Fidelity VIP Growth Portfolio - Fidelity Investments

[Pages:11]PORTFOLIO MANAGER Q&A | AS OF JUNE 30, 2022

Fidelity? VIP Growth Portfolio

Key Takeaways

? For the semiannual reporting period ending June 30, 2022, the fund's

share classes returned about -24%, outpacing the -28.15% result of the benchmark Russell 3000? Growth Index.

? Co-Portfolio Managers Jason Weiner and Asher Anolic say the market

backdrop was difficult the past six months, largely due to high inflation, which spurred the U.S. Federal Reserve to hike interest rates more aggressively than anticipated.

? Security selection was the primary driver of the fund's outperform of

the benchmark, especially in health care, where large positions in managed care provider UnitedHealth Group (+3%) and pharmaceutical firm Vertex Pharmaceuticals (+28%) were the two largest relative contributors.

? Picks among communication services and information technology

stocks also added value on a relative basis. Within the latter, an overweight stake in cybersecurity firm Mandiant (+23%) contributed amid strong demand for cybersecurity.

? Conversely, investment choices in industrials and underweighted

exposure to the defensive consumer staples sector pressured the portfolio's relative result.

? On a stock-specific basis, avoiding key benchmark components

AbbVie (+15%), a large pharmaceutical firm, and payment services firm Visa (-9%), detracted most from the fund's relative performance the past six months.

? As of midyear, Jason and Asher have increased the fund's exposure to

stocks they believe could perform relatively well in an inflationary environment, along with those areas of the market they associate with long-term tailwinds, such as the increasing demand for computing power and renewable energy, as well as the shift toward a more digital world.

Not FDIC Insured ? May Lose Value ? No Bank Guarantee

MARKET RECAP

The S&P 500? index returned -19.96% for the six months ending June 30, 2022, as a multitude of crosscurrents challenged the global economy and financial markets. It was the index's worst first-half result to begin a year since 1970. Persistently high inflation, exacerbated by energy price shocks from the Russia?Ukraine conflict, spurred the U.S. Federal Reserve to hike interest rates more aggressively than anticipated, and concerns about the outlook for economic growth sent stocks into bear market territory. Against this backdrop, the index returned -8.72% in April amid clearer signals of the Fed's intention to tighten monetary policy. In early May, the Fed approved a rare halfpercentage-point interest rate increase and announced plans to shrink its $9 trillion asset portfolio. The S&P 500? gained 0.18% for the month. June began with the Fed allowing up to billions in Treasuries and mortgage bonds to mature every month without investing the proceeds. Two weeks later, the central bank raised rates by 0.75 percentage points, its largest increase since 1994, and said it was becoming more difficult to achieve a soft landing, in which the economy slows enough to bring down inflation while avoiding a recession. Partly in reaction, the S&P 500 returned -8.25% in June. By sector for the full six months, the growth-oriented consumer discretionary (-33%) and communication services (-30%) groups lagged most. In contrast, energy (+32%) rode a surge in commodity prices and led by a wide margin, followed by defensive sectors, such as utilities (-1%).

PORTFOLIO MANAGER Q&A | AS OF JUNE 30, 2022

Jason Weiner Co-Manager

Fund Facts

Start Date: Size (in millions):

Asher Anolic Co-Manager

October 09, 1986 $6,778.37

Investment Approach

? Fidelity? VIP Growth Portfolio is a diversified domestic equity strategy with a large-cap growth bias.

? Our core philosophy is that stock prices follow earnings growth, and the fund tends to focus on the fastest quartile of earnings growers: industry leaders and companies with proven track records.

? We employ a "go anywhere" investment approach, analyzing the entire value chain, which enables the fund to invest in broad themes and across market capitalizations.

? We look for undervalued growth stories and stocks with the potential for price-to-earnings (P/E) expansion, while avoiding names that have unreasonably high valuations or deteriorating business fundamentals.

Q&A

An interview with Co-Portfolio Managers Jason Weiner and Asher Anolic

Q: Asher, how did the fund perform in the first half of 2022

A.A. The fund's share classes returned about -24%, outpacing the -28.15% result of the benchmark, the Russell 3000? Growth Index, as well as the peer group average.

Looking a bit longer term, the fund's share classes returned approximately -17% for the trailing 12 months, again outperforming the benchmark and peer group average.

Q: How did the market backdrop influence relative performance the past six months

A.A. Inflation had already been on the rise throughout 2021 due to supply-chain congestion caused by the COVID-19 pandemic. However, Russia's invasion of Ukraine in late February of 2022 made matters worse, driving up the global prices of crude oil, natural gas, industrial metals and many agricultural commodities. The annualized U.S. inflation rate surpassed 8% each month from March through June, well above the U.S. Federal Reserve's 2% target. As a result, the Fed began to tighten monetary policy by boosting its key interest rate, with more increases expected. What's more, in June the U.S. central bank began reducing its holdings in U.S. Treasuries and other securities.

Other noteworthy market headwinds included rising bond yields, ongoing supply constraint and disruption, and the ever-present potential for variants of the coronavirus to upend the U.S. economy.

Still, the fund was relatively well-positioned against this backdrop, as security selection propelled the fund's outperformance of the benchmark, especially among health care stocks. An overweighting in this defensive sector also was beneficial. Elsewhere, we had success with our stock picks in information technology and materials, while an underweighting in the consumer discretionary sector proved beneficial.

Q: Which stocks contributed most to the fund's performance versus the benchmark

A.A. A few health care stocks performed very well within the portfolio the past six months, including an outsized stake in managed care provider UnitedHealth Group (+3%), the top contributor versus the benchmark. The stock benefited from

2 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

PORTFOLIO MANAGER Q&A | AS OF JUNE 30, 2022

strong quarterly earnings this period, fueled by its Optum Health segment. We view UnitedHealth Group as a leader in improving patient outcomes by utilizing big data. As a result, it was the fund's third-largest holding as of midyear.

Traditionally, we tend to own a mix of larger, established biotech firms in the fund, and this period Vertex Pharmaceuticals (+28%) was a prime example. The company's core drug Trikafta?, a treatment for cystic fibrosis, continued to generate strong sales and investors became more excited about the firm's upcoming treatments for kidney disease and type 1 diabetes, as well as gene-based options for blood diseases and cystic fibrosis. We increased our exposure to the stock as a result.

I'll also mention our overweight in cybersecurity firm Mandiant. The stock gained 23% the past six months, rising amid strong demand for cybersecurity, especially due to increasing attacks stemming from Russia's invasion of Ukraine.

Q: Jason, what else notably helped this period

J.W. Energy (+26%) was the top-performing sector by far this period, as these companies were bolstered by surging prices for oil and natural gas. In turn, this propelled our nonbenchmark position in Reliance Industries (+3%), an Indiabased diversified company with a large oil and gas business. The stock was a top-10 holding at the midpoint of 2022.

A larger-than-benchmark holding in CF Industries (+22%), a materials play on fertilizer pricing, was another big relative contributor. While we trimmed our position in CF this period, we maintain a positive view on firms we think will play a critical role in the shift from a fossil fuel-based economy to one focused on renewable energy. Therefore, CF remains a holding at the end of June.

It also helped to avoid benchmark component Netflix, a video-streaming service provider. Shares of the firm returned -71% for the period, tumbling the most in May after its management team reported a net subscriber loss in the first quarter, while also highlighting that it expects to lose even more subscribers in the subsequent quarter.

Q: Did anything meaningfully detract

J.W. Yes. Investment choices in industrials and underweighted exposure to the defensive-oriented consumer staples sector pressured the portfolio's relative result the past six months.

On a stock-specific basis, we did not own outperforming benchmark component AbbVie (+15%), making it the biggest relative detractor. Shares of the pharmaceutical firm rose this period because investors became more comfortable with its business diversification plans amid the patent expiry of its blockbuster drug Humira.

Elsewhere, avoiding benchmark component Visa (-9%) and underweighting Mastercard (-12%) further hampered the fund's relative return. For both stocks, we were concerned about delays in the resumption of lucrative cross-border transactions, as well as increased competitive pressure. However, both stocks outperformed, in part due to solid quarterly earnings owed largely to a recovery in travel spending.

We're invested in the stocks of companies developing the augmented/virtual reality that will drive greater digital interaction between consumers and brands, including Apple (-3%), a sizable relative detractor this period. We reduced our stake due to valuation concerns and remained underweight, on average. This hurt our relative result because the stock outperformed the benchmark, benefiting from better-thanexpected quarterly earnings due to strong demand for its consumer electronics products, including the iPhone 13? device

Q: Asher, what is your outlook, and how was the fund positioned as of June 30

A.A. The factors I mentioned earlier ? elevated inflation, rising interest rates, geopolitical risk (i.e., Russia?Ukraine conflict), high commodity prices, supply-chain disruption ? have raised uncertainty about the global economy and prospects for recession. Further, there's no playbook for unwinding the considerable quantitative easing we've seen pumped into the U.S. economy since early 2020, and there also is the potential for policy risk if the Fed raises rates too aggressively. However, we think a lot of this concern about potential recession appears to be priced into the market. We are on the lookout for investment opportunities, and plan to redouble our efforts if volatility increases from recent levels.

That said, it's unclear exactly how long inflation will stick around, as an overheated economy can negatively impact business investments, operating margins, consumer spending and more. For this reason, we have increased exposure to some stocks that we think could perform well in this type of environment. Sometimes we make stock-specific calls, although we often look for investments with exposure to broader market trends because we think they stand a better chance of producing persistent, positive earnings revisions. Therefore, a big part of our process is identifying key three-to-five-year themes on which we can focus our investment lens, such as increasing demand for compute power and renewable energy ? which I'll describe in greater detail in the callout portion of this review ? as well the shift toward a more digital world.

3 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

PORTFOLIO MANAGER Q&A | AS OF JUNE 30, 2022

Co-Manager Asher Anolic on investing in renewable energy:

"We think the shift toward renewable energy and away from the current fossil fuel-based economy is an accelerating trend. In the coming years, there is little doubt that the U.S. and many other countries must move aggressively away from fossil fuels to sustain our current standard of living. As such, companies in the wind- and solar-energy businesses could be poised to benefit from a 'greening' of the world's electricity grid. In combination, wind and solar still account for only about 10% of global power generation, although we expect adoption to accelerate. In fact, within many regions of the world, the cost of wind and solar generation is on par with fossil fuels.

"At the midpoint of 2022, the fund owns shares in SolarEdge Technologies and Enphase Energy, two solar inverter companies functioning in what we view as a duopoly at a critical point in the solar value chain. Furthermore, electrical grid and microgrid management could become increasingly important, and we believe fund holding Eaton could play a vital role in this modernization.

"All told, the long-term shift away from the old energy paradigm could be messy and uncoordinated, in our view. We expect to see shortages in certain parts of the supply chain. Capital flight could starve existing fossil-fuel-based infrastructure, and this may precipitate inflation, as supply will not meet demand and it will be much harder to bring new capacity to market.

"To account for these challenges, we're invested in firms specializing in alleviating supply chain bottlenecks, including fertilizer producer CF Industries, as well as titanium dioxide producer Chemours, and we continue to monitor traditional energy companies for opportunities as well."

LARGEST CONTRIBUTORS VS. BENCHMARK

Holding

Market Segment

UnitedHealth Group, Inc.

Health Care

Vertex Pharmaceuticals, Inc.

Health Care

Mandiant, Inc.

Information Technology

Netflix, Inc.

Communication Services

Reliance Industries Ltd.

Energy

* 1 basis point = 0.01%.

Average Relative Relative Contribution Weight (basis points)*

4.63%

115

2.27%

93

1.07%

50

-0.64%

45

1.68%

44

LARGEST DETRACTORS VS. BENCHMARK

Holding

Market Segment

AbbVie, Inc.

Health Care

Visa, Inc. Class A

Information Technology

Warner Music Group Communication

Corp. Class A

Services

Apple, Inc.

Information Technology

PepsiCo, Inc.

Consumer Staples

* 1 basis point = 0.01%.

Average Relative Relative Contribution Weight (basis points)*

-1.25%

-42

-1.68%

-29

1.55%

-26

-6.06%

-26

-0.92%

-20

4 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

PORTFOLIO MANAGER Q&A | AS OF JUNE 30, 2022

ASSET ALLOCATION

Asset Class

Portfolio Weight Index Weight

Relative Weight

Relative Change From Six Months

Ago

Domestic Equities

90.67%

99.87%

-9.20%

-5.92%

International Equities

9.43%

0.13%

9.30%

-1.40%

Developed Markets

7.38%

0.07%

7.31%

-1.39%

Emerging Markets

2.05%

0.06%

1.99%

-0.01%

Tax-Advantaged Domiciles

0.00%

0.00%

0.00%

0.00%

Bonds

0.00%

0.00%

0.00%

0.00%

Cash & Net Other Assets

-0.10%

0.00%

-0.10%

7.32%

Net Other Assets can include fund receivables, fund payables, and offsets to other derivative positions, as well as certain assets that do not fall into any of the portfolio composition categories. Depending on the extent to which the fund invests in derivatives and the number of positions that are held for future settlement, Net Other Assets can be a negative number.

"Tax-Advantaged Domiciles" represent countries whose tax policies may be favorable for company incorporation.

MARKET-SEGMENT DIVERSIFICATION

Market Segment Information Technology Health Care Communication Services Consumer Discretionary Industrials Financials Energy Consumer Staples Materials Real Estate Other

Portfolio Weight 29.87% 19.20% 15.43% 8.64% 6.96% 5.55% 5.00% 4.39% 4.04% 0.77% 0.26%

Index Weight 42.22% 12.96% 7.75% 15.18% 7.67% 3.13% 1.74% 5.79% 1.57% 1.84% 0.15%

Relative Weight -12.35% 6.24% 7.68% -6.54% -0.71% 2.42% 3.26% -1.40% 2.47% -1.07% 0.11%

Relative Change From Six Months

Ago -6.88% 0.82% -2.54% 2.17% -2.49% -0.14% 2.15% 1.03% -1.20% 0.21% -0.46%

5 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

PORTFOLIO MANAGER Q&A | AS OF JUNE 30, 2022

10 LARGEST HOLDINGS

Holding

Market Segment

Portfolio Weight

Portfolio Weight Six Months Ago

Microsoft Corp.

Information Technology

11.38%

12.16%

Alphabet, Inc. Class A

Communication Services

8.26%

10.70%

UnitedHealth Group, Inc.

Health Care

5.71%

4.53%

Apple, Inc.

Information Technology

4.67%

6.05%

, Inc.

Consumer Discretionary

4.54%

5.61%

Vertex Pharmaceuticals, Inc.

Health Care

2.86%

1.52%

Adobe, Inc.

Information Technology

2.00%

3.08%

Reliance Industries Ltd.

Energy

1.86%

1.49%

The Coca-Cola Co.

Consumer Staples

1.81%

--

Qualcomm, Inc.

Information Technology

1.72%

1.98%

10 Largest Holdings as a % of Net Assets

44.81%

55.04%

Total Number of Holdings

182

168

The 10 largest holdings are as of the end of the reporting period, and may not be representative of the fund's current or future investments. Holdings do not include money market investments.

6 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

PORTFOLIO MANAGER Q&A | AS OF JUNE 30, 2022

PERFORMANCE SUMMARY

Variable annuity contracts are issued by insurance companies through separate accounts that are part of the insurer. The value of a variable annuity contract depends on the values of units of subaccounts of the separate account. Each subaccount purchases shares of a corresponding mutual fund. Subaccount investment performance is based on the performance of the mutual fund in which it invests, less insurance company charges made against the assets of the separate account. A subaccount is not a mutual fund.

The information provided in this Performance Summary contains performance information for the fund, or class, and each variable subaccount, with comparisons over different time periods to the fund's relevant benchmarks ? including an appropriate index as well as a group of similar funds whose average returns are compiled and monitored by an independent mutual fund research company. Figures for more than one year assume a steady compounded rate of return and are not a class' year-by-year results, which fluctuated over the periods shown. Fund performance numbers are net of all underlying fund operating expenses, but do not include any insurance charges imposed by your insurance company's separate account. If fund performance information included the effect of these additional charges, the total returns would have been lower. The performance table also contains performance information for certain insurance company subaccounts that invest in the fund. Each variable subaccount's performance, as shown, is net of all fees and expenses, including those charges imposed by your insurance company. Seeing the returns over different time periods can help you assess the performance against relevant measurements and across multiple market environments. The performance information includes average annual total returns and cumulative total returns and is further explained in this section.*

Investing in a variable annuity involves risk of loss ? investment returns, contract value, and, for variable income annuities, payment amounts are not guaranteed and will fluctuate. Withdrawals of taxable amounts from an annuity are subject to ordinary income tax, and, if taken before age 59 1/2, may be subject to a 10% IRS penalty.

Current performance may be higher or lower than the performance data quoted below. An investor's shares, when redeemed, may be worth more or less than their original cost. For month-end performance figures, please visit annuityperformance or call Fidelity. The performance data featured represents past performance, which is no guarantee of future results.

Fiscal periods ending June 30, 2022

Cumulative

Annualized

Total Returns for the Fund

6

Month

YTD

1 Year

3 Year

5 Year

10 Year/ LOF1

VIP Growth Portfolio - Initial Class Gross Expense Ratio: 0.61%2

-23.55%

-23.55%

-17.08%

14.35%

15.33%

15.36%

VIP Growth Portfolio - Investor Class Gross Expense Ratio: 0.68%2

Russell 3000 Growth Index

-23.58% -28.15%

-23.58% -28.15%

-17.14% -19.78%

14.26% 11.84%

15.24% 13.63%

15.27% 14.41%

Morningstar Insurance Large Growth

-30.76%

-30.76%

-25.42%

8.24%

11.38%

13.10%

1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 10/09/1986.

2 This expense ratio is from the prospectus in effect as of the date shown above and generally is based on amounts incurred during that fiscal year, or estimated amounts for the current fiscal year in the case of a newly launched fund. It does not include any fee waivers or reimbursements, which would be reflected in the fund's net expense ratio.

Performance and disclosure information continued on next page.

7 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

PORTFOLIO MANAGER Q&A | AS OF JUNE 30, 2022

PERFORMANCE SUMMARY (continued):

Fiscal periods ending June 30, 2022

Total Returns for the Variable Subaccount**

Annualized

New York Only: 10 Year/Life

of Subaccount

Cumulative

6

Month

YTD

1 Year

Annualized

3 Year

5 Year

10 Year/Life of

Subaccount

Fidelity Retirement Reserves A

14.44%

-23.86% -23.86% -17.75%

13.43%

14.40%

14.44%

Fidelity Income Advantage B

14.21%

-23.94% -23.94% -17.91%

13.20%

14.17%

14.21%

Fidelity Personal Retirement Annuity C (for contracts purchased prior to 1/1/09 and on or after 9/7/10)

14.98%

-23.68% -23.68% -17.35%

13.98%

14.95%

14.98%

Fidelity Personal Retirement Annuity C (for contracts purchased between 1/1/09 and 9/6/10)

14.98%

-23.68% -23.68% -17.35%

13.98%

14.95%

14.98%

Fidelity Personal Retirement Annuity C (for contracts purchased on or after 9/7/10 with an initial purchase payment of $1M+)

15.16%

-23.62% -23.62% -17.23%

14.15%

15.12%

15.16%

Fidelity Retirement Reserves - Subaccount Inception: February 10, 1988; New York Only Inception: June 03, 1992. Fidelity Income Advantage Subaccount Inception: February 10, 1988; New York Only Inception: June 03, 1992. Fidelity Personal Retirement Annuity - Subaccount Inception: August 15, 2005; New York Only Inception: October 28, 2005.

Fidelity Retirement Reserves' underlying fund options are Initial Class fund offerings. Fidelity Income Advantage's underlying fund options are Initial Class fund offerings. Fidelity Personal Retirement Annuity's underlying fund options are Investor Class fund offerings.

A In NY, Retirement Reserves B In NY, Income Advantage C In NY, Personal Retirement Annuity

* Total returns are historical and include changes in share price (for the fund) and unit price (for the variable subaccount) and reinvestment of dividends and capital gains, if any.

** Returns for Fidelity Retirement Reserves include the 0.80% annual annuity charge. For Fidelity Retirement Reserves contracts, returns do not reflect the annual $30 maintenance fee which applies to contracts where purchase payments less any withdrawals are less than $25,000. Returns for Fidelity Income Advantage include the 1.00% annual annuity charge. Returns for Fidelity Personal Retirement Annuity ("FPRA") include the 0.25% annual annuity charge for contracts purchased prior to 1/1/2009, and on or after 9/7/2010. For FPRA contracts purchased between 1/1/2009 and 9/6/2010, returns include a 0.35% annual annuity charge prior to 9/7/2010 and 0.25% thereafter. For FPRA contracts purchased on or after 9/7/2010 with an initial purchase payment of $1,000,000 or more, returns include a 0.10% annual annuity charge. Life of subaccount returns are from the subaccount inception, the date the portfolio was first available in the insurance company's variable product. Please see the last page(s) of this Q&A document for most-recent calendar-quarter performance.

8 | For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

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