Supplement to the
Fidelity® Variable Insurance Products
Balanced Portfolio, Contrafund® Portfolio, Disciplined Small Cap Portfolio, Dynamic Capital Appreciation Portfolio,
Emerging Markets Portfolio, Equity-Income Portfolio, Growth Portfolio, Growth & Income Portfolio,
Growth Opportunities Portfolio, Growth Stock Portfolio, Growth Strategies Portfolio, High Income Portfolio,
Index 500 Portfolio, International Capital Appreciation Portfolio, Mid Cap Portfolio, Overseas Portfolio,
Real Estate Portfolio, Value Portfolio, Value Leaders Portfolio, and Value Strategies Portfolio
Funds of Variable Insurance Products Fund, Variable Insurance Products Fund II,
Variable Insurance Products Fund III, and Variable Insurance Products Fund IV
Initial Class, Service Class, and Service Class 2
STATEMENT OF ADDITIONAL INFORMATION
April 30, 2011
The following information replaces the similar information found in the "Investment Policies and Limitations" section on page 6.
Loans
For VIP Balanced Portfolio, VIP Equity-Income Portfolio, and VIP High Income Portfolio:
The fund does not currently intend to lend assets other than securities to other parties, except by (a) making direct loans to companies in which the fund has a pre-existing investment (b) lending money (up to 15% of the fund's net assets) to a registered investment company or portfolio for which FMR or an affiliate serves as investment adviser or (c) assuming any unfunded commitments in connection with the acquisition of loans, loan participations, or other forms of debt instruments. (This limitation does not apply to purchases of debt securities, to repurchase agreements, or to acquisitions of loans, loan participations or other forms of debt instruments.)
For each fund (other than VIP Balanced Portfolio, VIP Equity-Income Portfolio, and VIP High Income Portfolio):
The fund does not currently intend to lend assets other than securities to other parties, except by (a) lending money (up to 15% of the fund's net assets) to a registered investment company or portfolio for which FMR or an affiliate serves as investment adviser or (b) assuming any unfunded commitments in connection with the acquisition of loans, loan participations, or other forms of debt instruments. (This limitation does not apply to purchases of debt securities, to repurchase agreements, or to acquisitions of loans, loan participations or other forms of debt instruments.)
The following information replaces the similar information found in the "Investment Policies and Limitations" section on page 17.
Loans and Other Direct Debt Instruments. Direct debt instruments are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates (loans and loan participations), to suppliers of goods or services (trade claims or other receivables), or to other parties. Direct debt instruments involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to the purchaser in the event of fraud or misrepresentation, or there may be a requirement that a fund supply additional cash to a borrower on demand. A fund may acquire loans by buying an assignment of all or a portion of the loan from a lender or by purchasing a loan participation from a lender or other purchaser of a participation. VIP Balanced Portfolio, VIP Equity-Income Portfolio, and VIP High Income Portfolio also may acquire loans directly at the time of the loan's closing.
Lenders and purchasers of loans and other forms of direct indebtedness depend primarily upon the creditworthiness of the borrower for payment of interest and repayment of principal. If scheduled interest or principal payments are not made, the value of the instrument may be adversely affected. Loans that are fully secured provide more protections than an unsecured loan in the event of failure to make scheduled interest or principal payments. However, there is no assurance that the liquidation of collateral from a secured loan would satisfy the borrower's obligation, or that the collateral could be liquidated. Indebtedness of borrowers whose creditworthiness is poor involves substantially greater risks and may be highly speculative. Borrowers that are in bankruptcy or restructuring may never pay off their indebtedness, or may pay only a small fraction of the amount owed. Direct indebtedness of developing countries also involves a risk that the governmental entities responsible for the repayment of the debt may be unable, or unwilling, to pay interest and repay principal when due.
Direct lending and investments in loans through direct assignment of a financial institution's interests with respect to a loan may involve additional risks. For example, if a loan is foreclosed, the lender/purchaser could become part owner of any collateral, and would bear the costs and liabilities associated with owning and disposing of the collateral. In addition, it is conceivable that under emerging legal theories of lender liability, a purchaser could be held liable as a co-lender. Direct debt instruments may also involve a risk of insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. Unless, under the terms of the loan or other indebtedness, the purchaser has direct recourse against the borrower, the purchaser may have to rely on the agent to apply appropriate credit remedies against a borrower. If assets held by the agent for the benefit of a purchaser were determined to be subject to the claims of the agent's general creditors, the purchaser might incur certain costs and delays in realizing payment on the loan or loan participation and could suffer a loss of principal or interest.
VIPIS2B-11-06 December 8, 2011
1.483795.160
Direct indebtedness may include letters of credit, revolving credit facilities, or other standby financing commitments that obligate lenders/purchasers to make additional cash payments on demand. These commitments may have the effect of requiring a lender/purchaser to increase its investment in a borrower at a time when it would not otherwise have done so, even if the borrower's condition makes it unlikely that the amount will ever be repaid.
Each fund limits the amount of total assets that it will invest in any one issuer or in issuers within the same industry (see the fund's investment limitations). For purposes of these limitations, a fund generally will treat the borrower as the "issuer" of indebtedness held by the fund. In the case of loan participations where a bank or other lending institution serves as financial intermediary between a fund and the borrower, if the participation does not shift to the fund the direct debtor-creditor relationship with the borrower, SEC interpretations require a fund, in appropriate circumstances, to treat both the lending bank or other lending institution and the borrower as "issuers" for these purposes. Treating a financial intermediary as an issuer of indebtedness may restrict a fund's ability to invest in indebtedness related to a single financial intermediary, or a group of intermediaries engaged in the same industry, even if the underlying borrowers represent many different companies and industries.
The following information replaces similar information for VIP Index 500 Portfolio under the heading "Management Related Expenses" in the "Management Contracts" section on page 64.
FMR and the fund have entered into a 10 Basis Point Expense Contract, which obliges FMR to pay all class-level expenses of the fund, except for fees paid by a class pursuant to a plan of distribution adopted under Rule 12b-1 and applicable to that class, to limit the total annual operating expenses, other than Rule 12b-1 fees, incurred by each current class (excluding interest, taxes, securities lending costs, brokerage commissions, fees and expenses of the disinterested Trustees of the Trust, and extraordinary expenses) to 0.10%. This Expense Contract may not be amended to increase the fees or expenses payable by each class except by a vote of a majority of the Board and by a vote of a majority of the outstanding voting securities of each class. The fund may offer other share classes in the future that may be subject to higher or lower fees and expenses. The fund also pays the costs related to the solicitation of fund proxies from variable product owners.
The following information replaces the similar information under the heading "Management Fees" in the "Management Contracts" section on page 64.
Management Fees. For the services of FMR under the management contract, VIP Index 500 Portfolio pays FMR a monthly management fee at the annual rate of 0.10% of the fund's average net assets throughout the month for periods prior to September 1, 2011. Effective September 1, 2011, for the services of FMR under the management contract, VIP Index 500 Portfolio pays FMR a monthly management fee at the annual rate of 0.045% of the fund's average net assets throughout the month.
The following information replaces the similar information under the heading "Sub-Adviser - Geode" in the "Management Contracts" section on page 68.
Under the terms of the sub-advisory agreements, for providing investment management services to VIP Disciplined Small Cap Portfolio and VIP Index 500 Portfolio, FMR, and not the funds, pays Geode fees at an annual rate of 0.225% and 0.01%, respectively, of the average net assets of each fund. Effective September 1, 2011, under the terms of the sub-advisory agreement, for providing investment management services to VIP Index 500 Portfolio, FMR, and not the fund, pays Geode fees at an annual rate of 0.0099% of the average net assets of VIP Index 500 Portfolio.
The following information supplements similar information for VIP Equity-Income Portfolio found in the "Management Contracts" section beginning on page 72.
The following table provides information relating to other accounts managed by Mr. Morrow as of April 30, 2011:
|
|
Registered |
Other Pooled |
Other |
|
Number of Accounts Managed |
3 |
none |
none |
|
Number of Accounts Managed with Performance-Based Advisory Fees |
none |
none |
none |
|
Assets Managed (in millions) |
$ 10,870 |
none |
none |
|
Assets Managed with Performance-Based Advisory Fees (in millions) |
none |
none |
none |
* Includes VIP Equity-Income Portfolio ($6,340 (in millions) assets managed).
As of April 30, 2011, the dollar range of shares of VIP Equity-Income Portfolio beneficially owned by Mr. Morrow was none.
The following table provides information relating to other accounts managed by Mr. Kramer as of April 30, 2011:
|
|
Registered |
Other Pooled |
Other |
|
Number of Accounts Managed |
3 |
2 |
4 |
|
Number of Accounts Managed with Performance-Based Advisory Fees |
none |
none |
none |
|
Assets Managed (in millions) |
$ 669 |
$ 997 |
$ 881 |
|
Assets Managed with Performance-Based Advisory Fees (in millions) |
none |
none |
none |
* Includes VIP Equity-Income Portfolio ($268 (in millions) assets managed).
As of April 30, 2011, the dollar range of shares of VIP Equity-Income Portfolio beneficially owned by Mr. Kramer was none.
The following information supplements the information for VIP Disciplined Small Cap Portfolio and VIP Index 500 Portfolio found in the "Management Contracts" section beginning on page 84.
VIP Disciplined Small Cap Portfolio and VIP Index 500 Portfolio are managed by Geode, a sub-adviser to each fund. James Francis is a portfolio manager of VIP Disciplined Small Cap Portfolio and senior portfolio manager of VIP Index 500 Portfolio and receives compensation for his services. As of October 31, 2011, portfolio manager compensation generally consists of a fixed base salary, a bonus that is based on both objective and subjective criteria, and, in certain cases, participation in a profit-based compensation plan. A portion of the portfolio manager's compensation may be deferred based on criteria established by Geode.
The portfolio manager's base salary is determined annually by level of responsibility and tenure at Geode. The primary component for determining the portfolio manager's bonus is the pre-tax investment performance of the portfolio manager's fund(s) and account(s) relative to a custom peer group, if applicable, and relative to a benchmark index assigned to each fund or account. Performance is measured over multiple measurement periods that eventually encompass periods of up to five years. A portion of the portfolio manager's bonus is linked to each fund's relative pre-tax investment performance measured against the Russell 2000 Index (for VIP Disciplined Small Cap Portfolio) or the S&P 500 Index (for VIP Index 500 Portfolio). A subjective component of the portfolio manager's bonus is based on the portfolio manager's overall contribution to the management of Geode, including recruiting, monitoring, and mentoring within the investment management teams, as well as time spent assisting in firm promotion. The portfolio manager may also be compensated under a profit-based compensation plan, which is primarily based on the profits of Geode.
The portfolio manager's compensation plan can give rise to potential conflicts of interest. The manager's base pay tends to increase with additional and more complex responsibilities that include increased assets under management and a portion of the bonus relates to firm promotion efforts, which together indirectly link compensation to sales. Managing and providing research to multiple accounts (including proprietary accounts) can give rise to potential conflicts of interest if the accounts have different objectives, benchmarks, time horizons, and fees as the portfolio manager must allocate his time and investment ideas across multiple accounts. Securities selected for accounts other than the fund may outperform the securities selected for the fund.
In addition to managing each fund's investment portfolio, the portfolio manager also manages other investment portfolios and accounts on behalf of Geode or its affiliates.
The following table provides information relating to other accounts managed by Mr. Francis as of October 31, 2011:
|
|
Registered |
Other Pooled |
Other |
|
Number of Accounts Managed |
25 |
2 |
13 |
|
Number of Accounts Managed with Performance-Based Advisory Fees |
none |
none |
none |
|
Assets Managed (in millions) |
$ 86,624 |
$ 4,022 |
$ 17,288 |
|
Assets Managed with Performance-Based Advisory Fees (in millions) |
none |
none |
none |
* Includes VIP Disciplined Small Cap Portfolio ($76 (in millions) assets managed) and VIP Index 500 Portfolio ($2,184 (in millions) assets managed).
As of October 31, 2011, the dollar range of shares of VIP Disciplined Small Cap Portfolio beneficially owned by Mr. Francis was none, and the dollar range of shares of VIP Index 500 Portfolio beneficially owned by Mr. Francis was none.
Supplement to the
Fidelity® Variable Insurance Products
Balanced Portfolio, Contrafund® Portfolio, Disciplined Small Cap Portfolio, Dynamic Capital Appreciation Portfolio,
Equity-Income Portfolio, Growth Portfolio, Growth & Income Portfolio, Growth Opportunities Portfolio,
Growth Stock Portfolio, Growth Strategies Portfolio, High Income Portfolio, Mid Cap Portfolio,
Real Estate Portfolio, Value Portfolio, Value Leaders Portfolio, and Value Strategies Portfolio
Funds of Variable Insurance Products Fund, Variable Insurance Products Fund II,
Variable Insurance Products Fund III, and Variable Insurance Products Fund IV
Investor Class
STATEMENT OF ADDITIONAL INFORMATION
April 30, 2011
The following information replaces the similar information found in the "Investment Policies and Limitations" section on page 6.
Loans
For each fund other than VIP Balanced Portfolio, VIP Equity-Income Portfolio, and VIP High Income Portfolio:
The fund does not currently intend to lend assets other than securities to other parties, except by (a) lending money (up to 15% of the fund's net assets) to a registered investment company or portfolio for which FMR or an affiliate serves as investment adviser or (b) assuming any unfunded commitments in connection with the acquisition of loans, loan participations, or other forms of debt instruments. (This limitation does not apply to purchases of debt securities, to repurchase agreements, or to acquisitions of loans, loan participations or other forms of debt instruments.)
For VIP Balanced Portfolio, VIP Equity-Income Portfolio, and VIP High Income Portfolio:
The fund does not currently intend to lend assets other than securities to other parties, except by (a) making direct loans to companies in which the fund has a pre-existing investment (b) lending money (up to 15% of the fund's net assets) to a registered investment company or portfolio for which FMR or an affiliate serves as investment adviser or (c) assuming any unfunded commitments in connection with the acquisition of loans, loan participations, or other forms of debt instruments. (This limitation does not apply to purchases of debt securities, to repurchase agreements, or to acquisitions of loans, loan participations or other forms of debt instruments.)
The following information replaces the similar information found in the "Investment Policies and Limitations" section on page 15.
Loans and Other Direct Debt Instruments. Direct debt instruments are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates (loans and loan participations), to suppliers of goods or services (trade claims or other receivables), or to other parties. Direct debt instruments involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to the purchaser in the event of fraud or misrepresentation, or there may be a requirement that a fund supply additional cash to a borrower on demand. A fund may acquire loans by buying an assignment of all or a portion of the loan from a lender or by purchasing a loan participation from a lender or other purchaser of a participation. VIP Balanced Portfolio, VIP Equity-Income Portfolio, and VIP High Income Portfolio also may acquire loans directly at the time of the loan's closing.
Lenders and purchasers of loans and other forms of direct indebtedness depend primarily upon the creditworthiness of the borrower for payment of interest and repayment of principal. If scheduled interest or principal payments are not made, the value of the instrument may be adversely affected. Loans that are fully secured provide more protections than an unsecured loan in the event of failure to make scheduled interest or principal payments. However, there is no assurance that the liquidation of collateral from a secured loan would satisfy the borrower's obligation, or that the collateral could be liquidated. Indebtedness of borrowers whose creditworthiness is poor involves substantially greater risks and may be highly speculative. Borrowers that are in bankruptcy or restructuring may never pay off their indebtedness, or may pay only a small fraction of the amount owed. Direct indebtedness of developing countries also involves a risk that the governmental entities responsible for the repayment of the debt may be unable, or unwilling, to pay interest and repay principal when due.
Direct lending and investments in loans through direct assignment of a financial institution's interests with respect to a loan may involve additional risks. For example, if a loan is foreclosed, the lender/purchaser could become part owner of any collateral, and would bear the costs and liabilities associated with owning and disposing of the collateral. In addition, it is conceivable that under emerging legal theories of lender liability, a purchaser could be held liable as a co-lender. Direct debt instruments may also involve a risk of insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. Unless, under the terms of the loan or other indebtedness, the purchaser has direct recourse against the borrower, the purchaser may have to rely on the agent to apply appropriate credit remedies against a borrower. If assets held by the agent for the benefit of a purchaser were determined to be subject to the claims of the agent's general creditors, the purchaser might incur certain costs and delays in realizing payment on the loan or loan participation and could suffer a loss of principal or interest.
VIPINVB-11-05 December 8, 2011
1.825687.127
Direct indebtedness may include letters of credit, revolving credit facilities, or other standby financing commitments that obligate lenders/purchasers to make additional cash payments on demand. These commitments may have the effect of requiring a lender/purchaser to increase its investment in a borrower at a time when it would not otherwise have done so, even if the borrower's condition makes it unlikely that the amount will ever be repaid.
Each fund limits the amount of total assets that it will invest in any one issuer or in issuers within the same industry (see the fund's investment limitations). For purposes of these limitations, a fund generally will treat the borrower as the "issuer" of indebtedness held by the fund. In the case of loan participations where a bank or other lending institution serves as financial intermediary between a fund and the borrower, if the participation does not shift to the fund the direct debtor-creditor relationship with the borrower, SEC interpretations require a fund, in appropriate circumstances, to treat both the lending bank or other lending institution and the borrower as "issuers" for these purposes. Treating a financial intermediary as an issuer of indebtedness may restrict a fund's ability to invest in indebtedness related to a single financial intermediary, or a group of intermediaries engaged in the same industry, even if the underlying borrowers represent many different companies and industries.
The following information supplements the similar information for VIP Equity-Income Portfolio found in the "Management Contracts" section beginning on page 57.
The following table provides information relating to other accounts managed by Mr. Morrow as of April 30, 2011:
|
|
Registered |
Other Pooled |
Other |
|
Number of Accounts Managed |
3 |
none |
none |
|
Number of Accounts Managed with Performance-Based Advisory Fees |
none |
none |
none |
|
Assets Managed (in millions) |
$ 10,870 |
none |
none |
|
Assets Managed with Performance-Based Advisory Fees (in millions) |
none |
none |
none |
* Includes VIP Equity-Income Portfolio ($6,340 (in millions) assets managed).
As of April 30, 2011, the dollar range of shares of VIP Equity-Income Portfolio beneficially owned by Mr. Morrow was none.
The following table provides information relating to other accounts managed by Mr. Kramer as of April 30, 2011:
|
|
Registered |
Other Pooled |
Other |
|
Number of Accounts Managed |
3 |
2 |
4 |
|
Number of Accounts Managed with Performance-Based Advisory Fees |
none |
none |
none |
|
Assets Managed (in millions) |
$ 669 |
$ 997 |
$ 881 |
|
Assets Managed with Performance-Based Advisory Fees (in millions) |
none |
none |
none |
* Includes VIP Equity-Income Portfolio ($268 (in millions) assets managed).
As of April 30, 2011, the dollar range of shares of VIP Equity-Income Portfolio beneficially owned by Mr. Kramer was none.
The following information supplements the similar information for VIP Disciplined Small Cap Portfolio found in the "Management Contracts" section beginning on page 67.
VIP Disciplined Small Cap Portfolio is managed by Geode, a sub-adviser to the fund. James Francis is a portfolio manager of the fund and receives compensation for his services. As of October 31, 2011, portfolio manager compensation generally consists of a fixed base salary, a bonus that is based on both objective and subjective criteria, and, in certain cases, participation in a profit-based compensation plan. A portion of the portfolio manager's compensation may be deferred based on criteria established by Geode.
The portfolio manager's base salary is determined annually by level of responsibility and tenure at Geode. The primary component for determining the portfolio manager's bonus is the pre-tax investment performance of the portfolio manager's fund(s) and account(s) relative to a custom peer group, if applicable, and relative to a benchmark index assigned to each fund or account. Performance is measured over multiple measurement periods that eventually encompass periods of up to five years. A portion of the portfolio manager's bonus is linked to VIP Disciplined Small Cap Portfolio's relative pre-tax investment performance measured against the Russell 2000 Index. A subjective component of the portfolio manager's bonus is based on the portfolio manager's overall contribution to the management of Geode, including recruiting, monitoring, and mentoring within the investment management teams, as well as time spent assisting in firm promotion. The portfolio manager may also be compensated under a profit-based compensation plan, which is primarily based on the profits of Geode.
The portfolio manager's compensation plan can give rise to potential conflicts of interest. The manager's base pay tends to increase with additional and more complex responsibilities that include increased assets under management and a portion of the bonus relates to firm promotion efforts, which together indirectly link compensation to sales. Managing and providing research to multiple accounts (including proprietary accounts) can give rise to potential conflicts of interest if the accounts have different objectives, benchmarks, time horizons, and fees as the portfolio manager must allocate his time and investment ideas across multiple accounts. Securities selected for accounts other than the fund may outperform the securities selected for the fund.
In addition to managing the fund's investment portfolio, the portfolio manager also manages other investment portfolios and accounts on behalf of Geode or its affiliates.
The following table provides information relating to other accounts managed by Mr. Francis as of October 31, 2011:
|
|
Registered |
Other Pooled |
Other |
|
Number of Accounts Managed |
25 |
2 |
13 |
|
Number of Accounts Managed with Performance-Based Advisory Fees |
none |
none |
none |
|
Assets Managed (in millions) |
$ 86,624 |
$ 4,022 |
$ 17,288 |
|
Assets Managed with Performance-Based Advisory Fees (in millions) |
none |
none |
none |
* Includes VIP Disciplined Small Cap Portfolio ($76 (in millions) assets managed).
As of October 31, 2011, the dollar range of shares of VIP Disciplined Small Cap Portfolio beneficially owned by Mr. Francis was none.