N-CSRS 1 main.htm

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 811-5511

Variable Insurance Products Fund II
 (Exact name of registrant as specified in charter)

82 Devonshire St., Boston, Massachusetts 02109
 (Address of principal executive offices)       (Zip code)

Scott C. Goebel, Secretary

82 Devonshire St.

Boston, Massachusetts 02109
(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, 2012

Item 1. Reports to Stockholders

Fidelity® Variable Insurance Products:

Contrafund Portfolio

Semiannual Report

June 30, 2012

(Fidelity Cover Art)

Contents

Shareholder Expense Example

(Click Here)

An example of shareholder expenses.

Investment Changes

(Click Here)

A summary of major shifts in the fund's investments over the past six months.

Investments

(Click Here)

A complete list of the fund's investments with their market values.

Financial Statements

(Click Here)

Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights.

Notes

(Click Here)

Notes to the financial statements.

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. ©2012 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-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q 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.advisor.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.

Semiannual Report

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees and (2) ongoing costs, including 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 the 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, 2012 to June 30, 2012).

Actual Expenses

The first line of the accompanying table for each class of the Fund 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 of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. 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. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.

Hypothetical Example for Comparison Purposes

The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' 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. 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. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.

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. In addition, if these transactional costs were included, your costs would have been higher.

 

Annualized Expense Ratio

Beginning
Account Value
January 1, 2012

Ending
Account Value
June 30, 2012

Expenses Paid
During Period*
January 1, 2012
to June 30, 2012

Initial Class

.64%

 

 

 

Actual

 

$ 1,000.00

$ 1,094.30

$ 3.33

HypotheticalA

 

$ 1,000.00

$ 1,021.68

$ 3.22

Service Class

.74%

 

 

 

Actual

 

$ 1,000.00

$ 1,093.70

$ 3.85

HypotheticalA

 

$ 1,000.00

$ 1,021.18

$ 3.72

Service Class 2

.89%

 

 

 

Actual

 

$ 1,000.00

$ 1,092.80

$ 4.63

HypotheticalA

 

$ 1,000.00

$ 1,020.44

$ 4.47

Service Class 2R

.89%

 

 

 

Actual

 

$ 1,000.00

$ 1,092.90

$ 4.63

HypotheticalA

 

$ 1,000.00

$ 1,020.44

$ 4.47

Investor Class

.73%

 

 

 

Actual

 

$ 1,000.00

$ 1,094.20

$ 3.80

HypotheticalA

 

$ 1,000.00

$ 1,021.23

$ 3.67

A 5% return per year before expenses

* Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).

Semiannual Report

Investment Changes (Unaudited)

Top Ten Stocks as of June 30, 2012

 

% of fund's
net assets

% of fund's net assets
6 months ago

Apple, Inc.

6.9

5.2

Microsoft Corp.

2.8

0.5

QUALCOMM, Inc.

2.3

2.2

The Coca-Cola Co.

2.1

1.9

Procter & Gamble Co.

2.1

2.3

U.S. Bancorp

1.9

1.3

Comcast Corp. Class A

1.8

0.3

General Electric Co.

1.8

0.8

Pfizer, Inc.

1.7

1.2

Capital One Financial Corp.

1.7

1.0

 

25.1

Market Sectors as of June 30, 2012

 

% of fund's
net assets

% of fund's net assets
6 months ago

Information Technology

20.2

19.7

Financials

14.7

13.3

Health Care

11.5

11.5

Consumer Staples

11.1

11.4

Energy

10.6

11.8

Consumer Discretionary

10.5

9.8

Industrials

10.2

10.8

Utilities

3.7

3.8

Materials

3.4

3.4

Telecommunication Services

2.0

2.8

Asset Allocation (% of fund's net assets)

As of June 30, 2012 *

As of December 31, 2011 **

abc234586

Stocks and
Equity Futures 98.1%

 

abc234586

Stocks and
Equity Futures 98.8%

 

abc234589

Short-Term
Investments and
Net Other Assets (Liabilities) 1.9%

 

abc234589

Short-Term
Investments and
Net Other Assets (Liabilities) 1.2%

 

* Foreign investments

13.9%

 

** Foreign investments

16.8%

 

abc234592

Semiannual Report

Investments June 30, 2012 (Unaudited)

Showing Percentage of Net Assets

Common Stocks - 97.9%

Shares

Value

CONSUMER DISCRETIONARY - 10.5%

Diversified Consumer Services - 0.2%

Weight Watchers International, Inc. (d)

641,017

$ 33,050,837

Hotels, Restaurants & Leisure - 2.7%

Arcos Dorados Holdings, Inc.

2,491,899

36,830,267

Domino's Pizza, Inc.

782,987

24,202,128

Dunkin' Brands Group, Inc.

436,711

14,996,656

Icahn Enterprises LP rights (a)

363,975

4

McDonald's Corp.

1,829,816

161,993,610

Starbucks Corp.

1,621,524

86,459,660

Yum! Brands, Inc.

1,682,792

108,405,461

 

432,887,786

Household Durables - 0.1%

Harman International Industries, Inc.

237,050

9,387,180

Internet & Catalog Retail - 0.5%

Priceline.com, Inc. (a)

123,962

82,375,228

Media - 3.3%

Comcast Corp. Class A

9,109,486

291,230,267

DIRECTV (a)

1,244,695

60,766,010

Legend Pictures LLC (a)(g)(h)

6,611

7,068,018

The Walt Disney Co.

3,538,626

171,623,361

Weinstein Co. Holdings LLC Class A-1 (a)(g)(h)

11,499

4,312,125

 

534,999,781

Multiline Retail - 0.8%

Dollar General Corp. (a)

2,324,003

126,402,523

Specialty Retail - 2.6%

AutoZone, Inc. (a)

230,484

84,626,810

Limited Brands, Inc.

728,070

30,964,817

Lowe's Companies, Inc.

5,389,135

153,266,999

TJX Companies, Inc.

3,266,649

140,237,242

 

409,095,868

Textiles, Apparel & Luxury Goods - 0.3%

Under Armour, Inc. Class A
(sub. vtg.) (a)(d)

541,706

51,180,383

TOTAL CONSUMER DISCRETIONARY

1,679,379,586

CONSUMER STAPLES - 11.1%

Beverages - 4.3%

Anheuser-Busch InBev SA NV

825,677

65,097,423

Coca-Cola Bottling Co. CONSOLIDATED

148,512

9,546,351

Coca-Cola FEMSA SAB de CV sponsored ADR

48,947

6,406,183

Coca-Cola Icecek A/S

486,386

7,530,444

Companhia de Bebidas das Americas (AmBev) (PN) sponsored ADR

200,370

7,680,182

Constellation Brands, Inc. Class A
(sub. vtg.) (a)

2,000,269

54,127,279

Diageo PLC sponsored ADR

627,882

64,715,798

Embotelladora Andina SA sponsored ADR

265,456

8,574,229

 

Shares

Value

Molson Coors Brewing Co. Class B

894,028

$ 37,200,505

Monster Beverage Corp. (a)

26,800

1,908,160

Pernod Ricard SA (d)

429,379

45,785,125

Remy Cointreau SA

324,908

35,599,192

The Coca-Cola Co.

4,303,795

336,513,731

 

680,684,602

Food & Staples Retailing - 1.5%

CVS Caremark Corp.

3,957,416

184,930,050

Drogasil SA

607,100

6,120,874

Kroger Co.

321,500

7,455,585

Safeway, Inc.

330,232

5,993,711

Wal-Mart Stores, Inc.

392,683

27,377,859

Walgreen Co.

464,823

13,749,464

 

245,627,543

Food Products - 0.7%

Bunge Ltd.

439,131

27,551,079

Green Mountain Coffee Roasters, Inc. (a)

207,119

4,511,052

Mead Johnson Nutrition Co. Class A

53,600

4,315,336

Nestle SA

417,951

24,901,363

Orion Corp.

7,305

6,072,784

Pilgrims Pride Corp.

20,100

143,715

Unilever NV (NY Reg.)

1,329,447

44,337,057

 

111,832,386

Household Products - 2.3%

Colgate-Palmolive Co.

373,902

38,923,198

Procter & Gamble Co.

5,360,720

328,344,100

Spectrum Brands Holdings, Inc. (a)

246,002

8,012,285

 

375,279,583

Personal Products - 0.4%

L'Oreal SA

336,600

39,291,224

Nu Skin Enterprises, Inc. Class A

376,849

17,674,218

 

56,965,442

Tobacco - 1.9%

Altria Group, Inc.

652,993

22,560,908

British American Tobacco PLC sponsored ADR

2,564,639

261,900,935

Philip Morris International, Inc.

152,500

13,307,150

Souza Cruz SA

590,300

8,664,199

 

306,433,192

TOTAL CONSUMER STAPLES

1,776,822,748

ENERGY - 10.6%

Energy Equipment & Services - 2.6%

Baker Hughes, Inc.

375,027

15,413,610

Cameron International Corp. (a)

1,081,780

46,202,824

Discovery Offshore S.A. (a)(e)

1,310,900

2,093,509

Ensco PLC Class A

1,023,201

48,059,751

Forum Energy Technologies, Inc.

626,050

12,326,925

Halliburton Co.

1,498,732

42,549,001

National Oilwell Varco, Inc.

1,309,082

84,357,244

Common Stocks - continued

Shares

Value

ENERGY - continued

Energy Equipment & Services - continued

Noble Corp.

1,657,901

$ 53,931,520

Ocean Rig UDW, Inc. (United States)

1,137,864

15,372,543

Oceaneering International, Inc.

358,418

17,153,885

Oil States International, Inc. (a)

126,678

8,386,084

Schlumberger Ltd.

779,179

50,576,509

Transocean Ltd. (United States)

174,583

7,809,098

Vantage Drilling Co. (a)

5,923,400

8,885,100

 

413,117,603

Oil, Gas & Consumable Fuels - 8.0%

Alpha Natural Resources, Inc. (a)

817,624

7,121,505

Anadarko Petroleum Corp.

1,366,403

90,455,879

Apache Corp.

1,011,008

88,857,493

Calumet Specialty Products Partners LP

183,916

4,373,522

Cheniere Energy, Inc. (a)

234,975

3,463,532

Chevron Corp.

571,381

60,280,696

Cobalt International Energy, Inc. (a)

612,409

14,391,612

EV Energy Partners LP

63,500

3,204,210

Exxon Mobil Corp.

2,951,302

252,542,912

Halcon Resources Corp. (h)

1,140,000

10,761,600

Hess Corp.

873,800

37,966,610

HollyFrontier Corp.

1,823,875

64,619,891

InterOil Corp. (a)(d)

486,648

33,919,366

Kodiak Oil & Gas Corp. (a)

874,463

7,179,341

Marathon Oil Corp.

2,647,858

67,705,729

Marathon Petroleum Corp.

1,760,760

79,093,339

Midstates Petroleum Co., Inc.

1,051,900

10,213,949

Noble Energy, Inc.

400,204

33,945,303

Occidental Petroleum Corp.

1,281,411

109,906,621

Painted Pony Petroleum Ltd. Class A (a)

114,500

826,613

QEP Resources, Inc.

693,946

20,797,562

Rockhopper Exploration PLC (a)

1,675,758

6,764,619

Royal Dutch Shell PLC:

Class A sponsored ADR

31,408

2,117,841

Class B sponsored ADR

2,395,188

167,495,497

Suncor Energy, Inc.

2,057,610

59,499,105

Williams Companies, Inc.

1,771,600

51,057,512

 

1,288,561,859

TOTAL ENERGY

1,701,679,462

FINANCIALS - 14.7%

Capital Markets - 1.3%

BlackRock, Inc. Class A

353,821

60,085,882

E*TRADE Financial Corp. (a)

795,347

6,394,590

Evercore Partners, Inc. Class A

370,900

8,675,351

ICAP PLC

1,163,090

6,147,810

Invesco Ltd.

1,222,561

27,629,879

Morgan Stanley

331,141

4,831,347

 

Shares

Value

State Street Corp.

932,274

$ 41,616,711

TD Ameritrade Holding Corp.

1,059,400

18,009,800

The Blackstone Group LP

1,306,135

17,071,184

UBS AG

1,318,256

15,426,464

 

205,889,018

Commercial Banks - 3.7%

CIT Group, Inc. (a)

372,312

13,269,200

Comerica, Inc.

1,496,497

45,957,423

FirstMerit Corp.

456,685

7,544,436

Huntington Bancshares, Inc.

6,271,651

40,138,566

Synovus Financial Corp. (d)

5,544,386

10,977,884

U.S. Bancorp

9,308,195

299,351,551

Wells Fargo & Co.

5,131,490

171,597,026

 

588,836,086

Consumer Finance - 2.2%

Capital One Financial Corp.

4,893,010

267,451,927

SLM Corp.

5,020,140

78,866,399

 

346,318,326

Diversified Financial Services - 1.9%

African Bank Investments Ltd.

1,244,941

5,529,552

Bank of America Corp.

10,198,795

83,426,143

Citigroup, Inc.

4,601,145

126,117,384

JPMorgan Chase & Co.

2,222,196

79,399,063

NBH Holdings Corp. Class A (a)(e)

813,800

14,851,850

 

309,323,992

Insurance - 3.5%

ACE Ltd.

985,620

73,064,011

Amlin PLC

2,680,756

14,858,371

Aon PLC

181,627

8,496,511

Berkshire Hathaway, Inc.:

Class A (a)

292

36,483,940

Class B (a)

965,501

80,455,198

Fairfax Financial Holdings Ltd. (sub. vtg.)

111,900

44,309,366

MetLife, Inc.

4,035,250

124,487,463

The Travelers Companies, Inc.

1,402,834

89,556,923

Torchmark Corp.

893,568

45,169,862

Validus Holdings Ltd.

1,186,157

37,992,609

 

554,874,254

Real Estate Investment Trusts - 1.8%

American Tower Corp.

1,985,606

138,813,715

Camden Property Trust (SBI)

648,135

43,859,295

Equity Lifestyle Properties, Inc.

333,800

23,022,186

Japan Retail Fund Investment Corp.

4,188

6,643,236

Sun Communities, Inc.

332,769

14,721,701

The Macerich Co.

1,075,908

63,532,367

 

290,592,500

Real Estate Management & Development - 0.0%

PT Lippo Karawaci Tbk

82,595,250

7,080,334

Common Stocks - continued

Shares

Value

FINANCIALS - continued

Thrifts & Mortgage Finance - 0.3%

Ocwen Financial Corp. (a)

2,605,219

$ 48,926,013

TOTAL FINANCIALS

2,351,840,523

HEALTH CARE - 11.5%

Biotechnology - 2.8%

Alexion Pharmaceuticals, Inc. (a)

172,036

17,083,175

Amgen, Inc.

2,407,816

175,866,881

Biogen Idec, Inc. (a)

715,857

103,355,434

BioMarin Pharmaceutical, Inc. (a)

775,630

30,699,435

Gilead Sciences, Inc. (a)

1,860,825

95,423,106

ONYX Pharmaceuticals, Inc. (a)

375,228

24,933,901

 

447,361,932

Health Care Equipment & Supplies - 1.9%

Boston Scientific Corp. (a)

3,652,683

20,710,713

C.R. Bard, Inc.

527,888

56,716,287

Covidien PLC

1,671,182

89,408,237

Edwards Lifesciences Corp. (a)

655,677

67,731,434

Mako Surgical Corp. (a)(d)

739,288

18,933,166

Quidel Corp. (a)(d)

1,609,104

25,230,751

The Cooper Companies, Inc.

432,668

34,509,600

 

313,240,188

Health Care Providers & Services - 2.7%

Catalyst Health Solutions, Inc. (a)

287,454

26,859,702

CIGNA Corp.

1,158,088

50,955,872

Express Scripts Holding Co. (a)

544,816

30,417,077

Henry Schein, Inc. (a)

847,513

66,521,295

McKesson Corp.

852,966

79,965,563

Omnicare, Inc.

964,520

30,121,960

UnitedHealth Group, Inc.

2,636,909

154,259,177

 

439,100,646

Health Care Technology - 0.1%

SXC Health Solutions Corp. (a)

110,800

11,003,819

Life Sciences Tools & Services - 0.1%

Agilent Technologies, Inc.

221,097

8,675,846

Fluidigm Corp. (a)(h)

312,345

4,697,669

 

13,373,515

Pharmaceuticals - 3.9%

Allergan, Inc.

647,258

59,916,673

Elan Corp. PLC sponsored ADR (a)

320,900

4,681,931

Eli Lilly & Co.

460,800

19,772,928

GlaxoSmithKline PLC sponsored ADR

825,008

37,595,615

Jazz Pharmaceuticals PLC (a)

295,637

13,306,621

Merck & Co., Inc.

2,433,536

101,600,128

Optimer Pharmaceuticals, Inc. (a)

681,649

10,579,192

Pfizer, Inc.

11,853,477

272,629,971

Sanofi SA sponsored ADR

499,962

18,888,564

 

Shares

Value

Shire PLC sponsored ADR

337,923

$ 29,193,168

Valeant Pharmaceuticals International, Inc. (Canada) (a)

1,220,434

54,746,313

 

622,911,104

TOTAL HEALTH CARE

1,846,991,204

INDUSTRIALS - 10.2%

Aerospace & Defense - 3.2%

Honeywell International, Inc.

1,566,966

87,499,381

MTU Aero Engines Holdings AG

270,697

19,848,335

Precision Castparts Corp.

455,595

74,940,822

Raytheon Co.

847,185

47,942,199

Textron, Inc.

2,596,299

64,569,956

The Boeing Co.

1,319,780

98,059,654

United Technologies Corp.

1,478,962

111,706,000

 

504,566,347

Air Freight & Logistics - 0.3%

United Parcel Service, Inc. Class B

624,960

49,221,850

Building Products - 0.7%

Armstrong World Industries, Inc.

818,106

40,218,091

Owens Corning (a)

1,819,501

51,928,559

Quanex Building Products Corp.

1,091,013

19,507,312

 

111,653,962

Commercial Services & Supplies - 0.2%

Stericycle, Inc. (a)

434,599

39,839,690

Construction & Engineering - 0.2%

Fluor Corp.

380,475

18,772,637

Foster Wheeler AG (a)

682,476

11,827,309

 

30,599,946

Electrical Equipment - 0.5%

Regal-Beloit Corp.

796,275

49,576,082

Roper Industries, Inc.

390,180

38,463,944

 

88,040,026

Industrial Conglomerates - 2.6%

Danaher Corp.

1,807,469

94,132,986

General Electric Co.

13,378,570

278,809,399

Tyco International Ltd.

669,074

35,360,561

 

408,302,946

Machinery - 1.2%

Caterpillar, Inc.

444,936

37,779,516

Cummins, Inc.

416,413

40,354,584

Fanuc Corp.

146,500

24,081,836

Fiat Industrial SpA

1,324,972

12,978,061

Illinois Tool Works, Inc.

1,356,866

71,764,643

 

186,958,640

Road & Rail - 1.2%

Canadian Pacific

110,900

8,139,130

CSX Corp.

2,380,055

53,218,030

Common Stocks - continued

Shares

Value

INDUSTRIALS - continued

Road & Rail - continued

J.B. Hunt Transport Services, Inc.

240,901

$ 14,357,700

Union Pacific Corp.

1,030,134

122,905,288

 

198,620,148

Trading Companies & Distributors - 0.1%

W.W. Grainger, Inc.

75,200

14,381,248

TOTAL INDUSTRIALS

1,632,184,803

INFORMATION TECHNOLOGY - 20.2%

Communications Equipment - 2.9%

Acme Packet, Inc. (a)

825,286

15,391,584

ADTRAN, Inc.

908,059

27,414,301

Comverse Technology, Inc. (a)

7,878

45,850

Juniper Networks, Inc. (a)

2,340,635

38,175,757

QUALCOMM, Inc.

6,558,281

365,165,086

Riverbed Technology, Inc. (a)

1,007,070

16,264,181

 

462,456,759

Computers & Peripherals - 7.5%

Apple, Inc. (a)

1,895,157

1,106,771,680

SanDisk Corp. (a)

2,432,566

88,740,008

 

1,195,511,688

Electronic Equipment & Components - 0.1%

Hon Hai Precision Industry Co. Ltd. (Foxconn)

5,750,000

17,438,498

Jabil Circuit, Inc.

215,500

4,381,115

 

21,819,613

Internet Software & Services - 1.5%

Dice Holdings, Inc. (a)

1,207,022

11,333,937

eBay, Inc. (a)

1,293,980

54,360,100

Google, Inc. Class A (a)

92,615

53,723,183

Mail.ru Group Ltd.:

GDR (a)(e)

494,266

16,750,675

GDR (Reg. S) (a)

246,700

8,360,663

VeriSign, Inc. (a)

2,342,588

102,066,559

 

246,595,117

IT Services - 0.4%

Accenture PLC Class A

982,990

59,067,869

Semiconductors & Semiconductor Equipment - 3.3%

Amkor Technology, Inc. (a)(d)

593,770

2,897,598

Analog Devices, Inc.

3,991,806

150,371,332

ASML Holding NV

334,690

17,209,760

Avago Technologies Ltd.

1,972,891

70,826,787

Fairchild Semiconductor International, Inc. (a)

1,243,657

17,535,564

International Rectifier Corp. (a)

1,722,798

34,438,732

Maxim Integrated Products, Inc.

1,949,808

49,993,077

 

Shares

Value

Micron Technology, Inc. (a)

9,025,766

$ 56,952,583

NXP Semiconductors NV (a)

1,676,606

38,981,090

ON Semiconductor Corp. (a)

2,521,623

17,903,523

PMC-Sierra, Inc. (a)

2,349,036

14,423,081

RF Micro Devices, Inc. (a)

3,874,921

16,468,414

Skyworks Solutions, Inc. (a)

1,328,988

36,374,402

 

524,375,943

Software - 4.5%

Ariba, Inc. (a)

1,365,741

61,130,567

Check Point Software Technologies Ltd. (a)

1,113,991

55,242,814

Citrix Systems, Inc. (a)

1,886,778

158,376,145

Microsoft Corp.

14,868,639

454,831,667

ServiceNow, Inc.

47,400

1,166,040

 

730,747,233

TOTAL INFORMATION TECHNOLOGY

3,240,574,222

MATERIALS - 3.4%

Chemicals - 2.4%

Air Products & Chemicals, Inc.

860,907

69,501,022

E.I. du Pont de Nemours & Co.

1,973,384

99,794,029

Eastman Chemical Co.

773,711

38,971,823

Ecolab, Inc.

866,758

59,398,926

LyondellBasell Industries NV Class A

583,946

23,515,505

Sherwin-Williams Co.

438,296

58,008,476

Sigma Aldrich Corp.

382,699

28,292,937

 

377,482,718

Containers & Packaging - 0.4%

Ball Corp.

861,922

35,381,898

Rock-Tenn Co. Class A

603,886

32,941,981

 

68,323,879

Metals & Mining - 0.6%

First Quantum Minerals Ltd.

1,950,900

34,491,897

Goldcorp, Inc.

1,018,733

38,353,832

Ivanhoe Mines Ltd.

1,862,400

18,366,070

Ivanhoe Mines Ltd. rights 7/19/12 (a)

1,875,800

1,695,055

 

92,906,854

TOTAL MATERIALS

538,713,451

TELECOMMUNICATION SERVICES - 2.0%

Diversified Telecommunication Services - 1.6%

CenturyLink, Inc.

2,974,550

117,464,980

Verizon Communications, Inc.

2,900,092

128,880,088

 

246,345,068

Wireless Telecommunication Services - 0.4%

MetroPCS Communications, Inc. (a)

379,800

2,297,790

SBA Communications Corp. Class A (a)

499,379

28,489,572

Common Stocks - continued

Shares

Value

TELECOMMUNICATION SERVICES - continued

Wireless Telecommunication Services - continued

Sprint Nextel Corp. (a)

7,055,938

$ 23,002,358

Vodafone Group PLC sponsored ADR

523,500

14,752,230

 

68,541,950

TOTAL TELECOMMUNICATION SERVICES

314,887,018

UTILITIES - 3.7%

Electric Utilities - 2.4%

Duke Energy Corp.

3,882,213

89,523,832

Edison International

1,991,188

91,992,886

Exelon Corp.

187,826

7,066,014

FirstEnergy Corp.

1,751,014

86,132,379

NextEra Energy, Inc.

1,424,513

98,020,740

Progress Energy, Inc.

103,100

6,203,527

 

378,939,378

Gas Utilities - 0.1%

ONEOK, Inc.

254,919

10,785,623

Independent Power Producers & Energy Traders - 0.2%

The AES Corp. (a)

3,220,059

41,313,357

Multi-Utilities - 1.0%

CenterPoint Energy, Inc.

2,009,829

41,543,165

NiSource, Inc.

850,080

21,039,480

PG&E Corp.

672,634

30,450,141

Sempra Energy

936,874

64,531,881

 

157,564,667

TOTAL UTILITIES

588,603,025

TOTAL COMMON STOCKS

(Cost $13,310,953,125)


15,671,676,042

Convertible Preferred Stocks - 0.0%

 

 

 

 

CONSUMER DISCRETIONARY - 0.0%

Media - 0.0%

Jumptap, Inc. Series G (h)

(Cost $8,211,980)

1,141,504


8,211,980

U.S. Treasury Obligations - 0.0%

 

Principal Amount

 

U.S. Treasury Bills, yield at date of purchase 0.08% 8/23/12 (f)
(Cost $6,799,161)

$ 6,800,000


6,799,558

Money Market Funds - 3.4%

Shares

Value

Fidelity Cash Central Fund, 0.17% (b)

377,739,001

$ 377,739,001

Fidelity Securities Lending Cash Central Fund, 0.18% (b)(c)

159,124,264

159,124,264

TOTAL MONEY MARKET FUNDS

(Cost $536,863,265)


536,863,265

TOTAL INVESTMENT PORTFOLIO - 101.3%

(Cost $13,862,827,531)

16,223,550,845

NET OTHER ASSETS (LIABILITIES) - (1.3)%

(210,641,863)

NET ASSETS - 100%

$ 16,012,908,982

Futures Contracts

Expiration Date

Underlying Face Amount at Value

Unrealized Appreciation/(Depreciation)

Purchased

Equity Index Contracts

584 CME E-mini S&P 500 Index Contracts

Sept. 2012

$ 39,606,880

$ 2,275,264

 

The face value of futures purchased as a percentage of net assets is 0.2%

Legend

(a) Non-income producing

(b) Affiliated fund that is 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.

(c) Investment made with cash collateral received from securities on loan.

(d) Security or a portion of the security is on loan at period end.

(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 $33,696,034 or 0.2% of net assets.

(f) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $2,299,850.

(g) Investment is owned by an entity that is treated as a corporation for U.S. tax purposes which is owned by the Fund.

(h) Restricted securities - 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 $35,051,392 or 0.2% of net assets.

Additional information on each restricted holding is as follows:

Security

Acquisition Date

Acquisition Cost

Fluidigm Corp.

10/9/07 - 1/6/11

$ 5,645,227

Halcon Resources Corp.

3/1/12

$ 10,260,000

Jumptap, Inc. Series G

6/29/12

$ 8,211,980

Legend Pictures LLC

9/23/10

$ 4,958,250

Weinstein Co. Holdings LLC Class A-1

10/19/05

$ 11,499,000

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

$ 231,333

Fidelity Securities Lending Cash Central Fund

1,129,225

Total

$ 1,360,558

Other Information

The following is a summary of the inputs used, as of June 30, 2012, 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 in the table below, please refer to the Security 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:

Equities:

Consumer Discretionary

$ 1,687,591,566

$ 1,667,999,439

$ -

$ 19,592,127

Consumer Staples

1,776,822,748

1,705,652,541

71,170,207

-

Energy

1,701,679,462

1,699,585,953

-

2,093,509

Financials

2,351,840,523

2,307,838,639

29,150,034

14,851,850

Health Care

1,846,991,204

1,846,991,204

-

-

Industrials

1,632,184,803

1,608,102,967

24,081,836

-

Information Technology

3,240,574,222

3,223,135,724

17,438,498

-

Materials

538,713,451

538,713,451

-

-

Telecommunication Services

314,887,018

314,887,018

-

-

Utilities

588,603,025

588,603,025

-

-

U.S. Government and Government Agency Obligations

6,799,558

-

6,799,558

-

Money Market Funds

536,863,265

536,863,265

-

-

Total Investments in Securities:

$ 16,223,550,845

$ 16,038,373,226

$ 148,640,133

$ 36,537,486

Derivative Instruments:

Assets

Futures Contracts

$ 2,275,264

$ 2,275,264

$ -

$ -

Value of Derivative Instruments

The following table is a summary of the Fund's value of derivative instruments by risk exposure as of June 30, 2012. For additional information on derivative instruments, please refer to the Derivative Instruments section in the accompanying Notes to Financial Statements.

Risk Exposure /
 Derivative Type

Value

 

Asset

Liability

Equity Risk

Futures Contracts (a)

$ 2,275,264

$ -

Total Value of Derivatives

$ 2,275,264

$ -

(a) Reflects cumulative appreciation/(depreciation) on futures contracts as disclosed on the Schedule of Investments. Only the period end variation margin is separately disclosed on the Statement of Assets and Liabilities.

Distribution of investments by country or territory of incorporation, as a percentage of total net assets, is as follows. (Unaudited)

United States of America

86.1%

United Kingdom

3.8%

Canada

2.0%

Switzerland

1.4%

Ireland

1.1%

Others (Individually Less Than 1%)

5.6%

 

100.0%

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements

Statement of Assets and Liabilities

 

June 30, 2012 (Unaudited)

 

 

 

Assets

Investment in securities, at value (including securities loaned of $160,383,891) - See accompanying schedule:

Unaffiliated issuers (cost $13,325,964,266)

$ 15,686,687,580

 

Fidelity Central Funds (cost $536,863,265)

536,863,265

 

Total Investments (cost $13,862,827,531)

 

$ 16,223,550,845

Cash

 

288,327

Receivable for investments sold

248,682,078

Receivable for fund shares sold

3,599,933

Dividends receivable

17,113,563

Distributions receivable from Fidelity Central Funds

217,873

Receivable for daily variation margin on futures contracts

992,800

Other receivables

718,076

Total assets

16,495,163,495

 

 

 

Liabilities

Payable for investments purchased

$ 299,295,570

Payable for fund shares redeemed

13,059,712

Accrued management fee

7,234,621

Distribution and service plan fees payable

1,650,327

Other affiliated payables

1,342,055

Other payables and accrued expenses

547,964

Collateral on securities loaned, at value

159,124,264

Total liabilities

482,254,513

 

 

 

Net Assets

$ 16,012,908,982

Net Assets consist of:

 

Paid in capital

$ 16,753,574,259

Undistributed net investment income

83,834,306

Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions

(3,187,548,899)

Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies

2,363,049,316

Net Assets

$ 16,012,908,982

Statement of Assets and Liabilities - continued

 

June 30, 2012 (Unaudited)

 

 

 

Initial Class:
Net Asset Value, offering price and redemption price per share ($6,389,688,071 ÷ 253,640,472 shares)

$ 25.19

 

 

 

Service Class:
Net Asset Value, offering price and redemption price per share ($1,345,634,351 ÷ 53,612,526 shares)

$ 25.10

 

 

 

Service Class 2:
Net Asset Value, offering price and redemption price per share ($7,611,379,750 ÷ 307,602,661 shares)

$ 24.74

 

 

 

Service Class 2R:
Net Asset Value, offering price and redemption price per share ($8,907,782 ÷ 360,652 shares)

$ 24.70

 

 

 

Investor Class:
Net Asset Value, offering price and redemption price per share ($657,299,028 ÷ 26,192,228 shares)

$ 25.10

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements - continued

Statement of Operations

Six months ended June 30, 2012 (Unaudited)

 

 

 

Investment Income

 

 

Dividends

 

$ 146,936,085

Interest

 

4,574

Income from Fidelity Central Funds

 

1,360,558

Total income

 

148,301,217

 

 

 

Expenses

Management fee

$ 44,979,640

Transfer agent fees

5,964,274

Distribution and service plan fees

10,250,972

Accounting and security lending fees

785,514

Custodian fees and expenses

168,831

Independent trustees' compensation

51,758

Appreciation in deferred trustee compensation account

11

Audit

47,177

Legal

37,872

Miscellaneous

93,288

Total expenses before reductions

62,379,337

Expense reductions

(410,634)

61,968,703

Net investment income (loss)

86,332,514

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investment securities:

 

 

Unaffiliated issuers

192,482,246

Foreign currency transactions

(225,355)

Futures contracts

5,821,222

Total net realized gain (loss)

 

198,078,113

Change in net unrealized appreciation (depreciation) on:

Investment securities

1,118,833,939

Assets and liabilities in foreign currencies

46,694

Futures contracts

2,301,989

Total change in net unrealized appreciation (depreciation)

 

1,121,182,622

Net gain (loss)

1,319,260,735

Net increase (decrease) in net assets resulting from operations

$ 1,405,593,249

Statement of Changes in Net Assets

 

Six months ended June 30, 2012
(Unaudited)

Year ended
December 31,
2011

Increase (Decrease) in Net Assets

 

 

Operations

 

 

Net investment income (loss)

$ 86,332,514

$ 145,885,373

Net realized gain (loss)

198,078,113

923,774,773

Change in net unrealized appreciation (depreciation)

1,121,182,622

(1,481,460,012)

Net increase (decrease) in net assets resulting from operations

1,405,593,249

(411,799,866)

Distributions to shareholders from net investment income

-

(141,940,543)

Share transactions - net increase (decrease)

(348,479,295)

(1,239,479,004)

Redemption fees

64

8,960

Total increase (decrease) in net assets

1,057,114,018

(1,793,210,453)

 

 

 

Net Assets

Beginning of period

14,955,794,964

16,749,005,417

End of period (including undistributed net investment income of $83,834,306 and distributions in excess of net investment income of $2,498,208, respectively)

$ 16,012,908,982

$ 14,955,794,964

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights - Initial Class

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 23.02

$ 23.88

$ 20.62

$ 15.39

$ 27.90

$ 31.47

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .15

.25

.23

.23

.24

.34

Net realized and unrealized gain (loss)

  2.02

(.86)

3.31

5.26

(11.87)

5.17

Total from investment operations

  2.17

(.61)

3.54

5.49

(11.63)

5.51

Distributions from net investment income

  -

(.25)

(.27)

(.25)

(.23)

(.33)

Distributions from net realized gain

  -

-

(.01)

(.01)

(.65)

(8.75)

Total distributions

  -

(.25)

(.28)

(.26) J

(.88)

(9.08)

Redemption fees added to paid in capital E,I

  -

-

-

-

-

-

Net asset value, end of period

$ 25.19

$ 23.02

$ 23.88

$ 20.62

$ 15.39

$ 27.90

Total Return B,C,D

  9.43%

(2.53)%

17.22%

35.71%

(42.51)%

17.59%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .64% A

.65%

.65%

.67%

.66%

.65%

Expenses net of fee waivers, if any

  .64% A

.64%

.65%

.67%

.66%

.65%

Expenses net of all reductions

  .64% A

.63%

.63%

.65%

.65%

.64%

Net investment income (loss)

  1.20% A

1.03%

1.06%

1.33%

1.07%

1.00%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 6,389,688

$ 6,113,440

$ 7,160,125

$ 7,405,228

$ 6,240,871

$ 12,371,009

Portfolio turnover rate G

  91% A

135%

117%

145%

172%

134%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.26 per share is comprised of distributions from net investment income of $.250 and distributions from net realized gain of $.005 per share.

Financial Highlights - Service Class

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 22.95

$ 23.81

$ 20.55

$ 15.33

$ 27.80

$ 31.38

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .14

.22

.20

.21

.21

.30

Net realized and unrealized gain (loss)

  2.01

(.85)

3.31

5.25

(11.83)

5.16

Total from investment operations

  2.15

(.63)

3.51

5.46

(11.62)

5.46

Distributions from net investment income

  -

(.23)

(.24)

(.23)

(.20)

(.29)

Distributions from net realized gain

  -

-

(.01)

(.01)

(.65)

(8.75)

Total distributions

  -

(.23)

(.25)

(.24) J

(.85)

(9.04)

Redemption fees added to paid in capital E,I

  -

-

-

-

-

-

Net asset value, end of period

$ 25.10

$ 22.95

$ 23.81

$ 20.55

$ 15.33

$ 27.80

Total Return B,C,D

  9.37%

(2.64)%

17.11%

35.66%

(42.61)%

17.51%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .74% A

.75%

.75%

.77%

.76%

.75%

Expenses net of fee waivers, if any

  .74% A

.74%

.75%

.77%

.76%

.75%

Expenses net of all reductions

  .74% A

.73%

.73%

.75%

.75%

.74%

Net investment income (loss)

  1.10% A

.93%

.96%

1.23%

.97%

.90%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 1,345,634

$ 1,277,101

$ 1,379,305

$ 1,784,820

$ 1,497,734

$ 3,008,644

Portfolio turnover rate G

  91% A

135%

117%

145%

172%

134%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.24 per share is comprised of distributions from net investment income of $.232 and distributions from net realized gain of $.005 per share.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights - Service Class 2

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 22.64

$ 23.49

$ 20.29

$ 15.14

$ 27.46

$ 31.11

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .12

.18

.17

.18

.18

.25

Net realized and unrealized gain (loss)

  1.98

(.84)

3.26

5.18

(11.67)

5.11

Total from investment operations

  2.10

(.66)

3.43

5.36

(11.49)

5.36

Distributions from net investment income

  -

(.19)

(.22)

(.21)

(.18)

(.26)

Distributions from net realized gain

  -

-

(.01)

(.01)

(.65)

(8.75)

Total distributions

  -

(.19)

(.23)

(.21) J

(.83)

(9.01)

Redemption fees added to paid in capital E,I

  -

-

-

-

-

-

Net asset value, end of period

$ 24.74

$ 22.64

$ 23.49

$ 20.29

$ 15.14

$ 27.46

Total Return B,C,D

  9.28%

(2.78)%

16.93%

35.47%

(42.69)%

17.30%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .89% A

.90%

.90%

.92%

.91%

.90%

Expenses net of fee waivers, if any

  .89% A

.89%

.90%

.92%

.91%

.90%

Expenses net of all reductions

  .89% A

.88%

.88%

.90%

.90%

.89%

Net investment income (loss)

  .95% A

.78%

.81%

1.08%

.82%

.75%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 7,611,380

$ 6,980,191

$ 7,627,793

$ 7,577,737

$ 6,187,985

$ 9,339,663

Portfolio turnover rate G

  91% A

135%

117%

145%

172%

134%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.21 per share is comprised of distributions from net investment income of $.205 and distributions from net realized gain of $.005 per share.

Financial Highlights - Service Class 2R

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 22.60

$ 23.44

$ 20.24

$ 15.10

$ 27.35

$ 31.02

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .12

.18

.17

.18

.18

.25

Net realized and unrealized gain (loss)

  1.98

(.84)

3.25

5.17

(11.62)

5.09

Total from investment operations

  2.10

(.66)

3.42

5.35

(11.44)

5.34

Distributions from net investment income

  -

(.18)

(.21)

(.20)

(.16)

(.26)

Distributions from net realized gain

  -

-

(.01)

(.01)

(.65)

(8.75)

Total distributions

  -

(.18)

(.22)

(.21)J

(.81)

(9.01)

Redemption fees added to paid in capital E,I

  -

-

-

-

-

-

Net asset value, end of period

$ 24.70

$ 22.60

$ 23.44

$ 20.24

$ 15.10

$ 27.35

Total Return B,C,D

  9.29%

(2.79)%

16.94%

35.46%

(42.69)%

17.30%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .89% A

.90%

.90%

.92%

.91%

.90%

Expenses net of fee waivers, if any

  .89% A

.89%

.90%

.92%

.91%

.90%

Expenses net of all reductions

  .89% A

.88%

.88%

.90%

.90%

.89%

Net investment income (loss)

  .95% A

.78%

.81%

1.08%

.82%

.75%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 8,908

$ 8,042

$ 10,942

$ 13,285

$ 13,585

$ 35,606

Portfolio turnover rate G

  91% A

135%

117%

145%

172%

134%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.21 per share is comprised of distributions from net investment income of $.200 and distributions from net realized gain of $.005 per share.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights - Investor Class

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 22.94

$ 23.80

$ 20.56

$ 15.34

$ 27.82

$ 31.41

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .14

.23

.21

.21

.21

.30

Net realized and unrealized gain (loss)

  2.02

(.86)

3.30

5.25

(11.83)

5.16

Total from investment operations

  2.16

(.63)

3.51

5.46

(11.62)

5.46

Distributions from net investment income

  -

(.23)

(.26)

(.24)

(.21)

(.30)

Distributions from net realized gain

  -

-

(.01)

(.01)

(.65)

(8.75)

Total distributions

  -

(.23)

(.27)

(.24) J

(.86)

(9.05)

Redemption fees added to paid in capital E,I

  -

-

-

-

-

-

Net asset value, end of period

$ 25.10

$ 22.94

$ 23.80

$ 20.56

$ 15.34

$ 27.82

Total Return B,C,D

  9.42%

(2.62)%

17.10%

35.66%

(42.60)%

17.47%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .73% A

.73%

.74%

.77%

.75%

.76%

Expenses net of fee waivers, if any

  .73% A

.73%

.73%

.77%

.75%

.76%

Expenses net of all reductions

  .72% A

.71%

.72%

.75%

.74%

.75%

Net investment income (loss)

  1.12% A

.94%

.98%

1.23%

.98%

.89%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 657,299

$ 577,021

$ 570,841

$ 457,476

$ 324,919

$ 532,268

Portfolio turnover rate G

  91% A

135%

117%

145%

172%

134%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.24 per share is comprised of distributions from net investment income of $.235 and distributions from net realized gain of $.005 per share.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Notes to Financial Statements

For the period ended June 30, 2012 (Unaudited)

1. Organization.

VIP Contrafund Portfolio (the Fund) is a fund of Variable Insurance Products Fund II (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, Service Class 2R shares, and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions may also differ by class.

2. Investments in Fidelity Central Funds.

The Fund invests in Fidelity Central Funds, which are open-end investment companies available only to other investment companies and accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The Fund's Schedule of Investments lists each of the Fidelity Central Funds held as of period end, if any, as an investment of the Fund, but do not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.

The Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.

A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the SEC) web site at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds are available on the SEC web site or upon request.

3. Significant Accounting Policies.

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 following summarizes the significant accounting policies of the Fund:

Security Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. In accordance with valuation policies and procedures approved by the Board of Trustees (the Board), the Fund attempts to obtain prices from one or more third party pricing vendor or broker to value its investments. When current market prices, quotations or rates are not readily available or reliable, securities will be fair valued in good faith by the FMR Fair Value Committee (the Committee), in accordance with procedures adopted by the Fund's Board. Factors used in determining fair value vary by security type and may include market or security 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 is responsible for approving and reporting to the Board all fair value determinations.

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 significant 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 are used and are categorized as Level 2 in the hierarchy. Utilizing these techniques may result in transfers between Level 1 and Level 2. For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used and these securities are categorized as Level 3 in the hierarchy .

Semiannual Report

3. Significant Accounting Policies - continued

Security Valuation - continued

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. For U.S. government and government agency obligations, pricing vendors utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type as well as broker-supplied prices and are generally categorized as Level 2 in the hierarchy. 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. These are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.

Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded and are categorized as Level 1 in the hierarchy. Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value 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, 2012, is included at the end of the Fund's Schedule of Investments.

Foreign Currency Translation. The Fund 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 may 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.

Expenses. 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. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.

Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), independent Trustees may elect to defer receipt of a portion of their annual compensation. Deferred amounts are invested in a cross-section of Fidelity funds, are marked-to-market and remain in the Fund until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting payable to the Trustees are included in the accompanying Statement of Assets and Liabilities.

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 income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. A 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.

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

3. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders - continued

Distributions are declared and recorded on the ex-dividend date. Income dividends 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. Temporary book-tax differences will reverse in a subsequent period.

Book-tax differences are primarily due to futures transactions, foreign currency transactions, passive foreign investment companies (PFIC), partnership, deferred trustees compensation, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.

The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:

Gross unrealized appreciation

$ 2,914,648,194

Gross unrealized depreciation

(680,498,305)

Net unrealized appreciation (depreciation) on securities and other investments

$ 2,234,149,889

 

 

Tax cost

$ 13,989,400,956

Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited. Under the Regulated Investment Company Modernization Act of 2010 (the Act), the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital losses are required to be used prior to any losses that expire. At December 31, 2011, capital loss carryforwards were as follows:

Fiscal year of expiration

 

2016

$ (854,185,637)

2017

(2,334,998,928)

Total capital loss carryforward

$ (3,189,184,565)

Trading (Redemption) Fees. Service Class 2 R shares held by investors less than 60 days are subject to a redemption fee equal to 1% of the net asset value of shares redeemed. All redemption fees, which reduce the proceeds of the shareholder redemption, are retained by the Fund and accounted for as an addition to paid in capital.

New Accounting Pronouncement. In December 2011, the Financial Accounting Standards Board issued Accounting Standard Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for interim and annual reporting periods beginning on or after January 1, 2013. Management is currently evaluating the impact of the update's adoption on the Fund's financial statement disclosures.

4. Operating Policies.

Restricted Securities. The Fund 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 is included at the end of the Fund's Schedule of Investments.

5. Derivative Instruments.

Risk Exposures and the Use of Derivative Instruments. The Fund's investment objectives allow the Fund to enter into various types of derivative contracts, including futures contracts. Derivatives are investments whose value is derived from underlying assets, indices or reference rates and may be transacted on an exchange or over-the-counter (OTC). Derivatives may involve a future commitment to buy or sell a specified instrument based on specified terms, or to exchange future cash flows at periodic intervals based on a notional principal amount. The Fund used derivatives to increase returns and to manage exposure to certain risks as defined below. The success of any strategy involving derivatives depends on analysis of numerous economic factors, and if the strategies for investment do not work as intended, the Fund may not achieve its objectives.

Semiannual Report

5. Derivative Instruments - continued

Risk Exposures and the Use of Derivative Instruments - continued

The Fund's use of derivatives increased or decreased its exposure to the following risk:

Equity Risk

Equity risk relates to the fluctuations in the value of financial instruments as a result of changes in market prices (other than those arising from interest rate risk or foreign exchange risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting all instruments traded in a market or market segment.

The Fund is also exposed to additional risks from investing in derivatives, such as liquidity risk and counterparty credit risk. Liquidity risk is the risk that the Fund will be unable to close out the derivative in the open market in a timely manner. Counterparty credit risk is the risk that the counterparty will not be able to fulfill its obligation to the Fund. Counterparty credit risk related to exchange-traded futures contracts is minimal because of the protection provided by the exchange on which they trade. Investing in derivatives may involve greater risks than investing in the underlying assets directly and, to varying degrees, involves risk of loss in excess of the initial investment, if any, collateral received and amounts recognized in the Statement of Assets and Liabilities. In addition, for futures contracts, there is the risk that the change in value of the derivative contract may not correspond to the change in value of the underlying instrument.

Futures Contracts. A futures contract is an agreement between two parties to buy or sell a specified underlying instrument for a fixed price at a specified future date. The Fund used futures contracts to manage its exposure to the stock market.

Upon entering into a futures contract, a fund is required to deposit either cash or securities (initial margin) with a clearing broker in an amount equal to a certain percentage of the face value of the contract. Futures contracts are marked-to-market daily and subsequent payments are made or received by a fund depending on the daily fluctuations in the value of the futures contracts and are recorded as unrealized appreciation or (depreciation). This receivable and/or payable is included in daily variation margin on futures contracts in the Statement of Assets and Liabilities. Realized gain or (loss) is recorded upon the expiration or closing of a futures contract.

Any open futures contracts at period end are shown in the Schedule of Investments under the caption "Futures Contracts." The underlying face amount at value reflects each contract's exposure to the underlying instrument at period end and is representative of activity for the period. Securities deposited to meet initial margin requirements are identified in the Schedule of Investments.

During the period the Fund recognized net realized gain (loss) of $5,821,222 and a change in net unrealized appreciation (depreciation) of $2,301,989 related to its investment in futures contracts. These amounts are included in the Statement of Operations.

6. Purchases and Sales of Investments.

Purchases and sales of securities, other than short-term securities, aggregated $7,157,745,837 and $7,480,918,873, respectively.

7. Fees and Other Transactions with Affiliates.

Management Fee. FMR 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 .26% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annualized management fee rate was .56% 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 Corporation (FDC), an affiliate of FMR, 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 and Service Class 2R'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

$ 680,432

Service Class 2

9,559,122

Service Class 2 R

11,418

 

$ 10,250,972

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

7. Fees and Other Transactions with Affiliates - continued

Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class (with the exception of Investor Class) pays a transfer agent fee, excluding out of pocket expenses, equal to an annual rate of .07% of average net assets. Investor Class pays a monthly asset-based transfer agent fee of .15% of average net assets. In addition, FIIOC receives an asset-based fee of .0038% of average net assets for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period, transfer agent fees for each class, including printing and out of pocket expenses, were as follows:

Initial Class

$ 2,288,072

Service Class

481,631

Service Class 2

2,696,035

Service Class 2R

3,208

Investor Class

495,328

 

$ 5,964,274

Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.

Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $248,058 for the period.

8. Committed Line of Credit.

The Fund participates with other funds managed by FMR 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 Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $23,299 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, there were no borrowings on this line of credit.

9. Security Lending.

The Fund lends portfolio securities through a lending agent from time to time in order to earn additional income. For equity securities, a lending agent is used and may loan securities to certain qualified borrowers, including Fidelity Capital Markets (FCM), a broker-dealer affiliated with the Fund. On the settlement date of the loan, the 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 the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. The value of securities loaned to FCM at period end was $4,176,991. 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. Total security lending income during the period amounted to $1,129,225, including $34,517 from securities loaned to FCM.

10. Expense Reductions.

Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $410,555 for the period.

In addition, through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $79.

Semiannual Report

11. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

Six months ended
June 30,
2012

Year ended
December 31,
2011

From net investment income

 

 

Initial Class

$ -

$ 65,616,073

Service Class

-

12,220,263

Service Class 2

-

58,305,804

Service Class 2R

-

65,304

Investor Class

-

5,733,099

Total

$ -

$ 141,940,543

12. Share Transactions.

Transactions for each class of shares were as follows:

 

Shares

Dollars

Six months ended June 30,
2012

Year ended
December 31,
2011

Six months ended June 30,
2012

Year ended
December 31,
2011

Initial Class

 

 

 

 

Shares sold

4,077,866

8,887,647

$ 101,523,723

$ 215,181,582

Reinvestment of distributions

-

2,941,106

-

65,616,073

Shares redeemed

(15,980,797)

(46,079,138)

(398,647,463)

(1,098,879,687)

Net increase (decrease)

(11,902,931)

(34,250,385)

$ (297,123,740)

$ (818,082,032)

Service Class

 

 

 

 

Shares sold

2,396,767

5,960,533

$ 59,691,142

$ 142,199,635

Reinvestment of distributions

-

549,472

-

12,220,263

Shares redeemed

(4,433,327)

(8,798,344)

(111,375,922)

(211,519,636)

Net increase (decrease)

(2,036,560)

(2,288,339)

$ (51,684,780)

$ (57,099,738)

Service Class 2

 

 

 

 

Shares sold

22,436,202

28,618,316

$ 543,485,488

$ 674,963,970

Reinvestment of distributions

-

2,657,512

-

58,305,804

Shares redeemed

(23,125,922)

(47,724,451)

(569,514,280)

(1,123,942,590)

Net increase (decrease)

(689,720)

(16,448,623)

$ (26,028,792)

$ (390,672,816)

Service Class 2R

 

 

 

 

Shares sold

61,957

57,708

$ 1,482,968

$ 1,412,478

Reinvestment of distributions

-

2,982

-

65,304

Shares redeemed

(57,128)

(171,761)

(1,393,997)

(4,029,960)

Net increase (decrease)

4,829

(111,071)

$ 88,971

$ (2,552,178)

Investor Class

 

 

 

 

Shares sold

1,732,876

3,165,850

$ 43,347,297

$ 76,274,096

Reinvestment of distributions

-

257,783

-

5,733,099

Shares redeemed

(690,123)

(2,256,234)

(17,078,251)

(53,079,435)

Net increase (decrease)

1,042,753

1,167,399

$ 26,269,046

$ 28,927,760

13. Other.

The 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, two otherwise unaffiliated shareholders were the owners of record of 30% of the total outstanding shares of the Fund.

Semiannual Report

Investment Adviser

Fidelity Management & Research Company
Boston, MA

Investment Sub-Advisers

FMR Co., Inc.

Fidelity Management & Research (U.K.) Inc.

Fidelity Management & Research (Hong Kong) Limited

Fidelity Management & Research (Japan) Inc.

General Distributor

Fidelity Distributors Corporation
Smithfield, RI

Transfer and Service Agents

Fidelity Investments Institutional Operations Company, Inc.
Boston, MA 

Fidelity Service Company, Inc.
Boston, MA 

Custodian

Brown Brothers Harriman & Co.
Boston, MA 

VIPCON-SANN-0812
1.705691.114

Fidelity® Variable Insurance Products:

Contrafund Portfolio - Service Class 2R

Semiannual Report

June 30, 2012

(Fidelity Cover Art)

Contents

Shareholder Expense Example

(Click Here)

An example of shareholder expenses.

Investment Changes

(Click Here)

A summary of major shifts in the fund's investments over the past six months.

Investments

(Click Here)

A complete list of the fund's investments with their market values.

Financial Statements

(Click Here)

Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights.

Notes

(Click Here)

Notes to the financial statements.

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. ©2012 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-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q 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 a http://www.fidelity.com, http://www.advisor.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.

Semiannual Report

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees and (2) ongoing costs, including 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 the 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, 2012 to June 30, 2012).

Actual Expenses

The first line of the accompanying table for each class of the Fund 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 of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. 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. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.

Hypothetical Example for Comparison Purposes

The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' 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. 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. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.

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. In addition, if these transactional costs were included, your costs would have been higher.

 

Annualized Expense Ratio

Beginning
Account Value
January 1, 2012

Ending
Account Value
June 30, 2012

Expenses Paid
During Period*
January 1, 2012
to June 30, 2012

Initial Class

.64%

 

 

 

Actual

 

$ 1,000.00

$ 1,094.30

$ 3.33

HypotheticalA

 

$ 1,000.00

$ 1,021.68

$ 3.22

Service Class

.74%

 

 

 

Actual

 

$ 1,000.00

$ 1,093.70

$ 3.85

HypotheticalA

 

$ 1,000.00

$ 1,021.18

$ 3.72

Service Class 2

.89%

 

 

 

Actual

 

$ 1,000.00

$ 1,092.80

$ 4.63

HypotheticalA

 

$ 1,000.00

$ 1,020.44

$ 4.47

Service Class 2R

.89%

 

 

 

Actual

 

$ 1,000.00

$ 1,092.90

$ 4.63

HypotheticalA

 

$ 1,000.00

$ 1,020.44

$ 4.47

Investor Class

.73%

 

 

 

Actual

 

$ 1,000.00

$ 1,094.20

$ 3.80

HypotheticalA

 

$ 1,000.00

$ 1,021.23

$ 3.67

A 5% return per year before expenses

* Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).

Semiannual Report

Investment Changes (Unaudited)

Top Ten Stocks as of June 30, 2012

 

% of fund's
net assets

% of fund's net assets
6 months ago

Apple, Inc.

6.9

5.2

Microsoft Corp.

2.8

0.5

QUALCOMM, Inc.

2.3

2.2

The Coca-Cola Co.

2.1

1.9

Procter & Gamble Co.

2.1

2.3

U.S. Bancorp

1.9

1.3

Comcast Corp. Class A

1.8

0.3

General Electric Co.

1.8

0.8

Pfizer, Inc.

1.7

1.2

Capital One Financial Corp.

1.7

1.0

 

25.1

Market Sectors as of June 30, 2012

 

% of fund's
net assets

% of fund's net assets
6 months ago

Information Technology

20.2

19.7

Financials

14.7

13.3

Health Care

11.5

11.5

Consumer Staples

11.1

11.4

Energy

10.6

11.8

Consumer Discretionary

10.5

9.8

Industrials

10.2

10.8

Utilities

3.7

3.8

Materials

3.4

3.4

Telecommunication Services

2.0

2.8

Asset Allocation (% of fund's net assets)

As of June 30, 2012 *

As of December 31, 2011 **

def234601

Stocks and
Equity Futures 98.1%

 

def234601

Stocks and
Equity Futures 98.8%

 

def234604

Short-Term
Investments and
Net Other Assets (Liabilities) 1.9%

 

def234604

Short-Term
Investments and
Net Other Assets (Liabilities) 1.2%

 

* Foreign investments

13.9%

 

** Foreign investments

16.8%

 

def234607

Semiannual Report

Investments June 30, 2012 (Unaudited)

Showing Percentage of Net Assets

Common Stocks - 97.9%

Shares

Value

CONSUMER DISCRETIONARY - 10.5%

Diversified Consumer Services - 0.2%

Weight Watchers International, Inc. (d)

641,017

$ 33,050,837

Hotels, Restaurants & Leisure - 2.7%

Arcos Dorados Holdings, Inc.

2,491,899

36,830,267

Domino's Pizza, Inc.

782,987

24,202,128

Dunkin' Brands Group, Inc.

436,711

14,996,656

Icahn Enterprises LP rights (a)

363,975

4

McDonald's Corp.

1,829,816

161,993,610

Starbucks Corp.

1,621,524

86,459,660

Yum! Brands, Inc.

1,682,792

108,405,461

 

432,887,786

Household Durables - 0.1%

Harman International Industries, Inc.

237,050

9,387,180

Internet & Catalog Retail - 0.5%

Priceline.com, Inc. (a)

123,962

82,375,228

Media - 3.3%

Comcast Corp. Class A

9,109,486

291,230,267

DIRECTV (a)

1,244,695

60,766,010

Legend Pictures LLC (a)(g)(h)

6,611

7,068,018

The Walt Disney Co.

3,538,626

171,623,361

Weinstein Co. Holdings LLC Class A-1 (a)(g)(h)

11,499

4,312,125

 

534,999,781

Multiline Retail - 0.8%

Dollar General Corp. (a)

2,324,003

126,402,523

Specialty Retail - 2.6%

AutoZone, Inc. (a)

230,484

84,626,810

Limited Brands, Inc.

728,070

30,964,817

Lowe's Companies, Inc.

5,389,135

153,266,999

TJX Companies, Inc.

3,266,649

140,237,242

 

409,095,868

Textiles, Apparel & Luxury Goods - 0.3%

Under Armour, Inc. Class A
(sub. vtg.) (a)(d)

541,706

51,180,383

TOTAL CONSUMER DISCRETIONARY

1,679,379,586

CONSUMER STAPLES - 11.1%

Beverages - 4.3%

Anheuser-Busch InBev SA NV

825,677

65,097,423

Coca-Cola Bottling Co. CONSOLIDATED

148,512

9,546,351

Coca-Cola FEMSA SAB de CV sponsored ADR

48,947

6,406,183

Coca-Cola Icecek A/S

486,386

7,530,444

Companhia de Bebidas das Americas (AmBev) (PN) sponsored ADR

200,370

7,680,182

Constellation Brands, Inc. Class A
(sub. vtg.) (a)

2,000,269

54,127,279

Diageo PLC sponsored ADR

627,882

64,715,798

Embotelladora Andina SA sponsored ADR

265,456

8,574,229

 

Shares

Value

Molson Coors Brewing Co. Class B

894,028

$ 37,200,505

Monster Beverage Corp. (a)

26,800

1,908,160

Pernod Ricard SA (d)

429,379

45,785,125

Remy Cointreau SA

324,908

35,599,192

The Coca-Cola Co.

4,303,795

336,513,731

 

680,684,602

Food & Staples Retailing - 1.5%

CVS Caremark Corp.

3,957,416

184,930,050

Drogasil SA

607,100

6,120,874

Kroger Co.

321,500

7,455,585

Safeway, Inc.

330,232

5,993,711

Wal-Mart Stores, Inc.

392,683

27,377,859

Walgreen Co.

464,823

13,749,464

 

245,627,543

Food Products - 0.7%

Bunge Ltd.

439,131

27,551,079

Green Mountain Coffee Roasters, Inc. (a)

207,119

4,511,052

Mead Johnson Nutrition Co. Class A

53,600

4,315,336

Nestle SA

417,951

24,901,363

Orion Corp.

7,305

6,072,784

Pilgrims Pride Corp.

20,100

143,715

Unilever NV (NY Reg.)

1,329,447

44,337,057

 

111,832,386

Household Products - 2.3%

Colgate-Palmolive Co.

373,902

38,923,198

Procter & Gamble Co.

5,360,720

328,344,100

Spectrum Brands Holdings, Inc. (a)

246,002

8,012,285

 

375,279,583

Personal Products - 0.4%

L'Oreal SA

336,600

39,291,224

Nu Skin Enterprises, Inc. Class A

376,849

17,674,218

 

56,965,442

Tobacco - 1.9%

Altria Group, Inc.

652,993

22,560,908

British American Tobacco PLC sponsored ADR

2,564,639

261,900,935

Philip Morris International, Inc.

152,500

13,307,150

Souza Cruz SA

590,300

8,664,199

 

306,433,192

TOTAL CONSUMER STAPLES

1,776,822,748

ENERGY - 10.6%

Energy Equipment & Services - 2.6%

Baker Hughes, Inc.

375,027

15,413,610

Cameron International Corp. (a)

1,081,780

46,202,824

Discovery Offshore S.A. (a)(e)

1,310,900

2,093,509

Ensco PLC Class A

1,023,201

48,059,751

Forum Energy Technologies, Inc.

626,050

12,326,925

Halliburton Co.

1,498,732

42,549,001

National Oilwell Varco, Inc.

1,309,082

84,357,244

Common Stocks - continued

Shares

Value

ENERGY - continued

Energy Equipment & Services - continued

Noble Corp.

1,657,901

$ 53,931,520

Ocean Rig UDW, Inc. (United States)

1,137,864

15,372,543

Oceaneering International, Inc.

358,418

17,153,885

Oil States International, Inc. (a)

126,678

8,386,084

Schlumberger Ltd.

779,179

50,576,509

Transocean Ltd. (United States)

174,583

7,809,098

Vantage Drilling Co. (a)

5,923,400

8,885,100

 

413,117,603

Oil, Gas & Consumable Fuels - 8.0%

Alpha Natural Resources, Inc. (a)

817,624

7,121,505

Anadarko Petroleum Corp.

1,366,403

90,455,879

Apache Corp.

1,011,008

88,857,493

Calumet Specialty Products Partners LP

183,916

4,373,522

Cheniere Energy, Inc. (a)

234,975

3,463,532

Chevron Corp.

571,381

60,280,696

Cobalt International Energy, Inc. (a)

612,409

14,391,612

EV Energy Partners LP

63,500

3,204,210

Exxon Mobil Corp.

2,951,302

252,542,912

Halcon Resources Corp. (h)

1,140,000

10,761,600

Hess Corp.

873,800

37,966,610

HollyFrontier Corp.

1,823,875

64,619,891

InterOil Corp. (a)(d)

486,648

33,919,366

Kodiak Oil & Gas Corp. (a)

874,463

7,179,341

Marathon Oil Corp.

2,647,858

67,705,729

Marathon Petroleum Corp.

1,760,760

79,093,339

Midstates Petroleum Co., Inc.

1,051,900

10,213,949

Noble Energy, Inc.

400,204

33,945,303

Occidental Petroleum Corp.

1,281,411

109,906,621

Painted Pony Petroleum Ltd. Class A (a)

114,500

826,613

QEP Resources, Inc.

693,946

20,797,562

Rockhopper Exploration PLC (a)

1,675,758

6,764,619

Royal Dutch Shell PLC:

Class A sponsored ADR

31,408

2,117,841

Class B sponsored ADR

2,395,188

167,495,497

Suncor Energy, Inc.

2,057,610

59,499,105

Williams Companies, Inc.

1,771,600

51,057,512

 

1,288,561,859

TOTAL ENERGY

1,701,679,462

FINANCIALS - 14.7%

Capital Markets - 1.3%

BlackRock, Inc. Class A

353,821

60,085,882

E*TRADE Financial Corp. (a)

795,347

6,394,590

Evercore Partners, Inc. Class A

370,900

8,675,351

ICAP PLC

1,163,090

6,147,810

Invesco Ltd.

1,222,561

27,629,879

Morgan Stanley

331,141

4,831,347

 

Shares

Value

State Street Corp.

932,274

$ 41,616,711

TD Ameritrade Holding Corp.

1,059,400

18,009,800

The Blackstone Group LP

1,306,135

17,071,184

UBS AG

1,318,256

15,426,464

 

205,889,018

Commercial Banks - 3.7%

CIT Group, Inc. (a)

372,312

13,269,200

Comerica, Inc.

1,496,497

45,957,423

FirstMerit Corp.

456,685

7,544,436

Huntington Bancshares, Inc.

6,271,651

40,138,566

Synovus Financial Corp. (d)

5,544,386

10,977,884

U.S. Bancorp

9,308,195

299,351,551

Wells Fargo & Co.

5,131,490

171,597,026

 

588,836,086

Consumer Finance - 2.2%

Capital One Financial Corp.

4,893,010

267,451,927

SLM Corp.

5,020,140

78,866,399

 

346,318,326

Diversified Financial Services - 1.9%

African Bank Investments Ltd.

1,244,941

5,529,552

Bank of America Corp.

10,198,795

83,426,143

Citigroup, Inc.

4,601,145

126,117,384

JPMorgan Chase & Co.

2,222,196

79,399,063

NBH Holdings Corp. Class A (a)(e)

813,800

14,851,850

 

309,323,992

Insurance - 3.5%

ACE Ltd.

985,620

73,064,011

Amlin PLC

2,680,756

14,858,371

Aon PLC

181,627

8,496,511

Berkshire Hathaway, Inc.:

Class A (a)

292

36,483,940

Class B (a)

965,501

80,455,198

Fairfax Financial Holdings Ltd. (sub. vtg.)

111,900

44,309,366

MetLife, Inc.

4,035,250

124,487,463

The Travelers Companies, Inc.

1,402,834

89,556,923

Torchmark Corp.

893,568

45,169,862

Validus Holdings Ltd.

1,186,157

37,992,609

 

554,874,254

Real Estate Investment Trusts - 1.8%

American Tower Corp.

1,985,606

138,813,715

Camden Property Trust (SBI)

648,135

43,859,295

Equity Lifestyle Properties, Inc.

333,800

23,022,186

Japan Retail Fund Investment Corp.

4,188

6,643,236

Sun Communities, Inc.

332,769

14,721,701

The Macerich Co.

1,075,908

63,532,367

 

290,592,500

Real Estate Management & Development - 0.0%

PT Lippo Karawaci Tbk

82,595,250

7,080,334

Common Stocks - continued

Shares

Value

FINANCIALS - continued

Thrifts & Mortgage Finance - 0.3%

Ocwen Financial Corp. (a)

2,605,219

$ 48,926,013

TOTAL FINANCIALS

2,351,840,523

HEALTH CARE - 11.5%

Biotechnology - 2.8%

Alexion Pharmaceuticals, Inc. (a)

172,036

17,083,175

Amgen, Inc.

2,407,816

175,866,881

Biogen Idec, Inc. (a)

715,857

103,355,434

BioMarin Pharmaceutical, Inc. (a)

775,630

30,699,435

Gilead Sciences, Inc. (a)

1,860,825

95,423,106

ONYX Pharmaceuticals, Inc. (a)

375,228

24,933,901

 

447,361,932

Health Care Equipment & Supplies - 1.9%

Boston Scientific Corp. (a)

3,652,683

20,710,713

C.R. Bard, Inc.

527,888

56,716,287

Covidien PLC

1,671,182

89,408,237

Edwards Lifesciences Corp. (a)

655,677

67,731,434

Mako Surgical Corp. (a)(d)

739,288

18,933,166

Quidel Corp. (a)(d)

1,609,104

25,230,751

The Cooper Companies, Inc.

432,668

34,509,600

 

313,240,188

Health Care Providers & Services - 2.7%

Catalyst Health Solutions, Inc. (a)

287,454

26,859,702

CIGNA Corp.

1,158,088

50,955,872

Express Scripts Holding Co. (a)

544,816

30,417,077

Henry Schein, Inc. (a)

847,513

66,521,295

McKesson Corp.

852,966

79,965,563

Omnicare, Inc.

964,520

30,121,960

UnitedHealth Group, Inc.

2,636,909

154,259,177

 

439,100,646

Health Care Technology - 0.1%

SXC Health Solutions Corp. (a)

110,800

11,003,819

Life Sciences Tools & Services - 0.1%

Agilent Technologies, Inc.

221,097

8,675,846

Fluidigm Corp. (a)(h)

312,345

4,697,669

 

13,373,515

Pharmaceuticals - 3.9%

Allergan, Inc.

647,258

59,916,673

Elan Corp. PLC sponsored ADR (a)

320,900

4,681,931

Eli Lilly & Co.

460,800

19,772,928

GlaxoSmithKline PLC sponsored ADR

825,008

37,595,615

Jazz Pharmaceuticals PLC (a)

295,637

13,306,621

Merck & Co., Inc.

2,433,536

101,600,128

Optimer Pharmaceuticals, Inc. (a)

681,649

10,579,192

Pfizer, Inc.

11,853,477

272,629,971

Sanofi SA sponsored ADR

499,962

18,888,564

 

Shares

Value

Shire PLC sponsored ADR

337,923

$ 29,193,168

Valeant Pharmaceuticals International, Inc. (Canada) (a)

1,220,434

54,746,313

 

622,911,104

TOTAL HEALTH CARE

1,846,991,204

INDUSTRIALS - 10.2%

Aerospace & Defense - 3.2%

Honeywell International, Inc.

1,566,966

87,499,381

MTU Aero Engines Holdings AG

270,697

19,848,335

Precision Castparts Corp.

455,595

74,940,822

Raytheon Co.

847,185

47,942,199

Textron, Inc.

2,596,299

64,569,956

The Boeing Co.

1,319,780

98,059,654

United Technologies Corp.

1,478,962

111,706,000

 

504,566,347

Air Freight & Logistics - 0.3%

United Parcel Service, Inc. Class B

624,960

49,221,850

Building Products - 0.7%

Armstrong World Industries, Inc.

818,106

40,218,091

Owens Corning (a)

1,819,501

51,928,559

Quanex Building Products Corp.

1,091,013

19,507,312

 

111,653,962

Commercial Services & Supplies - 0.2%

Stericycle, Inc. (a)

434,599

39,839,690

Construction & Engineering - 0.2%

Fluor Corp.

380,475

18,772,637

Foster Wheeler AG (a)

682,476

11,827,309

 

30,599,946

Electrical Equipment - 0.5%

Regal-Beloit Corp.

796,275

49,576,082

Roper Industries, Inc.

390,180

38,463,944

 

88,040,026

Industrial Conglomerates - 2.6%

Danaher Corp.

1,807,469

94,132,986

General Electric Co.

13,378,570

278,809,399

Tyco International Ltd.

669,074

35,360,561

 

408,302,946

Machinery - 1.2%

Caterpillar, Inc.

444,936

37,779,516

Cummins, Inc.

416,413

40,354,584

Fanuc Corp.

146,500

24,081,836

Fiat Industrial SpA

1,324,972

12,978,061

Illinois Tool Works, Inc.

1,356,866

71,764,643

 

186,958,640

Road & Rail - 1.2%

Canadian Pacific

110,900

8,139,130

CSX Corp.

2,380,055

53,218,030

Common Stocks - continued

Shares

Value

INDUSTRIALS - continued

Road & Rail - continued

J.B. Hunt Transport Services, Inc.

240,901

$ 14,357,700

Union Pacific Corp.

1,030,134

122,905,288

 

198,620,148

Trading Companies & Distributors - 0.1%

W.W. Grainger, Inc.

75,200

14,381,248

TOTAL INDUSTRIALS

1,632,184,803

INFORMATION TECHNOLOGY - 20.2%

Communications Equipment - 2.9%

Acme Packet, Inc. (a)

825,286

15,391,584

ADTRAN, Inc.

908,059

27,414,301

Comverse Technology, Inc. (a)

7,878

45,850

Juniper Networks, Inc. (a)

2,340,635

38,175,757

QUALCOMM, Inc.

6,558,281

365,165,086

Riverbed Technology, Inc. (a)

1,007,070

16,264,181

 

462,456,759

Computers & Peripherals - 7.5%

Apple, Inc. (a)

1,895,157

1,106,771,680

SanDisk Corp. (a)

2,432,566

88,740,008

 

1,195,511,688

Electronic Equipment & Components - 0.1%

Hon Hai Precision Industry Co. Ltd. (Foxconn)

5,750,000

17,438,498

Jabil Circuit, Inc.

215,500

4,381,115

 

21,819,613

Internet Software & Services - 1.5%

Dice Holdings, Inc. (a)

1,207,022

11,333,937

eBay, Inc. (a)

1,293,980

54,360,100

Google, Inc. Class A (a)

92,615

53,723,183

Mail.ru Group Ltd.:

GDR (a)(e)

494,266

16,750,675

GDR (Reg. S) (a)

246,700

8,360,663

VeriSign, Inc. (a)

2,342,588

102,066,559

 

246,595,117

IT Services - 0.4%

Accenture PLC Class A

982,990

59,067,869

Semiconductors & Semiconductor Equipment - 3.3%

Amkor Technology, Inc. (a)(d)

593,770

2,897,598

Analog Devices, Inc.

3,991,806

150,371,332

ASML Holding NV

334,690

17,209,760

Avago Technologies Ltd.

1,972,891

70,826,787

Fairchild Semiconductor International, Inc. (a)

1,243,657

17,535,564

International Rectifier Corp. (a)

1,722,798

34,438,732

Maxim Integrated Products, Inc.

1,949,808

49,993,077

 

Shares

Value

Micron Technology, Inc. (a)

9,025,766

$ 56,952,583

NXP Semiconductors NV (a)

1,676,606

38,981,090

ON Semiconductor Corp. (a)

2,521,623

17,903,523

PMC-Sierra, Inc. (a)

2,349,036

14,423,081

RF Micro Devices, Inc. (a)

3,874,921

16,468,414

Skyworks Solutions, Inc. (a)

1,328,988

36,374,402

 

524,375,943

Software - 4.5%

Ariba, Inc. (a)

1,365,741

61,130,567

Check Point Software Technologies Ltd. (a)

1,113,991

55,242,814

Citrix Systems, Inc. (a)

1,886,778

158,376,145

Microsoft Corp.

14,868,639

454,831,667

ServiceNow, Inc.

47,400

1,166,040

 

730,747,233

TOTAL INFORMATION TECHNOLOGY

3,240,574,222

MATERIALS - 3.4%

Chemicals - 2.4%

Air Products & Chemicals, Inc.

860,907

69,501,022

E.I. du Pont de Nemours & Co.

1,973,384

99,794,029

Eastman Chemical Co.

773,711

38,971,823

Ecolab, Inc.

866,758

59,398,926

LyondellBasell Industries NV Class A

583,946

23,515,505

Sherwin-Williams Co.

438,296

58,008,476

Sigma Aldrich Corp.

382,699

28,292,937

 

377,482,718

Containers & Packaging - 0.4%

Ball Corp.

861,922

35,381,898

Rock-Tenn Co. Class A

603,886

32,941,981

 

68,323,879

Metals & Mining - 0.6%

First Quantum Minerals Ltd.

1,950,900

34,491,897

Goldcorp, Inc.

1,018,733

38,353,832

Ivanhoe Mines Ltd.

1,862,400

18,366,070

Ivanhoe Mines Ltd. rights 7/19/12 (a)

1,875,800

1,695,055

 

92,906,854

TOTAL MATERIALS

538,713,451

TELECOMMUNICATION SERVICES - 2.0%

Diversified Telecommunication Services - 1.6%

CenturyLink, Inc.

2,974,550

117,464,980

Verizon Communications, Inc.

2,900,092

128,880,088

 

246,345,068

Wireless Telecommunication Services - 0.4%

MetroPCS Communications, Inc. (a)

379,800

2,297,790

SBA Communications Corp. Class A (a)

499,379

28,489,572

Common Stocks - continued

Shares

Value

TELECOMMUNICATION SERVICES - continued

Wireless Telecommunication Services - continued

Sprint Nextel Corp. (a)

7,055,938

$ 23,002,358

Vodafone Group PLC sponsored ADR

523,500

14,752,230

 

68,541,950

TOTAL TELECOMMUNICATION SERVICES

314,887,018

UTILITIES - 3.7%

Electric Utilities - 2.4%

Duke Energy Corp.

3,882,213

89,523,832

Edison International

1,991,188

91,992,886

Exelon Corp.

187,826

7,066,014

FirstEnergy Corp.

1,751,014

86,132,379

NextEra Energy, Inc.

1,424,513

98,020,740

Progress Energy, Inc.

103,100

6,203,527

 

378,939,378

Gas Utilities - 0.1%

ONEOK, Inc.

254,919

10,785,623

Independent Power Producers & Energy Traders - 0.2%

The AES Corp. (a)

3,220,059

41,313,357

Multi-Utilities - 1.0%

CenterPoint Energy, Inc.

2,009,829

41,543,165

NiSource, Inc.

850,080

21,039,480

PG&E Corp.

672,634

30,450,141

Sempra Energy

936,874

64,531,881

 

157,564,667

TOTAL UTILITIES

588,603,025

TOTAL COMMON STOCKS

(Cost $13,310,953,125)


15,671,676,042

Convertible Preferred Stocks - 0.0%

 

 

 

 

CONSUMER DISCRETIONARY - 0.0%

Media - 0.0%

Jumptap, Inc. Series G (h)

(Cost $8,211,980)

1,141,504


8,211,980

U.S. Treasury Obligations - 0.0%

 

Principal Amount

 

U.S. Treasury Bills, yield at date of purchase 0.08% 8/23/12 (f)
(Cost $6,799,161)

$ 6,800,000


6,799,558

Money Market Funds - 3.4%

Shares

Value

Fidelity Cash Central Fund, 0.17% (b)

377,739,001

$ 377,739,001

Fidelity Securities Lending Cash Central Fund, 0.18% (b)(c)

159,124,264

159,124,264

TOTAL MONEY MARKET FUNDS

(Cost $536,863,265)


536,863,265

TOTAL INVESTMENT PORTFOLIO - 101.3%

(Cost $13,862,827,531)

16,223,550,845

NET OTHER ASSETS (LIABILITIES) - (1.3)%

(210,641,863)

NET ASSETS - 100%

$ 16,012,908,982

Futures Contracts

Expiration Date

Underlying Face Amount at Value

Unrealized Appreciation/(Depreciation)

Purchased

Equity Index Contracts

584 CME E-mini S&P 500 Index Contracts

Sept. 2012

$ 39,606,880

$ 2,275,264

 

The face value of futures purchased as a percentage of net assets is 0.2%

Legend

(a) Non-income producing

(b) Affiliated fund that is 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.

(c) Investment made with cash collateral received from securities on loan.

(d) Security or a portion of the security is on loan at period end.

(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 $33,696,034 or 0.2% of net assets.

(f) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $2,299,850.

(g) Investment is owned by an entity that is treated as a corporation for U.S. tax purposes which is owned by the Fund.

(h) Restricted securities - 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 $35,051,392 or 0.2% of net assets.

Additional information on each restricted holding is as follows:

Security

Acquisition Date

Acquisition Cost

Fluidigm Corp.

10/9/07 - 1/6/11

$ 5,645,227

Halcon Resources Corp.

3/1/12

$ 10,260,000

Jumptap, Inc. Series G

6/29/12

$ 8,211,980

Legend Pictures LLC

9/23/10

$ 4,958,250

Weinstein Co. Holdings LLC Class A-1

10/19/05

$ 11,499,000

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

$ 231,333

Fidelity Securities Lending Cash Central Fund

1,129,225

Total

$ 1,360,558

Other Information

The following is a summary of the inputs used, as of June 30, 2012, 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 in the table below, please refer to the Security 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:

Equities:

Consumer Discretionary

$ 1,687,591,566

$ 1,667,999,439

$ -

$ 19,592,127

Consumer Staples

1,776,822,748

1,705,652,541

71,170,207

-

Energy

1,701,679,462

1,699,585,953

-

2,093,509

Financials

2,351,840,523

2,307,838,639

29,150,034

14,851,850

Health Care

1,846,991,204

1,846,991,204

-

-

Industrials

1,632,184,803

1,608,102,967

24,081,836

-

Information Technology

3,240,574,222

3,223,135,724

17,438,498

-

Materials

538,713,451

538,713,451

-

-

Telecommunication Services

314,887,018

314,887,018

-

-

Utilities

588,603,025

588,603,025

-

-

U.S. Government and Government Agency Obligations

6,799,558

-

6,799,558

-

Money Market Funds

536,863,265

536,863,265

-

-

Total Investments in Securities:

$ 16,223,550,845

$ 16,038,373,226

$ 148,640,133

$ 36,537,486

Derivative Instruments:

Assets

Futures Contracts

$ 2,275,264

$ 2,275,264

$ -

$ -

Value of Derivative Instruments

The following table is a summary of the Fund's value of derivative instruments by risk exposure as of June 30, 2012. For additional information on derivative instruments, please refer to the Derivative Instruments section in the accompanying Notes to Financial Statements.

Risk Exposure /
 Derivative Type

Value

 

Asset

Liability

Equity Risk

Futures Contracts (a)

$ 2,275,264

$ -

Total Value of Derivatives

$ 2,275,264

$ -

(a) Reflects cumulative appreciation/(depreciation) on futures contracts as disclosed on the Schedule of Investments. Only the period end variation margin is separately disclosed on the Statement of Assets and Liabilities.

Distribution of investments by country or territory of incorporation, as a percentage of total net assets, is as follows. (Unaudited)

United States of America

86.1%

United Kingdom

3.8%

Canada

2.0%

Switzerland

1.4%

Ireland

1.1%

Others (Individually Less Than 1%)

5.6%

 

100.0%

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements

Statement of Assets and Liabilities

  

June 30, 2012 (Unaudited)

 

 

 

Assets

Investment in securities, at value (including securities loaned of $160,383,891) - See accompanying schedule:

Unaffiliated issuers (cost $13,325,964,266)

$ 15,686,687,580

 

Fidelity Central Funds (cost $536,863,265)

536,863,265

 

Total Investments (cost $13,862,827,531)

 

$ 16,223,550,845

Cash

 

288,327

Receivable for investments sold

248,682,078

Receivable for fund shares sold

3,599,933

Dividends receivable

17,113,563

Distributions receivable from Fidelity Central Funds

217,873

Receivable for daily variation margin on futures contracts

992,800

Other receivables

718,076

Total assets

16,495,163,495

 

 

 

Liabilities

Payable for investments purchased

$ 299,295,570

Payable for fund shares redeemed

13,059,712

Accrued management fee

7,234,621

Distribution and service plan fees payable

1,650,327

Other affiliated payables

1,342,055

Other payables and accrued expenses

547,964

Collateral on securities loaned, at value

159,124,264

Total liabilities

482,254,513

 

 

 

Net Assets

$ 16,012,908,982

Net Assets consist of:

 

Paid in capital

$ 16,753,574,259

Undistributed net investment income

83,834,306

Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions

(3,187,548,899)

Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies

2,363,049,316

Net Assets

$ 16,012,908,982

Statement of Assets and Liabilities - continued

  

June 30, 2012 (Unaudited)

 

 

 

Initial Class:
Net Asset Value, offering price and redemption price per share ($6,389,688,071 ÷ 253,640,472 shares)

$ 25.19

 

 

 

Service Class:
Net Asset Value, offering price and redemption price per share ($1,345,634,351 ÷ 53,612,526 shares)

$ 25.10

 

 

 

Service Class 2:
Net Asset Value, offering price and redemption price per share ($7,611,379,750 ÷ 307,602,661 shares)

$ 24.74

 

 

 

Service Class 2R:
Net Asset Value, offering price and redemption price per share ($8,907,782 ÷ 360,652 shares)

$ 24.70

 

 

 

Investor Class:
Net Asset Value, offering price and redemption price per share ($657,299,028 ÷ 26,192,228 shares)

$ 25.10

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements - continued

Statement of Operations

Six months ended June 30, 2012 (Unaudited)

 

  

  

Investment Income

  

  

Dividends

 

$ 146,936,085

Interest

 

4,574

Income from Fidelity Central Funds

 

1,360,558

Total income

 

148,301,217

 

 

 

Expenses

Management fee

$ 44,979,640

Transfer agent fees

5,964,274

Distribution and service plan fees

10,250,972

Accounting and security lending fees

785,514

Custodian fees and expenses

168,831

Independent trustees' compensation

51,758

Appreciation in deferred trustee compensation account

11

Audit

47,177

Legal

37,872

Miscellaneous

93,288

Total expenses before reductions

62,379,337

Expense reductions

(410,634)

61,968,703

Net investment income (loss)

86,332,514

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investment securities:

 

 

Unaffiliated issuers

192,482,246

Foreign currency transactions

(225,355)

Futures contracts

5,821,222

Total net realized gain (loss)

 

198,078,113

Change in net unrealized appreciation (depreciation) on:

Investment securities

1,118,833,939

Assets and liabilities in foreign currencies

46,694

Futures contracts

2,301,989

Total change in net unrealized appreciation (depreciation)

 

1,121,182,622

Net gain (loss)

1,319,260,735

Net increase (decrease) in net assets resulting from operations

$ 1,405,593,249

Statement of Changes in Net Assets

  

Six months ended June 30, 2012
(Unaudited)

Year ended
December 31,
2011

Increase (Decrease) in Net Assets

 

 

Operations

 

 

Net investment income (loss)

$ 86,332,514

$ 145,885,373

Net realized gain (loss)

198,078,113

923,774,773

Change in net unrealized appreciation (depreciation)

1,121,182,622

(1,481,460,012)

Net increase (decrease) in net assets resulting from operations

1,405,593,249

(411,799,866)

Distributions to shareholders from net investment income

-

(141,940,543)

Share transactions - net increase (decrease)

(348,479,295)

(1,239,479,004)

Redemption fees

64

8,960

Total increase (decrease) in net assets

1,057,114,018

(1,793,210,453)

 

 

 

Net Assets

Beginning of period

14,955,794,964

16,749,005,417

End of period (including undistributed net investment income of $83,834,306 and distributions in excess of net investment income of $2,498,208, respectively)

$ 16,012,908,982

$ 14,955,794,964

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights - Initial Class

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 23.02

$ 23.88

$ 20.62

$ 15.39

$ 27.90

$ 31.47

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .15

.25

.23

.23

.24

.34

Net realized and unrealized gain (loss)

  2.02

(.86)

3.31

5.26

(11.87)

5.17

Total from investment operations

  2.17

(.61)

3.54

5.49

(11.63)

5.51

Distributions from net investment income

  -

(.25)

(.27)

(.25)

(.23)

(.33)

Distributions from net realized gain

  -

-

(.01)

(.01)

(.65)

(8.75)

Total distributions

  -

(.25)

(.28)

(.26) J

(.88)

(9.08)

Redemption fees added to paid in capital E,I

  -

-

-

-

-

-

Net asset value, end of period

$ 25.19

$ 23.02

$ 23.88

$ 20.62

$ 15.39

$ 27.90

Total Return B,C,D

  9.43%

(2.53)%

17.22%

35.71%

(42.51)%

17.59%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .64% A

.65%

.65%

.67%

.66%

.65%

Expenses net of fee waivers, if any

  .64% A

.64%

.65%

.67%

.66%

.65%

Expenses net of all reductions

  .64% A

.63%

.63%

.65%

.65%

.64%

Net investment income (loss)

  1.20% A

1.03%

1.06%

1.33%

1.07%

1.00%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 6,389,688

$ 6,113,440

$ 7,160,125

$ 7,405,228

$ 6,240,871

$ 12,371,009

Portfolio turnover rate G

  91% A

135%

117%

145%

172%

134%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.26 per share is comprised of distributions from net investment income of $.250 and distributions from net realized gain of $.005 per share.

Financial Highlights - Service Class

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 22.95

$ 23.81

$ 20.55

$ 15.33

$ 27.80

$ 31.38

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .14

.22

.20

.21

.21

.30

Net realized and unrealized gain (loss)

  2.01

(.85)

3.31

5.25

(11.83)

5.16

Total from investment operations

  2.15

(.63)

3.51

5.46

(11.62)

5.46

Distributions from net investment income

  -

(.23)

(.24)

(.23)

(.20)

(.29)

Distributions from net realized gain

  -

-

(.01)

(.01)

(.65)

(8.75)

Total distributions

  -

(.23)

(.25)

(.24) J

(.85)

(9.04)

Redemption fees added to paid in capital E,I

  -

-

-

-

-

-

Net asset value, end of period

$ 25.10

$ 22.95

$ 23.81

$ 20.55

$ 15.33

$ 27.80

Total Return B,C,D

  9.37%

(2.64)%

17.11%

35.66%

(42.61)%

17.51%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .74% A

.75%

.75%

.77%

.76%

.75%

Expenses net of fee waivers, if any

  .74% A

.74%

.75%

.77%

.76%

.75%

Expenses net of all reductions

  .74% A

.73%

.73%

.75%

.75%

.74%

Net investment income (loss)

  1.10% A

.93%

.96%

1.23%

.97%

.90%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 1,345,634

$ 1,277,101

$ 1,379,305

$ 1,784,820

$ 1,497,734

$ 3,008,644

Portfolio turnover rate G

  91% A

135%

117%

145%

172%

134%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.24 per share is comprised of distributions from net investment income of $.232 and distributions from net realized gain of $.005 per share.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights - Service Class 2

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 22.64

$ 23.49

$ 20.29

$ 15.14

$ 27.46

$ 31.11

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .12

.18

.17

.18

.18

.25

Net realized and unrealized gain (loss)

  1.98

(.84)

3.26

5.18

(11.67)

5.11

Total from investment operations

  2.10

(.66)

3.43

5.36

(11.49)

5.36

Distributions from net investment income

  -

(.19)

(.22)

(.21)

(.18)

(.26)

Distributions from net realized gain

  -

-

(.01)

(.01)

(.65)

(8.75)

Total distributions

  -

(.19)

(.23)

(.21) J

(.83)

(9.01)

Redemption fees added to paid in capital E,I

  -

-

-

-

-

-

Net asset value, end of period

$ 24.74

$ 22.64

$ 23.49

$ 20.29

$ 15.14

$ 27.46

Total Return B,C,D

  9.28%

(2.78)%

16.93%

35.47%

(42.69)%

17.30%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .89% A

.90%

.90%

.92%

.91%

.90%

Expenses net of fee waivers, if any

  .89% A

.89%

.90%

.92%

.91%

.90%

Expenses net of all reductions

  .89% A

.88%

.88%

.90%

.90%

.89%

Net investment income (loss)

  .95% A

.78%

.81%

1.08%

.82%

.75%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 7,611,380

$ 6,980,191

$ 7,627,793

$ 7,577,737

$ 6,187,985

$ 9,339,663

Portfolio turnover rate G

  91% A

135%

117%

145%

172%

134%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.21 per share is comprised of distributions from net investment income of $.205 and distributions from net realized gain of $.005 per share.

Financial Highlights - Service Class 2R

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 22.60

$ 23.44

$ 20.24

$ 15.10

$ 27.35

$ 31.02

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .12

.18

.17

.18

.18

.25

Net realized and unrealized gain (loss)

  1.98

(.84)

3.25

5.17

(11.62)

5.09

Total from investment operations

  2.10

(.66)

3.42

5.35

(11.44)

5.34

Distributions from net investment income

  -

(.18)

(.21)

(.20)

(.16)

(.26)

Distributions from net realized gain

  -

-

(.01)

(.01)

(.65)

(8.75)

Total distributions

  -

(.18)

(.22)

(.21)J

(.81)

(9.01)

Redemption fees added to paid in capital E,I

  -

-

-

-

-

-

Net asset value, end of period

$ 24.70

$ 22.60

$ 23.44

$ 20.24

$ 15.10

$ 27.35

Total Return B,C,D

  9.29%

(2.79)%

16.94%

35.46%

(42.69)%

17.30%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .89% A

.90%

.90%

.92%

.91%

.90%

Expenses net of fee waivers, if any

  .89% A

.89%

.90%

.92%

.91%

.90%

Expenses net of all reductions

  .89% A

.88%

.88%

.90%

.90%

.89%

Net investment income (loss)

  .95% A

.78%

.81%

1.08%

.82%

.75%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 8,908

$ 8,042

$ 10,942

$ 13,285

$ 13,585

$ 35,606

Portfolio turnover rate G

  91% A

135%

117%

145%

172%

134%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.21 per share is comprised of distributions from net investment income of $.200 and distributions from net realized gain of $.005 per share.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights - Investor Class

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 22.94

$ 23.80

$ 20.56

$ 15.34

$ 27.82

$ 31.41

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .14

.23

.21

.21

.21

.30

Net realized and unrealized gain (loss)

  2.02

(.86)

3.30

5.25

(11.83)

5.16

Total from investment operations

  2.16

(.63)

3.51

5.46

(11.62)

5.46

Distributions from net investment income

  -

(.23)

(.26)

(.24)

(.21)

(.30)

Distributions from net realized gain

  -

-

(.01)

(.01)

(.65)

(8.75)

Total distributions

  -

(.23)

(.27)

(.24) J

(.86)

(9.05)

Redemption fees added to paid in capital E,I

  -

-

-

-

-

-

Net asset value, end of period

$ 25.10

$ 22.94

$ 23.80

$ 20.56

$ 15.34

$ 27.82

Total Return B,C,D

  9.42%

(2.62)%

17.10%

35.66%

(42.60)%

17.47%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .73% A

.73%

.74%

.77%

.75%

.76%

Expenses net of fee waivers, if any

  .73% A

.73%

.73%

.77%

.75%

.76%

Expenses net of all reductions

  .72% A

.71%

.72%

.75%

.74%

.75%

Net investment income (loss)

  1.12% A

.94%

.98%

1.23%

.98%

.89%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 657,299

$ 577,021

$ 570,841

$ 457,476

$ 324,919

$ 532,268

Portfolio turnover rate G

  91% A

135%

117%

145%

172%

134%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.24 per share is comprised of distributions from net investment income of $.235 and distributions from net realized gain of $.005 per share.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Notes to Financial Statements

For the period ended June 30, 2012 (Unaudited)

1. Organization.

VIP Contrafund Portfolio (the Fund) is a fund of Variable Insurance Products Fund II (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, Service Class 2R shares, and Investor Class shares. All classes have equal rights and voting privileges, except for matters affecting a single class. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions may also differ by class.

2. Investments in Fidelity Central Funds.

The Fund invests in Fidelity Central Funds, which are open-end investment companies available only to other investment companies and accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The Fund's Schedule of Investments lists each of the Fidelity Central Funds held as of period end, if any, as an investment of the Fund, but do not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.

The Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.

A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the SEC) web site at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds are available on the SEC web site or upon request.

3. Significant Accounting Policies.

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 following summarizes the significant accounting policies of the Fund:

Security Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. In accordance with valuation policies and procedures approved by the Board of Trustees (the Board), the Fund attempts to obtain prices from one or more third party pricing vendor or broker to value its investments. When current market prices, quotations or rates are not readily available or reliable, securities will be fair valued in good faith by the FMR Fair Value Committee (the Committee), in accordance with procedures adopted by the Fund's Board. Factors used in determining fair value vary by security type and may include market or security 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 is responsible for approving and reporting to the Board all fair value determinations.

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 significant 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 are used and are categorized as Level 2 in the hierarchy. Utilizing these techniques may result in transfers between Level 1 and Level 2. For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used and these securities are categorized as Level 3 in the hierarchy .

Semiannual Report

3. Significant Accounting Policies - continued

Security Valuation - continued

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. For U.S. government and government agency obligations, pricing vendors utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type as well as broker-supplied prices and are generally categorized as Level 2 in the hierarchy. 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. These are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.

Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded and are categorized as Level 1 in the hierarchy. Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value 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, 2012, is included at the end of the Fund's Schedule of Investments.

Foreign Currency Translation. The Fund 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 may 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.

Expenses. 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. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.

Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), independent Trustees may elect to defer receipt of a portion of their annual compensation. Deferred amounts are invested in a cross-section of Fidelity funds, are marked-to-market and remain in the Fund until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting payable to the Trustees are included in the accompanying Statement of Assets and Liabilities.

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 income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. A 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.

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

3. Significant Accounting Policies - continued

Income Tax Information and Distributions to Shareholders - continued

Distributions are declared and recorded on the ex-dividend date. Income dividends 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. Temporary book-tax differences will reverse in a subsequent period.

Book-tax differences are primarily due to futures transactions, foreign currency transactions, passive foreign investment companies (PFIC), partnership, deferred trustees compensation, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.

The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:

Gross unrealized appreciation

$ 2,914,648,194

Gross unrealized depreciation

(680,498,305)

Net unrealized appreciation (depreciation) on securities and other investments

$ 2,234,149,889

 

 

Tax cost

$ 13,989,400,956

Capital loss carryforwards are only available to offset future capital gains of the Fund to the extent provided by regulations and may be limited. Under the Regulated Investment Company Modernization Act of 2010 (the Act), the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period and such capital losses are required to be used prior to any losses that expire. At December 31, 2011, capital loss carryforwards were as follows:

Fiscal year of expiration

 

2016

$ (854,185,637)

2017

(2,334,998,928)

Total capital loss carryforward

$ (3,189,184,565)

Trading (Redemption) Fees. Service Class 2 R shares held by investors less than 60 days are subject to a redemption fee equal to 1% of the net asset value of shares redeemed. All redemption fees, which reduce the proceeds of the shareholder redemption, are retained by the Fund and accounted for as an addition to paid in capital.

New Accounting Pronouncement. In December 2011, the Financial Accounting Standards Board issued Accounting Standard Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for interim and annual reporting periods beginning on or after January 1, 2013. Management is currently evaluating the impact of the update's adoption on the Fund's financial statement disclosures.

4. Operating Policies.

Restricted Securities. The Fund 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 is included at the end of the Fund's Schedule of Investments.

5. Derivative Instruments.

Risk Exposures and the Use of Derivative Instruments. The Fund's investment objectives allow the Fund to enter into various types of derivative contracts, including futures contracts. Derivatives are investments whose value is derived from underlying assets, indices or reference rates and may be transacted on an exchange or over-the-counter (OTC). Derivatives may involve a future commitment to buy or sell a specified instrument based on specified terms, or to exchange future cash flows at periodic intervals based on a notional principal amount. The Fund used derivatives to increase returns and to manage exposure to certain risks as defined below. The success of any strategy involving derivatives depends on analysis of numerous economic factors, and if the strategies for investment do not work as intended, the Fund may not achieve its objectives.

Semiannual Report

5. Derivative Instruments - continued

Risk Exposures and the Use of Derivative Instruments - continued

The Fund's use of derivatives increased or decreased its exposure to the following risk:

Equity Risk

Equity risk relates to the fluctuations in the value of financial instruments as a result of changes in market prices (other than those arising from interest rate risk or foreign exchange risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting all instruments traded in a market or market segment.

The Fund is also exposed to additional risks from investing in derivatives, such as liquidity risk and counterparty credit risk. Liquidity risk is the risk that the Fund will be unable to close out the derivative in the open market in a timely manner. Counterparty credit risk is the risk that the counterparty will not be able to fulfill its obligation to the Fund. Counterparty credit risk related to exchange-traded futures contracts is minimal because of the protection provided by the exchange on which they trade. Investing in derivatives may involve greater risks than investing in the underlying assets directly and, to varying degrees, involves risk of loss in excess of the initial investment, if any, collateral received and amounts recognized in the Statement of Assets and Liabilities. In addition, for futures contracts, there is the risk that the change in value of the derivative contract may not correspond to the change in value of the underlying instrument.

Futures Contracts. A futures contract is an agreement between two parties to buy or sell a specified underlying instrument for a fixed price at a specified future date. The Fund used futures contracts to manage its exposure to the stock market.

Upon entering into a futures contract, a fund is required to deposit either cash or securities (initial margin) with a clearing broker in an amount equal to a certain percentage of the face value of the contract. Futures contracts are marked-to-market daily and subsequent payments are made or received by a fund depending on the daily fluctuations in the value of the futures contracts and are recorded as unrealized appreciation or (depreciation). This receivable and/or payable is included in daily variation margin on futures contracts in the Statement of Assets and Liabilities. Realized gain or (loss) is recorded upon the expiration or closing of a futures contract.

Any open futures contracts at period end are shown in the Schedule of Investments under the caption "Futures Contracts." The underlying face amount at value reflects each contract's exposure to the underlying instrument at period end and is representative of activity for the period. Securities deposited to meet initial margin requirements are identified in the Schedule of Investments.

During the period the Fund recognized net realized gain (loss) of $5,821,222 and a change in net unrealized appreciation (depreciation) of $2,301,989 related to its investment in futures contracts. These amounts are included in the Statement of Operations.

6. Purchases and Sales of Investments.

Purchases and sales of securities, other than short-term securities, aggregated $7,157,745,837 and $7,480,918,873, respectively.

7. Fees and Other Transactions with Affiliates.

Management Fee. FMR 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 .26% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annualized management fee rate was .56% 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 Corporation (FDC), an affiliate of FMR, 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 and Service Class 2R'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

$ 680,432

Service Class 2

9,559,122

Service Class 2 R

11,418

 

$ 10,250,972

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

7. Fees and Other Transactions with Affiliates - continued

Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class (with the exception of Investor Class) pays a transfer agent fee, excluding out of pocket expenses, equal to an annual rate of .07% of average net assets. Investor Class pays a monthly asset-based transfer agent fee of .15% of average net assets. In addition, FIIOC receives an asset-based fee of .0038% of average net assets for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period, transfer agent fees for each class, including printing and out of pocket expenses, were as follows:

Initial Class

$ 2,288,072

Service Class

481,631

Service Class 2

2,696,035

Service Class 2R

3,208

Investor Class

495,328

 

$ 5,964,274

Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.

Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $248,058 for the period.

8. Committed Line of Credit.

The Fund participates with other funds managed by FMR 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 Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $23,299 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, there were no borrowings on this line of credit.

9. Security Lending.

The Fund lends portfolio securities through a lending agent from time to time in order to earn additional income. For equity securities, a lending agent is used and may loan securities to certain qualified borrowers, including Fidelity Capital Markets (FCM), a broker-dealer affiliated with the Fund. On the settlement date of the loan, the 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 the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. The value of securities loaned to FCM at period end was $4,176,991. 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. Total security lending income during the period amounted to $1,129,225, including $34,517 from securities loaned to FCM.

10. Expense Reductions.

Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $410,555 for the period.

In addition, through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $79.

Semiannual Report

11. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

Six months ended
June 30,
2012

Year ended
December 31,
2011

From net investment income

 

 

Initial Class

$ -

$ 65,616,073

Service Class

-

12,220,263

Service Class 2

-

58,305,804

Service Class 2R

-

65,304

Investor Class

-

5,733,099

Total

$ -

$ 141,940,543

12. Share Transactions.

Transactions for each class of shares were as follows:

 

Shares

Dollars

Six months ended June 30,
2012

Year ended
December 31,
2011

Six months ended June 30,
2012

Year ended
December 31,
2011

Initial Class

 

 

 

 

Shares sold

4,077,866

8,887,647

$ 101,523,723

$ 215,181,582

Reinvestment of distributions

-

2,941,106

-

65,616,073

Shares redeemed

(15,980,797)

(46,079,138)

(398,647,463)

(1,098,879,687)

Net increase (decrease)

(11,902,931)

(34,250,385)

$ (297,123,740)

$ (818,082,032)

Service Class

 

 

 

 

Shares sold

2,396,767

5,960,533

$ 59,691,142

$ 142,199,635

Reinvestment of distributions

-

549,472

-

12,220,263

Shares redeemed

(4,433,327)

(8,798,344)

(111,375,922)

(211,519,636)

Net increase (decrease)

(2,036,560)

(2,288,339)

$ (51,684,780)

$ (57,099,738)

Service Class 2

 

 

 

 

Shares sold

22,436,202

28,618,316

$ 543,485,488

$ 674,963,970

Reinvestment of distributions

-

2,657,512

-

58,305,804

Shares redeemed

(23,125,922)

(47,724,451)

(569,514,280)

(1,123,942,590)

Net increase (decrease)

(689,720)

(16,448,623)

$ (26,028,792)

$ (390,672,816)

Service Class 2R

 

 

 

 

Shares sold

61,957

57,708

$ 1,482,968

$ 1,412,478

Reinvestment of distributions

-

2,982

-

65,304

Shares redeemed

(57,128)

(171,761)

(1,393,997)

(4,029,960)

Net increase (decrease)

4,829

(111,071)

$ 88,971

$ (2,552,178)

Investor Class

 

 

 

 

Shares sold

1,732,876

3,165,850

$ 43,347,297

$ 76,274,096

Reinvestment of distributions

-

257,783

-

5,733,099

Shares redeemed

(690,123)

(2,256,234)

(17,078,251)

(53,079,435)

Net increase (decrease)

1,042,753

1,167,399

$ 26,269,046

$ 28,927,760

13. Other.

The 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, two otherwise unaffiliated shareholders were the owners of record of 30% of the total outstanding shares of the Fund.

Semiannual Report

Investment Adviser

Fidelity Management & Research Company
Boston, MA

Investment Sub-Advisers

FMR Co., Inc.

Fidelity Management & Research (U.K.) Inc.

Fidelity Management & Research (Hong Kong) Limited

Fidelity Management & Research (Japan) Inc.

General Distributor

Fidelity Distributors Corporation
Smithfield, RI

Transfer and Servicing Agents

Fidelity Investments Institutional Operations Company, Inc.
Boston, MA 

Fidelity Service Company, Inc.
Boston, MA

Custodian

Brown Brothers Harriman & Co.
Boston, MA 

VIPCONR-SANN-0812
1.833452.106

Fidelity® Variable Insurance Products:

Disciplined Small Cap Portfolio

Semiannual Report

June 30, 2012

(Fidelity Cover Art)

Contents

Shareholder Expense Example

(Click Here)

An example of shareholder expenses.

Investment Changes

(Click Here)

A summary of major shifts in the fund's investments over the past six months.

Investments

(Click Here)

A complete list of the fund's investments with their market values.

Financial Statements

(Click Here)

Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights.

Notes

(Click Here)

Notes to the financial statements.

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. © 2012 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-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q 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.advisor.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.

Semiannual Report

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including 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 the 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, 2012 to June 30, 2012).

Actual Expenses

The first line of the accompanying table for each class of the Fund 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 of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. 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. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.

Hypothetical Example for Comparison Purposes

The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' 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. 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. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.

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

Beginning
Account Value
January 1, 2012

Ending
Account Value
June 30, 2012

Expenses Paid
During Period*
January 1, 2012
to June 30, 2012

Initial Class

.90%

 

 

 

Actual

 

$ 1,000.00

$ 1,080.90

$ 4.66

HypotheticalA

 

$ 1,000.00

$ 1,020.39

$ 4.52

Service Class

.98%

 

 

 

Actual

 

$ 1,000.00

$ 1,080.70

$ 5.07

HypotheticalA

 

$ 1,000.00

$ 1,019.99

$ 4.92

Service Class 2

1.20%

 

 

 

Actual

 

$ 1,000.00

$ 1,078.90

$ 6.20

HypotheticalA

 

$ 1,000.00

$ 1,018.90

$ 6.02

Investor Class

.97%

 

 

 

Actual

 

$ 1,000.00

$ 1,080.10

$ 5.02

HypotheticalA

 

$ 1,000.00

$ 1,020.04

$ 4.87

A 5% return per year before expenses

* Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).

Semiannual Report

Investment Changes (Unaudited)

Top Ten Stocks as of June 30, 2012

 

% of fund's
net assets

% of fund's net assets
6 months ago

Aspen Technology, Inc.

0.7

0.6

Extra Space Storage, Inc.

0.7

0.3

Nu Skin Enterprises, Inc. Class A

0.7

0.7

MFA Financial, Inc.

0.7

0.6

Alaska Air Group, Inc.

0.7

0.8

Cleco Corp.

0.7

0.7

Fair Isaac Corp.

0.7

0.7

Harris Teeter Supermarkets, Inc.

0.7

0.0

Western Refining, Inc.

0.7

0.4

Maximus, Inc.

0.7

0.6

 

7.0

Top Five Market Sectors as of June 30, 2012

 

% of fund's
net assets

% of fund's net assets
6 months ago

Financials

22.5

19.9

Information Technology

15.6

16.5

Consumer Discretionary

14.8

14.4

Industrials

14.4

13.9

Health Care

12.4

11.0

Asset Allocation (% of fund's net assets)

As of June 30, 2012 *

As of December 31, 2011 **

ghi234616

Stocks and Equity
Futures 99.7%

 

ghi234616

Stocks and Equity
Futures 100.0%

 

ghi234619

Short-Term
Investments and
Net Other Assets (Liabilities) 0.3%

 

ghi234619

Short-Term
Investments and
Net Other Assets (Liabilities) 0.0%

 

* Foreign investments

3.4%

 

** Foreign investments

3.1%

 

ghi234622

Semiannual Report

Investments June 30, 2012 (Unaudited)

Showing Percentage of Net Assets

Common Stocks - 97.1%

Shares

Value

CONSUMER DISCRETIONARY - 14.8%

Auto Components - 0.5%

Dana Holding Corp.

26,297

$ 336,865

Standard Motor Products, Inc.

5,678

79,946

 

416,811

Distributors - 0.4%

Core-Mark Holding Co., Inc.

755

36,346

VOXX International Corp. (a)

25,490

237,567

 

273,913

Diversified Consumer Services - 0.2%

Lincoln Educational Services Corp.

17,828

115,882

Hotels, Restaurants & Leisure - 4.1%

AFC Enterprises, Inc. (a)

1,779

41,166

Ameristar Casinos, Inc.

17,317

307,723

Benihana, Inc.

6,763

108,952

Biglari Holdings, Inc. (a)

470

181,603

Bob Evans Farms, Inc.

11,689

469,898

Carrols Restaurant Group, Inc. (a)

3,229

19,180

CEC Entertainment, Inc.

1,400

50,918

Churchill Downs, Inc.

2,070

121,695

Cracker Barrel Old Country Store, Inc.

4,761

298,991

DineEquity, Inc. (a)

1,625

72,540

Einstein Noah Restaurant Group, Inc.

2,898

50,889

Fiesta Restaurant Group, Inc. (a)

6,236

82,502

Interval Leisure Group, Inc.

2,484

47,221

Multimedia Games Holdng Co., Inc. (a)

19,227

269,178

Papa John's International, Inc. (a)

9,017

428,939

Ruth's Hospitality Group, Inc. (a)

6,541

43,171

Scientific Games Corp. Class A (a)

16,479

140,895

Shuffle Master, Inc. (a)

1,453

20,051

Sonic Corp. (a)

37,629

377,043

Texas Roadhouse, Inc. Class A

7,867

144,989

The Cheesecake Factory, Inc. (a)

1,191

38,064

Town Sports International Holdings, Inc. (a)

2,866

38,089

 

3,353,697

Household Durables - 0.9%

American Greetings Corp. Class A

23

336

Blyth, Inc.

6,100

210,816

Helen of Troy Ltd. (a)

3,499

118,581

Libbey, Inc. (a)

5,417

83,259

Tupperware Brands Corp.

6,327

346,467

 

759,459

Internet & Catalog Retail - 0.3%

HSN, Inc.

4,554

183,754

Orbitz Worldwide, Inc. (a)

17,046

62,218

PetMed Express, Inc.

1,492

18,143

 

264,115

Leisure Equipment & Products - 3.1%

Arctic Cat, Inc. (a)

11,489

420,038

Brunswick Corp.

21,818

484,796

 

Shares

Value

Leapfrog Enterprises, Inc. Class A (a)

39,177

$ 401,956

Polaris Industries, Inc.

5,639

403,076

Smith & Wesson Holding Corp. (a)(d)

57,434

477,277

Steinway Musical Instruments, Inc. (a)

642

15,729

Sturm, Ruger & Co., Inc. (d)

8,250

331,238

 

2,534,110

Media - 0.7%

Arbitron, Inc.

2,622

91,770

Cinemark Holdings, Inc.

8,902

203,411

Global Sources Ltd. (a)

36,571

241,369

Valassis Communications, Inc. (a)

3

65

World Wrestling Entertainment, Inc. Class A

6,416

50,173

 

586,788

Specialty Retail - 4.2%

Aeropostale, Inc. (a)

16,712

297,975

ANN, Inc. (a)

16,281

415,003

Ascena Retail Group, Inc. (a)

13,518

251,705

Barnes & Noble, Inc. (a)

43

708

Big 5 Sporting Goods Corp.

1,088

8,225

Conn's, Inc. (a)(d)

4,437

65,668

Destination Maternity Corp.

2,346

50,674

Express, Inc. (a)

17,523

318,393

Finish Line, Inc. Class A

6,667

139,407

Group 1 Automotive, Inc.

969

44,196

Kirkland's, Inc. (a)

429

4,826

Pier 1 Imports, Inc.

12,029

197,636

Rent-A-Center, Inc.

15,698

529,651

Select Comfort Corp. (a)

17,976

376,058

Shoe Carnival, Inc.

2,347

50,437

The Cato Corp. Class A (sub. vtg.)

12,221

372,252

Tractor Supply Co.

3,069

254,911

 

3,377,725

Textiles, Apparel & Luxury Goods - 0.4%

Movado Group, Inc.

13,247

331,440

TOTAL CONSUMER DISCRETIONARY

12,013,940

CONSUMER STAPLES - 4.1%

Beverages - 0.1%

Coca-Cola Bottling Co. CONSOLIDATED

1,346

86,521

Food & Staples Retailing - 1.6%

Andersons, Inc.

3,933

167,782

Casey's General Stores, Inc.

1,036

61,114

Harris Teeter Supermarkets, Inc.

13,356

547,462

Ingles Markets, Inc. Class A

500

8,015

Rite Aid Corp. (a)

163,508

228,911

Roundy's, Inc. (d)

18,147

185,281

Spartan Stores, Inc.

237

4,297

Susser Holdings Corp. (a)

2,133

79,284

The Pantry, Inc. (a)

1,118

16,435

Common Stocks - continued

Shares

Value

CONSUMER STAPLES - continued

Food & Staples Retailing - continued

Village Super Market, Inc. Class A

1

$ 33

Weis Markets, Inc.

552

24,575

 

1,323,189

Food Products - 1.3%

B&G Foods, Inc. Class A

13,769

366,255

Cal-Maine Foods, Inc.

1,104

43,166

Darling International, Inc. (a)

430

7,091

Fresh Del Monte Produce, Inc.

17,556

412,039

Pilgrims Pride Corp. (d)

8,008

57,257

Seneca Foods Corp. Class A (a)

458

12,320

Smart Balance, Inc. (a)

16,620

156,062

 

1,054,190

Household Products - 0.1%

WD-40 Co.

1,035

51,553

Personal Products - 1.0%

Elizabeth Arden, Inc. (a)

3,659

142,006

Nature's Sunshine Products, Inc.

3,096

46,750

Nu Skin Enterprises, Inc. Class A

12,590

590,471

Nutraceutical International Corp. (a)

600

9,150

Schiff Nutrition International, Inc. (a)

190

3,411

 

791,788

TOTAL CONSUMER STAPLES

3,307,241

ENERGY - 3.9%

Energy Equipment & Services - 1.4%

Bristow Group, Inc.

1,102

44,818

Gulf Island Fabrication, Inc.

3,290

92,811

Helix Energy Solutions Group, Inc. (a)

29,988

492,103

Hercules Offshore, Inc. (a)

3,670

12,992

OYO Geospace Corp. (a)

2,632

236,854

RigNet, Inc. (a)

7,312

127,156

Superior Energy Services, Inc. (a)

2,113

42,746

Tesco Corp. (a)

11,020

132,240

 

1,181,720

Oil, Gas & Consumable Fuels - 2.5%

Alon USA Energy, Inc.

32,249

272,827

Callon Petroleum Co. (a)

8,392

35,750

CAMAC Energy, Inc. (a)

1,306

823

Crosstex Energy, Inc.

13,511

189,154

CVR Energy, Inc. (a)

4,620

122,800

Delek US Holdings, Inc.

1,387

24,397

DHT Holdings, Inc.

21,956

13,709

Rex American Resources Corp. (a)

5,591

109,136

Targa Resources Corp.

2,700

115,290

Teekay Tankers Ltd. (d)

25,545

116,485

VAALCO Energy, Inc. (a)

51,719

446,335

 

Shares

Value

Warren Resources, Inc. (a)

15,879

$ 38,110

Western Refining, Inc.

24,532

546,328

 

2,031,144

TOTAL ENERGY

3,212,864

FINANCIALS - 22.5%

Capital Markets - 1.2%

American Capital Ltd. (a)

47,031

473,602

Arlington Asset Investment Corp.

282

6,122

Calamos Asset Management, Inc. Class A

4,297

49,201

Duff & Phelps Corp. Class A

5,364

77,778

Kohlberg Capital Corp. (d)

7,037

51,089

Medallion Financial Corp.

1,963

20,847

Prospect Capital Corp.

165

1,879

SWS Group, Inc.

1,449

7,723

TICC Capital Corp.

15,241

147,838

Triangle Capital Corp.

5,178

117,955

 

954,034

Commercial Banks - 6.3%

1st Source Corp.

1,241

28,047

Alliance Financial Corp.

1,836

63,048

American National Bankshares, Inc.

2,172

51,172

Banco Latinoamericano de Exporaciones SA (BLADEX) Series E

20,620

441,887

BancorpSouth, Inc.

8,693

126,222

Bank of Marin Bancorp

1,486

54,997

Bank of the Ozarks, Inc.

9,520

286,362

Banner Bank

20,547

450,185

BBCN Bancorp, Inc. (a)

2,976

32,409

Boston Private Financial Holdings, Inc.

567

5,063

Cathay General Bancorp

2,069

34,159

Central Pacific Financial Corp. (a)

7,697

108,682

Citizens & Northern Corp.

3,574

68,085

Eagle Bancorp, Inc., Maryland (a)

4,219

66,449

First Community Bancshares, Inc.

649

9,365

First Interstate Bancsystem, Inc.

1,192

16,974

First Merchants Corp.

17,375

216,493

FirstMerit Corp.

10,832

178,945

Hanmi Financial Corp. (a)

35,638

373,486

International Bancshares Corp.

1,793

34,999

MainSource Financial Group, Inc.

2,696

31,894

MB Financial, Inc.

7,865

169,412

Merchants Bancshares, Inc.

8,818

242,936

National Penn Bancshares, Inc.

5,561

53,219

Old National Bancorp, Indiana

14,049

168,728

PacWest Bancorp

3,409

80,691

Park Sterling Corp. (a)

1,480

6,971

Peoples Bancorp, Inc.

2,413

53,038

PrivateBancorp, Inc.

18,944

279,613

Republic Bancorp, Inc., Kentucky Class A

10,652

237,007

SCBT Financial Corp.

406

14,312

Southside Bancshares, Inc.

1,212

27,246

Common Stocks - continued

Shares

Value

FINANCIALS - continued

Commercial Banks - continued

Southwest Bancorp, Inc., Oklahoma (a)

358

$ 3,369

State Bank Financial Corp. (a)

5,809

88,064

Susquehanna Bancshares, Inc.

49,213

506,894

Tompkins Financial Corp.

12

452

UMB Financial Corp.

1,932

98,976

United Community Banks, Inc., Georgia (a)

483

4,139

Washington Banking Co., Oak Harbor

381

5,296

Washington Trust Bancorp, Inc.

4,703

114,659

WesBanco, Inc.

6,583

139,955

Wilshire Bancorp, Inc. (a)

28,348

155,347

 

5,129,247

Consumer Finance - 1.4%

Cash America International, Inc.

3,095

136,304

Credit Acceptance Corp. (a)

3,382

285,542

EZCORP, Inc. (non-vtg.) Class A (a)

11,136

261,251

Nelnet, Inc. Class A

19,586

450,478

Nicholas Financial, Inc.

172

2,205

 

1,135,780

Diversified Financial Services - 0.6%

MarketAxess Holdings, Inc.

12,077

321,731

PHH Corp. (a)

9,048

158,159

Vector Capital Corp. rights (a)

5,673

0

 

479,890

Insurance - 1.8%

Amerisafe, Inc. (a)

759

19,696

FBL Financial Group, Inc. Class A

10,511

294,413

First American Financial Corp.

8,675

147,128

Horace Mann Educators Corp.

13,677

239,074

Maiden Holdings Ltd.

31,117

270,096

Montpelier Re Holdings Ltd.

9,458

201,361

Primerica, Inc.

4,774

127,609

ProAssurance Corp.

714

63,610

Symetra Financial Corp.

9,535

120,332

United Fire Group, Inc.

449

9,577

 

1,492,896

Real Estate Investment Trusts - 10.3%

AG Mortgage Investment Trust, Inc.

19,437

417,701

Alexanders, Inc.

672

289,706

American Capital Mortgage Investment Corp.

18,654

445,458

Anworth Mortgage Asset Corp.

64,636

455,684

Apollo Commercial Real Estate Finance, Inc.

1,242

19,959

Apollo Residential Mortgage, Inc.

20,694

398,980

Capstead Mortgage Corp.

35,474

493,443

CBL & Associates Properties, Inc.

26,250

512,925

Crexus Investment Corp.

34,094

346,736

CubeSmart

11,220

130,937

Dynex Capital, Inc.

13,673

141,926

 

Shares

Value

Education Realty Trust, Inc.

10,200

$ 113,016

Extra Space Storage, Inc.

19,574

598,964

First Industrial Realty Trust, Inc. (a)

7,221

91,129

Highwoods Properties, Inc. (SBI)

12,715

427,860

LTC Properties, Inc.

13,249

480,674

MFA Financial, Inc.

73,581

580,554

Mission West Properties, Inc.

8,641

74,485

National Health Investors, Inc.

1,729

88,041

NorthStar Realty Finance Corp.

68,983

360,091

Pennymac Mortgage Investment Trust

21,454

423,287

Potlatch Corp.

2,760

88,154

PS Business Parks, Inc.

6,943

470,180

RLJ Lodging Trust

7,852

142,357

Sabra Health Care REIT, Inc.

10,264

175,617

Saul Centers, Inc.

850

36,440

Starwood Property Trust, Inc.

8,626

183,820

Sunstone Hotel Investors, Inc. (a)

19,350

212,657

Universal Health Realty Income Trust (SBI)

840

34,885

Urstadt Biddle Properties, Inc. Class A

48

949

Winthrop Realty Trust

9,208

111,969

 

8,348,584

Thrifts & Mortgage Finance - 0.9%

BofI Holding, Inc. (a)

1,960

38,730

Dime Community Bancshares, Inc.

12,509

166,245

Doral Financial Corp. (a)

138,558

207,837

First Financial Holdings, Inc.

1,685

18,063

Flagstar Bancorp, Inc. (a)

13,072

10,980

Flushing Financial Corp.

5,939

80,949

Fox Chase Bancorp, Inc.

3,045

43,970

HomeStreet, Inc.

276

8,829

Kaiser Federal Financial Group, Inc.

3,381

49,971

NASB Financial, Inc. (a)

276

5,479

Oritani Financial Corp.

3,491

50,235

Provident Financial Services, Inc.

4,415

67,770

Walker & Dunlop, Inc. (a)

1,878

24,132

 

773,190

TOTAL FINANCIALS

18,313,621

HEALTH CARE - 12.4%

Biotechnology - 3.0%

Affymax, Inc. (a)

225

2,898

Allos Therapeutics, Inc. (a)

26,089

46,699

ARIAD Pharmaceuticals, Inc. (a)

3,516

60,510

Array Biopharma, Inc. (a)

28,839

100,071

Astex Pharmaceuticals, Inc. (a)

70,469

147,280

AVEO Pharmaceuticals, Inc. (a)(d)

7,582

92,197

Cepheid, Inc. (a)

1,330

59,518

Cubist Pharmaceuticals, Inc. (a)

1,481

56,145

DUSA Pharmaceuticals, Inc. (a)

573

2,991

Emergent BioSolutions, Inc. (a)

4,000

60,600

Genomic Health, Inc. (a)

1,412

47,161

Geron Corp. (a)

21,639

37,219

Common Stocks - continued

Shares

Value

HEALTH CARE - continued

Biotechnology - continued

Incyte Corp. (a)

3,312

$ 75,182

Maxygen, Inc. (a)

7,858

46,834

Medivation, Inc. (a)

847

77,416

Momenta Pharmaceuticals, Inc. (a)

9,098

123,005

Nabi Biopharmaceuticals (a)

33,953

53,646

Neurocrine Biosciences, Inc. (a)

4,588

36,291

ONYX Pharmaceuticals, Inc. (a)

1,944

129,179

Osiris Therapeutics, Inc. (a)(d)

4,118

45,174

PDL BioPharma, Inc. (d)

40,649

269,503

Pharmacyclics, Inc. (a)

6,967

380,468

Progenics Pharmaceuticals, Inc. (a)

12,629

123,512

SciClone Pharmaceuticals, Inc. (a)

26,303

184,384

Seattle Genetics, Inc. (a)

552

14,015

Spectrum Pharmaceuticals, Inc. (a)(d)

9,638

149,967

Trius Therapeutics, Inc. (a)

1,791

10,316

 

2,432,181

Health Care Equipment & Supplies - 3.4%

Analogic Corp.

4,277

265,174

ArthroCare Corp. (a)

16,513

483,501

Atrion Corp.

31

6,354

Cantel Medical Corp.

5,227

142,436

CONMED Corp.

3,776

104,482

Cyberonics, Inc. (a)

1,586

71,275

Greatbatch, Inc. (a)

11,301

256,646

Haemonetics Corp. (a)

1,129

83,670

Invacare Corp.

11,981

184,867

OraSure Technologies, Inc. (a)

643

7,227

RTI Biologics, Inc. (a)

48,333

181,732

Sirona Dental Systems, Inc. (a)

7,511

338,070

SurModics, Inc. (a)

3,716

64,287

Thoratec Corp. (a)

11,382

382,208

Young Innovations, Inc.

4,990

172,105

 

2,744,034

Health Care Providers & Services - 3.7%

Alliance Healthcare Services, Inc. (a)

2,800

2,794

Almost Family, Inc. (a)

316

7,059

Amedisys, Inc. (a)

18,136

225,793

Assisted Living Concepts, Inc. Class A

2,553

36,304

CardioNet, Inc. (a)

1,372

2,785

Centene Corp. (a)

12,814

386,470

Chemed Corp.

2,127

128,556

Chindex International, Inc. (a)

1,367

13,397

Five Star Quality Care, Inc. (a)

59,272

181,965

Magellan Health Services, Inc. (a)

9,623

436,211

Molina Healthcare, Inc. (a)

11,251

263,948

National Healthcare Corp.

1,462

66,126

PharMerica Corp. (a)

1,928

21,054

Providence Service Corp. (a)

8,712

119,442

Select Medical Holdings Corp. (a)

6,090

61,570

 

Shares

Value

Skilled Healthcare Group, Inc. (a)

1,061

$ 6,663

Sun Healthcare Group, Inc. (a)

33,185

277,758

Team Health Holdings, Inc. (a)

1,323

31,871

Triple-S Management Corp. (a)

1,729

31,606

Universal American Spin Corp. (a)

19,321

203,450

Wellcare Health Plans, Inc. (a)

9,840

521,520

 

3,026,342

Health Care Technology - 0.7%

Computer Programs & Systems, Inc.

3,525

201,701

HealthStream, Inc. (a)

3,143

81,718

MedAssets, Inc. (a)

250

3,363

Omnicell, Inc. (a)

18,767

274,749

 

561,531

Life Sciences Tools & Services - 0.2%

Affymetrix, Inc. (a)

36,055

169,098

Cambrex Corp. (a)

759

7,142

Medtox Scientific, Inc. (a)

1,143

30,815

 

207,055

Pharmaceuticals - 1.4%

Cornerstone Therapeutics, Inc. (a)

4,638

29,359

Impax Laboratories, Inc. (a)

2,483

50,330

Medicis Pharmaceutical Corp. Class A

6,564

224,161

Obagi Medical Products, Inc. (a)

5,339

81,527

Par Pharmaceutical Companies, Inc. (a)

5,524

199,637

Pozen, Inc. (a)

20,487

127,839

Questcor Pharmaceuticals, Inc. (a)(d)

797

42,432

Salix Pharmaceuticals Ltd. (a)

1,684

91,677

Santarus, Inc. (a)

989

7,012

Transcept Pharmaceuticals, Inc. (a)

41

254

ViroPharma, Inc. (a)

11,725

277,883

 

1,132,111

TOTAL HEALTH CARE

10,103,254

INDUSTRIALS - 14.4%

Aerospace & Defense - 2.3%

American Science & Engineering, Inc.

549

30,991

Ceradyne, Inc.

8,956

229,721

Cubic Corp.

5,388

259,055

Curtiss-Wright Corp.

14,567

452,305

Esterline Technologies Corp. (a)

6,925

431,774

Hexcel Corp. (a)

6,157

158,789

LMI Aerospace, Inc. (a)

1,827

31,753

Moog, Inc. Class A (a)

5,812

240,326

 

1,834,714

Air Freight & Logistics - 0.1%

Park-Ohio Holdings Corp. (a)

3,990

75,930

Airlines - 1.4%

Alaska Air Group, Inc. (a)

16,134

579,211

JetBlue Airways Corp. (a)

36,137

191,526

Republic Airways Holdings, Inc. (a)

4,655

25,835

SkyWest, Inc.

19,025

124,233

Common Stocks - continued

Shares

Value

INDUSTRIALS - continued

Airlines - continued

Spirit Airlines, Inc. (a)

1,700

$ 33,082

US Airways Group, Inc. (a)

15,204

202,669

 

1,156,556

Building Products - 0.2%

American Woodmark Corp.

1,960

33,516

Apogee Enterprises, Inc.

41

659

Gibraltar Industries, Inc. (a)

8,435

87,555

 

121,730

Commercial Services & Supplies - 1.9%

Consolidated Graphics, Inc. (a)

3,380

98,189

Courier Corp.

700

9,275

Encore Capital Group, Inc. (a)

8,091

239,655

Ennis, Inc.

175

2,692

G&K Services, Inc. Class A

12,163

379,364

Intersections, Inc.

9,288

147,215

Steelcase, Inc. Class A

6,840

61,765

Sykes Enterprises, Inc. (a)

1,645

26,254

Tetra Tech, Inc. (a)

6,970

181,778

The Brink's Co.

7,730

179,181

TMS International Corp. (a)

1,607

16,022

Unifirst Corp. Massachusetts

3,557

226,759

 

1,568,149

Construction & Engineering - 0.3%

Great Lakes Dredge & Dock Corp.

32,103

228,573

Sterling Construction Co., Inc. (a)

2,570

26,265

 

254,838

Electrical Equipment - 0.9%

Brady Corp. Class A

180

4,952

EnerSys (a)

10,686

374,758

Franklin Electric Co., Inc.

6,303

322,272

 

701,982

Industrial Conglomerates - 0.1%

Raven Industries, Inc.

690

48,017

Standex International Corp.

1,518

64,621

 

112,638

Machinery - 2.3%

Alamo Group, Inc.

760

23,841

Albany International Corp. Class A

3,995

74,746

Ampco-Pittsburgh Corp.

600

10,998

Astec Industries, Inc. (a)

100

3,068

Cascade Corp.

4,616

217,183

CLARCOR, Inc.

3,717

179,011

Hurco Companies, Inc. (a)

1,434

29,383

Kadant, Inc. (a)

12,526

293,735

L.B. Foster Co. Class A

2,213

63,314

NACCO Industries, Inc. Class A

2,011

233,779

Nordson Corp.

7,204

369,493

RBC Bearings, Inc. (a)

3,275

154,908

 

Shares

Value

Sauer-Danfoss, Inc.

1,898

$ 66,297

Tennant Co.

3,023

120,769

 

1,840,525

Professional Services - 0.8%

Barrett Business Services, Inc.

844

17,842

CDI Corp.

2,000

32,800

CRA International, Inc. (a)

171

2,512

GP Strategies Corp. (a)

870

16,069

ICF International, Inc. (a)

372

8,868

Insperity, Inc.

9,431

255,109

Kelly Services, Inc. Class A (non-vtg.)

9,928

128,170

Navigant Consulting, Inc. (a)

2,175

27,492

On Assignment, Inc. (a)

7,568

120,785

Resources Connection, Inc.

2,553

31,402

TrueBlue, Inc. (a)

1,757

27,198

 

668,247

Road & Rail - 1.9%

AMERCO

4,255

382,822

Arkansas Best Corp.

15,917

200,554

Marten Transport Ltd.

2,688

57,147

Quality Distribution, Inc. (a)

3,216

35,665

Saia, Inc. (a)

12,952

283,519

Swift Transporation Co. (a)

39,013

368,673

Universal Truckload Services, Inc.

202

3,055

Werner Enterprises, Inc.

8,754

209,133

 

1,540,568

Trading Companies & Distributors - 2.1%

Aceto Corp.

4,971

44,888

Aircastle Ltd.

35,703

430,221

Applied Industrial Technologies, Inc.

12,708

468,290

Beacon Roofing Supply, Inc. (a)

5,499

138,685

DXP Enterprises, Inc. (a)

4,549

188,738

H&E Equipment Services, Inc. (a)

23,071

346,757

Interline Brands, Inc. (a)

1,216

30,485

SeaCube Container Leasing Ltd.

3,073

52,456

 

1,700,520

Transportation Infrastructure - 0.1%

Wesco Aircraft Holdings, Inc. (a)

8,843

112,571

TOTAL INDUSTRIALS

11,688,968

INFORMATION TECHNOLOGY - 15.6%

Communications Equipment - 1.3%

Anaren, Inc. (a)

12,609

247,136

Arris Group, Inc. (a)

10,420

144,942

Black Box Corp.

3,935

112,935

Communications Systems, Inc.

2,754

30,762

Comtech Telecommunications Corp.

8,310

237,500

Emulex Corp. (a)

5,587

40,226

Tessco Technologies, Inc.

9,991

220,302

 

1,033,803

Common Stocks - continued

Shares

Value

INFORMATION TECHNOLOGY - continued

Computers & Peripherals - 0.4%

Cray, Inc. (a)

5,469

$ 66,066

Xyratex Ltd.

25,198

284,989

 

351,055

Electronic Equipment & Components - 2.2%

Anixter International, Inc.

6,737

357,398

Benchmark Electronics, Inc. (a)

6,753

94,204

BrightPoint, Inc. (a)

199

1,077

Coherent, Inc. (a)

4,328

187,402

Electro Scientific Industries, Inc.

12,390

146,450

GSI Group, Inc. (a)

1,154

13,225

Insight Enterprises, Inc. (a)

5,581

93,928

Measurement Specialties, Inc. (a)

963

31,307

MTS Systems Corp.

2,190

84,425

Multi-Fineline Electronix, Inc. (a)

1,302

32,081

Newport Corp. (a)

16,960

203,859

OSI Systems, Inc. (a)

1,869

118,382

PC Connection, Inc.

1,300

13,806

Pulse Electronics Corp.

22

43

SYNNEX Corp. (a)

11,671

402,533

Vishay Precision Group, Inc. (a)

2,048

28,570

 

1,808,690

Internet Software & Services - 0.5%

Ancestry.com, Inc. (a)(d)

7,591

208,980

Blucora, Inc. (a)

15,105

186,094

Rackspace Hosting, Inc. (a)

41

1,802

 

396,876

IT Services - 3.3%

Acxiom Corp. (a)

1,814

27,410

CACI International, Inc. Class A (a)

8,664

476,693

Cardtronics, Inc. (a)

53

1,601

Convergys Corp.

6,003

88,664

CSG Systems International, Inc. (a)

4,360

75,341

EPAM Systems, Inc.

3,933

66,822

Euronet Worldwide, Inc. (a)

1,491

25,526

Global Cash Access Holdings, Inc. (a)

31,561

227,555

Hackett Group, Inc. (a)

2,138

11,909

Heartland Payment Systems, Inc.

15,653

470,842

Jack Henry & Associates, Inc.

2,756

95,137

Maximus, Inc.

10,513

544,048

NCI, Inc. Class A (a)

515

2,086

Teletech Holdings, Inc. (a)

18,149

290,384

TNS, Inc. (a)

2,131

38,230

Unisys Corp. (a)

12,995

254,052

 

2,696,300

Semiconductors & Semiconductor Equipment - 2.4%

Advanced Energy Industries, Inc. (a)

5,451

73,152

DSP Group, Inc. (a)

80

507

Entegris, Inc. (a)

43,725

373,412

 

Shares

Value

GT Advanced Technologies, Inc. (a)(d)

22,637

$ 119,523

Kulicke & Soffa Industries, Inc. (a)

37,591

335,312

LTX-Credence Corp. (a)

29,194

195,600

Micrel, Inc.

5,726

54,569

MKS Instruments, Inc.

1,793

51,871

Monolithic Power Systems, Inc. (a)

4,968

98,714

Omnivision Technologies, Inc. (a)

11,791

157,528

Power Integrations, Inc.

2,691

100,374

Tessera Technologies, Inc.

23,335

358,659

Ultra Clean Holdings, Inc. (a)

897

5,768

 

1,924,989

Software - 5.5%

ACI Worldwide, Inc. (a)

4,559

201,553

Actuate Corp. (a)

19,089

132,287

Aspen Technology, Inc. (a)

25,924

600,135

CommVault Systems, Inc. (a)

2,256

111,830

Fair Isaac Corp.

13,308

562,662

JDA Software Group, Inc. (a)

8,524

253,078

Manhattan Associates, Inc. (a)

10,546

482,058

Monotype Imaging Holdings, Inc. (a)

27,872

467,413

NetScout Systems, Inc. (a)

8,602

185,717

Opnet Technologies, Inc.

3,541

94,155

Progress Software Corp. (a)

18,811

392,586

QAD, Inc.:

Class A

3,081

43,812

Class B

2,116

28,799

Quest Software, Inc. (a)

4,062

113,127

SeaChange International, Inc. (a)

1,241

10,213

SS&C Technologies Holdings, Inc. (a)

7,544

188,600

TeleCommunication Systems, Inc. Class A (a)

17,377

21,374

TeleNav, Inc. (a)

19,891

121,932

TIBCO Software, Inc. (a)

14,353

429,442

Verint Systems, Inc. (a)

1,162

34,291

 

4,475,064

TOTAL INFORMATION TECHNOLOGY

12,686,777

MATERIALS - 5.7%

Chemicals - 2.7%

American Vanguard Corp.

5,435

144,517

Ferro Corp. (a)

565

2,712

FutureFuel Corp.

1,185

12,454

Georgia Gulf Corp.

2,241

57,526

H.B. Fuller Co.

17,434

535,224

Innospec, Inc. (a)

6,373

188,705

LSB Industries, Inc. (a)

6,841

211,455

Minerals Technologies, Inc.

1,800

114,804

OM Group, Inc. (a)

502

9,538

Rockwood Holdings, Inc.

7,557

335,153

Sensient Technologies Corp.

2,487

91,348

TPC Group, Inc. (a)

9,705

358,600

Common Stocks - continued

Shares

Value

MATERIALS - continued

Chemicals - continued

Tredegar Corp.

860

$ 12,522

W.R. Grace & Co. (a)

2,842

143,379

 

2,217,937

Construction Materials - 0.1%

Eagle Materials, Inc.

1,517

56,645

Headwaters, Inc. (a)

7,032

36,215

 

92,860

Containers & Packaging - 0.7%

Boise, Inc.

33,273

218,936

Myers Industries, Inc.

18,709

321,046

 

539,982

Metals & Mining - 0.9%

Coeur d'Alene Mines Corp. (a)

3,516

61,741

Golden Star Resources Ltd. (a)(d)

17,585

20,381

Hecla Mining Co. (d)

60,372

286,767

Noranda Aluminium Holding Corp.

10,019

79,751

Worthington Industries, Inc.

14,946

305,945

 

754,585

Paper & Forest Products - 1.3%

Buckeye Technologies, Inc.

13,465

383,618

Domtar Corp.

4,403

337,754

Glatfelter

6,303

103,180

Kapstone Paper & Packaging Corp. (a)

4,303

68,203

Neenah Paper, Inc.

6,413

171,163

 

1,063,918

TOTAL MATERIALS

4,669,282

TELECOMMUNICATION SERVICES - 0.3%

Diversified Telecommunication Services - 0.3%

HickoryTech Corp.

1,345

14,943

IDT Corp. Class B

383

3,757

inContact, Inc. (a)

197

987

Neutral Tandem, Inc. (a)

966

12,732

Premiere Global Services, Inc. (a)

3,930

32,973

Vonage Holdings Corp. (a)

100,945

202,899

 

268,291

Wireless Telecommunication Services - 0.0%

NTELOS Holdings Corp.

966

18,209

TOTAL TELECOMMUNICATION SERVICES

286,500

UTILITIES - 3.4%

Electric Utilities - 2.5%

Cleco Corp.

13,672

571,900

El Paso Electric Co.

14,637

485,363

Empire District Electric Co.

1,994

42,073

IDACORP, Inc.

1,404

59,080

PNM Resources, Inc.

5,797

113,273

 

Shares

Value

Portland General Electric Co.

19,505

$ 520,003

Unitil Corp.

1,380

36,570

UNS Energy Corp.

5,037

193,471

 

2,021,733

Gas Utilities - 0.1%

Chesapeake Utilities Corp.

19

831

Southwest Gas Corp.

2,007

87,606

 

88,437

Multi-Utilities - 0.6%

Avista Corp.

3,166

84,532

NorthWestern Energy Corp.

11,546

423,738

 

508,270

Water Utilities - 0.2%

American States Water Co.

2,829

111,972

California Water Service Group

600

11,082

Consolidated Water Co., Inc.

785

6,508

 

129,562

TOTAL UTILITIES

2,748,002

TOTAL COMMON STOCKS

(Cost $74,377,908)


79,030,449

U.S. Treasury Obligations - 0.6%

 

Principal Amount

 

U.S. Treasury Bills, yield at date of purchase 0.1% 7/19/12 (e)
(Cost $499,974)

$ 500,000


499,991

Money Market Funds - 4.3%

Shares

 

Fidelity Cash Central Fund, 0.17% (b)

1,145,649

1,145,649

Fidelity Securities Lending Cash Central Fund, 0.18% (b)(c)

2,312,975

2,312,975

TOTAL MONEY MARKET FUNDS

(Cost $3,458,624)


3,458,624

TOTAL INVESTMENT PORTFOLIO - 102.0%

(Cost $78,336,506)

82,989,064

NET OTHER ASSETS (LIABILITIES) - (2.0)%

(1,592,998)

NET ASSETS - 100%

$ 81,396,066

Futures Contracts

Expiration Date

Underlying Face Amount at Value

Unrealized Appreciation/(Depreciation)

Purchased

Equity Index Contracts

27 NYFE Russell 2000 Mini Index Contracts

Sept. 2012

$ 2,147,580

$ 77,469

 

The face value of futures purchased as a percentage of net assets is 2.6%

Legend

(a) Non-income producing

(b) Affiliated fund that is 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.

(c) Investment made with cash collateral received from securities on loan.

(d) Security or a portion of the security is on loan at period end.

(e) Security or a portion of the security was pledged to cover margin requirements for futures contracts. At the period end, the value of securities pledged amounted to $249,996.

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

$ 1,831

Fidelity Securities Lending Cash Central Fund

24,010

Total

$ 25,841

Other Information

The following is a summary of the inputs used, as of June 30, 2012, 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 in the table below, please refer to the Security 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:

Equities:

Consumer Discretionary

$ 12,013,940

$ 12,013,940

$ -

$ -

Consumer Staples

3,307,241

3,307,241

-

-

Energy

3,212,864

3,212,864

-

-

Financials

18,313,621

18,313,621

-

-

Health Care

10,103,254

10,103,254

-

-

Industrials

11,688,968

11,688,968

-

-

Information Technology

12,686,777

12,686,777

-

-

Materials

4,669,282

4,669,282

-

-

Telecommunication Services

286,500

286,500

-

-

Utilities

2,748,002

2,748,002

-

-

U.S. Government and Government Agency Obligations

499,991

-

499,991

-

Money Market Funds

3,458,624

3,458,624

-

-

Total Investments in Securities:

$ 82,989,064

$ 82,489,073

$ 499,991

$ -

Derivative Instruments:

Assets

Futures Contracts

$ 77,469

$ 77,469

$ -

$ -

Value of Derivative Instruments

The following table is a summary of the Fund's value of derivative instruments by risk exposure as of June 30, 2012. For additional information on derivative instruments, please refer to the Derivative Instruments section in the accompanying Notes to Financial Statements.

Risk Exposure /
 Derivative Type

Value

 

Asset

Liability

Equity Risk

Futures Contracts (a)

$ 77,469

$ -

Total Value of Derivatives

$ 77,469

$ -

(a) Reflects cumulative appreciation/(depreciation) on futures contracts as disclosed on the Schedule of Investments. Only the period end variation margin is separately disclosed on the Statement of Assets and Liabilities.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements

Statement of Assets and Liabilities

 

June 30, 2012 (Unaudited)

 

 

 

Assets

Investment in securities, at value (including securities loaned of $2,268,991) - See accompanying schedule:

Unaffiliated issuers (cost $74,877,882)

$ 79,530,440

 

Fidelity Central Funds (cost $3,458,624)

3,458,624

 

Total Investments (cost $78,336,506)

 

$ 82,989,064

Cash

 

12,726

Receivable for investments sold

393,932

Receivable for fund shares sold

235,527

Dividends receivable

132,008

Distributions receivable from Fidelity Central Funds

2,626

Receivable for daily variation margin on futures contracts

63,451

Other receivables

380

Total assets

83,829,714

 

 

 

Liabilities

Payable for fund shares redeemed

35,730

Accrued management fee

46,536

Distribution and service plan fees payable

600

Other affiliated payables

12,567

Other payables and accrued expenses

25,240

Collateral on securities loaned, at value

2,312,975

Total liabilities

2,433,648

 

 

 

Net Assets

$ 81,396,066

Net Assets consist of:

 

Paid in capital

$ 74,592,539

Undistributed net investment income

413,710

Accumulated undistributed net realized gain (loss) on investments

1,659,790

Net unrealized appreciation (depreciation) on investments

4,730,027

Net Assets

$ 81,396,066

Statement of Assets and Liabilities - continued

 

June 30, 2012 (Unaudited)

 

 

 

Initial Class:
Net Asset Value, offering price and redemption price per share ($19,120,220 ÷ 1,618,153 shares)

$ 11.82

 

 

 

Service Class:
Net Asset Value, offering price and redemption price per share ($253,363 ÷ 21,406 shares)

$ 11.84

 

 

 

Service Class 2:
Net Asset Value, offering price and redemption price per share ($1,840,827 ÷ 155,800 shares)

$ 11.82

 

 

 

Investor Class:
Net Asset Value, offering price and redemption price per share ($60,181,656 ÷ 5,105,882 shares)

$ 11.79

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements - continued

Statement of Operations

 Six months ended June 30, 2012 (Unaudited)

 

 

 

Investment Income

 

 

Dividends

 

$ 809,142

Interest

 

194

Income from Fidelity Central Funds

 

25,841

Total income

 

835,177

 

 

 

Expenses

Management fee

$ 298,540

Transfer agent fees

59,223

Distribution and service plan fees

3,697

Accounting and security lending fees

16,648

Custodian fees and expenses

4,396

Independent trustees' compensation

268

Audit

23,085

Legal

178

Miscellaneous

430

Total expenses before reductions

406,465

Expense reductions

(3)

406,462

Net investment income (loss)

428,715

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investment securities:

 

 

Unaffiliated issuers

1,690,037

Futures contracts

51,707

Total net realized gain (loss)

 

1,741,744

Change in net unrealized appreciation (depreciation) on:

Investment securities

3,602,911

Futures contracts

61,299

Total change in net unrealized appreciation (depreciation)

 

3,664,210

Net gain (loss)

5,405,954

Net increase (decrease) in net assets resulting from operations

$ 5,834,669

Statement of Changes in Net Assets

 

Six months ended June 30, 2012
(Unaudited)

Year ended
December 31,
2011

Increase (Decrease) in Net Assets

 

 

Operations

 

 

Net investment income (loss)

$ 428,715

$ 328,759

Net realized gain (loss)

1,741,744

8,584,115

Change in net unrealized appreciation (depreciation)

3,664,210

(11,127,389)

Net increase (decrease) in net assets resulting from operations

5,834,669

(2,214,515)

Distributions to shareholders from net investment income

(7,032)

(345,088)

Distributions to shareholders from net realized gain

(28,127)

-

Total distributions

(35,159)

(345,088)

Share transactions - net increase (decrease)

(302,051)

6,046,479

Total increase (decrease) in net assets

5,497,459

3,486,876

 

 

 

Net Assets

Beginning of period

75,898,607

72,411,731

End of period (including undistributed net investment income of $413,710 and distributions in excess of net investment income of $7,973, respectively)

$ 81,396,066

$ 75,898,607

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights - Initial Class

 

Six months ended
June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 10.94

$ 11.15

$ 8.91

$ 7.32

$ 11.17

$ 11.56

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .06

.05

.04

.04

.07

.05

Net realized and unrealized gain (loss)

  .83

(.20)

2.24

1.59

(3.84)

(.32)

Total from investment operations

  .89

(.15)

2.28

1.63

(3.77)

(.27)

Distributions from net investment income

  - I

(.06)

(.04)

(.04)

(.08)

(.06)

Distributions from net realized gain

  - I

-

-

-

-

(.07)

Total distributions

  (.01) J

(.06)

(.04)

(.04)

(.08)

(.12) K

Net asset value, end of period

$ 11.82

$ 10.94

$ 11.15

$ 8.91

$ 7.32

$ 11.17

Total Return B, C, D

  8.09%

(1.36)%

25.54%

22.28%

(33.72)%

(2.33)%

Ratios to Average Net Assets F, H

 

 

 

 

 

 

Expenses before reductions

  .90% A

.91%

.95%

1.05%

1.04%

1.01%

Expenses net of fee waivers, if any

  .90% A

.91%

.94%

1.00%

1.00%

1.00%

Expenses net of all reductions

  .90% A

.91%

.94%

1.00%

1.00%

1.00%

Net investment income (loss)

  1.08% A

.47%

.41%

.56%

.71%

.45%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 19,120

$ 19,809

$ 19,742

$ 13,864

$ 8,381

$ 11,668

Portfolio turnover rate G

  65% A

90%

71%

81%

87%

113%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.01 per share is comprised of distributions from net investment income of $.001 and distributions from net realized gain of $.004 per share.

K Total distributions of $.12 per share is comprised of distributions from net investment income of $.059 and distributions from net realized gain of $.065 per share.

Financial Highlights - Service Class

 

Six months ended
June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 10.96

$ 11.16

$ 8.92

$ 7.33

$ 11.17

$ 11.56

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .06

.04

.03

.03

.06

.04

Net realized and unrealized gain (loss)

  .83

(.20)

2.23

1.58

(3.84)

(.31)

Total from investment operations

  .89

(.16)

2.26

1.61

(3.78)

(.27)

Distributions from net investment income

  - I

(.04)

(.02)

(.02)

(.06)

(.05)

Distributions from net realized gain

  - I

-

-

-

-

(.07)

Total distributions

  (.01) J

(.04)

(.02)

(.02)

(.06)

(.12) K

Net asset value, end of period

$ 11.84

$ 10.96

$ 11.16

$ 8.92

$ 7.33

$ 11.17

Total Return B, C, D

  8.07%

(1.41)%

25.35%

22.03%

(33.79)%

(2.40)%

Ratios to Average Net Assets F, H

 

 

 

 

 

 

Expenses before reductions

  .98% A

1.01%

1.04%

1.10%

1.10%

1.09%

Expenses net of fee waivers, if any

  .98% A

1.01%

1.04%

1.10%

1.10%

1.09%

Expenses net of all reductions

  .98% A

1.01%

1.04%

1.10%

1.10%

1.08%

Net investment income (loss)

  .99% A

.38%

.32%

.46%

.61%

.37%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 253

$ 235

$ 327

$ 426

$ 631

$ 1,411

Portfolio turnover rate G

  65% A

90%

71%

81%

87%

113%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.01 per share is comprised of distributions from net investment income of $.001 and distributions from net realized gain of $.004 per share.

K Total distributions of $.12 per share is comprised of distributions from net investment income of $.051 and distributions from net realized gain of $.065 per share.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights - Service Class 2

 

Six months ended
June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 10.96

$ 11.15

$ 8.92

$ 7.33

$ 11.15

$ 11.55

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .05

.02

.01

.02

.04

.02

Net realized and unrealized gain (loss)

  .82

(.20)

2.23

1.59

(3.82)

(.32)

Total from investment operations

  .87

(.18)

2.24

1.61

(3.78)

(.30)

Distributions from net investment income

  - I

(.01)

(.01)

(.02)

(.04)

(.04)

Distributions from net realized gain

  - I

-

-

-

-

(.07)

Total distributions

  (.01) J

(.01)

(.01)

(.02)

(.04)

(.10) K

Net asset value, end of period

$ 11.82

$ 10.96

$ 11.15

$ 8.92

$ 7.33

$ 11.15

Total Return B, C, D

  7.89%

(1.58)%

25.07%

21.94%

(33.91)%

(2.60)%

Ratios to Average Net Assets F, H

 

 

 

 

 

 

Expenses before reductions

  1.20% A

1.26%

1.28%

1.41%

1.32%

1.24%

Expenses net of fee waivers, if any

  1.20% A

1.25%

1.25%

1.25%

1.25%

1.24%

Expenses net of all reductions

  1.20% A

1.25%

1.25%

1.25%

1.25%

1.24%

Net investment income (loss)

  .77% A

.14%

.11%

.31%

.46%

.21%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 1,841

$ 1,656

$ 2,513

$ 1,535

$ 1,494

$ 4,143

Portfolio turnover rate G

  65% A

90%

71%

81%

87%

113%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.01 per share is comprised of distributions from net investment income of $.001 and distributions from net realized gain of $.004 per share.

K Total distributions of $.10 per share is comprised of distributions from net investment income of $.038 and distributions from net realized gain of $.065 per share.

Financial Highlights - Investor Class

 

Six months ended
June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 10.92

$ 11.12

$ 8.89

$ 7.31

$ 11.15

$ 11.55

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  .06

.04

.03

.04

.06

.04

Net realized and unrealized gain (loss)

  .82

(.19)

2.23

1.57

(3.83)

(.32)

Total from investment operations

  .88

(.15)

2.26

1.61

(3.77)

(.28)

Distributions from net investment income

  - I

(.05)

(.03)

(.03)

(.07)

(.05)

Distributions from net realized gain

  - I

-

-

-

-

(.07)

Total distributions

  (.01) J

(.05)

(.03)

(.03)

(.07)

(.12) K

Net asset value, end of period

$ 11.79

$ 10.92

$ 11.12

$ 8.89

$ 7.31

$ 11.15

Total Return B, C, D

  8.01%

(1.35)%

25.44%

22.09%

(33.77)%

(2.50)%

Ratios to Average Net Assets F, H

 

 

 

 

 

 

Expenses before reductions

  .97% A

.99%

1.02%

1.12%

1.10%

1.10%

Expenses net of fee waivers, if any

  .97% A

.98%

1.01%

1.08%

1.08%

1.10%

Expenses net of all reductions

  .97% A

.98%

1.01%

1.08%

1.08%

1.10%

Net investment income (loss)

  1.01% A

.40%

.34%

.48%

.63%

.35%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 60,182

$ 54,198

$ 49,830

$ 26,426

$ 16,331

$ 21,872

Portfolio turnover rate G

  65% A

90%

71%

81%

87%

113%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

I Amount represents less than $.01 per share.

J Total distributions of $.01 per share is comprised of distributions from net investment income of $.001 and distributions from net realized gain of $.004 per share.

K Total distributions of $.12 per share is comprised of distributions from net investment income of $.050 and distributions from net realized gain of $.065 per share.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Notes to Financial Statements

For the period ended June 30, 2012 (Unaudited)

1. Organization.

VIP Disciplined Small Cap Portfolio (the Fund) is a fund of Variable Insurance Products Fund II (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. All classes have equal rights and voting privileges, except for matters affecting a single class. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions may also differ by class.

2. Investments in Fidelity Central Funds.

The Fund invests in Fidelity Central Funds, which are open-end investment companies available only to other investment companies and accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The Fund's Schedule of Investments lists each of the Fidelity Central Funds held as of period end, if any, as an investment of the Fund, but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.

The Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.

A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the SEC) web site at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds are available on the SEC web site or upon request.

3. Significant Accounting Policies.

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 following summarizes the significant accounting policies of the Fund:

Security Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. In accordance with valuation policies and procedures approved by the Board of Trustees (the Board), the Fund attempts to obtain prices from one or more third party pricing vendor or broker to value its investments. When current market prices, quotations or rates are not readily available or reliable, securities will be fair valued in good faith by the FMR Fair Value Committee (the Committee), in accordance with procedures adopted by the Fund's Board. Factors used in determining fair value vary by security type and may include market or security 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 is responsible for approving and reporting to the Board all fair value determinations.

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 significant 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 are used and are categorized as Level 2 in the hierarchy. Utilizing these techniques may result in transfers between Level 1 and Level 2. For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used and these securities are categorized as Level 3 in the hierarchy.

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. For U.S. government and government agency obligations, pricing vendors utilize matrix pricing which considers yield

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

3. Significant Accounting Policies - continued

Security Valuation - continued

or price of bonds of comparable quality, coupon, maturity and type as well as broker-supplied prices and are generally categorized as Level 2 in the hierarchy. 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. These are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.

Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded and are categorized as Level 1 in the hierarchy. Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value 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, 2012, 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 and may 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.

Expenses. 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. 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 income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. A 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 dividends 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. Temporary book-tax differences will reverse in a subsequent period.

Book-tax differences are primarily due to futures transactions, passive foreign investment companies (PFIC), partnerships, market discount, capital loss carryforwards and losses deferred due to wash sales.

The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:

Gross unrealized appreciation

$ 10,547,829

Gross unrealized depreciation

(5,966,296)

Net unrealized appreciation (depreciation) on securities and other investments

$ 4,581,533

 

 

Tax cost

$ 78,407,531

New Accounting Pronouncement. In December 2011, the Financial Accounting Standards Board issued Accounting Standard Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for interim and annual reporting periods beginning on or after January 1, 2013. Management is currently evaluating the impact of the update's adoption on the Fund's financial statement disclosures.

Semiannual Report

4. Derivative Instruments.

Risk Exposures and the Use of Derivative Instruments. The Fund's investment objectives allow the Fund to enter into various types of derivative contracts, including futures contracts. Derivatives are investments whose value is derived from underlying assets, indices or reference rates and may be transacted on an exchange or over-the-counter (OTC). Derivatives may involve a future commitment to buy or sell a specified instrument based on specified terms, or to exchange future cash flows at periodic intervals based on a notional principal amount. The Fund used derivatives to increase returns and to manage exposure to certain risks as defined below. The success of any strategy involving derivatives depends on analysis of numerous economic factors, and if the strategies for investment do not work as intended, the Fund may not achieve its objectives.

The Fund's use of derivatives increased or decreased its exposure to the following risk:

Equity Risk

Equity risk relates to the fluctuations in the value of financial instruments as a result of changes in market prices (other than those arising from interest rate risk or foreign exchange risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting all instruments traded in a market or market segment.

The Fund is also exposed to additional risks from investing in derivatives, such as liquidity risk and counterparty credit risk. Liquidity risk is the risk that the Fund will be unable to close out the derivative in the open market in a timely manner. Counterparty credit risk is the risk that the counterparty will not be able to fulfill its obligation to the Fund. Counterparty credit risk related to exchange-traded futures contracts is minimal because of the protection provided by the exchange on which they trade. Investing in derivatives may involve greater risks than investing in the underlying assets directly and, to varying degrees, involves risk of loss in excess of the initial investment, if any, collateral received and amounts recognized in the Statement of Assets and Liabilities. In addition, for futures contracts, there is the risk that the change in value of the derivative contract may not correspond to the change in value of the underlying instrument.

Futures Contracts. A futures contract is an agreement between two parties to buy or sell a specified underlying instrument for a fixed price at a specified future date. The Fund used futures contracts to manage its exposure to the stock market.

Upon entering into a futures contract, a fund is required to deposit either cash or securities (initial margin) with a clearing broker in an amount equal to a certain percentage of the face value of the contract. Futures contracts are marked-to-market daily and subsequent payments (variation margin) are made or received by a fund depending on the daily fluctuations in the value of the futures contracts and are recorded as unrealized appreciation or (depreciation). This receivable and/or payable is included in daily variation margin on futures contracts in the Statement of Assets and Liabilities. Realized gain or (loss) is recorded upon the expiration or closing of a futures contract.

Any open futures contracts at period end are shown in the Schedule of Investments under the caption "Futures Contracts." The underlying face amount at value reflects each contract's exposure to the underlying instrument at period end and is representative of activity for the period. Securities deposited to meet initial margin requirements are identified in the Schedule of Investments.

During the period the Fund recognized net realized gain (loss) of $51,707 and a change in net unrealized appreciation (depreciation) of $61,299 related to its investment in futures contracts. These amounts are included in the Statement of Operations.

5. Purchases and Sales of Investments.

Purchases and sales of securities, other than short-term securities, aggregated $26,632,241 and $26,354,969, respectively.

6. Fees and Other Transactions with Affiliates.

Management Fee. FMR 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 .45% of the Fund's average net assets and an annualized group fee rate that averaged .26% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annualized management fee rate was .71% of the Fund's average net assets.

Sub-Adviser. Geode Capital Management, LLC (Geode), serves as sub-adviser for the Fund. Geode provides discretionary investment advisory services to the Fund and is paid by FMR for providing these services.

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 Corporation (FDC), an affiliate of FMR, 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.

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

6. Fees and Other Transactions with Affiliates - continued

Distribution and Service Plan Fees - continued

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

$ 127

Service Class 2

3,570

 

$ 3,697

Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the Fund's transfer, dividend disbursing, and shareholder servicing agent. FIIOC receives an asset-based fee with respect to each class. Each class (with the exception of Investor Class) pays a transfer agent fee, excluding out of pocket expenses, equal to an annual rate of .07% of average net assets. Investor Class pays a monthly asset-based transfer agent fee of .15% of average net assets. In addition, FIIOC receives an asset-based fee of .0038% of average net assets for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period, transfer agent fees for each class, including printing and out of pocket expenses, were as follows:

Initial Class

$ 8,822

Service Class

90

Service Class 2

2,020

Investor Class

48,291

 

$ 59,223

Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.

7. Committed Line of Credit.

The Fund participates with other funds managed by FMR 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 Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $119 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, there were no borrowings on this line of credit.

8. Security Lending.

The Fund lends portfolio securities through a lending agent from time to time in order to earn additional income. For equity securities, a lending agent is used and may loan securities to certain qualified borrowers, including Fidelity Capital Markets (FCM), a broker-dealer affiliated with the Fund. On the settlement date of the loan, the 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 the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's 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. Total security lending income during the period amounted to $24,010. During the period, there were no securities loaned to FCM.

9. Expense Reductions.

Through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $3.

Semiannual Report

10. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

 

Six months ended
June 30,
2012

Year ended
December 31,
2011

From net investment income

 

 

Initial Class

$ 1,817

$ 102,021

Service Class

21

895

Service Class 2

137

1,949

Investor Class

5,057

240,223

Total

$ 7,032

$ 345,088

From net realized gain

 

 

Initial Class

$ 7,267

$ -

Service Class

86

-

Service Class 2

547

-

Investor Class

20,227

-

Total

$ 28,127

$ -

11. Share Transactions.

Transactions for each class of shares were as follows:

 

Shares

Dollars

 

Six months ended
June 30,
2012

Year ended
December 31,
2011

Six months ended
June 30,
2012

Year ended
December 31,
2011

Initial Class

 

 

 

 

Shares sold

198,869

799,889

$ 2,366,019

$ 9,258,309

Reinvestment of distributions

739

9,535

9,084

102,021

Shares redeemed

(392,050)

(770,169)

(4,643,109)

(8,596,529)

Net increase (decrease)

(192,442)

39,255

$ (2,268,006)

$ 763,801

Service Class

 

 

 

 

Shares sold

-

-

$ -

$ -

Reinvestment of distributions

9

84

107

895

Shares redeemed

-

(7,941)

-

(86,551)

Net increase (decrease)

9

(7,857)

$ 107

$ (85,656)

Service Class 2

 

 

 

 

Shares sold

171,861

112,730

$ 2,096,010

$ 1,294,995

Reinvestment of distributions

55

182

684

1,949

Shares redeemed

(167,287)

(187,048)

(1,922,439)

(2,135,089)

Net increase (decrease)

4,629

(74,136)

$ 174,255

$ (838,145)

Investor Class

 

 

 

 

Shares sold

831,726

2,193,939

$ 9,904,955

$ 25,259,132

Reinvestment of distributions

2,061

22,493

25,284

240,223

Shares redeemed

(692,147)

(1,732,651)

(8,138,646)

(19,292,876)

Net increase (decrease)

141,640

483,781

$ 1,791,593

$ 6,206,479

12. Other.

The 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, FMR or its affiliates were the owners of record of 98% of the total outstanding shares of the Fund.

Semiannual Report

Investment Adviser

Fidelity Management & Research Company
Boston, MA

Investment Sub-Advisers

Geode Capital Management, LLC

FMR Co., Inc.

General Distributor

Fidelity Distributors Corporation
Smithfield, RI

Transfer and Service Agents

Fidelity Investments Institutional Operations Company, Inc.
Boston, MA 

Fidelity Service Company, Inc.
Boston, MA 

Custodian

The Northern Trust Company

Chicago, IL 

VDSC-SANN-0812
1.821007.106

Fidelity® Variable Insurance Products:

Index 500 Portfolio

Semiannual Report

June 30, 2012

(Fidelity Cover Art)

Contents

Shareholder Expense Example

(Click Here)

An example of shareholder expenses.

Investment Changes

(Click Here)

A summary of major shifts in the fund's investments over the past six months.

Investments

(Click Here)

A complete list of the fund's investments with their market values.

Financial Statements

(Click Here)

Statements of assets and liabilities, operations, and changes in net assets, as well as financial highlights.

Notes

(Click Here)

Notes to the financial statements.

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. © 2012 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-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q 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.advisor.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.

Semiannual Report

Shareholder Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including 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 the 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, 2012 to June 30, 2012).

Actual Expenses

The first line of the accompanying table for each class of the Fund 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 of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. 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. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.

Hypothetical Example for Comparison Purposes

The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' 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. 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. In addition, the Fund, as a shareholder in the underlying Fidelity Central Funds, will indirectly bear its pro-rata share of the fees and expenses incurred by the underlying Fidelity Central Funds. These fees and expenses are not included in the Fund's annualized expense ratio used to calculate the expense estimate in the table below.

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

Beginning
Account Value
January 1, 2012

Ending
Account Value
June 30, 2012

Expenses Paid
During Period*
January 1, 2012
to June 30, 2012

Initial Class

.10%

 

 

 

Actual

 

$ 1,000.00

$ 1,094.50

$ .52

Hypothetical A

 

$ 1,000.00

$ 1,024.37

$ .50

Service Class

.20%

 

 

 

Actual

 

$ 1,000.00

$ 1,094.00

$ 1.04

Hypothetical A

 

$ 1,000.00

$ 1,023.87

$ 1.01

Service Class 2

.35%

 

 

 

Actual

 

$ 1,000.00

$ 1,093.10

$ 1.82

Hypothetical A

 

$ 1,000.00

$ 1,023.12

$ 1.76

A 5% return per year before expenses

* Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).

Semiannual Report

Investment Changes (Unaudited)

Top Ten Stocks as of June 30, 2012

 

% of fund's
net assets

% of fund's net assets
6 months ago

Apple, Inc.

4.4

3.2

Exxon Mobil Corp.

3.2

3.5

Microsoft Corp.

1.8

1.7

IBM Corp.

1.8

1.9

General Electric Co.

1.8

1.6

AT&T, Inc.

1.7

1.5

Chevron Corp.

1.7

1.8

Johnson & Johnson

1.5

1.5

Wells Fargo & Co.

1.4

1.2

The Coca-Cola Co.

1.4

1.4

 

20.7

Market Sectors as of June 30, 2012

 

% of fund's
net assets

% of fund's net assets
6 months ago

Information Technology

19.7

18.5

Financials

14.3

13.1

Health Care

11.9

11.5

Consumer Staples

11.2

11.2

Consumer Discretionary

10.9

10.4

Energy

10.8

11.9

Industrials

10.4

10.4

Utilities

3.7

3.7

Materials

3.4

3.4

Telecommunication Services

3.2

3.1

Asset Allocation

To match the S&P 500® Index, the VIP Index 500 Portfolio seeks 100% investment exposure to stocks at all times.

Semiannual Report

Investments June 30, 2012 (Unaudited)

Showing Percentage of Net Assets

Common Stocks - 99.5%

Shares

Value

CONSUMER DISCRETIONARY - 10.9%

Auto Components - 0.2%

BorgWarner, Inc. (a)(d)

22,444

$ 1,472,102

Johnson Controls, Inc.

133,197

3,690,889

The Goodyear Tire & Rubber Co. (a)

47,919

565,923

 

5,728,914

Automobiles - 0.4%

Ford Motor Co.

747,323

7,166,828

Harley-Davidson, Inc.

45,336

2,073,215

 

9,240,043

Distributors - 0.1%

Genuine Parts Co. (d)

30,530

1,839,433

Diversified Consumer Services - 0.1%

Apollo Group, Inc. Class A (non-vtg.) (a)

21,026

760,931

DeVry, Inc.

11,540

357,394

H&R Block, Inc.

57,486

918,626

 

2,036,951

Hotels, Restaurants & Leisure - 1.9%

Carnival Corp. unit (d)

88,738

3,041,051

Chipotle Mexican Grill, Inc. (a)(d)

6,208

2,358,730

Darden Restaurants, Inc.

25,193

1,275,522

International Game Technology

57,806

910,445

Marriott International, Inc. Class A (d)

51,854

2,032,677

McDonald's Corp.

199,002

17,617,647

Starbucks Corp.

148,530

7,919,620

Starwood Hotels & Resorts Worldwide, Inc.

38,703

2,052,807

Wyndham Worldwide Corp.

28,572

1,506,887

Wynn Resorts Ltd.

15,549

1,612,742

Yum! Brands, Inc.

90,187

5,809,847

 

46,137,975

Household Durables - 0.3%

D.R. Horton, Inc. (d)

54,862

1,008,364

Harman International Industries, Inc. (d)

13,802

546,559

Leggett & Platt, Inc. (d)

27,450

580,019

Lennar Corp. Class A (d)

31,864

984,916

Newell Rubbermaid, Inc.

56,768

1,029,772

PulteGroup, Inc. (a)(d)

66,111

707,388

Whirlpool Corp.

15,128

925,228

 

5,782,246

Internet & Catalog Retail - 1.0%

Amazon.com, Inc. (a)

70,578

16,116,486

Expedia, Inc.

17,669

849,349

Netflix, Inc. (a)

10,871

744,337

Priceline.com, Inc. (a)

9,750

6,479,070

TripAdvisor, Inc. (a)

18,659

833,871

 

25,023,113

 

Shares

Value

Leisure Equipment & Products - 0.1%

Hasbro, Inc. (d)

22,853

$ 774,031

Mattel, Inc. (d)

66,692

2,163,488

 

2,937,519

Media - 3.4%

Cablevision Systems Corp. - NY Group Class A (d)

41,939

557,369

CBS Corp. Class B

126,919

4,160,405

Comcast Corp. Class A

527,965

16,879,041

DIRECTV (a)

128,262

6,261,751

Discovery Communications, Inc. (a)(d)

49,925

2,695,950

Gannett Co., Inc.

46,009

677,713

Interpublic Group of Companies, Inc.

86,757

941,313

McGraw-Hill Companies, Inc.

54,771

2,464,695

News Corp. Class A

412,551

9,195,762

Omnicom Group, Inc.

53,386

2,594,560

Scripps Networks Interactive, Inc. Class A

18,152

1,032,123

The Walt Disney Co.

350,003

16,975,146

Time Warner Cable, Inc.

61,193

5,023,945

Time Warner, Inc.

187,971

7,236,884

Viacom, Inc. Class B (non-vtg.)

103,358

4,859,893

Washington Post Co. Class B (d)

940

351,391

 

81,907,941

Multiline Retail - 0.8%

Big Lots, Inc. (a)(d)

12,475

508,855

Dollar Tree, Inc. (a)

45,422

2,443,704

Family Dollar Stores, Inc.

22,859

1,519,666

JCPenney Co., Inc. (d)

28,679

668,507

Kohl's Corp. (d)

46,955

2,135,983

Macy's, Inc.

80,903

2,779,018

Nordstrom, Inc.

31,364

1,558,477

Sears Holdings Corp. (a)(d)

7,503

447,929

Target Corp.

129,478

7,534,325

 

19,596,464

Specialty Retail - 2.0%

Abercrombie & Fitch Co. Class A (d)

16,166

551,907

AutoNation, Inc. (a)(d)

8,134

286,968

AutoZone, Inc. (a)

5,218

1,915,893

Bed Bath & Beyond, Inc. (a)

45,525

2,813,445

Best Buy Co., Inc.

54,278

1,137,667

CarMax, Inc. (a)(d)

44,685

1,159,129

GameStop Corp. Class A (d)

25,514

468,437

Gap, Inc.

65,143

1,782,312

Home Depot, Inc.

299,735

15,882,958

Limited Brands, Inc.

47,316

2,012,349

Lowe's Companies, Inc.

230,426

6,553,315

O'Reilly Automotive, Inc. (a)

24,691

2,068,365

Ross Stores, Inc.

44,173

2,759,487

Staples, Inc.

134,954

1,761,150

Tiffany & Co., Inc. (d)

24,816

1,314,007

Common Stocks - continued

Shares

Value

CONSUMER DISCRETIONARY - continued

Specialty Retail - continued

TJX Companies, Inc.

145,094

$ 6,228,885

Urban Outfitters, Inc. (a)(d)

21,835

602,428

 

49,298,702

Textiles, Apparel & Luxury Goods - 0.6%

Coach, Inc.

56,273

3,290,845

Fossil, Inc. (a)(d)

10,187

779,713

NIKE, Inc. Class B

71,806

6,303,131

Ralph Lauren Corp.

12,708

1,779,882

VF Corp.

16,950

2,261,978

 

14,415,549

TOTAL CONSUMER DISCRETIONARY

263,944,850

CONSUMER STAPLES - 11.2%

Beverages - 2.8%

Beam, Inc.

30,861

1,928,504

Brown-Forman Corp. Class B (non-vtg.)

19,466

1,885,282

Coca-Cola Enterprises, Inc.

58,753

1,647,434

Constellation Brands, Inc. Class A (sub. vtg.) (a)

29,810

806,659

Dr Pepper Snapple Group, Inc. (d)

41,481

1,814,794

Molson Coors Brewing Co. Class B

30,778

1,280,673

Monster Beverage Corp. (a)

30,021

2,137,495

PepsiCo, Inc.

306,256

21,640,049

The Coca-Cola Co.

441,761

34,541,293

 

67,682,183

Food & Staples Retailing - 2.4%

Costco Wholesale Corp.

84,662

8,042,890

CVS Caremark Corp.

250,944

11,726,613

Kroger Co.

109,850

2,547,422

Safeway, Inc.

47,075

854,411

Sysco Corp.

114,705

3,419,356

Wal-Mart Stores, Inc.

337,909

23,559,015

Walgreen Co.

168,944

4,997,364

Whole Foods Market, Inc.

31,992

3,049,477

 

58,196,548

Food Products - 1.7%

Archer Daniels Midland Co.

128,953

3,806,693

Campbell Soup Co. (d)

34,652

1,156,684

ConAgra Foods, Inc.

81,337

2,109,068

Dean Foods Co. (a)

36,129

615,277

General Mills, Inc.

126,756

4,885,176

H.J. Heinz Co.

62,641

3,406,418

Hormel Foods Corp.

26,847

816,686

Kellogg Co.

48,299

2,382,590

Kraft Foods, Inc. Class A

347,187

13,408,362

McCormick & Co., Inc. (non-vtg.)

25,965

1,574,777

Mead Johnson Nutrition Co. Class A

39,926

3,214,442

The Hershey Co.

29,781

2,145,125

 

Shares

Value

The J.M. Smucker Co.

22,200

$ 1,676,544

Tyson Foods, Inc. Class A

56,548

1,064,799

 

42,262,641

Household Products - 2.1%

Clorox Co. (d)

25,470

1,845,556

Colgate-Palmolive Co.

93,455

9,728,666

Kimberly-Clark Corp.

76,785

6,432,279

Procter & Gamble Co.

536,569

32,864,851

 

50,871,352

Personal Products - 0.2%

Avon Products, Inc.

84,555

1,370,637

Estee Lauder Companies, Inc. Class A

44,151

2,389,452

 

3,760,089

Tobacco - 2.0%

Altria Group, Inc.

398,464

13,766,931

Lorillard, Inc.

25,558

3,372,378

Philip Morris International, Inc.

333,984

29,143,444

Reynolds American, Inc.

64,910

2,912,512

 

49,195,265

TOTAL CONSUMER STAPLES

271,968,078

ENERGY - 10.8%

Energy Equipment & Services - 1.7%

Baker Hughes, Inc. (d)

85,863

3,528,969

Cameron International Corp. (a)

48,229

2,059,861

Diamond Offshore Drilling, Inc. (d)

13,612

804,878

FMC Technologies, Inc. (a)(d)

46,822

1,836,827

Halliburton Co.

180,743

5,131,294

Helmerich & Payne, Inc. (d)

21,034

914,558

Nabors Industries Ltd. (a)

56,848

818,611

National Oilwell Varco, Inc.

83,461

5,378,227

Noble Corp. (d)

49,423

1,607,730

Rowan Companies PLC (a)(d)

24,317

786,169

Schlumberger Ltd.

261,137

16,950,403

 

39,817,527

Oil, Gas & Consumable Fuels - 9.1%

Alpha Natural Resources, Inc. (a)

43,135

375,706

Anadarko Petroleum Corp.

97,825

6,476,015

Apache Corp.

76,533

6,726,485

Cabot Oil & Gas Corp. (d)

41,089

1,618,907

Chesapeake Energy Corp.

129,700

2,412,420

Chevron Corp.

386,389

40,764,040

ConocoPhillips

247,626

13,837,341

CONSOL Energy, Inc. (d)

44,558

1,347,434

Denbury Resources, Inc. (a)

76,495

1,155,839

Devon Energy Corp.

79,190

4,592,228

EOG Resources, Inc.

52,792

4,757,087

EQT Corp.

29,290

1,570,823

Exxon Mobil Corp.

915,689

78,355,508

Hess Corp.

59,536

2,586,839

Kinder Morgan Holding Co. LLC

98,888

3,186,171

Common Stocks - continued

Shares

Value

ENERGY - continued

Oil, Gas & Consumable Fuels - continued

Marathon Oil Corp.

138,116

$ 3,531,626

Marathon Petroleum Corp.

66,720

2,997,062

Murphy Oil Corp.

38,022

1,912,126

Newfield Exploration Co. (a)

26,398

773,725

Noble Energy, Inc.

34,814

2,952,923

Occidental Petroleum Corp.

158,823

13,622,249

Peabody Energy Corp.

53,340

1,307,897

Phillips 66 (a)

122,441

4,069,939

Pioneer Natural Resources Co. (d)

24,091

2,125,067

QEP Resources, Inc.

34,932

1,046,912

Range Resources Corp.

31,759

1,964,929

Southwestern Energy Co. (a)(d)

68,173

2,176,764

Spectra Energy Corp.

127,819

3,714,420

Sunoco, Inc.

20,737

985,008

Tesoro Corp. (a)

27,480

685,901

Valero Energy Corp.

108,264

2,614,576

Williams Companies, Inc.

122,515

3,530,882

WPX Energy, Inc.

38,913

629,612

 

220,404,461

TOTAL ENERGY

260,221,988

FINANCIALS - 14.3%

Capital Markets - 1.8%

Ameriprise Financial, Inc.

42,811

2,237,303

Bank of New York Mellon Corp.

233,558

5,126,598

BlackRock, Inc. Class A

25,094

4,261,463

Charles Schwab Corp.

211,892

2,739,764

E*TRADE Financial Corp. (a)

49,790

400,312

Federated Investors, Inc. Class B (non-vtg.) (d)

18,156

396,709

Franklin Resources, Inc.

27,811

3,086,743

Goldman Sachs Group, Inc.

96,320

9,233,235

Invesco Ltd.

87,771

1,983,625

Legg Mason, Inc.

24,606

648,860

Morgan Stanley

298,212

4,350,913

Northern Trust Corp.

47,222

2,173,156

State Street Corp.

95,677

4,271,021

T. Rowe Price Group, Inc.

49,953

3,145,041

 

44,054,743

Commercial Banks - 2.9%

BB&T Corp.

136,808

4,220,527

Comerica, Inc.

38,513

1,182,734

Fifth Third Bancorp

180,166

2,414,224

First Horizon National Corp. (d)

49,477

427,976

Huntington Bancshares, Inc.

169,321

1,083,654

KeyCorp

186,644

1,444,625

M&T Bank Corp.

24,783

2,046,332

PNC Financial Services Group, Inc.

103,547

6,327,757

Regions Financial Corp.

276,582

1,866,929

SunTrust Banks, Inc.

105,384

2,553,454

 

Shares

Value

U.S. Bancorp

370,921

$ 11,928,819

Wells Fargo & Co.

1,040,574

34,796,795

Zions Bancorporation (d)

36,070

700,479

 

70,994,305

Consumer Finance - 0.9%

American Express Co.

196,074

11,413,468

Capital One Financial Corp.

113,643

6,211,726

Discover Financial Services

103,847

3,591,029

SLM Corp.

95,511

1,500,478

 

22,716,701

Diversified Financial Services - 2.9%

Bank of America Corp.

2,110,296

17,262,221

Citigroup, Inc.

574,176

15,738,164

CME Group, Inc.

13,015

3,489,452

IntercontinentalExchange, Inc. (a)

14,246

1,937,171

JPMorgan Chase & Co.

745,423

26,633,964

Leucadia National Corp. (d)

38,794

825,148

Moody's Corp. (d)

38,721

1,415,253

NYSE Euronext

49,738

1,272,298

The NASDAQ Stock Market, Inc.

23,972

543,445

 

69,117,116

Insurance - 3.5%

ACE Ltd.

66,323

4,916,524

AFLAC, Inc.

91,571

3,900,009

Allstate Corp.

96,219

3,376,325

American International Group, Inc. (a)

125,232

4,018,695

Aon PLC

63,920

2,990,178

Assurant, Inc.

16,792

585,033

Berkshire Hathaway, Inc. Class B (a)

344,365

28,695,935

Cincinnati Financial Corp. (d)

31,787

1,210,131

Genworth Financial, Inc. Class A (a)

96,246

544,752

Hartford Financial Services Group, Inc.

86,330

1,521,998

Lincoln National Corp.

55,890

1,222,314

Loews Corp.

59,836

2,447,891

Marsh & McLennan Companies, Inc.

106,841

3,443,485

MetLife, Inc.

207,967

6,415,782

Principal Financial Group, Inc. (d)

58,773

1,541,616

Progressive Corp.

119,392

2,486,935

Prudential Financial, Inc.

91,840

4,447,811

The Chubb Corp.

52,862

3,849,411

The Travelers Companies, Inc.

76,182

4,863,459

Torchmark Corp.

19,279

974,553

Unum Group

55,975

1,070,802

XL Group PLC Class A

61,039

1,284,261

 

85,807,900

Real Estate Investment Trusts - 2.2%

American Tower Corp.

77,268

5,401,806

Apartment Investment & Management Co. Class A

27,680

748,190

AvalonBay Communities, Inc.

18,672

2,641,715

Boston Properties, Inc.

29,337

3,179,251

Equity Residential (SBI)

58,868

3,671,008

Common Stocks - continued

Shares

Value

FINANCIALS - continued

Real Estate Investment Trusts - continued

HCP, Inc. (d)

82,147

$ 3,626,790

Health Care REIT, Inc.

41,870

2,441,021

Host Hotels & Resorts, Inc.

140,677

2,225,510

Kimco Realty Corp.

79,685

1,516,406

Plum Creek Timber Co., Inc.

31,624

1,255,473

Prologis, Inc.

90,155

2,995,851

Public Storage

27,872

4,024,996

Simon Property Group, Inc.

59,353

9,238,888

Ventas, Inc.

56,598

3,572,466

Vornado Realty Trust

36,352

3,052,841

Weyerhaeuser Co.

105,244

2,353,256

 

51,945,468

Real Estate Management & Development - 0.0%

CBRE Group, Inc. (a)

64,217

1,050,590

Thrifts & Mortgage Finance - 0.1%

Hudson City Bancorp, Inc.

103,419

658,779

People's United Financial, Inc.

69,696

809,171

 

1,467,950

TOTAL FINANCIALS

347,154,773

HEALTH CARE - 11.9%

Biotechnology - 1.4%

Alexion Pharmaceuticals, Inc. (a)

37,615

3,735,170

Amgen, Inc.

152,291

11,123,335

Biogen Idec, Inc. (a)

46,911

6,773,010

Celgene Corp. (a)

86,259

5,534,377

Gilead Sciences, Inc. (a)(d)

148,299

7,604,773

 

34,770,665

Health Care Equipment & Supplies - 1.8%

Baxter International, Inc.

107,818

5,730,527

Becton, Dickinson & Co.

39,693

2,967,052

Boston Scientific Corp. (a)

279,885

1,586,948

C.R. Bard, Inc.

16,435

1,765,776

CareFusion Corp. (a)

43,456

1,115,950

Covidien PLC

94,440

5,052,540

DENTSPLY International, Inc.

27,757

1,049,492

Edwards Lifesciences Corp. (a)(d)

22,441

2,318,155

Intuitive Surgical, Inc. (a)(d)

7,774

4,305,163

Medtronic, Inc.

203,769

7,891,973

St. Jude Medical, Inc.

61,453

2,452,589

Stryker Corp.

63,405

3,493,616

Varian Medical Systems, Inc. (a)(d)

21,835

1,326,913

Zimmer Holdings, Inc.

34,491

2,219,841

 

43,276,535

Health Care Providers & Services - 2.0%

Aetna, Inc.

68,028

2,637,446

AmerisourceBergen Corp.

49,112

1,932,557

Cardinal Health, Inc.

67,769

2,846,298

CIGNA Corp.

56,459

2,484,196

 

Shares

Value

Coventry Health Care, Inc.

27,975

$ 889,325

DaVita, Inc. (a)(d)

18,411

1,808,144

Express Scripts Holding Co. (a)

157,729

8,806,010

Humana, Inc.

31,954

2,474,518

Laboratory Corp. of America Holdings (a)(d)

18,955

1,755,423

McKesson Corp.

46,096

4,321,500

Patterson Companies, Inc.

17,167

591,746

Quest Diagnostics, Inc.

31,067

1,860,913

Tenet Healthcare Corp. (a)(d)

81,033

424,613

UnitedHealth Group, Inc.

203,154

11,884,509

WellPoint, Inc.

64,783

4,132,508

 

48,849,706

Health Care Technology - 0.1%

Cerner Corp. (a)(d)

28,706

2,372,838

Life Sciences Tools & Services - 0.4%

Agilent Technologies, Inc.

68,048

2,670,204

Life Technologies Corp. (a)

34,969

1,573,255

PerkinElmer, Inc.

22,301

575,366

Thermo Fisher Scientific, Inc.

71,925

3,733,627

Waters Corp. (a)

17,403

1,383,016

 

9,935,468

Pharmaceuticals - 6.2%

Abbott Laboratories

308,102

19,863,336

Allergan, Inc.

60,221

5,574,658

Bristol-Myers Squibb Co.

330,757

11,890,714

Eli Lilly & Co.

199,965

8,580,498

Forest Laboratories, Inc. (a)

52,027

1,820,425

Hospira, Inc. (a)(d)

32,337

1,131,148

Johnson & Johnson (d)

537,796

36,333,498

Merck & Co., Inc.

595,601

24,866,342

Mylan, Inc. (a)

83,938

1,793,755

Perrigo Co. (d)

18,293

2,157,293

Pfizer, Inc.

1,466,330

33,725,590

Watson Pharmaceuticals, Inc. (a)

24,949

1,845,977

 

149,583,234

TOTAL HEALTH CARE

288,788,446

INDUSTRIALS - 10.4%

Aerospace & Defense - 2.5%

General Dynamics Corp.

70,614

4,657,699

Goodrich Corp.

24,658

3,129,100

Honeywell International, Inc.

152,580

8,520,067

L-3 Communications Holdings, Inc. (d)

19,078

1,411,963

Lockheed Martin Corp.

52,128

4,539,306

Northrop Grumman Corp. (d)

49,250

3,141,658

Precision Castparts Corp.

28,455

4,680,563

Raytheon Co.

65,274

3,693,856

Rockwell Collins, Inc. (d)

28,401

1,401,589

Textron, Inc. (d)

54,885

1,364,990

Common Stocks - continued

Shares

Value

INDUSTRIALS - continued

Aerospace & Defense - continued

The Boeing Co.

146,679

$ 10,898,250

United Technologies Corp.

178,463

13,479,310

 

60,918,351

Air Freight & Logistics - 1.0%

C.H. Robinson Worldwide, Inc.

31,843

1,863,771

Expeditors International of Washington, Inc.

41,593

1,611,729

FedEx Corp.

61,755

5,657,376

United Parcel Service, Inc. Class B

187,889

14,798,138

 

23,931,014

Airlines - 0.1%

Southwest Airlines Co.

150,328

1,386,024

Building Products - 0.0%

Masco Corp. (d)

69,927

969,887

Commercial Services & Supplies - 0.4%

Avery Dennison Corp. (d)

20,295

554,865

Cintas Corp. (d)

21,604

834,130

Iron Mountain, Inc.

33,524

1,104,951

Pitney Bowes, Inc. (d)

39,206

586,914

R.R. Donnelley & Sons Co. (d)

35,299

415,469

Republic Services, Inc.

61,624

1,630,571

Stericycle, Inc. (a)(d)

16,661

1,527,314

Waste Management, Inc. (d)

90,600

3,026,040

 

9,680,254

Construction & Engineering - 0.1%

Fluor Corp.

33,117

1,633,993

Jacobs Engineering Group, Inc. (a)(d)

25,266

956,571

Quanta Services, Inc. (a)(d)

41,716

1,004,104

 

3,594,668

Electrical Equipment - 0.5%

Cooper Industries PLC Class A

31,149

2,123,739

Emerson Electric Co.

143,655

6,691,450

Rockwell Automation, Inc.

27,948

1,846,245

Roper Industries, Inc.

19,079

1,880,808

 

12,542,242

Industrial Conglomerates - 2.7%

3M Co.

135,874

12,174,310

Danaher Corp.

112,594

5,863,896

General Electric Co.

2,074,778

43,238,374

Tyco International Ltd.

90,638

4,790,218

 

66,066,798

Machinery - 1.9%

Caterpillar, Inc.

127,741

10,846,488

Cummins, Inc.

37,634

3,647,111

Deere & Co.

77,885

6,298,560

Dover Corp.

35,960

1,927,816

Eaton Corp.

66,127

2,620,613

Flowserve Corp.

10,704

1,228,284

 

Shares

Value

Illinois Tool Works, Inc.

93,476

$ 4,943,946

Ingersoll-Rand PLC

58,496

2,467,361

Joy Global, Inc. (d)

20,726

1,175,786

PACCAR, Inc.

69,847

2,737,304

Pall Corp. (d)

22,676

1,242,872

Parker Hannifin Corp. (d)

29,579

2,274,034

Snap-On, Inc. (d)

11,378

708,281

Stanley Black & Decker, Inc.

33,464

2,153,743

Xylem, Inc.

36,312

913,973

 

45,186,172

Professional Services - 0.1%

Dun & Bradstreet Corp. (d)

9,373

667,076

Equifax, Inc.

23,573

1,098,502

Robert Half International, Inc.

27,998

799,903

 

2,565,481

Road & Rail - 0.9%

CSX Corp.

203,488

4,549,992

Norfolk Southern Corp.

63,791

4,578,280

Ryder System, Inc.

10,040

361,540

Union Pacific Corp.

93,253

11,126,015

 

20,615,827

Trading Companies & Distributors - 0.2%

Fastenal Co. (d)

57,830

2,331,127

W.W. Grainger, Inc. (d)

11,949

2,285,127

 

4,616,254

TOTAL INDUSTRIALS

252,072,972

INFORMATION TECHNOLOGY - 19.7%

Communications Equipment - 1.8%

Cisco Systems, Inc.

1,048,986

18,011,090

Comverse Technology, Inc. (a)

274

1,595

F5 Networks, Inc. (a)

15,547

1,547,859

Harris Corp.

22,280

932,418

JDS Uniphase Corp. (a)(d)

45,336

498,696

Juniper Networks, Inc. (a)

103,696

1,691,282

Motorola Solutions, Inc.

57,192

2,751,507

QUALCOMM, Inc.

335,690

18,691,219

 

44,125,666

Computers & Peripherals - 5.6%

Apple, Inc. (a)

183,104

106,932,727

Dell, Inc. (a)

291,118

3,644,797

EMC Corp. (a)

411,166

10,538,185

Hewlett-Packard Co.

387,204

7,786,672

Lexmark International, Inc. Class A (d)

13,930

370,259

NetApp, Inc. (a)

71,063

2,261,225

SanDisk Corp. (a)

47,714

1,740,607

Seagate Technology

74,110

1,832,740

Western Digital Corp. (a)

45,827

1,396,807

 

136,504,019

Electronic Equipment & Components - 0.4%

Amphenol Corp. Class A

31,725

1,742,337

Common Stocks - continued

Shares

Value

INFORMATION TECHNOLOGY - continued

Electronic Equipment & Components - continued

Corning, Inc.

297,176

$ 3,842,486

FLIR Systems, Inc.

30,196

588,822

Jabil Circuit, Inc.

35,614

724,033

Molex, Inc.

26,937

644,872

TE Connectivity Ltd.

83,728

2,671,760

 

10,214,310

Internet Software & Services - 1.9%

Akamai Technologies, Inc. (a)

35,088

1,114,044

eBay, Inc. (a)

225,035

9,453,720

Google, Inc. Class A (a)

49,797

28,885,746

VeriSign, Inc. (a)

30,937

1,347,925

Yahoo!, Inc. (a)

238,646

3,777,766

 

44,579,201

IT Services - 3.9%

Accenture PLC Class A

126,197

7,583,178

Automatic Data Processing, Inc.

95,773

5,330,725

Cognizant Technology Solutions Corp. Class A (a)

59,625

3,577,500

Computer Sciences Corp.

30,392

754,329

Fidelity National Information Services, Inc.

46,760

1,593,581

Fiserv, Inc. (a)(d)

26,726

1,930,152

IBM Corp.

225,876

44,176,828

MasterCard, Inc. Class A

20,788

8,941,127

Paychex, Inc. (d)

63,184

1,984,609

SAIC, Inc.

54,179

656,649

Teradata Corp. (a)

33,035

2,378,850

The Western Union Co.

120,028

2,021,272

Total System Services, Inc.

31,472

753,125

Visa, Inc. Class A

97,509

12,055,038

 

93,736,963

Office Electronics - 0.1%

Xerox Corp.

263,917

2,077,027

Semiconductors & Semiconductor Equipment - 2.3%

Advanced Micro Devices, Inc. (a)(d)

115,364

661,036

Altera Corp.

63,178

2,137,944

Analog Devices, Inc.

58,421

2,200,719

Applied Materials, Inc.

250,986

2,876,300

Broadcom Corp. Class A

97,107

3,282,217

First Solar, Inc. (a)(d)

11,554

174,003

Intel Corp.

985,173

26,254,860

KLA-Tencor Corp.

32,766

1,613,726

Lam Research Corp. (a)

39,449

1,488,805

Linear Technology Corp. (d)

45,079

1,412,325

LSI Corp. (a)

111,403

709,637

Microchip Technology, Inc. (d)

37,908

1,253,997

Micron Technology, Inc. (a)(d)

193,789

1,222,809

NVIDIA Corp. (a)

121,174

1,674,625

Teradyne, Inc. (a)(d)

36,554

513,949

 

Shares

Value

Texas Instruments, Inc.

224,088

$ 6,429,085

Xilinx, Inc. (d)

51,678

1,734,830

 

55,640,867

Software - 3.7%

Adobe Systems, Inc. (a)

97,152

3,144,810

Autodesk, Inc. (a)

45,000

1,574,550

BMC Software, Inc. (a)

31,543

1,346,255

CA Technologies, Inc. (d)

69,298

1,877,283

Citrix Systems, Inc. (a)

36,460

3,060,452

Electronic Arts, Inc. (a)

62,244

768,713

Intuit, Inc.

57,506

3,412,981

Microsoft Corp.

1,464,104

44,786,941

Oracle Corp.

759,897

22,568,941

Red Hat, Inc. (a)(d)

37,766

2,133,024

salesforce.com, Inc. (a)(d)

27,023

3,736,200

Symantec Corp. (a)

141,137

2,062,012

 

90,472,162

TOTAL INFORMATION TECHNOLOGY

477,350,215

MATERIALS - 3.4%

Chemicals - 2.3%

Air Products & Chemicals, Inc.

41,403

3,342,464

Airgas, Inc.

13,553

1,138,588

CF Industries Holdings, Inc.

12,853

2,490,140

Dow Chemical Co.

234,080

7,373,520

E.I. du Pont de Nemours & Co.

183,491

9,279,140

Eastman Chemical Co. (d)

27,012

1,360,594

Ecolab, Inc.

57,216

3,921,012

FMC Corp.

26,854

1,436,152

International Flavors & Fragrances, Inc.

15,874

869,895

Monsanto Co.

104,457

8,646,950

PPG Industries, Inc.

29,821

3,164,605

Praxair, Inc.

58,489

6,359,509

Sherwin-Williams Co.

16,786

2,221,627

Sigma Aldrich Corp. (d)

23,673

1,750,145

The Mosaic Co.

58,320

3,193,603

 

56,547,944

Construction Materials - 0.0%

Vulcan Materials Co.

25,337

1,006,132

Containers & Packaging - 0.1%

Ball Corp.

30,682

1,259,496

Bemis Co., Inc.

20,188

632,692

Owens-Illinois, Inc. (a)

32,296

619,114

Sealed Air Corp.

38,008

586,844

 

3,098,146

Metals & Mining - 0.8%

Alcoa, Inc. (d)

208,882

1,827,718

Allegheny Technologies, Inc.

20,974

668,861

Cliffs Natural Resources, Inc. (d)

27,900

1,375,191

Freeport-McMoRan Copper & Gold, Inc.

185,856

6,332,114

Newmont Mining Corp.

97,038

4,707,313

Common Stocks - continued

Shares

Value

MATERIALS - continued

Metals & Mining - continued

Nucor Corp.

62,085

$ 2,353,022

Titanium Metals Corp.

16,123

182,351

United States Steel Corp. (d)

28,200

580,920

 

18,027,490

Paper & Forest Products - 0.2%

International Paper Co.

85,590

2,474,407

MeadWestvaco Corp.

33,749

970,284

 

3,444,691

TOTAL MATERIALS

82,124,403

TELECOMMUNICATION SERVICES - 3.2%

Diversified Telecommunication Services - 3.0%

AT&T, Inc.

1,148,095

40,941,068

CenturyLink, Inc.

121,651

4,803,998

Frontier Communications Corp. (d)

195,517

748,830

Verizon Communications, Inc.

556,332

24,723,394

Windstream Corp.

115,213

1,112,958

 

72,330,248

Wireless Telecommunication Services - 0.2%

Crown Castle International Corp. (a)

50,492

2,961,861

MetroPCS Communications, Inc. (a)

57,607

348,522

Sprint Nextel Corp. (a)

587,235

1,914,386

 

5,224,769

TOTAL TELECOMMUNICATION SERVICES

77,555,017

UTILITIES - 3.7%

Electric Utilities - 2.2%

American Electric Power Co., Inc.

94,840

3,784,116

Duke Energy Corp. (d)

413,467

9,534,549

Edison International

63,800

2,947,560

Entergy Corp.

34,691

2,355,172

Exelon Corp.

166,919

6,279,493

FirstEnergy Corp.

81,895

4,028,415

NextEra Energy, Inc.

81,672

5,619,850

Northeast Utilities

61,410

2,383,322

Pepco Holdings, Inc.

44,702

874,818

Pinnacle West Capital Corp. (d)

21,438

1,109,202

PPL Corp.

113,580

3,158,660

Southern Co.

170,107

7,875,954

Xcel Energy, Inc.

95,353

2,708,979

 

52,660,090

Gas Utilities - 0.1%

AGL Resources, Inc.

22,972

890,165

ONEOK, Inc.

40,702

1,722,102

 

2,612,267

 

Shares

Value

Independent Power Producers & Energy Traders - 0.1%

NRG Energy, Inc. (a)(d)

44,592

$ 774,117

The AES Corp. (a)

126,244

1,619,711

 

2,393,828

Multi-Utilities - 1.3%

Ameren Corp.

47,513

1,593,586

CenterPoint Energy, Inc.

83,674

1,729,542

CMS Energy Corp.

50,972

1,197,842

Consolidated Edison, Inc. (d)

57,357

3,567,032

Dominion Resources, Inc.

111,911

6,043,194

DTE Energy Co.

33,311

1,976,342

Integrys Energy Group, Inc.

15,258

867,722

NiSource, Inc. (d)

55,631

1,376,867

PG&E Corp.

82,699

3,743,784

Public Service Enterprise Group, Inc. (d)

99,065

3,219,613

SCANA Corp.

22,794

1,090,465

Sempra Energy

46,979

3,235,914

TECO Energy, Inc. (d)

42,258

763,179

Wisconsin Energy Corp.

45,128

1,785,715

 

32,190,797

TOTAL UTILITIES

89,856,982

TOTAL COMMON STOCKS

(Cost $1,458,343,911)


2,411,037,724

Money Market Funds - 7.5%

 

 

 

 

Fidelity Cash Central Fund, 0.17% (b)

9,657,243

9,657,243

Fidelity Securities Lending Cash Central Fund, 0.18% (b)(c)

172,631,642

172,631,642

TOTAL MONEY MARKET FUNDS

(Cost $182,288,885)


182,288,885

TOTAL INVESTMENT PORTFOLIO - 107.0%

(Cost $1,640,632,796)

2,593,326,609

NET OTHER ASSETS (LIABILITIES) - (7.0)%

(170,389,832)

NET ASSETS - 100%

$ 2,422,936,777

Futures Contracts

Expiration Date

Underlying Face Amount at Value

Unrealized Appreciation/(Depreciation)

Purchased

Equity Index Contracts

15 CME E-mini S&P 500 Index Contracts

Sept. 2012

$ 1,017,300

$ 30,505

32 CME S&P 500 Index Contracts

Sept. 2012

10,851,200

378,142

TOTAL EQUITY INDEX CONTRACTS

$ 11,868,500

$ 408,647

The face value of futures purchased as a percentage of net assets is 0.5%

Legend

(a) Non-income producing

(b) Affiliated fund that is 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.

(c) Investment made with cash collateral received from securities on loan.

(d) Security or a portion of the security is on loan at period end.

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

$ 18,175

Fidelity Securities Lending Cash Central Fund

181,360

Total

$ 199,535

Other Information

All investments are categorized as Level 1 under the Fair Value Hierarchy. 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, please refer to the Security Valuation section in the accompanying Notes to Financial Statements.

Value of Derivative Instruments

The following table is a summary of the Fund's value of derivative instruments by risk exposure as of June 30, 2012. For additional information on derivative instruments, please refer to the Derivative Instruments section in the accompanying Notes to Financial Statements.

Risk Exposure /
 Derivative Type

Value

 

Asset

Liability

Equity Risk

Futures Contracts (a)

$ 408,647

$ -

Total Value of Derivatives

$ 408,647

$ -

(a) Reflects cumulative appreciation/(depreciation) on futures contracts as disclosed on the Schedule of Investments. Only the period end variation margin is separately disclosed on the Statement of Assets and Liabilities.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Statements

Statement of Assets and Liabilities

 

June 30, 2012 (Unaudited)

 

 

 

Assets

Investment in securities, at value (including securities loaned of $172,722,292) - See accompanying schedule:

Unaffiliated issuers (cost $1,458,343,911)

$ 2,411,037,724

 

Fidelity Central Funds (cost $182,288,885)

182,288,885

 

Total Investments (cost $1,640,632,796)

 

$ 2,593,326,609

Segregated cash with broker for futures contracts

682,500

Cash

 

9,301

Receivable for investments sold

5,681,779

Receivable for fund shares sold

2,068,089

Dividends receivable

3,130,292

Distributions receivable from Fidelity Central Funds

27,585

Receivable for daily variation margin on futures contracts

323,437

Other receivables

34,942

Total assets

2,605,284,534

 

 

 

Liabilities

Payable for investments purchased

$ 7,383,926

Payable for fund shares redeemed

2,046,318

Accrued management fee

87,977

Distribution and service plan fees payable

55,368

Other affiliated payables

107,586

Other payables and accrued expenses

34,940

Collateral on securities loaned, at value

172,631,642

Total liabilities

182,347,757

 

 

 

Net Assets

$ 2,422,936,777

Net Assets consist of:

 

Paid in capital

$ 1,433,502,790

Undistributed net investment income

23,327,028

Accumulated undistributed net realized gain (loss) on investments

13,004,499

Net unrealized appreciation (depreciation) on investments

953,102,460

Net Assets

$ 2,422,936,777

Statement of Assets and Liabilities - continued

 

June 30, 2012 (Unaudited)

 

 

 

Initial Class:
Net Asset Value, offering price and redemption price per share ($2,124,462,339 ÷ 15,179,487 shares)

$ 139.96

 

 

 

Service Class:
Net Asset Value, offering price and redemption price per share ($38,434,580 ÷ 275,453 shares)

$ 139.53

 

 

 

Service Class 2:
Net Asset Value, offering price and redemption price per share ($260,039,858 ÷ 1,876,308 shares)

$ 138.59

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Statement of Operations

Six months ended June 30, 2012 (Unaudited)

 

 

 

Investment Income

 

 

Dividends

 

$ 25,040,346

Interest

 

544

Income from Fidelity Central Funds

 

199,535

Total income

 

25,240,425

 

 

 

Expenses

Management fee

$ 535,921

Transfer agent fees

655,014

Distribution and service plan fees

340,109

Independent trustees' compensation

7,683

Miscellaneous

3,370

Total expenses before reductions

1,542,097

Expense reductions

(29)

1,542,068

Net investment income (loss)

23,698,357

Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investment securities:

 

 

Unaffiliated issuers

10,300,888

Futures contracts

5,133,098

Total net realized gain (loss)

 

15,433,986

Change in net unrealized appreciation (depreciation) on:

Investment securities

166,125,842

Futures contracts

(51,125)

Total change in net unrealized appreciation (depreciation)

 

166,074,717

Net gain (loss)

181,508,703

Net increase (decrease) in net assets resulting from operations

$ 205,207,060

Statement of Changes in Net Assets

 

Six months ended June 30, 2012
(Unaudited)

Year ended
December 31, 2011

Increase (Decrease) in Net Assets

 

 

Operations

 

 

Net investment income (loss)

$ 23,698,357

$ 42,729,839

Net realized gain (loss)

15,433,986

28,415,126

Change in net unrealized appreciation (depreciation)

166,074,717

(28,150,513)

Net increase (decrease) in net assets resulting from operations

205,207,060

42,994,452

Distributions to shareholders from net investment income

-

(43,244,270)

Distributions to shareholders from net realized gain

(26,528,684)

(51,595,129)

Total distributions

(26,528,684)

(94,839,399)

Share transactions - net increase (decrease)

48,399,666

36,547,032

Total increase (decrease) in net assets

227,078,042

(15,297,915)

 

 

 

Net Assets

Beginning of period

2,195,858,735

2,211,156,650

End of period (including undistributed net investment income of $23,327,028 and distributions in excess of net investment income of $371,329, respectively)

$ 2,422,936,777

$ 2,195,858,735

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights - Initial Class

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 129.33

$ 132.39

$ 119.62

$ 99.19

$ 164.03

$ 161.36

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  1.39

2.58

2.35

2.37

3.03

3.11

Net realized and unrealized gain (loss)

  10.80

.10

15.13

23.03

(63.32)

5.59

Total from investment operations

  12.19

2.68

17.48

25.40

(60.29)

8.70

Distributions from net investment income

  -

(2.65)

(2.44)

(2.72)

(3.07)

(6.03)

Distributions from net realized gain

  (1.56)

(3.09)

(2.27)

(2.25)

(1.48)

-

Total distributions

  (1.56)

(5.74)

(4.71)

(4.97)

(4.55)

(6.03)

Net asset value, end of period

$ 139.96

$ 129.33

$ 132.39

$ 119.62

$ 99.19

$ 164.03

Total Return B,C,D

  9.45%

2.04%

15.02%

26.61%

(37.00)%

5.45%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .10% A

.10%

.10%

.10%

.10%

.10%

Expenses net of fee waivers, if any

  .10% A

.10%

.10%

.10%

.10%

.10%

Expenses net of all reductions

  .10% A

.10%

.10%

.10%

.10%

.10%

Net investment income (loss)

  2.02% A

1.96%

1.94%

2.31%

2.22%

1.86%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 2,124,462

$ 1,918,592

$ 1,931,271

$ 1,767,750

$ 1,525,779

$ 2,626,891

Portfolio turnover rate G

  5% A

5%

5%

6%

6%

5%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

Financial Highlights - Service Class

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 129.00

$ 132.07

$ 119.35

$ 98.99

$ 163.66

$ 160.88

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  1.32

2.44

2.22

2.27

2.88

2.93

Net realized and unrealized gain (loss)

  10.77

.10

15.09

22.96

(63.14)

5.58

Total from investment operations

  12.09

2.54

17.31

25.23

(60.26)

8.51

Distributions from net investment income

  -

(2.52)

(2.32)

(2.62)

(2.93)

(5.73)

Distributions from net realized gain

  (1.56)

(3.09)

(2.27)

(2.25)

(1.48)

-

Total distributions

  (1.56)

(5.61)

(4.59)

(4.87)

(4.41)

(5.73)

Net asset value, end of period

$ 139.53

$ 129.00

$ 132.07

$ 119.35

$ 98.99

$ 163.66

Total Return B,C,D

  9.40%

1.93%

14.91%

26.48%

(37.07)%

5.34%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .20% A

.20%

.20%

.20%

.20%

.20%

Expenses net of fee waivers, if any

  .20% A

.20%

.20%

.20%

.20%

.20%

Expenses net of all reductions

  .20% A

.20%

.20%

.20%

.20%

.20%

Net investment income (loss)

  1.92% A

1.86%

1.84%

2.21%

2.12%

1.76%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 38,435

$ 37,095

$ 37,209

$ 32,708

$ 24,340

$ 38,960

Portfolio turnover rate G

  5% A

5%

5%

6%

6%

5%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Financial Highlights - Service Class 2

 

Six months ended June 30, 2012

Years ended December 31,

 

(Unaudited)

2011

2010

2009

2008

2007

Selected Per-Share Data

 

 

 

 

 

 

Net asset value, beginning of period

$ 128.24

$ 131.31

$ 118.71

$ 98.50

$ 162.79

$ 159.90

Income from Investment Operations

 

 

 

 

 

 

Net investment income (loss) E

  1.21

2.23

2.03

2.11

2.66

2.67

Net realized and unrealized gain (loss)

  10.70

.11

14.97

22.82

(62.74)

5.54

Total from investment operations

  11.91

2.34

17.00

24.93

(60.08)

8.21

Distributions from net investment income

  -

(2.32)

(2.13)

(2.47)

(2.73)

(5.32)

Distributions from net realized gain

  (1.56)

(3.09)

(2.27)

(2.25)

(1.48)

-

Total distributions

  (1.56)

(5.41)

(4.40)

(4.72)

(4.21)

(5.32)

Net asset value, end of period

$ 138.59

$ 128.24

$ 131.31

$ 118.71

$ 98.50

$ 162.79

Total Return B,C,D

  9.31%

1.78%

14.73%

26.30%

(37.16)%

5.17%

Ratios to Average Net Assets F,H

 

 

 

 

 

 

Expenses before reductions

  .35% A

.35%

.35%

.35%

.35%

.35%

Expenses net of fee waivers, if any

  .35% A

.35%

.35%

.35%

.35%

.35%

Expenses net of all reductions

  .35% A

.35%

.35%

.35%

.35%

.35%

Net investment income (loss)

  1.77% A

1.71%

1.69%

2.06%

1.97%

1.61%

Supplemental Data

 

 

 

 

 

 

Net assets, end of period (000 omitted)

$ 260,040

$ 240,172

$ 242,677

$ 220,221

$ 170,637

$ 269,769

Portfolio turnover rate G

  5% A

5%

5%

6%

6%

5%

A Annualized

B Total returns for periods of less than one year are not annualized.

C Total returns do not reflect charges attributable to your insurance company's separate account. Inclusion of these charges would reduce the total returns shown.

D Total returns would have been lower if certain expenses had not been reduced during the applicable periods shown.

E Calculated based on average shares outstanding during the period.

F Fees and expenses of any underlying Fidelity Central Funds are not included in the Fund's expense ratio. The Fund indirectly bears its proportionate share of the expenses of any underlying Fidelity Central Funds.

G Amount does not include the portfolio activity of any underlying Fidelity Central Funds.

H Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or reductions from other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.

See accompanying notes which are an integral part of the financial statements.

Semiannual Report

Notes to Financial Statements

For the period ended June 30, 2012 (Unaudited)

1. Organization.

VIP Index 500 Portfolio (the Fund) is a fund of Variable Insurance Products Fund II (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 and Service Class 2 shares. All classes have equal rights and voting privileges, except for matters affecting a single class. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to distribution and service plan fees incurred. Certain expense reductions may also differ by class.

2. Investments in Fidelity Central Funds.

The Fund invests in Fidelity Central Funds, which are open-end investment companies available only to other investment companies and accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The Fund's Schedule of Investments lists each of the Fidelity Central Funds held as of period end, if any, as an investment of the Fund, but does not include the underlying holdings of each Fidelity Central Fund. As an Investing Fund, the Fund indirectly bears its proportionate share of the expenses of the underlying Fidelity Central Funds.

The Money Market Central Funds seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.

A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the SEC) web site at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds are available on the SEC web site or upon request.

3. Significant Accounting Policies.

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 following summarizes the significant accounting policies of the Fund:

Security Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. In accordance with valuation policies and procedures approved by the Board of Trustees (the Board), the Fund attempts to obtain prices from one or more third party pricing vendor or broker to value its investments. When current market prices, quotations or rates are not readily available or reliable, securities will be fair valued in good faith by the FMR Fair Value Committee (the Committee), in accordance with procedures adopted by the Fund's Board. Factors used in determining fair value vary by security type and may include market or security 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 is responsible for approving and reporting to the Board all fair value determinations.

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 significant 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 are used and are categorized as Level 2 in the hierarchy. Utilizing these techniques may result in transfers between Level 1 and Level 2.

Futures contracts are valued at the settlement price established each day by the board of trade or exchange on which they are traded and are categorized as Level 1 in the hierarchy. Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value each business day and are categorized as Level 1 in the hierarchy.

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

3. Significant Accounting Policies - continued

Security Valuation - continued

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.

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 may 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income and distributions from the Fidelity Central Funds are accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities.

Expenses. 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. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.

Deferred Trustee Compensation. Under a Deferred Compensation Plan (the Plan), independent Trustees may elect to defer receipt of a portion of their annual compensation. Deferred amounts are invested in a cross-section of Fidelity funds, are marked-to-market and remain in the Fund until distributed in accordance with the Plan. The investment of deferred amounts and the offsetting payable to the Trustees are included in the accompanying Statement of Assets and Liabilities.

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 income taxes is required. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. A 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 dividends 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. Temporary book-tax differences will reverse in a subsequent period.

Book-tax differences are primarily due to futures transactions, foreign currency transactions, market discount, deferred trustees compensation and losses deferred due to wash sales and excise tax regulations.

The federal tax cost of investment securities and unrealized appreciation (depreciation) as of period end were as follows:

Gross unrealized appreciation

$ 1,189,245,368

Gross unrealized depreciation

(242,225,103)

Net unrealized appreciation (depreciation) on securities and other investments

$ 947,020,265

 

 

Tax cost

$ 1,646,306,344

New Accounting Pronouncement. In December 2011, the Financial Accounting Standards Board issued Accounting Standard Update No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The update creates new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for interim and annual reporting periods beginning on or after January 1, 2013. Management is currently evaluating the impact of the update's adoption on the Fund's financial statement disclosures.

4. Derivative Instruments.

Risk Exposures and the Use of Derivative Instruments. The Fund's investment objectives allow the Fund to enter into various types of derivative contracts, including futures contracts. Derivatives are investments whose value is derived from underlying assets, indices or reference rates and may be transacted on an exchange or over-the-counter (OTC). Derivatives may involve a future commitment to buy or sell a specified instrument based on specified terms, or to exchange future cash flows at periodic intervals based on a notional principal amount. The Fund used derivatives to increase

Semiannual Report

4. Derivative Instruments - continued

Risk Exposures and the Use of Derivative Instruments - continued

returns and to manage exposure to certain risks as defined below. The success of any strategy involving derivatives depends on analysis of numerous economic factors, and if the strategies for investment do not work as intended, the Fund may not achieve its objectives.

The Fund's use of derivatives increased or decreased its exposure to the following risk:

Equity Risk

Equity risk relates to the fluctuations in the value of financial instruments as a result of changes in market prices (other than those arising from interest rate risk or foreign exchange risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting all instruments traded in a market or market segment.

The Fund is also exposed to additional risks from investing in derivatives, such as liquidity risk and counterparty credit risk. Liquidity risk is the risk that the Fund will be unable to close out the derivative in the open market in a timely manner. Counterparty credit risk is the risk that the counterparty will not be able to fulfill its obligation to the Fund. Counterparty credit risk related to exchange-traded futures contracts is minimal because of the protection provided by the exchange on which they trade. Investing in derivatives may involve greater risks than investing in the underlying assets directly and, to varying degrees, involves risk of loss in excess of the initial investment, if any, collateral received and amounts recognized in the Statement of Assets and Liabilities. In addition, for futures contracts, there is the risk that the change in value of the derivative contract may not correspond to the change in value of the underlying instrument.

Futures Contracts. A futures contract is an agreement between two parties to buy or sell a specified underlying instrument for a fixed price at a specified future date. The Fund used futures contracts to manage its exposure to the stock market.

Upon entering into a futures contract, a fund is required to deposit either cash or securities (initial margin) with a clearing broker in an amount equal to a certain percentage of the face value of the contract. Futures contracts are marked-to-market daily and subsequent payments (variation margin) are made or received by a fund depending on the daily fluctuations in the value of the futures contracts and are recorded as unrealized appreciation or (depreciation). This receivable and/or payable is included in daily variation margin on futures contracts in the Statement of Assets and Liabilities. Realized gain or (loss) is recorded upon the expiration or closing of a futures contract.

Any open futures contracts at period end are shown in the Schedule of Investments under the caption "Futures Contracts." The underlying face amount at value reflects each contract's exposure to the underlying instrument at period end and is representative of activity for the period. Cash deposited to meet initial margin requirements is shown as segregated cash in the Statement of Assets and Liabilities.

During the period the Fund recognized net realized gain (loss) of $5,133,098 and a change in net unrealized appreciation (depreciation) of $(51,125) related to its investment in futures contracts. These amount are included in the Statement of Operations.

5. Purchases and Sales of Investments.

Purchases and sales of securities other than short-term securities, aggregated $155,956,654 and $56,231,653, respectively.

6. Fees and Other Transactions with Affiliates.

Management Fee and Expense Contract. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is based on an annual rate of .045% of the Fund's average net assets. Under the management contract, FMR pays all other fund-level expenses, except the compensation of the independent Trustees and certain other expenses such as interest expense, including commitment fees. In addition, under an expense contract, FMR pays class-level expenses as necessary so that total expenses do not exceed an annual rate of .10% of each class' average net assets, excluding the distribution and service fee for each applicable class, with certain exceptions.

Sub-Adviser. Geode Capital Management, LLC (Geode), serves as sub-adviser for the Fund. Geode provides discretionary investment advisory services to the Fund and is paid by FMR for providing these services.

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 Corporation (FDC), an affiliate of FMR, 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.

Semiannual Report

Notes to Financial Statements (Unaudited) - continued

6. Fees and Other Transactions with Affiliates - continued

Distribution and Service Plan Fees - continued

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

$ 19,116

Service Class 2

320,993

 

$ 340,109

Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing, and shareholder servicing agent for each class. FIIOC receives asset-based fees of .067% of each class's average net assets. In addition, FIIOC receives an asset-based fee of .0038% of average net assets for typesetting, printing and mailing of shareholder reports, except proxy statements. Under the expense contract, each class pays a portion of the transfer agent fees at an annual rate of .055% of the class' average net assets. For the period, transfer agent fees for each class, including printing and out of pocket expenses, were as follows:

Initial Class

$ 573,882

Service Class

10,514

Service Class 2

70,618

 

$ 655,014

7. Committed Line of Credit.

The Fund participates with other funds managed by FMR 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 Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $3,370 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, there were no borrowings on this line of credit.

8. Security Lending.

The Fund lends portfolio securities through a lending agent from time to time in order to earn additional income. On the settlement date of the loan, the 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 the Fund and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's 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. Total security lending income during the period amounted to $181,360.

9. Expense Reductions.

Through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's expenses by $29.

10. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

 

Six months ended
June 30,
2012

Year ended
December 31,
2011

From net investment income

 

 

Initial Class

$ -

$ 38,255,176

Service Class

-

707,018

Service Class 2

-

4,282,076

Total

$ -

$ 43,244,270

Semiannual Report

10. Distributions to Shareholders - continued

 

Six months ended
June 30,
2012

Year ended
December 31,
2011

From net realized gain

 

 

Initial Class

$ 23,183,501

$ 44,996,692

Service Class

431,344

869,322

Service Class 2

2,913,839

5,729,115

Total

$ 26,528,684

$ 51,595,129

11. Share Transactions.

Transactions for each class of shares were as follows:

 

Shares

Dollars

 

Six months ended June 30,
2012

Year ended
December 31,
2011

Six months ended June 30,
2012

Year ended
December 31,
2011

Initial Class

 

 

 

 

Shares sold

1,315,443

1,835,066

$ 183,759,900

$ 243,984,868

Reinvestment of distributions

169,284

638,728

23,183,501

83,251,868

Shares redeemed

(1,140,377)

(2,226,316)

(157,337,333)

(294,250,679)

Net increase (decrease)

344,350

247,478

$ 49,606,068

$ 32,986,057

Service Class

 

 

 

 

Shares sold

13,094

31,831

$ 1,812,464

$ 4,163,777

Reinvestment of distributions

3,158

12,115

431,344

1,576,340

Shares redeemed

(28,345)

(38,138)

(3,837,843)

(4,956,107)

Net increase (decrease)

(12,093)

5,808

$ (1,594,035)

$ 784,010

Service Class 2

 

 

 

 

Shares sold

156,187

359,331

$ 21,308,576

$ 46,317,215

Reinvestment of distributions

21,465

77,281

2,913,839

10,011,190

Shares redeemed

(174,189)

(411,858)

(23,834,782)

(53,551,440)

Net increase (decrease)

3,463

24,754

$ 387,633

$ 2,776,965

12. Other.

The 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, FMR or its affiliates were the owners of record of 31% of the total outstanding shares of the Fund.

Semiannual Report

Semiannual Report

Investment Adviser

Fidelity Management & Research Company
Boston, MA

Investment Sub-Advisers

FMR Co., Inc.

Geode Capital Management, LLC

General Distributor

Fidelity Distributors Corporation
Smithfield, RI

Transfer and Service Agents

Fidelity Investments Institutional Operations Company, Inc.
Boston, MA 

Fidelity Service Company, Inc.
Boston, MA 

Custodian

The Bank of New York Mellon
New York, NY 

VIPIDX-SANN-0812
1.705630.114

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 II'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 II'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 second fiscal quarter of 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. Exhibits

(a)

(1)

Not applicable.

(a)

(2)

Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT.

(a)

(3)

Not applicable.

(b)

 

Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT.

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 II

By:

/s/Kenneth B. Robins

 

Kenneth B. Robins

 

President and Treasurer

 

 

Date:

August 17, 2012

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.

By:

/s/Kenneth B. Robins

 

Kenneth B. Robins

 

President and Treasurer

 

 

Date:

August 17, 2012

By:

/s/Christine Reynolds

 

Christine Reynolds

 

Chief Financial Officer

 

 

Date:

August 17, 2012