COVID-19 pandemic.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
The Board noted that, in the past, it and the boards of certain other Fidelity funds had formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest, and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and ETFs with innovative structures, strategies and pricing and making other enhancements to meet client needs; (iv) launching new share classes of existing funds; (v) eliminating purchase minimums and broadening eligibility requirements for certain funds and share classes; (vi) approving the reduction in the holding period for the Class C to Class A conversion policy; (vii) reducing management fees and total expenses for certain target date funds and classes and index funds; (viii) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (ix) rationalizing product lines and gaining increased efficiencies from fund mergers, liquidations, and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (xi) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including retirement income goals.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history. The Board noted that there was a portfolio management change for the fund in January 2020. The Board will continue to monitor closely the fund's performance, taking into account the portfolio management change.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index). In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative total return information for the fund and an appropriate benchmark index for the most recent one-, three-, and five-year periods ended September 30, 2020, as shown below.
VIP Energy Portfolio
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable investment mandates. For this purpose, all sector focused equity variable annuity funds are grouped in the same mapped group. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods ended September 30 (June 30 for periods ended 2019 and 2018 and December 31 for periods prior to 2018) shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates (i.e., sector equities), regardless of whether their management fee structures also are comparable. Funds with comparable management fee structures have similar management fee contractual arrangements (
e.g., flat rate charged for advisory services, all-inclusive fee rate,
etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and was considered by the Board.
VIP Energy Portfolio
The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for the 12-month period ended September 30, 2020.
The Board noted that it, in the past, and the boards of other Fidelity funds had formed an ad hoc Committee on Group Fee to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of a representative class of the fund compared to competitive fund median expenses. The fund's representative class is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure (SLTG). The Board also considered a total expense ASPG comparison for the representative class, which focuses on the total expenses of the representative class relative to a subset of non-Fidelity funds within the total expense SLTG. The total expense ASPG is limited to 15 larger and 15 smaller classes in fund average assets for a total of 30 classes, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
The Board noted that the total expense ratio of the Initial Class ranked below the SLTG competitive median and below the ASPG competitive median for the 12-month period ended September 30, 2020.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board also considered that in 2019 a joint ad hoc committee created by it and the boards of other Fidelity funds evaluated potential fall-out benefits (PFOB Committee). The Board noted that it considered the PFOB Committee's findings in connection with its consideration of the renewal of the Advisory Contracts.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund, including the conclusions of the PFOB Committee, and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total "group assets" increase, and for higher group fee rates as total "group assets" decrease ("group assets" as defined in the management contract). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board further considered that Fidelity agreed to impose a temporary fee waiver in the form of additional breakpoints to the current breakpoint schedule. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as "group assets" increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) consideration of expanding the use of performance fees for additional funds; (iii) Fidelity's pricing philosophy compared to competitors; (iv) metrics for evaluating index fund and ETF performance and information about ETF trading characteristics; (v) the methodology with respect to evaluating competitive fund data and peer group classifications and fee and expense comparisons; (vi) the expense structures for different funds and classes and information about the differences between various expense structures; (vii) group fee breakpoints; (viii) information regarding other accounts managed by Fidelity and sub-advisory arrangements; and (ix) Fidelity's philosophies and strategies for evaluating funds and classes with lower or declining asset levels.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Liquidity Risk Management Program
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program pursuant to the Liquidity Rule (the Program) effective December 1, 2018. The Program is reasonably designed to assess and manage the Fund’s liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund’s Board of Trustees (the Board) has designated the Fund’s investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund’s liquidity risk based on a variety of factors including (1) the Fund’s investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) in the case of exchange-traded funds, certain additional factors including the effect of the Fund’s prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund’s portfolio, as applicable.
In accordance with the Program, each of the Fund’s portfolio investments is classified into one of four liquidity categories described below based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments – cash or convertible to cash within three business days or less
- Moderately liquid investments – convertible to cash in three to seven calendar days
- Less liquid investments – can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments – cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund’s illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund’s net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund’s Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the annual period from December 1, 2019 through November 30, 2020. The report concluded that the Program has been implemented and is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk.
VNRIC-SANN-0821
1.817382.116
Fidelity® Variable Insurance Products:
Health Care Portfolio
Semi-Annual Report
June 30, 2021
Contents
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov.
You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity® Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
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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. © 2021 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Note to Shareholders:
Early in 2020, the outbreak and spread of a new coronavirus emerged as a public health emergency that had a major influence on financial markets, primarily based on its impact on the global economy and the outlook for corporate earnings. The virus causes a respiratory disease known as COVID-19. On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a pandemic, citing sustained risk of further global spread.
In the weeks following, as the crisis worsened, we witnessed an escalating human tragedy with wide-scale social and economic consequences from coronavirus-containment measures. The outbreak of COVID-19 prompted a number of measures to limit the spread, including travel and border restrictions, quarantines, and restrictions on large gatherings. In turn, these resulted in lower consumer activity, diminished demand for a wide range of products and services, disruption in manufacturing and supply chains, and – given the wide variability in outcomes regarding the outbreak – significant market uncertainty and volatility. Amid the turmoil, global governments and central banks took unprecedented action to help support consumers, businesses, and the broader economies, and to limit disruption to financial systems.
The situation continues to unfold, and the extent and duration of its impact on financial markets and the economy remain highly uncertain. Extreme events such as the coronavirus crisis are “exogenous shocks” that can have significant adverse effects on mutual funds and their investments. Although multiple asset classes may be affected by market disruption, the duration and impact may not be the same for all types of assets.
Fidelity is committed to helping you stay informed amid news about COVID-19 and during increased market volatility, and we’re taking extra steps to be responsive to customer needs. We encourage you to visit our websites, where we offer ongoing updates, commentary, and analysis on the markets and our funds.
Investment Summary (Unaudited)
Top Ten Stocks as of June 30, 2021
| | % of fund's net assets |
| UnitedHealth Group, Inc. | 9.0 |
| Humana, Inc. | 6.3 |
| Boston Scientific Corp. | 5.5 |
| Cigna Corp. | 5.2 |
| Danaher Corp. | 5.2 |
| Eli Lilly & Co. | 5.0 |
| Centene Corp. | 3.2 |
| Penumbra, Inc. | 2.9 |
| Regeneron Pharmaceuticals, Inc. | 2.9 |
| Insulet Corp. | 2.6 |
| | 47.8 |
Top Industries (% of fund's net assets)
| As of June 30, 2021 |
| | Health Care Providers & Services | 30.1% |
| | Biotechnology | 21.6% |
| | Health Care Equipment & Supplies | 21.2% |
| | Pharmaceuticals | 15.2% |
| | Life Sciences Tools & Services | 8.5% |
| | All Others* | 3.4% |
* Includes short-term investments and net other assets (liabilities).
Schedule of Investments June 30, 2021 (Unaudited)
Showing Percentage of Net Assets
| Common Stocks - 98.7% | | | |
| | | Shares | Value |
| Biotechnology - 21.1% | | | |
| Biotechnology - 21.1% | | | |
| Acceleron Pharma, Inc. (a) | | 45,000 | $5,647,050 |
| ADC Therapeutics SA (a)(b) | | 116,693 | 2,841,475 |
| Agios Pharmaceuticals, Inc. (a) | | 140,000 | 7,715,400 |
| Alnylam Pharmaceuticals, Inc. (a) | | 122,250 | 20,723,820 |
| Ambrx Biopharma, Inc. ADR (b) | | 13,000 | 254,800 |
| Arcutis Biotherapeutics, Inc. (a) | | 86,400 | 2,357,856 |
| Argenx SE ADR (a) | | 92,800 | 27,939,296 |
| Ascendis Pharma A/S sponsored ADR (a) | | 110,274 | 14,506,545 |
| Avid Bioservices, Inc. (a) | | 190,000 | 4,873,500 |
| BeiGene Ltd. ADR (a) | | 15,000 | 5,147,850 |
| BioAtla, Inc. | | 67,000 | 2,839,460 |
| Black Diamond Therapeutics, Inc. (a)(b) | | 22,300 | 271,837 |
| Blueprint Medicines Corp. (a) | | 46,000 | 4,046,160 |
| Century Therapeutics, Inc. | | 37,590 | 1,102,891 |
| Cerevel Therapeutics Holdings (a) | | 60,000 | 1,537,200 |
| Cytokinetics, Inc. (a) | | 160,000 | 3,166,400 |
| Denali Therapeutics, Inc. (a) | | 69,000 | 5,412,360 |
| Exelixis, Inc. (a) | | 228,000 | 4,154,160 |
| Fate Therapeutics, Inc. (a) | | 78,000 | 6,769,620 |
| Forma Therapeutics Holdings, Inc. | | 90,000 | 2,240,100 |
| Fusion Pharmaceuticals, Inc. (a) | | 19,200 | 155,136 |
| Generation Bio Co. | | 55,558 | 1,494,510 |
| Graphite Bio, Inc. | | 19,723 | 606,088 |
| Innovent Biologics, Inc. (a)(c) | | 780,000 | 9,096,635 |
| Instil Bio, Inc. (a) | | 65,000 | 1,255,800 |
| Intellia Therapeutics, Inc. (a) | | 18,000 | 2,914,380 |
| Janux Therapeutics, Inc. | | 11,700 | 291,915 |
| Keros Therapeutics, Inc. (a) | | 60,000 | 2,548,200 |
| Kinnate Biopharma, Inc. (b) | | 40,000 | 931,200 |
| Kura Oncology, Inc. (a) | | 180,000 | 3,753,000 |
| Kymera Therapeutics, Inc. (a) | | 54,000 | 2,619,000 |
| Mirati Therapeutics, Inc. (a) | | 67,000 | 10,822,510 |
| Morphic Holding, Inc. (a) | | 42,000 | 2,410,380 |
| Novavax, Inc. (a) | | 34,000 | 7,218,540 |
| ORIC Pharmaceuticals, Inc. (a) | | 80,000 | 1,415,200 |
| Passage Bio, Inc. (a) | | 90,000 | 1,191,600 |
| Poseida Therapeutics, Inc. (a) | | 29,700 | 297,594 |
| Poseida Therapeutics, Inc. (c) | | 166,187 | 1,665,194 |
| Prelude Therapeutics, Inc. (b) | | 100,000 | 2,863,000 |
| PTC Therapeutics, Inc. (a) | | 130,800 | 5,528,916 |
| Recursion Pharmaceuticals, Inc. (a)(b) | | 40,000 | 1,460,000 |
| Regeneron Pharmaceuticals, Inc. (a) | | 70,000 | 39,097,800 |
| Relay Therapeutics, Inc. (a) | | 160,000 | 5,854,400 |
| Repare Therapeutics, Inc. | | 56,500 | 1,761,670 |
| Revolution Medicines, Inc. (a) | | 140,000 | 4,443,600 |
| Sage Therapeutics, Inc. (a) | | 6,000 | 340,860 |
| Sarepta Therapeutics, Inc. (a) | | 108,000 | 8,395,920 |
| Scholar Rock Holding Corp. (a) | | 21,600 | 624,240 |
| Shattuck Labs, Inc. | | 28,500 | 826,215 |
| Stoke Therapeutics, Inc. (a) | | 60,000 | 2,019,600 |
| Taysha Gene Therapies, Inc. | | 50,000 | 1,060,000 |
| TG Therapeutics, Inc. (a) | | 350,000 | 13,576,500 |
| Turning Point Therapeutics, Inc. (a) | | 50,000 | 3,901,000 |
| uniQure B.V. (a) | | 90,000 | 2,772,000 |
| Vaxcyte, Inc. | | 96,312 | 2,167,983 |
| Xencor, Inc. (a) | | 170,000 | 5,863,300 |
| Zentalis Pharmaceuticals, Inc. (a) | | 158,672 | 8,441,350 |
| Zymeworks, Inc. (a) | | 120,000 | 4,162,800 |
| | | | 289,395,816 |
| Health Care Equipment & Supplies - 21.2% | | | |
| Health Care Equipment - 21.2% | | | |
| Angelalign Technology, Inc. | | 400 | 20,638 |
| Boston Scientific Corp. (a) | | 1,765,000 | 75,471,400 |
| Danaher Corp. | | 264,000 | 70,847,040 |
| DexCom, Inc. (a) | | 14,000 | 5,978,000 |
| Envista Holdings Corp. (a) | | 230,000 | 9,938,300 |
| Hologic, Inc. (a) | | 228,000 | 15,212,160 |
| Insulet Corp. (a) | | 128,000 | 35,137,280 |
| Intuitive Surgical, Inc. (a) | | 10,800 | 9,932,112 |
| Masimo Corp. (a) | | 50,000 | 12,122,500 |
| Outset Medical, Inc. | | 140,000 | 6,997,200 |
| Penumbra, Inc. (a) | | 145,000 | 39,738,700 |
| Tandem Diabetes Care, Inc. (a) | | 94,000 | 9,155,600 |
| | | | 290,550,930 |
| Health Care Providers & Services - 30.1% | | | |
| Health Care Facilities - 3.1% | | | |
| Cano Health LLC (d) | | 475,900 | 5,470,471 |
| Cano Health, Inc. (a)(b) | | 300,000 | 3,630,000 |
| HCA Holdings, Inc. | | 100,000 | 20,674,000 |
| Rede D'Oregon Sao Luiz SA (c) | | 690,000 | 9,576,320 |
| Surgery Partners, Inc. (a) | | 56,000 | 3,730,720 |
| | | | 43,081,511 |
| Health Care Services - 7.5% | | | |
| 1Life Healthcare, Inc. (a) | | 84,090 | 2,780,015 |
| Cigna Corp. | | 300,000 | 71,121,000 |
| Guardant Health, Inc. (a) | | 67,000 | 8,320,730 |
| LifeStance Health Group, Inc. | | 73,605 | 2,050,635 |
| Oak Street Health, Inc. (a) | | 254,000 | 14,876,780 |
| Option Care Health, Inc. (a) | | 163,877 | 3,583,990 |
| | | | 102,733,150 |
| Managed Health Care - 19.5% | | | |
| Alignment Healthcare, Inc. (a) | | 85,700 | 2,002,809 |
| Alignment Healthcare, Inc. | | 346,940 | 7,702,588 |
| Anthem, Inc. | | 10,000 | 3,818,000 |
| Centene Corp. (a) | | 600,000 | 43,758,000 |
| Humana, Inc. | | 194,000 | 85,887,680 |
| UnitedHealth Group, Inc. | | 310,000 | 124,136,400 |
| | | | 267,305,477 |
|
| TOTAL HEALTH CARE PROVIDERS & SERVICES | | | 413,120,138 |
|
| Health Care Technology - 2.3% | | | |
| Health Care Technology - 2.3% | | | |
| agilon health, Inc. (a)(b) | | 170,000 | 6,896,900 |
| Castlight Health, Inc. (a) | | 103,200 | 271,416 |
| Castlight Health, Inc. Class B (a) | | 500,000 | 1,315,000 |
| Doximity, Inc. | | 3,900 | 226,980 |
| Evolent Health, Inc. (a) | | 35,162 | 742,621 |
| Health Catalyst, Inc. (a) | | 154,154 | 8,557,089 |
| Inspire Medical Systems, Inc. (a) | | 37,000 | 7,150,620 |
| Phreesia, Inc. (a) | | 110,000 | 6,743,000 |
| | | | 31,903,626 |
| Life Sciences Tools & Services - 8.5% | | | |
| Life Sciences Tools & Services - 8.5% | | | |
| 10X Genomics, Inc. (a) | | 120,000 | 23,498,400 |
| Bio-Rad Laboratories, Inc. Class A (a) | | 26,000 | 16,751,540 |
| Bruker Corp. | | 260,000 | 19,754,800 |
| Charles River Laboratories International, Inc. (a) | | 14,200 | 5,252,864 |
| Lonza Group AG | | 22,800 | 16,164,214 |
| Maravai LifeSciences Holdings, Inc. | | 105,000 | 4,381,650 |
| Olink Holding AB ADR (a) | | 40,000 | 1,376,800 |
| Seer, Inc. | | 1,509 | 49,465 |
| Seer, Inc. Class A (d) | | 52,491 | 1,720,655 |
| Thermo Fisher Scientific, Inc. | | 56,000 | 28,250,320 |
| | | | 117,200,708 |
| Personal Products - 0.4% | | | |
| Personal Products - 0.4% | | | |
| The Beauty Health Co. (a) | | 120,000 | 2,016,000 |
| The Beauty Health Co. (d) | | 200,000 | 3,024,000 |
| | | | 5,040,000 |
| Pharmaceuticals - 15.1% | | | |
| Pharmaceuticals - 15.1% | | | |
| Arvinas Holding Co. LLC (a) | | 90,000 | 6,930,000 |
| AstraZeneca PLC (United Kingdom) | | 290,000 | 34,841,825 |
| Atea Pharmaceuticals, Inc. | | 34,500 | 741,060 |
| Bristol-Myers Squibb Co. | | 400,000 | 26,728,000 |
| Eli Lilly & Co. | | 300,000 | 68,856,000 |
| Harmony Biosciences Holdings, Inc. (a) | | 59,276 | 1,673,361 |
| Harmony Biosciences Holdings, Inc. (c) | | 5,060 | 142,844 |
| Nektar Therapeutics (a) | | 280,000 | 4,804,800 |
| Pharvaris BV | | 70,000 | 1,271,900 |
| Pliant Therapeutics, Inc. | | 117,900 | 3,433,248 |
| Revance Therapeutics, Inc. (a) | | 80,000 | 2,371,200 |
| Roche Holding AG (participation certificate) | | 88,000 | 33,161,756 |
| Royalty Pharma PLC | | 200,000 | 8,198,000 |
| Royalty Pharma PLC (c) | | 196,040 | 8,035,680 |
| Theravance Biopharma, Inc. (a) | | 160,000 | 2,323,200 |
| UCB SA | | 28,000 | 2,927,000 |
| | | | 206,439,874 |
| TOTAL COMMON STOCKS | | | |
| (Cost $868,865,100) | | | 1,353,651,092 |
|
| Convertible Preferred Stocks - 0.7% | | | |
| Biotechnology - 0.5% | | | |
| Biotechnology - 0.5% | | | |
| Caris Life Sciences, Inc. Series D (d)(e) | | 398,133 | 3,224,877 |
| Element Biosciences, Inc. Series C (d)(e) | | 72,178 | 1,483,763 |
| ElevateBio LLC Series C (d)(e) | | 31,200 | 130,884 |
| Inscripta, Inc. Series E (d)(e) | | 157,568 | 1,391,325 |
| | | | 6,230,849 |
| Health Care Providers & Services - 0.0% | | | |
| Health Care Services - 0.0% | | | |
| dMed Biopharmaceutical Co. Ltd. Series C (d)(e) | | 45,182 | 624,867 |
| Health Care Technology - 0.1% | | | |
| Health Care Technology - 0.1% | | | |
| Aledade, Inc. Series B1 (d)(e) | | 24,966 | 955,966 |
| Pharmaceuticals - 0.1% | | | |
| Pharmaceuticals - 0.1% | | | |
| Aristea Therapeutics, Inc. Series B (d)(e) | | 123,100 | 1,112,824 |
| TOTAL CONVERTIBLE PREFERRED STOCKS | | | |
| (Cost $8,507,256) | | | 8,924,506 |
|
| Money Market Funds - 1.4% | | | |
| Fidelity Cash Central Fund 0.06% (f) | | 8,405,820 | 8,407,502 |
| Fidelity Securities Lending Cash Central Fund 0.06% (f)(g) | | 11,211,727 | 11,212,848 |
| TOTAL MONEY MARKET FUNDS | | | |
| (Cost $19,620,350) | | | 19,620,350 |
| TOTAL INVESTMENT IN SECURITIES - 100.8% | | | |
| (Cost $896,992,706) | | | 1,382,195,948 |
| NET OTHER ASSETS (LIABILITIES) - (0.8)% | | | (10,808,491) |
| NET ASSETS - 100% | | | $1,371,387,457 |
Legend
(a) Non-income producing
(b) Security or a portion of the security is on loan at period end.
(c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities amounted to $28,516,673 or 2.1% of net assets.
(d) Restricted securities (including private placements) - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $19,139,632 or 1.4% of net assets.
(e) Level 3 security
(f) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
(g) Investment made with cash collateral received from securities on loan.
Additional information on each restricted holding is as follows:
| Security | Acquisition Date | Acquisition Cost |
| Aledade, Inc. Series B1 | 5/7/21 | $955,966 |
| Aristea Therapeutics, Inc. Series B | 10/6/20 | $678,736 |
| Cano Health LLC | 11/11/20 | $4,759,000 |
| Caris Life Sciences, Inc. Series D | 5/11/21 | $3,224,877 |
| dMed Biopharmaceutical Co. Ltd. Series C | 12/1/20 | $641,727 |
| Element Biosciences, Inc. Series C | 6/21/21 | $1,483,741 |
| ElevateBio LLC Series C | 3/9/21 | $130,884 |
| Inscripta, Inc. Series E | 3/30/21 | $1,391,325 |
| Seer, Inc. Class A | 12/8/20 | $997,329 |
| The Beauty Health Co. | 12/8/20 | $2,000,000 |
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| Fidelity Cash Central Fund | $2,911 |
| Fidelity Securities Lending Cash Central Fund | 21,320 |
| Total | $24,231 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable. Amount for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Fund | Value, beginning of period | Purchases | Sales Proceeds | Realized Gain/Loss | Change in Unrealized appreciation (depreciation) | Value, end of period | % ownership, end of period |
| Fidelity Cash Central Fund 0.06% | $13,757,684 | $109,675,283 | $115,026,102 | $637 | $-- | $8,407,502 | 0.0% |
| Fidelity Securities Lending Cash Central Fund 0.06% | 20,471,323 | 87,024,724 | 96,283,199 | -- | -- | 11,212,848 | 0.0% |
| Total | $34,229,007 | $196,700,007 | $211,309,301 | $637 | $-- | $19,620,350 | |
Investment Valuation
The following is a summary of the inputs used, as of June 30, 2021, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| Investments in Securities: | | | | |
| Common Stocks | $1,353,651,092 | $1,253,286,238 | $100,364,854 | $-- |
| Convertible Preferred Stocks | 8,924,506 | -- | -- | 8,924,506 |
| Money Market Funds | 19,620,350 | 19,620,350 | -- | -- |
| Total Investments in Securities: | $1,382,195,948 | $1,272,906,588 | $100,364,854 | $8,924,506 |
| Net unrealized depreciation on unfunded commitments | $(297,967) | $-- | $(297,967) | $-- |
Other Information
Distribution of investments by country or territory of incorporation, as a percentage of Total Net Assets, is as follows (Unaudited):
| United States of America | 87.2% |
| Switzerland | 3.8% |
| United Kingdom | 3.1% |
| Netherlands | 2.2% |
| Cayman Islands | 1.3% |
| Denmark | 1.1% |
| Others (Individually Less Than 1%) | 1.3% |
| | 100.0% |
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| | | June 30, 2021 (Unaudited) |
| Assets | | |
Investment in securities, at value (including securities loaned of $10,851,581) — See accompanying schedule:
Unaffiliated issuers (cost $877,372,356) | $1,362,575,598 | |
| Fidelity Central Funds (cost $19,620,350) | 19,620,350 | |
| Total Investment in Securities (cost $896,992,706) | | $1,382,195,948 |
| Receivable for investments sold | | 6,082,268 |
| Receivable for fund shares sold | | 437,980 |
| Dividends receivable | | 1,178,262 |
| Distributions receivable from Fidelity Central Funds | | 2,848 |
| Prepaid expenses | | 3,401 |
| Other receivables | | 21,819 |
| Total assets | | 1,389,922,526 |
| Liabilities | | |
| Payable for investments purchased | $5,854,114 | |
| Unrealized depreciation on unfunded commitments | 297,967 | |
| Payable for fund shares redeemed | 331,582 | |
| Accrued management fee | 591,602 | |
| Distribution and service plan fees payable | 45,491 | |
| Other affiliated payables | 169,247 | |
| Other payables and accrued expenses | 37,916 | |
| Collateral on securities loaned | 11,207,150 | |
| Total liabilities | | 18,535,069 |
| Net Assets | | $1,371,387,457 |
| Net Assets consist of: | | |
| Paid in capital | | $834,591,312 |
| Total accumulated earnings (loss) | | 536,796,145 |
| Net Assets | | $1,371,387,457 |
| Net Asset Value and Maximum Offering Price | | |
| Initial Class: | | |
| Net Asset Value, offering price and redemption price per share ($174,832,783 ÷ 4,480,183 shares) | | $39.02 |
| Service Class 2: | | |
| Net Asset Value, offering price and redemption price per share ($224,744,268 ÷ 5,784,342 shares) | | $38.85 |
| Investor Class: | | |
| Net Asset Value, offering price and redemption price per share ($971,810,406 ÷ 25,166,804 shares) | | $38.61 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| | | Six months ended June 30, 2021 (Unaudited) |
| Investment Income | | |
| Dividends | | $4,497,115 |
| Income from Fidelity Central Funds (including $21,320 from security lending) | | 24,231 |
| Total income | | 4,521,346 |
| Expenses | | |
| Management fee | $3,421,705 | |
| Transfer agent fees | 774,359 | |
| Distribution and service plan fees | 233,702 | |
| Accounting fees | 207,385 | |
| Custodian fees and expenses | 21,855 | |
| Independent trustees' fees and expenses | 2,149 | |
| Audit | 22,970 | |
| Legal | 1,376 | |
| Miscellaneous | 3,771 | |
| Total expenses before reductions | 4,689,272 | |
| Expense reductions | (51,456) | |
| Total expenses after reductions | | 4,637,816 |
| Net investment income (loss) | | (116,470) |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 55,858,917 | |
| Fidelity Central Funds | 637 | |
| Foreign currency transactions | (7,581) | |
| Total net realized gain (loss) | | 55,851,973 |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 50,511,176 | |
| Unfunded commitments | (297,967) | |
| Assets and liabilities in foreign currencies | (33,434) | |
| Total change in net unrealized appreciation (depreciation) | | 50,179,775 |
| Net gain (loss) | | 106,031,748 |
| Net increase (decrease) in net assets resulting from operations | | $105,915,278 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| | Six months ended June 30, 2021 (Unaudited) | Year ended December 31, 2020 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $(116,470) | $991,107 |
| Net realized gain (loss) | 55,851,973 | 106,102,521 |
| Change in net unrealized appreciation (depreciation) | 50,179,775 | 98,261,377 |
| Net increase (decrease) in net assets resulting from operations | 105,915,278 | 205,355,005 |
| Distributions to shareholders | (86,358,180) | (52,920,916) |
| Share transactions - net increase (decrease) | 124,668,018 | 171,258,318 |
| Total increase (decrease) in net assets | 144,225,116 | 323,692,407 |
| Net Assets | | |
| Beginning of period | 1,227,162,341 | 903,469,934 |
| End of period | $1,371,387,457 | $1,227,162,341 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
VIP Health Care Portfolio Initial Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $38.41 | $33.32 | $27.86 | $26.44 | $21.28 | $25.92 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .01 | .06 | .07 | .06 | .07 | .04 |
| Net realized and unrealized gain (loss) | 3.25 | 6.90 | 7.47 | 1.99 | 5.26 | (2.86) |
| Total from investment operations | 3.26 | 6.96 | 7.54 | 2.05 | 5.33 | (2.82) |
| Distributions from net investment income | (.04) | (.19) | (.07) | (.06) | (.07) | (.04) |
| Distributions from net realized gain | (2.62) | (1.67) | (2.01) | (.57) | (.10) | (1.78) |
| Total distributions | (2.65)B | (1.87)B | (2.08) | (.63) | (.17) | (1.82) |
| Redemption fees added to paid in capitalA | – | – | – | – | –C | –C |
| Net asset value, end of period | $39.02 | $38.41 | $33.32 | $27.86 | $26.44 | $21.28 |
| Total ReturnD,E,F | 8.59% | 21.58% | 28.37% | 7.86% | 25.05% | (10.43)% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .63%I | .64% | .65% | .65% | .67% | .67% |
| Expenses net of fee waivers, if any | .63%I | .64% | .65% | .65% | .67% | .67% |
| Expenses net of all reductions | .62%I | .64% | .65% | .64% | .66% | .66% |
| Net investment income (loss) | .07%I | .18% | .23% | .19% | .30% | .19% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $174,833 | $168,627 | $145,315 | $139,026 | $131,698 | $130,887 |
| Portfolio turnover rateJ | 38%I | 51% | 38% | 65% | 74% | 53% |
A Calculated based on average shares outstanding during the period.
B Total distributions per share do not sum due to rounding.
C Amount represents less than $.005 per share.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Health Care Portfolio Service Class 2
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | |
| | 2021 | 2020 | 2019 A |
| Selected Per–Share Data | | | |
| Net asset value, beginning of period | $38.29 | $33.27 | $28.52 |
| Income from Investment Operations | | | |
| Net investment income (loss)B | (.03) | (.03) | (.04) |
| Net realized and unrealized gain (loss) | 3.23 | 6.88 | 4.85 |
| Total from investment operations | 3.20 | 6.85 | 4.81 |
| Distributions from net investment income | (.02) | (.16) | (.06) |
| Distributions from net realized gain | (2.62) | (1.67) | –C |
| Total distributions | (2.64) | (1.83) | (.06) |
| Net asset value, end of period | $38.85 | $38.29 | $33.27 |
| Total ReturnD,E,F | 8.45% | 21.28% | 16.87% |
| Ratios to Average Net AssetsG,H | | | |
| Expenses before reductions | .88%I | .89% | .91%I |
| Expenses net of fee waivers, if any | .88%I | .89% | .91%I |
| Expenses net of all reductions | .87%I | .88% | .90%I |
| Net investment income (loss) | (.18)%I | (.07)% | (.18)%I |
| Supplemental Data | | | |
| Net assets, end of period (000 omitted) | $224,744 | $143,771 | $20,198 |
| Portfolio turnover rateJ | 38%I | 51% | 38% |
A For the period April 11, 2019 (commencement of sale of shares) to December 31, 2019.
B Calculated based on average shares outstanding during the period.
C Amount represents less than $.005 per share.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Health Care Portfolio Investor Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $38.04 | $33.02 | $27.62 | $26.23 | $21.11 | $25.73 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | –B | .03 | .04 | .03 | .05 | .02 |
| Net realized and unrealized gain (loss) | 3.22 | 6.83 | 7.41 | 1.96 | 5.22 | (2.84) |
| Total from investment operations | 3.22 | 6.86 | 7.45 | 1.99 | 5.27 | (2.82) |
| Distributions from net investment income | (.03) | (.17) | (.05) | (.04) | (.05) | (.02) |
| Distributions from net realized gain | (2.62) | (1.67) | (2.01) | (.57) | (.10) | (1.78) |
| Total distributions | (2.65) | (1.84) | (2.05)C | (.60)C | (.15) | (1.80) |
| Redemption fees added to paid in capitalA | – | – | – | – | –B | –B |
| Net asset value, end of period | $38.61 | $38.04 | $33.02 | $27.62 | $26.23 | $21.11 |
| Total ReturnD,E,F | 8.55% | 21.49% | 28.29% | 7.72% | 24.97% | (10.51)% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .71%I | .72% | .73% | .73% | .75% | .75% |
| Expenses net of fee waivers, if any | .71%I | .72% | .73% | .73% | .75% | .75% |
| Expenses net of all reductions | .70%I | .71% | .73% | .72% | .74% | .75% |
| Net investment income (loss) | - %I,J | .10% | .15% | .11% | .22% | .11% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $971,810 | $914,765 | $737,957 | $674,111 | $582,358 | $529,828 |
| Portfolio turnover rateK | 38%I | 51% | 38% | 65% | 74% | 53% |
A Calculated based on average shares outstanding during the period.
B Amount represents less than $.005 per share.
C Total distributions per share do not sum due to rounding.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount represents less than .005%.
K Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements (Unaudited)
For the period ended June 30, 2021
1. Organization.
VIP Health Care Portfolio (the Fund) is a non-diversified fund of Variable Insurance Products Fund IV (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares, Service Class 2 shares and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the investing fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense Ratio(a) |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% to .01% |
(a) Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds which contain the significant accounting policies (including investment valuation policies) of those funds, and are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, ETFs and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy. Securities, including private placements or other restricted securities, for which observable inputs are not available are valued using alternate valuation approaches, including the market approach, the income approach and cost approach, and are categorized as Level 3 in the hierarchy. The market approach considers factors including the price of recent investments in the same or a similar security or financial metrics of comparable securities. The income approach considers factors including expected future cash flows, security specific risks and corresponding discount rates. The cost approach considers factors including the value of the security's underlying assets and liabilities.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of June 30, 2021 is included at the end of the Fund's Schedule of Investments.
Foreign Currency. Certain Funds may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Gains and losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received, and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost and include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of a fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of a fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred, as applicable. Certain expense reductions may also differ by class, if applicable. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, passive foreign investment companies (PFIC), partnerships and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $510,982,910 |
| Gross unrealized depreciation | (29,103,792) |
| Net unrealized appreciation (depreciation) | $481,879,118 |
| Tax cost | $900,018,863 |
Restricted Securities (including Private Placements). Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities held at period end is included at the end of the Schedule of Investments, if applicable.
Special Purpose Acquisition Companies. Funds may invest in stock, warrants, and other securities of special purpose acquisition companies (SPACs) or similar special purpose entities. A SPAC is a publicly traded company that raises investment capital via an initial public offering (IPO) for the purpose of acquiring the equity securities of one or more existing companies via merger, business combination, acquisition or other similar transactions within a designated time frame.
Private Investment in Public Equity. Funds may acquire equity securities of an issuer through a private investment in a public equity (PIPE) transaction, including through commitments to purchase securities on a when-issued basis. A PIPE typically involves the purchase of securities directly from a publicly traded company in a private placement transaction. Securities purchased through PIPE transactions will be restricted from trading and considered illiquid until a resale registration statement for the shares is filed and declared effective.
At period end, the Fund had commitments to purchase when-issued securities through PIPE transactions with SPACs. The commitments are contingent upon the SPACs acquiring the securities of target companies. Unrealized appreciation (depreciation) on these commitments is separately presented in the Statements of Assets and Liabilities as Unrealized appreciation (depreciation) on unfunded commitments, and in the Statement of Operations as Change in unrealized appreciation (depreciation) on unfunded commitments.
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Health Care Portfolio | 283,495,866 | 242,488,451 |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .23% during the period. The group fee rate is based upon the monthly average net assets of a group of registered investment companies with which the investment adviser has management contracts. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annualized management fee rate was .53% of the Fund's average net assets.
Distribution and Service Plan Fees. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate 12b-1 Plans for each Service Class of shares. Each Service Class pays Fidelity Distributors Company LLC (FDC), an affiliate of the investment adviser, a service fee. For the period, the service fee is based on an annual rate of .25% of Service Class 2's average net assets.
For the period, total fees, all of which were re-allowed to insurance companies for the distribution of shares and providing shareholder support services, were as follows:
Transfer Agent Fees. Fidelity Investments Institutional Operations Company LLC (FIIOC), an affiliate of the investment adviser, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class pays a fee for transfer agent services, typesetting and printing and mailing of shareholder reports, excluding mailing of proxy statements. For the period, transfer agent fees for each class were as follows:
| | Amount | % of Class-Level Average Net Assets(a) |
| Initial Class | $54,658 | .06 |
| Service Class 2 | 59,493 | .06 |
| Investor Class | 660,208 | .14 |
| | $774,359 | |
(a) Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. For the period, the fees were equivalent to the following annualized rates:
| | % of Average Net Assets |
| VIP Health Care Portfolio | .03 |
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount |
| VIP Health Care Portfolio | $5,684 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note and are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Health Care Portfolio | 32,273,113 | 11,586,818 |
6. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro-rata portion of the line of credit, which are reflected in Miscellaneous expenses on the Statement of Operations, and are listed below. During the period, there were no borrowings on this line of credit.
| | Amount |
| VIP Health Care Portfolio | $1,231 |
7. Security Lending.
Funds lend portfolio securities from time to time in order to earn additional income. Lending agents are used, including National Financial Services (NFS), an affiliate of the investment adviser. Pursuant to a securities lending agreement, NFS will receive a fee, which is capped at 9.9% of a fund's daily lending revenue, for its services as lending agent. A fund may lend securities to certain qualified borrowers, including NFS. On the settlement date of the loan, a fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of a fund and any additional required collateral is delivered to a fund on the next business day. A fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund may apply collateral received from the borrower against the obligation. A fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. Any loaned securities are identified as such in the Schedule of Investments, and the value of loaned securities and cash collateral at period end, as applicable, are presented in the Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Affiliated security lending activity, if any, was as follows:
| | Total Security Lending Fees Paid to NFS | Security Lending Income From Securities Loaned to NFS | Value of Securities Loaned to NFS at Period End |
| VIP Health Care Portfolio | $2,288 | $820 | $– |
8. Expense Reductions.
Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset expenses. This amount totaled $49,618 for the period. In addition, through arrangements with the Fund's custodian, credits realized as a result of certain uninvested cash balances were used to reduce the Fund's expenses. During the period, custodian credits reduced the Fund's expenses by $23.
In addition, during the period the investment adviser or an affiliate reimbursed and/or waived a portion of fund-level operating expenses in the amount of $1,815.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| | Six months ended
June 30, 2021 | Year ended
December 31, 2020 |
| VIP Health Care Portfolio | | |
| Distributions to shareholders | | |
| Initial Class | $11,528,070 | $8,036,737 |
| Service Class 2 | 11,344,348 | 3,021,287 |
| Investor Class | 63,485,762 | 41,862,892 |
| Total | $86,358,180 | $52,920,916 |
10. Share Transactions.
Transactions for each class of shares were as follows and may contain in-kind transactions:
| | Shares | Shares | Dollars | Dollars |
| | Six months ended June 30, 2021 | Year ended December 31, 2020 | Six months ended June 30, 2021 | Year ended December 31, 2020 |
| VIP Health Care Portfolio | | | | |
| Initial Class | | | | |
| Shares sold | 173,471 | 699,946 | $6,663,294 | $23,561,166 |
| Reinvestment of distributions | 299,898 | 232,819 | 11,528,070 | 8,036,737 |
| Shares redeemed | (383,352) | (904,348) | (14,540,462) | (30,141,247) |
| Net increase (decrease) | 90,017 | 28,417 | $3,650,902 | $1,456,656 |
| Service Class 2 | | | | |
| Shares sold | 1,960,464 | 3,500,419 | $74,615,563 | $120,387,558 |
| Reinvestment of distributions | 295,878 | 84,046 | 11,335,098 | 3,014,871 |
| Shares redeemed | (227,000) | (436,633) | (8,559,463) | (15,330,889) |
| Net increase (decrease) | 2,029,342 | 3,147,832 | $77,391,198 | $108,071,540 |
| Investor Class | | | | |
| Shares sold | 589,610 | 3,274,857 | $22,501,820 | $109,342,251 |
| Reinvestment of distributions | 1,668,483 | 1,223,996 | 63,485,762 | 41,862,892 |
| Shares redeemed | (1,136,931) | (2,802,839) | (42,361,664) | (89,475,021) |
| Net increase (decrease) | 1,121,162 | 1,696,014 | $43,625,918 | $61,730,122 |
11. Other.
Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.
At the end of the period, the investment adviser or its affiliates were owners of record of more than 10% and certain otherwise unaffiliated shareholders were owners of record of more than 10% of the outstanding shares as follows:
| Fund | Affiliated % | Number of
Unaffiliated Shareholders | Unaffiliated Shareholders % |
| VIP Health Care Portfolio | 83% | 1 | 16% |
12. Coronavirus (COVID-19) Pandemic.
An outbreak of COVID-19 first detected in China during December 2019 has since spread globally and was declared a pandemic by the World Health Organization during March 2020. Developments that disrupt global economies and financial markets, such as the COVID-19 pandemic, may magnify factors that affect the Fund's performance.
Shareholder Expense Example
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2021 to June 30, 2021).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
January 1, 2021 | Ending
Account Value
June 30, 2021 | Expenses Paid
During Period-B
January 1, 2021
to June 30, 2021 |
| VIP Health Care Portfolio | | | | |
| Initial Class | .63% | | | |
| Actual | | $1,000.00 | $1,085.90 | $3.26 |
| Hypothetical-C | | $1,000.00 | $1,021.67 | $3.16 |
| Service Class 2 | .88% | | | |
| Actual | | $1,000.00 | $1,084.50 | $4.55 |
| Hypothetical-C | | $1,000.00 | $1,020.43 | $4.41 |
| Investor Class | .71% | | | |
| Actual | | $1,000.00 | $1,085.50 | $3.67 |
| Hypothetical-C | | $1,000.00 | $1,021.27 | $3.56 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
C 5% return per year before expenses
Board Approval of Investment Advisory Contracts and Management Fees
VIP Health Care Portfolio
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
Approval of Stub Period Continuation. At its January 2021 meeting, the Board of Trustees voted to continue the fund's management contract with FMR, and the sub-advisory agreements and sub-subadvisory agreements, in each case, where applicable (together, the Advisory Contracts), without modification, for four months from February 1, 2021 through May 31, 2021, in connection with changes to the Board's meeting calendar. The Board considered that the approval of the fund's Advisory Contracts will not result in any changes in (i) the investment process or strategies employed in the management of the fund's assets; (ii) the fees and expenses paid by shareholders; (iii) the nature, extent or quality of services provided under the fund's Advisory Contracts; or (iv) the day-to-day management of the fund or the persons primarily responsible for such management. The Board also considered that since its last approval of the fund's Advisory Contracts, FMR had provided additional information on the fund in support of the annual contract renewal process, including competitive analyses on total expenses and management fees and in-depth reviews of fund performance and fund profitability information. The Board also considered the findings of certain ad hoc committees that had been previously formed to discuss matters relevant to all of the Fidelity funds, including economies of scale, fall-out benefits and retail vs. institutional funds. The Board concluded that the fund's Advisory Contracts are fair and reasonable, and that the fund's Advisory Contracts should be renewed, without modification, through May 31, 2021, with the understanding that the Board will consider the annual renewal for a full one year period in May 2021.
At its May 2021 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process. The Board also considered Fidelity's investments in business continuity planning, and its success in continuously providing services to the fund notwithstanding the severe disruptions caused by the COVID-19 pandemic.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
The Board noted, in the past, that it and the boards of certain other Fidelity funds had formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest, and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and ETFs with innovative structures, strategies and pricing and making other enhancements to meet client needs; (iv) launching new share classes of existing funds; (v) eliminating purchase minimums and broadening eligibility requirements for certain funds and share classes; (vi) approving the reduction in the holding period for the Class C to Class A conversion policy; (vii) reducing management fees and total expenses for certain target date funds and classes and index funds; (viii) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (ix) rationalizing product lines and gaining increased efficiencies from fund mergers, liquidations, and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (xi) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including retirement income goals.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index). In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative total return information for the fund and an appropriate benchmark index for the most recent one-, three-, and five-year periods ended September 30, 2020, as shown below.
VIP Health Care Portfolio
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable investment mandates. For this purpose, all sector focused equity variable annuity funds are grouped in the same mapped group. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods ended September 30 (June 30 for periods ended 2019 and 2018 and December 31 for periods prior to 2018) shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates (i.e., sector equities), regardless of whether their management fee structures also are comparable. Funds with comparable management fee structures have similar management fee contractual arrangements (
e.g., flat rate charged for advisory services, all-inclusive fee rate,
etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and was considered by the Board.
VIP Health Care Portfolio
The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for the 12-month period ended September 30, 2020.
The Board noted that, in the past, it and the boards of other Fidelity funds had formed an ad hoc Committee on Group Fee to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of a representative class of the fund compared to competitive fund median expenses. The fund's representative class is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure (SLTG). The Board also considered a total expense ASPG comparison for the representative class, which focuses on the total expenses of the representative class relative to a subset of non-Fidelity funds within the total expense SLTG. The total expense ASPG is limited to 15 larger and 15 smaller classes in fund average assets for a total of 30 classes, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
The Board noted that the total expense ratio of the Initial Class ranked below the SLTG competitive median and below the ASPG competitive median for the 12-month period ended September 30, 2020.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board also considered that in 2019 a joint ad hoc committee created by it and the boards of other Fidelity funds evaluated potential fall-out benefits (PFOB Committee). The Board noted that it considered the PFOB Committee's findings in connection with its consideration of the renewal of the Advisory Contracts.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund, including the conclusions of the PFOB Committee, and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total "group assets" increase, and for higher group fee rates as total "group assets" decrease ("group assets" as defined in the management contract). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board further considered that Fidelity agreed to impose a temporary fee waiver in the form of additional breakpoints to the current breakpoint schedule. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as "group assets" increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) consideration of expanding the use of performance fees for additional funds; (iii) Fidelity's pricing philosophy compared to competitors; (iv) metrics for evaluating index fund and ETF performance and information about ETF trading characteristics; (v) the methodology with respect to evaluating competitive fund data and peer group classifications and fee and expense comparisons; (vi) the expense structures for different funds and classes and information about the differences between various expense structures; (vii) group fee breakpoints; (viii) information regarding other accounts managed by Fidelity and sub-advisory arrangements; and (ix) Fidelity's philosophies and strategies for evaluating funds and classes with lower or declining asset levels.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Liquidity Risk Management Program
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program pursuant to the Liquidity Rule (the Program) effective December 1, 2018. The Program is reasonably designed to assess and manage the Fund’s liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund’s Board of Trustees (the Board) has designated the Fund’s investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund’s liquidity risk based on a variety of factors including (1) the Fund’s investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) in the case of exchange-traded funds, certain additional factors including the effect of the Fund’s prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund’s portfolio, as applicable.
In accordance with the Program, each of the Fund’s portfolio investments is classified into one of four liquidity categories described below based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments – cash or convertible to cash within three business days or less
- Moderately liquid investments – convertible to cash in three to seven calendar days
- Less liquid investments – can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments – cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund’s illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund’s net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund’s Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the annual period from December 1, 2019 through November 30, 2020. The report concluded that the Program has been implemented and is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk.
VHCIC-SANN-0821
1.817376.116
Fidelity® Variable Insurance Products:
Utilities Portfolio
Semi-Annual Report
June 30, 2021
Contents
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov.
You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity® Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
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. © 2021 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Note to Shareholders:
Early in 2020, the outbreak and spread of a new coronavirus emerged as a public health emergency that had a major influence on financial markets, primarily based on its impact on the global economy and the outlook for corporate earnings. The virus causes a respiratory disease known as COVID-19. On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a pandemic, citing sustained risk of further global spread.
In the weeks following, as the crisis worsened, we witnessed an escalating human tragedy with wide-scale social and economic consequences from coronavirus-containment measures. The outbreak of COVID-19 prompted a number of measures to limit the spread, including travel and border restrictions, quarantines, and restrictions on large gatherings. In turn, these resulted in lower consumer activity, diminished demand for a wide range of products and services, disruption in manufacturing and supply chains, and – given the wide variability in outcomes regarding the outbreak – significant market uncertainty and volatility. Amid the turmoil, global governments and central banks took unprecedented action to help support consumers, businesses, and the broader economies, and to limit disruption to financial systems.
The situation continues to unfold, and the extent and duration of its impact on financial markets and the economy remain highly uncertain. Extreme events such as the coronavirus crisis are “exogenous shocks” that can have significant adverse effects on mutual funds and their investments. Although multiple asset classes may be affected by market disruption, the duration and impact may not be the same for all types of assets.
Fidelity is committed to helping you stay informed amid news about COVID-19 and during increased market volatility, and we’re taking extra steps to be responsive to customer needs. We encourage you to visit our websites, where we offer ongoing updates, commentary, and analysis on the markets and our funds.
Investment Summary (Unaudited)
Top Ten Stocks as of June 30, 2021
| | % of fund's net assets |
| NextEra Energy, Inc. | 11.8 |
| Southern Co. | 9.7 |
| Exelon Corp. | 8.0 |
| Sempra Energy | 7.4 |
| Edison International | 5.9 |
| American Electric Power Co., Inc. | 4.9 |
| Dominion Energy, Inc. | 4.9 |
| Duke Energy Corp. | 4.9 |
| FirstEnergy Corp. | 4.9 |
| CenterPoint Energy, Inc. | 4.9 |
| | 67.3 |
Top Industries (% of fund's net assets)
| As of June 30, 2021 |
| | Electric Utilities | 64.6% |
| | Multi-Utilities | 24.3% |
| | Independent Power and Renewable Electricity Producers | 8.6% |
| | All Others* | 2.5% |
* Includes short-term investments and net other assets (liabilities).
Schedule of Investments June 30, 2021 (Unaudited)
Showing Percentage of Net Assets
| Common Stocks - 97.5% | | | |
| | | Shares | Value |
| Electric Utilities - 64.6% | | | |
| Electric Utilities - 64.6% | | | |
| American Electric Power Co., Inc. | | 101,442 | $8,580,979 |
| Duke Energy Corp. | | 86,147 | 8,504,432 |
| Edison International | | 178,781 | 10,337,117 |
| Entergy Corp. | | 43,239 | 4,310,928 |
| Evergy, Inc. | | 139,043 | 8,402,368 |
| Exelon Corp. | | 314,386 | 13,930,444 |
| FirstEnergy Corp. | | 227,889 | 8,479,750 |
| NextEra Energy, Inc. | | 280,868 | 20,582,006 |
| NRG Energy, Inc. | | 87,652 | 3,532,376 |
| OGE Energy Corp. | | 38,900 | 1,308,985 |
| PG&E Corp. (a) | | 774,169 | 7,873,299 |
| Southern Co. | | 278,990 | 16,881,685 |
| | | | 112,724,369 |
| Independent Power and Renewable Electricity Producers - 8.6% | | | |
| Independent Power Producers & Energy Traders - 6.3% | | | |
| Clearway Energy, Inc.: | | | |
| Class A | | 22,200 | 559,884 |
| Class C | | 13,747 | 364,021 |
| The AES Corp. | | 311,325 | 8,116,243 |
| Vistra Corp. | | 108,356 | 2,010,004 |
| | | | 11,050,152 |
| Renewable Electricity - 2.3% | | | |
| NextEra Energy Partners LP | | 37,660 | 2,875,718 |
| Sunnova Energy International, Inc. (a) | | 30,137 | 1,134,959 |
| | | | 4,010,677 |
|
| TOTAL INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS | | | 15,060,829 |
|
| Multi-Utilities - 24.3% | | | |
| Multi-Utilities - 24.3% | | | |
| CenterPoint Energy, Inc. | | 344,681 | 8,451,578 |
| Dominion Energy, Inc. | | 116,339 | 8,559,060 |
| NiSource, Inc. | | 247,400 | 6,061,300 |
| Public Service Enterprise Group, Inc. | | 105,601 | 6,308,604 |
| Sempra Energy | | 97,815 | 12,958,531 |
| | | | 42,339,073 |
| TOTAL COMMON STOCKS | | | |
| (Cost $132,527,771) | | | 170,124,271 |
|
| Money Market Funds - 2.1% | | | |
| Fidelity Cash Central Fund 0.06% (b) | | | |
| (Cost $3,615,530) | | 3,614,807 | 3,615,530 |
| TOTAL INVESTMENT IN SECURITIES - 99.6% | | | |
| (Cost $136,143,301) | | | 173,739,801 |
| NET OTHER ASSETS (LIABILITIES) - 0.4% | | | 758,356 |
| NET ASSETS - 100% | | | $174,498,157 |
Legend
(a) Non-income producing
(b) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| Fidelity Cash Central Fund | $398 |
| Fidelity Securities Lending Cash Central Fund | 20 |
| Total | $418 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable. Amount for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Fund | Value, beginning of period | Purchases | Sales Proceeds | Realized Gain/Loss | Change in Unrealized appreciation (depreciation) | Value, end of period | % ownership, end of period |
| Fidelity Cash Central Fund 0.06% | $697,259 | $23,124,385 | $20,206,100 | $(14) | $-- | $3,615,530 | 0.0% |
| Fidelity Securities Lending Cash Central Fund 0.06% | -- | 4,372,119 | 4,372,119 | -- | -- | -- | 0.0% |
| Total | $697,259 | $27,496,504 | $24,578,219 | $(14) | $-- | $3,615,530 | |
Investment Valuation
The following is a summary of the inputs used, as of June 30, 2021, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| Investments in Securities: | | | | |
| Common Stocks | $170,124,271 | $170,124,271 | $-- | $-- |
| Money Market Funds | 3,615,530 | 3,615,530 | -- | -- |
| Total Investments in Securities: | $173,739,801 | $173,739,801 | $-- | $-- |
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| | | June 30, 2021 (Unaudited) |
| Assets | | |
Investment in securities, at value — See accompanying schedule:
Unaffiliated issuers (cost $132,527,771) | $170,124,271 | |
| Fidelity Central Funds (cost $3,615,530) | 3,615,530 | |
| Total Investment in Securities (cost $136,143,301) | | $173,739,801 |
| Receivable for investments sold | | 726,202 |
| Receivable for fund shares sold | | 196,197 |
| Dividends receivable | | 56,723 |
| Distributions receivable from Fidelity Central Funds | | 34 |
| Prepaid expenses | | 539 |
| Other receivables | | 3,916 |
| Total assets | | 174,723,412 |
| Liabilities | | |
| Payable for fund shares redeemed | $103,463 | |
| Accrued management fee | 77,903 | |
| Transfer agent fee payable | 19,267 | |
| Other affiliated payables | 5,765 | |
| Audit fee payable | 16,911 | |
| Other payables and accrued expenses | 1,946 | |
| Total liabilities | | 225,255 |
| Net Assets | | $174,498,157 |
| Net Assets consist of: | | |
| Paid in capital | | $135,850,800 |
| Total accumulated earnings (loss) | | 38,647,357 |
| Net Assets | | $174,498,157 |
| Net Asset Value and Maximum Offering Price | | |
| Initial Class: | | |
| Net Asset Value, offering price and redemption price per share ($25,070,041 ÷ 1,361,055 shares) | | $18.42 |
| Investor Class: | | |
| Net Asset Value, offering price and redemption price per share ($149,428,116 ÷ 8,174,049 shares) | | $18.28 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| | | Six months ended June 30, 2021 (Unaudited) |
| Investment Income | | |
| Dividends | | $2,461,538 |
| Income from Fidelity Central Funds (including $20 from security lending) | | 418 |
| Total income | | 2,461,956 |
| Expenses | | |
| Management fee | $465,708 | |
| Transfer agent fees | 114,152 | |
| Accounting fees | 34,440 | |
| Custodian fees and expenses | 2,549 | |
| Independent trustees' fees and expenses | 300 | |
| Audit | 18,484 | |
| Legal | 590 | |
| Miscellaneous | 501 | |
| Total expenses before reductions | 636,724 | |
| Expense reductions | (8,358) | |
| Total expenses after reductions | | 628,366 |
| Net investment income (loss) | | 1,833,590 |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 4,780,382 | |
| Fidelity Central Funds | (14) | |
| Total net realized gain (loss) | | 4,780,368 |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | (3,012,864) | |
| Assets and liabilities in foreign currencies | (102) | |
| Total change in net unrealized appreciation (depreciation) | | (3,012,966) |
| Net gain (loss) | | 1,767,402 |
| Net increase (decrease) in net assets resulting from operations | | $3,600,992 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| | Six months ended June 30, 2021 (Unaudited) | Year ended December 31, 2020 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $1,833,590 | $3,709,866 |
| Net realized gain (loss) | 4,780,368 | (5,030,332) |
| Change in net unrealized appreciation (depreciation) | (3,012,966) | (9,695,806) |
| Net increase (decrease) in net assets resulting from operations | 3,600,992 | (11,016,272) |
| Distributions to shareholders | (149,337) | (8,490,512) |
| Share transactions - net increase (decrease) | (7,305,765) | (58,238,838) |
| Total increase (decrease) in net assets | (3,854,110) | (77,745,622) |
| Net Assets | | |
| Beginning of period | 178,352,267 | 256,097,889 |
| End of period | $174,498,157 | $178,352,267 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
VIP Utilities Portfolio Initial Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $18.05 | $18.79 | $16.81 | $16.73 | $14.49 | $13.17 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .20 | .34 | .43 | .40 | .33 | .34 |
| Net realized and unrealized gain (loss) | .19 | (.35) | 3.22 | .96 | 2.26 | 1.49 |
| Total from investment operations | .39 | (.01) | 3.65 | 1.36 | 2.59 | 1.83 |
| Distributions from net investment income | (.02) | (.45) | (.39) | (.32) | (.35) | (.26) |
| Distributions from net realized gain | – | (.28) | (1.28) | (.97) | – | (.25) |
| Total distributions | (.02) | (.73) | (1.67) | (1.28)B | (.35) | (.52)B |
| Redemption fees added to paid in capitalA | – | – | – | – | –C | .01 |
| Net asset value, end of period | $18.42 | $18.05 | $18.79 | $16.81 | $16.73 | $14.49 |
| Total ReturnD,E,F | 2.14% | (.12)% | 23.18% | 8.82% | 17.88% | 14.17% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .65%I | .67% | .66% | .68% | .69% | .70% |
| Expenses net of fee waivers, if any | .65%I | .67% | .66% | .68% | .69% | .70% |
| Expenses net of all reductions | .64%I | .66% | .66% | .65% | .68% | .69% |
| Net investment income (loss) | 2.14%I | 1.96% | 2.46% | 2.36% | 2.06% | 2.30% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $25,070 | $26,868 | $40,839 | $38,270 | $26,377 | $26,194 |
| Portfolio turnover rateJ | 41%I | 66% | 66% | 113% | 52% | 83% |
A Calculated based on average shares outstanding during the period.
B Total distributions per share do not sum due to rounding.
C Amount represents less than $.005 per share.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Utilities Portfolio Investor Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $17.92 | $18.66 | $16.70 | $16.64 | $14.41 | $13.11 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .19 | .32 | .42 | .38 | .32 | .32 |
| Net realized and unrealized gain (loss) | .19 | (.35) | 3.19 | .95 | 2.25 | 1.48 |
| Total from investment operations | .38 | (.03) | 3.61 | 1.33 | 2.57 | 1.80 |
| Distributions from net investment income | (.02) | (.44) | (.38) | (.31) | (.34) | (.26) |
| Distributions from net realized gain | – | (.28) | (1.28) | (.97) | – | (.25) |
| Total distributions | (.02) | (.71)B | (1.65)B | (1.27)B | (.34) | (.51) |
| Redemption fees added to paid in capitalA | – | – | – | – | –C | .01 |
| Net asset value, end of period | $18.28 | $17.92 | $18.66 | $16.70 | $16.64 | $14.41 |
| Total ReturnD,E,F | 2.09% | (.20)% | 23.14% | 8.66% | 17.83% | 14.03% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .73%I | .75% | .74% | .76% | .77% | .78% |
| Expenses net of fee waivers, if any | .73%I | .75% | .74% | .76% | .77% | .78% |
| Expenses net of all reductions | .72%I | .74% | .74% | .73% | .76% | .77% |
| Net investment income (loss) | 2.06%I | 1.89% | 2.38% | 2.28% | 1.98% | 2.22% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $149,428 | $151,484 | $215,259 | $137,635 | $106,040 | $98,360 |
| Portfolio turnover rateJ | 41%I | 66% | 66% | 113% | 52% | 83% |
A Calculated based on average shares outstanding during the period.
B Total distributions per share do not sum due to rounding.
C Amount represents less than $.005 per share.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements (Unaudited)
For the period ended June 30, 2021
1. Organization.
VIP Utilities Portfolio (the Fund) is a non-diversified fund of Variable Insurance Products Fund IV (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the investing fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense Ratio(a) |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% to .01% |
(a) Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds which contain the significant accounting policies (including investment valuation policies) of those funds, and are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, ETFs and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of June 30, 2021 is included at the end of the Fund's Schedule of Investments.
Foreign Currency. Certain Funds may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Gains and losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received, and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of a fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of a fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred, as applicable. Certain expense reductions may also differ by class, if applicable. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, partnerships and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $38,663,424 |
| Gross unrealized depreciation | (1,447,758) |
| Net unrealized appreciation (depreciation) | $37,215,666 |
| Tax cost | $136,524,135 |
Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited. The capital loss carryforward information presented below, including any applicable limitation, is estimated as of prior fiscal period end and is subject to adjustment.
| No expiration | |
| Short-term | $(5,053,162) |
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Utilities Portfolio | 35,291,083 | 44,370,059 |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .23% during the period. The group fee rate is based upon the monthly average net assets of a group of registered investment companies with which the investment adviser has management contracts. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annualized management fee rate was .53% of the Fund's average net assets.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company LLC (FIIOC), an affiliate of the investment adviser, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class pays a fee for transfer agent services, typesetting and printing and mailing of shareholder reports, excluding mailing of proxy statements. For the period, transfer agent fees for each class were as follows:
| | Amount | % of Class-Level Average Net Assets(a) |
| Initial Class | $8,242 | .06 |
| Investor Class | 105,910 | .14 |
| | $114,152 | |
(a) Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. For the period, the fees were equivalent to the following annualized rates:
| | % of Average Net Assets |
| VIP Utilities Portfolio | .04 |
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount |
| VIP Utilities Portfolio | $1,194 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note and are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Utilities Portfolio | 1,795,350 | 3,071,286 |
6. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro-rata portion of the line of credit, which are reflected in Miscellaneous expenses on the Statement of Operations, and are listed below. During the period, there were no borrowings on this line of credit.
| | Amount |
| VIP Utilities Portfolio | $177 |
7. Security Lending.
Funds lend portfolio securities from time to time in order to earn additional income. Lending agents are used, including National Financial Services (NFS), an affiliate of the investment adviser. Pursuant to a securities lending agreement, NFS will receive a fee, which is capped at 9.9% of a fund's daily lending revenue, for its services as lending agent. A fund may lend securities to certain qualified borrowers, including NFS. On the settlement date of the loan, a fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of a fund and any additional required collateral is delivered to a fund on the next business day. A fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund may apply collateral received from the borrower against the obligation. A fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. Any loaned securities are identified as such in the Schedule of Investments, and the value of loaned securities and cash collateral at period end, as applicable, are presented in the Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Affiliated security lending activity, if any, was as follows:
| | Total Security Lending Fees Paid to NFS | Security Lending Income From Securities Loaned to NFS | Value of Securities Loaned to NFS at Period End |
| VIP Utilities Portfolio | $2 | $– | $– |
8. Expense Reductions.
Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset expenses. This amount totaled $8,092 for the period.
In addition, during the period the investment adviser or an affiliate reimbursed and/or waived a portion of fund-level operating expenses in the amount of $266.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| | Six months ended
June 30, 2021 | Year ended
December 31, 2020 |
| VIP Utilities Portfolio | | |
| Distributions to shareholders | | |
| Initial Class | $24,662 | $1,317,531 |
| Investor Class | 124,675 | 7,172,981 |
| Total | $149,337 | $8,490,512 |
10. Share Transactions.
Transactions for each class of shares were as follows and may contain in-kind transactions:
| | Shares | Shares | Dollars | Dollars |
| | Six months ended June 30, 2021 | Year ended December 31, 2020 | Six months ended June 30, 2021 | Year ended December 31, 2020 |
| VIP Utilities Portfolio | | | | |
| Initial Class | | | | |
| Shares sold | 93,237 | 177,232 | $1,719,813 | $3,243,033 |
| Reinvestment of distributions | 1,347 | 70,720 | 24,662 | 1,317,531 |
| Shares redeemed | (222,227) | (933,010) | (4,069,907) | (15,325,726) |
| Net increase (decrease) | (127,643) | (685,058) | $(2,325,432) | $(10,765,162) |
| Investor Class | | | | |
| Shares sold | 482,526 | 1,318,798 | $8,855,444 | $23,635,279 |
| Reinvestment of distributions | 6,858 | 387,828 | 124,675 | 7,172,981 |
| Shares redeemed | (770,044) | (4,790,611) | (13,960,452) | (78,281,936) |
| Net increase (decrease) | (280,660) | (3,083,985) | $(4,980,333) | $(47,473,676) |
11. Other.
Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.
At the end of the period, the investment adviser or its affiliates were owners of record of more than 10% of the outstanding shares as follows:
| Fund | Affiliated % |
| VIP Utilities Portfolio | 100% |
12. Coronavirus (COVID-19) Pandemic.
An outbreak of COVID-19 first detected in China during December 2019 has since spread globally and was declared a pandemic by the World Health Organization during March 2020. Developments that disrupt global economies and financial markets, such as the COVID-19 pandemic, may magnify factors that affect the Fund's performance.
Shareholder Expense Example
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2021 to June 30, 2021).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
January 1, 2021 | Ending
Account Value
June 30, 2021 | Expenses Paid
During Period-B
January 1, 2021
to June 30, 2021 |
| VIP Utilities Portfolio | | | | |
| Initial Class | .65% | | | |
| Actual | | $1,000.00 | $1,021.40 | $3.26 |
| Hypothetical-C | | $1,000.00 | $1,021.57 | $3.26 |
| Investor Class | .73% | | | |
| Actual | | $1,000.00 | $1,020.90 | $3.66 |
| Hypothetical-C | | $1,000.00 | $1,021.17 | $3.66 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
C 5% return per year before expenses
Board Approval of Investment Advisory Contracts and Management Fees
VIP Utilities Portfolio
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
Approval of Stub Period Continuation. At its January 2021 meeting, the Board of Trustees voted to continue the fund's management contract with FMR, and the sub-advisory agreements and sub-subadvisory agreements, in each case, where applicable (together, the Advisory Contracts), without modification, for four months from February 1, 2021 through May 31, 2021, in connection with changes to the Board's meeting calendar. The Board considered that the approval of the fund's Advisory Contracts will not result in any changes in (i) the investment process or strategies employed in the management of the fund's assets; (ii) the fees and expenses paid by shareholders; (iii) the nature, extent or quality of services provided under the fund's Advisory Contracts; or (iv) the day-to-day management of the fund or the persons primarily responsible for such management. The Board also considered that since its last approval of the fund's Advisory Contracts, FMR had provided additional information on the fund in support of the annual contract renewal process, including competitive analyses on total expenses and management fees and in-depth reviews of fund performance and fund profitability information. The Board also considered the findings of certain ad hoc committees that had been previously formed to discuss matters relevant to all of the Fidelity funds, including economies of scale, fall-out benefits and retail vs. institutional funds. The Board concluded that the fund's Advisory Contracts are fair and reasonable, and that the fund's Advisory Contracts should be renewed, without modification, through May 31, 2021, with the understanding that the Board will consider the annual renewal for a full one year period in May 2021.
At its May 2021 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process. The Board also considered Fidelity's investments in business continuity planning, and its success in continuously providing services to the fund notwithstanding the severe disruptions caused by the COVID-19 pandemic.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
The Board noted that, in the past, it and the boards of certain other Fidelity funds had formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest, and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and ETFs with innovative structures, strategies and pricing and making other enhancements to meet client needs; (iv) launching new share classes of existing funds; (v) eliminating purchase minimums and broadening eligibility requirements for certain funds and share classes; (vi) approving the reduction in the holding period for the Class C to Class A conversion policy; (vii) reducing management fees and total expenses for certain target date funds and classes and index funds; (viii) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (ix) rationalizing product lines and gaining increased efficiencies from fund mergers, liquidations, and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (xi) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including retirement income goals.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index). In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative total return information for the fund and an appropriate benchmark index for the most recent one-, three-, and five-year periods ended September 30, 2020, as shown below.
VIP Utilities Portfolio
The Board considered the fund's underperformance for different time periods ended September 30, 2020 (which periods are reflected in the chart above). The Board's discussions with FMR regarding underperformance cover topics including, but not limited to: the longer-term track record of a fund's portfolio manager(s); broader trends in the market that may adversely impact a fund's performance; attribution reports on contributors to the fund's underperformance; and the applicable portfolio manager's explanation of his or her underperformance. The Board engages with FMR on steps that might be taken to address a fund's underperformance.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable investment mandates. For this purpose, all sector focused equity variable annuity funds are grouped in the same mapped group. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods ended September 30 (June 30 for periods ended 2019 and 2018 and December 31 for periods prior to 2018) shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates (i.e., sector equities), regardless of whether their management fee structures also are comparable. Funds with comparable management fee structures have similar management fee contractual arrangements (
e.g., flat rate charged for advisory services, all-inclusive fee rate,
etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and was considered by the Board.
VIP Utilities Portfolio
The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for the 12-month period ended September 30, 2020.
The Board noted that, in the past, it and the boards of other Fidelity funds had formed an ad hoc Committee on Group Fee to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of a representative class of the fund compared to competitive fund median expenses. The fund's representative class is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure (SLTG). The Board also considered a total expense ASPG comparison for the representative class, which focuses on the total expenses of the representative class relative to a subset of non-Fidelity funds within the total expense SLTG. The total expense ASPG is limited to 15 larger and 15 smaller classes in fund average assets for a total of 30 classes, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
The Board noted that the total expense ratio of the Initial Class ranked below the SLTG competitive median and below the ASPG competitive median for the 12-month period ended September 30, 2020.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board also considered that in 2019 a joint ad hoc committee created by it and the boards of other Fidelity funds evaluated potential fall-out benefits (PFOB Committee). The Board noted that it considered the PFOB Committee's findings in connection with its consideration of the renewal of the Advisory Contracts.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund, including the conclusions of the PFOB Committee, and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total "group assets" increase, and for higher group fee rates as total "group assets" decrease ("group assets" as defined in the management contract). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board further considered that Fidelity agreed to impose a temporary fee waiver in the form of additional breakpoints to the current breakpoint schedule. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as "group assets" increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) consideration of expanding the use of performance fees for additional funds; (iii) Fidelity's pricing philosophy compared to competitors; (iv) metrics for evaluating index fund and ETF performance and information about ETF trading characteristics; (v) the methodology with respect to evaluating competitive fund data and peer group classifications and fee and expense comparisons; (vi) the expense structures for different funds and classes and information about the differences between various expense structures; (vii) group fee breakpoints; (viii) information regarding other accounts managed by Fidelity and sub-advisory arrangements; and (ix) Fidelity's philosophies and strategies for evaluating funds and classes with lower or declining asset levels.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Liquidity Risk Management Program
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program pursuant to the Liquidity Rule (the Program) effective December 1, 2018. The Program is reasonably designed to assess and manage the Fund’s liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund’s Board of Trustees (the Board) has designated the Fund’s investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund’s liquidity risk based on a variety of factors including (1) the Fund’s investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) in the case of exchange-traded funds, certain additional factors including the effect of the Fund’s prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund’s portfolio, as applicable.
In accordance with the Program, each of the Fund’s portfolio investments is classified into one of four liquidity categories described below based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments – cash or convertible to cash within three business days or less
- Moderately liquid investments – convertible to cash in three to seven calendar days
- Less liquid investments – can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments – cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund’s illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund’s net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund’s Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the annual period from December 1, 2019 through November 30, 2020. The report concluded that the Program has been implemented and is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk.
VTELIC-SANN-0821
1.817394.116
Fidelity® Variable Insurance Products:
Financial Services Portfolio
Semi-Annual Report
June 30, 2021
Contents
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov.
You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity® Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
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. © 2021 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Note to Shareholders:
Early in 2020, the outbreak and spread of a new coronavirus emerged as a public health emergency that had a major influence on financial markets, primarily based on its impact on the global economy and the outlook for corporate earnings. The virus causes a respiratory disease known as COVID-19. On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a pandemic, citing sustained risk of further global spread.
In the weeks following, as the crisis worsened, we witnessed an escalating human tragedy with wide-scale social and economic consequences from coronavirus-containment measures. The outbreak of COVID-19 prompted a number of measures to limit the spread, including travel and border restrictions, quarantines, and restrictions on large gatherings. In turn, these resulted in lower consumer activity, diminished demand for a wide range of products and services, disruption in manufacturing and supply chains, and – given the wide variability in outcomes regarding the outbreak – significant market uncertainty and volatility. Amid the turmoil, global governments and central banks took unprecedented action to help support consumers, businesses, and the broader economies, and to limit disruption to financial systems.
The situation continues to unfold, and the extent and duration of its impact on financial markets and the economy remain highly uncertain. Extreme events such as the coronavirus crisis are “exogenous shocks” that can have significant adverse effects on mutual funds and their investments. Although multiple asset classes may be affected by market disruption, the duration and impact may not be the same for all types of assets.
Fidelity is committed to helping you stay informed amid news about COVID-19 and during increased market volatility, and we’re taking extra steps to be responsive to customer needs. We encourage you to visit our websites, where we offer ongoing updates, commentary, and analysis on the markets and our funds.
Investment Summary (Unaudited)
Top Ten Stocks as of June 30, 2021
| | % of fund's net assets |
| Wells Fargo & Co. | 5.3 |
| Morgan Stanley | 4.6 |
| Bank of America Corp. | 4.6 |
| Citigroup, Inc. | 4.6 |
| American Express Co. | 4.4 |
| Capital One Financial Corp. | 4.1 |
| The Travelers Companies, Inc. | 3.3 |
| State Street Corp. | 3.0 |
| PNC Financial Services Group, Inc. | 2.7 |
| Bank of New York Mellon Corp. | 2.5 |
| | 39.1 |
Top Industries (% of fund's net assets)
| As of June 30, 2021 |
| | Banks | 35.2% |
| | Insurance | 23.5% |
| | Capital Markets | 21.3% |
| | Consumer Finance | 9.7% |
| | Thrifts & Mortgage Finance | 4.6% |
| | All Others* | 5.7% |
* Includes short-term investments and net other assets (liabilities).
Schedule of Investments June 30, 2021 (Unaudited)
Showing Percentage of Net Assets
| Common Stocks - 99.8% | | | |
| | | Shares | Value |
| Banks - 35.2% | | | |
| Diversified Banks - 17.0% | | | |
| Bank of America Corp. | | 295,300 | $12,175,219 |
| Citigroup, Inc. | | 171,500 | 12,133,625 |
| Piraeus Financial Holdings SA (a) | | 117,400 | 207,419 |
| U.S. Bancorp | | 114,500 | 6,523,065 |
| Wells Fargo & Co. | | 308,577 | 13,975,453 |
| | | | 45,014,781 |
| Regional Banks - 18.2% | | | |
| Ameris Bancorp | | 23,100 | 1,169,553 |
| Associated Banc-Corp. | | 63,700 | 1,304,576 |
| Bank OZK | | 56,000 | 2,360,960 |
| BOK Financial Corp. | | 17,742 | 1,536,457 |
| Cadence Bancorp Class A | | 100,100 | 2,090,088 |
| East West Bancorp, Inc. | | 32,500 | 2,329,925 |
| First Horizon National Corp. | | 176,162 | 3,044,079 |
| First Interstate Bancsystem, Inc. | | 23,000 | 962,090 |
| Great Western Bancorp, Inc. | | 24,500 | 803,355 |
| Heartland Financial U.S.A., Inc. | | 29,500 | 1,386,205 |
| Huntington Bancshares, Inc. | | 426,970 | 6,092,862 |
| KeyCorp | | 121,100 | 2,500,715 |
| M&T Bank Corp. | | 28,900 | 4,199,459 |
| PacWest Bancorp | | 45,800 | 1,885,128 |
| Peoples United Financial, Inc. | | 63,000 | 1,079,820 |
| PNC Financial Services Group, Inc. | | 37,000 | 7,058,120 |
| Signature Bank | | 16,800 | 4,126,920 |
| WesBanco, Inc. | | 39,000 | 1,389,570 |
| Wintrust Financial Corp. | | 36,500 | 2,760,495 |
| | | | 48,080,377 |
|
| TOTAL BANKS | | | 93,095,158 |
|
| Capital Markets - 21.3% | | | |
| Asset Management & Custody Banks - 11.8% | | | |
| Affiliated Managers Group, Inc. | | 17,100 | 2,636,991 |
| AllianceBernstein Holding LP | | 73,300 | 3,412,848 |
| Bank of New York Mellon Corp. | | 128,800 | 6,598,424 |
| Brookfield Asset Management, Inc. Class A | | 73,800 | 3,762,324 |
| Carlyle Group LP | | 75,000 | 3,486,000 |
| Northern Trust Corp. | | 11,500 | 1,329,630 |
| Patria Investments Ltd. | | 123,200 | 2,170,784 |
| State Street Corp. | | 94,600 | 7,783,688 |
| | | | 31,180,689 |
| Financial Exchanges & Data - 2.1% | | | |
| Bolsa Mexicana de Valores S.A.B. de CV | | 715,200 | 1,575,420 |
| Cboe Global Markets, Inc. | | 34,627 | 4,122,344 |
| | | | 5,697,764 |
| Investment Banking & Brokerage - 7.4% | | | |
| Lazard Ltd. Class A | | 71,900 | 3,253,475 |
| Morgan Stanley | | 132,800 | 12,176,432 |
| Raymond James Financial, Inc. | | 20,900 | 2,714,910 |
| Virtu Financial, Inc. Class A | | 49,500 | 1,367,685 |
| | | | 19,512,502 |
|
| TOTAL CAPITAL MARKETS | | | 56,390,955 |
|
| Consumer Finance - 9.7% | | | |
| Consumer Finance - 9.7% | | | |
| American Express Co. | | 71,400 | 11,797,422 |
| Capital One Financial Corp. | | 70,000 | 10,828,300 |
| OneMain Holdings, Inc. | | 51,900 | 3,109,329 |
| | | | 25,735,051 |
| Diversified Financial Services - 1.2% | | | |
| Multi-Sector Holdings - 1.2% | | | |
| Cannae Holdings, Inc. (a) | | 93,200 | 3,160,412 |
| Insurance - 23.5% | | | |
| Insurance Brokers - 3.7% | | | |
| Arthur J. Gallagher & Co. | | 42,400 | 5,939,392 |
| Willis Towers Watson PLC | | 17,300 | 3,979,346 |
| | | | 9,918,738 |
| Life & Health Insurance - 2.6% | | | |
| CNO Financial Group, Inc. | | 79,100 | 1,868,342 |
| MetLife, Inc. | | 60,400 | 3,614,940 |
| Primerica, Inc. | | 8,600 | 1,317,004 |
| | | | 6,800,286 |
| Multi-Line Insurance - 5.8% | | | |
| American Financial Group, Inc. | | 31,000 | 3,866,320 |
| American International Group, Inc. | | 87,200 | 4,150,720 |
| Assurant, Inc. | | 23,700 | 3,701,466 |
| Hartford Financial Services Group, Inc. | | 57,200 | 3,544,684 |
| | | | 15,263,190 |
| Property & Casualty Insurance - 8.1% | | | |
| Chubb Ltd. | | 29,000 | 4,609,260 |
| First American Financial Corp. | | 35,400 | 2,207,190 |
| Hiscox Ltd. (a) | | 195,900 | 2,253,540 |
| Kemper Corp. | | 19,700 | 1,455,830 |
| Old Republic International Corp. | | 88,200 | 2,197,062 |
| The Travelers Companies, Inc. | | 58,912 | 8,819,716 |
| | | | 21,542,598 |
| Reinsurance - 3.3% | | | |
| Brookfield Asset Management Reinsurance Partners Ltd. (a) | | 508 | 26,426 |
| Reinsurance Group of America, Inc. | | 45,300 | 5,164,200 |
| RenaissanceRe Holdings Ltd. | | 23,200 | 3,452,624 |
| | | | 8,643,250 |
|
| TOTAL INSURANCE | | | 62,168,062 |
|
| IT Services - 2.0% | | | |
| Data Processing & Outsourced Services - 2.0% | | | |
| Computer Services, Inc. | | 9,600 | 540,000 |
| Fidelity National Information Services, Inc. | | 13,300 | 1,884,211 |
| Visa, Inc. Class A | | 12,300 | 2,875,986 |
| | | | 5,300,197 |
| Professional Services - 2.3% | | | |
| Research & Consulting Services - 2.3% | | | |
| Dun & Bradstreet Holdings, Inc. (a) | | 159,200 | 3,402,104 |
| Equifax, Inc. | | 11,700 | 2,802,267 |
| | | | 6,204,371 |
| Thrifts & Mortgage Finance - 4.6% | | | |
| Thrifts & Mortgage Finance - 4.6% | | | |
| Essent Group Ltd. | | 99,700 | 4,481,515 |
| MGIC Investment Corp. | | 330,400 | 4,493,440 |
| NMI Holdings, Inc. (a) | | 126,100 | 2,834,728 |
| Radian Group, Inc. | | 18,100 | 402,725 |
| | | | 12,212,408 |
| TOTAL COMMON STOCKS | | | |
| (Cost $203,184,327) | | | 264,266,614 |
|
| Money Market Funds - 0.1% | | | |
| Fidelity Cash Central Fund 0.06% (b) | | | |
| (Cost $382,714) | | 382,637 | 382,714 |
| TOTAL INVESTMENT IN SECURITIES - 99.9% | | | |
| (Cost $203,567,041) | | | 264,649,328 |
| NET OTHER ASSETS (LIABILITIES) - 0.1% | | | 148,863 |
| NET ASSETS - 100% | | | $264,798,191 |
Legend
(a) Non-income producing
(b) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| Fidelity Cash Central Fund | $792 |
| Fidelity Securities Lending Cash Central Fund | 397 |
| Total | $1,189 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable. Amount for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Fund | Value, beginning of period | Purchases | Sales Proceeds | Realized Gain/Loss | Change in Unrealized appreciation (depreciation) | Value, end of period | % ownership, end of period |
| Fidelity Cash Central Fund 0.06% | $1,212,041 | $53,796,748 | $54,625,997 | $(78) | $-- | $382,714 | 0.0% |
| Fidelity Securities Lending Cash Central Fund 0.06% | 54,600 | 4,804,035 | 4,858,635 | -- | -- | -- | 0.0% |
| Total | $1,266,641 | $58,600,783 | $59,484,632 | $(78) | $-- | $382,714 | |
Investment Valuation
The following is a summary of the inputs used, as of June 30, 2021, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| Investments in Securities: | | | | |
| Common Stocks | $264,266,614 | $264,266,614 | $-- | $-- |
| Money Market Funds | 382,714 | 382,714 | -- | -- |
| Total Investments in Securities: | $264,649,328 | $264,649,328 | $-- | $-- |
Other Information
Distribution of investments by country or territory of incorporation, as a percentage of Total Net Assets, is as follows (Unaudited):
| United States of America | 89.5% |
| Bermuda | 5.2% |
| Switzerland | 1.7% |
| United Kingdom | 1.5% |
| Canada | 1.4% |
| Others (Individually Less Than 1%) | 0.7% |
| | 100.0% |
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| | | June 30, 2021 (Unaudited) |
| Assets | | |
Investment in securities, at value — See accompanying schedule:
Unaffiliated issuers (cost $203,184,327) | $264,266,614 | |
| Fidelity Central Funds (cost $382,714) | 382,714 | |
| Total Investment in Securities (cost $203,567,041) | | $264,649,328 |
| Cash | | 8,331 |
| Receivable for fund shares sold | | 84,935 |
| Dividends receivable | | 263,136 |
| Distributions receivable from Fidelity Central Funds | | 39 |
| Prepaid expenses | | 1,129 |
| Other receivables | | 5,456 |
| Total assets | | 265,012,354 |
| Liabilities | | |
| Payable for fund shares redeemed | $31,953 | |
| Accrued management fee | 120,206 | |
| Transfer agent fee payable | 29,942 | |
| Other affiliated payables | 8,895 | |
| Audit Fee | 17,682 | |
| Other payables and accrued expenses | 5,485 | |
| Total liabilities | | 214,163 |
| Net Assets | | $264,798,191 |
| Net Assets consist of: | | |
| Paid in capital | | $200,768,225 |
| Total accumulated earnings (loss) | | 64,029,966 |
| Net Assets | | $264,798,191 |
| Net Asset Value and Maximum Offering Price | | |
| Initial Class: | | |
| Net Asset Value, offering price and redemption price per share ($33,546,582 ÷ 2,204,980 shares) | | $15.21 |
| Investor Class: | | |
| Net Asset Value, offering price and redemption price per share ($231,251,609 ÷ 15,285,807 shares) | | $15.13 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| | | Six months ended June 30, 2021 (Unaudited) |
| Investment Income | | |
| Dividends | | $2,995,232 |
| Income from Fidelity Central Funds (including $397 from security lending) | | 1,189 |
| Total income | | 2,996,421 |
| Expenses | | |
| Management fee | $564,245 | |
| Transfer agent fees | 139,766 | |
| Accounting fees | 41,730 | |
| Custodian fees and expenses | 7,127 | |
| Independent trustees' fees and expenses | 312 | |
| Audit | 19,318 | |
| Legal | 957 | |
| Miscellaneous | 450 | |
| Total expenses before reductions | 773,905 | |
| Expense reductions | (11,258) | |
| Total expenses after reductions | | 762,647 |
| Net investment income (loss) | | 2,233,774 |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 1,694,014 | |
| Fidelity Central Funds | (78) | |
| Foreign currency transactions | 3,694 | |
| Total net realized gain (loss) | | 1,697,630 |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 35,240,347 | |
| Assets and liabilities in foreign currencies | (5) | |
| Total change in net unrealized appreciation (depreciation) | | 35,240,342 |
| Net gain (loss) | | 36,937,972 |
| Net increase (decrease) in net assets resulting from operations | | $39,171,746 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| | Six months ended June 30, 2021 (Unaudited) | Year ended December 31, 2020 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $2,233,774 | $2,821,434 |
| Net realized gain (loss) | 1,697,630 | 1,960,296 |
| Change in net unrealized appreciation (depreciation) | 35,240,342 | (10,905,583) |
| Net increase (decrease) in net assets resulting from operations | 39,171,746 | (6,123,853) |
| Distributions to shareholders | (2,997,349) | (15,599,309) |
| Share transactions - net increase (decrease) | 87,130,065 | (1,372,059) |
| Total increase (decrease) in net assets | 123,304,462 | (23,095,221) |
| Net Assets | | |
| Beginning of period | 141,493,729 | 164,588,950 |
| End of period | $264,798,191 | $141,493,729 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
VIP Financial Services Portfolio Initial Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $12.38 | $13.62 | $11.15 | $13.72 | $11.50 | $9.74 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .15 | .26 | .22 | .17 | .11 | .12 |
| Net realized and unrealized gain (loss) | 2.93 | (.16) | 3.39 | (2.28) | 2.33 | 1.70 |
| Total from investment operations | 3.08 | .10 | 3.61 | (2.11) | 2.44 | 1.82 |
| Distributions from net investment income | (.04) | (.26) | (.26) | (.16) | (.09) | (.06) |
| Distributions from net realized gain | (.21) | (1.08) | (.88) | (.29) | (.13) | – |
| Total distributions | (.25) | (1.34) | (1.14) | (.46)B | (.22) | (.06) |
| Redemption fees added to paid in capitalA | – | – | – | –C | –C | –C |
| Net asset value, end of period | $15.21 | $12.38 | $13.62 | $11.15 | $13.72 | $11.50 |
| Total ReturnD,E,F | 25.23% | .77% | 34.33% | (15.73)% | 21.25% | 18.72% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .65%I | .69% | .68% | .67% | .69% | .72% |
| Expenses net of fee waivers, if any | .65%I | .69% | .68% | .67% | .69% | .72% |
| Expenses net of all reductions | .64%I | .68% | .67% | .66% | .69% | .71% |
| Net investment income (loss) | 2.13%I | 2.47% | 1.83% | 1.25% | .91% | 1.18% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $33,547 | $20,134 | $24,758 | $24,142 | $44,248 | $41,404 |
| Portfolio turnover rateJ | 30%I | 68% | 58% | 59% | 72% | 87% |
A Calculated based on average shares outstanding during the period.
B Total distributions per share do not sum due to rounding.
C Amount represents less than $.005 per share.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Financial Services Portfolio Investor Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $12.31 | $13.56 | $11.10 | $13.66 | $11.45 | $9.71 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .15 | .25 | .21 | .15 | .10 | .11 |
| Net realized and unrealized gain (loss) | 2.92 | (.16) | 3.38 | (2.26) | 2.32 | 1.69 |
| Total from investment operations | 3.07 | .09 | 3.59 | (2.11) | 2.42 | 1.80 |
| Distributions from net investment income | (.04) | (.25) | (.25) | (.15) | (.08) | (.06) |
| Distributions from net realized gain | (.21) | (1.08) | (.88) | (.29) | (.13) | – |
| Total distributions | (.25) | (1.34)B | (1.13) | (.45)B | (.21) | (.06) |
| Redemption fees added to paid in capitalA | – | – | – | –C | –C | –C |
| Net asset value, end of period | $15.13 | $12.31 | $13.56 | $11.10 | $13.66 | $11.45 |
| Total ReturnD,E,F | 25.29% | .63% | 34.28% | (15.82)% | 21.18% | 18.51% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .73%I | .76% | .76% | .75% | .77% | .80% |
| Expenses net of fee waivers, if any | .73%I | .76% | .76% | .75% | .77% | .80% |
| Expenses net of all reductions | .72%I | .75% | .75% | .74% | .77% | .79% |
| Net investment income (loss) | 2.06%I | 2.39% | 1.75% | 1.17% | .83% | 1.10% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $231,252 | $121,359 | $139,831 | $133,990 | $191,201 | $129,912 |
| Portfolio turnover rateJ | 30%I | 68% | 58% | 59% | 72% | 87% |
A Calculated based on average shares outstanding during the period.
B Total distributions per share do not sum due to rounding.
C Amount represents less than $.005 per share.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements (Unaudited)
For the period ended June 30, 2021
1. Organization.
VIP Financial Services Portfolio (the Fund) is a non-diversified fund of Variable Insurance Products Fund IV (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the investing fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense Ratio(a) |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% to .01% |
(a) Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds which contain the significant accounting policies (including investment valuation policies) of those funds, and are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, Exchange-Traded Funds (ETFs) and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of June 30, 2021 is included at the end of the Fund's Schedule of Investments.
Foreign Currency. Certain Funds may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Gains and losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received, and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost and include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of a fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of a fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred, as applicable. Certain expense reductions may also differ by class, if applicable. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, partnerships and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $63,523,358 |
| Gross unrealized depreciation | (3,751,585) |
| Net unrealized appreciation (depreciation) | $59,771,773 |
| Tax cost | $204,877,555 |
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Financial Services Portfolio | 117,228,284 | 30,793,371 |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .23% during the period. The group fee rate is based upon the monthly average net assets of a group of registered investment companies with which the investment adviser has management contracts. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annualized management fee rate was .52% of the Fund's average net assets.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company LLC (FIIOC), an affiliate of the investment adviser, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class pays a fee for transfer agent services, typesetting and printing and mailing of shareholder reports, excluding mailing of proxy statements. For the period, transfer agent fees for each class were as follows:
| | Amount | % of Class-Level Average Net Assets(a) |
| Initial Class | 9,029 | .06 |
| Investor Class | 130,737 | .14 |
| | $139,766 | |
(a) Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. For the period, the fees were equivalent to the following annualized rates:
| | % of Average Net Assets |
| VIP Financial Services Portfolio | .04 |
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount |
| VIP Financial Services Portfolio | $1,268 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note and are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Financial Services Portfolio | 4,615,165 | 1,567,235 |
6. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro-rata portion of the line of credit, which are reflected in Miscellaneous expenses on the Statement of Operations, and are listed below. During the period, there were no borrowings on this line of credit.
| | Amount |
| VIP Financial Services Portfolio | $145 |
7. Security Lending.
Funds lend portfolio securities from time to time in order to earn additional income. Lending agents are used, including National Financial Services (NFS), an affiliate of the investment adviser. Pursuant to a securities lending agreement, NFS will receive a fee, which is capped at 9.9% of a fund's daily lending revenue, for its services as lending agent. A fund may lend securities to certain qualified borrowers, including NFS. On the settlement date of the loan, a fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of a fund and any additional required collateral is delivered to a fund on the next business day. A fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund may apply collateral received from the borrower against the obligation. A fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. Any loaned securities are identified as such in the Schedule of Investments, and the value of loaned securities and cash collateral at period end, as applicable, are presented in the Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Affiliated security lending activity, if any, was as follows:
| | Total Security Lending Fees Paid to NFS | Security Lending Income From Securities Loaned to NFS | Value of Securities Loaned to NFS at Period End |
| VIP Financial Services Portfolio | $42 | $– | $– |
8. Expense Reductions.
Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset expenses. This amount totaled $11,056 for the period.
In addition, during the period the investment adviser or an affiliate reimbursed and/or waived a portion of fund-level operating expenses in the amount of $202.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| | Six months ended
June 30, 2021 | Year ended
December 31, 2020 |
| VIP Financial Services Portfolio | | |
| Distributions to shareholders | | |
| Initial Class | 405,457 | 2,314,671 |
| Investor Class | 2,591,892 | 13,284,638 |
| Total | $2,997,349 | $15,599,309 |
10. Share Transactions.
Transactions for each class of shares were as follows and may contain in-kind transactions:
| | Shares | Shares | Dollars | Dollars |
| | Six months ended June 30, 2021 | Year ended December 31, 2020 | Six months ended June 30, 2021 | Year ended December 31, 2020 |
| VIP Financial Services Portfolio | | | | |
| Initial Class | | | | |
| Shares sold | 996,265 | 505,603 | $14,712,733 | $5,316,841 |
| Reinvestment of distributions | 31,480 | 184,210 | 405,457 | 2,314,671 |
| Shares redeemed | (449,220) | (880,509) | (6,474,133) | (9,109,125) |
| Net increase (decrease) | 578,525 | (190,696) | $8,644,057 | $(1,477,613) |
| Investor Class | | | | |
| Shares sold | 6,577,846 | 2,600,837 | $95,192,328 | $27,124,780 |
| Reinvestment of distributions | 202,334 | 1,062,377 | 2,591,892 | 13,284,638 |
| Shares redeemed | (1,349,069) | (4,118,230) | (19,298,212) | (40,303,864) |
| Net increase (decrease) | 5,431,111 | (455,016) | $78,486,008 | $105,554 |
11. Other.
Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.
At the end of the period, the investment adviser or its affiliates were owners of record of more than 10% of the outstanding shares as follows:
| Fund | Affiliated % |
| VIP: Financial Services Portfolio | 100% |
12. Coronavirus (COVID-19) Pandemic.
An outbreak of COVID-19 first detected in China during December 2019 has since spread globally and was declared a pandemic by the World Health Organization during March 2020. Developments that disrupt global economies and financial markets, such as the COVID-19 pandemic, may magnify factors that affect the Fund's performance.
Shareholder Expense Example
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2021 to June 30, 2021).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
January 1, 2021 | Ending
Account Value
June 30, 2021 | Expenses Paid
During Period-B
January 1, 2021
to June 30, 2021 |
| VIP Financial Services Portfolio | | | | |
| Initial Class | .65% | | | |
| Actual | | $1,000.00 | $1,252.30 | $3.63 |
| Hypothetical-C | | $1,000.00 | $1,021.57 | $3.26 |
| Investor Class | .73% | | | |
| Actual | | $1,000.00 | $1,252.90 | $4.08 |
| Hypothetical-C | | $1,000.00 | $1,021.17 | $3.66 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
C 5% return per year before expenses
Board Approval of Investment Advisory Contracts and Management Fees
VIP Financial Services Portfolio
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
Approval of Stub Period Continuation. At its January 2021 meeting, the Board of Trustees voted to continue the fund's management contract with FMR, and the sub-advisory agreements and sub-subadvisory agreements, in each case, where applicable (together, the Advisory Contracts), without modification, for four months from February 1, 2021 through May 31, 2021, in connection with changes to the Board's meeting calendar. The Board considered that the approval of the fund's Advisory Contracts will not result in any changes in (i) the investment process or strategies employed in the management of the fund's assets; (ii) the fees and expenses paid by shareholders; (iii) the nature, extent or quality of services provided under the fund's Advisory Contracts; or (iv) the day-to-day management of the fund or the persons primarily responsible for such management. The Board also considered that since its last approval of the fund's Advisory Contracts, FMR had provided additional information on the fund in support of the annual contract renewal process, including competitive analyses on total expenses and management fees and in-depth reviews of fund performance and fund profitability information. The Board also considered the findings of certain ad hoc committees that had been previously formed to discuss matters relevant to all of the Fidelity funds, including economies of scale, fall-out benefits and retail vs. institutional funds. The Board concluded that the fund's Advisory Contracts are fair and reasonable, and that the fund's Advisory Contracts should be renewed, without modification, through May 31, 2021, with the understanding that the Board will consider the annual renewal for a full one year period in May 2021.
At its May 2021 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process. The Board also considered Fidelity's investments in business continuity planning, and its success in continuously providing services to the fund notwithstanding the severe disruptions caused by the COVID-19 pandemic.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
The Board noted that, in the past, it and the boards of certain other Fidelity funds had formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest, and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and ETFs with innovative structures, strategies and pricing and making other enhancements to meet client needs; (iv) launching new share classes of existing funds; (v) eliminating purchase minimums and broadening eligibility requirements for certain funds and share classes; (vi) approving the reduction in the holding period for the Class C to Class A conversion policy; (vii) reducing management fees and total expenses for certain target date funds and classes and index funds; (viii) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (ix) rationalizing product lines and gaining increased efficiencies from fund mergers, liquidations, and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (xi) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including retirement income goals.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history. The Board noted that there were portfolio management changes for the fund in May 2019 and October 2019. The Board will continue to monitor closely the fund's performance, taking into account the portfolio management changes.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index). In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative total return information for the fund and an appropriate benchmark index for the most recent one-, three-, and five-year periods ended September 30, 2020, as shown below.
VIP Financial Services Portfolio
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable investment mandates. For this purpose, all sector focused equity variable annuity funds are grouped in the same mapped group. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods ended September 30 (June 30 for periods ended 2019 and 2018 and December 31 for periods prior to 2018) shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates (i.e., sector equities), regardless of whether their management fee structures also are comparable. Funds with comparable management fee structures have similar management fee contractual arrangements (
e.g., flat rate charged for advisory services, all-inclusive fee rate,
etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and was considered by the Board.
VIP Financial Services Portfolio
The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for the 12-month period ended September 30, 2020.
The Board noted that, in the past, it and the boards of other Fidelity funds had formed an ad hoc Committee on Group Fee to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of a representative class of the fund compared to competitive fund median expenses. The fund's representative class is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure (SLTG). The Board also considered a total expense ASPG comparison for the representative class, which focuses on the total expenses of the representative class relative to a subset of non-Fidelity funds within the total expense SLTG. The total expense ASPG is limited to 15 larger and 15 smaller classes in fund average assets for a total of 30 classes, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
The Board noted that the total expense ratio of the Initial Class ranked below the SLTG competitive median and below the ASPG competitive median for the 12-month period ended September 30, 2020.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board also considered that in 2019 a joint ad hoc committee created by it and the boards of other Fidelity funds evaluated potential fall-out benefits (PFOB Committee). The Board noted that it considered the PFOB Committee's findings in connection with its consideration of the renewal of the Advisory Contracts.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund, including the conclusions of the PFOB Committee, and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total "group assets" increase, and for higher group fee rates as total "group assets" decrease ("group assets" as defined in the management contract). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board further considered that Fidelity agreed to impose a temporary fee waiver in the form of additional breakpoints to the current breakpoint schedule. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as "group assets" increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) consideration of expanding the use of performance fees for additional funds; (iii) Fidelity's pricing philosophy compared to competitors; (iv) metrics for evaluating index fund and ETF performance and information about ETF trading characteristics; (v) the methodology with respect to evaluating competitive fund data and peer group classifications and fee and expense comparisons; (vi) the expense structures for different funds and classes and information about the differences between various expense structures; (vii) group fee breakpoints; (viii) information regarding other accounts managed by Fidelity and sub-advisory arrangements; and (ix) Fidelity's philosophies and strategies for evaluating funds and classes with lower or declining asset levels.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Liquidity Risk Management Program
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program pursuant to the Liquidity Rule (the Program) effective December 1, 2018. The Program is reasonably designed to assess and manage the Fund’s liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund’s Board of Trustees (the Board) has designated the Fund’s investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund’s liquidity risk based on a variety of factors including (1) the Fund’s investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) in the case of exchange-traded funds, certain additional factors including the effect of the Fund’s prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund’s portfolio, as applicable.
In accordance with the Program, each of the Fund’s portfolio investments is classified into one of four liquidity categories described below based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments – cash or convertible to cash within three business days or less
- Moderately liquid investments – convertible to cash in three to seven calendar days
- Less liquid investments – can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments – cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund’s illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund’s net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund’s Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the annual period from December 1, 2019 through November 30, 2020. The report concluded that the Program has been implemented and is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk.
VFSIC-SANN-0821
1.817370.116
Fidelity® Variable Insurance Products:
Industrials Portfolio
Semi-Annual Report
June 30, 2021
Contents
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov.
You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity® Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
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This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Note to Shareholders:
Early in 2020, the outbreak and spread of a new coronavirus emerged as a public health emergency that had a major influence on financial markets, primarily based on its impact on the global economy and the outlook for corporate earnings. The virus causes a respiratory disease known as COVID-19. On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a pandemic, citing sustained risk of further global spread.
In the weeks following, as the crisis worsened, we witnessed an escalating human tragedy with wide-scale social and economic consequences from coronavirus-containment measures. The outbreak of COVID-19 prompted a number of measures to limit the spread, including travel and border restrictions, quarantines, and restrictions on large gatherings. In turn, these resulted in lower consumer activity, diminished demand for a wide range of products and services, disruption in manufacturing and supply chains, and – given the wide variability in outcomes regarding the outbreak – significant market uncertainty and volatility. Amid the turmoil, global governments and central banks took unprecedented action to help support consumers, businesses, and the broader economies, and to limit disruption to financial systems.
The situation continues to unfold, and the extent and duration of its impact on financial markets and the economy remain highly uncertain. Extreme events such as the coronavirus crisis are “exogenous shocks” that can have significant adverse effects on mutual funds and their investments. Although multiple asset classes may be affected by market disruption, the duration and impact may not be the same for all types of assets.
Fidelity is committed to helping you stay informed amid news about COVID-19 and during increased market volatility, and we’re taking extra steps to be responsive to customer needs. We encourage you to visit our websites, where we offer ongoing updates, commentary, and analysis on the markets and our funds.
Investment Summary (Unaudited)
Top Ten Stocks as of June 30, 2021
| | % of fund's net assets |
| Roper Technologies, Inc. | 10.5 |
| Honeywell International, Inc. | 6.6 |
| AMETEK, Inc. | 6.1 |
| The Boeing Co. | 4.5 |
| United Rentals, Inc. | 4.3 |
| XPO Logistics, Inc. | 4.3 |
| General Electric Co. | 4.2 |
| Howmet Aerospace, Inc. | 3.5 |
| Johnson Controls International PLC | 3.4 |
| Teledyne Technologies, Inc. | 3.4 |
| | 50.8 |
Top Industries (% of fund's net assets)
| As of June 30, 2021 |
| | Industrial Conglomerates | 21.3% |
| | Aerospace & Defense | 17.8% |
| | Machinery | 12.9% |
| | Road & Rail | 11.1% |
| | Electrical Equipment | 9.4% |
| | All Others* | 27.5% |
* Includes short-term investments and net other assets (liabilities).
Schedule of Investments June 30, 2021 (Unaudited)
Showing Percentage of Net Assets
| Common Stocks - 100.4% | | | |
| | | Shares | Value |
| Aerospace & Defense - 17.8% | | | |
| Aerospace & Defense - 17.8% | | | |
| Airbus Group NV (a) | | 20,800 | $2,680,139 |
| General Dynamics Corp. | | 4,600 | 865,996 |
| HEICO Corp. Class A | | 5,000 | 620,900 |
| Howmet Aerospace, Inc. (a) | | 163,400 | 5,632,398 |
| Raytheon Technologies Corp. | | 17,000 | 1,450,270 |
| Teledyne Technologies, Inc. (a) | | 13,300 | 5,570,439 |
| The Boeing Co. (a) | | 30,200 | 7,234,712 |
| TransDigm Group, Inc. (a) | | 4,800 | 3,106,992 |
| Triumph Group, Inc. (a) | | 82,213 | 1,705,920 |
| | | | 28,867,766 |
| Air Freight & Logistics - 6.1% | | | |
| Air Freight & Logistics - 6.1% | | | |
| FedEx Corp. | | 5,800 | 1,730,314 |
| Hub Group, Inc. Class A (a) | | 4,700 | 310,106 |
| United Parcel Service, Inc. Class B | | 4,000 | 831,880 |
| XPO Logistics, Inc. (a) | | 49,640 | 6,944,140 |
| | | | 9,816,440 |
| Building Products - 5.6% | | | |
| Building Products - 5.6% | | | |
| Advanced Drain Systems, Inc. | | 2,500 | 291,425 |
| Allegion PLC | | 7,400 | 1,030,820 |
| Johnson Controls International PLC | | 81,200 | 5,572,756 |
| Trane Technologies PLC | | 12,200 | 2,246,508 |
| | | | 9,141,509 |
| Commercial Services & Supplies - 3.7% | | | |
| Diversified Support Services - 2.9% | | | |
| Copart, Inc. (a) | | 35,900 | 4,732,697 |
| Environmental & Facility Services - 0.8% | | | |
| GFL Environmental, Inc. | | 36,100 | 1,152,312 |
| Waste Connection, Inc. (United States) | | 1,400 | 167,202 |
| | | | 1,319,514 |
|
| TOTAL COMMERCIAL SERVICES & SUPPLIES | | | 6,052,211 |
|
| Construction & Engineering - 0.2% | | | |
| Construction & Engineering - 0.2% | | | |
| AECOM (a) | | 3,900 | 246,948 |
| Electrical Equipment - 9.4% | | | |
| Electrical Components & Equipment - 9.4% | | | |
| Acuity Brands, Inc. | | 7,900 | 1,477,537 |
| AMETEK, Inc. | | 74,000 | 9,879,000 |
| Generac Holdings, Inc. (a) | | 2,900 | 1,203,935 |
| nVent Electric PLC | | 26,100 | 815,364 |
| Regal Beloit Corp. | | 4,788 | 639,246 |
| Vertiv Holdings Co. | | 42,300 | 1,154,790 |
| | | | 15,169,872 |
| Industrial Conglomerates - 21.3% | | | |
| Industrial Conglomerates - 21.3% | | | |
| General Electric Co. | | 500,100 | 6,731,346 |
| Honeywell International, Inc. | | 48,427 | 10,622,462 |
| Roper Technologies, Inc. | | 36,300 | 17,068,260 |
| | | | 34,422,068 |
| Machinery - 12.9% | | | |
| Agricultural & Farm Machinery - 0.0% | | | |
| Deere & Co. | | 80 | 28,217 |
| Construction Machinery & Heavy Trucks - 0.9% | | | |
| Oshkosh Corp. | | 11,813 | 1,472,372 |
| Industrial Machinery - 12.0% | | | |
| Crane Co. | | 12,513 | 1,155,826 |
| Dover Corp. | | 8,300 | 1,249,980 |
| Fortive Corp. | | 34,892 | 2,433,368 |
| Graco, Inc. | | 6,600 | 499,620 |
| IDEX Corp. | | 10,300 | 2,266,515 |
| Ingersoll Rand, Inc. (a) | | 95,500 | 4,661,355 |
| ITT, Inc. | | 29,156 | 2,670,398 |
| Middleby Corp. (a) | | 4,800 | 831,648 |
| Otis Worldwide Corp. | | 19,500 | 1,594,515 |
| Pentair PLC | | 8,000 | 539,920 |
| Woodward, Inc. | | 12,400 | 1,523,712 |
| | | | 19,426,857 |
|
| TOTAL MACHINERY | | | 20,927,446 |
|
| Marine - 0.1% | | | |
| Marine - 0.1% | | | |
| Genco Shipping & Trading Ltd. | | 11,600 | 219,008 |
| Professional Services - 4.7% | | | |
| Human Resource & Employment Services - 3.1% | | | |
| TriNet Group, Inc. (a) | | 69,163 | 5,012,934 |
| Research & Consulting Services - 1.6% | | | |
| CoStar Group, Inc. (a) | | 32,000 | 2,650,240 |
|
| TOTAL PROFESSIONAL SERVICES | | | 7,663,174 |
|
| Road & Rail - 11.1% | | | |
| Railroads - 6.7% | | | |
| CSX Corp. | | 112,500 | 3,609,000 |
| Norfolk Southern Corp. | | 10,950 | 2,906,240 |
| Union Pacific Corp. | | 19,700 | 4,332,621 |
| | | | 10,847,861 |
| Trucking - 4.4% | | | |
| Old Dominion Freight Lines, Inc. | | 21,000 | 5,329,800 |
| Saia, Inc. (a) | | 8,400 | 1,759,716 |
| | | | 7,089,516 |
|
| TOTAL ROAD & RAIL | | | 17,937,377 |
|
| Software - 0.7% | | | |
| Application Software - 0.7% | | | |
| Descartes Systems Group, Inc. (a) | | 15,700 | 1,085,812 |
| Trading Companies & Distributors - 6.8% | | | |
| Trading Companies & Distributors - 6.8% | | | |
| AerCap Holdings NV (a) | | 25,600 | 1,310,976 |
| Herc Holdings, Inc. (a) | | 23,758 | 2,662,559 |
| United Rentals, Inc. (a) | | 21,900 | 6,986,319 |
| | | | 10,959,854 |
| TOTAL COMMON STOCKS | | | |
| (Cost $130,684,848) | | | 162,509,485 |
|
| Money Market Funds - 0.2% | | | |
| Fidelity Cash Central Fund 0.06% (b) | | | |
| (Cost $281,997) | | 281,941 | 281,997 |
| TOTAL INVESTMENT IN SECURITIES - 100.6% | | | |
| (Cost $130,966,845) | | | 162,791,482 |
| NET OTHER ASSETS (LIABILITIES) - (0.6)% | | | (978,745) |
| NET ASSETS - 100% | | | $161,812,737 |
Legend
(a) Non-income producing
(b) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| Fidelity Cash Central Fund | $342 |
| Fidelity Securities Lending Cash Central Fund | 113 |
| Total | $455 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable. Amount for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Fund | Value, beginning of period | Purchases | Sales Proceeds | Realized Gain/Loss | Change in Unrealized appreciation (depreciation) | Value, end of period | % ownership, end of period |
| Fidelity Cash Central Fund 0.06% | $1,686,194 | $26,217,005 | $27,621,164 | $(38) | $-- | $281,997 | 0.0% |
| Fidelity Securities Lending Cash Central Fund 0.06% | 892,500 | 3,076,179 | 3,968,679 | -- | -- | -- | 0.0% |
| Total | $2,578,694 | $29,293,184 | $31,589,843 | $(38) | $-- | $281,997 | |
Investment Valuation
The following is a summary of the inputs used, as of June 30, 2021, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| Investments in Securities: | | | | |
| Common Stocks | $162,509,485 | $159,829,346 | $2,680,139 | $-- |
| Money Market Funds | 281,997 | 281,997 | -- | -- |
| Total Investments in Securities: | $162,791,482 | $160,111,343 | $2,680,139 | $-- |
Other Information
Distribution of investments by country or territory of incorporation, as a percentage of Total Net Assets, is as follows (Unaudited):
| United States of America | 89.7% |
| Ireland | 6.2% |
| Netherlands | 2.5% |
| Canada | 1.5% |
| Others (Individually Less Than 1%) | 0.1% |
| | 100.0% |
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| | | June 30, 2021 (Unaudited) |
| Assets | | |
Investment in securities, at value — See accompanying schedule:
Unaffiliated issuers (cost $130,684,848) | $162,509,485 | |
| Fidelity Central Funds (cost $281,997) | 281,997 | |
| Total Investment in Securities (cost $130,966,845) | | $162,791,482 |
| Cash | | 10,333 |
| Receivable for investments sold | | 101,716 |
| Receivable for fund shares sold | | 26,905 |
| Dividends receivable | | 45,301 |
| Distributions receivable from Fidelity Central Funds | | 6 |
| Prepaid expenses | | 995 |
| Other receivables | | 10,880 |
| Total assets | | 162,987,618 |
| Liabilities | | |
| Payable for investments purchased | $793,545 | |
| Payable for fund shares redeemed | 258,734 | |
| Accrued management fee | 72,967 | |
| Other affiliated payables | 23,114 | |
| Other payables and accrued expenses | 26,521 | |
| Total liabilities | | 1,174,881 |
| Net Assets | | $161,812,737 |
| Net Assets consist of: | | |
| Paid in capital | | $111,438,836 |
| Total accumulated earnings (loss) | | 50,373,901 |
| Net Assets | | $161,812,737 |
| Net Asset Value and Maximum Offering Price | | |
| Initial Class: | | |
| Net Asset Value, offering price and redemption price per share ($28,514,377 ÷ 1,241,427 shares) | | $22.97 |
| Investor Class: | | |
| Net Asset Value, offering price and redemption price per share ($133,298,360 ÷ 5,856,987 shares) | | $22.76 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| | | Six months ended June 30, 2021 (Unaudited) |
| Investment Income | | |
| Dividends | | $480,950 |
| Income from Fidelity Central Funds (including $113 from security lending) | | 455 |
| Total income | | 481,405 |
| Expenses | | |
| Management fee | $444,546 | |
| Transfer agent fees | 107,168 | |
| Accounting fees | 32,875 | |
| Custodian fees and expenses | 10,532 | |
| Independent trustees' fees and expenses | 283 | |
| Audit | 19,040 | |
| Legal | 369 | |
| Interest | 115 | |
| Miscellaneous | 472 | |
| Total expenses before reductions | 615,400 | |
| Expense reductions | (26,903) | |
| Total expenses after reductions | | 588,497 |
| Net investment income (loss) | | (107,092) |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 20,499,161 | |
| Fidelity Central Funds | (38) | |
| Foreign currency transactions | (1,283) | |
| Total net realized gain (loss) | | 20,497,840 |
| Change in net unrealized appreciation (depreciation) on investment securities | | (9,449,362) |
| Net gain (loss) | | 11,048,478 |
| Net increase (decrease) in net assets resulting from operations | | $10,941,386 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| | Six months ended June 30, 2021 (Unaudited) | Year ended December 31, 2020 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $(107,092) | $159,608 |
| Net realized gain (loss) | 20,497,840 | 10,899,557 |
| Change in net unrealized appreciation (depreciation) | (9,449,362) | 954,558 |
| Net increase (decrease) in net assets resulting from operations | 10,941,386 | 12,013,723 |
| Distributions to shareholders | (12,342,049) | (9,927,000) |
| Share transactions - net increase (decrease) | (1,987,872) | (8,380,340) |
| Total increase (decrease) in net assets | (3,388,535) | (6,293,617) |
| Net Assets | | |
| Beginning of period | 165,201,272 | 171,494,889 |
| End of period | $161,812,737 | $165,201,272 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
VIP Industrials Portfolio Initial Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $23.29 | $21.98 | $19.29 | $23.85 | $20.88 | $20.25 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | (.01) | .03 | .24 | .19 | .16 | .18 |
| Net realized and unrealized gain (loss) | 1.42 | 2.57 | 4.92 | (3.68) | 3.91 | 2.50 |
| Total from investment operations | 1.41 | 2.60 | 5.16 | (3.49) | 4.07 | 2.68 |
| Distributions from net investment income | – | (.10)B | (.24) | (.18) | (.16) | (.13) |
| Distributions from net realized gain | (1.73) | (1.19)B | (2.23) | (.89) | (.94) | (1.92) |
| Total distributions | (1.73) | (1.29) | (2.47) | (1.07) | (1.10) | (2.05) |
| Redemption fees added to paid in capitalA | – | – | – | – | –C | –C |
| Net asset value, end of period | $22.97 | $23.29 | $21.98 | $19.29 | $23.85 | $20.88 |
| Total ReturnD,E,F | 6.60% | 12.32% | 28.15% | (15.12)% | 20.15% | 15.87% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .66%I | .68% | .67% | .67% | .69% | .70% |
| Expenses net of fee waivers, if any | .66%I | .68% | .67% | .67% | .68% | .70% |
| Expenses net of all reductions | .63%I | .67% | .67% | .66% | .68% | .69% |
| Net investment income (loss) | (.06)%I | .17% | 1.13% | .85% | .72% | .94% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $28,514 | $29,873 | $33,078 | $30,987 | $44,205 | $42,322 |
| Portfolio turnover rateJ | 260%I | 240% | 121% | 94% | 64% | 62% |
A Calculated based on average shares outstanding during the period.
B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.
C Amount represents less than $.005 per share.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Industrials Portfolio Investor Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $23.10 | $21.82 | $19.17 | $23.69 | $20.75 | $20.15 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | (.02) | .02 | .22 | .17 | .14 | .16 |
| Net realized and unrealized gain (loss) | 1.41 | 2.53 | 4.88 | (3.64) | 3.88 | 2.48 |
| Total from investment operations | 1.39 | 2.55 | 5.10 | (3.47) | 4.02 | 2.64 |
| Distributions from net investment income | – | (.08)B | (.22) | (.16) | (.15) | (.12) |
| Distributions from net realized gain | (1.73) | (1.19)B | (2.23) | (.89) | (.94) | (1.92) |
| Total distributions | (1.73) | (1.27) | (2.45) | (1.05) | (1.08)C | (2.04) |
| Redemption fees added to paid in capitalA | – | – | – | – | –D | –D |
| Net asset value, end of period | $22.76 | $23.10 | $21.82 | $19.17 | $23.69 | $20.75 |
| Total ReturnE,F,G | 6.56% | 12.19% | 28.03% | (15.14)% | 20.05% | 15.73% |
| Ratios to Average Net AssetsH,I | | | | | | |
| Expenses before reductions | .74%J | .76% | .75% | .75% | .77% | .78% |
| Expenses net of fee waivers, if any | .74%J | .76% | .75% | .75% | .77% | .78% |
| Expenses net of all reductions | .71%J | .75% | .75% | .74% | .76% | .77% |
| Net investment income (loss) | (.14)%J | .10% | 1.05% | .77% | .64% | .86% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $133,298 | $135,328 | $138,417 | $124,268 | $174,645 | $151,967 |
| Portfolio turnover rateK | 260%J | 240% | 121% | 94% | 64% | 62% |
A Calculated based on average shares outstanding during the period.
B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.
C Total distributions per share do not sum due to rounding.
D Amount represents less than $.005 per share.
E Total returns for periods of less than one year are not annualized.
F Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
G Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
H Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
J Annualized
K Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements (Unaudited)
For the period ended June 30, 2021
1. Organization.
VIP Industrials Portfolio (the Fund) is a non-diversified fund of Variable Insurance Products Fund IV (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the investing fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense Ratio(a) |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% to .01% |
(a) Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds which contain the significant accounting policies (including investment valuation policies) of those funds, and are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, ETFs and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of June 30, 2021 is included at the end of the Fund's Schedule of Investments.
Foreign Currency. Certain Funds may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Gains and losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received, and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost and include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of a fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of a fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred, as applicable. Certain expense reductions may also differ by class, if applicable. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. These differences resulted in distribution reclassifications for the period ended December 31, 2020.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $32,492,434 |
| Gross unrealized depreciation | (1,445,584) |
| Net unrealized appreciation (depreciation) | $31,046,850 |
| Tax cost | $131,744,632 |
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Industrials Portfolio | 215,019,591 | 227,579,724 |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .23% during the period. The group fee rate is based upon the monthly average net assets of a group of registered investment companies with which the investment adviser has management contracts. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annualized management fee rate was .53% of the Fund's average net assets.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company LLC (FIIOC), an affiliate of the investment adviser, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class pays a fee for transfer agent services, typesetting and printing and mailing of shareholder reports, excluding mailing of proxy statements. For the period, transfer agent fees for each class were as follows:
| | Amount | % of Class-Level Average Net Assets(a) |
| Initial Class | $9,376 | .06 |
| Investor Class | 97,792 | .14 |
| | $107,168 | |
(a) Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. For the period, the fees were equivalent to the following annualized rates:
| | % of Average Net Assets |
| VIP Industrials Portfolio | .04 |
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount |
| VIP Industrials Portfolio | $3,950 |
Interfund Lending Program. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the Fund, along with other registered investment companies having management contracts with Fidelity Management & Research Company LLC (FMR), or other affiliated entities of FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from, or lend money to, other participating affiliated funds. At period end, there were no interfund loans outstanding. Activity in this program during the period for which loans were outstanding was as follows:
| | Borrower or Lender | Average Loan Balance | Weighted Average Interest Rate | Interest Expense |
| VIP Industrials Portfolio | Borrower | $7,165,000 | .29% | $115 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note and are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Industrials Portfolio | 8,949,751 | 14,688,054 |
6. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro-rata portion of the line of credit, which are reflected in Miscellaneous expenses on the Statement of Operations, and are listed below. During the period, there were no borrowings on this line of credit.
| | Amount |
| VIP Industrials Portfolio | $160 |
7. Security Lending.
Funds lend portfolio securities from time to time in order to earn additional income. Lending agents are used, including National Financial Services (NFS), an affiliate of the investment adviser. Pursuant to a securities lending agreement, NFS will receive a fee, which is capped at 9.9% of a fund's daily lending revenue, for its services as lending agent. A fund may lend securities to certain qualified borrowers, including NFS. On the settlement date of the loan, a fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of a fund and any additional required collateral is delivered to a fund on the next business day. A fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund may apply collateral received from the borrower against the obligation. A fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. Any loaned securities are identified as such in the Schedule of Investments, and the value of loaned securities and cash collateral at period end, as applicable, are presented in the Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Affiliated security lending activity, if any, was as follows:
| | Total Security Lending Fees Paid to NFS | Security Lending Income From Securities Loaned to NFS | Value of Securities Loaned to NFS at Period End |
| VIP Industrials Portfolio | $11 | $– | $– |
8. Expense Reductions.
Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset expenses. This amount totaled $26,659 for the period.
In addition, during the period the investment adviser or an affiliate reimbursed and/or waived a portion of fund-level operating expenses in the amount of $244.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| | Six months ended
June 30, 2021 | Year ended
December 31, 2020 |
| VIP Industrials Portfolio | | |
| Distributions to shareholders | | |
| Initial Class | $2,180,275 | $1,874,668 |
| Investor Class | 10,161,774 | 8,052,332 |
| Total | $12,342,049 | $9,927,000 |
10. Share Transactions.
Transactions for each class of shares were as follows and may contain in-kind transactions:
| | Shares | Shares | Dollars | Dollars |
| | Six months ended June 30, 2021 | Year ended December 31, 2020 | Six months ended June 30, 2021 | Year ended December 31, 2020 |
| VIP Industrials Portfolio | | | | |
| Initial Class | | | | |
| Shares sold | 48,138 | 99,469 | $1,106,203 | $1,983,772 |
| Reinvestment of distributions | 101,739 | 87,170 | 2,180,275 | 1,874,668 |
| Shares redeemed | (191,178) | (408,544) | (4,365,886) | (7,556,063) |
| Net increase (decrease) | (41,301) | (221,905) | $(1,079,408) | $(3,697,623) |
| Investor Class | | | | |
| Shares sold | 640,869 | 1,165,988 | $14,375,378 | $24,109,271 |
| Reinvestment of distributions | 478,426 | 377,577 | 10,161,774 | 8,052,332 |
| Shares redeemed | (1,120,720) | (2,029,237) | (25,445,616) | (36,844,320) |
| Net increase (decrease) | (1,425) | (485,672) | $(908,464) | $(4,682,717) |
11. Other.
Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.
At the end of the period, the investment adviser or its affiliates were owners of record of more than 10% of the outstanding shares as follows:
| Fund | Affiliated % |
| VIP Industrials Portfolio | 100% |
12. Coronavirus (COVID-19) Pandemic.
An outbreak of COVID-19 first detected in China during December 2019 has since spread globally and was declared a pandemic by the World Health Organization during March 2020. Developments that disrupt global economies and financial markets, such as the COVID-19 pandemic, may magnify factors that affect the Fund's performance.
Shareholder Expense Example
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2021 to June 30, 2021).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
January 1, 2021 | Ending
Account Value
June 30, 2021 | Expenses Paid
During Period-B
January 1, 2021
to June 30, 2021 |
| VIP Industrials Portfolio | | | | |
| Initial Class | .66% | | | |
| Actual | | $1,000.00 | $1,066.00 | $3.38 |
| Hypothetical-C | | $1,000.00 | $1,021.52 | $3.31 |
| Investor Class | .74% | | | |
| Actual | | $1,000.00 | $1,065.60 | $3.79 |
| Hypothetical-C | | $1,000.00 | $1,021.12 | $3.71 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
C 5% return per year before expenses
Board Approval of Investment Advisory Contracts and Management Fees
VIP Industrials Portfolio
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
Approval of Stub Period Continuation. At its January 2021 meeting, the Board of Trustees voted to continue the fund's management contract with FMR, and the sub-advisory agreements and sub-subadvisory agreements, in each case, where applicable (together, the Advisory Contracts), without modification, for four months from February 1, 2021 through May 31, 2021, in connection with changes to the Board's meeting calendar. The Board considered that the approval of the fund's Advisory Contracts will not result in any changes in (i) the investment process or strategies employed in the management of the fund's assets; (ii) the fees and expenses paid by shareholders; (iii) the nature, extent or quality of services provided under the fund's Advisory Contracts; or (iv) the day-to-day management of the fund or the persons primarily responsible for such management. The Board also considered that since its last approval of the fund's Advisory Contracts, FMR had provided additional information on the fund in support of the annual contract renewal process, including competitive analyses on total expenses and management fees and in-depth reviews of fund performance and fund profitability information. The Board also considered the findings of certain ad hoc committees that had been previously formed to discuss matters relevant to all of the Fidelity funds, including economies of scale, fall-out benefits and retail vs. institutional funds. The Board concluded that the fund's Advisory Contracts are fair and reasonable, and that the fund's Advisory Contracts should be renewed, without modification, through May 31, 2021, with the understanding that the Board will consider the annual renewal for a full one year period in May 2021.
At its May 2021 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process. The Board also considered Fidelity's investments in business continuity planning, and its success in continuously providing services to the fund notwithstanding the severe disruptions caused by the COVID-19 pandemic.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
The Board noted that, in the past, it and the boards of certain other Fidelity funds had formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest, and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and ETFs with innovative structures, strategies and pricing and making other enhancements to meet client needs; (iv) launching new share classes of existing funds; (v) eliminating purchase minimums and broadening eligibility requirements for certain funds and share classes; (vi) approving the reduction in the holding period for the Class C to Class A conversion policy; (vii) reducing management fees and total expenses for certain target date funds and classes and index funds; (viii) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (ix) rationalizing product lines and gaining increased efficiencies from fund mergers, liquidations, and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (xi) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including retirement income goals.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history. The Board noted that there were portfolio management changes for the fund in November 2018 and December 2018. The Board will continue to monitor closely the fund's performance, taking into account the portfolio management changes.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index). In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative total return information for the fund and an appropriate benchmark index for the most recent one-, three-, and five-year periods ended September 30, 2020, as shown below.
VIP Industrials Portfolio
The Board considered the fund's underperformance for different time periods ended September 30, 2020 and for different time periods ended December 31, 2020 (which periods are not reflected in the chart above). The Board noted that the fund's underperformance has continued since the Board approved the management contract in January 2019 and January 2020. The Board's discussions with FMR regarding underperformance cover topics including, but not limited to: the longer-term track record of a fund's portfolio manager(s); broader trends in the market that may adversely impact a fund's performance; and attribution reports on contributors to the fund's underperformance. The Board engages with FMR on steps that might be taken to address a fund's underperformance. For a fund with underperformance over longer periods of time, the Board typically monitors the fund's performance more closely.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable investment mandates. For this purpose, all sector focused equity variable annuity funds are grouped in the same mapped group. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods ended September 30 (June 30 for periods ended 2019 and 2018 and December 31 for periods prior to 2018) shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates (i.e., sector equities), regardless of whether their management fee structures also are comparable. Funds with comparable management fee structures have similar management fee contractual arrangements (
e.g., flat rate charged for advisory services, all-inclusive fee rate,
etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and was considered by the Board.
VIP Industrials Portfolio
The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for the 12-month period ended September 30, 2020.
The Board noted that, in the past, it and the boards of other Fidelity funds had formed an ad hoc Committee on Group Fee to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of a representative class of the fund compared to competitive fund median expenses. The fund's representative class is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure (SLTG). The Board also considered a total expense ASPG comparison for the representative class, which focuses on the total expenses of the representative class relative to a subset of non-Fidelity funds within the total expense SLTG. The total expense ASPG is limited to 15 larger and 15 smaller classes in fund average assets for a total of 30 classes, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
The Board noted that the total expense ratio of the Initial Class ranked below the SLTG competitive median and below the ASPG competitive median for the 12-month period ended September 30, 2020.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board also considered that in 2019 a joint ad hoc committee created by it and the boards of other Fidelity funds evaluated potential fall-out benefits (PFOB Committee). The Board noted that it considered the PFOB Committee's findings in connection with its consideration of the renewal of the Advisory Contracts.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund, including the conclusions of the PFOB Committee, and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total "group assets" increase, and for higher group fee rates as total "group assets" decrease ("group assets" as defined in the management contract). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board further considered that Fidelity agreed to impose a temporary fee waiver in the form of additional breakpoints to the current breakpoint schedule. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as "group assets" increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) consideration of expanding the use of performance fees for additional funds; (iii) Fidelity's pricing philosophy compared to competitors; (iv) metrics for evaluating index fund and ETF performance and information about ETF trading characteristics; (v) the methodology with respect to evaluating competitive fund data and peer group classifications and fee and expense comparisons; (vi) the expense structures for different funds and classes and information about the differences between various expense structures; (vii) group fee breakpoints; (viii) information regarding other accounts managed by Fidelity and sub-advisory arrangements; and (ix) Fidelity's philosophies and strategies for evaluating funds and classes with lower or declining asset levels.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Liquidity Risk Management Program
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program pursuant to the Liquidity Rule (the Program) effective December 1, 2018. The Program is reasonably designed to assess and manage the Fund’s liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund’s Board of Trustees (the Board) has designated the Fund’s investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund’s liquidity risk based on a variety of factors including (1) the Fund’s investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) in the case of exchange-traded funds, certain additional factors including the effect of the Fund’s prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund’s portfolio, as applicable.
In accordance with the Program, each of the Fund’s portfolio investments is classified into one of four liquidity categories described below based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments – cash or convertible to cash within three business days or less
- Moderately liquid investments – convertible to cash in three to seven calendar days
- Less liquid investments – can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments – cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund’s illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund’s net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund’s Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the annual period from December 1, 2019 through November 30, 2020. The report concluded that the Program has been implemented and is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk.
VCYLIC-SANN-0821
1.817364.116
Fidelity® Variable Insurance Products:
Consumer Discretionary Portfolio
Semi-Annual Report
June 30, 2021
Contents
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov.
You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity® Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
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. © 2021 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Note to Shareholders:
Early in 2020, the outbreak and spread of a new coronavirus emerged as a public health emergency that had a major influence on financial markets, primarily based on its impact on the global economy and the outlook for corporate earnings. The virus causes a respiratory disease known as COVID-19. On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a pandemic, citing sustained risk of further global spread.
In the weeks following, as the crisis worsened, we witnessed an escalating human tragedy with wide-scale social and economic consequences from coronavirus-containment measures. The outbreak of COVID-19 prompted a number of measures to limit the spread, including travel and border restrictions, quarantines, and restrictions on large gatherings. In turn, these resulted in lower consumer activity, diminished demand for a wide range of products and services, disruption in manufacturing and supply chains, and – given the wide variability in outcomes regarding the outbreak – significant market uncertainty and volatility. Amid the turmoil, global governments and central banks took unprecedented action to help support consumers, businesses, and the broader economies, and to limit disruption to financial systems.
The situation continues to unfold, and the extent and duration of its impact on financial markets and the economy remain highly uncertain. Extreme events such as the coronavirus crisis are “exogenous shocks” that can have significant adverse effects on mutual funds and their investments. Although multiple asset classes may be affected by market disruption, the duration and impact may not be the same for all types of assets.
Fidelity is committed to helping you stay informed amid news about COVID-19 and during increased market volatility, and we’re taking extra steps to be responsive to customer needs. We encourage you to visit our websites, where we offer ongoing updates, commentary, and analysis on the markets and our funds.
Investment Summary (Unaudited)
Top Ten Stocks as of June 30, 2021
| | % of fund's net assets |
| Amazon.com, Inc. | 21.6 |
| Tesla, Inc. | 5.6 |
| The Home Depot, Inc. | 5.5 |
| NIKE, Inc. Class B | 3.9 |
| Capri Holdings Ltd. | 3.3 |
| Lowe's Companies, Inc. | 3.0 |
| Starbucks Corp. | 2.5 |
| Tapestry, Inc. | 2.5 |
| Burlington Stores, Inc. | 2.3 |
| Booking Holdings, Inc. | 2.0 |
| | 52.2 |
Top Industries (% of fund's net assets)
| As of June 30, 2021 |
| | Internet & Direct Marketing Retail | 24.8% |
| | Hotels, Restaurants & Leisure | 19.0% |
| | Specialty Retail | 18.9% |
| | Textiles, Apparel & Luxury Goods | 16.4% |
| | Automobiles | 6.0% |
| | All Others* | 14.9% |
* Includes short-term investments and net other assets (liabilities).
Schedule of Investments June 30, 2021 (Unaudited)
Showing Percentage of Net Assets
| Common Stocks - 99.4% | | | |
| | | Shares | Value |
| Auto Components - 0.3% | | | |
| Auto Parts & Equipment - 0.3% | | | |
| Adient PLC (a) | | 17,300 | $781,960 |
| Automobiles - 6.0% | | | |
| Automobile Manufacturers - 6.0% | | | |
| Ferrari NV | | 7,100 | 1,462,955 |
| Tesla, Inc. (a) | | 26,360 | 17,916,892 |
| | | | 19,379,847 |
| Building Products - 0.2% | | | |
| Building Products - 0.2% | | | |
| The AZEK Co., Inc. | | 17,900 | 760,034 |
| Commercial Services & Supplies - 0.3% | | | |
| Diversified Support Services - 0.3% | | | |
| Copart, Inc. (a) | | 8,236 | 1,085,752 |
| Diversified Consumer Services - 0.2% | | | |
| Education Services - 0.2% | | | |
| Grand Canyon Education, Inc. (a) | | 5,500 | 494,835 |
| Entertainment - 0.8% | | | |
| Movies & Entertainment - 0.8% | | | |
| Cinemark Holdings, Inc. (a) | | 57,300 | 1,257,735 |
| Live Nation Entertainment, Inc. (a) | | 12,790 | 1,120,276 |
| | | | 2,378,011 |
| Food & Staples Retailing - 1.7% | | | |
| Food Distributors - 1.3% | | | |
| Performance Food Group Co. (a) | | 38,668 | 1,875,011 |
| U.S. Foods Holding Corp. (a) | | 59,000 | 2,263,240 |
| | | | 4,138,251 |
| Hypermarkets & Super Centers - 0.4% | | | |
| BJ's Wholesale Club Holdings, Inc. (a) | | 28,607 | 1,361,121 |
|
| TOTAL FOOD & STAPLES RETAILING | | | 5,499,372 |
|
| Hotels, Restaurants & Leisure - 19.0% | | | |
| Casinos & Gaming - 4.0% | | | |
| Caesars Entertainment, Inc. (a) | | 61,431 | 6,373,466 |
| Churchill Downs, Inc. | | 15,900 | 3,152,334 |
| MGM Resorts International | | 4,700 | 200,455 |
| Penn National Gaming, Inc. (a) | | 40,300 | 3,082,547 |
| | | | 12,808,802 |
| Hotels, Resorts & Cruise Lines - 7.7% | | | |
| Airbnb, Inc. Class A | | 10,500 | 1,607,970 |
| Booking Holdings, Inc. (a) | | 2,970 | 6,498,627 |
| Expedia, Inc. (a) | | 30,400 | 4,976,784 |
| Hilton Worldwide Holdings, Inc. (a) | | 38,300 | 4,619,746 |
| Lindblad Expeditions Holdings (a) | | 34,066 | 545,397 |
| Marriott International, Inc. Class A (a) | | 24,900 | 3,399,348 |
| Marriott Vacations Worldwide Corp. (a) | | 11,399 | 1,815,861 |
| Wyndham Hotels & Resorts, Inc. | | 18,800 | 1,359,052 |
| | | | 24,822,785 |
| Leisure Facilities - 0.9% | | | |
| Planet Fitness, Inc. (a) | | 16,590 | 1,248,398 |
| Vail Resorts, Inc. (a) | | 4,880 | 1,544,618 |
| | | | 2,793,016 |
| Restaurants - 6.4% | | | |
| ARAMARK Holdings Corp. | | 35,544 | 1,324,014 |
| Chipotle Mexican Grill, Inc. (a) | | 2,011 | 3,117,734 |
| Domino's Pizza, Inc. | | 3,400 | 1,586,066 |
| McDonald's Corp. | | 15,400 | 3,557,246 |
| Noodles & Co. (a) | | 94,500 | 1,179,360 |
| Restaurant Brands International, Inc. | | 21,800 | 1,404,619 |
| Ruth's Hospitality Group, Inc. (a) | | 14,832 | 341,581 |
| Starbucks Corp. | | 71,970 | 8,046,966 |
| | | | 20,557,586 |
|
| TOTAL HOTELS, RESTAURANTS & LEISURE | | | 60,982,189 |
|
| Household Durables - 2.9% | | | |
| Home Furnishings - 0.5% | | | |
| Purple Innovation, Inc. (a) | | 35,700 | 942,837 |
| Tempur Sealy International, Inc. | | 15,600 | 611,364 |
| | | | 1,554,201 |
| Homebuilding - 2.4% | | | |
| D.R. Horton, Inc. | | 35,400 | 3,199,098 |
| Lennar Corp. Class A | | 25,600 | 2,543,360 |
| NVR, Inc. (a) | | 410 | 2,039,053 |
| | | | 7,781,511 |
|
| TOTAL HOUSEHOLD DURABLES | | | 9,335,712 |
|
| Interactive Media & Services - 0.9% | | | |
| Interactive Media & Services - 0.9% | | | |
| Alphabet, Inc. Class A (a) | | 620 | 1,513,910 |
| Facebook, Inc. Class A (a) | | 4,000 | 1,390,840 |
| | | | 2,904,750 |
| Internet & Direct Marketing Retail - 24.8% | | | |
| Internet & Direct Marketing Retail - 24.8% | | | |
| Alibaba Group Holding Ltd. sponsored ADR (a) | | 3,700 | 839,086 |
| Amazon.com, Inc. (a) | | 20,216 | 69,546,274 |
| Coupang, Inc. Class A (a)(b) | | 2,400 | 100,368 |
| Deliveroo PLC (a)(c) | | 21,100 | 84,177 |
| Deliveroo PLC | | 20,000 | 75,799 |
| eBay, Inc. | | 30,400 | 2,134,384 |
| Farfetch Ltd. Class A (a) | | 29,600 | 1,490,656 |
| Global-e Online Ltd. (a) | | 2,400 | 136,992 |
| MercadoLibre, Inc. (a) | | 1,700 | 2,648,243 |
| The RealReal, Inc. (a) | | 66,900 | 1,321,944 |
| Wayfair LLC Class A (a) | | 3,937 | 1,242,950 |
| | | | 79,620,873 |
| IT Services - 0.2% | | | |
| Data Processing & Outsourced Services - 0.2% | | | |
| Visa, Inc. Class A | | 2,900 | 678,078 |
| Multiline Retail - 6.0% | | | |
| Department Stores - 0.8% | | | |
| Kohl's Corp. | | 22,400 | 1,234,464 |
| Nordstrom, Inc. (a) | | 37,685 | 1,378,140 |
| | | | 2,612,604 |
| General Merchandise Stores - 5.2% | | | |
| B&M European Value Retail SA | | 62,470 | 495,329 |
| Dollar General Corp. | | 28,000 | 6,058,920 |
| Dollar Tree, Inc. (a) | | 32,600 | 3,243,700 |
| Ollie's Bargain Outlet Holdings, Inc. (a) | | 25,000 | 2,103,250 |
| Target Corp. | | 20,000 | 4,834,800 |
| | | | 16,735,999 |
|
| TOTAL MULTILINE RETAIL | | | 19,348,603 |
|
| Personal Products - 0.1% | | | |
| Personal Products - 0.1% | | | |
| Herbalife Nutrition Ltd. (a) | | 2,400 | 126,552 |
| Road & Rail - 0.7% | | | |
| Trucking - 0.7% | | | |
| Lyft, Inc. (a) | | 22,800 | 1,378,944 |
| Uber Technologies, Inc. (a) | | 18,600 | 932,232 |
| | | | 2,311,176 |
| Software - 0.0% | | | |
| Application Software - 0.0% | | | |
| Procore Technologies, Inc. (a) | | 300 | 28,485 |
| Specialty Retail - 18.9% | | | |
| Apparel Retail - 6.9% | | | |
| American Eagle Outfitters, Inc. (b) | | 95,205 | 3,573,044 |
| Aritzia LP (a) | | 16,700 | 499,545 |
| Burlington Stores, Inc. (a) | | 23,254 | 7,487,555 |
| L Brands, Inc. | | 17,500 | 1,261,050 |
| Ross Stores, Inc. | | 34,582 | 4,288,168 |
| TJX Companies, Inc. | | 72,416 | 4,882,287 |
| | | | 21,991,649 |
| Automotive Retail - 0.6% | | | |
| Carvana Co. Class A (a) | | 6,500 | 1,961,830 |
| Home Improvement Retail - 9.2% | | | |
| Floor & Decor Holdings, Inc. Class A (a) | | 22,717 | 2,401,187 |
| Lowe's Companies, Inc. | | 49,300 | 9,562,721 |
| The Home Depot, Inc. | | 55,500 | 17,698,395 |
| | | | 29,662,303 |
| Specialty Stores - 2.2% | | | |
| Academy Sports & Outdoors, Inc. | | 14,521 | 598,846 |
| Dick's Sporting Goods, Inc. | | 14,700 | 1,472,793 |
| Five Below, Inc. (a) | | 10,916 | 2,109,735 |
| Sally Beauty Holdings, Inc. (a) | | 28,400 | 626,788 |
| Ulta Beauty, Inc. (a) | | 6,600 | 2,282,082 |
| | | | 7,090,244 |
|
| TOTAL SPECIALTY RETAIL | | | 60,706,026 |
|
| Textiles, Apparel & Luxury Goods - 16.4% | | | |
| Apparel, Accessories & Luxury Goods - 11.2% | | | |
| adidas AG | | 3,121 | 1,164,626 |
| Canada Goose Holdings, Inc. (a) | | 9,500 | 415,223 |
| Capri Holdings Ltd. (a) | | 183,398 | 10,488,532 |
| G-III Apparel Group Ltd. (a) | | 27,500 | 903,650 |
| Hermes International SCA | | 369 | 537,520 |
| Kontoor Brands, Inc. | | 5,300 | 298,973 |
| Levi Strauss & Co. Class A | | 39,600 | 1,097,712 |
| lululemon athletica, Inc. (a) | | 8,100 | 2,956,257 |
| LVMH Moet Hennessy Louis Vuitton SE | | 2,654 | 2,087,788 |
| PVH Corp. (a) | | 59,908 | 6,445,502 |
| Ralph Lauren Corp. | | 13,800 | 1,625,778 |
| Tapestry, Inc. (a) | | 182,492 | 7,934,752 |
| | | | 35,956,313 |
| Footwear - 5.2% | | | |
| Crocs, Inc. (a) | | 900 | 104,868 |
| Deckers Outdoor Corp. (a) | | 9,889 | 3,798,068 |
| NIKE, Inc. Class B | | 80,870 | 12,493,606 |
| Skechers U.S.A., Inc. Class A (sub. vtg.) (a) | | 9,300 | 463,419 |
| | | | 16,859,961 |
|
| TOTAL TEXTILES, APPAREL & LUXURY GOODS | | | 52,816,274 |
|
| TOTAL COMMON STOCKS | | | |
| (Cost $174,151,290) | | | 319,238,529 |
|
| Money Market Funds - 1.4% | | | |
| Fidelity Cash Central Fund 0.06% (d) | | 1,776,074 | 1,776,429 |
| Fidelity Securities Lending Cash Central Fund 0.06% (d)(e) | | 2,822,907 | 2,823,189 |
| TOTAL MONEY MARKET FUNDS | | | |
| (Cost $4,599,618) | | | 4,599,618 |
| TOTAL INVESTMENT IN SECURITIES - 100.8% | | | |
| (Cost $178,750,908) | | | 323,838,147 |
| NET OTHER ASSETS (LIABILITIES) - (0.8)% | | | (2,469,243) |
| NET ASSETS - 100% | | | $321,368,904 |
Legend
(a) Non-income producing
(b) Security or a portion of the security is on loan at period end.
(c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities amounted to $84,177 or 0.0% of net assets.
(d) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
(e) Investment made with cash collateral received from securities on loan.
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| Fidelity Cash Central Fund | $476 |
| Fidelity Securities Lending Cash Central Fund | 2,523 |
| Total | $2,999 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable. Amount for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Fund | Value, beginning of period | Purchases | Sales Proceeds | Realized Gain/Loss | Change in Unrealized appreciation (depreciation) | Value, end of period | % ownership, end of period |
| Fidelity Cash Central Fund 0.06% | $1,034,780 | $31,770,417 | $31,028,787 | $19 | $-- | $1,776,429 | 0.0% |
| Fidelity Securities Lending Cash Central Fund 0.06% | 2,677,839 | 25,222,962 | 25,077,612 | -- | -- | 2,823,189 | 0.0% |
| Total | $3,712,619 | $56,993,379 | $56,106,399 | $19 | $-- | $4,599,618 | |
Investment Valuation
The following is a summary of the inputs used, as of June 30, 2021, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| Investments in Securities: | | | | |
| Common Stocks | $319,238,529 | $315,910,316 | $3,328,213 | $-- |
| Money Market Funds | 4,599,618 | 4,599,618 | -- | -- |
| Total Investments in Securities: | $323,838,147 | $320,509,934 | $3,328,213 | $-- |
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| | | June 30, 2021 (Unaudited) |
| Assets | | |
Investment in securities, at value (including securities loaned of $2,786,229) — See accompanying schedule:
Unaffiliated issuers (cost $174,151,290) | $319,238,529 | |
| Fidelity Central Funds (cost $4,599,618) | 4,599,618 | |
| Total Investment in Securities (cost $178,750,908) | | $323,838,147 |
| Receivable for investments sold | | 279,606 |
| Receivable for fund shares sold | | 460,357 |
| Dividends receivable | | 45,427 |
| Distributions receivable from Fidelity Central Funds | | 341 |
| Prepaid expenses | | 793 |
| Other receivables | | 5,208 |
| Total assets | | 324,629,879 |
| Liabilities | | |
| Payable for investments purchased | $233,697 | |
| Payable for fund shares redeemed | 899 | |
| Accrued management fee | 136,364 | |
| Other affiliated payables | 44,670 | |
| Other payables and accrued expenses | 22,320 | |
| Collateral on securities loaned | 2,823,025 | |
| Total liabilities | | 3,260,975 |
| Net Assets | | $321,368,904 |
| Net Assets consist of: | | |
| Paid in capital | | $165,822,001 |
| Total accumulated earnings (loss) | | 155,546,903 |
| Net Assets | | $321,368,904 |
| Net Asset Value and Maximum Offering Price | | |
| Initial Class: | | |
| Net Asset Value, offering price and redemption price per share ($31,921,628 ÷ 854,964 shares) | | $37.34 |
| Investor Class: | | |
| Net Asset Value, offering price and redemption price per share ($289,447,276 ÷ 7,785,360 shares) | | $37.18 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| | | Six months ended June 30, 2021 (Unaudited) |
| Investment Income | | |
| Dividends | | $750,211 |
| Income from Fidelity Central Funds (including $2,523 from security lending) | | 2,999 |
| Total income | | 753,210 |
| Expenses | | |
| Management fee | $786,995 | |
| Transfer agent fees | 197,796 | |
| Accounting fees | 58,200 | |
| Custodian fees and expenses | 6,762 | |
| Independent trustees' fees and expenses | 484 | |
| Audit | 19,057 | |
| Legal | 1,068 | |
| Miscellaneous | 622 | |
| Total expenses before reductions | 1,070,984 | |
| Expense reductions | (8,406) | |
| Total expenses after reductions | | 1,062,578 |
| Net investment income (loss) | | (309,368) |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 11,760,951 | |
| Fidelity Central Funds | 19 | |
| Foreign currency transactions | 643 | |
| Total net realized gain (loss) | | 11,761,613 |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 21,615,879 | |
| Assets and liabilities in foreign currencies | (158) | |
| Total change in net unrealized appreciation (depreciation) | | 21,615,721 |
| Net gain (loss) | | 33,377,334 |
| Net increase (decrease) in net assets resulting from operations | | $33,067,966 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| | Six months ended June 30, 2021 (Unaudited) | Year ended December 31, 2020 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $(309,368) | $(677) |
| Net realized gain (loss) | 11,761,613 | 9,157,097 |
| Change in net unrealized appreciation (depreciation) | 21,615,721 | 52,672,248 |
| Net increase (decrease) in net assets resulting from operations | 33,067,966 | 61,828,668 |
| Distributions to shareholders | (9,209,525) | (192,082) |
| Share transactions - net increase (decrease) | 32,434,176 | 1,281,999 |
| Total increase (decrease) in net assets | 56,292,617 | 62,918,585 |
| Net Assets | | |
| Beginning of period | 265,076,287 | 202,157,702 |
| End of period | $321,368,904 | $265,076,287 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
VIP Consumer Discretionary Portfolio Initial Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $34.37 | $25.27 | $20.97 | $22.27 | $18.33 | $17.88 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | (.02) | .02 | .08 | .08 | .12 | .15 |
| Net realized and unrealized gain (loss) | 4.14 | 9.11 | 5.42 | (.30) | 3.93 | .73 |
| Total from investment operations | 4.12 | 9.13 | 5.50 | (.22) | 4.05 | .88 |
| Distributions from net investment income | – | (.03) | (.08) | (.07) | (.11) | (.14) |
| Distributions from net realized gain | (1.15) | – | (1.12) | (1.01) | – | (.30) |
| Total distributions | (1.15) | (.03) | (1.20) | (1.08) | (.11) | (.44) |
| Redemption fees added to paid in capitalA | – | – | – | – | –B | .01 |
| Net asset value, end of period | $37.34 | $34.37 | $25.27 | $20.97 | $22.27 | $18.33 |
| Total ReturnC,D,E | 12.17% | 36.15% | 27.19% | (1.09)% | 22.16% | 5.24% |
| Ratios to Average Net AssetsF,G | | | | | | |
| Expenses before reductions | .65%H | .67% | .68% | .68% | .71% | .70% |
| Expenses net of fee waivers, if any | .65%H | .67% | .68% | .68% | .71% | .70% |
| Expenses net of all reductions | .64%H | .67% | .67% | .67% | .70% | .70% |
| Net investment income (loss) | (.14)%H | .07% | .32% | .35% | .58% | .86% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $31,922 | $28,273 | $25,623 | $25,079 | $22,057 | $23,677 |
| Portfolio turnover rateI | 36%H | 52% | 40% | 38% | 81% | 43% |
A Calculated based on average shares outstanding during the period.
B Amount represents less than $.005 per share.
C Total returns for periods of less than one year are not annualized.
D Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
E Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
F Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
H Annualized
I Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Consumer Discretionary Portfolio Investor Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $34.24 | $25.20 | $20.91 | $22.21 | $18.28 | $17.84 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | (.04) | – | .06 | .06 | .10 | .14 |
| Net realized and unrealized gain (loss) | 4.13 | 9.06 | 5.41 | (.29) | 3.93 | .71 |
| Total from investment operations | 4.09 | 9.06 | 5.47 | (.23) | 4.03 | .85 |
| Distributions from net investment income | – | (.02) | (.06) | (.06) | (.10) | (.13) |
| Distributions from net realized gain | (1.15) | – | (1.12) | (1.01) | – | (.30) |
| Total distributions | (1.15) | (.02) | (1.18) | (1.07) | (.10) | (.42)B |
| Redemption fees added to paid in capitalA | – | – | – | – | –C | .01 |
| Net asset value, end of period | $37.18 | $34.24 | $25.20 | $20.91 | $22.21 | $18.28 |
| Total ReturnD,E,F | 12.13% | 36.00% | 27.12% | (1.16)% | 22.07% | 5.12% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .72%I | .75% | .76% | .76% | .79% | .78% |
| Expenses net of fee waivers, if any | .72%I | .75% | .76% | .76% | .79% | .78% |
| Expenses net of all reductions | .72%I | .74% | .75% | .75% | .78% | .78% |
| Net investment income (loss) | (.21)%I | (.01)% | .24% | .27% | .50% | .78% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $289,447 | $236,803 | $176,535 | $161,512 | $127,651 | $124,272 |
| Portfolio turnover rateJ | 36%I | 52% | 40% | 38% | 81% | 43% |
A Calculated based on average shares outstanding during the period.
B Total distributions per share do not sum due to rounding.
C Amount represents less than $.005 per share.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements (Unaudited)
For the period ended June 30, 2021
1. Organization.
VIP Consumer Discretionary Portfolio (the Fund) is a non-diversified fund of Variable Insurance Products Fund IV (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the investing fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense Ratio(a) |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% to .01% |
(a) Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds which contain the significant accounting policies (including investment valuation policies) of those funds, and are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, ETFs and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of June 30, 2021 is included at the end of the Fund's Schedule of Investments.
Foreign Currency. Certain Funds may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Gains and losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received, and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of a fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of a fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred, as applicable. Certain expense reductions may also differ by class, if applicable. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, net operating losses, capital loss carryforwards and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $146,401,269 |
| Gross unrealized depreciation | (2,328,739) |
| Net unrealized appreciation (depreciation) | $144,072,530 |
| Tax cost | $179,765,617 |
Restricted Securities (including Private Placements). Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities held at period end is included at the end of the Schedule of Investments, if applicable.
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Consumer Discretionary Portfolio | 75,192,197 | 52,913,247 |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .23% during the period. The group fee rate is based upon the monthly average net assets of a group of registered investment companies with which the investment adviser has management contracts. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annualized management fee rate was .53% of the Fund's average net assets.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company LLC (FIIOC), an affiliate of the investment adviser, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class pays a fee for transfer agent services, typesetting and printing and mailing of shareholder reports, excluding mailing of proxy statements. For the period, transfer agent fees for each class were as follows:
| | Amount | % of Class-Level Average Net Assets(a) |
| Initial Class | $9,981 | .06 |
| Investor Class | 187,815 | .14 |
| | $197,796 | |
(a) Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. For the period, the fees were equivalent to the following annualized rates:
| | % of Average Net Assets |
| VIP Consumer Discretionary Portfolio | .04 |
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount |
| VIP Consumer Discretionary Portfolio | $416 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note and are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Consumer Discretionary Portfolio | 5,616,229 | 1,973,365 |
6. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro-rata portion of the line of credit, which are reflected in Miscellaneous expenses on the Statement of Operations, and are listed below. During the period, there were no borrowings on this line of credit.
| | Amount |
| VIP Consumer Discretionary Portfolio | $265 |
7. Security Lending.
Funds lend portfolio securities from time to time in order to earn additional income. Lending agents are used, including National Financial Services (NFS), an affiliate of the investment adviser. Pursuant to a securities lending agreement, NFS will receive a fee, which is capped at 9.9% of a fund's daily lending revenue, for its services as lending agent. A fund may lend securities to certain qualified borrowers, including NFS. On the settlement date of the loan, a fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of a fund and any additional required collateral is delivered to a fund on the next business day. A fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund may apply collateral received from the borrower against the obligation. A fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. Any loaned securities are identified as such in the Schedule of Investments, and the value of loaned securities and cash collateral at period end, as applicable, are presented in the Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Affiliated security lending activity, if any, was as follows:
| | Total Security Lending Fees Paid to NFS | Security Lending Income From Securities Loaned to NFS | Value of Securities Loaned to NFS at Period End |
| VIP Consumer Discretionary Portfolio | $271 | $43 | $– |
8. Expense Reductions.
Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset expenses. This amount totaled $8,019 for the period.
In addition, during the period the investment adviser or an affiliate reimbursed and/or waived a portion of fund-level operating expenses in the amount of $387.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| | Six months ended
June 30, 2021 | Year ended
December 31, 2020 |
| VIP Consumer Discretionary Portfolio | | |
| Distributions to shareholders | | |
| Initial Class | $1,012,683 | $26,505 |
| Investor Class | 8,196,842 | 165,577 |
| Total | $9,209,525 | $192,082 |
10. Share Transactions.
Transactions for each class of shares were as follows and may contain in-kind transactions:
| | Shares | Shares | Dollars | Dollars |
| | Six months ended June 30, 2021 | Year ended December 31, 2020 | Six months ended June 30, 2021 | Year ended December 31, 2020 |
| VIP Consumer Discretionary Portfolio | | | | |
| Initial Class | | | | |
| Shares sold | 151,249 | 97,373 | $5,391,921 | $2,711,979 |
| Reinvestment of distributions | 28,542 | 995 | 1,012,683 | 26,505 |
| Shares redeemed | (147,512) | (289,482) | (5,249,069) | (7,405,118) |
| Net increase (decrease) | 32,279 | (191,114) | $1,155,535 | $(4,666,634) |
| Investor Class | | | | |
| Shares sold | 1,070,746 | 1,595,160 | $38,375,985 | $45,356,476 |
| Reinvestment of distributions | 231,942 | 6,236 | 8,196,842 | 165,577 |
| Shares redeemed | (433,583) | (1,691,350) | (15,294,186) | (39,573,420) |
| Net increase (decrease) | 869,105 | (89,954) | $31,278,641 | $5,948,633 |
11. Other.
Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.
At the end of the period, the investment adviser or its affiliates were owners of record of more than 10% of the outstanding shares as follows:
| Fund | Affiliated % |
| VIP Consumer Discretionary Portfolio | 100% |
12. Coronavirus (COVID-19) Pandemic.
An outbreak of COVID-19 first detected in China during December 2019 has since spread globally and was declared a pandemic by the World Health Organization during March 2020. Developments that disrupt global economies and financial markets, such as the COVID-19 pandemic, may magnify factors that affect the Fund's performance.
Shareholder Expense Example
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2021 to June 30, 2021).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
January 1, 2021 | Ending
Account Value
June 30, 2021 | Expenses Paid
During Period-B
January 1, 2021
to June 30, 2021 |
| VIP Consumer Discretionary Portfolio | | | | |
| Initial Class | .65% | | | |
| Actual | | $1,000.00 | $1,121.70 | $3.42 |
| Hypothetical-C | | $1,000.00 | $1,021.57 | $3.26 |
| Investor Class | .72% | | | |
| Actual | | $1,000.00 | $1,121.30 | $3.79 |
| Hypothetical-C | | $1,000.00 | $1,021.22 | $3.61 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
C 5% return per year before expenses
Board Approval of Investment Advisory Contracts and Management Fees
VIP Consumer Discretionary Portfolio
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
Approval of Stub Period Continuation. At its January 2021 meeting, the Board of Trustees voted to continue the fund's management contract with FMR, and the sub-advisory agreements and sub-subadvisory agreements, in each case, where applicable (together, the Advisory Contracts), without modification, for four months from February 1, 2021 through May 31, 2021, in connection with changes to the Board's meeting calendar. The Board considered that the approval of the fund's Advisory Contracts will not result in any changes in (i) the investment process or strategies employed in the management of the fund's assets; (ii) the fees and expenses paid by shareholders; (iii) the nature, extent or quality of services provided under the fund's Advisory Contracts; or (iv) the day-to-day management of the fund or the persons primarily responsible for such management. The Board also considered that since its last approval of the fund's Advisory Contracts, FMR had provided additional information on the fund in support of the annual contract renewal process, including competitive analyses on total expenses and management fees and in-depth reviews of fund performance and fund profitability information. The Board also considered the findings of certain ad hoc committees that had been previously formed to discuss matters relevant to all of the Fidelity funds, including economies of scale, fall-out benefits and retail vs. institutional funds. The Board concluded that the fund's Advisory Contracts are fair and reasonable, and that the fund's Advisory Contracts should be renewed, without modification, through May 31, 2021, with the understanding that the Board will consider the annual renewal for a full one year period in May 2021.
At its May 2021 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process. The Board also considered Fidelity's investments in business continuity planning, and its success in continuously providing services to the fund notwithstanding the severe disruptions caused by the COVID-19 pandemic.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
The Board noted that, in the past, it and the boards of certain other Fidelity funds had formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest, and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and ETFs with innovative structures, strategies and pricing and making other enhancements to meet client needs; (iv) launching new share classes of existing funds; (v) eliminating purchase minimums and broadening eligibility requirements for certain funds and share classes; (vi) approving the reduction in the holding period for the Class C to Class A conversion policy; (vii) reducing management fees and total expenses for certain target date funds and classes and index funds; (viii) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (ix) rationalizing product lines and gaining increased efficiencies from fund mergers, liquidations, and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (xi) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including retirement income goals.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index). In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative total return information for the fund and an appropriate benchmark index for the most recent one-, three-, and five-year periods ended September 30, 2020, as shown below.
VIP Consumer Discretionary Portfolio
The Board considered the fund's underperformance for different time periods ended September 30, 2020 and for different time periods ended December 31, 2020 (which periods are not reflected in the charts above). The Board's discussions with FMR regarding underperformance cover topics including, but not limited to: the longer-term track record of a fund's portfolio manager(s); broader trends in the market that may adversely impact a fund's performance; and attribution reports on contributors to the fund's underperformance. The Board engages with FMR on steps that might be taken to address a fund's underperformance.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable investment mandates. For this purpose, all sector focused equity variable annuity funds are grouped in the same mapped group. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods ended September 30 (June 30 for periods ended 2019 and 2018 and December 31 for periods prior to 2018) shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates (i.e., sector equities), regardless of whether their management fee structures also are comparable. Funds with comparable management fee structures have similar management fee contractual arrangements (
e.g., flat rate charged for advisory services, all-inclusive fee rate,
etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and was considered by the Board.
VIP Consumer Discretionary Portfolio
The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for the 12-month period ended September 30, 2020.
The Board noted that, in the past, it and the boards of other Fidelity funds had formed an ad hoc Committee on Group Fee to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of each class of the fund compared to competitive fund median expenses. The fund's representative class is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure (SLTG). The Board also considered a total expense ASPG comparison for the representative class, which focuses on the total expenses of the representative class relative to a subset of non-Fidelity funds within the total expense SLTG. The total expense ASPG is limited to 15 larger and 15 smaller classes in fund average assets for a total of 30 classes, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
The Board noted that the total expense ratio of the Initial Class ranked below the SLTG competitive median and below the ASPG competitive median for the 12-month period ended September 30, 2020.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board also considered that in 2019 a joint ad hoc committee created by it and the boards of other Fidelity funds evaluated potential fall-out benefits (PFOB Committee). The Board noted that it considered the PFOB Committee's findings in connection with its consideration of the renewal of the Advisory Contracts.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund, including the conclusions of the PFOB Committee, and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total "group assets" increase, and for higher group fee rates as total "group assets" decrease ("group assets" as defined in the management contract). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board further considered that Fidelity agreed to impose a temporary fee waiver in the form of additional breakpoints to the current breakpoint schedule. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as "group assets" increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) consideration of expanding the use of performance fees for additional funds; (iii) Fidelity's pricing philosophy compared to competitors; (iv) metrics for evaluating index fund and ETF performance and information about ETF trading characteristics; (v) the methodology with respect to evaluating competitive fund data and peer group classifications and fee and expense comparisons; (vi) the expense structures for different funds and classes and information about the differences between various expense structures; (vii) group fee breakpoints; (viii) information regarding other accounts managed by Fidelity and sub-advisory arrangements; and (ix) Fidelity's philosophies and strategies for evaluating funds and classes with lower or declining asset levels.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Liquidity Risk Management Program
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program pursuant to the Liquidity Rule (the Program) effective December 1, 2018. The Program is reasonably designed to assess and manage the Fund’s liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund’s Board of Trustees (the Board) has designated the Fund’s investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund’s liquidity risk based on a variety of factors including (1) the Fund’s investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) in the case of exchange-traded funds, certain additional factors including the effect of the Fund’s prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund’s portfolio, as applicable.
In accordance with the Program, each of the Fund’s portfolio investments is classified into one of four liquidity categories described below based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments – cash or convertible to cash within three business days or less
- Moderately liquid investments – convertible to cash in three to seven calendar days
- Less liquid investments – can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments – cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund’s illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund’s net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund’s Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the annual period from December 1, 2019 through November 30, 2020. The report concluded that the Program has been implemented and is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk.
VCONIC-SANN-0821
1.817358.116
Fidelity® Variable Insurance Products:
Real Estate Portfolio
Semi-Annual Report
June 30, 2021
Contents
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov.
You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity® Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
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. © 2021 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Note to Shareholders:
Early in 2020, the outbreak and spread of a new coronavirus emerged as a public health emergency that had a major influence on financial markets, primarily based on its impact on the global economy and the outlook for corporate earnings. The virus causes a respiratory disease known as COVID-19. On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a pandemic, citing sustained risk of further global spread.
In the weeks following, as the crisis worsened, we witnessed an escalating human tragedy with wide-scale social and economic consequences from coronavirus-containment measures. The outbreak of COVID-19 prompted a number of measures to limit the spread, including travel and border restrictions, quarantines, and restrictions on large gatherings. In turn, these resulted in lower consumer activity, diminished demand for a wide range of products and services, disruption in manufacturing and supply chains, and – given the wide variability in outcomes regarding the outbreak – significant market uncertainty and volatility. Amid the turmoil, global governments and central banks took unprecedented action to help support consumers, businesses, and the broader economies, and to limit disruption to financial systems.
The situation continues to unfold, and the extent and duration of its impact on financial markets and the economy remain highly uncertain. Extreme events such as the coronavirus crisis are “exogenous shocks” that can have significant adverse effects on mutual funds and their investments. Although multiple asset classes may be affected by market disruption, the duration and impact may not be the same for all types of assets.
Fidelity is committed to helping you stay informed amid news about COVID-19 and during increased market volatility, and we’re taking extra steps to be responsive to customer needs. We encourage you to visit our websites, where we offer ongoing updates, commentary, and analysis on the markets and our funds.
Investment Summary (Unaudited)
Top Ten Stocks as of June 30, 2021
| | % of fund's net assets |
| American Tower Corp. | 13.9 |
| Prologis (REIT), Inc. | 10.0 |
| Digital Realty Trust, Inc. | 9.5 |
| CubeSmart | 7.2 |
| Mid-America Apartment Communities, Inc. | 4.9 |
| CBRE Group, Inc. | 4.8 |
| Essex Property Trust, Inc. | 4.6 |
| Ventas, Inc. | 4.6 |
| SBA Communications Corp. Class A | 3.8 |
| VICI Properties, Inc. | 3.6 |
| | 66.9 |
Top Five REIT Sectors as of June 30, 2021
| | % of fund's net assets |
| REITs - Diversified | 20.4 |
| REITs - Management/Investment | 13.9 |
| REITs - Warehouse/Industrial | 13.4 |
| REITs - Apartments | 12.7 |
| REITs - Health Care | 7.3 |
Asset Allocation (% of fund's net assets)
| As of June 30, 2021 |
| | Stocks | 99.1% |
| | Short-Term Investments and Net Other Assets (Liabilities) | 0.9% |
Schedule of Investments June 30, 2021 (Unaudited)
Showing Percentage of Net Assets
| Common Stocks - 99.1% | | | |
| | | Shares | Value |
| Commercial Services & Supplies - 0.2% | | | |
| REITs - Diversified - 0.2% | | | |
| CoreCivic, Inc. (a) | | 96,400 | $1,009,308 |
| Equity Real Estate Investment Trusts (REITs) - 91.4% | | | |
| REITs - Apartments - 12.7% | | | |
| Essex Property Trust, Inc. | | 65,948 | 19,785,059 |
| Invitation Homes, Inc. | | 363,400 | 13,551,186 |
| Mid-America Apartment Communities, Inc. | | 124,100 | 20,900,922 |
| | | | 54,237,167 |
| REITs - Diversified - 20.2% | | | |
| Digital Realty Trust, Inc. | | 269,300 | 40,518,878 |
| Lamar Advertising Co. Class A | | 114,100 | 11,914,322 |
| SBA Communications Corp. Class A | | 51,000 | 16,253,700 |
| VICI Properties, Inc. | | 502,200 | 15,578,244 |
| Washington REIT (SBI) | | 83,100 | 1,911,300 |
| | | | 86,176,444 |
| REITs - Health Care - 7.3% | | | |
| Healthcare Realty Trust, Inc. | | 386,700 | 11,678,340 |
| Ventas, Inc. | | 344,410 | 19,665,811 |
| | | | 31,344,151 |
| REITs - Hotels - 3.5% | | | |
| RLJ Lodging Trust | | 980,426 | 14,931,888 |
| REITs - Management/Investment - 13.9% | | | |
| American Tower Corp. | | 220,200 | 59,484,828 |
| REITs - Manufactured Homes - 2.9% | | | |
| Equity Lifestyle Properties, Inc. | | 167,020 | 12,411,256 |
| REITs - Office Property - 4.1% | | | |
| Alexandria Real Estate Equities, Inc. | | 62,000 | 11,280,280 |
| Douglas Emmett, Inc. | | 183,800 | 6,179,356 |
| | | | 17,459,636 |
| REITs - Shopping Centers - 1.7% | | | |
| SITE Centers Corp. | | 488,800 | 7,361,328 |
| REITs - Single Tenant - 4.5% | | | |
| Four Corners Property Trust, Inc. | | 512,600 | 14,152,886 |
| Spirit Realty Capital, Inc. | | 107,800 | 5,157,152 |
| | | | 19,310,038 |
| REITs - Storage - 7.2% | | | |
| CubeSmart | | 661,000 | 30,617,520 |
| REITs - Warehouse/Industrial - 13.4% | | | |
| Americold Realty Trust | | 282,300 | 10,685,055 |
| Prologis (REIT), Inc. | | 357,354 | 42,714,524 |
| Terreno Realty Corp. | | 57,400 | 3,703,448 |
| | | | 57,103,027 |
|
| TOTAL EQUITY REAL ESTATE INVESTMENT TRUSTS (REITS) | | | 390,437,283 |
|
| Hotels, Restaurants & Leisure - 1.0% | | | |
| Casinos & Gaming - 1.0% | | | |
| Caesars Entertainment, Inc. (a) | | 41,410 | 4,296,288 |
| Real Estate Management & Development - 6.5% | | | |
| Real Estate Services - 6.5% | | | |
| CBRE Group, Inc. (a) | | 239,200 | 20,506,616 |
| Realogy Holdings Corp. (a) | | 387,100 | 7,052,962 |
| | | | 27,559,578 |
| TOTAL COMMON STOCKS | | | |
| (Cost $295,030,593) | | | 423,302,457 |
|
| Money Market Funds - 0.6% | | | |
| Fidelity Cash Central Fund 0.06% (b) | | | |
| (Cost $2,702,725) | | 2,702,184 | 2,702,725 |
| TOTAL INVESTMENT IN SECURITIES - 99.7% | | | |
| (Cost $297,733,318) | | | 426,005,182 |
| NET OTHER ASSETS (LIABILITIES) - 0.3% | | | 1,134,615 |
| NET ASSETS - 100% | | | $427,139,797 |
Legend
(a) Non-income producing
(b) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| Fidelity Cash Central Fund | $687 |
| Fidelity Securities Lending Cash Central Fund | 2,432 |
| Total | $3,119 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable. Amount for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Fund | Value, beginning of period | Purchases | Sales Proceeds | Realized Gain/Loss | Change in Unrealized appreciation (depreciation) | Value, end of period | % ownership, end of period |
| Fidelity Cash Central Fund 0.06% | $3,775,507 | $32,998,270 | $34,071,028 | $(24) | $-- | $2,702,725 | 0.0% |
| Fidelity Securities Lending Cash Central Fund 0.06% | 10,992,000 | 22,161,279 | 33,153,279 | -- | -- | -- | 0.0% |
| Total | $14,767,507 | $55,159,549 | $67,224,307 | $(24) | $-- | $2,702,725 | |
Investment Valuation
The following is a summary of the inputs used, as of June 30, 2021, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| Investments in Securities: | | | | |
| Common Stocks | $423,302,457 | $423,302,457 | $-- | $-- |
| Money Market Funds | 2,702,725 | 2,702,725 | -- | -- |
| Total Investments in Securities: | $426,005,182 | $426,005,182 | $-- | $-- |
| Net unrealized depreciation on unfunded commitments | $(150,297) | $-- | $(150,297) | $-- |
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| | | June 30, 2021 (Unaudited) |
| Assets | | |
Investment in securities, at value — See accompanying schedule:
Unaffiliated issuers (cost $295,030,593) | $423,302,457 | |
| Fidelity Central Funds (cost $2,702,725) | 2,702,725 | |
| Total Investment in Securities (cost $297,733,318) | | $426,005,182 |
| Receivable for fund shares sold | | 585,756 |
| Dividends receivable | | 1,519,338 |
| Distributions receivable from Fidelity Central Funds | | 102 |
| Prepaid expenses | | 1,661 |
| Other receivables | | 4,762 |
| Total assets | | 428,116,801 |
| Liabilities | | |
| Payable for investments purchased | $42,918 | |
| Payable for fund shares redeemed | 493,658 | |
| Accrued management fee | 188,073 | |
| Unrealized depreciation on unfunded commitments | 150,297 | |
| Distribution and service plan fees payable | 27,701 | |
| Other affiliated payables | 49,621 | |
| Other payables and accrued expenses | 24,736 | |
| Total liabilities | | 977,004 |
| Net Assets | | $427,139,797 |
| Net Assets consist of: | | |
| Paid in capital | | $293,853,527 |
| Total accumulated earnings (loss) | | 133,286,270 |
| Net Assets | | $427,139,797 |
| Net Asset Value and Maximum Offering Price | | |
| Initial Class: | | |
| Net Asset Value, offering price and redemption price per share ($83,750,462 ÷ 4,011,735 shares) | | $20.88 |
| Service Class: | | |
| Net Asset Value, offering price and redemption price per share ($19,895,600 ÷ 958,036 shares) | | $20.77 |
| Service Class 2: | | |
| Net Asset Value, offering price and redemption price per share ($123,396,827 ÷ 6,026,370 shares) | | $20.48 |
| Investor Class: | | |
| Net Asset Value, offering price and redemption price per share ($200,096,908 ÷ 9,648,297 shares) | | $20.74 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| | | Six months ended June 30, 2021 (Unaudited) |
| Investment Income | | |
| Dividends | | $4,412,560 |
| Income from Fidelity Central Funds (including $2,432 from security lending) | | 3,119 |
| Total income | | 4,415,679 |
| Expenses | | |
| Management fee | $989,482 | |
| Transfer agent fees | 184,635 | |
| Distribution and service plan fees | 151,377 | |
| Accounting fees | 73,177 | |
| Custodian fees and expenses | 3,706 | |
| Independent trustees' fees and expenses | 605 | |
| Audit | 23,456 | |
| Legal | 317 | |
| Miscellaneous | 1,009 | |
| Total expenses before reductions | 1,427,764 | |
| Expense reductions | (3,712) | |
| Total expenses after reductions | | 1,424,052 |
| Net investment income (loss) | | 2,991,627 |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 5,048,928 | |
| Fidelity Central Funds | (24) | |
| Total net realized gain (loss) | | 5,048,904 |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated Issuers | 60,112,699 | |
| Unfunded commitments | (150,297) | |
| Total change in net unrealized appreciation (depreciation) | | 59,962,402 |
| Net gain (loss) | | 65,011,306 |
| Net increase (decrease) in net assets resulting from operations | | $68,002,933 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| | Six months ended June 30, 2021 (Unaudited) | Year ended December 31, 2020 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $2,991,627 | $5,873,078 |
| Net realized gain (loss) | 5,048,904 | (1,274,453) |
| Change in net unrealized appreciation (depreciation) | 59,962,402 | (36,492,362) |
| Net increase (decrease) in net assets resulting from operations | 68,002,933 | (31,893,737) |
| Distributions to shareholders | (290,116) | (22,997,007) |
| Share transactions - net increase (decrease) | 19,942,197 | (25,986,434) |
| Total increase (decrease) in net assets | 87,655,014 | (80,877,178) |
| Net Assets | | |
| Beginning of period | 339,484,783 | 420,361,961 |
| End of period | $427,139,797 | $339,484,783 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
VIP Real Estate Portfolio Initial Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $17.43 | $19.79 | $16.68 | $19.44 | $20.21 | $19.61 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .16 | .31 | .43 | .40 | .36 | .36B |
| Net realized and unrealized gain (loss) | 3.31 | (1.54) | 3.41 | (1.64) | .42 | .74 |
| Total from investment operations | 3.47 | (1.23) | 3.84 | (1.24) | .78 | 1.10 |
| Distributions from net investment income | (.02) | (.37) | (.34) | (.51) | (.36) | (.30) |
| Distributions from net realized gain | – | (.76) | (.39) | (1.00) | (1.19) | (.20) |
| Total distributions | (.02) | (1.13) | (.73) | (1.52)C | (1.55) | (.50) |
| Net asset value, end of period | $20.88 | $17.43 | $19.79 | $16.68 | $19.44 | $20.21 |
| Total ReturnD,E,F | 19.91% | (6.55)% | 23.22% | (6.22)% | 4.07% | 5.75% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .64%I | .66% | .66% | .67% | .68% | .67% |
| Expenses net of fee waivers, if any | .64%I | .66% | .66% | .67% | .68% | .67% |
| Expenses net of all reductions | .64%I | .65% | .65% | .67% | .67% | .66% |
| Net investment income (loss) | 1.70%I | 1.83% | 2.21% | 2.23% | 1.84% | 1.79%B |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $83,750 | $69,612 | $90,029 | $74,259 | $107,038 | $102,666 |
| Portfolio turnover rateJ | 25%I | 83% | 44% | 50% | 52% | 65% |
A Calculated based on average shares outstanding during the period.
B Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.06 per share. Excluding such non-recurring dividend(s), the ratio of net investment income (loss) to average net assets would have been 1.47%.
C Total distributions per share do not sum due to rounding.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Real Estate Portfolio Service Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $17.35 | $19.70 | $16.61 | $19.37 | $20.14 | $19.56 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .15 | .29 | .41 | .38 | .34 | .34B |
| Net realized and unrealized gain (loss) | 3.29 | (1.52) | 3.39 | (1.63) | .42 | .74 |
| Total from investment operations | 3.44 | (1.23) | 3.80 | (1.25) | .76 | 1.08 |
| Distributions from net investment income | (.02) | (.36) | (.33) | (.50) | (.34) | (.29) |
| Distributions from net realized gain | – | (.76) | (.39) | (1.00) | (1.19) | (.20) |
| Total distributions | (.02) | (1.12) | (.71)C | (1.51)C | (1.53) | (.50)C |
| Net asset value, end of period | $20.77 | $17.35 | $19.70 | $16.61 | $19.37 | $20.14 |
| Total ReturnD,E,F | 19.82% | (6.61)% | 23.09% | (6.31)% | 3.98% | 5.63% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .74%I | .76% | .76% | .77% | .78% | .77% |
| Expenses net of fee waivers, if any | .74%I | .76% | .76% | .77% | .78% | .77% |
| Expenses net of all reductions | .74%I | .75% | .75% | .77% | .77% | .76% |
| Net investment income (loss) | 1.60%I | 1.73% | 2.11% | 2.13% | 1.74% | 1.69%B |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $19,896 | $14,062 | $12,933 | $9,737 | $7,877 | $8,781 |
| Portfolio turnover rateJ | 25%I | 83% | 44% | 50% | 52% | 65% |
A Calculated based on average shares outstanding during the period.
B Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.06 per share. Excluding such non-recurring dividend(s), the ratio of net investment income (loss) to average net assets would have been 1.38%.
C Total distributions per share do not sum due to rounding.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Real Estate Portfolio Service Class 2
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $17.11 | $19.45 | $16.40 | $19.14 | $19.92 | $19.35 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .14 | .26 | .37 | .35 | .31 | .31B |
| Net realized and unrealized gain (loss) | 3.24 | (1.51) | 3.36 | (1.62) | .41 | .72 |
| Total from investment operations | 3.38 | (1.25) | 3.73 | (1.27) | .72 | 1.03 |
| Distributions from net investment income | (.01) | (.33) | (.30) | (.47) | (.31) | (.26) |
| Distributions from net realized gain | – | (.76) | (.39) | (1.00) | (1.19) | (.20) |
| Total distributions | (.01) | (1.09) | (.68)C | (1.47) | (1.50) | (.46) |
| Net asset value, end of period | $20.48 | $17.11 | $19.45 | $16.40 | $19.14 | $19.92 |
| Total ReturnD,E,F | 19.77% | (6.79)% | 22.95% | (6.45)% | 3.77% | 5.46% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .89%I | .91% | .91% | .92% | .93% | .92% |
| Expenses net of fee waivers, if any | .89%I | .91% | .91% | .92% | .93% | .92% |
| Expenses net of all reductions | .89%I | .90% | .90% | .92% | .92% | .91% |
| Net investment income (loss) | 1.45%I | 1.58% | 1.96% | 1.98% | 1.59% | 1.54%B |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $123,397 | $105,694 | $124,526 | $104,238 | $119,798 | $213,984 |
| Portfolio turnover rateJ | 25%I | 83% | 44% | 50% | 52% | 65% |
A Calculated based on average shares outstanding during the period.
B Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.06 per share. Excluding such non-recurring dividend(s), the ratio of net investment income (loss) to average net assets would have been 1.23%.
C Total distributions per share do not sum due to rounding.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Real Estate Portfolio Investor Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $17.32 | $19.67 | $16.58 | $19.34 | $20.11 | $19.52 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .15 | .30 | .41 | .38 | .34 | .35B |
| Net realized and unrealized gain (loss) | 3.29 | (1.53) | 3.40 | (1.64) | .42 | .73 |
| Total from investment operations | 3.44 | (1.23) | 3.81 | (1.26) | .76 | 1.08 |
| Distributions from net investment income | (.02) | (.36) | (.33) | (.50) | (.35) | (.28) |
| Distributions from net realized gain | – | (.76) | (.39) | (1.00) | (1.19) | (.20) |
| Total distributions | (.02) | (1.12) | (.72) | (1.50) | (1.53)C | (.49)C |
| Net asset value, end of period | $20.74 | $17.32 | $19.67 | $16.58 | $19.34 | $20.11 |
| Total ReturnD,E,F | 19.85% | (6.61)% | 23.15% | (6.33)% | 3.99% | 5.65% |
| Ratios to Average Net AssetsG,H | | | | | | |
| Expenses before reductions | .72%I | .74% | .74% | .75% | .76% | .75% |
| Expenses net of fee waivers, if any | .72%I | .74% | .73% | .75% | .76% | .75% |
| Expenses net of all reductions | .72%I | .73% | .73% | .75% | .75% | .74% |
| Net investment income (loss) | 1.62%I | 1.75% | 2.13% | 2.15% | 1.76% | 1.71%B |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $200,097 | $150,117 | $192,874 | $151,327 | $187,371 | $230,521 |
| Portfolio turnover rateJ | 25%I | 83% | 44% | 50% | 52% | 65% |
A Calculated based on average shares outstanding during the period.
B Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.06 per share. Excluding such non-recurring dividend(s), the ratio of net investment income (loss) to average net assets would have been 1.39%.
C Total distributions per share do not sum due to rounding.
D Total returns for periods of less than one year are not annualized.
E Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
F Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
G Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
I Annualized
J Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements (Unaudited)
For the period ended June 30, 2021
1. Organization.
VIP Real Estate Portfolio (the Fund) is a non-diversified fund of Variable Insurance Products Fund IV (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares, Service Class shares, Service Class 2 shares and Investor Class shares.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the investing fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense Ratio(a) |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% to .01% |
(a) Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds which contain the significant accounting policies (including investment valuation policies) of those funds, and are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, Exchange-Traded Funds (ETFs) and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of June 30, 2021 is included at the end of the Fund's Schedule of Investments.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of a fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of a fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred, as applicable. Certain expense reductions may also differ by class, if applicable. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to capital loss carryforwards and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $129,718,612 |
| Gross unrealized depreciation | (2,226,257) |
| Net unrealized appreciation (depreciation) | $127,492,355 |
| Tax cost | $298,362,530 |
Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited. The capital loss carryforward information presented below, including any applicable limitation, is estimated as of prior fiscal period end and is subject to adjustment.
| No expiration | |
| Short-term | $(2,095,481) |
| Long-term | (–) |
| Total capital loss carryforward | $(2,095,481) |
Special Purpose Acquisition Companies. Funds may invest in stock, warrants, and other securities of special purpose acquisition companies (SPACs) or similar special purpose entities. A SPAC is a publicly traded company that raises investment capital via an initial public offering (IPO) for the purpose of acquiring the equity securities of one or more existing companies via merger, business combination, acquisition or other similar transactions within a designated time frame.
Private Investment in Public Equity. Funds may acquire equity securities of an issuer through a private investment in a public equity (PIPE) transaction, including through commitments to purchase securities on a when-issued basis. A PIPE typically involves the purchase of securities directly from a publicly traded company in a private placement transaction. Securities purchased through PIPE transactions will be restricted from trading and considered illiquid until a resale registration statement for the shares is filed and declared effective.
At period end, the Fund had commitments to purchase when-issued securities through PIPE transactions with SPACs. The commitments are contingent upon the SPACs acquiring the securities of target companies. Unrealized appreciation (depreciation) on these commitments is separately presented in the Statements of Assets and Liabilities as Unrealized appreciation (depreciation) on unfunded commitments, and in the Statement of Operations as Change in unrealized appreciation (depreciation) on unfunded commitments.
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Real Estate Portfolio | 68,904,826 | 46,664,444 |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .23% during the period. The group fee rate is based upon the monthly average net assets of a group of registered investment companies with which the investment adviser has management contracts. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annualized management fee rate was .52% of the Fund's average net assets.
Distribution and Service Plan Fees. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate 12b-1 Plans for each Service Class of shares. Each Service Class pays Fidelity Distributors Company LLC (FDC), an affiliate of the investment adviser, a service fee. For the period, the service fee is based on an annual rate of .10% of Service Class' average net assets and .25% of Service Class 2's average net assets.
For the period, total fees, all of which were re-allowed to insurance companies for the distribution of shares and providing shareholder support services, were as follows:
| Service Class | $8,650 |
| Service Class 2 | 142,727 |
| | $151,377 |
Transfer Agent Fees. Fidelity Investments Institutional Operations Company LLC (FIIOC), an affiliate of the investment adviser, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class pays a fee for transfer agent services, typesetting and printing and mailing of shareholder reports, excluding mailing of proxy statements. For the period, transfer agent fees for each class were as follows:
| | Amount | % of Class-Level Average Net Assets(a) |
| Initial Class | $23,905 | .06 |
| Service Class | 5,504 | .06 |
| Service Class 2 | 36,302 | .06 |
| Investor Class | 118,924 | .14 |
| | $184,635 | |
(a) Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. For the period, the fees were equivalent to the following annualized rates:
| | % of Average Net Assets |
| VIP Real Estate Portfolio | .04 |
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount |
| VIP Real Estate Portfolio | $821 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note and are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Real Estate Portfolio | 6,314,473 | 3,303,917 |
6. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro-rata portion of the line of credit, which are reflected in Miscellaneous expenses on the Statement of Operations, and are listed below. During the period, there were no borrowings on this line of credit.
| | Amount |
| VIP Real Estate Portfolio | $340 |
7. Security Lending.
Funds lend portfolio securities from time to time in order to earn additional income. Lending agents are used, including National Financial Services (NFS), an affiliate of the investment adviser. Pursuant to a securities lending agreement, NFS will receive a fee, which is capped at 9.9% of a fund's daily lending revenue, for its services as lending agent. A fund may lend securities to certain qualified borrowers, including NFS. On the settlement date of the loan, a fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of a fund and any additional required collateral is delivered to a fund on the next business day. A fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund may apply collateral received from the borrower against the obligation. A fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. Any loaned securities are identified as such in the Schedule of Investments, and the value of loaned securities and cash collateral at period end, as applicable, are presented in the Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Affiliated security lending activity, if any, was as follows:
| | Total Security Lending Fees Paid to NFS | Security Lending Income From Securities Loaned to NFS | Value of Securities Loaned to NFS at Period End |
| VIP Real Estate Portfolio | $258 | $– | $– |
8. Expense Reductions.
Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset expenses. This amount totaled $3,212 for the period.
In addition, during the period the investment adviser or an affiliate reimbursed and/or waived a portion of fund-level operating expenses in the amount of $500.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| | Six months ended
June 30, 2021 | Year ended
December 31, 2020 |
| VIP Real Estate Portfolio | | |
| Distributions to shareholders | | |
| Initial Class | $69,999 | $4,929,333 |
| Service Class | 14,569 | 784,153 |
| Service Class 2 | 67,510 | 6,803,065 |
| Investor Class | 138,038 | 10,480,456 |
| Total | $290,116 | $22,997,007 |
10. Share Transactions.
Transactions for each class of shares were as follows and may contain in-kind transactions:
| | Shares | Shares | Dollars | Dollars |
| | Six months ended June 30, 2021 | Year ended December 31, 2020 | Six months ended June 30, 2021 | Year ended December 31, 2020 |
| VIP Real Estate Portfolio | | | | |
| Initial Class | | | | |
| Shares sold | 447,742 | 556,594 | $8,515,239 | $9,428,625 |
| Reinvestment of distributions | 3,891 | 261,825 | 69,999 | 4,929,333 |
| Shares redeemed | (433,491) | (1,373,998) | (8,055,432) | (22,678,061) |
| Net increase (decrease) | 18,142 | (555,579) | $529,806 | $(8,320,103) |
| Service Class | | | | |
| Shares sold | 287,750 | 607,424 | $5,320,355 | $9,694,749 |
| Reinvestment of distributions | 813 | 42,112 | 14,569 | 784,153 |
| Shares redeemed | (141,176) | (495,296) | (2,679,412) | (8,178,628) |
| Net increase (decrease) | 147,387 | 154,240 | $2,655,512 | $2,300,274 |
| Service Class 2 | | | | |
| Shares sold | 620,192 | 1,228,037 | $11,618,273 | $20,151,841 |
| Reinvestment of distributions | 3,821 | 367,763 | 67,510 | 6,803,065 |
| Shares redeemed | (774,438) | (1,821,671) | (14,578,729) | (30,161,237) |
| Net increase (decrease) | (150,425) | (225,871) | $(2,892,946) | $(3,206,331) |
| Investor Class | | | | |
| Shares sold | 1,204,111 | 626,530 | $23,696,186 | $10,704,956 |
| Reinvestment of distributions | 7,720 | 559,430 | 138,038 | 10,480,456 |
| Shares redeemed | (230,319) | (2,323,675) | (4,184,399) | (37,945,686) |
| Net increase (decrease) | 981,512 | (1,137,715) | $19,649,825 | $(16,760,274) |
11. Other.
Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.
At the end of the period, the investment adviser or its affiliates were owners of record of more than 10% of the outstanding shares as follows:
| Fund | Affiliated % |
| VIP: Real Estate Portfolio | 55% |
12. Coronavirus (COVID-19) Pandemic.
An outbreak of COVID-19 first detected in China during December 2019 has since spread globally and was declared a pandemic by the World Health Organization during March 2020. Developments that disrupt global economies and financial markets, such as the COVID-19 pandemic, may magnify factors that affect the Fund's performance.
Shareholder Expense Example
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2021 to June 30, 2021).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
January 1, 2021 | Ending
Account Value
June 30, 2021 | Expenses Paid
During Period-B
January 1, 2021
to June 30, 2021 |
| VIP Real Estate Portfolio | | | | |
| Initial Class | .64% | | | |
| Actual | | $1,000.00 | $1,199.10 | $3.49 |
| Hypothetical-C | | $1,000.00 | $1,021.62 | $3.21 |
| Service Class | .74% | | | |
| Actual | | $1,000.00 | $1,198.20 | $4.03 |
| Hypothetical-C | | $1,000.00 | $1,021.12 | $3.71 |
| Service Class 2 | .89% | | | |
| Actual | | $1,000.00 | $1,197.70 | $4.85 |
| Hypothetical-C | | $1,000.00 | $1,020.38 | $4.46 |
| Investor Class | .72% | | | |
| Actual | | $1,000.00 | $1,198.50 | $3.92 |
| Hypothetical-C | | $1,000.00 | $1,021.22 | $3.61 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
C 5% return per year before expenses
Board Approval of Investment Advisory Contracts and Management Fees
VIP Real Estate Portfolio
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
Approval of Stub Period Continuation. At its January 2021 meeting, the Board of Trustees voted to continue the fund's management contract with FMR, and the sub-advisory agreements and sub-subadvisory agreements, in each case, where applicable (together, the Advisory Contracts), without modification, for four months from February 1, 2021 through May 31, 2021, in connection with changes to the Board's meeting calendar. The Board considered that the approval of the fund's Advisory Contracts will not result in any changes in (i) the investment process or strategies employed in the management of the fund's assets; (ii) the fees and expenses paid by shareholders; (iii) the nature, extent or quality of services provided under the fund's Advisory Contracts; or (iv) the day-to-day management of the fund or the persons primarily responsible for such management. The Board also considered that since its last approval of the fund's Advisory Contracts, FMR had provided additional information on the fund in support of the annual contract renewal process, including competitive analyses on total expenses and management fees and in-depth reviews of fund performance and fund profitability information. The Board also considered the findings of certain ad hoc committees that had been previously formed to discuss matters relevant to all of the Fidelity funds, including economies of scale, fall-out benefits and retail vs. institutional funds. The Board concluded that the fund's Advisory Contracts are fair and reasonable, and that the fund's Advisory Contracts should be renewed, without modification, through May 31, 2021, with the understanding that the Board will consider the annual renewal for a full one year period in May 2021.
At its May 2021 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process. The Board also considered Fidelity's investments in business continuity planning, and its success in continuously providing services to the fund notwithstanding the severe disruptions caused by the COVID-19 pandemic.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
The Board noted that, in the past, it and the boards of certain other Fidelity funds had formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest, and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and ETFs with innovative structures, strategies and pricing and making other enhancements to meet client needs; (iv) launching new share classes of existing funds; (v) eliminating purchase minimums and broadening eligibility requirements for certain funds and share classes; (vi) approving the reduction in the holding period for the Class C to Class A conversion policy; (vii) reducing management fees and total expenses for certain target date funds and classes and index funds; (viii) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (ix) rationalizing product lines and gaining increased efficiencies from fund mergers, liquidations, and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (xi) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including retirement income goals.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index). In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative total return information for the fund and an appropriate benchmark index for the most recent one-, three-, and five-year periods ended September 30, 2020, as shown below.
VIP Real Estate Portfolio
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable investment mandates. For this purpose, all sector focused equity variable annuity funds are grouped in the same mapped group. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods ended September 30 (June 30 for periods ended 2019 and 2018 and December 31 for periods prior to 2018) shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates (i.e., sector equities), regardless of whether their management fee structures also are comparable. Funds with comparable management fee structures have similar management fee contractual arrangements (
e.g., flat rate charged for advisory services, all-inclusive fee rate,
etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and was considered by the Board.
VIP Real Estate Portfolio
The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for the 12-month period ended September 30, 2020.
The Board noted that, in the past, it and the boards of other Fidelity funds had formed an ad hoc Committee on Group Fee to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of a representative class of the fund compared to competitive fund median expenses. The fund's representative class is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure (SLTG). The Board also considered a total expense ASPG comparison for the representative class, which focuses on the total expenses of the representative class relative to a subset of non-Fidelity funds within the total expense SLTG. The total expense ASPG is limited to 15 larger and 15 smaller classes in fund average assets for a total of 30 classes, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
The Board noted that the total expense ratio of the Initial Class ranked below the SLTG competitive median and below the ASPG competitive median for the 12-month period ended September 30, 2020.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board also considered that in 2019 a joint ad hoc committee created by it and the boards of other Fidelity funds evaluated potential fall-out benefits (PFOB Committee). The Board noted that it considered the PFOB Committee's findings in connection with its consideration of the renewal of the Advisory Contracts.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund, including the conclusions of the PFOB Committee, and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total "group assets" increase, and for higher group fee rates as total "group assets" decrease ("group assets" as defined in the management contract). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board further considered that Fidelity agreed to impose a temporary fee waiver in the form of additional breakpoints to the current breakpoint schedule. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as "group assets" increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) consideration of expanding the use of performance fees for additional funds; (iii) Fidelity's pricing philosophy compared to competitors; (iv) metrics for evaluating index fund and ETF performance and information about ETF trading characteristics; (v) the methodology with respect to evaluating competitive fund data and peer group classifications and fee and expense comparisons; (vi) the expense structures for different funds and classes and information about the differences between various expense structures; (vii) group fee breakpoints; (viii) information regarding other accounts managed by Fidelity and sub-advisory arrangements; and (ix) Fidelity's philosophies and strategies for evaluating funds and classes with lower or declining asset levels.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Liquidity Risk Management Program
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program pursuant to the Liquidity Rule (the Program) effective December 1, 2018. The Program is reasonably designed to assess and manage the Fund’s liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund’s Board of Trustees (the Board) has designated the Fund’s investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund’s liquidity risk based on a variety of factors including (1) the Fund’s investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) in the case of exchange-traded funds, certain additional factors including the effect of the Fund’s prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund’s portfolio, as applicable.
In accordance with the Program, each of the Fund’s portfolio investments is classified into one of four liquidity categories described below based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments – cash or convertible to cash within three business days or less
- Moderately liquid investments – convertible to cash in three to seven calendar days
- Less liquid investments – can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments – cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund’s illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund’s net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund’s Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the annual period from December 1, 2019 through November 30, 2020. The report concluded that the Program has been implemented and is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk.
VIPRE-SANN-0821
1.787989.118
Fidelity® Variable Insurance Products:
Consumer Staples Portfolio
Semi-Annual Report
June 30, 2021
Contents
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov.
You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity® Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
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. © 2021 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Note to Shareholders:
Early in 2020, the outbreak and spread of a new coronavirus emerged as a public health emergency that had a major influence on financial markets, primarily based on its impact on the global economy and the outlook for corporate earnings. The virus causes a respiratory disease known as COVID-19. On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a pandemic, citing sustained risk of further global spread.
In the weeks following, as the crisis worsened, we witnessed an escalating human tragedy with wide-scale social and economic consequences from coronavirus-containment measures. The outbreak of COVID-19 prompted a number of measures to limit the spread, including travel and border restrictions, quarantines, and restrictions on large gatherings. In turn, these resulted in lower consumer activity, diminished demand for a wide range of products and services, disruption in manufacturing and supply chains, and – given the wide variability in outcomes regarding the outbreak – significant market uncertainty and volatility. Amid the turmoil, global governments and central banks took unprecedented action to help support consumers, businesses, and the broader economies, and to limit disruption to financial systems.
The situation continues to unfold, and the extent and duration of its impact on financial markets and the economy remain highly uncertain. Extreme events such as the coronavirus crisis are “exogenous shocks” that can have significant adverse effects on mutual funds and their investments. Although multiple asset classes may be affected by market disruption, the duration and impact may not be the same for all types of assets.
Fidelity is committed to helping you stay informed amid news about COVID-19 and during increased market volatility, and we’re taking extra steps to be responsive to customer needs. We encourage you to visit our websites, where we offer ongoing updates, commentary, and analysis on the markets and our funds.
Investment Summary (Unaudited)
Top Ten Stocks as of June 30, 2021
| | % of fund's net assets |
| Procter & Gamble Co. | 16.7 |
| The Coca-Cola Co. | 13.9 |
| Mondelez International, Inc. | 7.3 |
| PepsiCo, Inc. | 6.9 |
| Altria Group, Inc. | 4.9 |
| Kimberly-Clark Corp. | 4.9 |
| Walmart, Inc. | 4.9 |
| Monster Beverage Corp. | 4.6 |
| Philip Morris International, Inc. | 3.8 |
| Costco Wholesale Corp. | 3.6 |
| | 71.5 |
Top Industries (% of fund's net assets)
| As of June 30, 2021 |
| | Beverages | 31.6% |
| | Household Products | 26.4% |
| | Food Products | 15.9% |
| | Food & Staples Retailing | 11.9% |
| | Tobacco | 9.0% |
| | All Others* | 5.2% |
* Includes short-term investments and net other assets (liabilities).
Schedule of Investments June 30, 2021 (Unaudited)
Showing Percentage of Net Assets
| Common Stocks - 99.6% | | | |
| | | Shares | Value |
| Beverages - 31.6% | | | |
| Brewers - 0.3% | | | |
| Molson Coors Beverage Co. Class B (a) | | 13,200 | $708,708 |
| Distillers & Vintners - 3.3% | | | |
| Constellation Brands, Inc. Class A (sub. vtg.) | | 19,100 | 4,467,299 |
| Diageo PLC | | 84,472 | 4,048,619 |
| | | | 8,515,918 |
| Soft Drinks - 28.0% | | | |
| Coca-Cola Bottling Co. Consolidated | | 300 | 120,639 |
| Keurig Dr. Pepper, Inc. (b) | | 178,000 | 6,272,720 |
| Monster Beverage Corp. (a) | | 129,900 | 11,866,365 |
| PepsiCo, Inc. | | 119,506 | 17,707,204 |
| Primo Water Corp. | | 18,900 | 316,197 |
| The Coca-Cola Co. | | 658,738 | 35,644,313 |
| | | | 71,927,438 |
|
| TOTAL BEVERAGES | | | 81,152,064 |
|
| Food & Staples Retailing - 11.9% | | | |
| Food Distributors - 1.6% | | | |
| Performance Food Group Co. (a) | | 7,600 | 368,524 |
| Sysco Corp. | | 18,400 | 1,430,600 |
| U.S. Foods Holding Corp. (a) | | 63,300 | 2,428,188 |
| | | | 4,227,312 |
| Food Retail - 0.7% | | | |
| Grocery Outlet Holding Corp. (a) | | 16,400 | 568,424 |
| Kroger Co. | | 31,852 | 1,220,250 |
| | | | 1,788,674 |
| Hypermarkets & Super Centers - 9.6% | | | |
| BJ's Wholesale Club Holdings, Inc. (a) | | 56,400 | 2,683,512 |
| Costco Wholesale Corp. | | 23,500 | 9,298,245 |
| Walmart, Inc. | | 89,004 | 12,551,344 |
| | | | 24,533,101 |
|
| TOTAL FOOD & STAPLES RETAILING | | | 30,549,087 |
|
| Food Products - 15.9% | | | |
| Agricultural Products - 1.4% | | | |
| Bunge Ltd. | | 22,900 | 1,789,635 |
| Darling Ingredients, Inc. (a) | | 26,300 | 1,775,250 |
| | | | 3,564,885 |
| Packaged Foods & Meats - 14.5% | | | |
| Conagra Brands, Inc. | | 75,200 | 2,735,776 |
| JDE Peet's BV | | 34,300 | 1,244,539 |
| Laird Superfood, Inc. (b) | | 10,100 | 301,687 |
| Lamb Weston Holdings, Inc. | | 70,900 | 5,718,794 |
| McCormick & Co., Inc. (non-vtg.) | | 14,300 | 1,262,976 |
| Mondelez International, Inc. | | 297,300 | 18,563,412 |
| Nomad Foods Ltd. (a) | | 11,600 | 327,932 |
| Sanderson Farms, Inc. | | 1,400 | 263,158 |
| TreeHouse Foods, Inc. (a) | | 99,100 | 4,411,932 |
| Tyson Foods, Inc. Class A | | 30,700 | 2,264,432 |
| | | | 37,094,638 |
|
| TOTAL FOOD PRODUCTS | | | 40,659,523 |
|
| Hotels, Restaurants & Leisure - 0.8% | | | |
| Restaurants - 0.8% | | | |
| Compass Group PLC (a) | | 99,600 | 2,098,364 |
| Household Durables - 0.1% | | | |
| Housewares & Specialties - 0.1% | | | |
| Tupperware Brands Corp. (a) | | 9,100 | 216,125 |
| Household Products - 26.4% | | | |
| Household Products - 26.4% | | | |
| Energizer Holdings, Inc. (b) | | 55,000 | 2,363,900 |
| Kimberly-Clark Corp. | | 93,900 | 12,561,942 |
| Procter & Gamble Co. | | 317,807 | 42,881,699 |
| Reckitt Benckiser Group PLC | | 1,100 | 97,185 |
| Reynolds Consumer Products, Inc. | | 149,890 | 4,549,162 |
| The Clorox Co. | | 29,300 | 5,271,363 |
| | | | 67,725,251 |
| Internet & Direct Marketing Retail - 1.0% | | | |
| Internet & Direct Marketing Retail - 1.0% | | | |
| Deliveroo PLC (a)(c) | | 18,200 | 72,608 |
| The Honest Co., Inc. | | 171,314 | 2,496,216 |
| | | | 2,568,824 |
| Personal Products - 2.9% | | | |
| Personal Products - 2.9% | | | |
| Herbalife Nutrition Ltd. (a) | | 126,100 | 6,649,253 |
| Shiseido Co. Ltd. | | 9,300 | 684,012 |
| | | | 7,333,265 |
| Tobacco - 9.0% | | | |
| Tobacco - 9.0% | | | |
| Altria Group, Inc. | | 266,396 | 12,701,761 |
| Philip Morris International, Inc. | | 97,334 | 9,646,773 |
| RLX Technology, Inc. ADR (b) | | 95,000 | 829,350 |
| | | | 23,177,884 |
| TOTAL COMMON STOCKS | | | |
| (Cost $188,555,842) | | | 255,480,387 |
| | | Principal Amount | Value |
|
| Convertible Bonds - 0.0% | | | |
| Food & Staples Retailing - 0.0% | | | |
| Food Retail - 0.0% | | | |
| The Real Good Food Co. LLC 1%(d)(e)(f) | | 100,000 | 100,000 |
| TOTAL CONVERTIBLE BONDS | | | |
| (Cost $100,000) | | | 100,000 |
| | | Shares | Value |
|
| Money Market Funds - 3.4% | | | |
| | | | |
| Fidelity Cash Central Fund 0.06% (g) | | 550,910 | 551,020 |
| Fidelity Securities Lending Cash Central Fund 0.06% (g)(h) | | 8,212,773 | 8,213,595 |
| TOTAL MONEY MARKET FUNDS | | | |
| (Cost $8,764,615) | | | 8,764,615 |
| TOTAL INVESTMENT IN SECURITIES - 103.0% | | | |
| (Cost $197,420,457) | | | 264,345,002 |
| NET OTHER ASSETS (LIABILITIES) - (3.0)% | | | (7,797,923) |
| NET ASSETS - 100% | | | $256,547,079 |
Legend
(a) Non-income producing
(b) Security or a portion of the security is on loan at period end.
(c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities amounted to $72,608 or 0.0% of net assets.
(d) Security is perpetual in nature with no stated maturity date.
(e) Restricted securities (including private placements) - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $100,000 or 0.0% of net assets.
(f) Level 3 security
(g) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
(h) Investment made with cash collateral received from securities on loan.
Additional information on each restricted holding is as follows:
| Security | Acquisition Date | Acquisition Cost |
| The Real Good Food Co. LLC 1% | 5/7/21 | $100,000 |
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| Fidelity Cash Central Fund | $72 |
| Fidelity Securities Lending Cash Central Fund | 3,732 |
| Total | $3,804 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable. Amount for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Fund | Value, beginning of period | Purchases | Sales Proceeds | Realized Gain/Loss | Change in Unrealized appreciation (depreciation) | Value, end of period | % ownership, end of period |
| Fidelity Cash Central Fund 0.06% | $687,981 | $9,561,619 | $9,698,580 | $-- | $-- | $551,020 | 0.0% |
| Fidelity Securities Lending Cash Central Fund 0.06% | 1,354,920 | 20,917,257 | 14,058,582 | -- | -- | 8,213,595 | 0.0% |
| Total | $2,042,901 | $30,478,876 | $23,757,162 | $-- | $-- | $8,764,615 | |
Investment Valuation
The following is a summary of the inputs used, as of June 30, 2021, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| Investments in Securities: | | | | |
| Common Stocks | $255,480,387 | $246,740,003 | $8,740,384 | $-- |
| Convertible Bonds | 100,000 | -- | -- | 100,000 |
| Money Market Funds | 8,764,615 | 8,764,615 | -- | -- |
| Total Investments in Securities: | $264,345,002 | $255,504,618 | $8,740,384 | $100,000 |
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| | | June 30, 2021 (Unaudited) |
| Assets | | |
Investment in securities, at value (including securities loaned of $8,010,272) — See accompanying schedule:
Unaffiliated issuers (cost $188,655,842) | $255,580,387 | |
| Fidelity Central Funds (cost $8,764,615) | 8,764,615 | |
| Total Investment in Securities (cost $197,420,457) | | $264,345,002 |
| Cash | | 502,390 |
| Foreign currency held at value (cost $141) | | 141 |
| Receivable for investments sold | | 5,576,331 |
| Dividends receivable | | 857,779 |
| Interest receivable | | 150 |
| Distributions receivable from Fidelity Central Funds | | 665 |
| Prepaid expenses | | 1,168 |
| Other receivables | | 5,897 |
| Total assets | | 271,289,523 |
| Liabilities | | |
| Payable for investments purchased | $6,117,012 | |
| Payable for fund shares redeemed | 240,552 | |
| Accrued management fee | 112,478 | |
| Other affiliated payables | 37,166 | |
| Other payables and accrued expenses | 22,036 | |
| Collateral on securities loaned | 8,213,200 | |
| Total liabilities | | 14,742,444 |
| Net Assets | | $256,547,079 |
| Net Assets consist of: | | |
| Paid in capital | | $177,742,368 |
| Total accumulated earnings (loss) | | 78,804,711 |
| Net Assets | | $256,547,079 |
| Net Asset Value and Maximum Offering Price | | |
| Initial Class: | | |
| Net Asset Value, offering price and redemption price per share ($20,599,110 ÷ 993,941 shares) | | $20.72 |
| Investor Class: | | |
| Net Asset Value, offering price and redemption price per share ($235,947,969 ÷ 11,444,702 shares) | | $20.62 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| | | Six months ended June 30, 2021 (Unaudited) |
| Investment Income | | |
| Dividends | | $2,988,476 |
| Income from Fidelity Central Funds (including $3,732 from security lending) | | 3,804 |
| Total income | | 2,992,280 |
| Expenses | | |
| Management fee | $645,502 | |
| Transfer agent fees | 164,418 | |
| Accounting fees | 47,738 | |
| Custodian fees and expenses | 11,718 | |
| Independent trustees' fees and expenses | 410 | |
| Audit | 19,053 | |
| Legal | 1,372 | |
| Miscellaneous | 678 | |
| Total expenses before reductions | 890,889 | |
| Expense reductions | (13,865) | |
| Total expenses after reductions | | 877,024 |
| Net investment income (loss) | | 2,115,256 |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 12,009,642 | |
| Foreign currency transactions | 2,093 | |
| Total net realized gain (loss) | | 12,011,735 |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 2,015,057 | |
| Assets and liabilities in foreign currencies | (182) | |
| Total change in net unrealized appreciation (depreciation) | | 2,014,875 |
| Net gain (loss) | | 14,026,610 |
| Net increase (decrease) in net assets resulting from operations | | $16,141,866 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| | Six months ended June 30, 2021 (Unaudited) | Year ended December 31, 2020 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $2,115,256 | $4,184,940 |
| Net realized gain (loss) | 12,011,735 | 5,257,634 |
| Change in net unrealized appreciation (depreciation) | 2,014,875 | 14,191,857 |
| Net increase (decrease) in net assets resulting from operations | 16,141,866 | 23,634,431 |
| Distributions to shareholders | (5,262,265) | (13,182,765) |
| Share transactions - net increase (decrease) | 1,165,955 | (14,696,014) |
| Total increase (decrease) in net assets | 12,045,556 | (4,244,348) |
| Net Assets | | |
| Beginning of period | 244,501,523 | 248,745,871 |
| End of period | $256,547,079 | $244,501,523 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
VIP Consumer Staples Portfolio Initial Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $19.84 | $18.76 | $15.10 | $19.72 | $17.48 | $18.25 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .18 | .35 | .39 | .44B | .32 | .33 |
| Net realized and unrealized gain (loss) | 1.14 | 1.78 | 4.22 | (3.36) | 2.24 | .30 |
| Total from investment operations | 1.32 | 2.13 | 4.61 | (2.92) | 2.56 | .63 |
| Distributions from net investment income | (.09) | (.35) | (.34) | (.50) | (.32) | (.33)C |
| Distributions from net realized gain | (.35) | (.71) | (.61) | (1.19) | – | (1.07)C |
| Total distributions | (.44) | (1.05)D | (.95) | (1.70)D | (.32) | (1.40) |
| Redemption fees added to paid in capitalA | – | – | – | – | –E | –E |
| Net asset value, end of period | $20.72 | $19.84 | $18.76 | $15.10 | $19.72 | $17.48 |
| Total ReturnF,G,H | 6.83% | 11.78% | 31.42% | (15.55)% | 14.66% | 3.72% |
| Ratios to Average Net AssetsI,J | | | | | | |
| Expenses before reductions | .65%K | .67% | .67% | .68% | .68% | .68% |
| Expenses net of fee waivers, if any | .65%K | .66% | .67% | .68% | .68% | .68% |
| Expenses net of all reductions | .64%K | .66% | .67% | .67% | .68% | .67% |
| Net investment income (loss) | 1.79%K | 1.94% | 2.23% | 2.53%B | 1.69% | 1.79% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $20,599 | $20,009 | $21,139 | $16,285 | $29,388 | $38,192 |
| Portfolio turnover rateL | 70%K | 51% | 46% | 38% | 41% | 45% |
A Calculated based on average shares outstanding during the period.
B Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.14 per share. Excluding such non-recurring dividend(s), the ratio of net investment income (loss) to average net assets would have been 1.71%.
C The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.
D Total distributions per share do not sum due to rounding.
E Amount represents less than $.005 per share.
F Total returns for periods of less than one year are not annualized.
G Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
H Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
I Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
K Annualized
L Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Consumer Staples Portfolio Investor Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $19.75 | $18.68 | $15.04 | $19.64 | $17.42 | $18.19 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .17 | .33 | .37 | .42B | .31 | .32 |
| Net realized and unrealized gain (loss) | 1.14 | 1.78 | 4.21 | (3.34) | 2.21 | .30 |
| Total from investment operations | 1.31 | 2.11 | 4.58 | (2.92) | 2.52 | .62 |
| Distributions from net investment income | (.08) | (.33) | (.33) | (.49) | (.30) | (.32)C |
| Distributions from net realized gain | (.35) | (.71) | (.61) | (1.19) | – | (1.07)C |
| Total distributions | (.44)D | (1.04) | (.94) | (1.68) | (.30) | (1.39) |
| Redemption fees added to paid in capitalA | – | – | – | – | –E | –E |
| Net asset value, end of period | $20.62 | $19.75 | $18.68 | $15.04 | $19.64 | $17.42 |
| Total ReturnF,G,H | 6.80% | 11.70% | 31.33% | (15.58)% | 14.52% | 3.67% |
| Ratios to Average Net AssetsI,J | | | | | | |
| Expenses before reductions | .73%K | .74% | .75% | .76% | .76% | .76% |
| Expenses net of fee waivers, if any | .73%K | .74% | .75% | .76% | .76% | .76% |
| Expenses net of all reductions | .72%K | .73% | .75% | .75% | .76% | .75% |
| Net investment income (loss) | 1.72%K | 1.86% | 2.15% | 2.45%B | 1.61% | 1.71% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $235,948 | $224,492 | $227,607 | $172,096 | $258,092 | $278,992 |
| Portfolio turnover rateL | 70%K | 51% | 46% | 38% | 41% | 45% |
A Calculated based on average shares outstanding during the period.
B Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.14 per share. Excluding such non-recurring dividend(s), the ratio of net investment income (loss) to average net assets would have been 1.63%.
C The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.
D Total distributions per share do not sum due to rounding.
E Amount represents less than $.005 per share.
F Total returns for periods of less than one year are not annualized.
G Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
H Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
I Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
J Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
K Annualized
L Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements (Unaudited)
For the period ended June 30, 2021
1. Organization.
VIP Consumer Staples Portfolio (the Fund) is a non-diversified fund of Variable Insurance Products Fund IV (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the investing fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense Ratio(a) |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% to .01% |
(a) Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds which contain the significant accounting policies (including investment valuation policies) of those funds, and are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events, changes in interest rates and credit quality. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, Exchange-Traded Funds (ETFs) and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy. Securities, including private placements or other restricted securities, for which observable inputs are not available are valued using alternate valuation approaches, including the market approach, the income approach and cost approach, and are categorized as Level 3 in the hierarchy. The market approach considers factors including the price of recent investments in the same or a similar security or financial metrics of comparable securities. The income approach considers factors including expected future cash flows, security specific risks and corresponding discount rates. The cost approach considers factors including the value of the security's underlying assets and liabilities.
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. Corporate bonds are valued by pricing vendors who utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of June 30, 2021 is included at the end of the Fund's Schedule of Investments.
Foreign Currency. Certain Funds may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Gains and losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received, and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost and include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of a fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of a fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred, as applicable. Certain expense reductions may also differ by class, if applicable. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $68,007,236 |
| Gross unrealized depreciation | (1,353,525) |
| Net unrealized appreciation (depreciation) | $66,653,711 |
| Tax cost | $197,691,291 |
Restricted Securities (including Private Placements). Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities held at period end is included at the end of the Schedule of Investments, if applicable.
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Consumer Staples Portfolio | 85,195,588 | 86,892,297 |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .23% during the period. The group fee rate is based upon the monthly average net assets of a group of registered investment companies with which the investment adviser has management contracts. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annualized management fee rate was .53% of the Fund's average net assets.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company LLC (FIIOC), an affiliate of the investment adviser, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class pays a fee for transfer agent services, typesetting and printing and mailing of shareholder reports, excluding mailing of proxy statements. For the period, transfer agent fees for each class were as follows:
| | Amount | % of Class-Level Average Net Assets(a) |
| Initial Class | 6,312 | .06 |
| Investor Class | 158,106 | .14 |
| | $164,418 | |
(a) Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. For the period, the fees were equivalent to the following annualized rates:
| | % of Average Net Assets |
| VIP Consumer Staples Portfolio | .04 |
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount |
| VIP Consumer Staples Portfolio | $2,076 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note and are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Consumer Staples Portfolio | 6,240,661 | 8,506,342 |
6. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro-rata portion of the line of credit, which are reflected in Miscellaneous expenses on the Statement of Operations, and are listed below. During the period, there were no borrowings on this line of credit.
| | Amount |
| VIP Consumer Staples Portfolio | $236 |
7. Security Lending.
Funds lend portfolio securities from time to time in order to earn additional income. Lending agents are used, including National Financial Services (NFS), an affiliate of the investment adviser. Pursuant to a securities lending agreement, NFS will receive a fee, which is capped at 9.9% of a fund's daily lending revenue, for its services as lending agent. A fund may lend securities to certain qualified borrowers, including NFS. On the settlement date of the loan, a fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of a fund and any additional required collateral is delivered to a fund on the next business day. A fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund may apply collateral received from the borrower against the obligation. A fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. Any loaned securities are identified as such in the Schedule of Investments, and the value of loaned securities and cash collateral at period end, as applicable, are presented in the Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Affiliated security lending activity, if any, was as follows:
| | Total Security Lending Fees Paid to NFS | Security Lending Income From Securities Loaned to NFS | Value of Securities Loaned to NFS at Period End |
| VIP Consumer Staples Portfolio | $392 | $– | $– |
8. Expense Reductions.
Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset expenses. This amount totaled $13,501 for the period.
In addition, during the period the investment adviser or an affiliate reimbursed and/or waived a portion of fund-level operating expenses in the amount of $364.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| | Six months ended
June 30, 2021 | Year ended
December 31, 2020 |
| VIP Consumer Staples Portfolio | | |
| Distributions to shareholders | | |
| Initial Class | $431,384 | $1,119,866 |
| Investor Class | 4,830,881 | 12,062,899 |
| Total | $5,262,265 | $13,182,765 |
10. Share Transactions.
Transactions for each class of shares were as follows and may contain in-kind transactions:
| | Shares | Shares | Dollars | Dollars |
| | Six months ended June 30, 2021 | Year ended December 31, 2020 | Six months ended June 30, 2021 | Year ended December 31, 2020 |
| VIP Consumer Staples Portfolio | | | | |
| Initial Class | | | | |
| Shares sold | 81,655 | 92,938 | $1,638,360 | $1,575,998 |
| Reinvestment of distributions | 22,538 | 59,857 | 431,384 | 1,119,866 |
| Shares redeemed | (118,602) | (271,260) | (2,366,030) | (4,743,261) |
| Net increase (decrease) | (14,409) | (118,465) | $(296,286) | $(2,047,397) |
| Investor Class | | | | |
| Shares sold | 651,374 | 1,230,516 | $13,001,344 | $21,786,233 |
| Reinvestment of distributions | 253,723 | 647,839 | 4,830,881 | 12,062,899 |
| Shares redeemed | (829,152) | (2,697,157) | (16,369,984) | (46,497,749) |
| Net increase (decrease) | 75,945 | (818,802) | $1,462,241 | $(12,648,617) |
11. Other.
Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.
At the end of the period, the investment adviser or its affiliates were owners of record of more than 10% of the outstanding shares as follows:
| Fund | Affiliated % |
| VIP: Consumer Staples Portfolio | 100% |
12. Coronavirus (COVID-19) Pandemic.
An outbreak of COVID-19 first detected in China during December 2019 has since spread globally and was declared a pandemic by the World Health Organization during March 2020. Developments that disrupt global economies and financial markets, such as the COVID-19 pandemic, may magnify factors that affect the Fund's performance.
Shareholder Expense Example
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2021 to June 30, 2021).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
January 1, 2021 | Ending
Account Value
June 30, 2021 | Expenses Paid
During Period-B
January 1, 2021
to June 30, 2021 |
| VIP Consumer Staples Portfolio | | | | |
| Initial Class | .65% | | | |
| Actual | | $1,000.00 | $1,068.30 | $3.33 |
| Hypothetical-C | | $1,000.00 | $1,021.57 | $3.26 |
| Investor Class | .73% | | | |
| Actual | | $1,000.00 | $1,068.00 | $3.74 |
| Hypothetical-C | | $1,000.00 | $1,021.17 | $3.66 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
C 5% return per year before expenses
Board Approval of Investment Advisory Contracts and Management Fees
VIP Consumer Staples Portfolio
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
Approval of Stub Period Continuation. At its January 2021 meeting, the Board of Trustees voted to continue the fund's management contract with FMR, and the sub-advisory agreements and sub-subadvisory agreements, in each case, where applicable (together, the Advisory Contracts), without modification, for four months from February 1, 2021 through May 31, 2021, in connection with changes to the Board's meeting calendar. The Board considered that the approval of the fund's Advisory Contracts will not result in any changes in (i) the investment process or strategies employed in the management of the fund's assets; (ii) the fees and expenses paid by shareholders; (iii) the nature, extent or quality of services provided under the fund's Advisory Contracts; or (iv) the day-to-day management of the fund or the persons primarily responsible for such management. The Board also considered that since its last approval of the fund's Advisory Contracts, FMR had provided additional information on the fund in support of the annual contract renewal process, including competitive analyses on total expenses and management fees and in-depth reviews of fund performance and fund profitability information. The Board also considered the findings of certain ad hoc committees that had been previously formed to discuss matters relevant to all of the Fidelity funds, including economies of scale, fall-out benefits and retail vs. institutional funds. The Board concluded that the fund's Advisory Contracts are fair and reasonable, and that the fund's Advisory Contracts should be renewed, without modification, through May 31, 2021, with the understanding that the Board will consider the annual renewal for a full one year period in May 2021.
At its May 2021 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process. The Board also considered Fidelity's investments in business continuity planning, and its success in continuously providing services to the fund notwithstanding the severe disruptions caused by the COVID-19 pandemic.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
The Board noted that, in the past, it and the boards of certain other Fidelity funds had formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest, and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and ETFs with innovative structures, strategies and pricing and making other enhancements to meet client needs; (iv) launching new share classes of existing funds; (v) eliminating purchase minimums and broadening eligibility requirements for certain funds and share classes; (vi) approving the reduction in the holding period for the Class C to Class A conversion policy; (vii) reducing management fees and total expenses for certain target date funds and classes and index funds; (viii) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (ix) rationalizing product lines and gaining increased efficiencies from fund mergers, liquidations, and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (xi) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including retirement income goals.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history. The Board noted that there were portfolio management changes for the fund in November 2019 and July 2020. The Board will continue to monitor closely the fund's performance, taking into account the portfolio management changes.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index). In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative total return information for the fund and an appropriate benchmark index for the most recent one-, three-, and five-year periods ended September 30, 2020, as shown below.
VIP Consumer Staples Portfolio
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable investment mandates. For this purpose, all sector focused equity variable annuity funds are grouped in the same mapped group. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods ended September 30 (June 30 for periods ended 2019 and 2018 and December 31 for periods prior to 2018) shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates (i.e., sector equities), regardless of whether their management fee structures also are comparable. Funds with comparable management fee structures have similar management fee contractual arrangements (
e.g., flat rate charged for advisory services, all-inclusive fee rate,
etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and was considered by the Board.
VIP Consumer Staples Portfolio
The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for the 12-month period ended September 30, 2020.
The Board noted that, in the past, it and the boards of other Fidelity funds had formed an ad hoc Committee on Group Fee to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of a representative class of the fund compared to competitive fund median expenses. The fund's representative class is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure (SLTG). The Board also considered a total expense ASPG comparison for the representative class, which focuses on the total expenses of the representative class relative to a subset of non-Fidelity funds within the total expense SLTG. The total expense ASPG is limited to 15 larger and 15 smaller classes in fund average assets for a total of 30 classes, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
The Board noted that the total expense ratio of the Initial Class ranked below the SLTG competitive median and below the ASPG competitive median for the 12-month period ended September 30, 2020.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board also considered that in 2019 a joint ad hoc committee created by it and the boards of other Fidelity funds evaluated potential fall-out benefits (PFOB Committee). The Board noted that it considered the PFOB Committee's findings in connection with its consideration of the renewal of the Advisory Contracts.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund, including the conclusions of the PFOB Committee, and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total "group assets" increase, and for higher group fee rates as total "group assets" decrease ("group assets" as defined in the management contract). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board further considered that Fidelity agreed to impose a temporary fee waiver in the form of additional breakpoints to the current breakpoint schedule. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as "group assets" increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) consideration of expanding the use of performance fees for additional funds; (iii) Fidelity's pricing philosophy compared to competitors; (iv) metrics for evaluating index fund and ETF performance and information about ETF trading characteristics; (v) the methodology with respect to evaluating competitive fund data and peer group classifications and fee and expense comparisons; (vi) the expense structures for different funds and classes and information about the differences between various expense structures; (vii) group fee breakpoints; (viii) information regarding other accounts managed by Fidelity and sub-advisory arrangements; and (ix) Fidelity's philosophies and strategies for evaluating funds and classes with lower or declining asset levels.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Liquidity Risk Management Program
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program pursuant to the Liquidity Rule (the Program) effective December 1, 2018. The Program is reasonably designed to assess and manage the Fund’s liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund’s Board of Trustees (the Board) has designated the Fund’s investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund’s liquidity risk based on a variety of factors including (1) the Fund’s investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) in the case of exchange-traded funds, certain additional factors including the effect of the Fund’s prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund’s portfolio, as applicable.
In accordance with the Program, each of the Fund’s portfolio investments is classified into one of four liquidity categories described below based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments – cash or convertible to cash within three business days or less
- Moderately liquid investments – convertible to cash in three to seven calendar days
- Less liquid investments – can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments – cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund’s illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund’s net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund’s Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the annual period from December 1, 2019 through November 30, 2020. The report concluded that the Program has been implemented and is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk.
VCSP-SANN-0821
1.850997.114
Fidelity® Variable Insurance Products:
Materials Portfolio
Semi-Annual Report
June 30, 2021
Contents
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov.
You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
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This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Note to Shareholders:
Early in 2020, the outbreak and spread of a new coronavirus emerged as a public health emergency that had a major influence on financial markets, primarily based on its impact on the global economy and the outlook for corporate earnings. The virus causes a respiratory disease known as COVID-19. On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a pandemic, citing sustained risk of further global spread.
In the weeks following, as the crisis worsened, we witnessed an escalating human tragedy with wide-scale social and economic consequences from coronavirus-containment measures. The outbreak of COVID-19 prompted a number of measures to limit the spread, including travel and border restrictions, quarantines, and restrictions on large gatherings. In turn, these resulted in lower consumer activity, diminished demand for a wide range of products and services, disruption in manufacturing and supply chains, and – given the wide variability in outcomes regarding the outbreak – significant market uncertainty and volatility. Amid the turmoil, global governments and central banks took unprecedented action to help support consumers, businesses, and the broader economies, and to limit disruption to financial systems.
The situation continues to unfold, and the extent and duration of its impact on financial markets and the economy remain highly uncertain. Extreme events such as the coronavirus crisis are “exogenous shocks” that can have significant adverse effects on mutual funds and their investments. Although multiple asset classes may be affected by market disruption, the duration and impact may not be the same for all types of assets.
Fidelity is committed to helping you stay informed amid news about COVID-19 and during increased market volatility, and we’re taking extra steps to be responsive to customer needs. We encourage you to visit our websites, where we offer ongoing updates, commentary, and analysis on the markets and our funds.
Investment Summary (Unaudited)
Top Ten Stocks as of June 30, 2021
| | % of fund's net assets |
| Linde PLC | 10.6 |
| Freeport-McMoRan, Inc. | 5.2 |
| Sherwin-Williams Co. | 4.9 |
| Air Products & Chemicals, Inc. | 4.6 |
| Newmont Corp. | 4.1 |
| Ecolab, Inc. | 3.9 |
| Tronox Holdings PLC | 3.9 |
| Olin Corp. | 3.3 |
| International Flavors & Fragrances, Inc. | 3.1 |
| Martin Marietta Materials, Inc. | 3.0 |
| | 46.6 |
Top Industries (% of fund's net assets)
| As of June 30, 2021 |
| | Chemicals | 60.9% |
| | Metals & Mining | 22.4% |
| | Containers & Packaging | 8.1% |
| | Construction Materials | 6.8% |
| | Paper & Forest Products | 1.4% |
| | All Others* | 0.4% |
* Includes Short-Term investments and Net Other Assets (Liabilities).
Schedule of Investments June 30, 2021 (Unaudited)
Showing Percentage of Net Assets
| Common Stocks - 99.6% | | | |
| | | Shares | Value |
| Chemicals - 60.9% | | | |
| Commodity Chemicals - 9.5% | | | |
| LyondellBasell Industries NV Class A | | 31,460 | $3,236,290 |
| Olin Corp. | | 99,822 | 4,617,766 |
| Tronox Holdings PLC | | 240,040 | 5,376,896 |
| | | | 13,230,952 |
| Diversified Chemicals - 1.5% | | | |
| Eastman Chemical Co. | | 8,300 | 969,025 |
| Huntsman Corp. | | 41,200 | 1,092,624 |
| | | | 2,061,649 |
| Fertilizers & Agricultural Chemicals - 7.9% | | | |
| CF Industries Holdings, Inc. | | 29,300 | 1,507,485 |
| Corteva, Inc. | | 81,700 | 3,623,395 |
| FMC Corp. | | 17,689 | 1,913,950 |
| Nutrien Ltd. | | 47,900 | 2,902,363 |
| The Mosaic Co. | | 23,100 | 737,121 |
| The Scotts Miracle-Gro Co. Class A | | 2,000 | 383,840 |
| | | | 11,068,154 |
| Industrial Gases - 15.2% | | | |
| Air Products & Chemicals, Inc. | | 22,288 | 6,411,812 |
| Linde PLC | | 50,800 | 14,686,279 |
| | | | 21,098,091 |
| Specialty Chemicals - 26.8% | | | |
| Albemarle Corp. U.S. | | 15,190 | 2,558,907 |
| Ashland Global Holdings, Inc. | | 7,200 | 630,000 |
| Balchem Corp. | | 14,700 | 1,929,522 |
| Corbion NV | | 4,100 | 234,328 |
| Diversey Holdings Ltd. (a) | | 30,500 | 546,255 |
| DuPont de Nemours, Inc. | | 39,914 | 3,089,743 |
| Ecolab, Inc. | | 26,403 | 5,438,226 |
| Element Solutions, Inc. | | 113,300 | 2,648,954 |
| Ingevity Corp. (a) | | 3,300 | 268,488 |
| Innospec, Inc. | | 11,210 | 1,015,738 |
| International Flavors & Fragrances, Inc. | | 29,260 | 4,371,444 |
| Livent Corp. (a)(b) | | 47,800 | 925,408 |
| PPG Industries, Inc. | | 23,300 | 3,955,641 |
| RPM International, Inc. | | 16,500 | 1,463,220 |
| Sherwin-Williams Co. | | 25,274 | 6,885,901 |
| Stepan Co. | | 2,000 | 240,540 |
| Wacker Chemie AG | | 6,800 | 1,048,606 |
| | | | 37,250,921 |
|
| TOTAL CHEMICALS | | | 84,709,767 |
|
| Construction Materials - 6.8% | | | |
| Construction Materials - 6.8% | | | |
| Martin Marietta Materials, Inc. | | 11,926 | 4,195,686 |
| Summit Materials, Inc. (a) | | 31,929 | 1,112,726 |
| Vulcan Materials Co. | | 23,850 | 4,151,570 |
| | | | 9,459,982 |
| Containers & Packaging - 8.1% | | | |
| Metal & Glass Containers - 5.3% | | | |
| Aptargroup, Inc. | | 12,300 | 1,732,332 |
| Ball Corp. | | 37,000 | 2,997,740 |
| Crown Holdings, Inc. | | 25,119 | 2,567,413 |
| | | | 7,297,485 |
| Paper Packaging - 2.8% | | | |
| Avery Dennison Corp. | | 12,800 | 2,691,072 |
| Packaging Corp. of America | | 8,800 | 1,191,696 |
| | | | 3,882,768 |
|
| TOTAL CONTAINERS & PACKAGING | | | 11,180,253 |
|
| Metals & Mining - 22.4% | | | |
| Aluminum - 0.7% | | | |
| Alcoa Corp. (a) | | 14,400 | 530,496 |
| Kaiser Aluminum Corp. | | 3,000 | 370,470 |
| | | | 900,966 |
| Copper - 8.9% | | | |
| First Quantum Minerals Ltd. | | 78,320 | 1,805,100 |
| Freeport-McMoRan, Inc. | | 196,540 | 7,293,599 |
| Lundin Mining Corp. | | 363,660 | 3,279,864 |
| | | | 12,378,563 |
| Diversified Metals & Mining - 0.4% | | | |
| MMC Norilsk Nickel PJSC sponsored ADR | | 17,000 | 579,190 |
| Gold - 4.8% | | | |
| Newmont Corp. | | 89,870 | 5,695,961 |
| Royal Gold, Inc. | | 9,120 | 1,040,592 |
| | | | 6,736,553 |
| Steel - 7.6% | | | |
| Allegheny Technologies, Inc. (a) | | 14,700 | 306,495 |
| Cleveland-Cliffs, Inc. (a) | | 78,300 | 1,688,148 |
| Commercial Metals Co. | | 54,751 | 1,681,951 |
| Nucor Corp. | | 34,200 | 3,280,806 |
| Reliance Steel & Aluminum Co. | | 13,700 | 2,067,330 |
| Steel Dynamics, Inc. | | 26,600 | 1,585,360 |
| | | | 10,610,090 |
|
| TOTAL METALS & MINING | | | 31,205,362 |
|
| Paper & Forest Products - 1.4% | | | |
| Forest Products - 1.4% | | | |
| Louisiana-Pacific Corp. | | 23,300 | 1,404,757 |
| West Fraser Timber Co. Ltd. | | 8,000 | 574,314 |
| | | | 1,979,071 |
| TOTAL COMMON STOCKS | | | |
| (Cost $119,138,354) | | | 138,534,435 |
|
| Money Market Funds - 0.6% | | | |
| Fidelity Securities Lending Cash Central Fund 0.06% (c)(d) | | | |
| (Cost $883,575) | | 883,487 | 883,575 |
| TOTAL INVESTMENT IN SECURITIES - 100.2% | | | |
| (Cost $120,021,929) | | | 139,418,010 |
| NET OTHER ASSETS (LIABILITIES) - (0.2)% | | | (299,090) |
| NET ASSETS - 100% | | | $139,118,920 |
Legend
(a) Non-income producing
(b) Security or a portion of the security is on loan at period end.
(c) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
(d) Investment made with cash collateral received from securities on loan.
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| Fidelity Cash Central Fund | $703 |
| Fidelity Securities Lending Cash Central Fund | 1,886 |
| Total | $2,589 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable. Amount for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Fund | Value, beginning of period | Purchases | Sales Proceeds | Realized Gain/Loss | Change in Unrealized appreciation (depreciation) | Value, end of period | % ownership, end of period |
| Fidelity Cash Central Fund 0.06% | $1,216,042 | $59,277,155 | $60,493,199 | $2 | $-- | $-- | 0.0% |
| Fidelity Securities Lending Cash Central Fund 0.06% | 1,652,490 | 4,259,980 | 5,028,895 | -- | -- | 883,575 | 0.0% |
| Total | $2,868,532 | $63,537,135 | $65,522,094 | $2 | $-- | $883,575 | |
Investment Valuation
The following is a summary of the inputs used, as of June 30, 2021, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| Investments in Securities: | | | | |
| Common Stocks | $138,534,435 | $138,534,435 | $-- | $-- |
| Money Market Funds | 883,575 | 883,575 | -- | -- |
| Total Investments in Securities: | $139,418,010 | $139,418,010 | $-- | $-- |
Other Information
Distribution of investments by country or territory of incorporation, as a percentage of Total Net Assets, is as follows (Unaudited):
| United States of America | 75.2% |
| Ireland | 10.6% |
| Canada | 6.2% |
| United Kingdom | 3.9% |
| Netherlands | 2.5% |
| Others (Individually Less Than 1%) | 1.6% |
| | 100.0% |
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| | | June 30, 2021 (Unaudited) |
| Assets | | |
Investment in securities, at value (including securities loaned of $888,624) — See accompanying schedule:
Unaffiliated issuers (cost $119,138,354) | $138,534,435 | |
| Fidelity Central Funds (cost $883,575) | 883,575 | |
| Total Investment in Securities (cost $120,021,929) | | $139,418,010 |
| Receivable for investments sold | | 2,328,972 |
| Dividends receivable | | 165,873 |
| Distributions receivable from Fidelity Central Funds | | 121 |
| Prepaid expenses | | 436 |
| Other receivables | | 3,682 |
| Total assets | | 141,917,094 |
| Liabilities | | |
| Payable to custodian bank | $753,337 | |
| Payable for fund shares redeemed | 1,051,536 | |
| Accrued management fee | 64,583 | |
| Other affiliated payables | 20,712 | |
| Other payables and accrued expenses | 24,431 | |
| Collateral on securities loaned | 883,575 | |
| Total liabilities | | 2,798,174 |
| Net Assets | | $139,118,920 |
| Net Assets consist of: | | |
| Paid in capital | | $116,223,278 |
| Total accumulated earnings (loss) | | 22,895,642 |
| Net Assets | | $139,118,920 |
| Net Asset Value and Maximum Offering Price | | |
| Initial Class: | | |
| Net Asset Value, offering price and redemption price per share ($20,341,234 ÷ 1,209,423 shares) | | $16.82 |
| Investor Class: | | |
| Net Asset Value, offering price and redemption price per share ($118,777,686 ÷ 7,067,714 shares) | | $16.81 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| | | Six months ended June 30, 2021 (Unaudited) |
| Investment Income | | |
| Dividends | | $806,426 |
| Income from Fidelity Central Funds (including $1,886 from security lending) | | 2,589 |
| Total income | | 809,015 |
| Expenses | | |
| Management fee | $263,005 | |
| Transfer agent fees | 64,139 | |
| Accounting fees | 19,452 | |
| Custodian fees and expenses | 9,341 | |
| Independent trustees' fees and expenses | 138 | |
| Audit | 21,237 | |
| Legal | 716 | |
| Miscellaneous | 167 | |
| Total expenses before reductions | 378,195 | |
| Expense reductions | (7,732) | |
| Total expenses after reductions | | 370,463 |
| Net investment income (loss) | | 438,552 |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 5,691,393 | |
| Fidelity Central Funds | 2 | |
| Foreign currency transactions | (4,385) | |
| Total net realized gain (loss) | | 5,687,010 |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 4,795,626 | |
| Assets and liabilities in foreign currencies | (557) | |
| Total change in net unrealized appreciation (depreciation) | | 4,795,069 |
| Net gain (loss) | | 10,482,079 |
| Net increase (decrease) in net assets resulting from operations | | $10,920,631 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| | Six months ended June 30, 2021 (Unaudited) | Year ended December 31, 2020 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $438,552 | $210,020 |
| Net realized gain (loss) | 5,687,010 | (828,259) |
| Change in net unrealized appreciation (depreciation) | 4,795,069 | 9,039,238 |
| Net increase (decrease) in net assets resulting from operations | 10,920,631 | 8,420,999 |
| Distributions to shareholders | (85,374) | (289,662) |
| Share transactions - net increase (decrease) | 70,337,086 | 5,656,348 |
| Total increase (decrease) in net assets | 81,172,343 | 13,787,685 |
| Net Assets | | |
| Beginning of period | 57,946,577 | 44,158,892 |
| End of period | $139,118,920 | $57,946,577 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
VIP Materials Portfolio Initial Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $14.17 | $11.74 | $11.46 | $16.18 | $13.16 | $12.18 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .08 | .07 | .16 | .18 | .15 | .17 |
| Net realized and unrealized gain (loss) | 2.59 | 2.44 | 1.31 | (3.83) | 3.25 | 1.23 |
| Total from investment operations | 2.67 | 2.51 | 1.47 | (3.65) | 3.40 | 1.40 |
| Distributions from net investment income | (.02) | (.08) | (.19) | (.21) | (.13) | (.11) |
| Distributions from net realized gain | – | – | (1.00) | (.86) | (.25) | (.31) |
| Total distributions | (.02) | (.08) | (1.19) | (1.07) | (.38) | (.42) |
| Redemption fees added to paid in capitalA | – | – | – | – | –B | –B |
| Net asset value, end of period | $16.82 | $14.17 | $11.74 | $11.46 | $16.18 | $13.16 |
| Total ReturnC,D,E | 18.86% | 21.49% | 13.40% | (23.60)% | 26.08% | 12.20% |
| Ratios to Average Net AssetsF,G | | | | | | |
| Expenses before reductions | .69%H | .77% | .75% | .72% | .73% | .77% |
| Expenses net of fee waivers, if any | .69%H | .77% | .75% | .72% | .73% | .77% |
| Expenses net of all reductions | .67%H | .76% | .74% | .71% | .72% | .76% |
| Net investment income (loss) | .93%H | .59% | 1.37% | 1.26% | 1.05% | 1.37% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $20,341 | $9,924 | $8,905 | $9,728 | $19,126 | $12,726 |
| Portfolio turnover rateI | 104%H | 83% | 104% | 87% | 64% | 56% |
A Calculated based on average shares outstanding during the period.
B Amount represents less than $.005 per share.
C Total returns for periods of less than one year are not annualized.
D Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
E Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
F Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
H Annualized
I Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Materials Portfolio Investor Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $14.16 | $11.73 | $11.46 | $16.17 | $13.15 | $12.18 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | .07 | .06 | .15 | .17 | .14 | .16 |
| Net realized and unrealized gain (loss) | 2.60 | 2.45 | 1.30 | (3.82) | 3.25 | 1.23 |
| Total from investment operations | 2.67 | 2.51 | 1.45 | (3.65) | 3.39 | 1.39 |
| Distributions from net investment income | (.02) | (.08) | (.18) | (.20) | (.12) | (.11) |
| Distributions from net realized gain | – | – | (1.00) | (.86) | (.25) | (.31) |
| Total distributions | (.02) | (.08) | (1.18) | (1.06) | (.37) | (.42) |
| Redemption fees added to paid in capitalA | – | – | – | – | –B | –B |
| Net asset value, end of period | $16.81 | $14.16 | $11.73 | $11.46 | $16.17 | $13.15 |
| Total ReturnC,D,E | 18.86% | 21.45% | 13.20% | (23.65)% | 26.02% | 12.06% |
| Ratios to Average Net AssetsF,G | | | | | | |
| Expenses before reductions | .76%H | .85% | .83% | .80% | .81% | .85% |
| Expenses net of fee waivers, if any | .76%H | .85% | .83% | .80% | .81% | .85% |
| Expenses net of all reductions | .75%H | .84% | .82% | .79% | .80% | .85% |
| Net investment income (loss) | .86%H | .52% | 1.29% | 1.18% | .97% | 1.29% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $118,778 | $48,022 | $35,254 | $42,448 | $78,212 | $52,786 |
| Portfolio turnover rateI | 104%H | 83% | 104% | 87% | 64% | 56% |
A Calculated based on average shares outstanding during the period.
B Amount represents less than $.005 per share.
C Total returns for periods of less than one year are not annualized.
D Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
E Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
F Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
H Annualized
I Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements (Unaudited)
For the period ended June 30, 2021
1. Organization.
VIP Materials Portfolio (the Fund) is a non-diversified fund of Variable Insurance Products Fund IV (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the investing fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense Ratio(a) |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% to .01% |
(a) Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds which contain the significant accounting policies (including investment valuation policies) of those funds, and are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, Exchange-Traded Funds (ETFs) and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of June 30, 2021 is included at the end of the Fund's Schedule of Investments.
Foreign Currency. Certain Funds may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Gains and losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received, and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of a fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of a fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred, as applicable. Certain expense reductions may also differ by class, if applicable. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, capital loss carryforwards and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $22,282,547 |
| Gross unrealized depreciation | (3,605,068) |
| Net unrealized appreciation (depreciation) | $18,677,479 |
| Tax cost | $120,740,531 |
Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited. The capital loss carryforward information presented below, including any applicable limitation, is estimated as of prior fiscal period end and is subject to adjustment.
| No expiration | |
| Short-term | $(2,205,960) |
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Materials Portfolio | 120,910,373 | 50,003,194 |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .23% during the period. The group fee rate is based upon the monthly average net assets of a group of registered investment companies with which the investment adviser has management contracts. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annualized management fee rate was .52% of the Fund's average net assets.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company LLC (FIIOC), an affiliate of the investment adviser, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class pays a fee for transfer agent services, typesetting and printing and mailing of shareholder reports, excluding mailing of proxy statements. For the period, transfer agent fees for each class were as follows:
| | Amount | % of Class-Level Average Net Assets(a) |
| Initial Class | $ 5,069 | .06 |
| Investor Class | 59,070 | .14 |
| | $64,139 | |
(a) Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. For the period, the fees were equivalent to the following annualized rates:
| | % of Average Net Assets |
| VIP Materials Portfolio | .04 |
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount |
| VIP Materials Portfolio | $2,125 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note and are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Materials Portfolio | 11,234,422 | 3,895,684 |
6. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro-rata portion of the line of credit, which are reflected in Miscellaneous expenses on the Statement of Operations, and are listed below. During the period, there were no borrowings on this line of credit.
| | Amount |
| VIP Materials Portfolio | $61 |
7. Security Lending.
Funds lend portfolio securities from time to time in order to earn additional income. Lending agents are used, including National Financial Services (NFS), an affiliate of the investment adviser. Pursuant to a securities lending agreement, NFS will receive a fee, which is capped at 9.9% of a fund's daily lending revenue, for its services as lending agent. A fund may lend securities to certain qualified borrowers, including NFS. On the settlement date of the loan, a fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of a fund and any additional required collateral is delivered to a fund on the next business day. A fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund may apply collateral received from the borrower against the obligation. A fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. Any loaned securities are identified as such in the Schedule of Investments, and the value of loaned securities and cash collateral at period end, as applicable, are presented in the Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Affiliated security lending activity, if any, was as follows:
| | Total Security Lending Fees Paid to NFS | Security Lending Income From Securities Loaned to NFS | Value of Securities Loaned to NFS at Period End |
| VIP Materials Portfolio | $199 | $– | $– |
8. Expense Reductions.
Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset expenses. This amount totaled $7,649 for the period.
In addition, during the period the investment adviser or an affiliate reimbursed and/or waived a portion of fund-level operating expenses in the amount of $83.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| | Six months ended
June 30, 2021 | Year ended
December 31, 2020 |
| VIP Materials Portfolio | | |
| Distributions to shareholders | | |
| Initial Class | $ 16,686 | $ 57,405 |
| Investor Class | 68,688 | 232,257 |
| Total | $85,374 | $289,662 |
10. Share Transactions.
Transactions for each class of shares were as follows and may contain in-kind transactions:
| | Shares | Shares | Dollars | Dollars |
| | Six months ended June 30, 2021 | Year ended December 31, 2020 | Six months ended June 30, 2021 | Year ended December 31, 2020 |
| VIP Materials Portfolio | | | | |
| Initial Class | | | | |
| Shares sold | 703,083 | 192,332 | $11,711,671 | $2,221,081 |
| Reinvestment of distributions | 1,127 | 4,667 | 16,686 | 57,405 |
| Shares redeemed | (195,227) | (255,284) | (3,200,524) | (2,730,769) |
| Net increase (decrease) | 508,983 | (58,285) | $8,527,833 | $(452,283) |
| Investor Class | | | | |
| Shares sold | 4,484,230 | 1,432,671 | $75,243,429 | $17,088,530 |
| Reinvestment of distributions | 4,641 | 18,810 | 68,688 | 232,257 |
| Shares redeemed | (812,089) | (1,064,877) | (13,502,864) | (11,212,156) |
| Net increase (decrease) | 3,676,782 | 386,604 | $61,809,253 | $6,108,631 |
11. Other.
Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.
At the end of the period, the investment adviser or its affiliates were owners of record of more than 10% of the outstanding shares as follows:
| Fund | Affiliated % |
| VIP Materials Portfolio | 100% |
12. Coronavirus (COVID-19) Pandemic.
An outbreak of COVID-19 first detected in China during December 2019 has since spread globally and was declared a pandemic by the World Health Organization during March 2020. Developments that disrupt global economies and financial markets, such as the COVID-19 pandemic, may magnify factors that affect the Fund's performance.
Shareholder Expense Example
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2021 to June 30, 2021).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
January 1, 2021 | Ending
Account Value
June 30, 2021 | Expenses Paid
During Period-B
January 1, 2021
to June 30, 2021 |
| VIP Materials Portfolio | | | | |
| Initial Class | .69% | | | |
| Actual | | $1,000.00 | $1,188.60 | $3.74 |
| Hypothetical-C | | $1,000.00 | $1,021.37 | $3.46 |
| Investor Class | .76% | | | |
| Actual | | $1,000.00 | $1,188.60 | $4.12 |
| Hypothetical-C | | $1,000.00 | $1,021.03 | $3.81 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
C 5% return per year before expenses
Board Approval of Investment Advisory Contracts and Management Fees
VIP Materials Portfolio
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
Approval of Stub Period Continuation. At its January 2021 meeting, the Board of Trustees voted to continue the fund's management contract with FMR, and the sub-advisory agreements and sub-subadvisory agreements, in each case, where applicable (together, the Advisory Contracts), without modification, for four months from February 1, 2021 through May 31, 2021, in connection with changes to the Board's meeting calendar. The Board considered that the approval of the fund's Advisory Contracts will not result in any changes in (i) the investment process or strategies employed in the management of the fund's assets; (ii) the fees and expenses paid by shareholders; (iii) the nature, extent or quality of services provided under the fund's Advisory Contracts; or (iv) the day-to-day management of the fund or the persons primarily responsible for such management. The Board also considered that since its last approval of the fund's Advisory Contracts, FMR had provided additional information on the fund in support of the annual contract renewal process, including competitive analyses on total expenses and management fees and in-depth reviews of fund performance and fund profitability information. The Board also considered the findings of certain ad hoc committees that had been previously formed to discuss matters relevant to all of the Fidelity funds, including economies of scale, fall-out benefits and retail vs. institutional funds. The Board concluded that the fund's Advisory Contracts are fair and reasonable, and that the fund's Advisory Contracts should be renewed, without modification, through May 31, 2021, with the understanding that the Board will consider the annual renewal for a full one year period in May 2021.
At its May 2021 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process. The Board also considered Fidelity's investments in business continuity planning, and its success in continuously providing services to the fund notwithstanding the severe disruptions caused by the COVID-19 pandemic.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
The Board noted that, in the past, it and the boards of certain other Fidelity funds had formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest, and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and ETFs with innovative structures, strategies and pricing and making other enhancements to meet client needs; (iv) launching new share classes of existing funds; (v) eliminating purchase minimums and broadening eligibility requirements for certain funds and share classes; (vi) approving the reduction in the holding period for the Class C to Class A conversion policy; (vii) reducing management fees and total expenses for certain target date funds and classes and index funds; (viii) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (ix) rationalizing product lines and gaining increased efficiencies from fund mergers, liquidations, and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (xi) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including retirement income goals.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history. The Board noted that there were portfolio management changes for the fund in November 2019 and May 2020. The Board will continue to monitor closely the fund's performance, taking into account the portfolio management changes.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index). In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative total return information for the fund and an appropriate benchmark index for the most recent one-, three-, and five-year periods ended September 30, 2020, as shown below.
VIP Materials Portfolio
The Board considered the fund's underperformance for different time periods ended September 30, 2020 (which periods are reflected in the chart above). The Board noted that the fund's underperformance has continued since the Board approved the management contract in January 2019 and January 2020. The Board's discussions with FMR regarding underperformance cover topics including, but not limited to: the longer-term track record of a fund's portfolio manager(s); broader trends in the market that may adversely impact a fund's performance; and attribution reports on contributors to the fund's underperformance. The Board engages with FMR on steps that might be taken to address a fund's underperformance. For a fund with underperformance over longer periods of time, the Board typically monitors the fund's performance more closely.
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable investment mandates. For this purpose, all sector focused equity variable annuity funds are grouped in the same mapped group. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods ended September 30 (June 30 for periods ended 2019 and 2018 and December 31 for periods prior to 2018) shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates (i.e., sector equities), regardless of whether their management fee structures also are comparable. Funds with comparable management fee structures have similar management fee contractual arrangements (
e.g., flat rate charged for advisory services, all-inclusive fee rate,
etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and was considered by the Board.
VIP Materials Portfolio
The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for the 12-month period ended September 30, 2020.
The Board noted that, in the past, it and the boards of other Fidelity funds had formed an ad hoc Committee on Group Fee to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of a representative class of the fund compared to competitive fund median expenses. The fund's representative class is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure (SLTG). The Board also considered a total expense ASPG comparison for the representative class, which focuses on the total expenses of the representative class relative to a subset of non-Fidelity funds within the total expense SLTG. The total expense ASPG is limited to 15 larger and 15 smaller classes in fund average assets for a total of 30 classes, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
The Board noted that the total expense ratio of the Initial Class ranked below the SLTG competitive median and below the ASPG competitive median for the 12-month period ended September 30, 2020.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board also considered that in 2019 a joint ad hoc committee created by it and the boards of other Fidelity funds evaluated potential fall-out benefits (PFOB Committee). The Board noted that it considered the PFOB Committee's findings in connection with its consideration of the renewal of the Advisory Contracts.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund, including the conclusions of the PFOB Committee, and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total "group assets" increase, and for higher group fee rates as total "group assets" decrease ("group assets" as defined in the management contract). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board further considered that Fidelity agreed to impose a temporary fee waiver in the form of additional breakpoints to the current breakpoint schedule. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as "group assets" increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) consideration of expanding the use of performance fees for additional funds; (iii) Fidelity's pricing philosophy compared to competitors; (iv) metrics for evaluating index fund and ETF performance and information about ETF trading characteristics; (v) the methodology with respect to evaluating competitive fund data and peer group classifications and fee and expense comparisons; (vi) the expense structures for different funds and classes and information about the differences between various expense structures; (vii) group fee breakpoints; (viii) information regarding other accounts managed by Fidelity and sub-advisory arrangements; and (ix) Fidelity's philosophies and strategies for evaluating funds and classes with lower or declining asset levels.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Liquidity Risk Management Program
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program pursuant to the Liquidity Rule (the Program) effective December 1, 2018. The Program is reasonably designed to assess and manage the Fund’s liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund’s Board of Trustees (the Board) has designated the Fund’s investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund’s liquidity risk based on a variety of factors including (1) the Fund’s investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) in the case of exchange-traded funds, certain additional factors including the effect of the Fund’s prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund’s portfolio, as applicable.
In accordance with the Program, each of the Fund’s portfolio investments is classified into one of four liquidity categories described below based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments – cash or convertible to cash within three business days or less
- Moderately liquid investments – convertible to cash in three to seven calendar days
- Less liquid investments – can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments – cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund’s illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund’s net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund’s Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the annual period from December 1, 2019 through November 30, 2020. The report concluded that the Program has been implemented and is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk.
VMATP-SANN-0821
1.851002.114
Fidelity® Variable Insurance Products:
Communication Services Portfolio
Semi-Annual Report
June 30, 2021
Contents
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit http://www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at http://www.sec.gov.
You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
Fidelity® Variable Insurance Products are separate account options which are purchased through a variable insurance contract.
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
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. © 2021 FMR LLC. All rights reserved.
This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Forms N-PORT are available on the SEC’s web site at http://www.sec.gov. A fund's Forms N-PORT may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.
For a complete list of a fund's portfolio holdings, view the most recent holdings listing, semiannual report, or annual report on Fidelity's web site at http://www.fidelity.com, http://www.institutional.fidelity.com, or http://www.401k.com, as applicable.
NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE
Neither the Fund nor Fidelity Distributors Corporation is a bank.
Note to Shareholders:
Early in 2020, the outbreak and spread of a new coronavirus emerged as a public health emergency that had a major influence on financial markets, primarily based on its impact on the global economy and the outlook for corporate earnings. The virus causes a respiratory disease known as COVID-19. On March 11, 2020 the World Health Organization declared the COVID-19 outbreak a pandemic, citing sustained risk of further global spread.
In the weeks following, as the crisis worsened, we witnessed an escalating human tragedy with wide-scale social and economic consequences from coronavirus-containment measures. The outbreak of COVID-19 prompted a number of measures to limit the spread, including travel and border restrictions, quarantines, and restrictions on large gatherings. In turn, these resulted in lower consumer activity, diminished demand for a wide range of products and services, disruption in manufacturing and supply chains, and – given the wide variability in outcomes regarding the outbreak – significant market uncertainty and volatility. Amid the turmoil, global governments and central banks took unprecedented action to help support consumers, businesses, and the broader economies, and to limit disruption to financial systems.
The situation continues to unfold, and the extent and duration of its impact on financial markets and the economy remain highly uncertain. Extreme events such as the coronavirus crisis are “exogenous shocks” that can have significant adverse effects on mutual funds and their investments. Although multiple asset classes may be affected by market disruption, the duration and impact may not be the same for all types of assets.
Fidelity is committed to helping you stay informed amid news about COVID-19 and during increased market volatility, and we’re taking extra steps to be responsive to customer needs. We encourage you to visit our websites, where we offer ongoing updates, commentary, and analysis on the markets and our funds.
Investment Summary (Unaudited)
Top Ten Stocks as of June 30, 2021
| | % of fund's net assets |
| Alphabet, Inc. Class A | 22.4 |
| Facebook, Inc. Class A | 20.5 |
| Comcast Corp. Class A | 5.7 |
| The Walt Disney Co. | 4.7 |
| T-Mobile U.S., Inc. | 4.1 |
| Activision Blizzard, Inc. | 4.0 |
| AT&T, Inc. | 3.4 |
| Snap, Inc. Class A | 3.1 |
| Netflix, Inc. | 3.0 |
| Liberty Broadband Corp. Class A | 2.6 |
| | 73.5 |
Top Industries (% of fund's net assets)
| As of June 30, 2021 |
| | Interactive Media & Services | 49.2% |
| | Entertainment | 19.5% |
| | Media | 13.1% |
| | Diversified Telecommunication Services | 6.3% |
| | Wireless Telecommunication Services | 4.6% |
| | All Others* | 7.3% |
* Includes short-term investments and net other assets (liabilities).
Schedule of Investments June 30, 2021 (Unaudited)
Showing Percentage of Net Assets
| Common Stocks - 98.2% | | | |
| | | Shares | Value |
| Communications Equipment - 0.2% | | | |
| Communications Equipment - 0.2% | | | |
| EchoStar Holding Corp. Class A (a) | | 16,600 | $403,214 |
| Consumer Finance - 0.6% | | | |
| Consumer Finance - 0.6% | | | |
| LendingTree, Inc. (a)(b) | | 4,800 | 1,017,024 |
| Diversified Telecommunication Services - 6.3% | | | |
| Alternative Carriers - 2.9% | | | |
| Liberty Global PLC Class C (a) | | 123,900 | 3,350,256 |
| Liberty Latin America Ltd. Class C (a) | | 113,090 | 1,594,569 |
| | | | 4,944,825 |
| Integrated Telecommunication Services - 3.4% | | | |
| AT&T, Inc. | | 197,300 | 5,678,294 |
|
| TOTAL DIVERSIFIED TELECOMMUNICATION SERVICES | | | 10,623,119 |
|
| Entertainment - 19.5% | | | |
| Interactive Home Entertainment - 8.4% | | | |
| Activision Blizzard, Inc. | | 70,600 | 6,738,064 |
| Electronic Arts, Inc. | | 9,200 | 1,323,236 |
| Motorsport Games, Inc. Class A | | 600 | 8,400 |
| Roblox Corp. (a) | | 1,700 | 152,966 |
| Skillz, Inc. (a)(b) | | 5,000 | 108,600 |
| Take-Two Interactive Software, Inc. (a) | | 22,100 | 3,912,142 |
| Zynga, Inc. (a) | | 173,200 | 1,841,116 |
| | | | 14,084,524 |
| Movies & Entertainment - 11.1% | | | |
| Cinemark Holdings, Inc. (a)(b) | | 33,400 | 733,130 |
| Lions Gate Entertainment Corp.: | | | |
| Class A (a)(b) | | 4,500 | 93,150 |
| Class B (a) | | 58,400 | 1,068,720 |
| Marcus Corp. (a)(b) | | 35,700 | 757,197 |
| Netflix, Inc. (a) | | 9,410 | 4,970,456 |
| The Walt Disney Co. (a) | | 45,223 | 7,948,847 |
| Warner Music Group Corp. Class A | | 56,300 | 2,029,052 |
| World Wrestling Entertainment, Inc. Class A | | 17,900 | 1,036,231 |
| | | | 18,636,783 |
|
| TOTAL ENTERTAINMENT | | | 32,721,307 |
|
| Equity Real Estate Investment Trusts (REITs) - 1.4% | | | |
| Specialized REITs - 1.4% | | | |
| Lamar Advertising Co. Class A | | 8,800 | 918,896 |
| Outfront Media, Inc. (a) | | 57,237 | 1,375,405 |
| | | | 2,294,301 |
| Interactive Media & Services - 49.2% | | | |
| Interactive Media & Services - 49.2% | | | |
| Alphabet, Inc. Class A (a) | | 15,390 | 37,579,149 |
| ANGI Homeservices, Inc. Class A (a) | | 102,799 | 1,389,842 |
| Facebook, Inc. Class A (a) | | 99,100 | 34,458,061 |
| IAC (a) | | 1,400 | 215,838 |
| Match Group, Inc. (a) | | 8,799 | 1,418,839 |
| Snap, Inc. Class A (a) | | 77,200 | 5,260,408 |
| Twitter, Inc. (a) | | 15,900 | 1,094,079 |
| Vimeo, Inc. (a) | | 6,358 | 311,542 |
| Zillow Group, Inc. Class A (a) | | 7,600 | 931,228 |
| | | | 82,658,986 |
| Internet & Direct Marketing Retail - 0.4% | | | |
| Internet & Direct Marketing Retail - 0.4% | | | |
| Coupang, Inc. Class A (a)(b) | | 900 | 37,638 |
| Doordash, Inc. | | 500 | 89,165 |
| eBay, Inc. | | 6,435 | 451,801 |
| | | | 578,604 |
| Media - 13.1% | | | |
| Advertising - 0.2% | | | |
| S4 Capital PLC (a) | | 18,300 | 158,974 |
| TechTarget, Inc. (a) | | 1,900 | 147,231 |
| | | | 306,205 |
| Broadcasting - 3.7% | | | |
| Endeavor Group Holdings, Inc. (a)(b) | | 1,200 | 33,252 |
| Fox Corp. Class A | | 7,900 | 293,327 |
| Liberty Media Corp.: | | | |
| Liberty Media Class A (a) | | 46,400 | 1,978,032 |
| Liberty SiriusXM Series A (a) | | 52,700 | 2,454,766 |
| Liberty SiriusXM Series C (a) | | 3,651 | 169,370 |
| ViacomCBS, Inc. Class B | | 28,200 | 1,274,640 |
| | | | 6,203,387 |
| Cable & Satellite - 9.2% | | | |
| Altice U.S.A., Inc. Class A (a) | | 13,400 | 457,476 |
| Comcast Corp. Class A | | 169,500 | 9,664,890 |
| DISH Network Corp. Class A (a) | | 24,754 | 1,034,717 |
| Liberty Broadband Corp. Class A (a) | | 25,700 | 4,321,969 |
| | | | 15,479,052 |
|
| TOTAL MEDIA | | | 21,988,644 |
|
| Road & Rail - 2.3% | | | |
| Trucking - 2.3% | | | |
| Lyft, Inc. (a) | | 64,000 | 3,870,720 |
| Software - 0.6% | | | |
| Application Software - 0.6% | | | |
| Unity Software, Inc. (b) | | 8,600 | 944,538 |
| Viant Technology, Inc. | | 200 | 5,956 |
| | | | 950,494 |
| Wireless Telecommunication Services - 4.6% | | | |
| Wireless Telecommunication Services - 4.6% | | | |
| Millicom International Cellular SA (a) | | 21,500 | 850,755 |
| T-Mobile U.S., Inc. | | 46,971 | 6,802,810 |
| | | | 7,653,565 |
| TOTAL COMMON STOCKS | | | |
| (Cost $107,670,262) | | | 164,759,978 |
|
| Money Market Funds - 2.2% | | | |
| Fidelity Cash Central Fund 0.06% (c) | | 1,459,730 | 1,460,022 |
| Fidelity Securities Lending Cash Central Fund 0.06% (c)(d) | | 2,314,899 | 2,315,130 |
| TOTAL MONEY MARKET FUNDS | | | |
| (Cost $3,775,152) | | | 3,775,152 |
| TOTAL INVESTMENT IN SECURITIES - 100.4% | | | |
| (Cost $111,445,414) | | | 168,535,130 |
| NET OTHER ASSETS (LIABILITIES) - (0.4)% | | | (680,899) |
| NET ASSETS - 100% | | | $167,854,231 |
Legend
(a) Non-income producing
(b) Security or a portion of the security is on loan at period end.
(c) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements are available on the SEC's website or upon request.
(d) Investment made with cash collateral received from securities on loan.
Affiliated Central Funds
Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:
| Fund | Income earned |
| Fidelity Cash Central Fund | $729 |
| Fidelity Securities Lending Cash Central Fund | 3,110 |
| Total | $3,839 |
Amounts in the income column in the above table include any capital gain distributions from underlying funds, which are presented in the corresponding line-item in the Statement of Operations, if applicable. Amount for Fidelity Securities Lending Cash Central Fund represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities.
Fiscal year to date information regarding the Fund's investments in Fidelity Central Funds, including the ownership percentage, is presented below.
| Fund | Value, beginning of period | Purchases | Sales Proceeds | Realized Gain/Loss | Change in Unrealized appreciation (depreciation) | Value, end of period | % ownership, end of period |
| Fidelity Cash Central Fund 0.06% | $2,297,213 | $41,649,956 | $42,487,138 | $(9) | $-- | $1,460,022 | 0.0% |
| Fidelity Securities Lending Cash Central Fund 0.06% | 1,616,480 | 14,998,991 | 14,300,341 | -- | -- | 2,315,130 | 0.0% |
| Total | $3,913,693 | $56,648,947 | $56,787,479 | $(9) | $-- | $3,775,152 | |
Investment Valuation
The following is a summary of the inputs used, as of June 30, 2021, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.
| | Valuation Inputs at Reporting Date: |
| Description | Total | Level 1 | Level 2 | Level 3 |
| Investments in Securities: | | | | |
| Common Stocks | $164,759,978 | $164,759,978 | $-- | $-- |
| Money Market Funds | 3,775,152 | 3,775,152 | -- | -- |
| Total Investments in Securities: | $168,535,130 | $168,535,130 | $-- | $-- |
See accompanying notes which are an integral part of the financial statements.
Financial Statements
Statement of Assets and Liabilities
| | | June 30, 2021 (Unaudited) |
| Assets | | |
Investment in securities, at value (including securities loaned of $2,266,380) — See accompanying schedule:
Unaffiliated issuers (cost $107,670,262) | $164,759,978 | |
| Fidelity Central Funds (cost $3,775,152) | 3,775,152 | |
| Total Investment in Securities (cost $111,445,414) | | $168,535,130 |
| Foreign currency held at value (cost $40) | | 40 |
| Receivable for investments sold | | 1,906,995 |
| Receivable for fund shares sold | | 401,539 |
| Distributions receivable from Fidelity Central Funds | | 1,078 |
| Prepaid expenses | | 171 |
| Other receivables | | 4,195 |
| Total assets | | 170,849,148 |
| Liabilities | | |
| Payable for investments purchased | $564,388 | |
| Payable for fund shares redeemed | 1,322 | |
| Accrued management fee | 70,961 | |
| Other affiliated payables | 23,148 | |
| Other payables and accrued expenses | 20,048 | |
| Collateral on securities loaned | 2,315,050 | |
| Total liabilities | | 2,994,917 |
| Net Assets | | $167,854,231 |
| Net Assets consist of: | | |
| Paid in capital | | $102,801,464 |
| Total accumulated earnings (loss) | | 65,052,767 |
| Net Assets | | $167,854,231 |
| Net Asset Value and Maximum Offering Price | | |
| Initial Class: | | |
| Net Asset Value, offering price and redemption price per share ($18,210,148 ÷ 873,708 shares) | | $20.84 |
| Investor Class: | | |
| Net Asset Value, offering price and redemption price per share ($149,644,083 ÷ 7,245,030 shares) | | $20.65 |
See accompanying notes which are an integral part of the financial statements.
Statement of Operations
| | | Six months ended June 30, 2021 (Unaudited) |
| Investment Income | | |
| Dividends | | $156,377 |
| Income from Fidelity Central Funds (including $3,110 from security lending) | | 3,839 |
| Total income | | 160,216 |
| Expenses | | |
| Management fee | $372,209 | |
| Transfer agent fees | 93,268 | |
| Accounting fees | 27,527 | |
| Custodian fees and expenses | 4,471 | |
| Independent trustees' fees and expenses | 221 | |
| Audit | 20,988 | |
| Legal | 338 | |
| Miscellaneous | 244 | |
| Total expenses before reductions | 519,266 | |
| Expense reductions | (7,844) | |
| Total expenses after reductions | | 511,422 |
| Net investment income (loss) | | (351,206) |
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 9,495,460 | |
| Fidelity Central Funds | (9) | |
| Foreign currency transactions | (2,561) | |
| Total net realized gain (loss) | | 9,492,890 |
| Change in net unrealized appreciation (depreciation) on: | | |
| Investment securities: | | |
| Unaffiliated issuers | 18,243,919 | |
| Assets and liabilities in foreign currencies | (83) | |
| Total change in net unrealized appreciation (depreciation) | | 18,243,836 |
| Net gain (loss) | | 27,736,726 |
| Net increase (decrease) in net assets resulting from operations | | $27,385,520 |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets
| | Six months ended June 30, 2021 (Unaudited) | Year ended December 31, 2020 |
| Increase (Decrease) in Net Assets | | |
| Operations | | |
| Net investment income (loss) | $(351,206) | $(390,206) |
| Net realized gain (loss) | 9,492,890 | 1,823,801 |
| Change in net unrealized appreciation (depreciation) | 18,243,836 | 25,327,231 |
| Net increase (decrease) in net assets resulting from operations | 27,385,520 | 26,760,826 |
| Distributions to shareholders | (1,968,621) | (1,027,920) |
| Share transactions - net increase (decrease) | 26,436,605 | 9,265,800 |
| Total increase (decrease) in net assets | 51,853,504 | 34,998,706 |
| Net Assets | | |
| Beginning of period | 116,000,727 | 81,002,021 |
| End of period | $167,854,231 | $116,000,727 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights
VIP Communication Services Portfolio Initial Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $17.39 | $12.98 | $10.58 | $12.74 | $13.10 | $10.85 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | (.04) | (.05) | (.01) | .21B | .26 | .19 |
| Net realized and unrealized gain (loss) | 3.79 | 4.62 | 3.36 | (.89) | –C | 2.28 |
| Total from investment operations | 3.75 | 4.57 | 3.35 | (.68) | .26 | 2.47 |
| Distributions from net investment income | – | – | (.01) | (.19) | (.39) | (.15) |
| Distributions from net realized gain | (.30) | (.16) | (.94) | (1.29) | (.23) | (.08) |
| Total distributions | (.30) | (.16) | (.95) | (1.48) | (.62) | (.22)D |
| Redemption fees added to paid in capitalA | – | – | – | – | –C | –C |
| Net asset value, end of period | $20.84 | $17.39 | $12.98 | $10.58 | $12.74 | $13.10 |
| Total ReturnE,F,G | 21.77% | 35.60% | 32.98% | (5.36)% | 2.05% | 22.81% |
| Ratios to Average Net AssetsH,I | | | | | | |
| Expenses before reductions | .66%J | .70% | .72% | .81% | .76% | .78% |
| Expenses net of fee waivers, if any | .66%J | .70% | .72% | .81% | .76% | .78% |
| Expenses net of all reductions | .65%J | .70% | .71% | .79% | .74% | .77% |
| Net investment income (loss) | (.43)%J | (.39)% | (.09)% | 1.87%B | 2.02% | 1.52% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $18,210 | $13,370 | $9,865 | $5,702 | $6,067 | $15,797 |
| Portfolio turnover rateK | 72%J | 66% | 73% | 162% | 74% | 100% |
A Calculated based on average shares outstanding during the period.
B Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.05 per share. Excluding such non-recurring dividend(s), the ratio of net investment income (loss) to average net assets would have been 1.45%.
C Amount represents less than $.005 per share.
D Total distributions per share do not sum due to rounding.
E Total returns for periods of less than one year are not annualized.
F Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
G Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
H Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
J Annualized
K Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
VIP Communication Services Portfolio Investor Class
| | Six months ended (Unaudited) June 30, | Years endedDecember 31, | | | | |
| | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| Selected Per–Share Data | | | | | | |
| Net asset value, beginning of period | $17.23 | $12.88 | $10.50 | $12.65 | $13.02 | $10.79 |
| Income from Investment Operations | | | | | | |
| Net investment income (loss)A | (.05) | (.06) | (.02) | .20B | .25 | .18 |
| Net realized and unrealized gain (loss) | 3.76 | 4.57 | 3.34 | (.88) | (.01) | 2.27 |
| Total from investment operations | 3.71 | 4.51 | 3.32 | (.68) | .24 | 2.45 |
| Distributions from net investment income | – | – | (.01) | (.18) | (.37) | (.14) |
| Distributions from net realized gain | (.29) | (.16) | (.93) | (1.29) | (.23) | (.08) |
| Total distributions | (.29) | (.16) | (.94) | (1.47) | (.61)C | (.22) |
| Redemption fees added to paid in capitalA | – | – | – | – | –D | –D |
| Net asset value, end of period | $20.65 | $17.23 | $12.88 | $10.50 | $12.65 | $13.02 |
| Total ReturnE,F,G | 21.74% | 35.40% | 32.95% | (5.39)% | 1.89% | 22.69% |
| Ratios to Average Net AssetsH,I | | | | | | |
| Expenses before reductions | .74%J | .78% | .80% | .89% | .84% | .86% |
| Expenses net of fee waivers, if any | .74%J | .78% | .80% | .89% | .84% | .86% |
| Expenses net of all reductions | .73%J | .78% | .79% | .87% | .83% | .85% |
| Net investment income (loss) | (.50)%J | (.46)% | (.17)% | 1.79%B | 1.94% | 1.44% |
| Supplemental Data | | | | | | |
| Net assets, end of period (000 omitted) | $149,644 | $102,631 | $71,137 | $38,626 | $36,744 | $74,059 |
| Portfolio turnover rateK | 72%J | 66% | 73% | 162% | 74% | 100% |
A Calculated based on average shares outstanding during the period.
B Net investment income per share reflects one or more large, non-recurring dividend(s) which amounted to $.05 per share. Excluding such non-recurring dividend(s), the ratio of net investment income (loss) to average net assets would have been 1.37%.
C Total distributions per share do not sum due to rounding.
D Amount represents less than $.005 per share.
E Total returns for periods of less than one year are not annualized.
F Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.
G Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.
H Fees and expenses of any underlying mutual funds or exchange-traded funds (ETFs) are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of these expenses. For additional expense information related to investments in Fidelity Central Funds, please refer to the "Investments in Fidelity Central Funds" note found in the Notes to Financial Statements section of the most recent Annual or Semi-Annual report.
I Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed, waived, or reduced through arrangements with the investment adviser, brokerage services, or other offset arrangements, if applicable, and do not represent the amount paid by the class during periods when reimbursements, waivers or reductions occur.
J Annualized
K Amount does not include the portfolio activity of any underlying mutual funds or exchange-traded funds (ETFs).
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Statements (Unaudited)
For the period ended June 30, 2021
1. Organization.
VIP Communication Services Portfolio (the Fund) is a non-diversified fund of Variable Insurance Products Fund IV (the Trust) and is authorized to issue an unlimited number of shares. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. Shares of the Fund may only be purchased by insurance companies for the purpose of funding variable annuity or variable life insurance contracts. The Fund offers the following classes of shares: Initial Class shares and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class.
2. Investments in Fidelity Central Funds.
Funds may invest in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The Schedule of Investments lists any Fidelity Central Funds held as an investment as of period end, but does not include the underlying holdings of each Fidelity Central Fund. An investing fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.
Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the investing fund. These strategies are consistent with the investment objectives of the investing fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the investing fund.
| Fidelity Central Fund | Investment Manager | Investment Objective | Investment Practices | Expense Ratio(a) |
| Fidelity Money Market Central Funds | Fidelity Management & Research Company LLC (FMR) | Each fund seeks to obtain a high level of current income consistent with the preservation of capital and liquidity. | Short-term Investments | Less than .005% to .01% |
(a) Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.
A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds which contain the significant accounting policies (including investment valuation policies) of those funds, and are not covered by the Report of Independent Registered Public Accounting Firm, are available on the Securities and Exchange Commission website or upon request.
3. Significant Accounting Policies.
The Fund is an investment company and applies the accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. Subsequent events, if any, through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The Fund's Schedule of Investments lists any underlying mutual funds or exchange-traded funds (ETFs) but does not include the underlying holdings of these funds. The following summarizes the significant accounting policies of the Fund:
Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.
The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:
- Level 1 – quoted prices in active markets for identical investments
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
- Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, Exchange-Traded Funds (ETFs) and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy.
Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of June 30, 2021 is included at the end of the Fund's Schedule of Investments.
Foreign Currency. Certain Funds may use foreign currency contracts to facilitate transactions in foreign-denominated securities. Gains and losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rates at period end. Purchases and sales of investment securities, income and dividends received, and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. For financial reporting purposes, the Fund's investment holdings and NAV include trades executed through the end of the last business day of the period. The NAV per share for processing shareholder transactions is calculated as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time and includes trades executed through the end of the prior business day. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of a fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of a fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred, as applicable. Certain expense reductions may also differ by class, if applicable. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expenses included in the accompanying financial statements reflect the expenses of that fund and do not include any expenses associated with any underlying mutual funds or exchange-traded funds. Although not included in a fund's expenses, a fund indirectly bears its proportionate share of these expenses through the net asset value of each underlying mutual fund or exchange-traded fund. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are declared and recorded on the ex-dividend date. Income and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, net operating losses and losses deferred due to wash sales.
As of period end, the cost and unrealized appreciation (depreciation) in securities, and derivatives if applicable, for federal income tax purposes were as follows:
| Gross unrealized appreciation | $57,054,281 |
| Gross unrealized depreciation | (840,238) |
| Net unrealized appreciation (depreciation) | $56,214,043 |
| Tax cost | $112,321,087 |
4. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities and in-kind transactions, as applicable, are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Communication Services Portfolio | 72,924,436 | 49,994,843 |
5. Fees and Other Transactions with Affiliates.
Management Fee. Fidelity Management & Research Company LLC (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .23% during the period. The group fee rate is based upon the monthly average net assets of a group of registered investment companies with which the investment adviser has management contracts. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annualized management fee rate was .52% of the Fund's average net assets.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company LLC (FIIOC), an affiliate of the investment adviser, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class pays a fee for transfer agent services, typesetting and printing and mailing of shareholder reports, excluding mailing of proxy statements. For the period, transfer agent fees for each class were as follows:
| | Amount | % of Class-Level Average Net Assets(a) |
| Initial Class | 4,999 | .06 |
| Investor Class | 88,269 | .14 |
| | $93,268 | |
(a) Annualized
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. For the period, the fees were equivalent to the following annualized rates:
| | % of Average Net Assets |
| VIP Communication Services Portfolio | .04 |
Brokerage Commissions. A portion of portfolio transactions were placed with brokerage firms which are affiliates of the investment adviser. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were as follows:
| | Amount |
| VIP Communication Services Portfolio | $1,186 |
Interfund Trades. Funds may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Any interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note and are noted in the table below.
| | Purchases ($) | Sales ($) |
| VIP Communication Services Portfolio | 6,322,509 | 2,225,195 |
6. Committed Line of Credit.
Certain Funds participate with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The participating funds have agreed to pay commitment fees on their pro-rata portion of the line of credit, which are reflected in Miscellaneous expenses on the Statement of Operations, and are listed below. During the period, there were no borrowings on this line of credit.
| | Amount |
| VIP Communication Services Portfolio | $115 |
7. Security Lending.
Funds lend portfolio securities from time to time in order to earn additional income. Lending agents are used, including National Financial Services (NFS), an affiliate of the investment adviser. Pursuant to a securities lending agreement, NFS will receive a fee, which is capped at 9.9% of a fund's daily lending revenue, for its services as lending agent. A fund may lend securities to certain qualified borrowers, including NFS. On the settlement date of the loan, a fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of a fund and any additional required collateral is delivered to a fund on the next business day. A fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund may apply collateral received from the borrower against the obligation. A fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. Any loaned securities are identified as such in the Schedule of Investments, and the value of loaned securities and cash collateral at period end, as applicable, are presented in the Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less rebates paid to borrowers and any lending agent fees associated with the loan, plus any premium payments received for lending certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from Fidelity Central Funds. Affiliated security lending activity, if any, was as follows:
| | Total Security Lending Fees Paid to NFS | Security Lending Income From Securities Loaned to NFS | Value of Securities Loaned to NFS at Period End |
| VIP Communication Services Portfolio | $316 | $388 | $– |
8. Expense Reductions.
Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset expenses. This amount totaled $7,674 for the period.
In addition, during the period the investment adviser or an affiliate reimbursed and/or waived a portion of fund-level operating expenses in the amount of $170.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
| | Six months ended
June 30, 2021 | Year ended
December 31, 2020 |
| VIP Communication Services Portfolio | | |
| Distributions to shareholders | | |
| Initial Class | $226,960 | $121,021 |
| Investor Class | 1,741,661 | 906,899 |
| Total | $1,968,621 | $1,027,920 |
10. Share Transactions.
Transactions for each class of shares were as follows and may contain in-kind transactions:
| | Shares | Shares | Dollars | Dollars |
| | Six months ended June 30, 2021 | Year ended December 31, 2020 | Six months ended June 30, 2021 | Year ended December 31, 2020 |
| VIP Communication Services Portfolio | | | | |
| Initial Class | | | | |
| Shares sold | 166,756 | 284,098 | $3,173,615 | $4,057,480 |
| Reinvestment of distributions | 12,321 | 9,120 | 226,960 | 121,021 |
| Shares redeemed | (74,164) | (284,300) | (1,386,313) | (3,810,858) |
| Net increase (decrease) | 104,913 | 8,918 | $2,014,262 | $367,643 |
| Investor Class | | | | |
| Shares sold | 1,503,555 | 2,179,681 | $28,520,040 | $30,745,582 |
| Reinvestment of distributions | 95,381 | 68,913 | 1,741,661 | 906,899 |
| Shares redeemed | (308,847) | (1,818,816) | (5,839,358) | (22,754,324) |
| Net increase (decrease) | 1,290,089 | 429,778 | $24,422,343 | $8,898,157 |
11. Other.
Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the fund. In the normal course of business, the fund may also enter into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the fund. The risk of material loss from such claims is considered remote.
At the end of the period, the investment adviser or its affiliates were owners of record of more than 10% of the outstanding shares as follows:
| Fund | Affiliated % |
| VIP: Communication Services Portfolio | 100% |
12. Coronavirus (COVID-19) Pandemic.
An outbreak of COVID-19 first detected in China during December 2019 has since spread globally and was declared a pandemic by the World Health Organization during March 2020. Developments that disrupt global economies and financial markets, such as the COVID-19 pandemic, may magnify factors that affect the Fund's performance.
Shareholder Expense Example
As a shareholder, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments or redemption proceeds, as applicable and (2) ongoing costs, which generally include management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2021 to June 30, 2021).
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class/Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. If any fund is a shareholder of any underlying mutual funds or exchange-traded funds (ETFs) (the Underlying Funds), such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses incurred presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. If any fund is a shareholder of any Underlying Funds, such fund indirectly bears its proportional share of the expenses of the Underlying Funds in addition to the direct expenses as presented in the table. These fees and expenses are not included in the annualized expense ratio used to calculate the expense estimate in the table below. The estimate of expenses does not include any fees or other expenses of any variable annuity or variable life insurance product. If they were, the estimate of expenses you paid during the period would be higher, and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Annualized Expense Ratio-A | Beginning
Account Value
January 1, 2021 | Ending
Account Value
June 30, 2021 | Expenses Paid
During Period-B
January 1, 2021
to June 30, 2021 |
| VIP Communication Services Portfolio | | | | |
| Initial Class | .66% | | | |
| Actual | | $1,000.00 | $1,217.70 | $3.63 |
| Hypothetical-C | | $1,000.00 | $1,021.52 | $3.31 |
| Investor Class | .74% | | | |
| Actual | | $1,000.00 | $1,217.40 | $4.07 |
| Hypothetical-C | | $1,000.00 | $1,021.12 | $3.71 |
A Annualized expense ratio reflects expenses net of applicable fee waivers.
B Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/ 365 (to reflect the one-half year period). The fees and expenses of any Underlying Funds are not included in each annualized expense ratio.
C 5% return per year before expenses
Board Approval of Investment Advisory Contracts and Management Fees
VIP Communication Services Portfolio
Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company LLC (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. FMR and the sub-advisers are referred to herein as the Investment Advisers. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.
The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to review matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through joint ad hoc committees to discuss certain matters relevant to all of the Fidelity funds.
Approval of Stub Period Continuation. At its January 2021 meeting, the Board of Trustees voted to continue the fund's management contract with FMR, and the sub-advisory agreements and sub-subadvisory agreements, in each case, where applicable (together, the Advisory Contracts), without modification, for four months from February 1, 2021 through May 31, 2021, in connection with changes to the Board's meeting calendar. The Board considered that the approval of the fund's Advisory Contracts will not result in any changes in (i) the investment process or strategies employed in the management of the fund's assets; (ii) the fees and expenses paid by shareholders; (iii) the nature, extent or quality of services provided under the fund's Advisory Contracts; or (iv) the day-to-day management of the fund or the persons primarily responsible for such management. The Board also considered that since its last approval of the fund's Advisory Contracts, FMR had provided additional information on the fund in support of the annual contract renewal process, including competitive analyses on total expenses and management fees and in-depth reviews of fund performance and fund profitability information. The Board also considered the findings of certain ad hoc committees that had been previously formed to discuss matters relevant to all of the Fidelity funds, including economies of scale, fall-out benefits and retail vs. institutional funds. The Board concluded that the fund's Advisory Contracts are fair and reasonable, and that the fund's Advisory Contracts should be renewed, without modification, through May 31, 2021, with the understanding that the Board will consider the annual renewal for a full one year period in May 2021.
At its May 2021 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services provided by and the profits realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and are realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.
In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.
Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.
Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process. The Board also considered Fidelity's investments in business continuity planning, and its success in continuously providing services to the fund notwithstanding the severe disruptions caused by the COVID-19 pandemic.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.
The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value and convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information over the Internet and through telephone representatives, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.
The Board noted that, in the past, it and the boards of certain other Fidelity funds had formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to Fidelity's investment research process, which includes meetings with management of issuers of securities in which the funds invest, and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and ETFs with innovative structures, strategies and pricing and making other enhancements to meet client needs; (iv) launching new share classes of existing funds; (v) eliminating purchase minimums and broadening eligibility requirements for certain funds and share classes; (vi) approving the reduction in the holding period for the Class C to Class A conversion policy; (vii) reducing management fees and total expenses for certain target date funds and classes and index funds; (viii) lowering expenses for certain existing funds and classes by implementing or lowering expense caps; (ix) rationalizing product lines and gaining increased efficiencies from fund mergers, liquidations, and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; and (xi) continuing to implement enhancements to further strengthen Fidelity's product line to increase investors' probability of success in achieving their investment goals, including retirement income goals.
Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history.
The Board took into account discussions that occur at Board meetings throughout the year with representatives of the Investment Advisers about fund investment performance. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund for different time periods, measured against an appropriate securities market index (benchmark index). In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.
In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.
The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative total return information for the fund and an appropriate benchmark index for the most recent one-, three-, and five-year periods ended September 30, 2020, as shown below.
VIP Communication Services Portfolio
Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.
Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable investment mandates. For this purpose, all sector focused equity variable annuity funds are grouped in the same mapped group. Combining Lipper investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.
Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods ended September 30 (June 30 for periods ended 2019 and 2018 and December 31 for periods prior to 2018) shown in basis points (BP) in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates (i.e., sector equities), regardless of whether their management fee structures also are comparable. Funds with comparable management fee structures have similar management fee contractual arrangements (
e.g., flat rate charged for advisory services, all-inclusive fee rate,
etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Sized Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and was considered by the Board.
VIP Communication Services Portfolio
The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for the 12-month period ended September 30, 2020.
The Board noted that, in the past, it and the boards of other Fidelity funds had formed an ad hoc Committee on Group Fee to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.
Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.
Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, and custodial, legal, and audit fees. The Board also noted that Fidelity may agree to waive fees or reimburse expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of a representative class of the fund compared to competitive fund median expenses. The fund's representative class is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure (SLTG). The Board also considered a total expense ASPG comparison for the representative class, which focuses on the total expenses of the representative class relative to a subset of non-Fidelity funds within the total expense SLTG. The total expense ASPG is limited to 15 larger and 15 smaller classes in fund average assets for a total of 30 classes, where possible. The total expense ASPG comparison excludes performance adjustments and fund-paid 12b-1 fees to eliminate variability in fee structures.
The Board noted that the total expense ratio of Initial Class ranked below the SLTG competitive median and below the ASPG competitive median for the 12-month period ended September 30, 2020.
The Board considered that FMR has contractually agreed to reimburse the Initial Class and Investor Class of the fund to the extent that total operating expenses, with certain exceptions, as a percentage of their respective average net assets, exceed 1.00% and 1.08% through April 30, 2022.
Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted that a joint ad hoc committee created by it and the boards of other Fidelity funds periodically reviews and compares Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds and also noted the most recent findings of the committee. The Board noted that the committee's review included a consideration of the differences in services provided, fees charged, and costs incurred, as well as competition in the markets serving the different categories of clients.
Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, Fidelity presents to the Board information about the profitability of its relationships with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies and the full Board approves such changes.
A public accounting firm has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. The engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of certain fund profitability information and its conformity to established allocation methodologies. After considering the reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board also reviewed Fidelity's non-fund businesses and potential indirect benefits such businesses may have received as a result of their association with Fidelity's mutual fund business (i.e., fall-out benefits) as well as cases where Fidelity's affiliates may benefit from the funds' business. The Board considered areas where potential indirect benefits to the Fidelity funds from their relationships with Fidelity may exist. The Board also considered that in 2019 a joint ad hoc committee created by it and the boards of other Fidelity funds evaluated potential fall-out benefits (PFOB Committee). The Board noted that it considered the PFOB Committee's findings in connection with its consideration of the renewal of the Advisory Contracts.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund, including the conclusions of the PFOB Committee, and was satisfied that the profitability was not excessive.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that a committee (the Economies of Scale Committee) created by it and the boards of other Fidelity funds periodically analyzes whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total "group assets" increase, and for higher group fee rates as total "group assets" decrease ("group assets" as defined in the management contract). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board further considered that Fidelity agreed to impose a temporary fee waiver in the form of additional breakpoints to the current breakpoint schedule. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as "group assets" increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' advisory contracts, the Board requested and received additional information on certain topics, including: (i) fund flow and performance trends, in particular the underperformance of certain funds and strategies, and Fidelity's long-term strategies for certain funds; (ii) consideration of expanding the use of performance fees for additional funds; (iii) Fidelity's pricing philosophy compared to competitors; (iv) metrics for evaluating index fund and ETF performance and information about ETF trading characteristics; (v) the methodology with respect to evaluating competitive fund data and peer group classifications and fee and expense comparisons; (vi) the expense structures for different funds and classes and information about the differences between various expense structures; (vii) group fee breakpoints; (viii) information regarding other accounts managed by Fidelity and sub-advisory arrangements; and (ix) Fidelity's philosophies and strategies for evaluating funds and classes with lower or declining asset levels.
Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee arrangements are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Liquidity Risk Management Program
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940 (the Liquidity Rule) to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders.
The Fund has adopted and implemented a liquidity risk management program pursuant to the Liquidity Rule (the Program) effective December 1, 2018. The Program is reasonably designed to assess and manage the Fund’s liquidity risk and to comply with the requirements of the Liquidity Rule. The Fund’s Board of Trustees (the Board) has designated the Fund’s investment adviser as administrator of the Program. The Fidelity advisers have established a Liquidity Risk Management Committee (the LRM Committee) to manage the Program for each of the Fidelity Funds. The LRM Committee monitors the adequacy and effectiveness of implementation of the Program and on a periodic basis assesses each Fund’s liquidity risk based on a variety of factors including (1) the Fund’s investment strategy, (2) portfolio liquidity and cash flow projections during normal and reasonably foreseeable stressed conditions, (3) shareholder redemptions, (4) borrowings and other funding sources and (5) in the case of exchange-traded funds, certain additional factors including the effect of the Fund’s prices and spreads, market participants, and basket compositions on the overall liquidity of the Fund’s portfolio, as applicable.
In accordance with the Program, each of the Fund’s portfolio investments is classified into one of four liquidity categories described below based on a determination of a reasonable expectation for how long it would take to convert the investment to cash (or sell or dispose of the investment) without significantly changing its market value.
- Highly liquid investments – cash or convertible to cash within three business days or less
- Moderately liquid investments – convertible to cash in three to seven calendar days
- Less liquid investments – can be sold or disposed of, but not settled, within seven calendar days
- Illiquid investments – cannot be sold or disposed of within seven calendar days
Liquidity classification determinations take into account a variety of factors including various market, trading and investment-specific considerations, as well as market depth, and generally utilize analysis from a third-party liquidity metrics service.
The Liquidity Rule places a 15% limit on a fund’s illiquid investments and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund’s net assets to be invested in highly liquid investments (highly liquid investment minimum or HLIM). The Program includes provisions reasonably designed to comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement as applicable.
At a recent meeting of the Fund’s Board of Trustees, the LRM Committee provided a written report to the Board pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the annual period from December 1, 2019 through November 30, 2020. The report concluded that the Program has been implemented and is operating effectively and is reasonably designed to assess and manage the Fund’s liquidity risk.
VTELP-SANN-0821
1.851007.114
Item 2.
Code of Ethics
Not applicable.
Item 3.
Audit Committee Financial Expert
Not applicable.
Item 4.
Principal Accountant Fees and Services
Not applicable.
Item 5.
Audit Committee of Listed Registrants
Not applicable.
Item 6.
Investments
(a)
Not applicable.
(b)
Not applicable
Item 7.
Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8.
Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9.
Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10.
Submission of Matters to a Vote of Security Holders
There were no material changes to the procedures by which shareholders may recommend nominees to the Variable Insurance Products Fund IV’s Board of Trustees.
Item 11.
Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the Variable Insurance Products Fund IV’s (the “Trust”) disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the Trust is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(a)(ii) There was no change in the Trust’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.
Item 12.
Disclosure of Securities Lending Activities for Closed-End Management
Investment Companies
Not applicable.
Item 13.
Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Variable Insurance Products Fund IV
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By: | /s/Stacie M. Smith |
| Stacie M. Smith |
| President and Treasurer |
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Date: | August 19, 2021 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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By: | /s/Stacie M. Smith |
| Stacie M. Smith |
| President and Treasurer |
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Date: | August 19, 2021 |
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By: | /s/John J. Burke III |
| John J. Burke III |
| Chief Financial Officer |
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Date: | August 19, 2021 |
