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 811-7205

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

245 Summer St., Boston, Massachusetts 02210
(Address of principal executive offices) (Zip code)

Marc Bryant, Secretary

245 Summer St.

Boston, Massachusetts 02210
(Name and address of agent for service)

Registrant's telephone number, including area code:

617-563-7000


Date of fiscal year end:	December 31

Date of reporting period:	December 31, 2016

Item 1.

Reports to Stockholders

Fidelity® Variable Insurance Products:

Balanced Portfolio

Annual Report

December 31, 2016

Contents

Performance
Management's Discussion of Fund Performance
Investment Summary
Investments
Financial Statements
Notes to Financial Statements
Report of Independent Registered Public Accounting Firm
Trustees and Officers
Shareholder Expense Example
Distributions
Board Approval of Investment Advisory Contracts and Management Fees

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.

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.institutional.fidelity.com, or http://www.401k.com, as applicable.

NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE

Neither the Fund nor Fidelity Distributors Corporation is a bank.

Performance: The Bottom Line

Average annual total return reflects the change in the value of an investment, assuming reinvestment of distributions from dividend income and capital gains (the profits earned upon the sale of securities that have grown in value, if any) and assuming a constant rate of performance each year. During periods of reimbursement by Fidelity, a fund’s total return will be greater than it would be had the reimbursement not occurred. Performance numbers are net of all underlying fund operating expenses, but do not include any insurance charges imposed by your insurance company’s separate account. If performance information included the effect of these additional charges, the total returns would have been lower. How a fund did yesterday is no guarantee of how it will do tomorrow.

Average Annual Total Returns

For the periods ended December 31, 2016	Past 1 year	Past 5 years	Past 10 years
Initial Class	7.26%	10.37%	6.40%
Service Class	7.16%	10.25%	6.28%
Service Class 2	6.98%	10.10%	6.14%
Investor Class	7.18%	10.29%	6.32%

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in VIP Balanced Portfolio - Initial Class on December 31, 2006.

The chart shows how the value of your investment would have changed, and also shows how the S&P 500® Index performed over the same period.

	Period Ending Values
	$18,595	VIP Balanced Portfolio - Initial Class
	$19,572	S&P 500® Index

Management's Discussion of Fund Performance

Market Recap: The S&P 500 index gained 11.96% in 2016, rising sharply on post-election optimism for economic growth. The year began during a fairly volatile stretch, with stocks hampered by persistent oil-price weakness and U.S.-dollar strength. Markets regained momentum in February amid U.S. job gains, a rally in energy and other stimuli that helped keep the roughly seven-year uptrend intact. Markets tumbled briefly following the U.K.’s June 23 vote to exit the European Union – dubbed “Brexit” – then recovered quickly and settled into a flattish stretch until the November 8 U.S. presidential election. Stocks reacted to the outcome by reaching a series of all-time highs. For the year, energy (+27%) and dividend-rich telecommunication services (+23%) led the way amid two commodity rallies and high demand for yield early in the period, respectively. Conversely, health care (-2%) fared the worst, hampered by an uncertain political and regulatory outlook. Meanwhile, taxable investment-grade bonds rose 2.65%, according to the Bloomberg Barclays U.S. Aggregate Bond Index, gaining modestly amid a volatile stretch marked by early- and mid-period concern about global economic growth, then late-period optimism for the U.S. economy. Most spread sectors outperformed U.S. Treasuries in a supportive environment for riskier assets, with corporate credit enjoying particularly strong demand from investors.

Comments from Co-Portfolio Manager Robert Stansky, Head of FMR’s Stock Selector Large Cap Group, which manages VIP Balanced Portfolio: For the year, the fund’s share classes returned about 7%, trailing the 8.31% gain of the Fidelity Balanced 60/40 Composite Index. Versus the Composite index, the negative impact of security selection in the stock subportfolio outweighed the value added from asset allocation – consisting of an overweighting in stocks, an underweighting in investment-grade bonds and a small out-of-benchmark stake in high-yield bonds – and favorable security selection in investment-grade bonds. The equity subportfolio meaningfully trailed its benchmark, the S&P 500^®. Relative equity performance was particularly hurt by picks in the industrials, consumer discretionary and health care sectors. The two largest relative detractors were Ametek, a maker of electronic instruments and motors for aerospace, power and industrial markets, and Roper Technologies, which makes pumps and other equipment used in the energy and industrials sectors, as well as medical software and scientific imaging products. We considerably reduced Ametek and sold Roper. Shares of L Brands, the parent of intimate apparel retailer Victoria’s Secret, also detracted from relative results, as did an out-of-benchmark position in Beijing-based online marketplace 58.com. Conversely, several of our top relative contributors – including Capital One Financial, which was among the subportfolio’s largest holdings – were from its financials sleeve, which rallied strongly after the U.S. presidential election. With that said, the equity subportfolio’s top relative contributor was Autodesk, which makes design software for engineering and architectural firms. Turning to fixed income, the investment-grade bond subportfolio did quite well, outperforming the benchmark Bloomberg Barclays U.S. Aggregate Bond Index by more than two percentage points. An overweighting in investment-grade corporates added value. Positioning within that segment also was helpful, with overweightings in the energy and financials sectors helping offset disappointing performance in the utilities sector. Security selection among government-related bonds and an out-of-benchmark position in Treasury Inflation Protected Securities (TIPS) were other positives.

The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Note to shareholders: On October 22, 2016, John Mirshekari was named Co-Manager, succeeding Monty Kori in managing the fund’s equity investments in the industrials sector.

Investment Summary (Unaudited)

The information in the following tables is based on the combined investments of the Fund and its pro-rata share of the investments of Fidelity's Fixed-Income Central Funds.

Top Five Stocks as of December 31, 2016

	% of fund's net assets	% of fund's net assets 6 months ago
Apple, Inc.	2.4	1.8
Alphabet, Inc. Class C	1.8	1.9
Autodesk, Inc.	1.6	1.1
Capital One Financial Corp.	1.4	1.0
Amazon.com, Inc.	1.3	1.3
	8.5

Top Five Bond Issuers as of December 31, 2016

(with maturities greater than one year)	% of fund's net assets	% of fund's net assets 6 months ago
U.S. Treasury Obligations	7.3	4.3
Fannie Mae	3.4	4.6
Freddie Mac	2.1	2.7
Citigroup, Inc.	0.8	1.0
Petroleos Mexicanos	0.7	0.7
	14.3

Top Five Market Sectors as of December 31, 2016

	% of fund's net assets	% of fund's net assets 6 months ago
Financials	15.5	18.1
Information Technology	12.5	12.4
Consumer Discretionary	9.7	9.9
Health Care	9.6	10.5
Energy	7.7	7.6

Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications.

Asset Allocation (% of fund's net assets)

As of December 31, 2016^*
	Stocks and Equity Futures	65.6%
	Bonds	31.0%
	Short-Term Investments and Net Other Assets (Liabilities)	2.9%
	Other Investments	0.5%

* Foreign investments - 10.0%

As of June 30, 2016^*
	Stocks and Equity Futures	64.2%
	Bonds	32.9%
	Short-Term Investments and Net Other Assets (Liabilities)	2.3%
	Other Investments	0.6%

* Foreign investments - 11.1%

An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro-rata share of any securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or institutional.fidelity.com, as applicable.

Percentages in the above tables are adjusted for the effect of TBA Sale Commitments.

Percentages are adjusted for the effect of futures contracts and swaps, if applicable.

Investments December 31, 2016

Showing Percentage of Net Assets

Common Stocks - 64.1%
	Shares	Value
CONSUMER DISCRETIONARY - 8.3%
Automobiles - 0.5%
Tesla Motors, Inc. (a)	78,200	$16,710,558
Distributors - 0.1%
LKQ Corp. (a)	94,859	2,907,428
Diversified Consumer Services - 0.3%
ServiceMaster Global Holdings, Inc. (a)	228,429	8,604,920
Hotels, Restaurants & Leisure - 0.7%
Darden Restaurants, Inc.	43,000	3,126,960
Hilton Worldwide Holdings, Inc.	458,200	12,463,040
Las Vegas Sands Corp.	23,595	1,260,209
Starbucks Corp.	118,490	6,578,565
		23,428,774
Internet & Direct Marketing Retail - 1.3%
Amazon.com, Inc. (a)	55,110	41,325,336
JD.com, Inc. sponsored ADR (a)	43,700	1,111,728
		42,437,064
Leisure Products - 0.1%
Mattel, Inc.	152,300	4,195,865
Media - 1.9%
Charter Communications, Inc. Class A (a)	59,464	17,120,875
Comcast Corp. Class A	121,300	8,375,765
DISH Network Corp. Class A (a)	22,000	1,274,460
Interpublic Group of Companies, Inc.	171,900	4,024,179
Manchester United PLC	107,600	1,533,300
MDC Partners, Inc. Class A	391,321	2,563,153
The Walt Disney Co.	252,900	26,357,238
Time Warner, Inc.	5,900	569,527
		61,818,497
Multiline Retail - 0.4%
Dollar Tree, Inc. (a)	140,900	10,874,662
Specialty Retail - 2.1%
Advance Auto Parts, Inc.	30,277	5,120,446
AutoZone, Inc. (a)	2,209	1,744,646
Home Depot, Inc.	198,008	26,548,913
L Brands, Inc.	195,794	12,891,077
Ross Stores, Inc.	154,343	10,124,901
TJX Companies, Inc.	155,740	11,700,746
		68,130,729
Textiles, Apparel & Luxury Goods - 0.9%
Michael Kors Holdings Ltd. (a)	19,400	833,812
NIKE, Inc. Class B	343,930	17,481,962
VF Corp.	211,100	11,262,185
		29,577,959

TOTAL CONSUMER DISCRETIONARY		268,686,456

CONSUMER STAPLES - 6.0%
Beverages - 1.4%
Anheuser-Busch InBev SA NV	45,800	4,847,653
Constellation Brands, Inc. Class A (sub. vtg.)	55,500	8,508,705
Monster Beverage Corp. (a)	155,155	6,879,573
The Coca-Cola Co.	594,986	24,668,120
		44,904,051
Food & Staples Retailing - 1.1%
CVS Health Corp.	246,580	19,457,628
Kroger Co.	378,078	13,047,472
Rite Aid Corp. (a)	231,900	1,910,856
Walgreens Boots Alliance, Inc.	38,920	3,221,019
		37,636,975
Food Products - 0.5%
Bunge Ltd.	53,900	3,893,736
Mead Johnson Nutrition Co. Class A	87,532	6,193,764
The Hain Celestial Group, Inc. (a)	54,900	2,142,747
TreeHouse Foods, Inc. (a)	56,700	4,093,173
		16,323,420
Household Products - 0.6%
Colgate-Palmolive Co.	220,144	14,406,223
Procter & Gamble Co.	69,423	5,837,086
		20,243,309
Personal Products - 0.4%
Coty, Inc. Class A	285,904	5,234,902
Estee Lauder Companies, Inc. Class A	115,992	8,872,228
		14,107,130
Tobacco - 2.0%
Altria Group, Inc.	343,108	23,200,963
British American Tobacco PLC sponsored ADR	191,397	21,564,700
Philip Morris International, Inc.	208,550	19,080,240
		63,845,903

TOTAL CONSUMER STAPLES		197,060,788

ENERGY - 5.3%
Energy Equipment & Services - 1.0%
Baker Hughes, Inc.	159,300	10,349,721
Dril-Quip, Inc. (a)	34,500	2,071,725
Oceaneering International, Inc.	47,700	1,345,617
Schlumberger Ltd.	213,100	17,889,745
		31,656,808
Oil, Gas & Consumable Fuels - 4.3%
Anadarko Petroleum Corp.	195,549	13,635,632
Black Stone Minerals LP	92,900	1,744,662
Cabot Oil & Gas Corp.	172,660	4,033,338
Centennial Resource Development, Inc.:
Class A (b)(c)	144,300	2,845,596
Class A (c)	72,000	1,277,856
Chevron Corp.	119,600	14,076,920
Cimarex Energy Co.	43,285	5,882,432
ConocoPhillips Co.	345,200	17,308,328
Devon Energy Corp.	130,700	5,969,069
EOG Resources, Inc.	40,800	4,124,880
Extraction Oil & Gas, Inc.	36,254	726,530
Extraction Oil & Gas, Inc. (c)	76,712	1,460,443
Exxon Mobil Corp.	233,300	21,057,658
Newfield Exploration Co. (a)	94,300	3,819,150
Parsley Energy, Inc. Class A (a)	93,700	3,301,988
PDC Energy, Inc. (a)	39,600	2,874,168
Phillips 66 Co.	105,026	9,075,297
Pioneer Natural Resources Co.	43,400	7,815,038
PrairieSky Royalty Ltd.	138,834	3,302,691
SM Energy Co.	108,100	3,727,288
Suncor Energy, Inc.	333,180	10,893,831
The Williams Companies, Inc.	52,900	1,647,306
		140,600,101

TOTAL ENERGY		172,256,909

FINANCIALS - 10.0%
Banks - 3.9%
Bank of America Corp.	1,354,887	29,943,003
Citigroup, Inc.	392,354	23,317,598
Huntington Bancshares, Inc.	1,274,138	16,844,104
JPMorgan Chase & Co.	307,700	26,551,433
M&T Bank Corp.	45,300	7,086,279
PNC Financial Services Group, Inc.	59,000	6,900,640
Synovus Financial Corp.	35,742	1,468,281
U.S. Bancorp	242,247	12,444,228
		124,555,566
Capital Markets - 1.6%
BlackRock, Inc. Class A	41,472	15,781,755
CBOE Holdings, Inc.	31,600	2,334,924
CME Group, Inc.	48,600	5,606,010
E*TRADE Financial Corp. (a)	92,300	3,198,195
Goldman Sachs Group, Inc.	68,900	16,498,105
IntercontinentalExchange, Inc.	112,500	6,347,250
Legg Mason, Inc.	34,900	1,043,859
NorthStar Asset Management Group, Inc.	87,800	1,309,976
Oaktree Capital Group LLC Class A	14,182	531,825
		52,651,899
Consumer Finance - 1.8%
Capital One Financial Corp.	497,131	43,369,708
Imperial Holdings, Inc. warrants 4/11/19 (a)	6,565	11
OneMain Holdings, Inc. (a)	178,500	3,951,990
SLM Corp. (a)	663,452	7,311,241
Synchrony Financial	117,300	4,254,471
		58,887,421
Diversified Financial Services - 0.9%
Bats Global Markets, Inc.	13,200	442,332
Berkshire Hathaway, Inc.:
Class A (a)	17	4,150,057
Class B (a)	140,900	22,963,882
KBC Ancora (a)	38,000	1,591,028
On Deck Capital, Inc. (a)	65,000	300,950
PICO Holdings, Inc. (a)	48,568	735,805
		30,184,054
Insurance - 1.7%
American International Group, Inc.	302,400	19,749,744
Chubb Ltd.	75,730	10,005,448
Direct Line Insurance Group PLC	495,345	2,255,051
Marsh & McLennan Companies, Inc.	187,233	12,655,078
The Travelers Companies, Inc.	73,300	8,973,386
Unum Group	56,400	2,477,652
WMI Holdings Corp. (a)	57	88
		56,116,447
Mortgage Real Estate Investment Trusts - 0.1%
Altisource Residential Corp. Class B	223,900	2,471,856
Thrifts & Mortgage Finance - 0.0%
Washington Mutual, Inc. (a)	101,600	1

TOTAL FINANCIALS		324,867,244

HEALTH CARE - 8.6%
Biotechnology - 2.7%
Alexion Pharmaceuticals, Inc. (a)	78,350	9,586,123
Amgen, Inc.	160,409	23,453,400
Biogen, Inc. (a)	46,391	13,155,560
Celgene Corp. (a)	116,600	13,496,450
Gilead Sciences, Inc.	106,383	7,618,087
Regeneron Pharmaceuticals, Inc. (a)	21,100	7,745,599
Shire PLC sponsored ADR	34,100	5,809,958
Vertex Pharmaceuticals, Inc. (a)	80,400	5,923,068
		86,788,245
Health Care Equipment & Supplies - 1.9%
Abbott Laboratories	235,700	9,053,237
Boston Scientific Corp. (a)	744,680	16,107,428
Edwards Lifesciences Corp. (a)	72,500	6,793,250
Intuitive Surgical, Inc. (a)	13,200	8,371,044
Medtronic PLC	258,356	18,402,698
Wright Medical Group NV (a)	127,300	2,925,354
		61,653,011
Health Care Providers & Services - 1.7%
Cigna Corp.	43,700	5,829,143
Henry Schein, Inc. (a)	45,224	6,860,933
Humana, Inc.	23,000	4,692,690
McKesson Corp.	23,628	3,318,553
UnitedHealth Group, Inc.	189,200	30,279,568
Universal Health Services, Inc. Class B	45,000	4,787,100
		55,767,987
Health Care Technology - 0.1%
Medidata Solutions, Inc. (a)	109,025	5,415,272
Life Sciences Tools & Services - 0.5%
Agilent Technologies, Inc.	130,100	5,927,356
Thermo Fisher Scientific, Inc.	71,817	10,133,379
		16,060,735
Pharmaceuticals - 1.7%
Allergan PLC	83,123	17,456,661
Bristol-Myers Squibb Co.	243,760	14,245,334
GlaxoSmithKline PLC sponsored ADR	251,300	9,677,563
Merck & Co., Inc.	81,500	4,797,905
Pfizer, Inc.	228,500	7,421,680
Teva Pharmaceutical Industries Ltd. sponsored ADR	60,800	2,204,000
		55,803,143

TOTAL HEALTH CARE		281,488,393

INDUSTRIALS - 6.3%
Aerospace & Defense - 1.1%
General Dynamics Corp.	6,799	1,173,915
Lockheed Martin Corp.	4,300	1,074,742
Northrop Grumman Corp.	49,400	11,489,452
Raytheon Co.	75,200	10,678,400
United Technologies Corp.	103,400	11,334,708
		35,751,217
Air Freight & Logistics - 0.3%
United Parcel Service, Inc. Class B	84,797	9,721,128
Airlines - 0.7%
American Airlines Group, Inc.	229,500	10,715,355
Southwest Airlines Co.	172,700	8,607,368
United Continental Holdings, Inc. (a)	31,200	2,273,856
		21,596,579
Building Products - 0.3%
Allegion PLC	141,716	9,069,824
Commercial Services & Supplies - 0.2%
Stericycle, Inc. (a)	66,000	5,084,640
Waste Management, Inc.	43,500	3,084,585
		8,169,225
Construction & Engineering - 0.3%
Fluor Corp.	162,247	8,521,212
Electrical Equipment - 1.1%
AMETEK, Inc.	347,609	16,893,797
Fortive Corp.	227,175	12,183,395
Sensata Technologies Holding BV (a)	53,500	2,083,825
Sunrun, Inc. (a)(d)	703,790	3,737,125
		34,898,142
Industrial Conglomerates - 1.1%
General Electric Co.	1,130,744	35,731,510
Machinery - 0.6%
Allison Transmission Holdings, Inc.	43,044	1,450,152
Caterpillar, Inc.	8,565	794,318
Deere & Co.	99,000	10,200,960
Flowserve Corp.	157,684	7,576,716
		20,022,146
Road & Rail - 0.6%
CSX Corp.	523,200	18,798,576
Trading Companies & Distributors - 0.0%
Fastenal Co.	31,500	1,479,870

TOTAL INDUSTRIALS		203,759,429

INFORMATION TECHNOLOGY - 12.3%
Electronic Equipment & Components - 0.5%
Jabil Circuit, Inc.	533,418	12,626,004
Samsung SDI Co. Ltd.	26,899	2,428,643
		15,054,647
Internet Software & Services - 3.5%
2U, Inc. (a)	118,250	3,565,238
58.com, Inc. ADR (a)	139,126	3,895,528
Alphabet, Inc.:
Class A (a)	3,600	2,852,820
Class C (a)	76,749	59,236,413
Facebook, Inc. Class A (a)	262,604	30,212,590
Just Dial Ltd. (a)	111,750	557,397
New Relic, Inc. (a)	229,868	6,493,771
Shopify, Inc. Class A (a)	22,200	951,714
SPS Commerce, Inc. (a)	26,700	1,866,063
Velti PLC (a)(c)	284,296	742
Yahoo!, Inc. (a)	138,100	5,340,327
		114,972,603
IT Services - 0.2%
Alliance Data Systems Corp.	2,800	639,800
Blackhawk Network Holdings, Inc. (a)	28,491	1,073,398
Fidelity National Information Services, Inc.	8,900	673,196
Travelport Worldwide Ltd.	342,441	4,828,418
		7,214,812
Semiconductors & Semiconductor Equipment - 1.6%
Broadcom Ltd.	37,800	6,681,906
Cavium, Inc. (a)	26,100	1,629,684
Marvell Technology Group Ltd.	208,700	2,894,669
Micron Technology, Inc. (a)	121,700	2,667,664
NVIDIA Corp.	62,900	6,713,946
Qorvo, Inc. (a)	350,165	18,464,200
Qualcomm, Inc.	149,408	9,741,402
Semtech Corp. (a)	46,600	1,470,230
SolarEdge Technologies, Inc. (a)	68,800	853,120
		51,116,821
Software - 3.8%
Activision Blizzard, Inc.	247,767	8,946,866
Adobe Systems, Inc. (a)	40,131	4,131,486
Autodesk, Inc. (a)	691,959	51,211,886
Electronic Arts, Inc. (a)	39,100	3,079,516
HubSpot, Inc. (a)	60,910	2,862,770
Microsoft Corp.	532,700	33,101,978
Nintendo Co. Ltd.	9,900	2,057,967
Parametric Technology Corp. (a)	44,700	2,068,269
Paycom Software, Inc. (a)	52,600	2,392,774
RealPage, Inc. (a)	52,500	1,575,000
Salesforce.com, Inc. (a)	147,200	10,077,312
Varonis Systems, Inc. (a)	2,500	67,000
Zendesk, Inc. (a)	181,600	3,849,920
		125,422,744
Technology Hardware, Storage & Peripherals - 2.7%
Apple, Inc.	662,511	76,732,024
HP, Inc.	698,700	10,368,708
		87,100,732

TOTAL INFORMATION TECHNOLOGY		400,882,359

MATERIALS - 1.8%
Chemicals - 1.3%
E.I. du Pont de Nemours & Co.	227,200	16,676,480
Ecolab, Inc.	28,200	3,305,604
LyondellBasell Industries NV Class A	63,600	5,455,608
Monsanto Co.	61,500	6,470,415
PPG Industries, Inc.	59,200	5,609,792
W.R. Grace & Co.	58,925	3,985,687
		41,503,586
Construction Materials - 0.1%
Eagle Materials, Inc.	44,450	4,379,659
Containers & Packaging - 0.4%
Ball Corp.	58,400	4,384,088
Graphic Packaging Holding Co.	159,598	1,991,783
WestRock Co.	131,622	6,682,449
		13,058,320

TOTAL MATERIALS		58,941,565

REAL ESTATE - 1.8%
Equity Real Estate Investment Trusts (REITs) - 1.7%
American Tower Corp.	141,000	14,900,880
Boston Properties, Inc.	39,100	4,917,998
Coresite Realty Corp.	13,400	1,063,558
Corrections Corp. of America	69,200	1,692,632
Duke Realty LP	88,500	2,350,560
Equinix, Inc.	10,900	3,895,769
Extra Space Storage, Inc.	68,073	5,257,959
FelCor Lodging Trust, Inc.	97,500	780,975
Gaming & Leisure Properties	18,400	563,408
NorthStar Realty Finance Corp.	91,200	1,381,680
Omega Healthcare Investors, Inc.	25,300	790,878
Outfront Media, Inc.	153,420	3,815,555
Store Capital Corp.	381,200	9,419,452
Sun Communities, Inc.	4,800	367,728
The GEO Group, Inc.	16,000	574,880
VEREIT, Inc.	421,400	3,565,044
		55,338,956
Real Estate Management & Development - 0.1%
CBRE Group, Inc. (a)	85,606	2,695,733

TOTAL REAL ESTATE		58,034,689

TELECOMMUNICATION SERVICES - 1.7%
Diversified Telecommunication Services - 1.6%
AT&T, Inc.	701,871	29,850,574
CenturyLink, Inc.	26,600	632,548
Level 3 Communications, Inc. (a)	82,004	4,621,745
SBA Communications Corp. Class A (a)	18,900	1,951,614
Verizon Communications, Inc.	202,696	10,819,912
Zayo Group Holdings, Inc. (a)	105,700	3,473,302
		51,349,695
Wireless Telecommunication Services - 0.1%
T-Mobile U.S., Inc. (a)	60,000	3,450,600
Telephone & Data Systems, Inc.	21,361	616,692
		4,067,292

TOTAL TELECOMMUNICATION SERVICES		55,416,987

UTILITIES - 2.0%
Electric Utilities - 1.2%
Edison International	43,058	3,099,745
Exelon Corp.	220,400	7,821,996
FirstEnergy Corp.	89,000	2,756,330
NextEra Energy, Inc.	118,951	14,209,886
PG&E Corp.	143,850	8,741,765
PPL Corp.	91,850	3,127,493
		39,757,215
Independent Power and Renewable Electricity Producers - 0.1%
NextEra Energy Partners LP	8,100	206,874
NRG Yield, Inc. Class C	99,702	1,575,292
Vivint Solar, Inc. (a)(d)	502,852	1,282,273
		3,064,439
Multi-Utilities - 0.7%
CenterPoint Energy, Inc.	46,700	1,150,688
Dominion Resources, Inc.	124,417	9,529,098
Sempra Energy	101,295	10,194,329
		20,874,115
Water Utilities - 0.0%
AquaVenture Holdings Ltd.	24,600	603,438

TOTAL UTILITIES		64,299,207

TOTAL COMMON STOCKS
(Cost $1,757,121,279)		2,085,694,026
	Principal Amount	Value

Convertible Bonds - 0.0%
ENERGY - 0.0%
Oil, Gas & Consumable Fuels - 0.0%
Amyris, Inc. 9.5% 4/15/19 pay-in-kind (Cost $896,145)	1,452,000	910,223

U.S. Treasury Obligations - 0.1%
U.S. Treasury Bills, yield at date of purchase 0.32% to 0.53% 1/12/17 to 3/30/17 (e)
(Cost $1,978,249)	1,980,000	1,978,331
	Shares	Value

Fixed-Income Funds - 32.1%
Fidelity High Income Central Fund 2 (f)	769,886	$85,572,854
Fidelity VIP Investment Grade Central Fund (f)	9,198,935	958,344,998
TOTAL FIXED-INCOME FUNDS
(Cost $1,030,217,478)		1,043,917,852

Money Market Funds - 3.6%
Fidelity Cash Central Fund, 0.60% (g)	116,561,558	116,584,871
Fidelity Securities Lending Cash Central Fund 0.65% (g)(h)	493,915	493,964
TOTAL MONEY MARKET FUNDS
(Cost $117,068,578)		117,078,835
TOTAL INVESTMENT PORTFOLIO - 99.9%
(Cost $2,907,281,729)		3,249,579,267
NET OTHER ASSETS (LIABILITIES) - 0.1%		2,518,160
NET ASSETS - 100%		$3,252,097,427

Futures Contracts
	Expiration Date	Underlying Face Amount at Value	Unrealized Appreciation/(Depreciation)
Purchased
Equity Index Contracts
425 CME E-mini S&P 500 Index Contracts (United States)	March 2017	47,519,250	$(391,357)

The face value of futures purchased as a percentage of Net Assets is 1.5%

Legend

(a) Non-income producing

(b) A portion of the security sold on a delayed delivery basis.

(c) 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 $5,584,637 or 0.2% of net assets.

(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 period end, the value of securities pledged amounted to $1,978,331.

(f) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. A complete unaudited schedule of portfolio holdings for each Fidelity Central Fund is filed with the SEC for the first and third quarters of each fiscal year on Form N-Q and is available upon request or at the SEC's website at www.sec.gov. An unaudited holdings listing for the Fund, which presents direct holdings as well as the pro-rata share of securities and other investments held indirectly through its investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or institutional.fidelity.com, as applicable. In addition, each Fidelity Central Fund's financial statements, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's website or upon request.

(g) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's website or upon request.

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

Additional information on each restricted holding is as follows:

Security	Acquisition Date	Acquisition Cost
Centennial Resource Development, Inc. Class A	10/11/16 - 12/28/16	$2,489,880
Extraction Oil & Gas, Inc.	12/12/16	$1,399,994
Velti PLC	4/19/13	$426,444

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	$266,940
Fidelity High Income Central Fund 2	5,257,374
Fidelity Securities Lending Cash Central Fund	143,429
Fidelity VIP Investment Grade Central Fund	28,019,073
Total	$33,686,816

Additional information regarding the Fund's fiscal year to date purchases and sales, including the ownership percentage, of the non Money Market Central Funds is as follows:

Fund	Value, beginning of period	Purchases	Sales Proceeds	Value, end of period	% ownership, end of period
Fidelity High Income Central Fund 2	$53,349,035	$25,158,779	$--	$85,572,854	10.0%
Fidelity VIP Investment Grade Central Fund	915,358,433	39,155,898	--	958,344,998	19.7%
Total	$968,707,468	$64,314,677	$--	$1,043,917,852

Investment Valuation

The following is a summary of the inputs used, as of December 31, 2016, involving the Fund's assets and liabilities carried at fair value. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used below, please refer to the Investment Valuation section in the accompanying Notes to Financial Statements.

	Valuation Inputs at Reporting Date:
Description	Total	Level 1	Level 2	Level 3
Investments in Securities:
Equities:
Consumer Discretionary	$268,686,456	$268,686,456	$--	$--
Consumer Staples	197,060,788	197,060,788	--	--
Energy	172,256,909	169,518,610	2,738,299	--
Financials	324,867,244	324,867,232	11	1
Health Care	281,488,393	281,488,393	--	--
Industrials	203,759,429	203,759,429	--	--
Information Technology	400,882,359	398,823,650	2,058,709	--
Materials	58,941,565	58,941,565	--	--
Real Estate	58,034,689	58,034,689	--	--
Telecommunication Services	55,416,987	55,416,987	--	--
Utilities	64,299,207	64,299,207	--	--
Corporate Bonds	910,223	--	910,223	--
U.S. Government and Government Agency Obligations	1,978,331	--	1,978,331	--
Fixed-Income Funds	1,043,917,852	1,043,917,852	--	--
Money Market Funds	117,078,835	117,078,835	--	--
Total Investments in Securities:	$3,249,579,267	$3,241,893,693	$7,685,573	$1
Derivative Instruments:
Liabilities
Futures Contracts	$(391,357)	$(391,357)	$--	$--
Total Liabilities	$(391,357)	$(391,357)	$--	$--
Total Derivative Instruments:	$(391,357)	$(391,357)	$--	$--

Value of Derivative Instruments

The following table is a summary of the Fund's value of derivative instruments by primary risk exposure as of December 31, 2016. For additional information on derivative instruments, please refer to the Derivative Instruments section in the accompanying Notes to Financial Statements.

Primary Risk Exposure / Derivative Type	Value
	Asset	Liability
Equity Risk
Futures Contracts(a)	$0	$(391,357)
Total Equity Risk	0	(391,357)
Total Value of Derivatives	$0	$(391,357)

(a) Reflects gross cumulative appreciation (depreciation) on futures contracts as presented in the Schedule of Investments. In the Statement of Assets and Liabilities, the period end daily variation margin is included in receivable or payable for daily variation margin for derivative instruments, and the net cumulative appreciation (depreciation) is included in net unrealized appreciation (depreciation).

Other Information

The composition of credit quality ratings as a percentage of Total Net Assets (Unaudited) is as follows. The information in the following tables is based on the combined investments of the Fund and its pro-rata share of the investments of Fidelity's Fixed-Income Central Funds.

U.S. Government and U.S. Government Agency Obligations	13.4%
AAA,AA,A	3.0%
BBB	8.6%
BB	3.2%
B	1.7%
CCC,CC,C	0.6%
Not Rated	0.0%
Equities	64.1%
Short-Term Investments and Net Other Assets	5.4%
	100%

We have used ratings from Moody's Investors Service, Inc. Where Moody's^® ratings are not available, we have used S&P^® ratings. All ratings are as of the date indicated and do not reflect subsequent changes. Percentages are adjusted for the effect of futures contracts, if applicable.

Distribution of investments by country or territory of incorporation, as a percentage of Total Net Assets, is as follows (Unaudited):

United States of America	90.0%
United Kingdom	1.9%
Ireland	1.4%
Canada	1.1%
Others (Individually Less Than 1%)	5.6%
	100.0%

Percentages shown as 0.0% may reflect amounts less than 0.05%.

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

Financial Statements

Statement of Assets and Liabilities

		December 31, 2016
Assets
Investment in securities, at value (including securities loaned of $451,311) — See accompanying schedule: Unaffiliated issuers (cost $1,759,995,673)	$2,088,582,580
Fidelity Central Funds (cost $1,147,286,056)	1,160,996,687
Total Investments (cost $2,907,281,729)		$3,249,579,267
Cash		61,815
Receivable for investments sold
Regular delivery		2,023,650
Delayed delivery		90,577
Receivable for fund shares sold		1,597,157
Dividends receivable		2,838,431
Interest receivable		46,551
Distributions receivable from Fidelity Central Funds		47,779
Prepaid expenses		6,121
Other receivables		62,930
Total assets		3,256,354,278
Liabilities
Payable for investments purchased	$1,713,455
Payable for fund shares redeemed	134,667
Accrued management fee	1,072,207
Transfer agent fee payable	338,214
Distribution and service plan fees payable	141,505
Payable for daily variation margin for derivative instruments	172,397
Other affiliated payables	100,992
Other payables and accrued expenses	89,514
Collateral on Securities Loaned	493,900
Total liabilities		4,256,851
Net Assets		$3,252,097,427
Net Assets consist of:
Paid in capital		$2,874,061,397
Undistributed net investment income		7,691,858
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions		28,450,446
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies		341,893,726
Net Assets		$3,252,097,427
Initial Class:
Net Asset Value, offering price and redemption price per share ($209,200,995 ÷ 12,472,165 shares)		$16.77
Service Class:
Net Asset Value, offering price and redemption price per share ($4,865,144 ÷ 291,535 shares)		$16.69
Service Class 2:
Net Asset Value, offering price and redemption price per share ($687,972,942 ÷ 41,925,431 shares)		$16.41
Investor Class:
Net Asset Value, offering price and redemption price per share ($2,350,058,346 ÷ 141,149,250 shares)		$16.65

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

Statement of Operations

		Year ended December 31, 2016
Investment Income
Dividends		$32,468,163
Interest		56,431
Income from Fidelity Central Funds		33,686,816
Total income		66,211,410
Expenses
Management fee	$12,163,007
Transfer agent fees	3,842,896
Distribution and service plan fees	1,467,020
Accounting and security lending fees	1,148,783
Custodian fees and expenses	89,468
Independent trustees' fees and expenses	13,119
Audit	80,884
Legal	18,920
Miscellaneous	24,359
Total expenses before reductions	18,848,456
Expense reductions	(108,124)	18,740,332
Net investment income (loss)		47,471,078
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities:
Unaffiliated issuers	36,734,117
Fidelity Central Funds	3,060
Foreign currency transactions	(4,551)
Futures contracts	1,668,258
Capital gain distributions from Fidelity Central Funds	11,210,358
Total net realized gain (loss)		49,611,242
Change in net unrealized appreciation (depreciation) on: Investment securities	116,236,520
Assets and liabilities in foreign currencies	(279)
Futures contracts	(861,429)
Total change in net unrealized appreciation (depreciation)		115,374,812
Net gain (loss)		164,986,054
Net increase (decrease) in net assets resulting from operations		$212,457,132

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

Statement of Changes in Net Assets

	Year ended December 31, 2016	Year ended December 31, 2015
Increase (Decrease) in Net Assets
Operations
Net investment income (loss)	$47,471,078	$42,414,500
Net realized gain (loss)	49,611,242	83,470,657
Change in net unrealized appreciation (depreciation)	115,374,812	(115,895,671)
Net increase (decrease) in net assets resulting from operations	212,457,132	9,989,486
Distributions to shareholders from net investment income	(40,091,074)	(44,291,936)
Distributions to shareholders from net realized gain	(73,621,115)	(85,979,865)
Total distributions	(113,712,189)	(130,271,801)
Share transactions - net increase (decrease)	155,546,730	319,786,548
Total increase (decrease) in net assets	254,291,673	199,504,233
Net Assets
Beginning of period	2,997,805,754	2,798,301,521
End of period	$3,252,097,427	$2,997,805,754
Other Information
Undistributed net investment income end of period	$7,691,858	$211

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

Financial Highlights — VIP Balanced Portfolio Initial Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$16.27	$16.93	$17.76	$15.76	$14.63
Income from Investment Operations
Net investment income (loss)^A	.27	.26	.27	.26	.26
Net realized and unrealized gain (loss)	.85	(.16)	1.37	2.76	1.91
Total from investment operations	1.12	.10	1.64	3.02	2.17
Distributions from net investment income	(.22)	(.26)	(.25)	(.27)	(.26)^B
Distributions from net realized gain	(.40)	(.50)	(2.22)	(.76)	(.78)^B
Total distributions	(.62)	(.76)	(2.47)	(1.02)^C	(1.04)
Net asset value, end of period	$16.77	$16.27	$16.93	$17.76	$15.76
Total Return^D,^E	7.26%	.59%	10.26%	19.66%	15.07%
Ratios to Average Net Assets^F,^G
Expenses before reductions	.51%	.51%	.51%	.53%	.54%
Expenses net of fee waivers, if any	.51%	.51%	.51%	.52%	.54%
Expenses net of all reductions	.51%	.51%	.51%	.52%	.53%
Net investment income (loss)	1.66%	1.54%	1.63%	1.54%	1.69%
Supplemental Data
Net assets, end of period (000 omitted)	$209,201	$212,589	$220,897	$207,796	$178,915
Portfolio turnover rate^H	43%	54%	56%	95%	48%

^A Calculated based on average shares outstanding during the period.

^B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.

^C Total distributions of $1.02 per share is comprised of distributions from net investment income of $.268 and distributions from net realized gain of $.755 per share.

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

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

^F Fees and expenses of any underlying 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. Based on their most recent shareholder report date, the expenses of any underlying non-money market Fidelity Central Funds were less than .005%.

^G 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.

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

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

Financial Highlights — VIP Balanced Portfolio Service Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$16.20	$16.86	$17.70	$15.71	$14.58
Income from Investment Operations
Net investment income (loss)^A	.25	.24	.25	.24	.24
Net realized and unrealized gain (loss)	.85	(.15)	1.36	2.75	1.91
Total from investment operations	1.10	.09	1.61	2.99	2.15
Distributions from net investment income	(.21)	(.25)	(.23)	(.24)	(.23)^B
Distributions from net realized gain	(.40)	(.50)	(2.22)	(.76)	(.78)^B
Total distributions	(.61)	(.75)	(2.45)	(1.00)	(1.02)^C
Net asset value, end of period	$16.69	$16.20	$16.86	$17.70	$15.71
Total Return^D,^E	7.16%	.51%	10.09%	19.50%	14.95%
Ratios to Average Net Assets^F,^G
Expenses before reductions	.61%	.62%	.65%	.66%	.67%
Expenses net of fee waivers, if any	.61%	.61%	.65%	.66%	.67%
Expenses net of all reductions	.61%	.61%	.65%	.66%	.67%
Net investment income (loss)	1.56%	1.43%	1.50%	1.41%	1.55%
Supplemental Data
Net assets, end of period (000 omitted)	$4,865	$4,619	$3,267	$3,474	$3,548
Portfolio turnover rate^H	43%	54%	56%	95%	48%

^A Calculated based on average shares outstanding during the period.

^B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.

^C Total distributions of $1.02 per share is comprised of distributions from net investment income of $.232 and distributions from net realized gain of $.784 per share.

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

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

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

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

Financial Highlights — VIP Balanced Portfolio Service Class 2

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$15.95	$16.61	$17.47	$15.53	$14.43
Income from Investment Operations
Net investment income (loss)^A	.22	.21	.23	.21	.22
Net realized and unrealized gain (loss)	.83	(.15)	1.34	2.71	1.89
Total from investment operations	1.05	.06	1.57	2.92	2.11
Distributions from net investment income	(.19)	(.22)	(.22)	(.23)	(.22)^B
Distributions from net realized gain	(.40)	(.50)	(2.22)	(.76)	(.78)^B
Total distributions	(.59)	(.72)	(2.43)^C	(.98)^D	(1.01)^E
Net asset value, end of period	$16.41	$15.95	$16.61	$17.47	$15.53
Total Return^F,^G	6.98%	.36%	10.02%	19.28%	14.82%
Ratios to Average Net Assets^H,^I
Expenses before reductions	.76%	.76%	.76%	.78%	.78%
Expenses net of fee waivers, if any	.76%	.76%	.76%	.77%	.78%
Expenses net of all reductions	.76%	.76%	.76%	.77%	.78%
Net investment income (loss)	1.41%	1.29%	1.38%	1.29%	1.44%
Supplemental Data
Net assets, end of period (000 omitted)	$687,973	$555,924	$521,880	$436,060	$353,711
Portfolio turnover rate^J	43%	54%	56%	95%	48%

^A Calculated based on average shares outstanding during the period.

^B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.

^C Total distributions of $2.43 per share is comprised of distributions from net investment income of $.216 and distributions from net realized gain of $2.217 per share.

^D Total distributions of $.98 per share is comprised of distributions from net investment income of $.227 and distributions from net realized gain of $.755 per share.

^E Total distributions of $1.01 per share is comprised of distributions from net investment income of $.221 and distributions from net realized gain of $.784 per share.

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

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

^H Fees and expenses of any underlying 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. Based on their most recent shareholder report date, the expenses of any underlying non-money market Fidelity Central Funds were less than .005%.

^I 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.

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

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

Financial Highlights — VIP Balanced Portfolio Investor Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$16.16	$16.82	$17.66	$15.68	$14.56
Income from Investment Operations
Net investment income (loss)^A	.25	.24	.26	.25	.25
Net realized and unrealized gain (loss)	.85	(.15)	1.36	2.74	1.90
Total from investment operations	1.10	.09	1.62	2.99	2.15
Distributions from net investment income	(.21)	(.25)	(.24)	(.26)	(.24)^B
Distributions from net realized gain	(.40)	(.50)	(2.22)	(.76)	(.78)^B
Total distributions	(.61)	(.75)	(2.46)	(1.01)^C	(1.03)^D
Net asset value, end of period	$16.65	$16.16	$16.82	$17.66	$15.68
Total Return^E,^F	7.18%	.52%	10.18%	19.54%	14.99%
Ratios to Average Net Assets^G,^H
Expenses before reductions	.59%	.59%	.59%	.61%	.62%
Expenses net of fee waivers, if any	.59%	.59%	.59%	.60%	.62%
Expenses net of all reductions	.59%	.59%	.59%	.60%	.61%
Net investment income (loss)	1.58%	1.46%	1.55%	1.46%	1.61%
Supplemental Data
Net assets, end of period (000 omitted)	$2,350,058	$2,224,674	$2,052,258	$1,783,149	$1,417,431
Portfolio turnover rate^I	43%	54%	56%	95%	48%

^A Calculated based on average shares outstanding during the period.

^B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.

^C Total distributions of $1.01 per share is comprised of distributions from net investment income of $.255 and distributions from net realized gain of $.755 per share.

^D Total distributions of $1.03 per share is comprised of distributions from net investment income of $.244 and distributions from net realized gain of $.784 per share.

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

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

^G Fees and expenses of any underlying 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. Based on their most recent shareholder report date, the expenses of any underlying non-money market Fidelity Central Funds were less than .005%.

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

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

Notes to Financial Statements

For the period ended December 31, 2016

1. Organization.

VIP Balanced Portfolio (the Fund) is a fund of Variable Insurance Products Fund III (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.

2. Investments in Fidelity Central Funds.

The Fund invests in Fidelity Central Funds, which are open-end investment companies generally available only to other investment companies and accounts managed by the investment adviser and its affiliates. The 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.

Based on its investment objective, each Fidelity Central Fund may invest or participate in various investment vehicles or strategies that are similar to those of the Fund. These strategies are consistent with the investment objectives of the Fund and may involve certain economic risks which may cause a decline in value of each of the Fidelity Central Funds and thus a decline in the value of the Fund. 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 the investment adviser. Annualized expenses of the Money Market Central Funds as of their most recent shareholder report date are less than .005%. The following summarizes the Fund's investment in each non-money market Fidelity Central Fund.

Fidelity Central Fund	Investment Manager	Investment Objective	Investment Practices	Expense Ratio^(a)
Fidelity High Income Central Fund 2	FMR Co., Inc. (FMRC)	Seeks a high level of income and may also seek capital appreciation by investing primarily in debt securities, preferred stocks, and convertible securities, with an emphasis on lower-quality debt securities.	Foreign Securities Loans & Direct Debt Instruments Restricted Securities	Less than .005%
Fidelity VIP Investment Grade Central Fund	FIMM	Seeks a high level of current income by normally investing in investment-grade debt securities and repurchase agreements.	Repurchase Agreements Delayed Delivery & When Issued Securities Futures Restricted Securities Swaps	Less than .005%

(a) Expenses expressed as a percentage of average net assets and are as of each underlying Central Fund's most recent annual or semi-annual shareholder report.

An unaudited holdings listing for each Fund, which presents direct holdings as well as the pro-rata share of any securities and other investments held indirectly through each Fund's investment in underlying non-money market Fidelity Central Funds, is available at fidelity.com and/or institutional.fidelity.com, as applicable. A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the SEC) website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds which contain the significant accounting policies (including investment valuation policies) of those funds, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC website 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:

Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events, changes in interest rates and credit quality. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.

The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:

Level 1 – quoted prices in active markets for identical investments
Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)

Valuation techniques used to value the Fund's investments by major category are as follows:

Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, Exchange-Traded Funds (ETFs) and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. Utilizing these techniques may result in transfers between Level 1 and Level 2. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy.

Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. Corporate bonds and U.S. government and government agency obligations are valued by pricing vendors who utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.

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 (NAV) each business day and are categorized as Level 1 in the hierarchy.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of December 31, 2016, is included at the end of the Fund's Schedule of Investments.

Foreign Currency. 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. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Interest income is accrued as earned and includes coupon interest and amortization of premium and accretion of discount on debt securities as applicable. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.

Class Allocations and Expenses. Investment income, realized and unrealized capital gains and losses, common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated daily on a pro-rata basis to each class based on the relative net assets of each class to the total net assets of 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. For the reporting period, the allocated portion of income and expenses to each class as a percent of its average net assets may vary due to the timing of recording these transactions in relation to fluctuating net assets of the classes. Expenses directly attributable to a fund are charged to that fund. Expenses attributable to more than one fund are allocated among the respective funds on the basis of relative net assets or other appropriate methods. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.

Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, including distributing substantially all of its taxable income and realized gains. As a result, no provision for U.S. Federal income taxes is required. As of December 31, 2016, the Fund did not have any unrecognized tax benefits in the financial statements; nor is the Fund aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. The Fund files a U.S. federal tax return, in addition to state and local tax returns as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service (IRS) for a period of three fiscal years after they are filed. State and local tax returns may be subject to examination for an additional fiscal year depending on the jurisdiction. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.

Distributions are declared and recorded on the ex-dividend date. Income 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. Capital accounts are not adjusted for temporary book-tax differences which will reverse in a subsequent period.

Book-tax differences are primarily due to short-term gain distributions from the Underlying Funds, futures contracts, foreign currency transactions, passive foreign investment companies (PFIC), market discount, partnerships (including allocations from the Fidelity Central Funds), deferred trustees compensation 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	$395,031,790
Gross unrealized depreciation	(70,000,031)
Net unrealized appreciation (depreciation) on securities	$325,031,759
Tax Cost	$2,924,547,508

The tax-based components of distributable earnings as of period end were as follows:

Undistributed ordinary income	$10,364,685
Undistributed long-term capital gain	$46,253,388
Net unrealized appreciation (depreciation) on securities and other investments	$325,019,304

The tax character of distributions paid was as follows:

	December 31, 2016	December 31, 2015
Ordinary Income	$41,439,707	$ 63,324,112
Long-term Capital Gains	72,272,482	66,947,689
Total	$113,712,189	$ 130,271,801

Delayed Delivery Transactions and When-Issued Securities. During the period, the Fund transacted in securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The Fund may receive compensation for interest forgone in the purchase of a delayed delivery or when-issued security. With respect to purchase commitments, the Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract's terms, or if the issuer does not issue the securities due to political, economic, or other factors.

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.

4. Derivative Instruments.

Risk Exposures and the Use of Derivative Instruments. The Fund's investment objective allows the Fund to enter into various types of derivative contracts, including futures contracts. Derivatives are investments whose value is primarily 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 asset based on specified terms, to exchange future cash flows at periodic intervals based on a notional principal amount, or for one party to make one or more payments upon the occurrence of specified events in exchange for periodic payments from the other party.

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 may be mitigated by 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, may involve risk of loss in excess of any initial investment and collateral received and amounts recognized in the Statement of Assets and Liabilities. In addition, there may be the risk that the change in value of the derivative contract does 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 daily 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, if any, is included in daily variation margin for derivative instruments 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 presented 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 or index at period end and is representative of volume of activity during 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 $1,668,258 and a change in net unrealized appreciation (depreciation) of $(861,429) 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 (including the Fixed-Income Central Funds), other than short-term securities, aggregated $1,355,095,712 and $1,304,619,910, respectively.

6. Fees and Other Transactions with Affiliates.

Management Fee. Fidelity Management & Research Company (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .15% of the Fund's average net assets and an annualized group fee rate that averaged .25% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by the investment adviser, including any mutual funds previously advised by the investment adviser that are currently advised by Fidelity SelectCo, LLC, an affiliate of the investment adviser. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annual management fee rate was .40% 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 the investment adviser, a service fee. For the period, the service fee is based on an annual rate of .10% of Service Class' average net assets and .25% of Service Class 2's average net assets.

For the period, total fees, all of which were re-allowed to insurance companies for the distribution of shares and providing shareholder support services, were as follows:

Service Class	$4,379
Service Class 2	1,462,641
	$1,467,020

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

Initial Class	$136,636
Service Class	2,890
Service Class 2	386,137
Investor Class	3,317,233
	$3,842,896

Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of the investment adviser, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for each month. 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. Brokerage commissions are included in net realized gain (loss) and change in net unrealized appreciation (depreciation) in the Statement of Operations. The commissions paid to these affiliated firms were $30,318 for the period.

Interfund Trades. The Fund may purchase from or sell securities to other Fidelity Funds under procedures adopted by the Board. The procedures have been designed to ensure these interfund trades are executed in accordance with Rule 17a-7 of the 1940 Act. Interfund trades are included within the respective purchases and sales amounts shown in the Purchases and Sales of Investments note.

7. Committed Line of Credit.

The Fund participates with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $7,716 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, the Fund did not borrow 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. The Fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund may apply collateral received from the borrower against the obligation. The Fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. At period end, there were no security loans outstanding with FCM. 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 $143,429, including $11,662 from securities loaned to FCM.

9. Expense Reductions.

In addition, during the period the investment adviser reimbursed and/or waived a portion of fund-level operating expenses in the amount of $21,502.

10. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

	Year ended December 31, 2016	Year ended December 31, 2015
From net investment income
Initial Class	$2,731,972	$3,323,772
Service Class	60,138	64,282
Service Class 2	7,938,842	7,594,899
Investor Class	29,360,122	33,308,983
Total	$40,091,074	$44,291,936
From net realized gain
Initial Class	$5,088,372	$6,578,470
Service Class	105,659	103,935
Service Class 2	13,741,804	16,268,035
Investor Class	54,685,280	63,029,425
Total	$73,621,115	$85,979,865

11. Share Transactions.

Transactions for each class of shares were as follows:

	Shares	Shares	Dollars	Dollars
	Year ended December 31, 2016	Year ended December 31, 2015	Year ended December 31, 2016	Year ended December 31, 2015
Initial Class
Shares sold	1,190,454	1,154,477	$19,542,488	$19,407,389
Reinvestment of distributions	508,731	599,288	7,820,344	9,902,242
Shares redeemed	(2,291,938)	(1,735,971)	(37,399,408)	(29,100,395)
Net increase (decrease)	(592,753)	17,794	$(10,036,576)	$209,236
Service Class
Shares sold	72,296	118,581	$1,167,509	$1,959,537
Reinvestment of distributions	10,818	10,253	165,797	168,217
Shares redeemed	(76,747)	(37,445)	(1,218,697)	(623,998)
Net increase (decrease)	6,367	91,389	$114,609	$1,503,756
Service Class 2
Shares sold	10,983,630	6,448,104	$177,679,347	$106,308,756
Reinvestment of distributions	1,437,467	1,472,852	21,680,646	23,862,934
Shares redeemed	(5,359,696)	(4,480,604)	(85,052,676)	(73,117,062)
Net increase (decrease)	7,061,401	3,440,352	$114,307,317	$57,054,628
Investor Class
Shares sold	6,410,977	13,442,473	$103,317,005	$225,190,711
Reinvestment of distributions	5,507,570	5,873,921	84,045,402	96,338,408
Shares redeemed	(8,445,108)	(3,657,048)	(136,201,027)	(60,510,191)
Net increase (decrease)	3,473,439	15,659,346	$51,161,380	$261,018,928

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, the investment adviser or its affiliates were the owners of record of 77% of the total outstanding shares of the Fund and one otherwise unaffiliated shareholder was the owner of record of 11% of the total outstanding shares of the Fund.

Report of Independent Registered Public Accounting Firm

To the Trustees of Variable Insurance Products Fund III and Shareholders of VIP Balanced Portfolio:

We have audited the accompanying statement of assets and liabilities of VIP Balanced Portfolio (the Fund), a fund of Variable Insurance Products Fund III, including the schedule of investments, as of December 31, 2016, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2016, by correspondence with the custodians and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of VIP Balanced Portfolio as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
February 21, 2017

Trustees and Officers

The Trustees, Members of the Advisory Board (if any), and officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, oversee management of the risks associated with such activities and contractual arrangements, and review the fund's performance. Each of the Trustees oversees 169 funds.

The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) of the trust and the fund is referred to herein as an Independent Trustee. Each Independent Trustee shall retire not later than the last day of the calendar year in which his or her 75th birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. Officers and Advisory Board Members hold office without limit in time, except that any officer or Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.

The fund’s Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.

Experience, Skills, Attributes, and Qualifications of the Trustees. The Governance and Nominating Committee has adopted a statement of policy that describes the experience, qualifications, attributes, and skills that are necessary and desirable for potential Independent Trustee candidates (Statement of Policy). The Board believes that each Trustee satisfied at the time he or she was initially elected or appointed a Trustee, and continues to satisfy, the standards contemplated by the Statement of Policy. The Governance and Nominating Committee also engages professional search firms to help identify potential Independent Trustee candidates who have the experience, qualifications, attributes, and skills consistent with the Statement of Policy. From time to time, additional criteria based on the composition and skills of the current Independent Trustees, as well as experience or skills that may be appropriate in light of future changes to board composition, business conditions, and regulatory or other developments, have also been considered by the professional search firms and the Governance and Nominating Committee. In addition, the Board takes into account the Trustees' commitment and participation in Board and committee meetings, as well as their leadership of standing and ad hoc committees throughout their tenure.

In determining that a particular Trustee was and continues to be qualified to serve as a Trustee, the Board has considered a variety of criteria, none of which, in isolation, was controlling. The Board believes that, collectively, the Trustees have balanced and diverse experience, qualifications, attributes, and skills, which allow the Board to operate effectively in governing the fund and protecting the interests of shareholders. Information about the specific experience, skills, attributes, and qualifications of each Trustee, which in each case led to the Board's conclusion that the Trustee should serve (or continue to serve) as a trustee of the fund, is provided below.

Board Structure and Oversight Function. James C. Curvey is an interested person and currently serves as Chairman. The Trustees have determined that an interested Chairman is appropriate and benefits shareholders because an interested Chairman has a personal and professional stake in the quality and continuity of services provided to the fund. Independent Trustees exercise their informed business judgment to appoint an individual of their choosing to serve as Chairman, regardless of whether the Trustee happens to be independent or a member of management. The Independent Trustees have determined that they can act independently and effectively without having an Independent Trustee serve as Chairman and that a key structural component for assuring that they are in a position to do so is for the Independent Trustees to constitute a substantial majority for the Board. The Independent Trustees also regularly meet in executive session. Ned C. Lautenbach serves as Chairman of the Independent Trustees and as such (i) acts as a liaison between the Independent Trustees and management with respect to matters important to the Independent Trustees and (ii) with management prepares agendas for Board meetings.

Fidelity^® funds are overseen by different Boards of Trustees. The fund's Board oversees Fidelity's high income and certain equity funds, and other Boards oversee Fidelity's investment-grade bond, money market, asset allocation, and sector funds. The asset allocation funds may invest in Fidelity^® funds overseen by the fund's Board. The use of separate Boards, each with its own committee structure, allows the Trustees of each group of Fidelity^® funds to focus on the unique issues of the funds they oversee, including common research, investment, and operational issues. On occasion, the separate Boards establish joint committees to address issues of overlapping consequences for the Fidelity^® funds overseen by each Board.

The Trustees operate using a system of committees to facilitate the timely and efficient consideration of all matters of importance to the Trustees, the fund, and fund shareholders and to facilitate compliance with legal and regulatory requirements and oversight of the fund's activities and associated risks. The Board, acting through its committees, has charged FMR and its affiliates with (i) identifying events or circumstances the occurrence of which could have demonstrably adverse effects on the fund's business and/or reputation; (ii) implementing processes and controls to lessen the possibility that such events or circumstances occur or to mitigate the effects of such events or circumstances if they do occur; and (iii) creating and maintaining a system designed to evaluate continuously business and market conditions in order to facilitate the identification and implementation processes described in (i) and (ii) above. Because the day-to-day operations and activities of the fund are carried out by or through FMR, its affiliates, and other service providers, the fund's exposure to risks is mitigated but not eliminated by the processes overseen by the Trustees. While each of the Board's committees has responsibility for overseeing different aspects of the fund's activities, oversight is exercised primarily through the Operations, Audit, and Compliance Committees. In addition, the Independent Trustees have worked with FMR to enhance the Board's oversight of investment and financial risks, legal and regulatory risks, technology risks, and operational risks, including the development of additional risk reporting to the Board. For example, a working group comprised of Independent Trustees and FMR has worked and continues to work to review the Fidelity^® funds' valuation-related activities, reporting and risk management. Appropriate personnel, including but not limited to the fund's Chief Compliance Officer (CCO), FMR's internal auditor, the independent accountants, the fund's Treasurer and portfolio management personnel, make periodic reports to the Board's committees, as appropriate, including an annual review of Fidelity's risk management program for the Fidelity^® funds. The responsibilities of each standing committee, including their oversight responsibilities, are described further under "Standing Committees of the Trustees."

Interested Trustees*:

Correspondence intended for a Trustee who is an interested person may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.

Name, Year of Birth; Principal Occupations and Other Relevant Experience+

James C. Curvey (1935)

Year of Election or Appointment: 2007

Trustee

Chairman of the Board of Trustees

Mr. Curvey also serves as Trustee of other Fidelity^® funds. Mr. Curvey is a Director of Fidelity Research & Analysis Co. (investment adviser firm, 2009-present), and Vice Chairman (2007-present) and Director of FMR LLC (diversified financial services company). In addition, Mr. Curvey serves as an Overseer for the Boston Symphony Orchestra and a member of the board of Artis-Naples, Naples, Florida, and as a Trustee for Brewster Academy, Wolfeboro, New Hampshire. Previously, Mr. Curvey served as a Director of Fidelity Investments Money Management, Inc. (investment adviser firm, 2009-2014) and a Director of FMR and FMR Co., Inc. (investment adviser firms, 2007-2014).

Charles S. Morrison (1960)

Year of Election or Appointment: 2014

Trustee

Mr. Morrison also serves as Trustee of other funds. He serves as President of Fidelity Management & Research Company (FMR) (investment adviser firm, 2016-present), a Director of Fidelity Investments Money Management, Inc. (FIMM) (investment adviser firm, 2014-present), Director of Fidelity SelectCo, LLC (investment adviser firm, 2014-present), President, Asset Management (2014-present), and is an employee of Fidelity Investments. Previously, Mr. Morrison served as Vice President of Fidelity's Fixed Income and Asset Allocation Funds (2012-2014), President, Fixed Income (2011-2014), Vice President of Fidelity's Money Market Funds (2005-2009), President, Money Market Group Leader of FMR (investment adviser firm, 2009), and Senior Vice President, Money Market Group of FMR (2004-2009). Mr. Morrison also served as Vice President of Fidelity's Bond Funds (2002-2005), certain Balanced Funds (2002-2005), and certain Asset Allocation Funds (2002-2007), and as Senior Vice President (2002-2005) of Fidelity's Bond Division.

* Determined to be an “Interested Trustee” by virtue of, among other things, his or her affiliation with the trust or various entities under common control with FMR.

+ The information includes the Trustee's principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to the Trustee's qualifications to serve as a Trustee, which led to the conclusion that the Trustee should serve as a Trustee for the fund.

Independent Trustees:

Correspondence intended for an Independent Trustee may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Year of Birth; Principal Occupations and Other Relevant Experience+

Dennis J. Dirks (1948)

Year of Election or Appointment: 2005

Trustee

Mr. Dirks also serves as Trustee of other Fidelity^® funds. Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) and President and Board member of the National Securities Clearing Corporation (NSCC). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation, Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation, as a Trustee and a member of the Finance Committee of Manhattan College (2005-2008), as a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-2008), and as a member of the Independent Directors Council (IDC) Governing Council (2010-2015). Mr. Dirks is a member of the Board of Directors for The Brookville Center for Children's Services, Inc. (2009-present) and the Finance Committee of the Asolo Repertory Theatre (2016-present).

Alan J. Lacy (1953)

Year of Election or Appointment: 2008

Trustee

Mr. Lacy also serves as Trustee of other Fidelity^® funds. Mr. Lacy serves as Chairman (2014-present) and a member (2010-present) of the Board of Directors of Dave & Buster's Entertainment, Inc. (restaurant and entertainment complexes) and a Director of Bristol-Myers Squibb Company (global pharmaceuticals, 2008-present). He is a Trustee of the California Chapter of The Nature Conservancy (2015-present) and a Director of the Center for Advanced Study in the Behavioral Sciences at Stanford University (2015-present). In addition, Mr. Lacy served as Senior Adviser (2007-2014) of Oak Hill Capital Partners, L.P. (private equity) and also served as Chief Executive Officer (2005) and Vice Chairman (2005-2006) of Sears Holdings Corporation (retail) and Chief Executive Officer and Chairman of the Board of Sears, Roebuck and Co. (retail, 2000-2005). Previously, Mr. Lacy served as Chairman (2008-2011) and a member (2006-2015) of the Board of Trustees of the National Parks Conservation Association and as a member of the Board of Directors for The Western Union Company (global money transfer, 2006-2011), The Hillman Companies, Inc. (hardware wholesalers, 2010-2014), and Earth Fare, Inc. (retail grocery, 2010-2014).

Ned C. Lautenbach (1944)

Year of Election or Appointment: 2000

Trustee

Chairman of the Independent Trustees

Mr. Lautenbach also serves as Trustee of other Fidelity^® funds. Mr. Lautenbach currently serves as the Lead Director of the Eaton Corporation Board of Directors (diversified industrial, 1997-present). Mr. Lautenbach is Chairman of the Board of Directors of Artis-Naples in Naples, Florida (2012-present), a member of the Council on Foreign Relations (1994-present), and currently Vice Chair of the Board of Governors, State University System of Florida (2013-present). Previously, Mr. Lautenbach was a Partner and Advisory Partner at Clayton, Dubilier & Rice, LLC (private equity investment, 1998-2010), as well as a Director of Sony Corporation (2006-2007). Mr. Lautenbach also had a 30-year career with IBM (technology company) during which time he served as Senior Vice President and a member of the Corporate Executive Committee (1968-1998).

Joseph Mauriello (1944)

Year of Election or Appointment: 2008

Trustee

Mr. Mauriello also serves as Trustee of other Fidelity^® funds. Prior to his retirement in January 2006, Mr. Mauriello served in numerous senior management positions including Deputy Chairman and Chief Operating Officer (2004-2005), and Vice Chairman of Financial Services (2002-2004) of KPMG LLP US (professional services, 1965-2005). Mr. Mauriello currently serves as a member of the Board of Directors of XL Group plc. (global insurance and re-insurance, 2006-present) and the Independent Directors Council (IDC) Governing Council (2015-present). Previously, Mr. Mauriello served as a Director of the Hamilton Funds of the Bank of New York (2006-2007) and of Arcadia Resources Inc. (health care services and products, 2007-2012).

Robert W. Selander (1950)

Year of Election or Appointment: 2011

Trustee

Mr. Selander also serves as Trustee of other Fidelity^® funds. Mr. Selander serves as a Director of The Western Union Company (global money transfer, 2014-present) and a non-executive Chairman of Health Equity, Inc. (health savings custodian, 2015-present). Previously, Mr. Selander served as a Member of the Advisory Board of certain Fidelity^® funds (2011), and Executive Vice Chairman (2010), Chief Executive Officer (2009-2010), and President and Chief Executive Officer (1997-2009) of Mastercard, Inc.

Cornelia M. Small (1944)

Year of Election or Appointment: 2005

Trustee

Ms. Small also serves as Trustee of other Fidelity^® funds. Ms. Small is a member of the Board of Directors (2009-present) and Chair of the Investment Committee (2010-present) of the Teagle Foundation. Ms. Small also serves on the Investment Committee of the Berkshire Taconic Community Foundation (2008-present). Previously, Ms. Small served as Chairperson (2002-2008) and a member of the Investment Committee and Chairperson (2008-2012) and a member of the Board of Trustees of Smith College. In addition, Ms. Small served as Chief Investment Officer, Director of Global Equity Investments, and a member of the Board of Directors of Scudder, Stevens & Clark and Scudder Kemper Investments.

William S. Stavropoulos (1939)

Year of Election or Appointment: 2002

Trustee

Vice Chairman of the Independent Trustees

Mr. Stavropoulos also serves as Trustee of other Fidelity^® funds. Mr. Stavropoulos serves as President and Founder of the Michigan Baseball Foundation, the Great Lakes Loons (2007-present). Mr. Stavropoulos is Chairman Emeritus of the Board of Directors of The Dow Chemical Company, where he previously served in numerous senior management positions, including President, CEO (1995-2000; 2002-2004), Chairman of the Executive Committee (2000-2006), and as a member of the Board of Directors (1990-2006). Currently, Mr. Stavropoulos is Chairman of the Board of Directors of Univar Inc. (global distributor of commodity and specialty chemicals), a Director of Teradata Corporation (data warehousing and technology solutions), and a member of the Advisory Board for Metalmark Capital LLC (private equity investment, 2005-present). Mr. Stavropoulos is an operating advisor to Clayton, Dubilier & Rice, LLC (private equity investment). In addition, Mr. Stavropoulos is a member of the University of Notre Dame Advisory Council for the College of Science, a Trustee of the Rollin L. Gerstacker Foundation, and a Director of Artis-Naples in Naples, Florida. Previously, Mr. Stavropoulos served as a Director of Chemical Financial Corporation (bank holding company, 1993-2012) and Tyco International, Ltd. (multinational manufacturing and services, 2007-2012).

David M. Thomas (1949)

Year of Election or Appointment: 2008

Trustee

Mr. Thomas also serves as Trustee of other Fidelity^® funds. Mr. Thomas serves as Non-Executive Chairman of the Board of Directors of Fortune Brands Home and Security (home and security products, 2011-present), as a member of the Board of Directors (2004-present) and Presiding Director (2013-present) of Interpublic Group of Companies, Inc. (marketing communication), and as a member of the Board of Trustees of the University of Florida (2013-present). Previously, Mr. Thomas served as Executive Chairman (2005-2006) and Chairman and Chief Executive Officer (2000-2005) of IMS Health, Inc. (pharmaceutical and healthcare information solutions), and a Director of Fortune Brands, Inc. (consumer products, 2000-2011).

Advisory Board Members and Officers:

Correspondence intended for an officer or Peter S. Lynch may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210. Officers appear below in alphabetical order.

Name, Year of Birth; Principal Occupation

Peter S. Lynch (1944)

Year of Election or Appointment: 2003

Member of the Advisory Board

Mr. Lynch also serves as Member of the Advisory Board of other Fidelity^® funds. Mr. Lynch is Vice Chairman and a Director of FMR (investment adviser firm) and FMR Co., Inc. (investment adviser firm). In addition, Mr. Lynch serves as a Trustee of Boston College and as the Chairman of the Inner-City Scholarship Fund. Previously, Mr. Lynch served on the Special Olympics International Board of Directors (1997-2006).

Marc R. Bryant (1966)

Year of Election or Appointment: 2015

Secretary and Chief Legal Officer (CLO)

Mr. Bryant also serves as Secretary and CLO of other funds. Mr. Bryant serves as CLO, Secretary, and Senior Vice President of Fidelity Management & Research Company (investment adviser firm, 2015-present) and FMR Co., Inc. (investment adviser firm, 2015-present); Secretary of Fidelity SelectCo, LLC (investment adviser firm, 2015-present) and Fidelity Investments Money Management, Inc. (investment adviser firm, 2015-present); and CLO of Fidelity Management & Research (Hong Kong) Limited and FMR Investment Management (UK) Limited (investment adviser firms, 2015-present) and Fidelity Management & Research (Japan) Limited (investment adviser firm, 2016-present). He is Senior Vice President and Deputy General Counsel of FMR LLC (diversified financial services company). Previously, Mr. Bryant served as Secretary and CLO of Fidelity Rutland Square Trust II (2010-2014) and Assistant Secretary of Fidelity's Fixed Income and Asset Allocation Funds (2013-2015). Prior to joining Fidelity Investments, Mr. Bryant served as a Senior Vice President and the Head of Global Retail Legal for AllianceBernstein L.P. (2006-2010), and as the General Counsel for ProFund Advisors LLC (2001-2006).

Jeffrey S. Christian (1961)

Year of Election or Appointment: 2016

Assistant Treasurer

Mr. Christian also serves as Assistant Treasurer of other funds. Mr. Christian is an employee of Fidelity Investments (2003-present).

William C. Coffey (1969)

Year of Election or Appointment: 2009

Assistant Secretary

Mr. Coffey also serves as Assistant Secretary of other funds. He is Senior Vice President and Deputy General Counsel of FMR LLC (diversified financial services company, 2010-present), and is an employee of Fidelity Investments. Previously, Mr. Coffey served as Vice President and Associate General Counsel of FMR LLC (2005-2009).

Jonathan Davis (1968)

Year of Election or Appointment: 2010

Assistant Treasurer

Mr. Davis also serves as Assistant Treasurer of other funds, and is an employee of Fidelity Investments. Previously, Mr. Davis served as Vice President and Associate General Counsel of FMR LLC (diversified financial services company, 2003-2010).

Adrien E. Deberghes (1967)

Year of Election or Appointment: 2016

Assistant Treasurer

Mr. Deberghes also serves as an officer of other funds. He serves as Executive Vice President of Fidelity Investments Money Management, Inc. (FIMM) (investment adviser firm, 2016-present) and is an employee of Fidelity Investments (2008-present). Prior to joining Fidelity Investments, Mr. Deberghes was Senior Vice President of Mutual Fund Administration at State Street Corporation (2007-2008), Senior Director of Mutual Fund Administration at Investors Bank & Trust (2005-2007), and Director of Finance for Dunkin' Brands (2000-2005). Previously, Mr. Deberghes served in other fund officer roles.

Stephanie J. Dorsey (1969)

Year of Election or Appointment: 2010

Assistant Treasurer

Ms. Dorsey also serves as an officer of other funds. She is an employee of Fidelity Investments (2008-present) and has served in other fund officer roles. Prior to joining Fidelity Investments, Ms. Dorsey served as Treasurer (2004-2008) of the JPMorgan Mutual Funds and Vice President (2004-2008) of JPMorgan Chase Bank.

Howard J. Galligan III (1966)

Year of Election or Appointment: 2014

Chief Financial Officer

Mr. Galligan also serves as Chief Financial Officer of other funds. Mr. Galligan serves as President of Fidelity Pricing and Cash Management Services (FPCMS) (2014-present) and as a Director of Strategic Advisers, Inc. (investment adviser firm, 2008-present). Previously, Mr. Galligan served as Chief Administrative Officer of Asset Management (2011-2014) and Chief Operating Officer and Senior Vice President of Investment Support for Strategic Advisers, Inc. (2003-2011).

Scott C. Goebel (1968)

Year of Election or Appointment: 2015

Vice President

Mr. Goebel serves as Vice President of other funds and is an employee of Fidelity Investments (2001-present). Previously, Mr. Goebel served as Senior Vice President of Fidelity Management & Research Company (FMR) (investment adviser firm, 2016), Secretary of Fidelity SelectCo, LLC (investment adviser firm, 2013-2015), Fidelity Investments Money Management, Inc. (FIMM) (investment adviser firm, 2010-2015), and Fidelity Research and Analysis Company (FRAC) (investment adviser firm, 2010-2015); General Counsel, Secretary, and Senior Vice President of FMR (investment adviser firm, 2008-2015) and FMR Co., Inc. (investment adviser firm, 2008-2015); Assistant Secretary of Fidelity Management & Research (Japan) Limited (investment adviser firm, 2008-2015) and Fidelity Management & Research (U.K.) Inc. (investment adviser firm, 2008-2015); Chief Legal Officer (CLO) of Fidelity Management & Research (Hong Kong) Limited (investment adviser firm, 2008-2015); Secretary and CLO of certain Fidelity^® funds (2008-2015); Assistant Secretary of FIMM (2008-2010), FRAC (2008-2010), and certain funds (2007-2008); and as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (2005-2007).

Brian B. Hogan (1964)

Year of Election or Appointment: 2009

Vice President

Mr. Hogan also serves as Trustee or Vice President of other funds. Mr. Hogan serves as a Director of FMR Investment Management (UK) Limited (investment adviser firm, 2015-present) and Fidelity SelectCo, LLC (investment adviser firm, 2014-present) and President of the Equity Division of FMR (investment adviser firm, 2009-present). Previously, Mr. Hogan served as Senior Vice President, Equity Research of FMR (2006-2009) and as a portfolio manager. Mr. Brian B. Hogan is not related to Mr. Colm A. Hogan.

Colm A. Hogan (1973)

Year of Election or Appointment: 2016

Deputy Treasurer

Mr. Hogan also serves as an officer of other funds. Mr. Hogan is an employee of Fidelity Investments (2005-present). Mr. Colm A. Hogan is not related to Mr. Brian B. Hogan.

Chris Maher (1972)

Year of Election or Appointment: 2013

Assistant Treasurer

Mr. Maher serves as Assistant Treasurer of other funds. Mr. Maher is Vice President of Valuation Oversight and is an employee of Fidelity Investments. Previously, Mr. Maher served as Vice President of Asset Management Compliance (2013), Vice President of the Program Management Group of FMR (investment adviser firm, 2010-2013), and Vice President of Valuation Oversight (2008-2010).

John F. Papandrea (1972)

Year of Election or Appointment: 2016

Anti-Money Laundering (AML) Officer

Mr. Papandrea also serves as AML Officer of other funds. Mr. Papandrea is Vice President of FMR LLC (diversified financial services company, 2008-present) and is an employee of Fidelity Investments (2005-present).

Melissa M. Reilly (1971)

Year of Election or Appointment: 2014

Vice President of certain Equity Funds

Ms. Reilly also serves as Vice President of other funds. Ms. Reilly is an employee of Fidelity Investments (2004-present).

Kenneth B. Robins (1969)

Year of Election or Appointment: 2016

Chief Compliance Officer

Mr. Robins also serves as an officer of other funds. Mr. Robins serves as Compliance Officer of Fidelity Management & Research Company and FMR Co., Inc. (investment adviser firms, 2016-present) and is an employee of Fidelity Investments (2004-present). Previously, Mr. Robins served as Executive Vice President of Fidelity Investments Money Management, Inc. (investment adviser firm, 2013-2016) and served in other fund officer roles.

Stacie M. Smith (1974)

Year of Election or Appointment: 2016

President and Treasurer

Ms. Smith also serves as an officer of other funds. She is an employee of Fidelity Investments (2009-present) and has served in other fund officer roles. Prior to joining Fidelity Investments, Ms. Smith served as Senior Audit Manager of Ernst & Young LLP (accounting firm, 1996-2009). Previously, Ms. Smith served as Deputy Treasurer of certain Fidelity^® funds (2013-2016).

Marc L. Spector (1972)

Year of Election or Appointment: 2016

Assistant Treasurer

Mr. Spector also serves as an officer of other funds. Mr. Spector is an employee of Fidelity Investments (2016-present). Prior to joining Fidelity Investments, Mr. Spector served as Director at the Siegfried Group (accounting firm, 2013-2016), and prior to Siegfried Group as audit senior manager at Deloitte & Touche (accounting firm, 2005-2013).

Renee Stagnone (1975)

Year of Election or Appointment: 2016

Assistant Treasurer

Ms. Stagnone also serves as an officer of other funds. Ms. Stagnone is an employee of Fidelity Investments (1997-present). Previously, Ms. Stagnone served as Deputy Treasurer of certain Fidelity^® funds (2013-2016).

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 (July 1, 2016 to December 31, 2016).

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-^A	Beginning Account Value July 1, 2016	Ending Account Value December 31, 2016	Expenses Paid During Period-^B July 1, 2016 to December 31, 2016
Initial Class	.51%
Actual		$1,000.00	$1,046.70	$2.62
Hypothetical-^C		$1,000.00	$1,022.57	$2.59
Service Class	.61%
Actual		$1,000.00	$1,046.20	$3.14
Hypothetical-^C		$1,000.00	$1,022.07	$3.10
Service Class 2	.76%
Actual		$1,000.00	$1,045.30	$3.91
Hypothetical-^C		$1,000.00	$1,021.32	$3.86
Investor Class	.59%
Actual		$1,000.00	$1,046.30	$3.03
Hypothetical-^C		$1,000.00	$1,022.17	$3.00

^A Annualized expense ratio reflects expenses net of applicable fee waivers.

^B Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). In addition to the expenses noted above, the Fund also indirectly bears its proportional share of the expenses of the underlying Fidelity Central Funds. Annualized expenses of the underlying non-money market Fidelity Central Funds as of their most recent fiscal half year were less than .005%.

^C 5% return per year before expenses

Distributions (Unaudited)

The Board of Trustees of VIP Balanced Portfolio voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income:

	Pay Date	Record Date	Dividends	Capital Gains
VIP Balanced Portfolio
Initial Class	02/10/17	02/10/17	$0.042	$0.250
Service Class	02/10/17	02/10/17	$0.039	$0.250
Service Class 2	02/10/17	02/10/17	$0.036	$0.250
Investor Class	02/10/17	02/10/17	$0.040	$0.250

The fund hereby designates as a capital gain dividend with respect to the taxable year ended December 31, 2016, $46,805,065, or, if subsequently determined to be different, the net capital gain of such year.

A total of 3.12% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.

Initial Class designates 61%, Service Class designates 65%, Service Class 2 designates 70%, and Investor Class designates 64%, of the dividend distributed in December, during the fiscal year as qualifying for the dividends–received deduction for corporate shareholders.

Board Approval of Investment Advisory Contracts and Management Fees

VIP Balanced Portfolio

Each year, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract with Fidelity Management & Research Company (FMR) and the sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information relevant to the renewal of the Advisory Contracts throughout the year.

The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. The Board has established various standing committees (Committees), each composed of and chaired by Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. The Board, acting directly and through its Committees, requests and receives information concerning the annual consideration of the renewal of the fund's Advisory Contracts. The Board also meets as needed to consider matters specifically related to the Board's annual consideration of the renewal of the Advisory Contracts. Members of the Board may also meet with trustees of other Fidelity funds through ad hoc joint committees to discuss certain matters relevant to all of the Fidelity funds.

At its July 2016 meeting, the Board unanimously determined to renew the fund's Advisory Contracts. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the fund's management fee and total expense ratio relative to peer funds; (iii) the total costs of the services to be provided by and the profits to be realized by Fidelity from its relationships with the fund; and (iv) the extent to which, if any, economies of scale exist and would be realized as the fund grows, and whether any economies of scale are appropriately shared with fund shareholders.

In considering whether to renew the Advisory Contracts for the fund, the Board reached a determination, with the assistance of fund counsel and Independent Trustees' counsel and through the exercise of its business judgment, that the renewal of the Advisory Contracts was in the best interests of the fund and its shareholders and that the compensation payable under the Advisory Contracts was fair and reasonable. The Board's decision to renew the Advisory Contracts was not based on any single factor, but rather was based on a comprehensive consideration of all the information provided to the Board at its meetings throughout the year. The Board, in reaching its determination to renew the Advisory Contracts, was aware that shareholders of the fund have a broad range of investment choices available to them, including a wide choice among funds offered by Fidelity's competitors, and that the fund's shareholders, who have the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, which is part of the Fidelity family of funds.

Nature, Extent, and Quality of Services Provided. The Board considered Fidelity's staffing as it relates to the fund, including the backgrounds of investment personnel of Fidelity, and also considered the fund's investment objective, strategies, and related investment philosophy. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the investment personnel compensation program and whether this structure provides appropriate incentives to act in the best interests of the fund. Additionally, the Board considered the portfolio managers' investments, if any, in the funds that they manage.

Resources Dedicated to Investment Management and Support Services. The Board and the Fund Oversight and Research Committees reviewed the general qualifications and capabilities of Fidelity's investment staff, including its size, education, experience, and resources, as well as Fidelity's approach to recruiting, training, managing, and compensating investment personnel. The Board noted that Fidelity has continued to increase the resources devoted to non-U.S. offices, including expansion of Fidelity's global investment organization. The Board also noted that Fidelity's analysts have extensive resources, tools and capabilities that allow them to conduct sophisticated quantitative and fundamental analysis, as well as credit analysis of issuers, counterparties and guarantors. Further, the Board considered that Fidelity's investment professionals have sufficient access to global information and data so as to provide competitive investment results over time, and that those professionals also have access to sophisticated tools that permit them to assess portfolio construction and risk and performance attribution characteristics continuously, as well as to transmit new information and research conclusions rapidly around the world. Additionally, in its deliberations, the Board considered Fidelity's trading, risk management, compliance, and technology and operations capabilities and resources, which are integral parts of the investment management process.

Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of advisory, administrative, and shareholder services performed by FMR, the sub-advisers (together with FMR, the Investment Advisers), and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the supervision of third party service providers, principally custodians, subcustodians, and pricing vendors; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board also reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services.

The Board noted that the growth of fund assets over time across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through telephone representatives and over the Internet, investor education materials and asset allocation tools, and the expanded availability of Fidelity Investor Centers.

In 2014, the Board formed an ad hoc Committee on Transfer Agency Fees to review the variety of transfer agency fee structures throughout the industry and Fidelity's competitive positioning with respect to industry participants.

Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing a large variety of mutual fund investor services. The Board noted that Fidelity had taken, or had made recommendations that resulted in the Fidelity funds taking, a number of actions over the previous year that benefited particular funds, including: (i) continuing to dedicate additional resources to investment research and to the support of the senior management team that oversees asset management; (ii) continuing efforts to enhance Fidelity's global research capabilities; (iii) launching new funds and making other enhancements to meet client needs; (iv) broadening eligibility requirements for certain lower-priced share classes of, and streamlining the fee structure for, certain existing equity index funds; (v) lowering expense caps for certain existing funds and classes to reduce expenses paid by shareholders; (vi) eliminating redemption fees for certain variable insurance product funds and classes; (vii) continuing to launch dedicated lower cost underlying funds to meet portfolio construction needs related to expanding underlying fund options for Fidelity funds of funds, specifically for the Freedom Fund product lines; (viii) launching a lower cost share class for use by the Freedom Index Fund product line; (ix) rationalizing product lines and gaining increased efficiencies through fund mergers and share class consolidations; (x) continuing to develop, acquire and implement systems and technology to improve services to the funds and shareholders, strengthen information security, and increase efficiency; (xi) implementing investment enhancements to further strengthen Fidelity's target date product line to increase investors' probability of success in achieving their goals; (xii) accelerating the conversion of all remaining Class B shares to Class A shares, which have a lower expense structure; and (xiii) implementing changes to Fidelity's money market fund product line in response to recent regulatory reforms.

Investment Performance. The Board considered whether the fund has operated in accordance with its investment objective, as well as its record of compliance with its investment restrictions and its performance history. The Board noted that there were portfolio management changes for the fund in January 2014, January 2015, July 2015, and October 2015.

The Board took into account discussions with representatives of the Investment Advisers about fund investment performance that occur at Board meetings throughout the year. In this regard the Board noted that as part of regularly scheduled fund reviews and other reports to the Board on fund performance, the Board considers annualized return information for the fund, for different time periods, measured against a securities market index ("benchmark index") and a peer group of funds with similar objectives ("peer group"), if any. In its evaluation of fund investment performance, the Board gave particular attention to information indicating changes in performance of certain Fidelity funds for specific time periods and discussed with the Investment Advisers the reasons for any overperformance or underperformance.

In addition to reviewing absolute and relative fund performance, the Independent Trustees periodically consider the appropriateness of fund performance metrics in evaluating the results achieved. In general, the Independent Trustees believe that fund performance should be evaluated based on net performance (after fees and expenses) of both the highest performing and lowest performing fund share classes, where applicable, compared to appropriate benchmark indices, over appropriate time periods that may include full market cycles, and compared to peer groups, as applicable, over the same periods, taking into account relevant factors including the following: general market conditions; issuer-specific information; and fund cash flows and other factors.

The Independent Trustees recognize that shareholders evaluate performance on a net basis over their own holding periods, for which one-, three-, and five-year periods are often used as a proxy. For this reason, the performance information reviewed by the Board also included net cumulative calendar year total return information for the fund and an appropriate benchmark index and peer group for the most recent one-, three-, and five-year periods, as shown below. Returns are shown compared to the 25th percentile (top of box, 75% beaten) and 75th percentile (bottom of box, 25% beaten) of the peer universe.

VIP Balanced Portfolio

Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.

Competitiveness of Management Fee and Total Expense Ratio. The Board considered the fund's management fee and total expense ratio compared to "mapped groups" of competitive funds and classes created for the purpose of facilitating the Trustees' competitive analysis of management fees and total expenses. Fidelity creates "mapped groups" by combining similar Broadridge investment objective categories that have comparable investment mandates. Combining Broadridge investment objective categories aids the Board's management fee and total expense ratio comparisons by broadening the competitive group used for comparison.

Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in basis points (BP) in the chart below. The group of Broadridge funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group is broader than the Broadridge peer group used by the Board for performance comparisons because the Total Mapped Group combines several Broadridge investment objective categories while the Broadridge peer group does not. The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates, regardless of whether their management fee structures also are comparable. Funds with comparable investment mandates offer exposure to similar types of securities. Funds with comparable management fee structures have similar management fee contractual arrangements (e.g., flat rate charged for advisory services, all-inclusive fee rate, etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and considered by the Board.

VIP Balanced Portfolio

The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for 2015.

The Board noted that, in 2014, the ad hoc Committee on Group Fee was formed by it and the boards of other Fidelity funds to conduct an in-depth review of the "group fee" component of the management fee of funds with such management fee structures. The Committee's focus included the mechanics of the group fee, the competitive landscape of group fee structures, Fidelity funds with no group fee component and investment products not included in group fee assets. The Board also considered that, for funds subject to the group fee, FMR agreed to voluntarily waive fees over a specified period of time in amounts designed to account for assets converted from certain funds to certain collective investment trusts.

The Board also noted that, in 2013, the ad hoc Committee on Management Fees was formed to conduct an in-depth review of the management fee rates of Fidelity's active equity mutual funds. The Committee focused on the following areas: (i) standard fee structures; (ii) research consumption and trading evolution; (iii) management fee competitiveness/profitability by category; and (iv) factors that drive institutional pricing.

Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.

Total Expense Ratio. In its review of each class's total expense ratio, the Board considered the fund's management fee rate as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted that Fidelity may agree to waive fees and expenses from time to time, and the extent to which, if any, it has done so for the fund. As part of its review, the Board also considered the current and historical total expense ratios of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.

The Board noted that the total expense ratio of each class ranked below the competitive median for 2015.

Fees Charged to Other Fidelity Clients. The Board also considered Fidelity fee structures and other information with respect to clients of Fidelity, such as other funds advised or subadvised by Fidelity, pension plan clients, and other institutional clients with similar mandates. The Board noted the findings of the 2013 ad hoc joint committee (created with the board of other Fidelity funds), which reviewed and compared Fidelity's institutional investment advisory business with its business of providing services to the Fidelity funds, including the differences in services provided, fees charged, and costs incurred, as well as competition in their respective marketplaces.

Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.

Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and servicing the fund's shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.

On an annual basis, Fidelity presents to the Board information about the profitability of its relationship with the fund. Fidelity calculates profitability information for each fund, as well as aggregate profitability information for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the books and records of Fidelity on which Fidelity's audited financial statements are based. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.

PricewaterhouseCoopers LLP (PwC), independent registered public accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of the methodologies used by Fidelity in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures in respect of the mathematical accuracy of the fund profitability information and its conformity to established allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board concluded that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.

The Board also reviewed Fidelity's non-fund businesses and fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.

The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and was satisfied that the profitability was not excessive.

Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale as assets grow through increased services to the fund, through waivers or reimbursements, or through fee or expense ratio reductions. The Board also noted that in 2013, it and the boards of other Fidelity funds created an ad hoc committee (the Economies of Scale Committee) to analyze whether Fidelity attains economies of scale in respect of the management and servicing of the Fidelity funds, whether the Fidelity funds have appropriately benefited from such economies of scale, and whether there is potential for realization of any further economies of scale.

The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower group fee rates as total group assets increase, and for higher group fee rates as total group assets decrease (with "group assets" defined to include fund assets under FMR's management plus the assets of sector funds previously under FMR's management). FMR calculates the group fee rates based on a tiered asset "breakpoint" schedule that varies based on asset class. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total Fidelity fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will benefit from lower management fees as group assets increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.

The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.

Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Fidelity funds' Advisory Contracts, the Board requested and received additional information on certain topics, including: (i) fund performance trends and Fidelity's long-term strategies for certain funds; (ii) the various share classes employed by Fidelity and the attributes of each class, together with similar information on the distribution and servicing payments made by Fidelity or the funds to third-party participants in the distribution channels; (iii) fund profitability, and fund performance in relation to fund profitability; (iv) the methodology with respect to evaluating competitive fund data and peer group classifications and fee comparisons; (v) annual fund profitability margins; (vi) the realization of fall-out benefits in and attribution of fall-out benefits to certain Fidelity business units; (vii) the appropriateness of certain funds' benchmarks; (viii) the rationalization for certain share classes and expenses; (ix) sub-advisory fee rates for comparable investment mandates; (x) product strategy for certain underperforming funds; and (xi) Fidelity's resources and strategy for cybersecurity.

Based on its evaluation of all of the conclusions noted above, and after considering all factors it believed relevant, the Board concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.

Fidelity Investments

VIPBAL-ANN-0217
1.540208.119

Fidelity® Variable Insurance Products:

Dynamic Capital Appreciation Portfolio

Annual Report

December 31, 2016

Contents

Performance
Management's Discussion of Fund Performance
Investment Summary
Investments
Financial Statements
Notes to Financial Statements
Report of Independent Registered Public Accounting Firm
Trustees and Officers
Shareholder Expense Example
Distributions
Board Approval of Investment Advisory Contracts and Management Fees

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.

NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE

Neither the Fund nor Fidelity Distributors Corporation is a bank.

Performance: The Bottom Line

Average Annual Total Returns

For the periods ended December 31, 2016	Past 1 year	Past 5 years	Past 10 years
Initial Class	2.88%	14.47%	6.85%
Service Class	2.76%	14.36%	6.74%
Service Class 2	2.66%	14.17%	6.58%
Investor Class	2.81%	14.37%	6.77%

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in VIP Dynamic Capital Appreciation Portfolio - Initial Class on December 31, 2006.

The chart shows how the value of your investment would have changed, and also shows how the S&P 500® Index performed over the same period.

	Period Ending Values
	$19,402	VIP Dynamic Capital Appreciation Portfolio - Initial Class
	$19,572	S&P 500® Index

Management's Discussion of Fund Performance

Market Recap: The S&P 500 index returned 11.96% in 2016, rising sharply on post-election optimism for economic growth. The year began during a fairly volatile stretch, with stocks hampered by persistent oil-price weakness and U.S.-dollar strength. Markets regained momentum in February amid U.S. job gains, a rally in energy and other stimuli that helped keep the roughly seven-year uptrend intact. Markets tumbled briefly following the U.K.’s June 23 vote to exit the European Union – dubbed “Brexit” – then recovered quickly and settled into a flattish stretch until the November 8 U.S. presidential election. Stocks reacted to the outcome by reaching a series of all-time highs. For the year, energy (+27%) led the way amid two strong rallies in commodity prices, one in the spring and another in November. Telecommunication services (+23%) was close behind, as demand for dividend-paying equities was high early in the period. Cyclical sectors, including financials (+22%), industrials (+18%) and materials (+17%), also posted strong gains. Conversely, consumer staples (+5%) and consumer discretionary (+6%) lagged the index, the latter hurt as online competition continued to pressure brick-and-mortar retailers. Real estate (+3%) struggled due to expectations for rising interest rates, while health care (-2%) was hampered by an uncertain political and regulatory outlook.

Comments from Portfolio Manager Fergus Shiel: For the year, the fund’s share classes returned roughly 3%, considerably lagging the S&P 500 index. Versus the benchmark, stock picks and a sizable overweighting in biotechnology stocks hurt this period. The largest detractor was Gilead Sciences, with six other biotechs scattered among our 10 largest relative detractors. Gilead’s shares fell amid continued sales erosion of Harvoni, a drug to treat hepatitis C. An out-of-benchmark position in Pacira Pharmaceuticals also worked against us, as did non-benchmark investments in two U.K.-based companies stung by the region’s June decision to exit the European Union: hotel/restaurant chain Whitbread and ITV, a London-based television producer and broadcaster. Partly because of these U.K. holdings and the British pound’s weakness versus the U.S. dollar, the fund’s foreign investments were a drag on performance. Conversely, the decision to underweight consumer staples and real estate, two lagging sectors, added value. At the stock level, the top contributor was casino operator Las Vegas Sands, a non-index position and our largest holding at period end. Also lifting relative results was an out-of-index position in Medivation, a biotech company focused on developing therapies for cancers with limited treatment options. We sold Pacira and Medivation from the fund by period end.

Investment Summary (Unaudited)

Top Ten Stocks as of December 31, 2016

	% of fund's net assets	% of fund's net assets 6 months ago
Las Vegas Sands Corp.	4.5	5.3
CME Group, Inc.	4.1	3.1
Adobe Systems, Inc.	3.5	3.7
Celgene Corp.	3.3	4.7
Apple, Inc.	3.0	0.0
Gilead Sciences, Inc.	2.9	6.9
Amgen, Inc.	2.6	2.7
Wells Fargo & Co.	2.5	1.2
Goldman Sachs Group, Inc.	1.9	0.3
Vertex Pharmaceuticals, Inc.	1.9	0.8
	30.2

Top Five Market Sectors as of December 31, 2016

	% of fund's net assets	% of fund's net assets 6 months ago
Consumer Discretionary	21.0	29.5
Information Technology	17.5	13.6
Financials	16.7	15.2
Health Care	16.5	25.8
Industrials	14.2	7.3

Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications.

Asset Allocation (% of fund's net assets)

As of December 31, 2016^*
	Stocks	98.6%
	Short-Term Investments and Net Other Assets (Liabilities)	1.4%

* Foreign investments - 14.5%

As of June 30, 2016^*
	Stocks	97.9%
	Short-Term Investments and Net Other Assets (Liabilities)	2.1%

* Foreign investments - 16.8%

Percentages shown as 0.0% may reflect amounts less than 0.05%.

Investments December 31, 2016

Showing Percentage of Net Assets

Common Stocks - 98.6%
	Shares	Value
CONSUMER DISCRETIONARY - 21.0%
Auto Components - 0.2%
The Goodyear Tire & Rubber Co.	9,800	$302,526
Automobiles - 0.4%
General Motors Co.	17,500	609,700
Diversified Consumer Services - 0.2%
DeVry, Inc. (a)	9,320	290,784
Hotels, Restaurants & Leisure - 6.5%
Dalata Hotel Group PLC (b)	217,540	1,006,426
Las Vegas Sands Corp.	131,971	7,048,567
Whitbread PLC	31,952	1,486,900
Wynn Resorts Ltd. (a)	6,600	570,966
		10,112,859
Household Durables - 1.7%
Cairn Homes PLC (b)	809,064	1,149,743
D.R. Horton, Inc.	24,600	672,318
Newell Brands, Inc.	10,300	459,895
TRI Pointe Homes, Inc. (b)	31,600	362,768
		2,644,724
Internet & Direct Marketing Retail - 0.9%
Amazon.com, Inc. (b)	1,900	1,424,753
Media - 5.4%
Altice NV Class A (b)	97,049	1,923,647
Charter Communications, Inc. Class A (b)	8,677	2,498,282
Havas SA	95,100	800,856
Interpublic Group of Companies, Inc.	55,000	1,287,550
ITV PLC	586,486	1,491,829
The Walt Disney Co.	3,300	343,926
		8,346,090
Multiline Retail - 3.1%
Dollar General Corp.	32,444	2,403,127
JC Penney Corp., Inc. (a)(b)	262,800	2,183,868
Macy's, Inc.	4,300	153,983
		4,740,978
Specialty Retail - 2.6%
AutoZone, Inc. (b)	1,300	1,026,727
Home Depot, Inc.	19,988	2,679,991
TJX Companies, Inc.	5,390	404,951
		4,111,669

TOTAL CONSUMER DISCRETIONARY		32,584,083

CONSUMER STAPLES - 0.6%
Food & Staples Retailing - 0.5%
Costco Wholesale Corp.	4,884	781,977
Personal Products - 0.1%
elf Beauty, Inc. (a)	4,100	118,654

TOTAL CONSUMER STAPLES		900,631

ENERGY - 7.2%
Energy Equipment & Services - 1.7%
Baker Hughes, Inc.	33,615	2,183,967
Helmerich & Payne, Inc. (a)	1,100	85,140
Patterson-UTI Energy, Inc.	3,300	88,836
U.S. Silica Holdings, Inc.	6,500	368,420
		2,726,363
Oil, Gas & Consumable Fuels - 5.5%
Chevron Corp.	11,800	1,388,860
ConocoPhillips Co.	46,500	2,331,510
EOG Resources, Inc.	5,000	505,500
Marathon Oil Corp.	123,535	2,138,391
Southwestern Energy Co. (b)	55,579	601,365
Suncor Energy, Inc.	38,500	1,258,817
Whiting Petroleum Corp. (b)	21,700	260,834
		8,485,277

TOTAL ENERGY		11,211,640

FINANCIALS - 16.7%
Banks - 5.1%
Bank of America Corp.	126,300	2,791,230
PNC Financial Services Group, Inc.	10,464	1,223,869
Wells Fargo & Co.	70,750	3,899,033
		7,914,132
Capital Markets - 10.0%
CBOE Holdings, Inc.	7,900	583,731
CME Group, Inc.	54,784	6,319,334
Goldman Sachs Group, Inc.	12,600	3,017,070
Legg Mason, Inc.	25,381	759,146
Morgan Stanley	64,000	2,704,000
MSCI, Inc.	12,171	958,831
S&P Global, Inc.	10,000	1,075,400
Waddell & Reed Financial, Inc. Class A	6,800	132,668
		15,550,180
Consumer Finance - 1.5%
Capital One Financial Corp.	10,400	907,296
Discover Financial Services	10,300	742,527
Synchrony Financial	21,700	787,059
		2,436,882
Diversified Financial Services - 0.1%
Bats Global Markets, Inc.	3,900	130,689

TOTAL FINANCIALS		26,031,883

HEALTH CARE - 16.5%
Biotechnology - 14.2%
Alexion Pharmaceuticals, Inc. (b)	15,900	1,945,365
Amgen, Inc.	27,200	3,976,912
Biogen, Inc. (b)	4,560	1,293,125
Celgene Corp. (b)	44,950	5,202,963
Gilead Sciences, Inc.	64,019	4,584,401
Regeneron Pharmaceuticals, Inc. (b)	6,000	2,202,540
Vertex Pharmaceuticals, Inc. (b)	39,100	2,880,497
		22,085,803
Health Care Equipment & Supplies - 0.3%
Abiomed, Inc. (b)	3,800	428,184
Life Sciences Tools & Services - 0.2%
ICON PLC (b)	4,200	315,840
Pharmaceuticals - 1.8%
Jazz Pharmaceuticals PLC (b)	16,817	1,833,558
Mallinckrodt PLC (b)	1,100	54,802
The Medicines Company (b)	30,000	1,018,200
		2,906,560

TOTAL HEALTH CARE		25,736,387

INDUSTRIALS - 14.2%
Air Freight & Logistics - 0.5%
United Parcel Service, Inc. Class B	6,500	745,160
Airlines - 1.5%
Air Canada (b)	84,400	859,307
Ryanair Holdings PLC sponsored ADR (b)	17,170	1,429,574
		2,288,881
Building Products - 0.5%
Johnson Controls International PLC	8,700	358,353
Kingspan Group PLC (Ireland)	17,900	486,135
		844,488
Construction & Engineering - 1.5%
AECOM (b)	7,500	272,700
Chicago Bridge & Iron Co. NV	9,800	311,150
EMCOR Group, Inc.	7,200	509,472
Fluor Corp.	6,901	362,441
Granite Construction, Inc.	2,000	110,000
KBR, Inc.	24,600	410,574
MasTec, Inc. (b)	9,500	363,375
		2,339,712
Electrical Equipment - 1.0%
Acuity Brands, Inc.	1,602	369,838
AMETEK, Inc.	9,800	476,280
General Cable Corp.	11,000	209,550
Rockwell Automation, Inc.	3,400	456,960
		1,512,628
Industrial Conglomerates - 1.6%
General Electric Co.	78,670	2,485,972
Machinery - 4.1%
Cummins, Inc.	5,200	710,684
Deere & Co.	6,100	628,544
Flowserve Corp.	22,300	1,071,515
Harsco Corp.	5,300	72,080
Manitowoc Co., Inc.	60,596	362,364
Navistar International Corp. New (b)	6,968	218,586
Oshkosh Corp.	6,122	395,542
PACCAR, Inc.	4,400	281,160
Pentair PLC	28,800	1,614,816
Terex Corp.	10,700	337,371
Xylem, Inc.	14,334	709,820
		6,402,482
Marine - 0.5%
Irish Continental Group PLC unit	166,000	786,330
Road & Rail - 0.9%
CSX Corp.	12,000	431,160
Norfolk Southern Corp.	9,800	1,059,086
		1,490,246
Trading Companies & Distributors - 2.1%
GATX Corp. (a)	12,284	756,449
HD Supply Holdings, Inc. (b)	28,957	1,230,962
MRC Global, Inc. (b)	17,300	350,498
WESCO International, Inc. (b)	13,206	878,859
		3,216,768

TOTAL INDUSTRIALS		22,112,667

INFORMATION TECHNOLOGY - 17.5%
Electronic Equipment & Components - 0.3%
Zebra Technologies Corp. Class A (b)	5,400	463,104
Internet Software & Services - 2.4%
Alphabet, Inc. Class C (b)	1,800	1,389,276
Datalex PLC	102,007	365,084
Facebook, Inc. Class A (b)	13,611	1,565,946
VeriSign, Inc. (b)	6,100	464,027
		3,784,333
IT Services - 1.4%
First Data Corp. Class A (b)	65,206	925,273
PayPal Holdings, Inc. (b)	29,900	1,180,153
		2,105,426
Semiconductors & Semiconductor Equipment - 3.0%
ASML Holding NV	8,000	897,600
Broadcom Ltd.	6,800	1,202,036
KLA-Tencor Corp.	6,800	535,024
Texas Instruments, Inc.	28,000	2,043,160
		4,677,820
Software - 7.4%
Adobe Systems, Inc. (b)	52,500	5,404,875
Citrix Systems, Inc. (b)	3,400	303,654
Electronic Arts, Inc. (b)	36,285	2,857,807
Microsoft Corp.	42,722	2,654,745
Workday, Inc. Class A (b)	3,602	238,056
		11,459,137
Technology Hardware, Storage & Peripherals - 3.0%
Apple, Inc.	40,119	4,646,583

TOTAL INFORMATION TECHNOLOGY		27,136,403

MATERIALS - 4.2%
Chemicals - 1.9%
E.I. du Pont de Nemours & Co.	2,300	168,820
FMC Corp.	24,564	1,389,340
LyondellBasell Industries NV Class A	4,400	377,432
Potash Corp. of Saskatchewan, Inc.	10,900	197,193
PPG Industries, Inc.	2,400	227,424
Sociedad Quimica y Minera de Chile SA (PN-B) sponsored ADR	11,469	328,587
The Dow Chemical Co.	2,300	131,606
The Mosaic Co.	4,800	140,784
		2,961,186
Construction Materials - 0.2%
Eagle Materials, Inc.	2,200	216,766
Metals & Mining - 2.1%
ArcelorMittal SA Class A unit (b)	54,500	397,850
BHP Billiton PLC	23,832	379,477
Freeport-McMoRan, Inc. (b)	63,900	842,841
Glencore Xstrata PLC (b)	173,327	592,442
Nucor Corp.	5,600	333,312
Rio Tinto PLC	15,200	580,306
Worthington Industries, Inc.	3,300	156,552
		3,282,780

TOTAL MATERIALS		6,460,732

TELECOMMUNICATION SERVICES - 0.7%
Wireless Telecommunication Services - 0.7%
T-Mobile U.S., Inc. (b)	20,000	1,150,200
TOTAL COMMON STOCKS
(Cost $132,513,723)		153,324,626

Money Market Funds - 3.7%
Fidelity Cash Central Fund, 0.60% (c)	2,230,429	2,230,875
Fidelity Securities Lending Cash Central Fund 0.65% (c)(d)	3,477,358	3,477,705
TOTAL MONEY MARKET FUNDS
(Cost $5,708,273)		5,708,580
TOTAL INVESTMENT PORTFOLIO - 102.3%
(Cost $138,221,996)		159,033,206
NET OTHER ASSETS (LIABILITIES) - (2.3)%		(3,534,585)
NET ASSETS - 100%		$155,498,621

Legend

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

(b) Non-income producing

(c) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's website or upon request.

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

Affiliated Central Funds

Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:

Fund	Income earned
Fidelity Cash Central Fund	$16,192
Fidelity Securities Lending Cash Central Fund	35,549
Total	$51,741

Investment Valuation

	Valuation Inputs at Reporting Date:
Description	Total	Level 1	Level 2	Level 3
Investments in Securities:
Equities:
Consumer Discretionary	$32,584,083	$32,584,083	$--	$--
Consumer Staples	900,631	900,631	--	--
Energy	11,211,640	11,211,640	--	--
Financials	26,031,883	26,031,883	--	--
Health Care	25,736,387	25,736,387	--	--
Industrials	22,112,667	22,112,667	--	--
Information Technology	27,136,403	27,136,403	--	--
Materials	6,460,732	5,500,949	959,783	--
Telecommunication Services	1,150,200	1,150,200	--	--
Money Market Funds	5,708,580	5,708,580	--	--
Total Investments in Securities:	$159,033,206	$158,073,423	$959,783	$--

Other Information

Distribution of investments by country or territory of incorporation, as a percentage of Total Net Assets, is as follows (Unaudited):

United States of America	85.5%
Ireland	5.9%
United Kingdom	2.6%
Netherlands	2.3%
Canada	1.5%
Others (Individually Less Than 1%)	2.2%
	100.0%

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

Financial Statements

Statement of Assets and Liabilities

		December 31, 2016
Assets
Investment in securities, at value (including securities loaned of $3,325,534) — See accompanying schedule: Unaffiliated issuers (cost $132,513,723)	$153,324,626
Fidelity Central Funds (cost $5,708,273)	5,708,580
Total Investments (cost $138,221,996)		$159,033,206
Cash		6,351
Receivable for investments sold		1,172,327
Receivable for fund shares sold		929
Dividends receivable		255,125
Distributions receivable from Fidelity Central Funds		2,469
Prepaid expenses		346
Other receivables		8,255
Total assets		160,479,008
Liabilities
Payable for investments purchased	$1,005,722
Payable for fund shares redeemed	349,570
Accrued management fee	72,617
Distribution and service plan fees payable	3,621
Other affiliated payables	21,834
Other payables and accrued expenses	49,898
Collateral on Securities Loaned	3,477,125
Total liabilities		4,980,387
Net Assets		$155,498,621
Net Assets consist of:
Paid in capital		$127,241,572
Undistributed net investment income		434,761
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions		7,011,543
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies		20,810,745
Net Assets		$155,498,621
Initial Class:
Net Asset Value, offering price and redemption price per share ($25,140,718 ÷ 2,006,107 shares)		$12.53
Service Class:
Net Asset Value, offering price and redemption price per share ($530,464 ÷ 42,728 shares)		$12.41
Service Class 2:
Net Asset Value, offering price and redemption price per share ($16,829,665 ÷ 1,376,342 shares)		$12.23
Investor Class:
Net Asset Value, offering price and redemption price per share ($112,997,774 ÷ 9,032,406 shares)		$12.51

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

Statement of Operations

		Year ended December 31, 2016
Investment Income
Dividends		$2,921,219
Income from Fidelity Central Funds		51,741
Total income		2,972,960
Expenses
Management fee	$969,970
Transfer agent fees	221,922
Distribution and service plan fees	44,523
Accounting and security lending fees	69,771
Custodian fees and expenses	42,519
Independent trustees' fees and expenses	792
Audit	50,322
Legal	7,817
Miscellaneous	1,563
Total expenses before reductions	1,409,199
Expense reductions	(26,659)	1,382,540
Net investment income (loss)		1,590,420
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities:
Unaffiliated issuers	7,533,132
Fidelity Central Funds	1,826
Foreign currency transactions	(10,060)
Total net realized gain (loss)		7,524,898
Change in net unrealized appreciation (depreciation) on investment securities		(7,131,032)
Net gain (loss)		393,866
Net increase (decrease) in net assets resulting from operations		$1,984,286

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

Statement of Changes in Net Assets

	Year ended December 31, 2016	Year ended December 31, 2015
Increase (Decrease) in Net Assets
Operations
Net investment income (loss)	$1,590,420	$2,013,147
Net realized gain (loss)	7,524,898	7,594,396
Change in net unrealized appreciation (depreciation)	(7,131,032)	(8,327,161)
Net increase (decrease) in net assets resulting from operations	1,984,286	1,280,382
Distributions to shareholders from net investment income	(1,308,115)	(1,813,948)
Distributions to shareholders from net realized gain	(8,053,857)	(11,800,940)
Total distributions	(9,361,972)	(13,614,888)
Share transactions - net increase (decrease)	(60,590,752)	29,167,908
Total increase (decrease) in net assets	(67,968,438)	16,833,402
Net Assets
Beginning of period	223,467,059	206,633,657
End of period	$155,498,621	$223,467,059
Other Information
Undistributed net investment income end of period	$434,761	$173,464

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

Financial Highlights — VIP Dynamic Capital Appreciation Portfolio Initial Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$12.85	$13.56	$12.76	$10.02	$8.22
Income from Investment Operations
Net investment income (loss)^A	.12	.13	.06	.05	.07
Net realized and unrealized gain (loss)	.17	.04	1.30	3.70	1.80
Total from investment operations	.29	.17	1.36	3.75	1.87
Distributions from net investment income	(.11)	(.12)	(.06)	(.04)	(.07)
Distributions from net realized gain	(.49)	(.77)	(.50)	(.97)	–
Total distributions	(.61)^B	(.88)^C	(.56)	(1.01)	(.07)
Net asset value, end of period	$12.53	$12.85	$13.56	$12.76	$10.02
Total Return^D,^E	2.88%	1.30%	10.92%	38.53%	22.72%
Ratios to Average Net Assets^F,^G
Expenses before reductions	.71%	.70%	.72%	.77%	.82%
Expenses net of fee waivers, if any	.71%	.70%	.72%	.77%	.82%
Expenses net of all reductions	.70%	.69%	.71%	.76%	.80%
Net investment income (loss)	.99%	.97%	.47%	.47%	.78%
Supplemental Data
Net assets, end of period (000 omitted)	$25,141	$37,281	$38,705	$35,050	$21,049
Portfolio turnover rate^H	123%	129%	122%	136%	168%

^A Calculated based on average shares outstanding during the period.

^B Total distributions of $.61 per share is comprised of distributions from net investment income of $.111 and distributions from net realized gain of $.494 per share.

^C Total distributions of $.88 per share is comprised of distributions from net investment income of $.115 and distributions from net realized gain of $.767 per share.

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

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

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

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

Financial Highlights — VIP Dynamic Capital Appreciation Portfolio Service Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$12.74	$13.45	$12.66	$9.95	$8.17
Income from Investment Operations
Net investment income (loss)^A	.11	.12	.05	.04	.07
Net realized and unrealized gain (loss)	.16	.03	1.29	3.67	1.78
Total from investment operations	.27	.15	1.34	3.71	1.85
Distributions from net investment income	(.10)	(.10)	(.05)	(.03)	(.07)
Distributions from net realized gain	(.49)	(.77)	(.50)	(.97)	–
Total distributions	(.60)^B	(.86)^C	(.55)	(1.00)	(.07)
Net asset value, end of period	$12.41	$12.74	$13.45	$12.66	$9.95
Total Return^D,^E	2.76%	1.16%	10.88%	38.39%	22.61%
Ratios to Average Net Assets^F,^G
Expenses before reductions	.81%	.80%	.81%	.86%	.91%
Expenses net of fee waivers, if any	.81%	.80%	.81%	.86%	.91%
Expenses net of all reductions	.80%	.79%	.80%	.85%	.88%
Net investment income (loss)	.89%	.87%	.37%	.38%	.70%
Supplemental Data
Net assets, end of period (000 omitted)	$530	$642	$946	$518	$347
Portfolio turnover rate^H	123%	129%	122%	136%	168%

^A Calculated based on average shares outstanding during the period.

^B Total distributions of $.60 per share is comprised of distributions from net investment income of $.103 and distributions from net realized gain of $.494 per share.

^C Total distributions of $.86 per share is comprised of distributions from net investment income of $.096 and distributions from net realized gain of $.767 per share.

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

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

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

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

Financial Highlights — VIP Dynamic Capital Appreciation Portfolio Service Class 2

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$12.56	$13.27	$12.50	$9.83	$8.08
Income from Investment Operations
Net investment income (loss)^A	.09	.09	.03	.03	.05
Net realized and unrealized gain (loss)	.16	.05	1.27	3.62	1.75
Total from investment operations	.25	.14	1.30	3.65	1.80
Distributions from net investment income	(.09)	(.08)	(.03)	(.01)	(.05)
Distributions from net realized gain	(.49)	(.77)	(.50)	(.97)	–
Total distributions	(.58)	(.85)	(.53)	(.98)	(.05)
Net asset value, end of period	$12.23	$12.56	$13.27	$12.50	$9.83
Total Return^B,^C	2.66%	1.02%	10.66%	38.25%	22.25%
Ratios to Average Net Assets^D,^E
Expenses before reductions	.96%	.95%	.97%	1.02%	1.07%
Expenses net of fee waivers, if any	.96%	.95%	.97%	1.01%	1.07%
Expenses net of all reductions	.95%	.94%	.96%	1.00%	1.05%
Net investment income (loss)	.74%	.72%	.22%	.22%	.54%
Supplemental Data
Net assets, end of period (000 omitted)	$16,830	$20,128	$24,336	$24,512	$18,565
Portfolio turnover rate^F	123%	129%	122%	136%	168%

^A Calculated based on average shares outstanding during the period.

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

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

^D 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.

^E 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.

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

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

Financial Highlights — VIP Dynamic Capital Appreciation Portfolio Investor Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$12.83	$13.54	$12.75	$10.01	$8.22
Income from Investment Operations
Net investment income (loss)^A	.11	.12	.05	.05	.07
Net realized and unrealized gain (loss)	.17	.04	1.29	3.69	1.78
Total from investment operations	.28	.16	1.34	3.74	1.85
Distributions from net investment income	(.10)	(.11)	(.05)	(.04)	(.06)
Distributions from net realized gain	(.49)	(.77)	(.50)	(.97)	–
Total distributions	(.60)^B	(.87)^C	(.55)	(1.00)^D	(.06)
Net asset value, end of period	$12.51	$12.83	$13.54	$12.75	$10.01
Total Return^E,^F	2.81%	1.22%	10.79%	38.52%	22.52%
Ratios to Average Net Assets^G,^H
Expenses before reductions	.79%	.78%	.79%	.84%	.90%
Expenses net of fee waivers, if any	.79%	.78%	.79%	.84%	.90%
Expenses net of all reductions	.78%	.77%	.79%	.83%	.87%
Net investment income (loss)	.90%	.89%	.39%	.40%	.71%
Supplemental Data
Net assets, end of period (000 omitted)	$112,998	$165,416	$142,646	$105,425	$37,037
Portfolio turnover rate^I	123%	129%	122%	136%	168%

^A Calculated based on average shares outstanding during the period.

^B Total distributions of $.60 per share is comprised of distributions from net investment income of $.102 and distributions from net realized gain of $.494 per share.

^C Total distributions of $.87 per share is comprised of distributions from net investment income of $.105 and distributions from net realized gain of $.767 per share.

^D Total distributions of $1.00 per share is comprised of distributions from net investment income of $.037 and distributions from net realized gain of $.967 per share.

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

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

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

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

Notes to Financial Statements

For the period ended December 31, 2016

1. Organization.

VIP Dynamic Capital Appreciation Portfolio (the Fund) is a fund of Variable Insurance Products Fund III (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.

2. Investments in 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 the investment adviser. Annualized expenses of the Money Market Central Funds as of their most recent shareholder report date are less than .005%.

A complete unaudited list of holdings for each Fidelity Central Fund is available upon request or at the Securities and Exchange Commission (the SEC) website at www.sec.gov. In addition, the financial statements of the Fidelity Central Funds, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC website or upon request.

3. Significant Accounting Policies.

Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.

The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:

Level 1 – quoted prices in active markets for identical investments
Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)

Valuation techniques used to value the Fund's investments by major category are as follows:

Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price or may be valued using the last available price and are generally categorized as Level 2 in the hierarchy. For foreign equity securities, when market or security specific events arise, comparisons to the valuation of American Depositary Receipts (ADRs), futures contracts, Exchange-Traded Funds (ETFs)and certain indexes as well as quoted prices for similar securities may be used and would be categorized as Level 2 in the hierarchy. Utilizing these techniques may result in transfers between Level 1 and Level 2. For equity securities, including restricted securities, where observable inputs are limited, assumptions about market activity and risk are used and these securities may be categorized as Level 3 in the hierarchy.

Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of December 31, 2016 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. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.

Book-tax differences are primarily due to foreign currency transactions 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	$23,784,334
Gross unrealized depreciation	(3,146,775)
Net unrealized appreciation (depreciation) on securities	$20,637,559
Tax Cost	$138,395,647

The tax-based components of distributable earnings as of period end were as follows:

Undistributed ordinary income	$434,761
Undistributed long-term capital gain	$7,185,195
Net unrealized appreciation (depreciation) on securities and other investments	$20,637,094

The tax character of distributions paid was as follows:

	December 31, 2016	December 31, 2015
Ordinary Income	$1,308,115	$ 2,044,736
Long-term Capital Gains	8,053,857	11,570,152
Total	$9,361,972	$ 13,614,888

4. Purchases and Sales of Investments.

Purchases and sales of securities, other than short-term securities, aggregated $215,079,186 and $281,411,415, respectively.

5. Fees and Other Transactions with Affiliates.

Management Fee. Fidelity Management & Research Company (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .25% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by the investment adviser, including any mutual funds previously advised by the investment adviser that are currently advised by Fidelity SelectCo, LLC, an affiliate of the investment adviser. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annual management fee rate was .55% of the Fund'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	$523
Service Class 2	44,000
	$44,523

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

Initial Class	$18,984
Service Class	345
Service Class 2	11,616
Investor Class	190,977
	$221,922

6. Committed Line of Credit.

The Fund participates with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $480 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, the Fund did not borrow on this line of credit.

7. 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. The Fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund may apply collateral received from the borrower against the obligation. The Fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. 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 $49,264. 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 $35,549, including $4,448 from securities loaned to FCM.

8. Expense Reductions.

In addition, during the period the investment adviser reimbursed and/or waived a portion of fund-level operating expenses in the amount of $1,607.

9. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

	Year ended December 31, 2016	Year ended December 31, 2015
From net investment income
Initial Class	$227,944	$333,856
Service Class	4,366	4,800
Service Class 2	120,531	126,545
Investor Class	955,274	1,348,747
Total	$1,308,115	$1,813,948
From net realized gain
Initial Class	$1,329,712	$2,242,173
Service Class	20,796	54,559
Service Class 2	764,648	1,404,834
Investor Class	5,938,701	8,099,374
Total	$8,053,857	$11,800,940

10. Share Transactions.

Transactions for each class of shares were as follows:

	Shares	Shares	Dollars	Dollars
	Year ended December 31, 2016	Year ended December 31, 2015	Year ended December 31, 2016	Year ended December 31, 2015
Initial Class
Shares sold	59,307	537,177	$723,273	$7,199,471
Reinvestment of distributions	141,572	199,716	1,557,656	2,576,029
Shares redeemed	(1,095,052)	(690,307)	(13,190,380)	(9,122,359)
Net increase (decrease)	(894,173)	46,586	$(10,909,451)	$653,141
Service Class
Shares sold	417	4,038	$5,102	$54,048
Reinvestment of distributions	2,298	4,636	25,162	59,359
Shares redeemed	(10,325)	(28,704)	(128,470)	(382,810)
Net increase (decrease)	(7,610)	(20,030)	$(98,206)	$(269,403)
Service Class 2
Shares sold	126,153	288,124	$1,469,996	$3,722,995
Reinvestment of distributions	82,574	121,322	885,179	1,531,379
Shares redeemed	(434,340)	(641,236)	(5,103,920)	(8,242,162)
Net increase (decrease)	(225,613)	(231,790)	$(2,748,745)	$(2,987,788)
Investor Class
Shares sold	340,788	3,353,296	$4,141,529	$44,883,083
Reinvestment of distributions	628,496	733,990	6,893,975	9,448,121
Shares redeemed	(4,825,288)	(1,731,332)	(57,869,854)	(22,559,246)
Net increase (decrease)	(3,856,004)	2,355,954	$(46,834,350)	$31,771,958

11. Other.

At the end of the period, the investment adviser or its affiliates were the owners of record of 89% of the total outstanding shares of the Fund.

Report of Independent Registered Public Accounting Firm

To the Trustees of Variable Insurance Products Fund III and Shareholders of VIP Dynamic Capital Appreciation Portfolio:

We have audited the accompanying statement of assets and liabilities of VIP Dynamic Capital Appreciation Portfolio (the Fund), a fund of Variable Insurance Products Fund III, including the schedule of investments, as of December 31, 2016, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of VIP Dynamic Capital Appreciation Portfolio as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
February 15, 2017

Trustees and Officers

The fund’s Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.

Interested Trustees*:

Correspondence intended for a Trustee who is an interested person may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.

Name, Year of Birth; Principal Occupations and Other Relevant Experience+

James C. Curvey (1935)

Year of Election or Appointment: 2007

Trustee

Chairman of the Board of Trustees

Charles S. Morrison (1960)

Year of Election or Appointment: 2014

Trustee

* Determined to be an “Interested Trustee” by virtue of, among other things, his or her affiliation with the trust or various entities under common control with FMR.

Independent Trustees:

Correspondence intended for an Independent Trustee may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Year of Birth; Principal Occupations and Other Relevant Experience+

Dennis J. Dirks (1948)

Year of Election or Appointment: 2005

Trustee

Alan J. Lacy (1953)

Year of Election or Appointment: 2008

Trustee

Ned C. Lautenbach (1944)

Year of Election or Appointment: 2000

Trustee

Chairman of the Independent Trustees

Joseph Mauriello (1944)

Year of Election or Appointment: 2008

Trustee

Robert W. Selander (1950)

Year of Election or Appointment: 2011

Trustee

Cornelia M. Small (1944)

Year of Election or Appointment: 2005

Trustee

William S. Stavropoulos (1939)

Year of Election or Appointment: 2002

Trustee

Vice Chairman of the Independent Trustees

David M. Thomas (1949)

Year of Election or Appointment: 2008

Trustee

Advisory Board Members and Officers:

Correspondence intended for an officer or Peter S. Lynch may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210. Officers appear below in alphabetical order.

Name, Year of Birth; Principal Occupation

Peter S. Lynch (1944)

Year of Election or Appointment: 2003

Member of the Advisory Board

Marc R. Bryant (1966)

Year of Election or Appointment: 2015

Secretary and Chief Legal Officer (CLO)

Jeffrey S. Christian (1961)

Year of Election or Appointment: 2016

Assistant Treasurer

Mr. Christian also serves as Assistant Treasurer of other funds. Mr. Christian is an employee of Fidelity Investments (2003-present).

William C. Coffey (1969)

Year of Election or Appointment: 2009

Assistant Secretary

Jonathan Davis (1968)

Year of Election or Appointment: 2010

Assistant Treasurer

Adrien E. Deberghes (1967)

Year of Election or Appointment: 2016

Assistant Treasurer

Stephanie J. Dorsey (1969)

Year of Election or Appointment: 2010

Assistant Treasurer

Howard J. Galligan III (1966)

Year of Election or Appointment: 2014

Chief Financial Officer

Scott C. Goebel (1968)

Year of Election or Appointment: 2015

Vice President

Brian B. Hogan (1964)

Year of Election or Appointment: 2009

Vice President

Colm A. Hogan (1973)

Year of Election or Appointment: 2016

Deputy Treasurer

Mr. Hogan also serves as an officer of other funds. Mr. Hogan is an employee of Fidelity Investments (2005-present). Mr. Colm A. Hogan is not related to Mr. Brian B. Hogan.

Chris Maher (1972)

Year of Election or Appointment: 2013

Assistant Treasurer

John F. Papandrea (1972)

Year of Election or Appointment: 2016

Anti-Money Laundering (AML) Officer

Melissa M. Reilly (1971)

Year of Election or Appointment: 2014

Vice President of certain Equity Funds

Ms. Reilly also serves as Vice President of other funds. Ms. Reilly is an employee of Fidelity Investments (2004-present).

Kenneth B. Robins (1969)

Year of Election or Appointment: 2016

Chief Compliance Officer

Stacie M. Smith (1974)

Year of Election or Appointment: 2016

President and Treasurer

Marc L. Spector (1972)

Year of Election or Appointment: 2016

Assistant Treasurer

Renee Stagnone (1975)

Year of Election or Appointment: 2016

Assistant Treasurer

Shareholder Expense Example

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2016 to December 31, 2016).

Actual Expenses

Hypothetical Example for Comparison Purposes

	Annualized Expense Ratio-^A	Beginning Account Value July 1, 2016	Ending Account Value December 31, 2016	Expenses Paid During Period-^B July 1, 2016 to December 31, 2016
Initial Class	.72%
Actual		$1,000.00	$1,081.20	$3.77
Hypothetical-^C		$1,000.00	$1,021.52	$3.66
Service Class	.82%
Actual		$1,000.00	$1,080.40	$4.29
Hypothetical-^C		$1,000.00	$1,021.01	$4.17
Service Class 2	.97%
Actual		$1,000.00	$1,080.20	$5.07
Hypothetical-^C		$1,000.00	$1,020.26	$4.93
Investor Class	.80%
Actual		$1,000.00	$1,080.60	$4.18
Hypothetical-^C		$1,000.00	$1,021.11	$4.06

^A Annualized expense ratio reflects expenses net of applicable fee waivers.

^B Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

^C 5% return per year before expenses

Distributions (Unaudited)

The Board of Trustees of VIP Dynamic Capital Appreciation Portfolio voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income:

	Pay Date	Record Date	Dividends	Capital Gains
VIP Dynamic Capital Appreciation Portfolio
Initial Class	02/10/17	02/10/17	$0.041	$0.603
Service Class	02/10/17	02/10/17	$0.039	$0.603
Service Class 2	02/10/17	02/10/17	$0.035	$0.603
Investor Class	02/10/17	02/10/17	$0.039	$0.603

The fund hereby designates as a capital gain dividend with respect to the taxable year ended December 31, 2016, $7,192,265, or, if subsequently determined to be different, the net capital gain of such year.

Initial Class, Service Class, Service Class 2, and Investor Class designate 100% of the dividends distributed during the fiscal year as qualifying for the dividends–received deduction for corporate shareholders.

Board Approval of Investment Advisory Contracts and Management Fees

VIP Dynamic Capital Appreciation Portfolio

Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.

Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in basis points (BP) in the chart below. The group of Broadridge funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates, regardless of whether their management fee structures also are comparable. Funds with comparable investment mandates offer exposure to similar types of securities. Funds with comparable management fee structures have similar management fee contractual arrangements (e.g., flat rate charged for advisory services, all-inclusive fee rate, etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and considered by the Board.

VIP Dynamic Capital Appreciation Portfolio

The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for 2015.

Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.

The Board noted that the total expense ratio of each of Initial Class, Investor Class, and Service Class ranked below the competitive median for 2015 and the total expense ratio of Service Class 2 ranked above the competitive median for 2015. The Board considered that, in general, various factors can affect total expense ratios. The Board noted that the total expense ratio of Service Class 2 was above the competitive median primarily because of higher 12b-1 fees for the class as compared to most competitor funds. The Board noted that the fund offers multiple classes, each of which has a different 12b-1 fee structure, and that the multiple structures are intended to offer a range of pricing options for the intermediary market. The Board also noted that the total expense ratios of the classes vary primarily by the level of their 12b-1 fees, although differences in transfer agent fees may also cause expenses to vary from class to class.

Based on its review of total expense ratios and fees charged to other Fidelity clients, the Board concluded that, although Service Class 2 was above the median of the universe presented for comparison, the total expense ratio of each class of the fund was reasonable in light of the services that the fund and its shareholders receive and the other factors considered.

The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.

Fidelity Investments

VIPDCA-ANN-0217
1.751799.116

Fidelity® Variable Insurance Products:

Growth & Income Portfolio

Annual Report

December 31, 2016

Contents

Performance
Management's Discussion of Fund Performance
Investment Summary
Investments
Financial Statements
Notes to Financial Statements
Report of Independent Registered Public Accounting Firm
Trustees and Officers
Shareholder Expense Example
Distributions
Board Approval of Investment Advisory Contracts and Management Fees

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.

NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE

Neither the Fund nor Fidelity Distributors Corporation is a bank.

Performance: The Bottom Line

Average Annual Total Returns

For the periods ended December 31, 2016	Past 1 year	Past 5 years	Past 10 years
Initial Class	16.08%	14.69%	6.77%
Service Class	15.94%	14.58%	6.67%
Service Class 2	15.81%	14.41%	6.51%
Investor Class	15.96%	14.60%	6.68%

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in VIP Growth & Income Portfolio - Initial Class on December 31, 2006.

The chart shows how the value of your investment would have changed, and also shows how the S&P 500® Index performed over the same period.

	Period Ending Values
	$19,261	VIP Growth & Income Portfolio - Initial Class
	$19,572	S&P 500® Index

Management's Discussion of Fund Performance

Comments from Portfolio Manager Matthew Fruhan: The fund’s share classes gained about 16% for the fiscal year ending December 31, 2016, handily outpacing the benchmark S&P 500 index. The fund outperformed largely due to positioning in the strong-performing financials and energy sectors, as a combination of good stock picking and overweights added value. Security selection in consumer discretion also contributed. Conversely, stock picking in the health care and consumer staples sectors detracted, as did our allocation to cash in a rising market. In financials, Bank of America and JPMorgan Chase – two of the fund’s biggest holdings – were among our largest relative contributors. Financials stocks have benefited from higher interest rates, which rose in conjunction with expectations for faster economic growth and inflation. In energy, the fund’s largest relative contributors included master limited partnership and non-benchmark holding Williams Partners, and its majority-owned energy transportation firm William Companies, both of which benefited from a more favorable industry backdrop. On the negative side, the fund’s biggest individual detractor was Teva Pharmaceutical Industries, an Israeli drug manufacturer that was hurt both by industrywide concerns about generic-drug pricing and a management team that continues to make ill-timed and expensive acquisitions.

Investment Summary (Unaudited)

Top Ten Stocks as of December 31, 2016

	% of fund's net assets	% of fund's net assets 6 months ago
JPMorgan Chase & Co.^(a)	4.2	3.5
Bank of America Corp.^(a)	4.0	2.6
Microsoft Corp.	3.3	3.1
Apple, Inc.	3.1	2.6
Citigroup, Inc.^(a)	3.1	2.3
General Electric Co.^(a)	2.7	3.3
Chevron Corp.	2.0	2.5
Qualcomm, Inc.^(a)	1.8	1.9
Comcast Corp. Class A	1.8	1.8
The Williams Companies, Inc.	1.6	1.0
	27.6

(a) Security or a portion of the security is pledged as collateral for call options written.

Top Five Market Sectors as of December 31, 2016

	% of fund's net assets	% of fund's net assets 6 months ago
Financials	25.5	20.5
Information Technology	16.8	20.0
Energy	12.9	12.4
Health Care	12.2	14.2
Industrials	11.4	12.6

Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications.

Asset Allocation (% of fund's net assets)

As of December 31, 2016^,^*
	Stocks	98.7%
	Bonds	0.2%
	Short-Term Investments and Net Other Assets (Liabilities)	1.1%

* Foreign investments - 9.8%

** Written options - (0.5)%

As of June 30, 2016^,^*
	Stocks	99.5%
	Bonds	0.3%
	Short-Term Investments and Net Other Assets (Liabilities)	0.2%

* Foreign investments - 11.5%

** Written options - (0.1)%

Investments December 31, 2016

Showing Percentage of Net Assets

Common Stocks - 97.7%
		Shares	Value
CONSUMER DISCRETIONARY - 8.4%
Auto Components - 0.0%
Gentex Corp.		25,700	$506,033
Automobiles - 0.1%
General Motors Co.		20,100	700,284
Diversified Consumer Services - 0.1%
ServiceMaster Global Holdings, Inc. (a)		18,000	678,060
Hotels, Restaurants & Leisure - 0.5%
Cedar Fair LP (depositary unit)		6,000	385,200
Dunkin' Brands Group, Inc.		21,400	1,122,216
Las Vegas Sands Corp. (b)		24,600	1,313,886
Whitbread PLC		13,277	617,851
Wingstop, Inc.		20,300	600,677
Yum! Brands, Inc.		24,889	1,576,220
			5,616,050
Leisure Products - 0.1%
NJOY, Inc. (a)(c)		95,072	1
Polaris Industries, Inc. (d)		18,600	1,532,454
			1,532,455
Media - 4.8%
AMC Networks, Inc. Class A (a)		10,900	570,506
Comcast Corp. Class A		298,181	20,589,398
Scripps Networks Interactive, Inc. Class A		88,855	6,341,581
Sinclair Broadcast Group, Inc. Class A		56,518	1,884,875
The Walt Disney Co.		46,000	4,794,120
Time Warner, Inc.		167,549	16,173,505
Viacom, Inc. Class B (non-vtg.)		118,300	4,152,330
			54,506,315
Multiline Retail - 1.4%
Dollar General Corp.		7,700	570,339
Kohl's Corp.		20,000	987,600
Macy's, Inc.		25,100	898,831
Target Corp.		182,277	13,165,868
			15,622,638
Specialty Retail - 1.3%
Bed Bath & Beyond, Inc.		9,600	390,144
Foot Locker, Inc.		36,700	2,601,663
L Brands, Inc.		43,900	2,890,376
Lowe's Companies, Inc.		129,217	9,189,913
			15,072,096
Textiles, Apparel & Luxury Goods - 0.1%
Ralph Lauren Corp.		7,400	668,368
VF Corp.		4,700	250,745
			919,113

TOTAL CONSUMER DISCRETIONARY			95,153,044

CONSUMER STAPLES - 6.1%
Beverages - 2.1%
Britvic PLC		27,300	190,764
Cott Corp.		20,100	227,550
Diageo PLC		141,853	3,681,065
Dr. Pepper Snapple Group, Inc.		10,100	915,767
Molson Coors Brewing Co. Class B		37,100	3,610,201
PepsiCo, Inc.		26,343	2,756,268
The Coca-Cola Co.		288,753	11,971,699
			23,353,314
Food & Staples Retailing - 1.4%
Costco Wholesale Corp.		15,800	2,529,738
CVS Health Corp.		108,564	8,566,785
Kroger Co.		59,600	2,056,796
Walgreens Boots Alliance, Inc.		19,323	1,599,171
Whole Foods Market, Inc.		14,900	458,324
			15,210,814
Food Products - 0.5%
B&G Foods, Inc. Class A		32,000	1,401,600
Hostess Brands, Inc. Class A (a)		94,900	1,233,700
Mead Johnson Nutrition Co. Class A		46,600	3,297,416
			5,932,716
Household Products - 1.6%
Procter & Gamble Co.		213,450	17,946,876
Personal Products - 0.1%
Edgewell Personal Care Co. (a)		15,100	1,102,149
Tobacco - 0.4%
Altria Group, Inc.		19,300	1,305,066
Reynolds American, Inc.		65,800	3,687,432
			4,992,498

TOTAL CONSUMER STAPLES			68,538,367

ENERGY - 12.8%
Energy Equipment & Services - 1.0%
Baker Hughes, Inc.		52,100	3,384,937
National Oilwell Varco, Inc.		101,200	3,788,928
Oceaneering International, Inc.		101,800	2,871,778
Schlumberger Ltd.		16,947	1,422,701
			11,468,344
Oil, Gas & Consumable Fuels - 11.8%
Amyris, Inc. (a)(d)		32,895	24,013
Anadarko Petroleum Corp.		37,700	2,628,821
Apache Corp.		170,200	10,802,594
Cabot Oil & Gas Corp.		73,700	1,721,632
Cenovus Energy, Inc.		434,300	6,566,335
Chevron Corp.		190,618	22,435,739
ConocoPhillips Co.		365,700	18,336,198
EQT Midstream Partners LP		8,100	621,108
Golar LNG Ltd.		92,700	2,126,538
Imperial Oil Ltd.		230,800	8,029,396
Kinder Morgan, Inc.		516,800	10,702,928
Legacy Reserves LP (a)		179,888	381,363
MPLX LP		13,546	468,963
PrairieSky Royalty Ltd.		108,709	2,586,054
Suncor Energy, Inc.		546,060	17,854,269
Teekay LNG Partners LP		76,500	1,105,425
The Williams Companies, Inc.		592,790	18,459,481
Williams Partners LP		226,705	8,621,591
			133,472,448

TOTAL ENERGY			144,940,792

FINANCIALS - 25.5%
Banks - 18.1%
Bank of America Corp. (b)		2,024,732	44,746,577
Citigroup, Inc. (b)		582,118	34,595,273
Comerica, Inc. (b)		98,400	6,702,024
Cullen/Frost Bankers, Inc.		5,700	502,911
JPMorgan Chase & Co. (b)		549,432	47,410,484
Lloyds Banking Group PLC		261,500	200,800
M&T Bank Corp.		41,600	6,507,488
PNC Financial Services Group, Inc.		74,072	8,663,461
Regions Financial Corp. (b)		583,200	8,374,752
Standard Chartered PLC (United Kingdom) (a)		62,364	510,026
SunTrust Banks, Inc. (b)		270,064	14,813,010
U.S. Bancorp (b)		278,898	14,326,990
Wells Fargo & Co.		317,769	17,512,250
			204,866,046
Capital Markets - 6.4%
Apollo Global Management LLC Class A		94,000	1,819,840
Ashmore Group PLC		22,300	77,693
CBOE Holdings, Inc.		36,600	2,704,374
Charles Schwab Corp. (b)		199,684	7,881,527
Federated Investors, Inc. Class B (non-vtg.)		9,600	271,488
Goldman Sachs Group, Inc.		1,700	407,065
Intertrust NV		29,900	526,249
KKR & Co. LP		371,293	5,714,199
Morgan Stanley (b)		218,983	9,252,032
Northern Trust Corp. (b)		145,245	12,934,067
Oaktree Capital Group LLC Class A		38,200	1,432,500
S&P Global, Inc.		24,100	2,591,714
State Street Corp.		235,579	18,309,200
The Blackstone Group LP		309,800	8,373,894
			72,295,842
Insurance - 0.7%
Marsh & McLennan Companies, Inc.		57,242	3,868,987
MetLife, Inc.		35,414	1,908,460
Principal Financial Group, Inc.		26,700	1,544,862
Willis Group Holdings PLC		4,400	538,032
			7,860,341
Thrifts & Mortgage Finance - 0.3%
Radian Group, Inc.		169,550	3,048,509

TOTAL FINANCIALS			288,070,738

HEALTH CARE - 11.3%
Biotechnology - 2.4%
Alexion Pharmaceuticals, Inc. (a)		40,500	4,955,175
Amgen, Inc.		47,344	6,922,166
Biogen, Inc. (a)		18,100	5,132,798
Gilead Sciences, Inc.		74,300	5,320,623
Grifols SA		31,600	628,019
Intercept Pharmaceuticals, Inc. (a)		6,645	721,979
Shire PLC sponsored ADR		17,300	2,947,574
Vertex Pharmaceuticals, Inc. (a)		3,300	243,111
			26,871,445
Health Care Equipment & Supplies - 1.6%
Abbott Laboratories		101,697	3,906,182
Becton, Dickinson & Co.		3,500	579,425
Medtronic PLC		134,185	9,557,998
Meridian Bioscience, Inc.		9,100	161,070
Zimmer Biomet Holdings, Inc.		41,400	4,272,480
			18,477,155
Health Care Providers & Services - 1.7%
Anthem, Inc.		32,600	4,686,902
Cigna Corp.		40,800	5,442,312
McKesson Corp.		44,688	6,276,430
Patterson Companies, Inc.		56,343	2,311,753
			18,717,397
Life Sciences Tools & Services - 0.4%
Agilent Technologies, Inc.		98,100	4,469,436
Pharmaceuticals - 5.2%
Allergan PLC		4,800	1,008,048
AstraZeneca PLC sponsored ADR		100,600	2,748,392
Bayer AG		7,200	750,121
Bristol-Myers Squibb Co.		123,600	7,223,184
GlaxoSmithKline PLC sponsored ADR		389,594	15,003,265
Innoviva, Inc. (a)(d)		43,800	468,660
Johnson & Johnson		153,959	17,737,616
Novartis AG sponsored ADR		4,425	322,317
Sanofi SA		38,848	3,141,450
Teva Pharmaceutical Industries Ltd. sponsored ADR		289,303	10,487,234
			58,890,287

TOTAL HEALTH CARE			127,425,720

INDUSTRIALS - 11.2%
Aerospace & Defense - 2.0%
General Dynamics Corp.		15,900	2,745,294
Meggitt PLC		38,842	219,527
Rolls-Royce Holdings PLC		185,900	1,526,890
The Boeing Co.		57,717	8,985,383
United Technologies Corp.		86,687	9,502,629
			22,979,723
Air Freight & Logistics - 1.3%
C.H. Robinson Worldwide, Inc.		46,300	3,391,938
Expeditors International of Washington, Inc.		32,400	1,715,904
United Parcel Service, Inc. Class B (b)		84,172	9,649,478
			14,757,320
Airlines - 0.2%
Copa Holdings SA Class A		24,138	2,192,455
Commercial Services & Supplies - 0.1%
Aggreko PLC		20,000	226,269
KAR Auction Services, Inc.		29,400	1,253,028
			1,479,297
Construction & Engineering - 0.1%
Fluor Corp.		18,800	987,376
Electrical Equipment - 0.5%
AMETEK, Inc.		48,700	2,366,820
Hubbell, Inc. Class B		30,879	3,603,579
			5,970,399
Industrial Conglomerates - 2.7%
General Electric Co. (b)		966,250	30,533,500
Machinery - 1.1%
Burckhardt Compression Holding AG		2,070	544,282
Caterpillar, Inc.		2,900	268,946
Deere & Co.		29,900	3,080,896
Donaldson Co., Inc.		39,200	1,649,536
Flowserve Corp.		86,500	4,156,325
IMI PLC		12,600	161,494
Wabtec Corp.		26,400	2,191,728
			12,053,207
Professional Services - 0.3%
Nielsen Holdings PLC		46,900	1,967,455
Robert Half International, Inc.		28,300	1,380,474
			3,347,929
Road & Rail - 2.4%
CSX Corp.		268,247	9,638,115
J.B. Hunt Transport Services, Inc.		85,482	8,297,738
Kansas City Southern		24,200	2,053,370
Norfolk Southern Corp.		33,593	3,630,396
Union Pacific Corp.		27,500	2,851,200
			26,470,819
Trading Companies & Distributors - 0.5%
Fastenal Co.		20,700	972,486
Howden Joinery Group PLC		16,600	78,517
W.W. Grainger, Inc.		5,000	1,161,250
Watsco, Inc.		26,092	3,864,747
			6,077,000

TOTAL INDUSTRIALS			126,849,025

INFORMATION TECHNOLOGY - 16.8%
Communications Equipment - 1.5%
Cisco Systems, Inc.		556,904	16,829,639
Internet Software & Services - 2.8%
Alphabet, Inc.:
Class A (a)		21,618	17,131,184
Class C (a)		18,483	14,265,549
			31,396,733
IT Services - 3.7%
First Data Corp. (e)		117,131	1,662,089
First Data Corp. Class A (a)		125,400	1,779,426
MasterCard, Inc. Class A (b)		98,710	10,191,808
Paychex, Inc.		165,531	10,077,527
Sabre Corp.		83,005	2,070,975
Unisys Corp. (a)		189,700	2,836,015
Visa, Inc. Class A		167,076	13,035,270
			41,653,110
Semiconductors & Semiconductor Equipment - 1.8%
Qualcomm, Inc. (b)		317,661	20,711,497
Software - 3.6%
Microsoft Corp.		603,413	37,496,084
Oracle Corp.		39,791	1,529,964
SS&C Technologies Holdings, Inc.		47,900	1,369,940
			40,395,988
Technology Hardware, Storage & Peripherals - 3.4%
Apple, Inc.		301,358	34,903,284
Western Digital Corp.		58,800	3,995,460
			38,898,744

TOTAL INFORMATION TECHNOLOGY			189,885,711

MATERIALS - 2.8%
Chemicals - 2.4%
CF Industries Holdings, Inc.		97,600	3,072,448
E.I. du Pont de Nemours & Co.		39,452	2,895,777
Johnson Matthey PLC		2,700	105,880
LyondellBasell Industries NV Class A		57,600	4,940,928
Monsanto Co.		73,419	7,724,413
Olin Corp.		14,800	379,028
Potash Corp. of Saskatchewan, Inc.		279,400	5,054,650
PPG Industries, Inc.		3,900	369,564
W.R. Grace & Co.		35,100	2,374,164
			26,916,852
Containers & Packaging - 0.4%
Ball Corp.		9,700	728,179
Graphic Packaging Holding Co.		7,400	92,352
Packaging Corp. of America		10,000	848,200
WestRock Co.		67,400	3,421,898
			5,090,629

TOTAL MATERIALS			32,007,481

REAL ESTATE - 0.8%
Equity Real Estate Investment Trusts (REITs) - 0.8%
American Tower Corp.		14,900	1,574,632
Crown Castle International Corp.		39,200	3,401,384
First Potomac Realty Trust		8,800	96,536
Omega Healthcare Investors, Inc.		19,600	612,696
Public Storage		10,600	2,369,100
Sabra Health Care REIT, Inc.		30,600	747,252
			8,801,600
TELECOMMUNICATION SERVICES - 1.2%
Diversified Telecommunication Services - 1.2%
Verizon Communications, Inc.		244,280	13,039,666
UTILITIES - 0.8%
Electric Utilities - 0.8%
Exelon Corp.		268,800	9,539,712
TOTAL COMMON STOCKS
(Cost $792,137,869)			1,104,251,856

Preferred Stocks - 1.0%
Convertible Preferred Stocks - 1.0%
HEALTH CARE - 0.8%
Health Care Equipment & Supplies - 0.8%
Alere, Inc. 3.00% (a)		28,629	9,218,538
INDUSTRIALS - 0.2%
Commercial Services & Supplies - 0.2%
Stericycle, Inc. 2.25%		24,200	1,531,134
UTILITIES - 0.0%
Independent Power and Renewable Electricity Producers - 0.0%
Dynegy, Inc. 7.00% (a)		6,400	397,696

TOTAL CONVERTIBLE PREFERRED STOCKS			11,147,368

Nonconvertible Preferred Stocks - 0.0%
INDUSTRIALS - 0.0%
Aerospace & Defense - 0.0%
Rolls-Royce Holdings PLC (C Shares)		25,453,070	31,368
TOTAL PREFERRED STOCKS
(Cost $9,818,178)			11,178,736
		Principal Amount	Value

Convertible Bonds - 0.2%
ENERGY - 0.1%
Oil, Gas & Consumable Fuels - 0.1%
Amyris, Inc.:
5% 10/15/18 pay-in-kind (c)(f)		545,940	302,380
9.5% 4/15/19 pay-in-kind		716,000	448,843
			751,223
HEALTH CARE - 0.1%
Pharmaceuticals - 0.1%
Bayer Capital Corp. BV 5.625% 11/22/19 (e)	EUR	1,100,000	1,259,615
TOTAL CONVERTIBLE BONDS
(Cost $2,436,960)			2,010,838
		Shares	Value

Money Market Funds - 1.9%
Fidelity Cash Central Fund, 0.60% (g)		20,751,362	20,755,512
Fidelity Securities Lending Cash Central Fund 0.65% (g)(h)		846,317	846,402
TOTAL MONEY MARKET FUNDS
(Cost $21,600,789)			21,601,914
TOTAL INVESTMENT PORTFOLIO - 100.8%
(Cost $825,993,796)			1,139,043,344
NET OTHER ASSETS (LIABILITIES) - (0.8)%			(8,597,121)
NET ASSETS - 100%			$1,130,446,223

Written Options
	Expiration Date/Exercise Price	Number of Contracts	Premium	Value
Call Options
Bank of America Corp.	1/20/17 - $18.00	1,911	$45,863	$(793,065)
Bank of America Corp.	1/20/17 - $20.00	2,871	126,320	(643,104)
Charles Schwab	1/20/17 - $35.00	359	22,078	(161,550)
Citigroup, Inc.	1/20/17 - $50.00	519	105,355	(494,348)
Citigroup, Inc.	1/20/17 - $55.00	529	23,275	(252,598)
Citigroup, Inc.	2/17/17 - $60.00	267	31,772	(56,604)
Comerica, Inc.	1/20/17 - $55.00	182	22,749	(243,425)
General Electric	1/20/17 - $32.00	958	29,766	(35,925)
JPMorgan Chase & Co.	1/20/17 - $72.50	1,062	73,308	(1,470,868)
JPMorgan Chase & Co.	2/17/17 - $85.00	520	60,519	(176,800)
Las Vegas Sands Corp.	1/20/17 - $62.50	88	16,544	(396)
MasterCard, Inc. Class A	1/20/17 - $105.00	193	54,301	(20,844)
Morgan Stanley	1/20/17 - $36.00	320	14,720	(203,200)
Northern Trust Corp.	1/20/17 - $75.00	142	20,874	(198,800)
Qualcomm, Inc.	1/20/17 - $67.50	489	58,199	(23,961)
Regions Financial Corp.	1/20/17 - $11.00	13	430	(4,355)
Regions Financial Corp.	2/17/17 - $13.00	1,028	35,020	(163,452)
Regions Financial Corp.	1/20/17 - $14.00	1,358	47,529	(85,554)
SunTrust Banks, Inc.	1/20/17 - $55.00	254	17,526	(33,020)
SunTrust Banks, Inc.	1/20/17 - $46.00	526	58,627	(466,825)
SunTrust Banks, Inc.	1/20/17 - $50.00	264	16,111	(133,980)
U.S. Bancorp	1/20/17 - $50.00	409	15,133	(74,643)
United Parcel Service, Inc. Class B	4/21/17 - $115.00	143	20,306	(53,983)
TOTAL WRITTEN OPTIONS			$916,325	$(5,791,300)

Legend

(a) Non-income producing

(b) Security or a portion of the security is pledged as collateral for call options written. At period end, the value of securities pledged amounted to $58,897,410.

(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 $2,921,704 or 0.3% of net assets.

(f) Coupon rates for floating and adjustable rate securities reflect the rates in effect at period end.

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

Additional information on each restricted holding is as follows:

Security	Acquisition Date	Acquisition Cost
Amyris, Inc. 5% 10/15/18 pay-in-kind	10/16/13 - 10/17/16	$545,940
NJOY, Inc.	2/14/14	$164,892

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	$31,435
Fidelity Securities Lending Cash Central Fund	59,038
Total	$90,473

Investment Valuation

	Valuation Inputs at Reporting Date:
Description	Total	Level 1	Level 2	Level 3
Investments in Securities:
Equities:
Consumer Discretionary	$95,153,044	$95,153,043	$--	$1
Consumer Staples	68,538,367	64,857,302	3,681,065	--
Energy	144,940,792	144,940,792	--	--
Financials	288,070,738	287,869,938	200,800	--
Health Care	136,644,258	123,534,149	13,110,109	--
Industrials	128,411,527	126,884,637	1,526,890	--
Information Technology	189,885,711	189,885,711	--	--
Materials	32,007,481	32,007,481	--	--
Real Estate	8,801,600	8,801,600	--	--
Telecommunication Services	13,039,666	13,039,666	--	--
Utilities	9,937,408	9,937,408	--	--
Corporate Bonds	2,010,838	--	1,708,458	302,380
Money Market Funds	21,601,914	21,601,914	--	--
Total Investments in Securities:	$1,139,043,344	$1,118,513,641	$20,227,322	$302,381
Derivative Instruments:
Liabilities
Written Options	$(5,791,300)	$(5,791,300)	$--	$--
Total Liabilities	$(5,791,300)	$(5,791,300)	$--	$--
Total Derivative Instruments:	$(5,791,300)	$(5,791,300)	$--	$--

Value of Derivative Instruments

Primary Risk Exposure / Derivative Type	Value
	Asset	Liability
Equity Risk
Written Options(a)	$0	$(5,791,300)
Total Equity Risk	0	(5,791,300)
Total Value of Derivatives	$0	$(5,791,300)

(a) Gross value is presented in the Statement of Assets and Liabilities in the written options, at value line-item.

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

Financial Statements

Statement of Assets and Liabilities

		December 31, 2016
Assets
Investment in securities, at value (including securities loaned of $836,650) — See accompanying schedule: Unaffiliated issuers (cost $804,393,007)	$1,117,441,430
Fidelity Central Funds (cost $21,600,789)	21,601,914
Total Investments (cost $825,993,796)		$1,139,043,344
Receivable for investments sold		805,513
Receivable for fund shares sold		1,055,168
Dividends receivable		1,360,453
Interest receivable		39,523
Distributions receivable from Fidelity Central Funds		13,261
Prepaid expenses		1,973
Other receivables		2,305
Total assets		1,142,321,540
Liabilities
Payable for investments purchased	$3,553,082
Payable for fund shares redeemed	1,003,955
Accrued management fee	418,231
Distribution and service plan fees payable	82,878
Written options, at value (premium received $916,325)	5,791,300
Other affiliated payables	110,789
Other payables and accrued expenses	67,982
Collateral on Securities Loaned	847,100
Total liabilities		11,875,317
Net Assets		$1,130,446,223
Net Assets consist of:
Paid in capital		$809,353,699
Distributions in excess of net investment income		(2,262,708)
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions		15,188,772
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies		308,166,460
Net Assets		$1,130,446,223
Initial Class:
Net Asset Value, offering price and redemption price per share ($375,638,572 ÷ 18,642,607 shares)		$20.15
Service Class:
Net Asset Value, offering price and redemption price per share ($119,952,376 ÷ 6,001,384 shares)		$19.99
Service Class 2:
Net Asset Value, offering price and redemption price per share ($356,194,020 ÷ 18,044,105 shares)		$19.74
Investor Class:
Net Asset Value, offering price and redemption price per share ($278,661,255 ÷ 13,881,966 shares)		$20.07

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

Statement of Operations

		Year ended December 31, 2016
Investment Income
Dividends		$24,505,672
Interest		142,097
Income from Fidelity Central Funds		90,473
Total income		24,738,242
Expenses
Management fee	$4,493,163
Transfer agent fees	851,387
Distribution and service plan fees	846,801
Accounting and security lending fees	333,639
Custodian fees and expenses	55,608
Independent trustees' fees and expenses	4,302
Audit	67,547
Legal	10,909
Interest	898
Miscellaneous	8,479
Total expenses before reductions	6,672,733
Expense reductions	(23,298)	6,649,435
Net investment income (loss)		18,088,807
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities:
Unaffiliated issuers	18,879,310
Fidelity Central Funds	3,791
Foreign currency transactions	(3,625)
Written options	1,177,750
Total net realized gain (loss)		20,057,226
Change in net unrealized appreciation (depreciation) on: Investment securities	118,363,224
Assets and liabilities in foreign currencies	(151)
Written options	(4,940,623)
Total change in net unrealized appreciation (depreciation)		113,422,450
Net gain (loss)		133,479,676
Net increase (decrease) in net assets resulting from operations		$151,568,483

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

Statement of Changes in Net Assets

	Year ended December 31, 2016	Year ended December 31, 2015
Increase (Decrease) in Net Assets
Operations
Net investment income (loss)	$18,088,807	$20,826,791
Net realized gain (loss)	20,057,226	58,283,136
Change in net unrealized appreciation (depreciation)	113,422,450	(104,868,319)
Net increase (decrease) in net assets resulting from operations	151,568,483	(25,758,392)
Distributions to shareholders from net investment income	(17,117,243)	(21,240,388)
Distributions to shareholders from net realized gain	(60,942,871)	(55,691,244)
Total distributions	(78,060,114)	(76,931,632)
Share transactions - net increase (decrease)	41,331,938	(13,978,089)
Total increase (decrease) in net assets	114,840,307	(116,668,113)
Net Assets
Beginning of period	1,015,605,916	1,132,274,029
End of period	$1,130,446,223	$1,015,605,916
Other Information
Distributions in excess of net investment income end of period	$(2,262,708)	$(1,915,883)

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

Financial Highlights — VIP Growth & Income Portfolio Initial Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$18.88	$20.78	$19.14	$14.59	$12.59
Income from Investment Operations
Net investment income (loss)^A	.35	.40	.38	.33	.32
Net realized and unrealized gain (loss)	2.38	(.86)	1.63	4.55	2.01
Total from investment operations	2.73	(.46)	2.01	4.88	2.33
Distributions from net investment income	(.32)	(.42)^B	(.36)	(.33)	(.33)
Distributions from net realized gain	(1.14)	(1.01)^B	(.01)	–	(.01)
Total distributions	(1.46)	(1.44)^C	(.37)	(.33)	(.33)^D
Net asset value, end of period	$20.15	$18.88	$20.78	$19.14	$14.59
Total Return^E,^F	16.08%	(2.27)%	10.47%	33.56%	18.56%
Ratios to Average Net Assets^G,^H
Expenses before reductions	.56%	.56%	.57%	.57%	.59%
Expenses net of fee waivers, if any	.56%	.56%	.57%	.57%	.59%
Expenses net of all reductions	.56%	.56%	.57%	.57%	.58%
Net investment income (loss)	1.91%	1.99%	1.90%	1.92%	2.29%
Supplemental Data
Net assets, end of period (000 omitted)	$375,639	$370,704	$406,311	$385,028	$300,330
Portfolio turnover rate^I	34%	35%	45%	48%	54%

^A Calculated based on average shares outstanding during the period.

^B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.

^C Total distributions of $1.44 per share is comprised of distributions from net investment income of $.422 and distributions from net realized gain of $1.013 per share.

^D Total distributions of $.33 per share is comprised of distributions from net investment income of $.327 and distributions from net realized gain of $.007 per share.

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

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

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

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

Financial Highlights — VIP Growth & Income Portfolio Service Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$18.75	$20.64	$19.01	$14.49	$12.51
Income from Investment Operations
Net investment income (loss)^A	.33	.37	.36	.31	.31
Net realized and unrealized gain (loss)	2.35	(.85)	1.62	4.53	1.99
Total from investment operations	2.68	(.48)	1.98	4.84	2.30
Distributions from net investment income	(.31)	(.40)^B	(.34)	(.32)	(.31)
Distributions from net realized gain	(1.14)	(1.01)^B	(.01)	–	(.01)
Total distributions	(1.44)^C	(1.41)	(.35)	(.32)	(.32)
Net asset value, end of period	$19.99	$18.75	$20.64	$19.01	$14.49
Total Return^D,^E	15.94%	(2.35)%	10.39%	33.46%	18.40%
Ratios to Average Net Assets^F,^G
Expenses before reductions	.66%	.66%	.66%	.67%	.68%
Expenses net of fee waivers, if any	.66%	.66%	.66%	.67%	.68%
Expenses net of all reductions	.66%	.66%	.66%	.67%	.67%
Net investment income (loss)	1.81%	1.89%	1.80%	1.82%	2.19%
Supplemental Data
Net assets, end of period (000 omitted)	$119,952	$116,035	$135,893	$139,248	$118,185
Portfolio turnover rate^H	34%	35%	45%	48%	54%

^A Calculated based on average shares outstanding during the period.

^B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.

^C Total distributions of $1.44 per share is comprised of distributions from net investment income of $.308 and distributions from net realized gain of $1.135 per share.

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

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

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

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

Financial Highlights — VIP Growth & Income Portfolio Service Class 2

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$18.54	$20.43	$18.82	$14.35	$12.39
Income from Investment Operations
Net investment income (loss)^A	.30	.34	.32	.28	.28
Net realized and unrealized gain (loss)	2.33	(.85)	1.61	4.48	1.98
Total from investment operations	2.63	(.51)	1.93	4.76	2.26
Distributions from net investment income	(.29)	(.37)^B	(.31)	(.29)	(.29)
Distributions from net realized gain	(1.14)	(1.01)^B	(.01)	–	(.01)
Total distributions	(1.43)	(1.38)	(.32)	(.29)	(.30)
Net asset value, end of period	$19.74	$18.54	$20.43	$18.82	$14.35
Total Return^C,^D	15.81%	(2.54)%	10.23%	33.25%	18.25%
Ratios to Average Net Assets^E,^F
Expenses before reductions	.81%	.81%	.81%	.82%	.83%
Expenses net of fee waivers, if any	.81%	.81%	.81%	.82%	.83%
Expenses net of all reductions	.81%	.81%	.81%	.82%	.82%
Net investment income (loss)	1.66%	1.74%	1.65%	1.67%	2.04%
Supplemental Data
Net assets, end of period (000 omitted)	$356,194	$290,102	$330,608	$342,586	$285,693
Portfolio turnover rate^G	34%	35%	45%	48%	54%

^A Calculated based on average shares outstanding during the period.

^B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.

^C Total 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 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.

^F 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.

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

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

Financial Highlights — VIP Growth & Income Portfolio Investor Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$18.82	$20.71	$19.09	$14.55	$12.56
Income from Investment Operations
Net investment income (loss)^A	.33	.38	.36	.32	.31
Net realized and unrealized gain (loss)	2.37	(.85)	1.62	4.54	2.01
Total from investment operations	2.70	(.47)	1.98	4.86	2.32
Distributions from net investment income	(.31)	(.40)^B	(.35)	(.32)	(.32)
Distributions from net realized gain	(1.14)	(1.01)^B	(.01)	–	(.01)
Total distributions	(1.45)	(1.42)^C	(.36)	(.32)	(.33)
Net asset value, end of period	$20.07	$18.82	$20.71	$19.09	$14.55
Total Return^D,^E	15.96%	(2.32)%	10.33%	33.52%	18.46%
Ratios to Average Net Assets^F,^G
Expenses before reductions	.64%	.64%	.65%	.65%	.67%
Expenses net of fee waivers, if any	.64%	.64%	.65%	.65%	.67%
Expenses net of all reductions	.64%	.64%	.64%	.65%	.66%
Net investment income (loss)	1.83%	1.91%	1.82%	1.84%	2.20%
Supplemental Data
Net assets, end of period (000 omitted)	$278,661	$238,765	$259,462	$192,195	$95,689
Portfolio turnover rate^H	34%	35%	45%	48%	54%

^A Calculated based on average shares outstanding during the period.

^B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.

^C Total distributions of $1.42 per share is comprised of distributions from net investment income of $.404 and distributions from net realized gain of $1.013 per share.

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

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

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

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

Notes to Financial Statements

For the period ended December 31, 2016

1. Organization.

VIP Growth & Income Portfolio (the Fund) is a fund of Variable Insurance Products Fund III (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.

2. Investments in Fidelity Central Funds.

3. Significant Accounting Policies.

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:

Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. Corporate bonds are valued by pricing vendors who utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.

Exchange-traded options are valued using the last sale price or, in the absence of a sale, the last offering price 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 (NAV) each business day and are categorized as Level 1 in the hierarchy.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of December 31, 2016 is included at the end of the Fund's Schedule of Investments.

Book-tax differences are primarily due to foreign currency transactions, market discount, passive foreign investment companies (PFIC), equity-debt classifications, certain conversion ratio adjustments, partnerships, security level mergers and exchanges 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	$345,233,521
Gross unrealized depreciation	(38,785,232)
Net unrealized appreciation (depreciation) on securities	$306,448,289
Tax Cost	$832,595,055

The tax-based components of distributable earnings as of period end were as follows:

Undistributed ordinary income	$2,311,453
Undistributed long-term capital gain	$20,512,183
Net unrealized appreciation (depreciation) on securities and other investments	$298,269,120

The tax character of distributions paid was as follows:

	December 31, 2016	December 31, 2015
Ordinary Income	$17,117,243	$ 23,175,989
Long-term Capital Gains	60,942,871	53,755,643
Total	$78,060,114	$ 76,931,632

4. Derivative Instruments.

Risk Exposures and the Use of Derivative Instruments. The Fund's investment objective allows the Fund to enter into various types of derivative contracts, including options. Derivatives are investments whose value is primarily 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 asset based on specified terms, to exchange future cash flows at periodic intervals based on a notional principal amount, or for one party to make one or more payments upon the occurrence of specified events in exchange for periodic payments from the other party.

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

Equity Risk

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 options may be mitigated by the protection provided by the exchange on which they trade.

Options. Options give the purchaser the right, but not the obligation, to buy (call) or sell (put) an underlying security or financial instrument at an agreed exercise or strike price between or on certain dates. Options obligate the seller (writer) to buy (put) or sell (call) an underlying instrument at the exercise or strike price or cash settle an underlying derivative instrument if the holder exercises the option on or before the expiration date.

The Fund used exchange-traded written covered call options to manage its exposure to the market. When the Fund writes a covered call option, the Fund holds the underlying instrument which must be delivered to the holder upon the exercise of the option.

Upon entering into a written options contract, the Fund will receive a premium. Premiums received are reflected as a liability on the Statement of Assets and Liabilities. Options are valued daily and any unrealized appreciation (depreciation) is reflected on the Statement of Assets and Liabilities. When a written option is exercised, the premium is added to the proceeds from the sale of the underlying instrument in determining the gain or loss realized on that investment. When an option is closed the Fund will realize a gain or loss depending on whether the proceeds or amount paid for the closing sale transaction are greater or less than the premium received. When an option expires, gains and losses are realized to the extent of premiums received. The net realized gain (loss) on closed and expired written options and the change in net unrealized appreciation (depreciation) on written options are reflected separately on the Statement of Operations.

Writing call options tends to decrease exposure to the underlying instrument and risk of loss is the change in value in excess of the premium received.

Any open options at period end are presented in the Schedule of Investments under the caption "Written Options".

During the period, the Fund recognized net realized gain (loss) of $1,177,750 and a change in net unrealized appreciation (depreciation) of $(4,940,623) related to its investment in written options. This amount is included in the Statement of Operations.

The following is a summary of the Fund's written options activity:

	Number of Contracts	Amount of Premiums
Outstanding at beginning of period	5,854	$302,316
Options Opened	36,488	2,567,750
Options Exercised	(4,718)	(390,894)
Options Closed	(16,134)	(986,170)
Options Expired	(7,085)	(576,677)
Outstanding at end of period	14,405	$916,325

5. Purchases and Sales of Investments.

Purchases and sales of securities, other than short-term securities, aggregated $345,231,009 and $371,701,081, respectively.

6. Fees and Other Transactions with Affiliates.

Management Fee. Fidelity Management & Research Company (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .20% of the Fund's average net assets and an annualized group fee rate that averaged .25% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by the investment adviser, including any mutual funds previously advised by the investment adviser that are currently advised by Fidelity SelectCo, LLC, an affiliate of the investment adviser. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annual management fee rate was .45% of the Fund'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	$113,173
Service Class 2	733,628
	$846,801

Initial Class	$238,162
Service Class	74,694
Service Class 2	193,678
Investor Class	344,853
	$851,387

Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the Fund, along with other registered investment companies having management contracts with Fidelity Management & Research Company (FMR) or other affiliated entities of FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating affiliated funds. At period end, there were no interfund loans outstanding. The Fund's activity in this program during the period for which loans were outstanding was as follows:

Borrower or Lender	Average Loan Balance	Weighted Average Interest Rate	Interest Expense
Borrower	$11,133,800	.58%	$898

7. Committed Line of Credit.

The Fund participates with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $2,530 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, the Fund did not borrow 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. The Fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund may apply collateral received from the borrower against the obligation. The Fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. At period end, there were no security loans outstanding with FCM. 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 $59,038, including $10 from securities loaned to FCM.

9. Expense Reductions.

In addition, during the period the investment adviser reimbursed and/or waived a portion of fund-level operating expenses in the amount of $7,321.

10. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

	Year ended December 31, 2016	Year ended December 31, 2015
From net investment income
Initial Class	$5,948,497	$8,108,227
Service Class	1,825,191	2,442,137
Service Class 2	5,114,614	5,676,695
Investor Class	4,228,941	5,013,329
Total	$17,117,243	$21,240,388
From net realized gain
Initial Class	$22,208,671	$20,144,244
Service Class	6,932,182	6,583,614
Service Class 2	17,563,645	16,214,130
Investor Class	14,238,373	12,749,256
Total	$60,942,871	$55,691,244

11. Share Transactions.

Transactions for each class of shares were as follows:

	Shares	Shares	Dollars	Dollars
	Year ended December 31, 2016	Year ended December 31, 2015	Year ended December 31, 2016	Year ended December 31, 2015
Initial Class
Shares sold	1,795,563	2,224,516	$33,082,383	$44,215,071
Reinvestment of distributions	1,674,735	1,463,958	28,157,168	28,252,471
Shares redeemed	(4,462,581)	(3,609,006)	(82,426,585)	(71,552,420)
Net increase (decrease)	(992,283)	79,468	$(21,187,034)	$915,122
Service Class
Shares sold	212,574	95,204	$3,929,712	$1,878,780
Reinvestment of distributions	525,159	470,573	8,757,373	9,025,751
Shares redeemed	(926,473)	(960,795)	(16,914,248)	(18,920,023)
Net increase (decrease)	(188,740)	(395,018)	$(4,227,163)	$(8,015,492)
Service Class 2
Shares sold	5,989,891	972,488	$111,049,985	$18,999,506
Reinvestment of distributions	1,371,267	1,153,123	22,678,259	21,890,825
Shares redeemed	(4,961,413)	(2,666,199)	(90,185,943)	(52,033,114)
Net increase (decrease)	2,399,745	(540,588)	$43,542,301	$(11,142,783)
Investor Class
Shares sold	2,638,403	1,948,446	$50,668,587	$38,591,195
Reinvestment of distributions	1,097,665	923,421	18,467,314	17,762,585
Shares redeemed	(2,540,649)	(2,711,566)	(45,932,067)	(52,088,716)
Net increase (decrease)	1,195,419	160,301	$23,203,834	$4,265,064

12. Other.

At the end of the period, the investment adviser or its affiliates were the owners of record of 31% of the total outstanding shares of the Fund and one otherwise unaffiliated shareholder was the owner of record of 23% of the total outstanding shares of the Fund.

Report of Independent Registered Public Accounting Firm

To the Trustees of Variable Insurance Products Fund III and Shareholders of VIP Growth & Income Portfolio:

We have audited the accompanying statement of assets and liabilities of VIP Growth & Income Portfolio (the Fund), a fund of Variable Insurance Products Fund III, including the schedule of investments, as of December 31, 2016, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of VIP Growth & Income Portfolio as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
February 14, 2017

Trustees and Officers

The fund’s Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.

Interested Trustees*:

Correspondence intended for a Trustee who is an interested person may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.

Name, Year of Birth; Principal Occupations and Other Relevant Experience+

James C. Curvey (1935)

Year of Election or Appointment: 2007

Trustee

Chairman of the Board of Trustees

Charles S. Morrison (1960)

Year of Election or Appointment: 2014

Trustee

* Determined to be an “Interested Trustee” by virtue of, among other things, his or her affiliation with the trust or various entities under common control with FMR.

Independent Trustees:

Correspondence intended for an Independent Trustee may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Year of Birth; Principal Occupations and Other Relevant Experience+

Dennis J. Dirks (1948)

Year of Election or Appointment: 2005

Trustee

Alan J. Lacy (1953)

Year of Election or Appointment: 2008

Trustee

Ned C. Lautenbach (1944)

Year of Election or Appointment: 2000

Trustee

Chairman of the Independent Trustees

Joseph Mauriello (1944)

Year of Election or Appointment: 2008

Trustee

Robert W. Selander (1950)

Year of Election or Appointment: 2011

Trustee

Cornelia M. Small (1944)

Year of Election or Appointment: 2005

Trustee

William S. Stavropoulos (1939)

Year of Election or Appointment: 2002

Trustee

Vice Chairman of the Independent Trustees

David M. Thomas (1949)

Year of Election or Appointment: 2008

Trustee

Advisory Board Members and Officers:

Correspondence intended for an officer or Peter S. Lynch may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210. Officers appear below in alphabetical order.

Name, Year of Birth; Principal Occupation

Peter S. Lynch (1944)

Year of Election or Appointment: 2003

Member of the Advisory Board

Marc R. Bryant (1966)

Year of Election or Appointment: 2015

Secretary and Chief Legal Officer (CLO)

Jeffrey S. Christian (1961)

Year of Election or Appointment: 2016

Assistant Treasurer

Mr. Christian also serves as Assistant Treasurer of other funds. Mr. Christian is an employee of Fidelity Investments (2003-present).

William C. Coffey (1969)

Year of Election or Appointment: 2009

Assistant Secretary

Jonathan Davis (1968)

Year of Election or Appointment: 2010

Assistant Treasurer

Adrien E. Deberghes (1967)

Year of Election or Appointment: 2016

Assistant Treasurer

Stephanie J. Dorsey (1969)

Year of Election or Appointment: 2010

Assistant Treasurer

Howard J. Galligan III (1966)

Year of Election or Appointment: 2014

Chief Financial Officer

Scott C. Goebel (1968)

Year of Election or Appointment: 2015

Vice President

Thomas C. Hense (1964)

Year of Election or Appointment: 2008, 2010, or 2015

Vice President

Mr. Hense serves as Vice President of Fidelity Advisor^® Multi-Asset Income Fund (2015) and other funds (High Income (2008), Small Cap (2008), and Value (2010) funds), and is an employee of Fidelity Investments (1993-present). Previously, Mr. Hense served as a portfolio manager for Fidelity's Institutional Money Management Group (Pyramis) (2003-2008).

Brian B. Hogan (1964)

Year of Election or Appointment: 2009

Vice President

Colm A. Hogan (1973)

Year of Election or Appointment: 2016

Deputy Treasurer

Mr. Hogan also serves as an officer of other funds. Mr. Hogan is an employee of Fidelity Investments (2005-present). Mr. Colm A. Hogan is not related to Mr. Brian B. Hogan.

Chris Maher (1972)

Year of Election or Appointment: 2013

Assistant Treasurer

John F. Papandrea (1972)

Year of Election or Appointment: 2016

Anti-Money Laundering (AML) Officer

Kenneth B. Robins (1969)

Year of Election or Appointment: 2016

Chief Compliance Officer

Stacie M. Smith (1974)

Year of Election or Appointment: 2016

President and Treasurer

Marc L. Spector (1972)

Year of Election or Appointment: 2016

Assistant Treasurer

Renee Stagnone (1975)

Year of Election or Appointment: 2016

Assistant Treasurer

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 (July 1, 2016 to December 31, 2016).

Actual Expenses

Hypothetical Example for Comparison Purposes

	Annualized Expense Ratio-^A	Beginning Account Value July 1, 2016	Ending Account Value December 31, 2016	Expenses Paid During Period-^B July 1, 2016 to December 31, 2016
Initial Class	.56%
Actual		$1,000.00	$1,144.20	$3.02
Hypothetical-^C		$1,000.00	$1,022.32	$2.85
Service Class	.66%
Actual		$1,000.00	$1,144.00	$3.56
Hypothetical-^C		$1,000.00	$1,021.82	$3.35
Service Class 2	.81%
Actual		$1,000.00	$1,142.50	$4.36
Hypothetical-^C		$1,000.00	$1,021.06	$4.12
Investor Class	.64%
Actual		$1,000.00	$1,143.60	$3.45
Hypothetical-^C		$1,000.00	$1,021.92	$3.25

^A Annualized expense ratio reflects expenses net of applicable fee waivers.

^B Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

^C 5% return per year before expenses

Distributions (Unaudited)

The Board of Trustees of VIP Growth & Income Portfolio voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income:

	Pay Date	Record Date	Dividends	Capital Gains

Initial Class	02/10/17	02/10/17	$0.020	$0.366
Service Class	02/10/17	02/10/17	$0.017	$0.366
Service Class 2	02/10/17	02/10/17	$0.013	$0.366
Investor Class	02/10/17	02/10/17	$0.018	$0.366

The fund hereby designates as a capital gain dividend with respect to the taxable year ended December 31, 2016, $20,512,765, or, if subsequently determined to be different, the net capital gain of such year.

Initial Class, Service Class, Service Class 2, and Investor Class designate 100% of the dividend distributed in December, 2016, during the fiscal year as qualifying for the dividends–received deduction for corporate shareholders.

Board Approval of Investment Advisory Contracts and Management Fees

VIP Growth & Income Portfolio

The Board has discussed the fund's underperformance with FMR and has engaged with FMR to consider what steps might be taken to remediate the fund's underperformance.

Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.

Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in basis points (BP) in the chart below. The group of Broadridge funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates, regardless of whether their management fee structures also are comparable. Funds with comparable investment mandates offer exposure to similar types of securities. Funds with comparable management fee structures have similar management fee contractual arrangements (e.g., flat rate charged for advisory services, all-inclusive fee rate, etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and considered by the Board.

VIP Growth & Income Portfolio

The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for 2015.

Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.

The Board noted that the total expense ratio of each class ranked below the competitive median for 2015.

The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.

Fidelity Investments

VIPGI-ANN-0217
1.540026.119

Fidelity® Variable Insurance Products:

Growth Opportunities Portfolio

Annual Report

December 31, 2016

Contents

Performance
Management's Discussion of Fund Performance
Investment Summary
Investments
Financial Statements
Notes to Financial Statements
Report of Independent Registered Public Accounting Firm
Trustees and Officers
Shareholder Expense Example
Distributions
Board Approval of Investment Advisory Contracts and Management Fees

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.

NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE

Neither the Fund nor Fidelity Distributors Corporation is a bank.

Performance: The Bottom Line

Average Annual Total Returns

For the periods ended December 31, 2016	Past 1 year	Past 5 years	Past 10 years
Initial Class	0.37%	14.43%	7.21%
Service Class	0.28%	14.31%	7.11%
Service Class 2	0.10%	14.14%	6.94%
Investor Class	0.28%	14.33%	7.11%

Prior to February 1, 2007, the fund operated under certain different investment policies and compared its performance to a different index. The fund's historical performance may not represent its current investment policies.

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in VIP Growth Opportunities Portfolio - Initial Class on December 31, 2006.

The chart shows how the value of your investment would have changed, and also shows how the Russell 1000® Growth Index performed over the same period.

	Period Ending Values
	$20,068	VIP Growth Opportunities Portfolio - Initial Class
	$22,266	Russell 1000® Growth Index

Management's Discussion of Fund Performance

Comments from Portfolio Manager Kyle Weaver: For the year, the fund’s share classes posted slightly positive returns that were well behind the 7.08% of the benchmark Russell 1000 Growth Index. Versus the benchmark, stock selection in the health care sector detracted most. In particular, our pharmaceuticals, biotechnology & life sciences holdings accounted for nine of the fund’s 20 largest relative detractors. Stock selection in information technology and industrials also hurt. In industrials, a sizable overweighting in SolarCity, a manufacturer and installer of solar panels, was the fund’s largest detractor. In February, the company reported disappointing financial results, and I had liquidated the position by November. Similar factors resulted in a large loss for our non-benchmark stake in Solaredge Technologies. In this case, I was more confident of the firm’s business model and bought more as the stock declined. Two of the biggest detractors in health care were Israel-based Teva Pharmaceutical Industries and Ireland-headquartered Endo International, the former a non-index position. Conversely, picks in the consumer discretionary, real estate and energy sectors bolstered relative results. At the stock level, the fund’s top relative contributor was an out-of-benchmark stake in Wix.com, which competes in the web-hosting space. Large overweightings in cable company Charter Communications and wireless carrier T-Mobile US also proved timely this period.

Note to shareholders: Effective October 1, 2016, Kyle Weaver became sole Portfolio Manager of the fund, after having co-managed with Steve Wymer since July 2015.

Investment Summary (Unaudited)

Top Ten Stocks as of December 31, 2016

	% of fund's net assets	% of fund's net assets 6 months ago
Apple, Inc.	6.1	5.5
Alphabet, Inc. Class C	3.6	3.5
American Tower Corp.	3.4	2.3
Amazon.com, Inc.	3.3	3.4
Tesla Motors, Inc.	2.9	2.2
Charter Communications, Inc. Class A	2.8	2.4
Microsoft Corp.	2.8	1.4
Alliance Data Systems Corp.	2.6	2.3
Facebook, Inc. Class A	2.3	2.4
Alexion Pharmaceuticals, Inc.	2.3	1.2
	32.1

Top Five Market Sectors as of December 31, 2016

	% of fund's net assets	% of fund's net assets 6 months ago
Information Technology	38.8	37.2
Health Care	17.8	18.2
Consumer Discretionary	15.4	17.3
Consumer Staples	7.4	8.7
Real Estate	5.2	0.0

Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications.

Asset Allocation (% of fund's net assets)

As of December 31, 2016^*
	Stocks	99.6%
	Short-Term Investments and Net Other Assets (Liabilities)	0.4%

* Foreign investments - 12.0%

As of June 30, 2016^*
	Stocks	99.2%
	Short-Term Investments and Net Other Assets (Liabilities)	0.8%

* Foreign investments - 11.3%

Percentages shown as 0.0% may reflect amounts less than 0.05%.

Investments December 31, 2016

Showing Percentage of Net Assets

Common Stocks - 98.4%
	Shares	Value
CONSUMER DISCRETIONARY - 15.4%
Automobiles - 2.9%
Tesla Motors, Inc. (a)(b)	70,697	$15,107,242
Hotels, Restaurants & Leisure - 2.1%
Chipotle Mexican Grill, Inc. (a)	2,200	830,104
Starbucks Corp.	132,264	7,343,297
U.S. Foods Holding Corp.	107,100	2,943,108
		11,116,509
Household Durables - 0.3%
Newell Brands, Inc.	33,900	1,513,635
Internet & Direct Marketing Retail - 4.1%
Amazon.com, Inc. (a)	22,973	17,226,764
Expedia, Inc.	3,200	362,496
Groupon, Inc. Class A (a)	197,800	656,696
Priceline Group, Inc. (a)	1,250	1,832,575
Wayfair LLC Class A (a)	26,500	928,825
		21,007,356
Media - 4.3%
Charter Communications, Inc. Class A (a)	50,763	14,615,683
Comcast Corp. Class A	62,939	4,345,938
Liberty Global PLC Class A (a)	34,500	1,055,355
Lions Gate Entertainment Corp. (b)	28,100	755,890
Lions Gate Entertainment Corp. Class B (a)(b)	28,100	689,574
The Walt Disney Co.	7,900	823,338
		22,285,778
Specialty Retail - 0.9%
Home Depot, Inc.	17,810	2,387,965
TJX Companies, Inc.	29,700	2,231,361
		4,619,326
Textiles, Apparel & Luxury Goods - 0.8%
lululemon athletica, Inc. (a)	24,472	1,590,435
NIKE, Inc. Class B	26,518	1,347,910
VF Corp.	24,400	1,301,740
		4,240,085

TOTAL CONSUMER DISCRETIONARY		79,889,931

CONSUMER STAPLES - 7.1%
Beverages - 2.0%
Anheuser-Busch InBev SA NV ADR	2,700	284,688
Constellation Brands, Inc. Class A (sub. vtg.)	11,300	1,732,403
Molson Coors Brewing Co. Class B	39,700	3,863,207
Monster Beverage Corp. (a)	65,195	2,890,746
The Coca-Cola Co.	35,869	1,487,129
		10,258,173
Food & Staples Retailing - 1.5%
Costco Wholesale Corp.	29,400	4,707,234
CVS Health Corp.	31,400	2,477,774
Performance Food Group Co. (a)	34,508	828,192
		8,013,200
Food Products - 0.3%
Mead Johnson Nutrition Co. Class A	18,245	1,291,016
Personal Products - 0.4%
Coty, Inc. Class A	118,200	2,164,242
Tobacco - 2.9%
Altria Group, Inc.	8,400	568,008
British American Tobacco PLC:
(United Kingdom)	37,300	2,113,993
sponsored ADR (b)	12,000	1,352,040
Imperial Tobacco Group PLC	28,372	1,238,658
Philip Morris International, Inc.	18,200	1,665,118
Reynolds American, Inc.	143,800	8,058,552
		14,996,369

TOTAL CONSUMER STAPLES		36,723,000

ENERGY - 1.3%
Oil, Gas & Consumable Fuels - 1.3%
Cabot Oil & Gas Corp.	46,882	1,095,164
Devon Energy Corp.	30,700	1,402,069
PDC Energy, Inc. (a)	16,700	1,212,086
Teekay LNG Partners LP	49,100	709,495
The Williams Companies, Inc.	28,200	878,148
Williams Partners LP	35,500	1,350,065
		6,647,027
FINANCIALS - 2.8%
Banks - 0.6%
Bank of the Ozarks, Inc.	15,200	799,368
HDFC Bank Ltd. sponsored ADR	40,600	2,463,608
		3,262,976
Capital Markets - 1.6%
BlackRock, Inc. Class A	800	304,432
CBOE Holdings, Inc.	62,100	4,588,569
MSCI, Inc.	39,000	3,072,420
		7,965,421
Consumer Finance - 0.6%
Capital One Financial Corp.	6,100	532,164
Synchrony Financial	74,900	2,716,623
		3,248,787

TOTAL FINANCIALS		14,477,184

HEALTH CARE - 17.8%
Biotechnology - 9.9%
ACADIA Pharmaceuticals, Inc. (a)	44,818	1,292,551
Agios Pharmaceuticals, Inc. (a)	16,000	667,680
Alexion Pharmaceuticals, Inc. (a)	95,152	11,641,847
Alkermes PLC (a)	51,300	2,851,254
Alnylam Pharmaceuticals, Inc. (a)	39,703	1,486,480
Amgen, Inc.	54,259	7,933,208
Amicus Therapeutics, Inc. (a)	142,400	707,728
aTyr Pharma, Inc. (a)(c)	22,036	47,377
BioMarin Pharmaceutical, Inc. (a)	24,000	1,988,160
bluebird bio, Inc. (a)	28,330	1,747,961
Coherus BioSciences, Inc. (a)	21,800	613,670
Five Prime Therapeutics, Inc. (a)	13,700	686,507
Genocea Biosciences, Inc. (a)(b)	16,693	68,775
Gilead Sciences, Inc.	10,286	736,580
Global Blood Therapeutics, Inc. (a)	6,900	99,705
Insmed, Inc. (a)	76,442	1,011,328
Intercept Pharmaceuticals, Inc. (a)(b)	2,500	271,625
Ionis Pharmaceuticals, Inc. (a)	89,306	4,271,506
Merrimack Pharmaceuticals, Inc. (a)	89,800	366,384
Opko Health, Inc. (a)	1	9
Prothena Corp. PLC (a)	25,402	1,249,524
Regeneron Pharmaceuticals, Inc. (a)	12,500	4,588,625
Regulus Therapeutics, Inc. (a)	54,400	122,400
Rigel Pharmaceuticals, Inc. (a)	111,406	265,146
Sage Therapeutics, Inc. (a)	6,300	321,678
Spark Therapeutics, Inc. (a)	2,500	124,750
TESARO, Inc. (a)(b)	7,900	1,062,392
Vertex Pharmaceuticals, Inc. (a)	67,300	4,957,991
XOMA Corp. (a)(b)	11,611	48,998
		51,231,839
Health Care Equipment & Supplies - 2.5%
Boston Scientific Corp. (a)	252,300	5,457,249
Danaher Corp.	15,600	1,214,304
Insulet Corp. (a)	41,300	1,556,184
Medtronic PLC	70,500	5,021,715
		13,249,452
Health Care Providers & Services - 2.2%
Anthem, Inc.	45,000	6,469,650
Cigna Corp.	14,200	1,894,138
UnitedHealth Group, Inc.	18,500	2,960,740
		11,324,528
Health Care Technology - 0.4%
athenahealth, Inc. (a)	16,900	1,777,373
Castlight Health, Inc. Class B (a)	17,500	86,625
		1,863,998
Pharmaceuticals - 2.8%
Allergan PLC	24,363	5,116,474
Endo International PLC (a)	210,300	3,463,641
Innoviva, Inc. (a)(b)	25,200	269,640
Teva Pharmaceutical Industries Ltd. sponsored ADR	157,800	5,720,250
		14,570,005

TOTAL HEALTH CARE		92,239,822

INDUSTRIALS - 4.1%
Air Freight & Logistics - 0.3%
FedEx Corp.	5,700	1,061,340
United Parcel Service, Inc. Class B	5,652	647,945
		1,709,285
Airlines - 1.0%
JetBlue Airways Corp. (a)	7,300	163,666
Southwest Airlines Co.	3,900	194,376
Spirit Airlines, Inc. (a)	79,600	4,605,656
		4,963,698
Electrical Equipment - 0.7%
Acuity Brands, Inc.	6,900	1,592,934
Fortive Corp.	7,850	420,996
Sunrun, Inc. (a)(b)	262,100	1,391,751
		3,405,681
Industrial Conglomerates - 0.4%
3M Co.	6,600	1,178,562
Honeywell International, Inc.	9,800	1,135,330
		2,313,892
Machinery - 0.6%
Allison Transmission Holdings, Inc.	64,700	2,179,743
Caterpillar, Inc.	10,800	1,001,592
		3,181,335
Professional Services - 0.5%
Equifax, Inc.	9,200	1,087,716
TransUnion Holding Co., Inc. (a)	53,500	1,654,755
		2,742,471
Road & Rail - 0.1%
J.B. Hunt Transport Services, Inc.	6,910	670,754
Trading Companies & Distributors - 0.5%
HD Supply Holdings, Inc. (a)	58,700	2,495,337

TOTAL INDUSTRIALS		21,482,453

INFORMATION TECHNOLOGY - 38.0%
Electronic Equipment & Components - 0.2%
CDW Corp.	7,000	364,630
Jabil Circuit, Inc.	21,691	513,426
		878,056
Internet Software & Services - 10.8%
Alphabet, Inc.:
Class A (a)	14,102	11,175,130
Class C (a)	24,463	18,881,033
Apptio, Inc. Class A	800	14,824
Coupa Software, Inc.	700	17,507
Criteo SA sponsored ADR (a)	1,900	78,052
Endurance International Group Holdings, Inc. (a)	639,370	5,946,141
Facebook, Inc. Class A (a)	104,710	12,046,886
GoDaddy, Inc. (a)(b)	99,120	3,464,244
The Trade Desk, Inc. (b)	2,700	74,709
Wix.com Ltd. (a)	101,707	4,531,047
		56,229,573
IT Services - 12.0%
Accenture PLC Class A	2,200	257,686
Alliance Data Systems Corp.	59,800	13,664,300
Booz Allen Hamilton Holding Corp. Class A	36,100	1,302,127
Capgemini SA	31,300	2,640,778
Cognizant Technology Solutions Corp. Class A (a)	142,064	7,959,846
EPAM Systems, Inc. (a)	110,000	7,074,100
Euronet Worldwide, Inc. (a)	17,600	1,274,768
Global Payments, Inc.	77,700	5,393,157
Luxoft Holding, Inc. (a)	102,900	5,782,980
MasterCard, Inc. Class A	51,200	5,286,400
PayPal Holdings, Inc. (a)	28,600	1,128,842
Sabre Corp.	119,800	2,989,010
Total System Services, Inc.	16,400	804,092
Visa, Inc. Class A	88,600	6,912,572
		62,470,658
Semiconductors & Semiconductor Equipment - 1.9%
NVIDIA Corp.	14,900	1,590,426
NXP Semiconductors NV (a)	50,300	4,929,903
Qualcomm, Inc.	8,300	541,160
SolarEdge Technologies, Inc. (a)(b)	205,235	2,544,914
		9,606,403
Software - 7.0%
Activision Blizzard, Inc.	79,200	2,859,912
Adobe Systems, Inc. (a)	25,700	2,645,815
Autodesk, Inc. (a)	43,900	3,249,039
Electronic Arts, Inc. (a)	37,700	2,969,252
Microsoft Corp.	233,649	14,518,949
Paycom Software, Inc. (a)	21,010	955,745
Red Hat, Inc. (a)	7,800	543,660
Salesforce.com, Inc. (a)	109,677	7,508,487
Workday, Inc. Class A (a)	18,400	1,216,056
		36,466,915
Technology Hardware, Storage & Peripherals - 6.1%
Apple, Inc.	271,343	31,426,948

TOTAL INFORMATION TECHNOLOGY		197,078,553

MATERIALS - 4.6%
Chemicals - 3.4%
E.I. du Pont de Nemours & Co.	40,100	2,943,340
LyondellBasell Industries NV Class A	102,300	8,775,294
Monsanto Co.	22,300	2,346,183
PPG Industries, Inc.	31,800	3,013,368
The Dow Chemical Co.	13,200	755,304
		17,833,489
Containers & Packaging - 1.2%
Ball Corp.	81,400	6,110,698

TOTAL MATERIALS		23,944,187

REAL ESTATE - 5.1%
Equity Real Estate Investment Trusts (REITs) - 5.1%
American Tower Corp.	167,600	17,711,968
Extra Space Storage, Inc.	72,000	5,561,280
Public Storage	13,600	3,039,600
		26,312,848
TELECOMMUNICATION SERVICES - 2.2%
Diversified Telecommunication Services - 0.9%
SBA Communications Corp. Class A (a)	46,200	4,770,612
Wireless Telecommunication Services - 1.3%
T-Mobile U.S., Inc. (a)	120,800	6,947,208

TOTAL TELECOMMUNICATION SERVICES		11,717,820

TOTAL COMMON STOCKS
(Cost $356,791,814)		510,512,825

Convertible Preferred Stocks - 1.2%
CONSUMER STAPLES - 0.3%
Food & Staples Retailing - 0.1%
Blue Apron, Inc. Series D (a)(d)	45,022	620,853
Tobacco - 0.2%
PAX Labs, Inc. Series C (a)(d)	215,881	831,142

TOTAL CONSUMER STAPLES		1,451,995

INFORMATION TECHNOLOGY - 0.8%
Internet Software & Services - 0.6%
Uber Technologies, Inc. Series D, 8.00% (a)(d)	66,008	3,219,357
Software - 0.2%
Cloudera, Inc. Series F (a)(d)	6,366	165,548
Cloudflare, Inc. Series D 0.08% (a)(d)	5,997	28,366
MongoDB, Inc. Series F, 8.00% (a)(d)	82,814	636,831
		830,745

TOTAL INFORMATION TECHNOLOGY		4,050,102

REAL ESTATE - 0.1%
Real Estate Management & Development - 0.1%
Redfin Corp. Series G (a)(d)	152,148	722,703
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $4,471,285)		6,224,800

Money Market Funds - 2.9%
Fidelity Cash Central Fund, 0.60% (e)	2,922,852	2,923,437
Fidelity Securities Lending Cash Central Fund 0.65% (e)(f)	11,914,358	11,915,549
TOTAL MONEY MARKET FUNDS
(Cost $14,837,795)		14,838,986
TOTAL INVESTMENT PORTFOLIO - 102.5%
(Cost $376,100,894)		531,576,611
NET OTHER ASSETS (LIABILITIES) - (2.5)%		(12,810,012)
NET ASSETS - 100%		$518,766,599

Legend

(a) Non-income producing

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

(c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the end of the period, the value of these securities amounted to $47,377 or 0.0% of net assets.

(d) 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 $6,224,800 or 1.2% of net assets.

(e) Affiliated fund that is generally available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. In addition, each Fidelity Central Fund's financial statements, which are not covered by the Fund's Report of Independent Registered Public Accounting Firm, are available on the SEC's website or upon request.

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

Additional information on each restricted holding is as follows:

Security	Acquisition Date	Acquisition Cost
Blue Apron, Inc. Series D	5/18/15	$600,004
Cloudera, Inc. Series F	2/5/14	$92,689
Cloudflare, Inc. Series D 0.08%	11/5/14	$36,735
MongoDB, Inc. Series F, 8.00%	10/2/13	$1,384,992
PAX Labs, Inc. Series C	5/22/15	$831,142
Redfin Corp. Series G	12/16/14	$501,738
Uber Technologies, Inc. Series D, 8.00%	6/6/14	$1,023,986

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	$16,816
Fidelity Securities Lending Cash Central Fund	669,318
Total	$686,134

Investment Valuation

	Valuation Inputs at Reporting Date:
Description	Total	Level 1	Level 2	Level 3
Investments in Securities:
Equities:
Consumer Discretionary	$79,889,931	$79,889,931	$--	$--
Consumer Staples	38,174,995	34,609,007	2,113,993	1,451,995
Energy	6,647,027	6,647,027	--	--
Financials	14,477,184	14,477,184	--	--
Health Care	92,239,822	92,239,822	--	--
Industrials	21,482,453	21,482,453	--	--
Information Technology	201,128,655	197,078,553	--	4,050,102
Materials	23,944,187	23,944,187	--	--
Real Estate	27,035,551	26,312,848	--	722,703
Telecommunication Services	11,717,820	11,717,820	--	--
Money Market Funds	14,838,986	14,838,986	--	--
Total Investments in Securities:	$531,576,611	$523,237,818	$2,113,993	$6,224,800

The following is a reconciliation of Investments in Securities for which Level 3 inputs were used in determining value:

Investments in Securities:
Beginning Balance	$6,081,063
Net Realized Gain (Loss) on Investment Securities	--
Net Unrealized Gain (Loss) on Investment Securities	143,737
Cost of Purchases	--
Proceeds of Sales	--
Amortization/Accretion	--
Transfers into Level 3	--
Transfers out of Level 3	--
Ending Balance	$6,224,800
The change in unrealized gain (loss) for the period attributable to Level 3 securities held at December 31, 2016	$143,737

The information used in the above reconciliations represents fiscal year to date activity for any Investments in Securities identified as using Level 3 inputs at either the beginning or the end of the current fiscal period. Transfers in or out of Level 3 represent the beginning value of any Security or Instrument where a change in the pricing level occurred from the beginning to the end of the period. The cost of purchases and the proceeds of sales may include securities received or delivered through corporate actions or exchanges. Realized and unrealized gains (losses) disclosed in the reconciliations are included in Net Gain (Loss) on the Fund's Statement of Operations.

Other Information

Distribution of investments by country or territory of incorporation, as a percentage of Total Net Assets, is as follows (Unaudited):

United States of America	88.0%
Ireland	3.6%
Netherlands	2.7%
Israel	2.0%
British Virgin Islands	1.1%
United Kingdom	1.1%
Others (Individually Less Than 1%)	1.5%
	100.0%

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

Financial Statements

Statement of Assets and Liabilities

		December 31, 2016
Assets
Investment in securities, at value (including securities loaned of $11,631,587) — See accompanying schedule: Unaffiliated issuers (cost $361,263,099)	$516,737,625
Fidelity Central Funds (cost $14,837,795)	14,838,986
Total Investments (cost $376,100,894)		$531,576,611
Foreign currency held at value (cost $18,889)		18,889
Receivable for investments sold		244,414
Receivable for fund shares sold		112,372
Dividends receivable		272,426
Distributions receivable from Fidelity Central Funds		30,667
Prepaid expenses		1,154
Other receivables		5,507
Total assets		532,262,040
Liabilities
Payable for investments purchased	$407,084
Payable for fund shares redeemed	784,059
Accrued management fee	239,689
Distribution and service plan fees payable	32,367
Other affiliated payables	57,967
Other payables and accrued expenses	59,919
Collateral on Securities Loaned	11,914,356
Total liabilities		13,495,441
Net Assets		$518,766,599
Net Assets consist of:
Paid in capital		$299,743,493
Undistributed net investment income		347,887
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions		63,199,745
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies		155,475,474
Net Assets		$518,766,599
Initial Class:
Net Asset Value, offering price and redemption price per share ($133,392,980 ÷ 4,295,160 shares)		$31.06
Service Class:
Net Asset Value, offering price and redemption price per share ($92,664,448 ÷ 2,988,206 shares)		$31.01
Service Class 2:
Net Asset Value, offering price and redemption price per share ($117,622,737 ÷ 3,829,783 shares)		$30.71
Investor Class:
Net Asset Value, offering price and redemption price per share ($175,086,434 ÷ 5,664,541 shares)		$30.91

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

Statement of Operations

		Year ended December 31, 2016
Investment Income
Dividends		$5,570,120
Income from Fidelity Central Funds (including $669,318 from security lending)		686,134
Total income		6,256,254
Expenses
Management fee	$3,304,320
Transfer agent fees	569,198
Distribution and service plan fees	463,502
Accounting and security lending fees	228,867
Custodian fees and expenses	57,104
Independent trustees' fees and expenses	2,706
Audit	80,477
Legal	14,226
Interest	2,490
Miscellaneous	5,360
Total expenses before reductions	4,728,250
Expense reductions	(22,107)	4,706,143
Net investment income (loss)		1,550,111
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities:
Unaffiliated issuers	64,518,673
Fidelity Central Funds	963
Foreign currency transactions	829
Total net realized gain (loss)		64,520,465
Change in net unrealized appreciation (depreciation) on: Investment securities	(70,612,982)
Assets and liabilities in foreign currencies	(201)
Total change in net unrealized appreciation (depreciation)		(70,613,183)
Net gain (loss)		(6,092,718)
Net increase (decrease) in net assets resulting from operations		$(4,542,607)

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

Statement of Changes in Net Assets

	Year ended December 31, 2016	Year ended December 31, 2015
Increase (Decrease) in Net Assets
Operations
Net investment income (loss)	$1,550,111	$1,318,523
Net realized gain (loss)	64,520,465	80,573,124
Change in net unrealized appreciation (depreciation)	(70,613,183)	(57,087,274)
Net increase (decrease) in net assets resulting from operations	(4,542,607)	24,804,373
Distributions to shareholders from net investment income	(1,170,788)	(741,285)
Distributions to shareholders from net realized gain	(13,837,937)	(71,873,523)
Total distributions	(15,008,725)	(72,614,808)
Share transactions - net increase (decrease)	(199,072,390)	264,249,608
Total increase (decrease) in net assets	(218,623,722)	216,439,173
Net Assets
Beginning of period	737,390,321	520,951,148
End of period	$518,766,599	$737,390,321
Other Information
Undistributed net investment income end of period	$347,887	$147,470

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

Financial Highlights — VIP Growth Opportunities Portfolio Initial Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$31.75	$33.51	$29.96	$21.80	$18.30
Income from Investment Operations
Net investment income (loss)^A	.11	.10	.07	.08	.08
Net realized and unrealized gain (loss)	(.10)	1.70	3.58	8.18	3.51
Total from investment operations	.01	1.80	3.65	8.26	3.59
Distributions from net investment income	(.10)	(.06)	(.07)	(.08)	(.09)
Distributions from net realized gain	(.60)	(3.49)	(.03)	(.01)	–
Total distributions	(.70)	(3.56)^B	(.10)	(.10)^C	(.09)
Net asset value, end of period	$31.06	$31.75	$33.51	$29.96	$21.80
Total Return^D,^E	.37%	5.61%	12.20%	37.90%	19.61%
Ratios to Average Net Assets^F,^G
Expenses before reductions	.68%	.67%	.68%	.68%	.69%
Expenses net of fee waivers, if any	.68%	.67%	.68%	.68%	.69%
Expenses net of all reductions	.68%	.66%	.68%	.68%	.69%
Net investment income (loss)	.36%	.30%	.21%	.31%	.40%
Supplemental Data
Net assets, end of period (000 omitted)	$133,393	$176,056	$158,791	$163,798	$121,947
Portfolio turnover rate^H	65%	63%^I	11%	25%	36%

^A Calculated based on average shares outstanding during the period.

^B Total distributions of $3.56 per share is comprised of distributions from net investment income of $.064 and distributions from net realized gain of $3.492 per share.

^C Total distributions of $.10 per share is comprised of distributions from net investment income of $.082 and distributions from net realized gain of $.014 per share.

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

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

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

^I The portfolio turnover rate does not include the assets acquired in the merger.

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

Financial Highlights — VIP Growth Opportunities Portfolio Service Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$31.70	$33.46	$29.91	$21.76	$18.27
Income from Investment Operations
Net investment income (loss)^A	.08	.07	.04	.05	.06
Net realized and unrealized gain (loss)	(.09)	1.68	3.58	8.17	3.50
Total from investment operations	(.01)	1.75	3.62	8.22	3.56
Distributions from net investment income	(.07)	(.02)	(.04)	(.05)	(.07)
Distributions from net realized gain	(.60)	(3.49)	(.03)	(.01)	–
Total distributions	(.68)^B	(3.51)	(.07)	(.07)^C	(.07)
Net asset value, end of period	$31.01	$31.70	$33.46	$29.91	$21.76
Total Return^D,^E	.28%	5.48%	12.10%	37.78%	19.46%
Ratios to Average Net Assets^F,^G
Expenses before reductions	.78%	.77%	.77%	.78%	.79%
Expenses net of fee waivers, if any	.78%	.77%	.77%	.78%	.79%
Expenses net of all reductions	.78%	.76%	.77%	.78%	.79%
Net investment income (loss)	.26%	.20%	.11%	.21%	.30%
Supplemental Data
Net assets, end of period (000 omitted)	$92,664	$113,812	$141,833	$160,835	$143,321
Portfolio turnover rate^H	65%	63%^I	11%	25%	36%

^A Calculated based on average shares outstanding during the period.

^B Total distributions of $.68 per share is comprised of distributions from net investment income of $.073 and distributions from net realized gain of $.602 per share.

^C Total distributions of $.07 per share is comprised of distributions from net investment income of $.052 and distributions from net realized gain of $.014 per share.

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

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

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

^I The portfolio turnover rate does not include the assets acquired in the merger.

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

Financial Highlights — VIP Growth Opportunities Portfolio Service Class 2

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$31.40	$33.20	$29.68	$21.60	$18.13
Income from Investment Operations
Net investment income (loss)^A	.03	.02	(.01)	.01	.03
Net realized and unrealized gain (loss)	(.10)	1.67	3.56	8.10	3.47
Total from investment operations	(.07)	1.69	3.55	8.11	3.50
Distributions from net investment income	(.02)	–^B	–^B	(.01)	(.03)
Distributions from net realized gain	(.60)	(3.49)	(.02)	(.01)	–
Total distributions	(.62)	(3.49)	(.03)^C	(.03)^D	(.03)
Net asset value, end of period	$30.71	$31.40	$33.20	$29.68	$21.60
Total Return^E,^F	.10%	5.34%	11.95%	37.54%	19.32%
Ratios to Average Net Assets^G,^H
Expenses before reductions	.93%	.92%	.93%	.94%	.94%
Expenses net of fee waivers, if any	.93%	.92%	.93%	.93%	.94%
Expenses net of all reductions	.93%	.91%	.93%	.93%	.94%
Net investment income (loss)	.11%	.05%	(.04)%	.06%	.15%
Supplemental Data
Net assets, end of period (000 omitted)	$117,623	$177,404	$83,545	$81,360	$72,525
Portfolio turnover rate^I	65%	63%^J	11%	25%	36%

^A Calculated based on average shares outstanding during the period.

^B Amount represents less than $.005 per share.

^C Total distributions of $.03 per share is comprised of distributions from net investment income of $.002 and distributions from net realized gain of $.023 per share.

^D Total distributions of $.03 per share is comprised of distributions from net investment income of $.012 and distributions from net realized gain of $.014 per share.

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

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

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

^J The portfolio turnover rate does not include the assets acquired in the merger.

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

Financial Highlights — VIP Growth Opportunities Portfolio Investor Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$31.60	$33.37	$29.84	$21.72	$18.23
Income from Investment Operations
Net investment income (loss)^A	.08	.07	.04	.06	.07
Net realized and unrealized gain (loss)	(.09)	1.70	3.57	8.14	3.49
Total from investment operations	(.01)	1.77	3.61	8.20	3.56
Distributions from net investment income	(.07)	(.05)	(.05)	(.07)	(.07)
Distributions from net realized gain	(.60)	(3.49)	(.03)	(.01)	–
Total distributions	(.68)^B	(3.54)	(.08)	(.08)	(.07)
Net asset value, end of period	$30.91	$31.60	$33.37	$29.84	$21.72
Total Return^C,^D	.28%	5.54%	12.09%	37.77%	19.54%
Ratios to Average Net Assets^E,^F
Expenses before reductions	.76%	.75%	.76%	.77%	.78%
Expenses net of fee waivers, if any	.76%	.75%	.76%	.76%	.78%
Expenses net of all reductions	.76%	.74%	.76%	.76%	.77%
Net investment income (loss)	.28%	.22%	.13%	.23%	.31%
Supplemental Data
Net assets, end of period (000 omitted)	$175,086	$270,119	$136,782	$122,334	$77,969
Portfolio turnover rate^G	65%	63%^H	11%	25%	36%

^A Calculated based on average shares outstanding during the period.

^B Total distributions of $.68 per share is comprised of distributions from net investment income of $.073 and distributions from net realized gain of $.602 per share.

^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.

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

^H The portfolio turnover rate does not include the assets acquired in the merger.

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

Notes to Financial Statements

For the period ended December 31, 2016

1. Organization.

VIP Growth Opportunities Portfolio (the Fund) is a fund of Variable Insurance Products Fund III (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.

2. Investments in Fidelity Central Funds.

3. Significant Accounting Policies.

Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.

The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:

Level 1 – quoted prices in active markets for identical investments
Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)

Valuation techniques used to value the Fund's investments by major category are as follows:

Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.

The following provides information on Level 3 securities held by the Fund that were valued at period end based on unobservable inputs. These amounts exclude valuations provided by a broker.

Asset Type	Fair Value at 12/31/2016	Valuation Technique(s)	Unobservable Input	Amount or Range/Weighted Average	Impact to Valuation from an Increase in Input^(a)
Equities	$6,224,800	Market approach	Discount rate	3.0% - 19.0% / 11.6%	Decrease
			Transaction price	$3.85 - $48.77 / $39.55	Increase
			Discount for lack of marketability	15.0% - 20.0% / 15.2%	Decrease
			Premium rate	8.0% - 130.0% / 31.8%	Increase
		Market comparable	Enterprise value/Sales multiple (EV/S)	1.7 – 5.4 / 3.4	Increase
			Enterprise value/Gross profit multiple (EV/GP)	5.2	Increase

(a) Represents the expected directional change in the fair value of the Level 3 investments that would result from an increase in the corresponding input. A decrease to the unobservable input would have the opposite effect. Significant changes in these inputs could result in significantly higher or lower fair value measurements.

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 December 31, 2016, as well as a roll forward of Level 3 investments, 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. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.

Book-tax differences are primarily due to foreign currency transactions, passive foreign investment companies (PFIC), partnerships, deferred trustees compensation 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	$175,287,312
Gross unrealized depreciation	(22,830,001)
Net unrealized appreciation (depreciation) on securities	$152,457,311
Tax Cost	$379,119,300

The tax-based components of distributable earnings as of period end were as follows:

Undistributed ordinary income	$347,784
Undistributed long-term capital gain	$66,218,152
Net unrealized appreciation (depreciation) on securities and other investments	$152,457,188

The tax character of distributions paid was as follows:

	December 31, 2016	December 31, 2015
Ordinary Income	$1,170,788	$ 823,400
Long-term Capital Gains	13,837,937	71,791,408
Total	$15,008,725	$ 72,614,808

4. Purchases and Sales of Investments.

Purchases and sales of securities, other than short-term securities, aggregated $389,395,829 and $584,334,702, respectively.

5. Fees and Other Transactions with Affiliates.

Management Fee. Fidelity Management & Research Company (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .25% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by the investment adviser, including any mutual funds previously advised by the investment adviser that are currently advised by Fidelity SelectCo, LLC, an affiliate of the investment adviser. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annual management fee rate was .55% of the Fund'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	$98,989
Service Class 2	364,513
	$463,502

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

Initial Class	$96,124
Service Class	65,333
Service Class 2	96,231
Investor Class	311,510
	$569,198

Borrower or Lender	Average Loan Balance	Weighted Average Interest Rate	Interest Expense
Borrower	$21,595,571	.59%	$2,490

6. Committed Line of Credit.

The Fund participates with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $1,621 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, the Fund did not borrow on this line of credit.

7. 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. The Fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund may apply collateral received from the borrower against the obligation. The Fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. At period end, there were no security loans outstanding with FCM. 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 and includes $6,788 from securities loaned to FCM.

8. Expense Reductions.

Through arrangements with the Fund's custodian, credits realized as a result of certain uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $1,975.

In addition, during the period the investment adviser reimbursed and/or waived a portion of fund-level operating expenses in the amount of $5,252.

9. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

	Year ended December 31, 2016	Year ended December 31, 2015
From net investment income
Initial Class	$441,232	$320,894
Service Class	222,177	69,435
Service Class 2	71,358	5,026
Investor Class	436,021	345,930
Total	$1,170,788	$741,285
From net realized gain
Initial Class	$3,227,176	$17,409,526
Service Class	2,124,607	11,786,825
Service Class 2	3,498,766	16,848,249
Investor Class	4,987,388	25,828,923
Total	$13,837,937	$71,873,523

10. Share Transactions.

Transactions for each class of shares were as follows:

	Shares	Shares	Dollars	Dollars
	Year ended December 31, 2016	Year ended December 31, 2015	Year ended December 31, 2016	Year ended December 31, 2015
Initial Class
Shares sold	280,329	645,934	$8,217,274	$22,399,656
Issued in exchange for shares of VIP Growth Stock Portfolio	–	711,426	–	25,262,741
Reinvestment of distributions	135,711	567,119	3,668,408	17,730,420
Shares redeemed	(1,666,374)	(1,117,965)	(50,097,985)	(38,432,494)
Net increase (decrease)	(1,250,334)	806,514	$(38,212,303)	$26,960,323
Service Class
Shares sold	68,666	69,061	$2,044,301	$2,385,381
Issued in exchange for shares of VIP Growth Stock Portfolio	–	17,544	–	621,950
Reinvestment of distributions	87,295	379,069	2,346,784	11,856,260
Shares redeemed	(757,522)	(1,115,052)	(22,707,390)	(38,332,449)
Net increase (decrease)	(601,561)	(649,378)	$(18,316,305)	$(23,468,858)
Service Class 2
Shares sold	1,537,082	2,060,374	$44,979,886	$70,488,391
Issued in exchange for shares of VIP Growth Stock Portfolio	–	1,406,338	–	49,432,795
Reinvestment of distributions	135,723	546,218	3,570,124	16,853,275
Shares redeemed	(3,493,410)	(879,259)	(104,002,667)	(30,055,817)
Net increase (decrease)	(1,820,605)	3,133,671	$(55,452,657)	$106,718,644
Investor Class
Shares sold	180,117	1,142,653	$5,259,727	$39,385,547
Issued in exchange for shares of VIP Growth Stock Portfolio	–	3,476,126	–	122,915,819
Reinvestment of distributions	202,876	842,775	5,423,409	26,174,853
Shares redeemed	(3,267,048)	(1,011,465)	(97,774,261)	(34,436,720)
Net increase (decrease)	(2,884,055)	4,450,089	$(87,091,125)	$154,039,499

11. Other.

At the end of the period, the investment adviser or its affiliates were the owners of record of 49% of the total outstanding shares of the Fund and two otherwise unaffiliated shareholders were the owners of record of 25% of the total outstanding shares of the Fund.

12. Prior Fiscal Year Merger Information.

On April 24, 2015, the Fund acquired all of the assets and assumed all of the liabilities of VIP Growth Stock Portfolio ("Target Fund") pursuant to an Agreement and Plan of Reorganization approved by the Board of Trustees ("The Board"). The acquisition was accomplished by an exchange of shares of each class of the Fund for corresponding shares then outstanding of the Target Fund at their respective net asset value on the acquisition date. The reorganization provides shareholders of the Target Fund access to a larger portfolio with a similar investment objective and lower expenses. The reorganization qualified as a tax-free reorganization for federal income tax purposes with no gain or loss recognized to the funds or their shareholders. The Target Fund's net assets of $198,233,305, including securities of $195,063,924 and unrealized appreciation of $30,894,612 was combined with VIP Growth Opportunities Portfolio's net assets of $545,944,315 for total net assets after the acquisition of $744,177,620.

Pro forma results of operations of the combined entity for the entire period ended December 31, 2015, as though the acquisition had occurred as of the beginning of the year (rather than on the actual acquisition date), are as follows:

Net Investment income (loss)	$1,885,674
Total net realized gain (loss)	100,248,061
Total change in net unrealized appreciation (depreciation)	(64,663,111)
Net increase (decrease) in net assets resulting from operations	$37,470,624

Because the combined investment portfolios have been managed as a single portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the acquired fund that have been included in the Fund's accompanying Statement of Operations since April 24, 2015.

Report of Independent Registered Public Accounting Firm

To the Trustees of Variable Insurance Products Fund III and Shareholders of VIP Growth Opportunities Portfolio:

We have audited the accompanying statement of assets and liabilities of VIP Growth Opportunities Portfolio (the Fund), a fund of Variable Insurance Products Fund III, including the schedule of investments, as of December 31, 2016, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of VIP Growth Opportunities Portfolio as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
February 14, 2017

Trustees and Officers

The fund’s Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.

Interested Trustees*:

Correspondence intended for a Trustee who is an interested person may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.

Name, Year of Birth; Principal Occupations and Other Relevant Experience+

James C. Curvey (1935)

Year of Election or Appointment: 2007

Trustee

Chairman of the Board of Trustees

Charles S. Morrison (1960)

Year of Election or Appointment: 2014

Trustee

* Determined to be an “Interested Trustee” by virtue of, among other things, his or her affiliation with the trust or various entities under common control with FMR.

Independent Trustees:

Correspondence intended for an Independent Trustee may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Year of Birth; Principal Occupations and Other Relevant Experience+

Dennis J. Dirks (1948)

Year of Election or Appointment: 2005

Trustee

Alan J. Lacy (1953)

Year of Election or Appointment: 2008

Trustee

Ned C. Lautenbach (1944)

Year of Election or Appointment: 2000

Trustee

Chairman of the Independent Trustees

Joseph Mauriello (1944)

Year of Election or Appointment: 2008

Trustee

Robert W. Selander (1950)

Year of Election or Appointment: 2011

Trustee

Cornelia M. Small (1944)

Year of Election or Appointment: 2005

Trustee

William S. Stavropoulos (1939)

Year of Election or Appointment: 2002

Trustee

Vice Chairman of the Independent Trustees

David M. Thomas (1949)

Year of Election or Appointment: 2008

Trustee

Advisory Board Members and Officers:

Correspondence intended for an officer or Peter S. Lynch may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210. Officers appear below in alphabetical order.

Name, Year of Birth; Principal Occupation

Peter S. Lynch (1944)

Year of Election or Appointment: 2003

Member of the Advisory Board

Marc R. Bryant (1966)

Year of Election or Appointment: 2015

Secretary and Chief Legal Officer (CLO)

Jeffrey S. Christian (1961)

Year of Election or Appointment: 2016

Assistant Treasurer

Mr. Christian also serves as Assistant Treasurer of other funds. Mr. Christian is an employee of Fidelity Investments (2003-present).

William C. Coffey (1969)

Year of Election or Appointment: 2009

Assistant Secretary

Jonathan Davis (1968)

Year of Election or Appointment: 2010

Assistant Treasurer

Adrien E. Deberghes (1967)

Year of Election or Appointment: 2016

Assistant Treasurer

Stephanie J. Dorsey (1969)

Year of Election or Appointment: 2010

Assistant Treasurer

Howard J. Galligan III (1966)

Year of Election or Appointment: 2014

Chief Financial Officer

Scott C. Goebel (1968)

Year of Election or Appointment: 2015

Vice President

Brian B. Hogan (1964)

Year of Election or Appointment: 2009

Vice President

Colm A. Hogan (1973)

Year of Election or Appointment: 2016

Deputy Treasurer

Mr. Hogan also serves as an officer of other funds. Mr. Hogan is an employee of Fidelity Investments (2005-present). Mr. Colm A. Hogan is not related to Mr. Brian B. Hogan.

Chris Maher (1972)

Year of Election or Appointment: 2013

Assistant Treasurer

John F. Papandrea (1972)

Year of Election or Appointment: 2016

Anti-Money Laundering (AML) Officer

Melissa M. Reilly (1971)

Year of Election or Appointment: 2014

Vice President of certain Equity Funds

Ms. Reilly also serves as Vice President of other funds. Ms. Reilly is an employee of Fidelity Investments (2004-present).

Kenneth B. Robins (1969)

Year of Election or Appointment: 2016

Chief Compliance Officer

Stacie M. Smith (1974)

Year of Election or Appointment: 2016

President and Treasurer

Marc L. Spector (1972)

Year of Election or Appointment: 2016

Assistant Treasurer

Renee Stagnone (1975)

Year of Election or Appointment: 2016

Assistant Treasurer

Shareholder Expense Example

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2016 to December 31, 2016).

Actual Expenses

Hypothetical Example for Comparison Purposes

	Annualized Expense Ratio-^A	Beginning Account Value July 1, 2016	Ending Account Value December 31, 2016	Expenses Paid During Period-^B July 1, 2016 to December 31, 2016
Initial Class	.68%
Actual		$1,000.00	$1,060.40	$3.52
Hypothetical-^C		$1,000.00	$1,021.72	$3.46
Service Class	.78%
Actual		$1,000.00	$1,059.50	$4.04
Hypothetical-^C		$1,000.00	$1,021.22	$3.96
Service Class 2	.93%
Actual		$1,000.00	$1,058.90	$4.81
Hypothetical-^C		$1,000.00	$1,020.46	$4.72
Investor Class	.76%
Actual		$1,000.00	$1,059.70	$3.93
Hypothetical-^C		$1,000.00	$1,021.32	$3.86

^A Annualized expense ratio reflects expenses net of applicable fee waivers.

^B Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

^C 5% return per year before expenses

Distributions (Unaudited)

The Board of Trustees of VIP Growth Opportunities Portfolio voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income:

	Pay Date	Record Date	Dividends	Capital Gains

Initial Class	02/10/17	02/10/17	$0.028	$4.002
Service Class	02/10/17	02/10/17	$0.023	$4.002
Service Class 2	02/10/17	02/10/17	$0.017	$4.002
Investor Class	02/10/17	02/10/17	$0.024	$4.002

The fund hereby designates as a capital gain dividend with respect to the taxable year ended December 31, 2016, $66,462,615, or, if subsequently determined to be different, the net capital gain of such year.

Initial Class, Service Class, Service Class 2, and Investor Class designate 100% of the dividends distributed in February and December, 2016, respectively during the fiscal year as qualifying for the dividends–received deduction for corporate shareholders.

Board Approval of Investment Advisory Contracts and Management Fees

VIP Growth Opportunities Portfolio

Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.

Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in basis points (BP) in the chart below. The group of Broadridge funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates, regardless of whether their management fee structures also are comparable. Funds with comparable investment mandates offer exposure to similar types of securities. Funds with comparable management fee structures have similar management fee contractual arrangements (e.g., flat rate charged for advisory services, all-inclusive fee rate, etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and considered by the Board.

VIP Growth Opportunities Portfolio

The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for 2015.

Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.

The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.

Fidelity Investments

VIPGRO-ANN-0217
1.540209.119

Fidelity® Variable Insurance Products:

Mid Cap Portfolio

Annual Report

December 31, 2016

Contents

Performance
Management's Discussion of Fund Performance
Investment Summary
Investments
Financial Statements
Notes to Financial Statements
Report of Independent Registered Public Accounting Firm
Trustees and Officers
Shareholder Expense Example
Distributions
Board Approval of Investment Advisory Contracts and Management Fees

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.

NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE

Neither the Fund nor Fidelity Distributors Corporation is a bank.

Performance: The Bottom Line

Average Annual Total Returns

For the periods ended December 31, 2016	Past 1 year	Past 5 years	Past 10 years
Initial Class	12.23%	12.97%	7.59%
Service Class	12.11%	12.86%	7.48%
Service Class 2	11.92%	12.69%	7.32%
Investor Class	12.13%	12.87%	7.49%

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in VIP Mid Cap Portfolio - Initial Class on December 31, 2006.

The chart shows how the value of your investment would have changed, and also shows how the S&P MidCap 400® Index performed over the same period.

	Period Ending Values
	$20,787	VIP Mid Cap Portfolio - Initial Class
	$24,018	S&P MidCap 400® Index

Management's Discussion of Fund Performance

Comments from Portfolio Manager Thomas Allen: For the year, the fund’s share classes returned roughly 12%, considerably trailing the 20.74% return of the benchmark S&P MidCap 400 Index. Versus the benchmark, the health care sector had the most negative impact on fund performance. Picks in consumer discretionary also hurt, as did a small cash position in a rising market. The fund’s two largest relative detractors were Ireland-headquartered specialty pharma and generics company Endo International and Israel-based Teva Pharmaceutical Industries. Endo faced uncertainty regarding the future profitability of the firm’s pain relieving drugs, and both stocks suffered from unfavorable political rhetoric about drug companies and pressure late in the period from an antitrust investigation of generic-drug companies by the U.S. Justice Department. Another detractor in health care was Jazz Pharmaceuticals. Elsewhere, publisher Houghton Mifflin Harcourt also underperformed. Conversely, stock selection in energy and financials had a modestly positive impact. The fund’s top individual contributor, though, was graphics-processor designer Nvidia, which introduced several innovations expected to drive future growth. Overweighting education-loan provider SLM, also known as Sallie Mae, also paid off. All stocks mentioned here, except for SLM, were out-of-benchmark positions.

Investment Summary (Unaudited)

Top Ten Stocks as of December 31, 2016

	% of fund's net assets	% of fund's net assets 6 months ago
Reinsurance Group of America, Inc.	1.2	0.8
Electronic Arts, Inc.	1.2	1.1
Essent Group Ltd.	1.1	0.8
SLM Corp.	1.1	0.7
S&P Global, Inc.	1.1	1.2
Boston Scientific Corp.	1.0	1.2
Belden, Inc.	1.0	0.7
United Therapeutics Corp.	1.0	0.5
Spirit Airlines, Inc.	0.9	0.8
Global Payments, Inc.	0.9	1.6
	10.5

Top Five Market Sectors as of December 31, 2016

	% of fund's net assets	% of fund's net assets 6 months ago
Information Technology	22.8	23.9
Financials	20.0	19.4
Industrials	14.4	13.7
Health Care	14.1	13.6
Consumer Discretionary	13.7	15.3

Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications.

Asset Allocation (% of fund's net assets)

As of December 31, 2016 ^*
	Stocks	99.6%
	Short-Term Investments and Net Other Assets (Liabilities)	0.4%

* Foreign investments - 12.1%

As of June 30, 2016 ^*
	Stocks	96.1%
	Short-Term Investments and Net Other Assets (Liabilities)	3.9%

* Foreign investments - 11.1%

Investments December 31, 2016

Showing Percentage of Net Assets

Common Stocks - 99.5%
	Shares	Value
CONSUMER DISCRETIONARY - 13.7%
Auto Components - 1.3%
Adient PLC (a)	14,727	$863,002
Delphi Automotive PLC	457,961	30,843,673
Gentex Corp.	2,221,192	43,735,270
Tenneco, Inc. (a)	191,076	11,936,518
Visteon Corp.	209,322	16,816,929
		104,195,392
Distributors - 0.2%
LKQ Corp. (a)	584,500	17,914,925
Diversified Consumer Services - 0.5%
Houghton Mifflin Harcourt Co. (a)	2,235,400	24,254,090
New Oriental Education & Technology Group, Inc. sponsored ADR (a)	445,096	18,738,542
		42,992,632
Hotels, Restaurants & Leisure - 2.6%
Bojangles', Inc. (a)	357,800	6,672,970
Buffalo Wild Wings, Inc. (a)	87,100	13,448,240
Darden Restaurants, Inc.	285,300	20,747,016
DineEquity, Inc.	651,800	50,188,600
Extended Stay America, Inc. unit	442,633	7,148,523
Ilg, Inc.	551,200	10,015,304
Jubilant Foodworks Ltd.	75,070	942,814
Las Vegas Sands Corp.	592,488	31,644,784
Texas Roadhouse, Inc. Class A	410,800	19,816,992
The Restaurant Group PLC	166,500	665,856
Wyndham Worldwide Corp.	716,400	54,711,468
		216,002,567
Household Durables - 3.0%
Ethan Allen Interiors, Inc.	100,900	3,718,165
Harman International Industries, Inc.	321,705	35,760,728
iRobot Corp. (a)	410,780	24,010,091
Lennar Corp. Class A	1,216,400	52,220,052
Maisons du Monde SA	18,250	481,136
Mohawk Industries, Inc. (a)	38,000	7,587,840
NVR, Inc. (a)	20,514	34,237,866
PulteGroup, Inc.	3,071,800	56,459,684
Toll Brothers, Inc. (a)	1,038,200	32,184,200
		246,659,762
Internet & Direct Marketing Retail - 0.0%
Liberty Interactive Corp. QVC Group Series A (a)	101,800	2,033,964
Leisure Products - 0.6%
Polaris Industries, Inc. (b)	569,747	46,941,455
Media - 1.6%
Interpublic Group of Companies, Inc.	2,235,485	52,332,704
John Wiley & Sons, Inc. Class A	361,200	19,685,400
Lions Gate Entertainment Corp. (b)	477,650	12,848,785
Lions Gate Entertainment Corp. Class B (a)	477,650	11,721,531
Naspers Ltd. Class N	62,800	9,168,277
News Corp. Class A	855,800	9,807,468
Omnicom Group, Inc.	152,500	12,979,275
		128,543,440
Multiline Retail - 0.2%
Dollar Tree, Inc. (a)	264,300	20,398,674
Specialty Retail - 1.8%
AutoZone, Inc. (a)	26,332	20,796,750
Foot Locker, Inc.	843,087	59,766,437
GNC Holdings, Inc.	269,800	2,978,592
Party City Holdco, Inc. (a)(b)	497,000	7,057,400
Ross Stores, Inc.	13,100	859,360
Select Comfort Corp. (a)	259,253	5,864,303
TJX Companies, Inc.	330,800	24,853,004
Williams-Sonoma, Inc.	453,900	21,964,221
		144,140,067
Textiles, Apparel & Luxury Goods - 1.9%
Deckers Outdoor Corp. (a)	345,400	19,131,706
G-III Apparel Group Ltd. (a)	1,519,566	44,918,371
Kate Spade & Co. (a)	345,000	6,441,150
Michael Kors Holdings Ltd. (a)	416,000	17,879,680
Page Industries Ltd.	21,178	4,254,265
PVH Corp.	469,200	42,340,608
Ralph Lauren Corp.	92,900	8,390,728
VF Corp.	220,376	11,757,060
		155,113,568

TOTAL CONSUMER DISCRETIONARY		1,124,936,446

CONSUMER STAPLES - 1.0%
Beverages - 0.3%
C&C Group PLC	1,528,224	6,193,437
Dr. Pepper Snapple Group, Inc.	241,225	21,871,871
		28,065,308
Food & Staples Retailing - 0.2%
CVS Health Corp.	203,247	16,038,221
Food Products - 0.5%
Amplify Snack Brands, Inc. (a)(b)	102,200	900,382
Britannia Industries Ltd.	15,000	637,110
Bunge Ltd.	188,088	13,587,477
Hostess Brands, Inc. Class A (a)	1,008,799	13,114,387
Ingredion, Inc.	41,205	5,148,977
TreeHouse Foods, Inc. (a)	56,300	4,064,297
		37,452,630

TOTAL CONSUMER STAPLES		81,556,159

ENERGY - 4.1%
Energy Equipment & Services - 1.6%
Baker Hughes, Inc.	420,281	27,305,657
Dril-Quip, Inc. (a)	495,500	29,754,775
Ensco PLC Class A	102,700	998,244
Frank's International NV (b)	246,200	3,030,722
Halliburton Co.	654,400	35,396,496
National Oilwell Varco, Inc.	389,000	14,564,160
Oceaneering International, Inc.	569,700	16,071,237
		127,121,291
Oil, Gas & Consumable Fuels - 2.5%
Anadarko Petroleum Corp.	96,000	6,694,080
Apache Corp.	514,596	32,661,408
Cimarex Energy Co.	303,652	41,266,307
Newfield Exploration Co. (a)	444,600	18,006,300
PDC Energy, Inc. (a)	155,200	11,264,416
Southwestern Energy Co. (a)	871,500	9,429,630
Suncor Energy, Inc.	1,608,400	52,589,104
Teekay LNG Partners LP	371,886	5,373,753
Western Refining, Inc.	253,200	9,583,620
World Fuel Services Corp.	408,095	18,735,641
		205,604,259

TOTAL ENERGY		332,725,550

FINANCIALS - 19.9%
Banks - 7.7%
BankUnited, Inc.	573,761	21,625,052
Boston Private Financial Holdings, Inc.	1,463,616	24,222,845
CIT Group, Inc.	1,288,400	54,988,912
Comerica, Inc.	665,429	45,322,369
Commerce Bancshares, Inc.	798,371	46,153,828
CVB Financial Corp.	1,103,000	25,291,790
First Citizen Bancshares, Inc.	41,500	14,732,500
First Commonwealth Financial Corp.	1,097,500	15,562,550
First Republic Bank	485,300	44,715,542
Hilltop Holdings, Inc.	80,200	2,389,960
Huntington Bancshares, Inc.	4,376,016	57,850,932
Investors Bancorp, Inc.	1,349,600	18,826,920
Lakeland Financial Corp.	955,119	45,234,436
M&T Bank Corp.	352,000	55,063,360
Prosperity Bancshares, Inc.	272,300	19,545,694
Regions Financial Corp.	2,278,400	32,717,824
SunTrust Banks, Inc.	714,165	39,171,950
TCF Financial Corp.	1,035,535	20,286,131
UMB Financial Corp.	676,500	52,171,680
Valley National Bancorp	103,300	1,202,412
		637,076,687
Capital Markets - 3.4%
Affiliated Managers Group, Inc. (a)	196,800	28,595,040
Ameriprise Financial, Inc.	173,513	19,249,532
CBOE Holdings, Inc.	130,200	9,620,478
CRISIL Ltd.	84,555	2,741,165
Diamond Hill Investment Group, Inc.	8,500	1,788,230
E*TRADE Financial Corp. (a)	26,400	914,760
Greenhill & Co., Inc.	30,700	850,390
Invesco Ltd.	577,900	17,533,486
Lazard Ltd. Class A	405,945	16,680,280
Legg Mason, Inc.	461,200	13,794,492
Moody's Corp.	157,500	14,847,525
Raymond James Financial, Inc.	471,395	32,653,532
S&P Global, Inc.	797,030	85,712,606
Stifel Financial Corp. (a)	656,400	32,787,180
		277,768,696
Consumer Finance - 2.6%
Capital One Financial Corp.	439,400	38,333,256
Discover Financial Services	212,100	15,290,289
Kruk SA	88,400	5,006,584
OneMain Holdings, Inc. (a)	531,600	11,769,624
SLM Corp. (a)	8,439,646	93,004,899
Synchrony Financial	1,318,600	47,825,622
		211,230,274
Insurance - 4.6%
AFLAC, Inc.	893,700	62,201,520
Bajaj Finserv Ltd.	58,922	2,510,065
Brown & Brown, Inc.	31,900	1,431,034
Chubb Ltd.	113,239	14,961,137
First American Financial Corp.	1,336,900	48,970,647
FNF Group	22,700	770,892
Hiscox Ltd.	1,712,850	21,468,019
Marsh & McLennan Companies, Inc.	269,284	18,200,906
Primerica, Inc.	474,920	32,840,718
Principal Financial Group, Inc.	1,154,700	66,810,942
Progressive Corp.	236,500	8,395,750
Reinsurance Group of America, Inc.	797,376	100,333,824
		378,895,454
Mortgage Real Estate Investment Trusts - 0.3%
Ladder Capital Corp. Class A	1,630,776	22,374,247
Thrifts & Mortgage Finance - 1.3%
Beneficial Bancorp, Inc.	377,362	6,943,461
Essent Group Ltd. (a)	2,906,300	94,076,931
Housing Development Finance Corp. Ltd.	349,130	6,486,858
		107,507,250

TOTAL FINANCIALS		1,634,852,608

HEALTH CARE - 14.1%
Biotechnology - 2.5%
Alexion Pharmaceuticals, Inc. (a)	312,200	38,197,670
AMAG Pharmaceuticals, Inc. (a)	785,100	27,321,480
Amgen, Inc.	137,500	20,103,875
BioMarin Pharmaceutical, Inc. (a)	137,200	11,365,648
Regeneron Pharmaceuticals, Inc. (a)	30,100	11,049,409
REGENXBIO, Inc. (a)	437,300	8,111,915
Repligen Corp. (a)	25,400	782,828
Seattle Genetics, Inc. (a)	211,054	11,137,320
United Therapeutics Corp. (a)	539,955	77,445,746
		205,515,891
Health Care Equipment & Supplies - 4.9%
Alere, Inc. (a)	93,300	3,635,901
Becton, Dickinson & Co.	172,600	28,573,930
Boston Scientific Corp. (a)	3,807,003	82,345,475
Dentsply Sirona, Inc.	727,900	42,021,667
Hill-Rom Holdings, Inc.	306,211	17,190,686
Hologic, Inc. (a)	847,624	34,006,675
Medtronic PLC	81,200	5,783,876
Olympus Corp.	498,100	17,217,745
ResMed, Inc.	252,548	15,670,603
Steris PLC	894,300	60,266,877
The Cooper Companies, Inc.	190,783	33,373,670
Zimmer Biomet Holdings, Inc.	613,600	63,323,520
		403,410,625
Health Care Providers & Services - 3.3%
AmerisourceBergen Corp.	55,300	4,323,907
Cardinal Health, Inc.	822,147	59,169,920
Centene Corp. (a)	119,700	6,764,247
DaVita HealthCare Partners, Inc. (a)	666,900	42,814,980
Envision Healthcare Corp. (a)	337,100	21,335,059
HCA Holdings, Inc. (a)	294,435	21,794,079
Laboratory Corp. of America Holdings (a)	314,800	40,414,024
McKesson Corp.	337,350	47,380,808
Premier, Inc. (a)	323,800	9,830,568
Quest Diagnostics, Inc.	65,000	5,973,500
Surgical Care Affiliates, Inc. (a)	98,900	4,576,103
Universal Health Services, Inc. Class B	98,900	10,520,982
VCA, Inc. (a)	14,300	981,695
		275,879,872
Life Sciences Tools & Services - 1.3%
Agilent Technologies, Inc.	788,806	35,938,001
Bruker Corp.	890,200	18,854,436
Cambrex Corp. (a)	2,300	124,085
Charles River Laboratories International, Inc. (a)	9,900	754,281
PAREXEL International Corp. (a)	83,600	5,494,192
Thermo Fisher Scientific, Inc.	332,163	46,868,199
		108,033,194
Pharmaceuticals - 2.1%
Catalent, Inc. (a)	914,800	24,663,008
Endo International PLC (a)	824,500	13,579,515
Jazz Pharmaceuticals PLC (a)	613,371	66,875,840
Pacira Pharmaceuticals, Inc. (a)	53,700	1,734,510
Perrigo Co. PLC	197,300	16,421,279
Teva Pharmaceutical Industries Ltd. sponsored ADR	1,287,156	46,659,405
		169,933,557

TOTAL HEALTH CARE		1,162,773,139

INDUSTRIALS - 14.4%
Aerospace & Defense - 2.6%
Curtiss-Wright Corp.	161,948	15,929,205
Elbit Systems Ltd.	105,009	10,679,415
Esterline Technologies Corp. (a)	112,748	10,057,122
Hexcel Corp.	88,700	4,562,728
Huntington Ingalls Industries, Inc.	349,800	64,429,662
Rockwell Collins, Inc.	409,783	38,011,471
Teledyne Technologies, Inc. (a)	8,800	1,082,400
Textron, Inc.	1,410,581	68,497,813
		213,249,816
Air Freight & Logistics - 1.0%
C.H. Robinson Worldwide, Inc.	314,200	23,018,292
FedEx Corp.	328,411	61,150,128
		84,168,420
Airlines - 1.1%
Allegiant Travel Co.	50,100	8,336,640
Copa Holdings SA Class A	43,300	3,932,939
Spirit Airlines, Inc. (a)	1,315,413	76,109,796
		88,379,375
Building Products - 0.7%
A.O. Smith Corp.	406,100	19,228,835
Johnson Controls International PLC	129,976	5,353,711
Lennox International, Inc.	209,557	32,097,846
		56,680,392
Commercial Services & Supplies - 0.9%
Copart, Inc. (a)	111,100	6,156,051
Herman Miller, Inc.	132,800	4,541,760
HNI Corp.	202,077	11,300,146
KAR Auction Services, Inc.	284,282	12,116,099
Knoll, Inc.	1,317,200	36,789,396
Matthews International Corp. Class A	28,744	2,208,976
Multi-Color Corp.	34,600	2,684,960
		75,797,388
Construction & Engineering - 1.5%
EMCOR Group, Inc.	769,107	54,422,011
Jacobs Engineering Group, Inc. (a)	689,855	39,321,735
Quanta Services, Inc. (a)	311,571	10,858,249
Valmont Industries, Inc.	136,981	19,300,623
		123,902,618
Electrical Equipment - 0.3%
AMETEK, Inc.	200,800	9,758,880
Regal Beloit Corp.	196,756	13,625,353
Rockwell Automation, Inc.	8,100	1,088,640
		24,472,873
Industrial Conglomerates - 0.1%
Carlisle Companies, Inc.	54,700	6,032,863
Machinery - 3.8%
Colfax Corp. (a)	756,400	27,177,452
Cummins, Inc.	13,875	1,896,296
Flowserve Corp.	312,800	15,030,040
IDEX Corp.	17,500	1,576,050
Ingersoll-Rand PLC	850,045	63,787,377
Mueller Industries, Inc.	667,204	26,661,472
Pentair PLC	74,800	4,194,036
Rexnord Corp. (a)	3,248,934	63,646,617
Stanley Black & Decker, Inc.	81,400	9,335,766
Wabtec Corp.	649,560	53,926,471
Woodward, Inc.	505,107	34,877,638
Xylem, Inc.	327,400	16,212,848
		318,322,063
Professional Services - 0.8%
CEB, Inc.	197,400	11,962,440
Dun & Bradstreet Corp.	427,205	51,828,511
		63,790,951
Road & Rail - 0.8%
CSX Corp.	245,900	8,835,187
J.B. Hunt Transport Services, Inc.	50,400	4,892,328
Old Dominion Freight Lines, Inc. (a)	220,900	18,951,011
Saia, Inc. (a)	414,705	18,309,226
Swift Transporation Co. (a)	551,478	13,434,004
		64,421,756
Trading Companies & Distributors - 0.8%
Air Lease Corp. Class A	937,194	32,173,870
HD Supply Holdings, Inc. (a)	324,900	13,811,499
Misumi Group, Inc.	757,400	12,468,343
WESCO International, Inc. (a)	107,000	7,120,850
		65,574,562

TOTAL INDUSTRIALS		1,184,793,077

INFORMATION TECHNOLOGY - 22.8%
Communications Equipment - 1.9%
CommScope Holding Co., Inc. (a)	1,147,990	42,705,228
F5 Networks, Inc. (a)	438,254	63,424,119
Harris Corp.	211,600	21,682,652
NETGEAR, Inc. (a)	455,200	24,740,120
		152,552,119
Electronic Equipment & Components - 4.8%
Amphenol Corp. Class A	52,000	3,494,400
Arrow Electronics, Inc. (a)	615,980	43,919,374
Avnet, Inc.	702,730	33,456,975
Belden, Inc.	1,048,800	78,418,776
CDW Corp.	1,200,401	62,528,888
Dell Technologies, Inc. (a)	119,846	6,587,935
IPG Photonics Corp. (a)	112,809	11,135,376
Jabil Circuit, Inc.	1,337,341	31,654,861
Keysight Technologies, Inc. (a)	872,053	31,890,978
Methode Electronics, Inc. Class A	332,000	13,728,200
National Instruments Corp.	29,200	899,944
TE Connectivity Ltd.	399,366	27,668,076
Trimble, Inc. (a)	1,518,700	45,788,805
Zebra Technologies Corp. Class A (a)	54,600	4,682,496
		395,855,084
Internet Software & Services - 1.1%
Akamai Technologies, Inc. (a)	537,300	35,827,164
Alphabet, Inc. Class C (a)	53,802	41,525,460
Tencent Holdings Ltd.	536,400	13,006,152
		90,358,776
IT Services - 7.8%
Alliance Data Systems Corp.	74,590	17,043,815
Blackhawk Network Holdings, Inc. (a)	1,401,994	52,820,124
Broadridge Financial Solutions, Inc.	211,703	14,035,909
CSRA, Inc.	499,900	15,916,816
Euronet Worldwide, Inc. (a)	875,077	63,381,827
EVERTEC, Inc.	716,193	12,712,426
ExlService Holdings, Inc. (a)	433,500	21,865,740
Fidelity National Information Services, Inc.	494,677	37,417,368
FleetCor Technologies, Inc. (a)	438,340	62,033,877
Genpact Ltd. (a)	2,681,988	65,279,588
Global Payments, Inc.	1,089,176	75,599,706
Maximus, Inc.	396,100	22,098,419
Syntel, Inc.	271,326	5,369,542
Teletech Holdings, Inc.	108,100	3,297,050
The Western Union Co.	1,108,648	24,079,835
Total System Services, Inc.	1,470,510	72,099,105
Vantiv, Inc. (a)	568,500	33,893,970
Visa, Inc. Class A	401,400	31,317,228
Xerox Corp.	1,486,549	12,977,573
		643,239,918
Semiconductors & Semiconductor Equipment - 3.1%
Analog Devices, Inc.	58,400	4,241,008
Applied Materials, Inc.	650,200	20,981,954
Cirrus Logic, Inc. (a)	500	28,270
Cree, Inc. (a)	712,500	18,802,875
Maxim Integrated Products, Inc.	926,000	35,715,820
Microchip Technology, Inc.	125,804	8,070,327
NVIDIA Corp.	560,233	59,799,270
NXP Semiconductors NV (a)	667,543	65,425,889
Semtech Corp. (a)	729,171	23,005,345
Skyworks Solutions, Inc.	308,500	23,032,610
		259,103,368
Software - 3.3%
Activision Blizzard, Inc.	1,470,100	53,085,311
Electronic Arts, Inc. (a)	1,234,190	97,204,804
Fair Isaac Corp.	313,900	37,423,158
Intuit, Inc.	186,297	21,351,499
Parametric Technology Corp. (a)	588,741	27,241,046
Synopsys, Inc. (a)	571,649	33,647,260
		269,953,078
Technology Hardware, Storage & Peripherals - 0.8%
NEC Corp.	1,502,000	3,983,914
Western Digital Corp.	923,019	62,719,141
		66,703,055

TOTAL INFORMATION TECHNOLOGY		1,877,765,398

MATERIALS - 5.2%
Chemicals - 3.1%
Albemarle Corp. U.S.	657,456	56,593,812
Ashland Global Holdings, Inc.	82,726	9,041,125
CF Industries Holdings, Inc.	701,900	22,095,812
Eastman Chemical Co.	818,100	61,529,301
Ferro Corp. (a)	1,377,009	19,732,539
H.B. Fuller Co.	565,075	27,298,773
Innospec, Inc.	121,109	8,295,967
PolyOne Corp.	860,360	27,565,934
PPG Industries, Inc.	183,100	17,350,556
Praxair, Inc.	52,300	6,129,037
W.R. Grace & Co.	67,300	4,552,172
		260,185,028
Containers & Packaging - 1.4%
Aptargroup, Inc.	185,230	13,605,144
Graphic Packaging Holding Co.	2,392,500	29,858,400
Packaging Corp. of America	176,100	14,936,802
WestRock Co.	1,130,100	57,375,177
		115,775,523
Metals & Mining - 0.5%
B2Gold Corp. (a)	8,173,000	19,418,218
Continental Gold, Inc. (a)	245,200	803,545
Guyana Goldfields, Inc. (a)	107,400	489,545
New Gold, Inc. (a)	2,039,120	7,153,208
Randgold Resources Ltd. sponsored ADR	99,732	7,613,541
Tahoe Resources, Inc.	262,000	2,468,477
		37,946,534
Paper & Forest Products - 0.2%
Boise Cascade Co. (a)	749,264	16,858,440

TOTAL MATERIALS		430,765,525

REAL ESTATE - 3.6%
Equity Real Estate Investment Trusts (REITs) - 2.1%
Extra Space Storage, Inc.	332,600	25,690,024
Gaming & Leisure Properties	531,900	16,286,778
Hibernia (REIT) PLC	11,906,000	15,427,939
Highwoods Properties, Inc. (SBI)	249,995	12,752,245
InfraReit, Inc.	362,000	6,483,420
Mid-America Apartment Communities, Inc.	60,248	5,899,484
Monogram Residential Trust, Inc.	79,300	858,026
Outfront Media, Inc.	548,400	13,638,708
Safestore Holdings PLC	2,076,500	8,956,775
Store Capital Corp.	687,691	16,992,845
Urban Edge Properties	28,500	784,035
Ventas, Inc.	261,800	16,367,736
VEREIT, Inc.	2,208,750	18,686,025
Welltower, Inc.	244,200	16,344,306
		175,168,346
Real Estate Management & Development - 1.5%
Buwog-Gemeinnuetzige Wohnung	730,069	16,976,322
CBRE Group, Inc. (a)	1,954,623	61,551,078
Goldcrest Co. Ltd.	101,600	1,828,148
Hysan Development Co. Ltd.	169,000	696,963
Jones Lang LaSalle, Inc.	326,815	33,021,388
Olav Thon Eiendomsselskap A/S	287,000	5,317,677
Tai Cheung Holdings Ltd.	1,910,000	1,677,410
Wing Tai Holdings Ltd.	2,465,300	2,706,782
		123,775,768

TOTAL REAL ESTATE		298,944,114

UTILITIES - 0.7%
Electric Utilities - 0.4%
Exelon Corp.	605,300	21,482,097
OGE Energy Corp.	338,100	11,309,445
		32,791,542
Independent Power and Renewable Electricity Producers - 0.1%
Calpine Corp. (a)	352,400	4,027,932
Dynegy, Inc. (a)	452,700	3,829,842
		7,857,774
Multi-Utilities - 0.2%
Avangrid, Inc.	531,400	20,129,432

TOTAL UTILITIES		60,778,748

TOTAL COMMON STOCKS
(Cost $6,831,845,571)		8,189,890,764

Nonconvertible Preferred Stocks - 0.1%
FINANCIALS - 0.1%
Capital Markets - 0.1%
GMAC Capital Trust I Series 2, 8.125%
(Cost $8,358,700)	405,466	10,298,836

Money Market Funds - 1.0%
Fidelity Cash Central Fund, 0.60% (c)	31,586,434	31,592,751
Fidelity Securities Lending Cash Central Fund 0.65% (c)(d)	50,790,372	50,795,451
TOTAL MONEY MARKET FUNDS
(Cost $82,383,132)		82,388,202
TOTAL INVESTMENT PORTFOLIO - 100.6%
(Cost $6,922,587,403)		8,282,577,802
NET OTHER ASSETS (LIABILITIES) - (0.6)%		(48,189,835)
NET ASSETS - 100%		$8,234,387,967

Legend

(a) Non-income producing

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

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

Affiliated Central Funds

Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:

Fund	Income earned
Fidelity Cash Central Fund	$750,942
Fidelity Securities Lending Cash Central Fund	759,689
Total	$1,510,631

Investment Valuation

	Valuation Inputs at Reporting Date:
Description	Total	Level 1	Level 2	Level 3
Investments in Securities:
Equities:
Consumer Discretionary	$1,124,936,446	$1,115,768,169	$9,168,277	$--
Consumer Staples	81,556,159	81,556,159	--	--
Energy	332,725,550	332,725,550	--	--
Financials	1,645,151,444	1,645,151,444	--	--
Health Care	1,162,773,139	1,162,773,139	--	--
Industrials	1,184,793,077	1,184,793,077	--	--
Information Technology	1,877,765,398	1,864,759,246	13,006,152	--
Materials	430,765,525	430,765,525	--	--
Real Estate	298,944,114	296,569,741	2,374,373	--
Utilities	60,778,748	60,778,748	--	--
Money Market Funds	82,388,202	82,388,202	--	--
Total Investments in Securities:	$8,282,577,802	$8,258,029,000	$24,548,802	$--

Other Information

Distribution of investments by country or territory of incorporation, as a percentage of Total Net Assets, is as follows (Unaudited):

United States of America	87.9%
Bermuda	2.8%
Ireland	2.5%
Canada	1.5%
Others (Individually Less Than 1%)	5.3%
	100.0%

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

Financial Statements

Statement of Assets and Liabilities

		December 31, 2016
Assets
Investment in securities, at value (including securities loaned of $50,022,471) — See accompanying schedule: Unaffiliated issuers (cost $6,840,204,271)	$8,200,189,600
Fidelity Central Funds (cost $82,383,132)	82,388,202
Total Investments (cost $6,922,587,403)		$8,282,577,802
Foreign currency held at value (cost $2)		2
Receivable for investments sold		29,224,659
Receivable for fund shares sold		1,311,124
Dividends receivable		7,671,725
Distributions receivable from Fidelity Central Funds		102,187
Prepaid expenses		15,953
Other receivables		174,343
Total assets		8,321,077,795
Liabilities
Payable to custodian bank	$1,540
Payable for investments purchased	22,455,750
Payable for fund shares redeemed	7,669,895
Accrued management fee	3,819,023
Distribution and service plan fees payable	1,260,662
Other affiliated payables	600,497
Other payables and accrued expenses	92,057
Collateral on Securities Loaned	50,790,404
Total liabilities		86,689,828
Net Assets		$8,234,387,967
Net Assets consist of:
Paid in capital		$6,544,692,667
Undistributed net investment income		10,147,136
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions		319,599,866
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies		1,359,948,298
Net Assets		$8,234,387,967
Initial Class:
Net Asset Value, offering price and redemption price per share ($1,360,134,374 ÷ 40,028,287 shares)		$33.98
Service Class:
Net Asset Value, offering price and redemption price per share ($566,378,308 ÷ 16,806,327 shares)		$33.70
Service Class 2:
Net Asset Value, offering price and redemption price per share ($5,746,266,123 ÷ 173,959,889 shares)		$33.03
Investor Class:
Net Asset Value, offering price and redemption price per share ($561,609,162 ÷ 16,613,845 shares)		$33.80

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

Statement of Operations

		Year ended December 31, 2016
Investment Income
Dividends		$102,711,348
Income from Fidelity Central Funds		1,510,631
Total income		104,221,979
Expenses
Management fee	$43,461,981
Transfer agent fees	5,651,973
Distribution and service plan fees	14,320,068
Accounting and security lending fees	1,218,864
Custodian fees and expenses	130,388
Independent trustees' fees and expenses	34,237
Audit	70,604
Legal	34,737
Interest	5,275
Miscellaneous	67,499
Total expenses before reductions	64,995,626
Expense reductions	(233,037)	64,762,589
Net investment income (loss)		39,459,390
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities:
Unaffiliated issuers	347,702,708
Fidelity Central Funds	5,474
Foreign currency transactions	7,331
Total net realized gain (loss)		347,715,513
Change in net unrealized appreciation (depreciation) on: Investment securities	522,349,847
Assets and liabilities in foreign currencies	(1,848)
Total change in net unrealized appreciation (depreciation)		522,347,999
Net gain (loss)		870,063,512
Net increase (decrease) in net assets resulting from operations		$909,522,902

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

Statement of Changes in Net Assets

	Year ended December 31, 2016	Year ended December 31, 2015
Increase (Decrease) in Net Assets
Operations
Net investment income (loss)	$39,459,390	$26,811,219
Net realized gain (loss)	347,715,513	506,962,213
Change in net unrealized appreciation (depreciation)	522,347,999	(648,520,131)
Net increase (decrease) in net assets resulting from operations	909,522,902	(114,746,699)
Distributions to shareholders from net investment income	(28,421,672)	(24,497,724)
Distributions to shareholders from net realized gain	(494,682,420)	(1,074,651,414)
Total distributions	(523,104,092)	(1,099,149,138)
Share transactions - net increase (decrease)	(215,304,797)	244,251,301
Total increase (decrease) in net assets	171,114,013	(969,644,536)
Net Assets
Beginning of period	8,063,273,954	9,032,918,490
End of period	$8,234,387,967	$8,063,273,954
Other Information
Undistributed net investment income end of period	$10,147,136	$–
Distributions in excess of net investment income end of period	$–	$(115,077)

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

Financial Highlights — VIP Mid Cap Portfolio Initial Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$32.65	$37.68	$36.39	$30.55	$29.08
Income from Investment Operations
Net investment income (loss)^A	.21	.17	.13	.18	.29
Net realized and unrealized gain (loss)	3.27	(.59)	2.11	10.57	3.99
Total from investment operations	3.48	(.42)	2.24	10.75	4.28
Distributions from net investment income	(.16)	(.16)^B	(.10)	(.19)	(.20)^B
Distributions from net realized gain	(1.99)	(4.45)^B	(.85)	(4.72)	(2.61)^B
Total distributions	(2.15)	(4.61)	(.95)	(4.91)	(2.81)
Net asset value, end of period	$33.98	$32.65	$37.68	$36.39	$30.55
Total Return^C,^D	12.23%	(1.39)%	6.29%	36.23%	14.83%
Ratios to Average Net Assets^E,^F
Expenses before reductions	.63%	.63%	.64%	.64%	.65%
Expenses net of fee waivers, if any	.63%	.63%	.64%	.64%	.65%
Expenses net of all reductions	.63%	.63%	.63%	.63%	.63%
Net investment income (loss)	.68%	.49%	.35%	.52%	.90%
Supplemental Data
Net assets, end of period (000 omitted)	$1,360,134	$1,382,527	$1,476,171	$1,489,788	$1,217,359
Portfolio turnover rate^G	30%	26%^H	142%	132%	187%

^A Calculated based on average shares outstanding during the period.

^B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.

^C Total 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.

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

^H The portfolio turnover rate does not include the assets acquired in the merger.

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

Financial Highlights — VIP Mid Cap Portfolio Service Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$32.41	$37.44	$36.16	$30.39	$28.93
Income from Investment Operations
Net investment income (loss)^A	.18	.13	.09	.15	.25
Net realized and unrealized gain (loss)	3.23	(.59)	2.10	10.49	3.98
Total from investment operations	3.41	(.46)	2.19	10.64	4.23
Distributions from net investment income	(.14)	(.13)^B	(.06)	(.15)	(.16)^B
Distributions from net realized gain	(1.99)	(4.45)^B	(.85)	(4.72)	(2.61)^B
Total distributions	(2.12)^C	(4.57)^D	(.91)	(4.87)	(2.77)
Net asset value, end of period	$33.70	$32.41	$37.44	$36.16	$30.39
Total Return^E,^F	12.11%	(1.50)%	6.20%	36.06%	14.75%
Ratios to Average Net Assets^G,^H
Expenses before reductions	.73%	.73%	.74%	.74%	.75%
Expenses net of fee waivers, if any	.73%	.73%	.74%	.74%	.75%
Expenses net of all reductions	.73%	.73%	.73%	.73%	.73%
Net investment income (loss)	.58%	.39%	.25%	.42%	.80%
Supplemental Data
Net assets, end of period (000 omitted)	$566,378	$566,349	$622,227	$638,612	$525,875
Portfolio turnover rate^I	30%	26%^J	142%	132%	187%

^A Calculated based on average shares outstanding during the period.

^B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.

^C Total distributions of $2.12 per share is comprised of distributions from net investment income of $.137 and distributions from net realized gain of $1.987 per share.

^D Total distributions of $4.57 per share is comprised of distributions from net investment income of $.128 and distributions from net realized gain of $4.445 per share.

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

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

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

^J The portfolio turnover rate does not include the assets acquired in the merger.

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

Financial Highlights — VIP Mid Cap Portfolio Service Class 2

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$31.83	$36.84	$35.60	$29.98	$28.58
Income from Investment Operations
Net investment income (loss)^A	.13	.08	.04	.09	.20
Net realized and unrealized gain (loss)	3.16	(.57)	2.06	10.35	3.93
Total from investment operations	3.29	(.49)	2.10	10.44	4.13
Distributions from net investment income	(.10)	(.08)^B	(.01)	(.10)	(.12)^B
Distributions from net realized gain	(1.99)	(4.45)^B	(.85)	(4.72)	(2.61)^B
Total distributions	(2.09)	(4.52)^C	(.86)	(4.82)	(2.73)
Net asset value, end of period	$33.03	$31.83	$36.84	$35.60	$29.98
Total Return^D,^E	11.92%	(1.63)%	6.03%	35.87%	14.56%
Ratios to Average Net Assets^F,^G
Expenses before reductions	.88%	.88%	.88%	.89%	.90%
Expenses net of fee waivers, if any	.88%	.88%	.88%	.89%	.90%
Expenses net of all reductions	.88%	.88%	.88%	.88%	.88%
Net investment income (loss)	.43%	.24%	.10%	.27%	.65%
Supplemental Data
Net assets, end of period (000 omitted)	$5,746,266	$5,591,030	$6,431,011	$6,574,623	$5,335,565
Portfolio turnover rate^H	30%	26%^I	142%	132%	187%

^A Calculated based on average shares outstanding during the period.

^B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.

^C Total distributions of $4.52 per share is comprised of distributions from net investment income of $.075 and distributions from net realized gain of $4.446 per share.

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

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

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

^I The portfolio turnover rate does not include the assets acquired in the merger.

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

Financial Highlights — VIP Mid Cap Portfolio Investor Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$32.50	$37.53	$36.25	$30.46	$29.00
Income from Investment Operations
Net investment income (loss)^A	.19	.14	.10	.15	.26
Net realized and unrealized gain (loss)	3.24	(.59)	2.10	10.52	3.98
Total from investment operations	3.43	(.45)	2.20	10.67	4.24
Distributions from net investment income	(.14)	(.14)^B	(.07)	(.16)	(.17)^B
Distributions from net realized gain	(1.99)	(4.45)^B	(.85)	(4.72)	(2.61)^B
Total distributions	(2.13)	(4.58)^C	(.92)	(4.88)	(2.78)
Net asset value, end of period	$33.80	$32.50	$37.53	$36.25	$30.46
Total Return^D,^E	12.13%	(1.47)%	6.20%	36.08%	14.74%
Ratios to Average Net Assets^F,^G
Expenses before reductions	.71%	.71%	.72%	.73%	.74%
Expenses net of fee waivers, if any	.71%	.71%	.72%	.72%	.74%
Expenses net of all reductions	.71%	.71%	.71%	.71%	.72%
Net investment income (loss)	.60%	.41%	.27%	.44%	.82%
Supplemental Data
Net assets, end of period (000 omitted)	$561,609	$523,368	$503,509	$470,265	$312,004
Portfolio turnover rate^H	30%	26%^I	142%	132%	187%

^A Calculated based on average shares outstanding during the period.

^B The amounts shown reflect certain reclassifications related to book to tax differences that were made in the year shown.

^C Total distributions of $4.58 per share is comprised of distributions from net investment income of $.137 and distributions from net realized gain of $4.446 per share.

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

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

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

^I The portfolio turnover rate does not include the assets acquired in the merger.

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

Notes to Financial Statements

For the period ended December 31, 2016

1. Organization.

VIP Mid Cap Portfolio (the Fund) is a fund of Variable Insurance Products Fund III (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.

2. Investments in Fidelity Central Funds.

3. Significant Accounting Policies.

Investment Valuation. Investments are valued as of 4:00 p.m. Eastern time on the last calendar day of the period. The Board of Trustees (the Board) has delegated the day to day responsibility for the valuation of the Fund's investments to the Fair Value Committee (the Committee) established by the Fund's investment adviser. In accordance with valuation policies and procedures approved by the Board, the Fund attempts to obtain prices from one or more third party pricing vendors or brokers to value its investments. When current market prices, quotations or currency exchange rates are not readily available or reliable, investments will be fair valued in good faith by the Committee, in accordance with procedures adopted by the Board. Factors used in determining fair value vary by investment type and may include market or investment specific events. The frequency with which these procedures are used cannot be predicted and they may be utilized to a significant extent. The Committee oversees the Fund's valuation policies and procedures and reports to the Board on the Committee's activities and fair value determinations. The Board monitors the appropriateness of the procedures used in valuing the Fund's investments and ratifies the fair value determinations of the Committee.

The Fund categorizes the inputs to valuation techniques used to value its investments into a disclosure hierarchy consisting of three levels as shown below:

Level 1 – quoted prices in active markets for identical investments
Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, etc.)
Level 3 – unobservable inputs (including the Fund's own assumptions based on the best information available)

Valuation techniques used to value the Fund's investments by major category are as follows:

Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of December 31, 2016 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. Income and capital gain distributions from Fidelity Central Funds, if any, are recorded on the ex-dividend date. Certain distributions received by the Fund represent a return of capital or capital gain. The Fund determines the components of these distributions subsequent to the ex-dividend date, based upon receipt of tax filings or other correspondence relating to the underlying investment. These distributions are recorded as a reduction of cost of investments and/or as a realized gain. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.

Book-tax differences are primarily due to foreign currency transactions, passive foreign investment companies (PFIC), partnerships, equity-debt classifications 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	$1,760,627,227
Gross unrealized depreciation	(417,563,846)
Net unrealized appreciation (depreciation) on securities	$1,343,063,381
Tax Cost	$6,939,514,421

The tax-based components of distributable earnings as of period end were as follows:

Undistributed ordinary income	$10,264,470
Undistributed long-term capital gain	$336,526,885
Net unrealized appreciation (depreciation) on securities and other investments	$1,342,021,280

The tax character of distributions paid was as follows:

	December 31, 2016	December 31, 2015
Ordinary Income	$28,421,672	$ 30,795,763
Long-term Capital Gains	494,682,420	1,068,353,375
Total	$523,104,092	$ 1,099,149,138

4. Purchases and Sales of Investments.

Purchases and sales of securities, other than short-term securities, aggregated $2,314,327,384 and $3,015,115,482, respectively.

5. Fees and Other Transactions with Affiliates.

Management Fee. Fidelity Management & Research Company (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .25% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by the investment adviser, including any mutual funds previously advised by the investment adviser that are currently advised by Fidelity SelectCo, LLC, an affiliate of the investment adviser. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annual management fee rate was .55% of the Fund'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	$545,944
Service Class 2	13,774,124
	$14,320,068

Initial Class	$890,707
Service Class	360,323
Service Class 2	3,636,369
Investor Class	764,574
	$5,651,973

Borrower or Lender	Average Loan Balance	Weighted Average Interest Rate	Interest Expense
Borrower	$16,676,526	.60%	$5,275

6. Committed Line of Credit.

The Fund participates with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $20,256 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, the Fund did not borrow on this line of credit.

7. 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. The Fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund may apply collateral received from the borrower against the obligation. The Fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. 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 $4,243,085. 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 $759,689, including $74,538 from securities loaned to FCM.

8. Expense Reductions.

Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset certain expenses. This amount totaled $174,047 for the period. In addition, through arrangements with the Fund's custodian, credits realized as a result of certain uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's expenses by $367.

In addition, during the period the investment adviser reimbursed and/or waived a portion of fund-level operating expenses in the amount of $58,623.

9. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

	Year ended December 31, 2016	Year ended December 31, 2015
From net investment income
Initial Class	$6,509,193	$6,856,691
Service Class	2,306,610	2,239,466
Service Class 2	17,226,607	13,204,712
Investor Class	2,379,262	2,196,855
Total	$28,421,672	$24,497,724
From net realized gain
Initial Class	$83,439,215	$173,008,924
Service Class	33,992,166	73,895,308
Service Class 2	345,471,270	768,328,236
Investor Class	31,779,769	59,418,946
Total	$494,682,420	$1,074,651,414

10. Share Transactions.

Transactions for each class of shares were as follows:

	Shares	Shares	Dollars	Dollars
	Year ended December 31, 2016	Year ended December 31, 2015	Year ended December 31, 2016	Year ended December 31, 2015
Initial Class
Shares sold	5,842,420	4,347,457	$184,976,667	$150,311,214
Issued in exchange for the shares of VIP Growth Strategies Portfolio	–	360,771	–	12,767,680
Reinvestment of distributions	3,268,042	5,354,795	89,948,408	179,865,615
Shares redeemed	(11,423,991)	(6,893,278)	(368,303,468)	(237,965,645)
Net increase (decrease)	(2,313,529)	3,169,745	$(93,378,393)	$104,978,864
Service Class
Shares sold	1,242,725	1,507,053	$38,448,209	$51,724,215
Issued in exchange for the shares of VIP Growth Strategies Portfolio	–	2,365	–	83,060
Reinvestment of distributions	1,331,661	2,283,479	36,298,776	76,134,774
Shares redeemed	(3,242,354)	(2,939,119)	(100,590,205)	(101,018,159)
Net increase (decrease)	(667,968)	853,778	$(25,843,220)	$26,923,890
Service Class 2
Shares sold	16,603,885	8,545,475	$504,881,832	$287,200,999
Issued in exchange for the shares of VIP Growth Strategies Portfolio	–	219,579	–	7,566,682
Reinvestment of distributions	13,620,413	23,864,809	362,697,877	781,532,948
Shares redeemed	(31,941,188)	(31,525,458)	(975,475,144)	(1,056,122,491)
Net increase (decrease)	(1,716,890)	1,104,405	$(107,895,435)	$20,178,138
Investor Class
Shares sold	958,357	1,067,585	$30,135,517	$36,914,564
Issued in exchange for the shares of VIP Growth Strategies Portfolio	–	1,289,847	–	45,428,423
Reinvestment of distributions	1,247,783	1,843,002	34,159,031	61,615,801
Shares redeemed	(1,694,440)	(1,513,170)	(52,482,297)	(51,788,379)
Net increase (decrease)	511,700	2,687,264	$11,812,251	$92,170,409

11. Other.

At the end of the period, the investment adviser or its affiliates were the owners of record of 11% of the total outstanding shares of the Fund.

12. Prior Fiscal Year Merger Information.

On April 24, 2015, the Fund acquired all of the assets and assumed all of the liabilities of VIP Growth Strategies Portfolio ("Target Fund") pursuant to an Agreement and Plan of Reorganization approved by the Board of Trustees ("The Board"). The acquisition was accomplished by an exchange of shares of each class of the Fund for corresponding shares then outstanding of the Target Fund at their respective net asset value on the acquisition date. The reorganization provides shareholders of the Target Fund access to larger portfolio with a similar investment objective and lower expenses. The reorganization qualified as a tax-free reorganization for federal income tax purposes with no gain or loss recognized to the funds or their shareholders. The Target Fund's net assets of $65,845,845, including securities of $65,918,670 and unrealized appreciation of $3,990,039 were combined with the Fund's net assets of $9,322,211,254 for total net assets after the acquisition of $9,388,057,099.

Net Investment income (loss)	$26,894,205
Total net realized gain (loss)	515,198,842
Total change in net unrealized appreciation (depreciation)	(653,262,046)
Net increase (decrease) in net assets resulting from operations	$(111,168,999)

Report of Independent Registered Public Accounting Firm

To the Trustees of Variable Insurance Products Fund III and Shareholders of VIP Mid Cap Portfolio:

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of VIP Mid Cap Portfolio (a fund of Variable Insurance Products Fund III) (the "Fund") as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Boston, Massachusetts
February 14, 2017

Trustees and Officers

The fund’s Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.

Interested Trustees*:

Correspondence intended for a Trustee who is an interested person may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.

Name, Year of Birth; Principal Occupations and Other Relevant Experience+

James C. Curvey (1935)

Year of Election or Appointment: 2007

Trustee

Chairman of the Board of Trustees

Charles S. Morrison (1960)

Year of Election or Appointment: 2014

Trustee

* Determined to be an “Interested Trustee” by virtue of, among other things, his or her affiliation with the trust or various entities under common control with FMR.

Independent Trustees:

Correspondence intended for an Independent Trustee may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Year of Birth; Principal Occupations and Other Relevant Experience+

Dennis J. Dirks (1948)

Year of Election or Appointment: 2005

Trustee

Alan J. Lacy (1953)

Year of Election or Appointment: 2008

Trustee

Ned C. Lautenbach (1944)

Year of Election or Appointment: 2000

Trustee

Chairman of the Independent Trustees

Joseph Mauriello (1944)

Year of Election or Appointment: 2008

Trustee

Robert W. Selander (1950)

Year of Election or Appointment: 2011

Trustee

Cornelia M. Small (1944)

Year of Election or Appointment: 2005

Trustee

William S. Stavropoulos (1939)

Year of Election or Appointment: 2002

Trustee

Vice Chairman of the Independent Trustees

David M. Thomas (1949)

Year of Election or Appointment: 2008

Trustee

Advisory Board Members and Officers:

Correspondence intended for an officer or Peter S. Lynch may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210. Officers appear below in alphabetical order.

Name, Year of Birth; Principal Occupation

Peter S. Lynch (1944)

Year of Election or Appointment: 2003

Member of the Advisory Board

Marc R. Bryant (1966)

Year of Election or Appointment: 2015

Secretary and Chief Legal Officer (CLO)

Jeffrey S. Christian (1961)

Year of Election or Appointment: 2016

Assistant Treasurer

Mr. Christian also serves as Assistant Treasurer of other funds. Mr. Christian is an employee of Fidelity Investments (2003-present).

William C. Coffey (1969)

Year of Election or Appointment: 2009

Assistant Secretary

Jonathan Davis (1968)

Year of Election or Appointment: 2010

Assistant Treasurer

Adrien E. Deberghes (1967)

Year of Election or Appointment: 2016

Assistant Treasurer

Stephanie J. Dorsey (1969)

Year of Election or Appointment: 2010

Assistant Treasurer

Howard J. Galligan III (1966)

Year of Election or Appointment: 2014

Chief Financial Officer

Scott C. Goebel (1968)

Year of Election or Appointment: 2015

Vice President

Brian B. Hogan (1964)

Year of Election or Appointment: 2009

Vice President

Colm A. Hogan (1973)

Year of Election or Appointment: 2016

Deputy Treasurer

Mr. Hogan also serves as an officer of other funds. Mr. Hogan is an employee of Fidelity Investments (2005-present). Mr. Colm A. Hogan is not related to Mr. Brian B. Hogan.

Chris Maher (1972)

Year of Election or Appointment: 2013

Assistant Treasurer

John F. Papandrea (1972)

Year of Election or Appointment: 2016

Anti-Money Laundering (AML) Officer

Melissa M. Reilly (1971)

Year of Election or Appointment: 2014

Vice President of certain Equity Funds

Ms. Reilly also serves as Vice President of other funds. Ms. Reilly is an employee of Fidelity Investments (2004-present).

Kenneth B. Robins (1969)

Year of Election or Appointment: 2016

Chief Compliance Officer

Stacie M. Smith (1974)

Year of Election or Appointment: 2016

President and Treasurer

Marc L. Spector (1972)

Year of Election or Appointment: 2016

Assistant Treasurer

Renee Stagnone (1975)

Year of Election or Appointment: 2016

Assistant Treasurer

Shareholder Expense Example

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2016 to December 31, 2016).

Actual Expenses

Hypothetical Example for Comparison Purposes

	Annualized Expense Ratio-^A	Beginning Account Value July 1, 2016	Ending Account Value December 31, 2016	Expenses Paid During Period-^B July 1, 2016 to December 31, 2016
Initial Class	.63%
Actual		$1,000.00	$1,109.30	$3.34
Hypothetical-^C		$1,000.00	$1,021.97	$3.20
Service Class	.73%
Actual		$1,000.00	$1,108.80	$3.87
Hypothetical-^C		$1,000.00	$1,021.47	$3.71
Service Class 2	.88%
Actual		$1,000.00	$1,107.70	$4.66
Hypothetical-^C		$1,000.00	$1,020.71	$4.47
Investor Class	.71%
Actual		$1,000.00	$1,108.60	$3.76
Hypothetical-^C		$1,000.00	$1,021.57	$3.61

^A Annualized expense ratio reflects expenses net of applicable fee waivers.

^B Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

^C 5% return per year before expenses

Distributions (Unaudited)

The Board of Trustees of VIP Mid Cap Portfolio voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income:

	Pay Date	Record Date	Dividends	Capital Gains
VIP Mid Cap Portfolio
Initial Class	02/10/17	02/10/17	$0.050	$1.377
Investor Class	02/10/17	02/10/17	$0.048	$1.377
Service Class	02/10/17	02/10/17	$0.047	$1.377
Service Class 2	02/10/17	02/10/17	$0.042	$1.377

The fund hereby designates as a capital gain dividend with respect to the taxable year ended December 31, 2016, $336,613,759, or, if subsequently determined to be different, the net capital gain of such year.

Initial Class, Investor Class, Service Class, and Service Class 2 designate 100% of the dividends distributed in December 2016, as qualifying for the dividends–received deduction for corporate shareholders.

Board Approval of Investment Advisory Contracts and Management Fees

VIP Mid Cap Portfolio

Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.

Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in basis points (BP) in the chart below. The group of Broadridge funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates, regardless of whether their management fee structures also are comparable. Funds with comparable investment mandates offer exposure to similar types of securities. Funds with comparable management fee structures have similar management fee contractual arrangements (e.g., flat rate charged for advisory services, all-inclusive fee rate, etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and considered by the Board.

VIP Mid Cap Portfolio

The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for 2015.

Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.

The Board noted that the total expense ratio of each class ranked below the competitive median for 2015.

The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.

Fidelity Investments

VIPMID-ANN-0217
1.735273.117

Fidelity® Variable Insurance Products:

Value Strategies Portfolio

Annual Report

December 31, 2016

Contents

Performance
Management's Discussion of Fund Performance
Investment Summary
Investments
Financial Statements
Notes to Financial Statements
Report of Independent Registered Public Accounting Firm
Trustees and Officers
Shareholder Expense Example
Distributions
Board Approval of Investment Advisory Contracts and Management Fees

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.

NOT FDIC INSURED •MAY LOSE VALUE •NO BANK GUARANTEE

Neither the Fund nor Fidelity Distributors Corporation is a bank.

Performance: The Bottom Line

Average Annual Total Returns

For the periods ended December 31, 2016	Past 1 year	Past 5 years	Past 10 years
Initial Class	9.62%	13.53%	5.89%
Service Class	9.48%	13.43%	5.79%
Service Class 2	9.27%	13.26%	5.62%
Investor Class	9.53%	13.45%	5.79%

$10,000 Over 10 Years

Let's say hypothetically that $10,000 was invested in VIP Value Strategies Portfolio - Initial Class on December 31, 2006.

The chart shows how the value of your investment would have changed, and also shows how the Russell Midcap® Value Index performed over the same period.

	Period Ending Values
	$17,726	VIP Value Strategies Portfolio - Initial Class
	$20,776	Russell Midcap® Value Index

Management's Discussion of Fund Performance

Comments from Thomas Soviero, Portfolio Manager until September 14, 2016, and his successor, Portfolio Manager Matthew Friedman: For the year, the fund’s share classes gained about 9% to 10%, significantly lagging the 20% return of the benchmark Russell Midcap Value Index. Weak security selection accounted for most of the fund’s underperformance of the benchmark. Industry positioning also hurt, but to a much lesser extent. Individual detractors included Netherlands-based LyondellBasell Industries, which was pressured by lower global oil prices and higher natural gas prices that significantly reduced the cost advantage it had from using natural-gas liquids such as ethane in the production of ethylene, its main product. Shares of U.K.-based automotive parts company Delphi Automotive declined due to concern about peaking U.S. auto sales and weak economic growth in Europe. In financials, Bank of America and Citigroup were hurt by continued low interest rates, increased regulation and sluggish economic growth. All four stocks were non-benchmark positions. By contrast, timely positioning in consumer finance company Synchrony Financial helped relative performance, as better-than-expected revenue, write-offs that were not as sizable as feared and a post-election rally in financials lifted the stock. In addition, shares of medical device company St. Jude Medical rose significantly following a buyout offer last April. Bank of America, Citigroup and St. Jude Medical were not held at period end.

Investment Summary (Unaudited)

Top Ten Stocks as of December 31, 2016

	% of fund's net assets	% of fund's net assets 6 months ago
Edison International	3.2	0.0
Sempra Energy	3.0	1.7
Synchrony Financial	2.8	0.0
U.S. Bancorp	2.8	3.3
American Tower Corp.	2.7	0.0
Extra Space Storage, Inc.	2.4	0.0
American Electric Power Co., Inc.	2.1	0.0
Wells Fargo & Co.	2.0	1.4
Essex Property Trust, Inc.	2.0	0.0
E.I. du Pont de Nemours & Co.	1.7	0.0
	24.7

Top Five Market Sectors as of December 31, 2016

	% of fund's net assets	% of fund's net assets 6 months ago
Financials	18.7	18.9
Consumer Discretionary	12.6	17.5
Information Technology	11.6	3.9
Real Estate	11.5	0.0
Industrials	10.1	10.5

Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications.

Asset Allocation (% of fund's net assets)

As of December 31, 2016^*
	Stocks	99.5%
	Bonds	0.6%
	Short-Term Investments and Net Other Assets (Liabilities)^**	(0.1)%

* Foreign investments - 15.9%

** Not included in the pie chart

As of June 30, 2016^*
	Stocks	93.8%
	Bonds	3.6%
	Short-Term Investments and Net Other Assets (Liabilities)	2.6%

* Foreign investments - 17.6%

Percentages shown as 0.0% may reflect amounts less than 0.05%.

Investments December 31, 2016

Showing Percentage of Net Assets

Common Stocks - 99.5%
	Shares	Value
CONSUMER DISCRETIONARY - 12.6%
Auto Components - 1.5%
Delphi Automotive PLC	90,231	$6,077,058
Diversified Consumer Services - 3.4%
H&R Block, Inc.	163,800	3,765,762
Houghton Mifflin Harcourt Co. (a)	355,010	3,851,859
Service Corp. International	237,400	6,742,160
		14,359,781
Hotels, Restaurants & Leisure - 1.0%
Wyndham Worldwide Corp.	56,233	4,294,514
Household Durables - 0.7%
Tupperware Brands Corp.	58,661	3,086,742
Internet & Direct Marketing Retail - 1.2%
Liberty Interactive Corp. QVC Group Series A (a)	254,500	5,084,910
Media - 4.3%
DISH Network Corp. Class A (a)	77,400	4,483,782
Liberty Broadband Corp. Class C (a)	40,800	3,022,056
Sinclair Broadcast Group, Inc. Class A	183,300	6,113,055
Twenty-First Century Fox, Inc. Class A	157,300	4,410,692
		18,029,585
Specialty Retail - 0.5%
GameStop Corp. Class A	88,687	2,240,234

TOTAL CONSUMER DISCRETIONARY		53,172,824

CONSUMER STAPLES - 2.8%
Beverages - 0.9%
Cott Corp.	351,461	3,978,853
Food & Staples Retailing - 1.2%
Whole Foods Market, Inc.	163,300	5,023,108
Food Products - 0.7%
Darling International, Inc. (a)	211,663	2,732,569

TOTAL CONSUMER STAPLES		11,734,530

ENERGY - 7.2%
Energy Equipment & Services - 1.5%
Baker Hughes, Inc.	94,800	6,159,156
Oil, Gas & Consumable Fuels - 5.7%
Anadarko Petroleum Corp.	59,900	4,176,827
Boardwalk Pipeline Partners, LP	223,823	3,885,567
ConocoPhillips Co.	128,000	6,417,920
GasLog Ltd. (b)	211,078	3,398,356
Teekay Corp.	455,792	3,660,010
Teekay Offshore Partners LP	501,400	2,537,084
		24,075,764

TOTAL ENERGY		30,234,920

FINANCIALS - 18.7%
Banks - 4.8%
U.S. Bancorp	226,716	11,646,401
Wells Fargo & Co.	155,430	8,565,747
		20,212,148
Capital Markets - 4.4%
Apollo Global Management LLC Class A	229,713	4,447,244
Legg Mason, Inc.	150,792	4,510,189
NorthStar Asset Management Group, Inc.	447,800	6,681,176
The Blackstone Group LP	114,800	3,103,044
		18,741,653
Consumer Finance - 5.4%
Discover Financial Services	94,300	6,798,087
OneMain Holdings, Inc. (a)	178,000	3,940,920
Synchrony Financial	326,400	11,838,528
		22,577,535
Insurance - 4.1%
Brown & Brown, Inc.	111,000	4,979,460
Chubb Ltd.	40,500	5,350,860
FNF Group	206,400	7,009,344
		17,339,664

TOTAL FINANCIALS		78,871,000

HEALTH CARE - 7.8%
Biotechnology - 2.1%
Amgen, Inc.	20,200	2,953,442
United Therapeutics Corp. (a)	39,900	5,722,857
		8,676,299
Health Care Providers & Services - 2.8%
Cigna Corp.	32,300	4,308,497
Envision Healthcare Corp. (a)	64,161	4,060,750
Laboratory Corp. of America Holdings (a)	27,700	3,556,126
		11,925,373
Pharmaceuticals - 2.9%
Jazz Pharmaceuticals PLC (a)	63,200	6,890,696
Teva Pharmaceutical Industries Ltd. sponsored ADR	107,000	3,878,750
Valeant Pharmaceuticals International, Inc. (Canada) (a)	91,500	1,328,580
		12,098,026

TOTAL HEALTH CARE		32,699,698

INDUSTRIALS - 10.1%
Aerospace & Defense - 2.1%
General Dynamics Corp.	30,200	5,214,332
KLX, Inc. (a)	81,200	3,662,932
		8,877,264
Airlines - 1.3%
Delta Air Lines, Inc.	108,300	5,327,277
Construction & Engineering - 1.1%
AECOM (a)	127,100	4,621,356
Machinery - 2.7%
Allison Transmission Holdings, Inc.	188,600	6,353,934
Ingersoll-Rand PLC	68,900	5,170,256
		11,524,190
Trading Companies & Distributors - 2.9%
AerCap Holdings NV (a)	167,600	6,973,836
Univar, Inc. (a)	179,800	5,100,926
		12,074,762

TOTAL INDUSTRIALS		42,424,849

INFORMATION TECHNOLOGY - 11.6%
Communications Equipment - 1.3%
CommScope Holding Co., Inc. (a)	153,500	5,710,200
Electronic Equipment & Components - 2.2%
Flextronics International Ltd. (a)	294,300	4,229,091
TE Connectivity Ltd.	72,700	5,036,656
		9,265,747
IT Services - 4.2%
Cognizant Technology Solutions Corp. Class A (a)	54,500	3,053,635
Computer Sciences Corp.	112,500	6,684,750
First Data Corp. Class A (a)	351,600	4,989,204
Total System Services, Inc.	59,700	2,927,091
		17,654,680
Semiconductors & Semiconductor Equipment - 3.9%
Cree, Inc. (a)	134,215	3,541,934
Marvell Technology Group Ltd.	186,600	2,588,142
Qorvo, Inc. (a)	77,100	4,065,483
Qualcomm, Inc.	93,800	6,115,760
		16,311,319

TOTAL INFORMATION TECHNOLOGY		48,941,946

MATERIALS - 8.9%
Chemicals - 7.3%
CF Industries Holdings, Inc.	173,000	5,446,040
E.I. du Pont de Nemours & Co.	100,200	7,354,680
Eastman Chemical Co.	93,100	7,002,051
LyondellBasell Industries NV Class A	62,108	5,327,624
Westlake Chemical Corp.	100,800	5,643,792
		30,774,187
Containers & Packaging - 0.9%
Ball Corp.	50,000	3,753,500
WestRock Co.	18	914
		3,754,414
Metals & Mining - 0.7%
Compass Minerals International, Inc.	36,798	2,883,123

TOTAL MATERIALS		37,411,724

REAL ESTATE - 11.5%
Equity Real Estate Investment Trusts (REITs) - 9.8%
American Tower Corp.	107,900	11,402,872
Equity Lifestyle Properties, Inc.	61,000	4,398,100
Essex Property Trust, Inc.	36,700	8,532,750
Extra Space Storage, Inc.	129,400	9,994,856
Outfront Media, Inc.	275,200	6,844,224
		41,172,802
Real Estate Management & Development - 1.7%
CBRE Group, Inc. (a)	232,500	7,321,425

TOTAL REAL ESTATE		48,494,227

UTILITIES - 8.3%
Electric Utilities - 5.3%
American Electric Power Co., Inc.	139,700	8,795,512
Edison International	187,600	13,505,323
		22,300,835
Multi-Utilities - 3.0%
Sempra Energy	125,161	12,596,203

TOTAL UTILITIES		34,897,038

TOTAL COMMON STOCKS
(Cost $370,395,675)		418,882,756
	Principal Amount	Value

Convertible Bonds - 0.6%
ENERGY - 0.6%
Oil, Gas & Consumable Fuels - 0.6%
Cobalt International Energy, Inc. 2.625% 12/1/19 (Cost $3,133,787)	6,240,000	2,457,936
	Shares	Value

Money Market Funds - 0.2%
Fidelity Securities Lending Cash Central Fund 0.65% (c)(d)
(Cost $719,780)	719,713	719,785
TOTAL INVESTMENT PORTFOLIO - 100.3%
(Cost $374,249,242)		422,060,477
NET OTHER ASSETS (LIABILITIES) - (0.3)%		(1,312,636)
NET ASSETS - 100%		$420,747,841

Legend

(a) Non-income producing

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

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

Affiliated Central Funds

Information regarding fiscal year to date income earned by the Fund from investments in Fidelity Central Funds is as follows:

Fund	Income earned
Fidelity Cash Central Fund	$47,601
Fidelity Securities Lending Cash Central Fund	85,887
Total	$133,488

Investment Valuation

	Valuation Inputs at Reporting Date:
Description	Total	Level 1	Level 2	Level 3
Investments in Securities:
Equities:
Consumer Discretionary	$53,172,824	$53,172,824	$--	$--
Consumer Staples	11,734,530	11,734,530	--	--
Energy	30,234,920	30,234,920	--	--
Financials	78,871,000	78,871,000	--	--
Health Care	32,699,698	32,699,698	--	--
Industrials	42,424,849	42,424,849	--	--
Information Technology	48,941,946	48,941,946	--	--
Materials	37,411,724	37,411,724	--	--
Real Estate	48,494,227	48,494,227	--	--
Utilities	34,897,038	34,897,038	--	--
Corporate Bonds	2,457,936	--	2,457,936	--
Money Market Funds	719,785	719,785	--	--
Total Investments in Securities:	$422,060,477	$419,602,541	$2,457,936	$--

Other Information

Distribution of investments by country or territory of incorporation, as a percentage of Total Net Assets, is as follows (Unaudited):

United States of America	84.1%
Netherlands	3.0%
Ireland	2.9%
Switzerland	2.5%
Marshall Islands	1.5%
Bailiwick of Jersey	1.5%
Bermuda	1.4%
Canada	1.2%
Singapore	1.0%
Others (Individually Less Than 1%)	0.9%
	100.0%

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

Financial Statements

Statement of Assets and Liabilities

		December 31, 2016
Assets
Investment in securities, at value (including securities loaned of $692,300) — See accompanying schedule: Unaffiliated issuers (cost $373,529,462)	$421,340,692
Fidelity Central Funds (cost $719,780)	719,785
Total Investments (cost $374,249,242)		$422,060,477
Receivable for investments sold		8,793,127
Receivable for fund shares sold		51,704
Dividends receivable		640,867
Interest receivable		13,950
Distributions receivable from Fidelity Central Funds		1,781
Prepaid expenses		856
Other receivables		6,810
Total assets		431,569,572
Liabilities
Payable to custodian bank	$27,466
Payable for fund shares redeemed	2,284,547
Accrued management fee	197,708
Distribution and service plan fees payable	40,909
Notes payable to affiliates	7,459,000
Other affiliated payables	46,605
Other payables and accrued expenses	45,246
Collateral on Securities Loaned	720,250
Total liabilities		10,821,731
Net Assets		$420,747,841
Net Assets consist of:
Paid in capital		$287,588,640
Undistributed net investment income		1,138,711
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions		84,209,574
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies		47,810,916
Net Assets		$420,747,841
Initial Class:
Net Asset Value, offering price and redemption price per share ($93,647,676 ÷ 5,938,678 shares)		$15.77
Service Class:
Net Asset Value, offering price and redemption price per share ($21,948,533 ÷ 1,394,616 shares)		$15.74
Service Class 2:
Net Asset Value, offering price and redemption price per share ($187,875,605 ÷ 11,842,556 shares)		$15.86
Investor Class:
Net Asset Value, offering price and redemption price per share ($117,276,027 ÷ 7,474,011 shares)		$15.69

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

Statement of Operations

		Year ended December 31, 2016
Investment Income
Dividends		$8,321,029
Interest		948,827
Income from Fidelity Central Funds		133,488
Total income		9,403,344
Expenses
Management fee	$2,309,864
Transfer agent fees	379,024
Distribution and service plan fees	468,227
Accounting and security lending fees	165,820
Custodian fees and expenses	7,690
Independent trustees' fees and expenses	1,826
Audit	63,921
Legal	4,540
Interest	309
Miscellaneous	3,314
Total expenses before reductions	3,404,535
Expense reductions	(20,863)	3,383,672
Net investment income (loss)		6,019,672
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities:
Unaffiliated issuers	111,820,031
Fidelity Central Funds	2,977
Foreign currency transactions	2,366
Futures contracts	36,147
Total net realized gain (loss)		111,861,521
Change in net unrealized appreciation (depreciation) on: Investment securities	(80,134,539)
Assets and liabilities in foreign currencies	(118)
Total change in net unrealized appreciation (depreciation)		(80,134,657)
Net gain (loss)		31,726,864
Net increase (decrease) in net assets resulting from operations		$37,746,536

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

Statement of Changes in Net Assets

	Year ended December 31, 2016	Year ended December 31, 2015
Increase (Decrease) in Net Assets
Operations
Net investment income (loss)	$6,019,672	$4,868,835
Net realized gain (loss)	111,861,521	31,935,829
Change in net unrealized appreciation (depreciation)	(80,134,657)	(50,643,692)
Net increase (decrease) in net assets resulting from operations	37,746,536	(13,839,028)
Distributions to shareholders from net investment income	(4,176,551)	(4,717,088)
Distributions to shareholders from net realized gain	–	(361,806)
Total distributions	(4,176,551)	(5,078,894)
Share transactions - net increase (decrease)	(47,571,176)	(14,433,823)
Total increase (decrease) in net assets	(14,001,191)	(33,351,745)
Net Assets
Beginning of period	434,749,032	468,100,777
End of period	$420,747,841	$434,749,032
Other Information
Undistributed net investment income end of period	$1,138,711	$–
Distributions in excess of net investment income end of period	$–	$(196,500)

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

Financial Highlights — VIP Value Strategies Portfolio Initial Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$14.54	$15.19	$14.37	$11.11	$8.78
Income from Investment Operations
Net investment income (loss)^A	.23	.18	.15	.12	.07^B
Net realized and unrealized gain (loss)	1.17	(.64)	.83	3.26	2.32
Total from investment operations	1.40	(.46)	.98	3.38	2.39
Distributions from net investment income	(.17)	(.18)	(.16)	(.12)	(.06)
Distributions from net realized gain	–	(.01)	–	–	–
Total distributions	(.17)	(.19)	(.16)	(.12)	(.06)
Net asset value, end of period	$15.77	$14.54	$15.19	$14.37	$11.11
Total Return^C,^D	9.62%	(2.99)%	6.80%	30.49%	27.28%
Ratios to Average Net Assets^E,^F
Expenses before reductions	.67%	.67%	.68%	.68%	.70%
Expenses net of fee waivers, if any	.67%	.67%	.68%	.68%	.70%
Expenses net of all reductions	.67%	.67%	.68%	.68%	.68%
Net investment income (loss)	1.56%	1.19%	1.02%	.94%	.72%^B
Supplemental Data
Net assets, end of period (000 omitted)	$93,648	$98,919	$107,742	$115,594	$93,738
Portfolio turnover rate^G	108%	25%	9%	28%	27%

^A Calculated based on average shares outstanding during the period.

^B Net Investment income per share reflects a large, non-recurring dividend which amounted to $.05 per share. Excluding this non-recurring dividend, the ratio of net investment income (loss) to average net assets would have been .26%.

^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.

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

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

Financial Highlights — VIP Value Strategies Portfolio Service Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$14.52	$15.16	$14.34	$11.08	$8.76
Income from Investment Operations
Net investment income (loss)^A	.21	.17	.14	.11	.06^B
Net realized and unrealized gain (loss)	1.17	(.63)	.82	3.26	2.31
Total from investment operations	1.38	(.46)	.96	3.37	2.37
Distributions from net investment income	(.16)	(.16)	(.14)	(.11)	(.05)
Distributions from net realized gain	–	(.01)	–	–	–
Total distributions	(.16)	(.18)^C	(.14)	(.11)	(.05)
Net asset value, end of period	$15.74	$14.52	$15.16	$14.34	$11.08
Total Return^D,^E	9.48%	(3.05)%	6.69%	30.44%	27.10%
Ratios to Average Net Assets^F,^G
Expenses before reductions	.77%	.77%	.77%	.78%	.79%
Expenses net of fee waivers, if any	.77%	.77%	.77%	.78%	.79%
Expenses net of all reductions	.77%	.77%	.77%	.78%	.78%
Net investment income (loss)	1.46%	1.09%	.93%	.84%	.62%^B
Supplemental Data
Net assets, end of period (000 omitted)	$21,949	$22,970	$29,109	$33,460	$27,293
Portfolio turnover rate^H	108%	25%	9%	28%	27%

^A Calculated based on average shares outstanding during the period.

^C Total distributions of $.18 per share is comprised of distributions from net investment income of $.163 and distributions from net realized gain of $.012 per share.

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

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

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

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

Financial Highlights — VIP Value Strategies Portfolio Service Class 2

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$14.64	$15.28	$14.46	$11.18	$8.83
Income from Investment Operations
Net investment income (loss)^A	.19	.15	.12	.09	.05^B
Net realized and unrealized gain (loss)	1.17	(.64)	.82	3.28	2.34
Total from investment operations	1.36	(.49)	.94	3.37	2.39
Distributions from net investment income	(.14)	(.14)	(.12)	(.09)	(.04)
Distributions from net realized gain	–	(.01)	–	–	–
Total distributions	(.14)	(.15)	(.12)	(.09)	(.04)
Net asset value, end of period	$15.86	$14.64	$15.28	$14.46	$11.18
Total Return^C,^D	9.27%	(3.19)%	6.51%	30.18%	27.06%
Ratios to Average Net Assets^E,^F
Expenses before reductions	.92%	.92%	.92%	.93%	.94%
Expenses net of fee waivers, if any	.92%	.92%	.92%	.93%	.94%
Expenses net of all reductions	.92%	.92%	.92%	.93%	.93%
Net investment income (loss)	1.31%	.94%	.78%	.69%	.47%^B
Supplemental Data
Net assets, end of period (000 omitted)	$187,876	$186,853	$220,494	$215,780	$155,316
Portfolio turnover rate^G	108%	25%	9%	28%	27%

^A Calculated based on average shares outstanding during the period.

^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.

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

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

Financial Highlights — VIP Value Strategies Portfolio Investor Class

Years ended December 31,	2016	2015	2014	2013	2012
Selected Per–Share Data
Net asset value, beginning of period	$14.47	$15.12	$14.31	$11.06	$8.74
Income from Investment Operations
Net investment income (loss)^A	.22	.17	.14	.11	.06^B
Net realized and unrealized gain (loss)	1.16	(.64)	.82	3.25	2.32
Total from investment operations	1.38	(.47)	.96	3.36	2.38
Distributions from net investment income	(.16)	(.17)	(.15)	(.11)	(.06)
Distributions from net realized gain	–	(.01)	–	–	–
Total distributions	(.16)	(.18)	(.15)	(.11)	(.06)
Net asset value, end of period	$15.69	$14.47	$15.12	$14.31	$11.06
Total Return^C,^D	9.53%	(3.07)%	6.67%	30.45%	27.21%
Ratios to Average Net Assets^E,^F
Expenses before reductions	.75%	.75%	.76%	.76%	.78%
Expenses net of fee waivers, if any	.75%	.75%	.76%	.76%	.78%
Expenses net of all reductions	.75%	.75%	.75%	.76%	.76%
Net investment income (loss)	1.48%	1.11%	.94%	.86%	.64%^B
Supplemental Data
Net assets, end of period (000 omitted)	$117,276	$126,007	$110,755	$115,468	$77,935
Portfolio turnover rate^G	108%	25%	9%	28%	27%

^A Calculated based on average shares outstanding during the period.

^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.

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

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

Notes to Financial Statements

For the period ended December 31, 2016

1. Organization.

VIP Value Strategies Portfolio (the Fund) is a fund of Variable Insurance Products Fund III (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.

2. Investments in Fidelity Central Funds.

3. Significant Accounting Policies.

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:

Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. Corporate bonds are valued by pricing vendors who utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type or by broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.

Investments in open-end mutual funds, including the Fidelity Central Funds, are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The aggregate value of investments by input level as of December 31, 2016 is included at the end of the Fund's Schedule of Investments.

Book-tax differences are primarily due to foreign currency transactions, passive foreign investments companies (PFIC), market discount, partnerships, 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	$60,158,442
Gross unrealized depreciation	(12,094,984)
Net unrealized appreciation (depreciation) on securities	$48,063,458
Tax Cost	$373,997,019

The tax-based components of distributable earnings as of period end were as follows:

Undistributed ordinary income	$957,714
Undistributed long-term capital gain	$84,138,202
Net unrealized appreciation (depreciation) on securities and other investments	$48,063,286

The tax character of distributions paid was as follows:

	December 31, 2016	December 31, 2015
Ordinary Income	$4,176,551	$ 5,078,894

4. Derivative Instruments.

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

Equity Risk

During the period the Fund recognized net realized gain (loss) of $36,147 related to its investment in futures contracts. This amount is included in the Statement of Operations.

5. Purchases and Sales of Investments.

Purchases and sales of securities, other than short-term securities, aggregated $442,085,475 and $468,155,322, respectively.

6. Fees and Other Transactions with Affiliates.

Management Fee. Fidelity Management & Research Company (the investment adviser) and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and an annualized group fee rate that averaged .25% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by the investment adviser, including any mutual funds previously advised by the investment adviser that are currently advised by Fidelity SelectCo, LLC, an affiliate of the investment adviser. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the reporting period, the total annual management fee rate was .55% of the Fund'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	$21,767
Service Class 2	446,460
	$468,227

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

Initial Class	$63,437
Service Class	14,366
Service Class 2	117,865
Investor Class	183,356
	$379,024

Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the Fund, along with other registered investment companies having management contracts with Fidelity Management & Research Company (FMR) or other affiliated entities of FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating affiliated funds. Any open loans, including accrued interest, at period end are presented under the caption "Notes payable to affiliates" in the Fund's Statement of Assets and Liabilities. The Fund's activity in this program during the period for which loans were outstanding was as follows:

Borrower or Lender	Average Loan Balance	Weighted Average Interest Rate	Interest Expense
Borrower	$7,151,400	.83%	$309

7. Committed Line of Credit.

The Fund participates with other funds managed by the investment adviser or an affiliate in a $4.25 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro-rata portion of the line of credit, which amounted to $1,083 and is reflected in Miscellaneous expenses on the Statement of Operations. During the period, the Fund did not borrow 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. The Fund or borrower may terminate the loan at any time, and if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund may apply collateral received from the borrower against the obligation. The Fund may experience delays and costs in recovering the securities loaned. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. At period end, there were no security loans outstanding with FCM. 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 $85,887, including $3 from securities loaned to FCM.

9. Expense Reductions.

Commissions paid to certain brokers with whom the investment adviser, or its affiliates, places trades on behalf of the Fund include an amount in addition to trade execution, which may be rebated back to the Fund to offset certain expenses. This amount totaled $17,561 for the period. In addition, through arrangements with the Fund's custodian, credits realized as a result of certain uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $174.

In addition, during the period the investment adviser reimbursed and/or waived a portion of fund-level operating expenses in the amount of $3,128.

10. Distributions to Shareholders.

Distributions to shareholders of each class were as follows:

	Year ended December 31, 2016	Year ended December 31, 2015
From net investment income
Initial Class	$1,028,891	$1,221,427
Service Class	219,057	257,049
Service Class 2	1,628,779	1,762,368
Investor Class	1,299,824	1,476,244
Total	$4,176,551	$4,717,088
From net realized gain
Initial Class	$–	$83,641
Service Class	–	22,055
Service Class 2	–	166,383
Investor Class	–	89,727
Total	$–	$361,806

11. Share Transactions.

Transactions for each class of shares were as follows:

	Shares	Shares	Dollars	Dollars
	Year ended December 31, 2016	Year ended December 31, 2015	Year ended December 31, 2016	Year ended December 31, 2015
Initial Class
Shares sold	821,158	862,729	$11,762,517	$13,193,445
Reinvestment of distributions	64,548	90,714	1,028,891	1,305,068
Shares redeemed	(1,749,152)	(1,243,527)	(25,984,549)	(19,223,982)
Net increase (decrease)	(863,446)	(290,084)	$(13,193,141)	$(4,725,469)
Service Class
Shares sold	80,499	95,428	$1,151,667	$1,481,451
Reinvestment of distributions	13,768	19,408	219,057	279,104
Shares redeemed	(281,967)	(452,587)	(4,123,665)	(6,966,595)
Net increase (decrease)	(187,700)	(337,751)	$(2,752,941)	$(5,206,040)
Service Class 2
Shares sold	1,130,913	1,661,203	$16,766,591	$25,906,196
Reinvestment of distributions	101,545	132,959	1,628,779	1,928,751
Shares redeemed	(2,155,697)	(3,456,560)	(31,103,249)	(53,560,879)
Net increase (decrease)	(923,239)	(1,662,398)	$(12,707,879)	$(25,725,932)
Investor Class
Shares sold	1,395,785	2,524,010	$20,122,693	$38,825,489
Reinvestment of distributions	81,956	109,368	1,299,824	1,565,967
Shares redeemed	(2,709,498)	(1,251,474)	(40,339,732)	(19,167,838)
Net increase (decrease)	(1,231,757)	1,381,904	$(18,917,215)	$21,223,618

12. Other.

At the end of the period, the investment adviser or its affiliates were the owners of record of 34% of the total outstanding shares of the Fund and one otherwise unaffiliated shareholder was the owner of record of 31% of the total outstanding shares of the Fund.

Report of Independent Registered Public Accounting Firm

To the Trustees of Variable Insurance Products Fund III and Shareholders of VIP Value Strategies Portfolio:

We have audited the accompanying statement of assets and liabilities of VIP Value Strategies Portfolio (the Fund), a fund of Variable Insurance Products Fund III, including the schedule of investments, as of December 31, 2016, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2016, by correspondence with the custodians and brokers. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of VIP Value Strategies Portfolio as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
February 14, 2017

Trustees and Officers

The fund’s Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.

Interested Trustees*:

Correspondence intended for a Trustee who is an interested person may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210.

Name, Year of Birth; Principal Occupations and Other Relevant Experience+

James C. Curvey (1935)

Year of Election or Appointment: 2007

Trustee

Chairman of the Board of Trustees

Charles S. Morrison (1960)

Year of Election or Appointment: 2014

Trustee

* Determined to be an “Interested Trustee” by virtue of, among other things, his or her affiliation with the trust or various entities under common control with FMR.

Independent Trustees:

Correspondence intended for an Independent Trustee may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.

Name, Year of Birth; Principal Occupations and Other Relevant Experience+

Dennis J. Dirks (1948)

Year of Election or Appointment: 2005

Trustee

Alan J. Lacy (1953)

Year of Election or Appointment: 2008

Trustee

Ned C. Lautenbach (1944)

Year of Election or Appointment: 2000

Trustee

Chairman of the Independent Trustees

Joseph Mauriello (1944)

Year of Election or Appointment: 2008

Trustee

Robert W. Selander (1950)

Year of Election or Appointment: 2011

Trustee

Cornelia M. Small (1944)

Year of Election or Appointment: 2005

Trustee

William S. Stavropoulos (1939)

Year of Election or Appointment: 2002

Trustee

Vice Chairman of the Independent Trustees

David M. Thomas (1949)

Year of Election or Appointment: 2008

Trustee

Advisory Board Members and Officers:

Correspondence intended for an officer or Peter S. Lynch may be sent to Fidelity Investments, 245 Summer Street, Boston, Massachusetts 02210. Officers appear below in alphabetical order.

Name, Year of Birth; Principal Occupation

Peter S. Lynch (1944)

Year of Election or Appointment: 2003

Member of the Advisory Board

Marc R. Bryant (1966)

Year of Election or Appointment: 2015

Secretary and Chief Legal Officer (CLO)

Jeffrey S. Christian (1961)

Year of Election or Appointment: 2016

Assistant Treasurer

Mr. Christian also serves as Assistant Treasurer of other funds. Mr. Christian is an employee of Fidelity Investments (2003-present).

William C. Coffey (1969)

Year of Election or Appointment: 2009

Assistant Secretary

Jonathan Davis (1968)

Year of Election or Appointment: 2010

Assistant Treasurer

Adrien E. Deberghes (1967)

Year of Election or Appointment: 2016

Assistant Treasurer

Stephanie J. Dorsey (1969)

Year of Election or Appointment: 2010

Assistant Treasurer

Howard J. Galligan III (1966)

Year of Election or Appointment: 2014

Chief Financial Officer

Scott C. Goebel (1968)

Year of Election or Appointment: 2015

Vice President

Thomas C. Hense (1964)

Year of Election or Appointment: 2008, 2010, or 2015

Vice President

Brian B. Hogan (1964)

Year of Election or Appointment: 2009

Vice President

Colm A. Hogan (1973)

Year of Election or Appointment: 2016

Deputy Treasurer

Mr. Hogan also serves as an officer of other funds. Mr. Hogan is an employee of Fidelity Investments (2005-present). Mr. Colm A. Hogan is not related to Mr. Brian B. Hogan.

Chris Maher (1972)

Year of Election or Appointment: 2013

Assistant Treasurer

John F. Papandrea (1972)

Year of Election or Appointment: 2016

Anti-Money Laundering (AML) Officer

Kenneth B. Robins (1969)

Year of Election or Appointment: 2016

Chief Compliance Officer

Stacie M. Smith (1974)

Year of Election or Appointment: 2016

President and Treasurer

Marc L. Spector (1972)

Year of Election or Appointment: 2016

Assistant Treasurer

Renee Stagnone (1975)

Year of Election or Appointment: 2016

Assistant Treasurer

Shareholder Expense Example

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2016 to December 31, 2016).

Actual Expenses

Hypothetical Example for Comparison Purposes

	Annualized Expense Ratio-^A	Beginning Account Value July 1, 2016	Ending Account Value December 31, 2016	Expenses Paid During Period-^B July 1, 2016 to December 31, 2016
Initial Class	.67%
Actual		$1,000.00	$1,093.20	$3.53
Hypothetical-^C		$1,000.00	$1,021.77	$3.40
Service Class	.77%
Actual		$1,000.00	$1,093.30	$4.05
Hypothetical-^C		$1,000.00	$1,021.27	$3.91
Service Class 2	.92%
Actual		$1,000.00	$1,092.00	$4.84
Hypothetical-^C		$1,000.00	$1,020.51	$4.67
Investor Class	.75%
Actual		$1,000.00	$1,093.10	$3.95
Hypothetical-^C		$1,000.00	$1,021.37	$3.81

^A Annualized expense ratio reflects expenses net of applicable fee waivers.

^B Expenses are equal to each Class' annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

^C 5% return per year before expenses

Distributions (Unaudited)

The Board of Trustees of VIP Value Strategies Portfolio voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income:

	Pay Date	Record Date	Dividends	Capital Gains
Value Strategies Portfolio
Initial Class	02/10/17	02/10/17	$0.042	$3.232
Service Class	02/10/17	02/10/17	$0.040	$3.232
Service Class 2	02/10/17	02/10/17	$0.036	$3.232
Investor Class	02/10/17	02/10/17	$0.040	$3.232

The fund hereby designates as a capital gain dividend with respect to the taxable year ended December 31, 2016, $84,138,202, or, if subsequently determined to be different, the net capital gain of such year.

Board Approval of Investment Advisory Contracts and Management Fees

VIP Value Strategies Portfolio

Based on its review, the Board concluded that the nature, extent, and quality of services provided to the fund under the Advisory Contracts should continue to benefit the shareholders of the fund.

Management Fee. The Board considered two proprietary management fee comparisons for the 12-month periods shown in basis points (BP) in the chart below. The group of Broadridge funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group." The Total Mapped Group comparison focuses on a fund's standing in terms of gross management fees before expense reimbursements or caps relative to the total universe of funds with comparable investment mandates, regardless of whether their management fee structures also are comparable. Funds with comparable investment mandates offer exposure to similar types of securities. Funds with comparable management fee structures have similar management fee contractual arrangements (e.g., flat rate charged for advisory services, all-inclusive fee rate, etc.). "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a hypothetical TMG % of 20% would mean that 80% of the funds in the Total Mapped Group had higher, and 20% had lower, management fees than the fund. The fund's actual TMG %s and the number of funds in the Total Mapped Group are in the chart below. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to a subset of non-Fidelity funds within the Total Mapped Group that are similar in size and management fee structure. For example, if a fund is in the first quartile of the ASPG, the fund's management fee ranks in the least expensive or lowest 25% of funds in the ASPG. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee structures, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee rate ranked, is also included in the chart and considered by the Board.

VIP Value Strategies Portfolio

The Board noted that the fund's management fee rate ranked below the median of its Total Mapped Group and below the median of its ASPG for 2015.

Based on its review, the Board concluded that the fund's management fee is fair and reasonable in light of the services that the fund receives and the other factors considered.

The Board concluded, taking into account the analysis of the Economies of Scale Committee, that economies of scale, if any, are being appropriately shared between fund shareholders and Fidelity.

Fidelity Investments

VIPVS-ANN-0217
1.781994.114

Item 2.

Code of Ethics

As of the end of the period, December 31, 2016, Variable Insurance Products Fund III (the trust) has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.

Item 3.

Audit Committee Financial Expert

The Board of Trustees of the trust has determined that Joseph Mauriello is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mr. Mauriello is independent for purposes of Item 3 of Form N-CSR.

Item 4.

Principal Accountant Fees and Services

Fees and Services

The following table presents fees billed by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, “Deloitte Entities”) in each of the last two fiscal years for services rendered to VIP Balanced Portfolio, VIP Dynamic Capital Appreciation Portfolio, VIP Growth & Income Portfolio, VIP Growth Opportunities Portfolio and VIP Value Strategies Portfolio (the “Funds”):

Services Billed by Deloitte Entities

December 31, 2016 Fees^A


	Audit Fees	Audit-Related Fees	Tax Fees	All Other Fees
VIP Balanced Portfolio	$57,000	$-	$6,700	$1,700
VIP Dynamic Capital Appreciation Portfolio	$38,000	$-	$6,300	$1,200
VIP Growth & Income Portfolio	$48,000	$-	$6,900	$1,400
VIP Growth Opportunities Portfolio	$62,000	$-	$5,300	$1,400
VIP Value Strategies Portfolio	$45,000	$-	$7,400	$1,400

December 31, 2015 Fees^A


	Audit Fees	Audit-Related Fees	Tax Fees	All Other Fees
VIP Balanced Portfolio	$56,000	$-	$6,500	$1,200
VIP Dynamic Capital Appreciation Portfolio	$38,000	$-	$6,000	$700
VIP Growth & Income Portfolio	$47,000	$-	$6,600	$900
VIP Growth Opportunities Portfolio	$53,000	$-	$4,900	$800
VIP Value Strategies Portfolio	$44,000	$-	$7,100	$700

^AAmounts may reflect rounding.

The following table presents fees billed by PricewaterhouseCoopers LLP (“PwC”) in each of the last two fiscal years for services rendered to VIP Mid Cap Portfolio (the “Fund”):

Services Billed by PwC

December 31, 2016 Fees^A


	Audit Fees	Audit-Related Fees	Tax Fees	All Other Fees
VIP Mid Cap Portfolio	$56,000	$-	$3,500	$2,400

December 31, 2015 Fees^A


	Audit Fees	Audit-Related Fees	Tax Fees	All Other Fees
VIP Mid Cap Portfolio	$62,000	$-	$3,500	$4,800

^AAmounts may reflect rounding.

The following table presents fees billed by PwC and Deloitte Entities that were required to be approved by the Audit Committee for services that relate directly to the operations and financial reporting of the Funds and that are rendered on behalf of Fidelity Management & Research Company (“FMR”) and entities controlling, controlled by, or under common control with FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Funds (“Fund Service Providers”):

Services Billed by Deloitte Entities


	December 31, 2016^A	December 31, 2015^A
Audit-Related Fees	$35,000	$-
Tax Fees	$-	$10,000
All Other Fees	$-	$-

^A Amounts may reflect rounding.

Services Billed by PwC


	December 31, 2016^A	December 31, 2015^A
Audit-Related Fees	$6,240,000	$5,290,000
Tax Fees	$10,000	$-
All Other Fees	$-	$-

^A Amounts may reflect rounding.

“Audit-Related Fees” represent fees billed for assurance and related services that are reasonably related to the performance of the fund audit or the review of the fund's financial statements and that are not reported under Audit Fees.

“Tax Fees” represent fees billed for tax compliance, tax advice or tax planning that relate directly to the operations and financial reporting of the fund.

“All Other Fees” represent fees billed for services provided to the fund or Fund Service Provider, a significant portion of which are assurance related, that relate directly to the operations and financial reporting of the fund, excluding those services that are reported under Audit Fees, Audit-Related Fees or Tax Fees.

Assurance services must be performed by an independent public accountant.

* * *

The aggregate non-audit fees billed by PwC and Deloitte Entities for services rendered to the Funds, FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any Fund Service Provider for each of the last two fiscal years of the Funds are as follows:


Billed By	December 31, 2016^A	December 31, 2015^A
Deloitte Entities	$305,000	$70,000
PwC	$8,220,000	$5,655,000

^A Amounts may reflect rounding.

The trust's Audit Committee has considered non-audit services that were not pre-approved that were provided by PwC and Deloitte Entities to Fund Service Providers to be compatible with maintaining the independence of PwC and Deloitte Entities in their audits of the Funds, taking into account representations from PwC and Deloitte Entities, in accordance with Public Company Accounting Oversight Board rules, regarding their independence from the Funds and their related entities and FMR’s review of the appropriateness and permissibility under applicable law of such non-audit services prior to their provision to the Fund Service Providers.

Audit Committee Pre-Approval Policies and Procedures

The trust’s Audit Committee must pre-approve all audit and non-audit services provided by a fund’s independent registered public accounting firm relating to the operations or financial reporting of the fund. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.

The Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee’s consideration of non-audit services by the audit firms that audit the Fidelity funds. The policies and procedures require that any non-audit service provided by a fund audit firm to a Fidelity fund and any non-audit service provided by a fund auditor to a Fund Service Provider that relates directly to the operations and financial reporting of a Fidelity fund (“Covered Service”) are subject to approval by the Audit Committee before such service is provided.

All Covered Services must be approved in advance of provision of the service either: (i) by formal resolution of the Audit Committee, or (ii) by oral or written approval of the service by the Chair of the Audit Committee (or if the Chair is unavailable, such other member of the Audit Committee as may be designated by the Chair to act in the Chair’s absence). The approval contemplated by (ii) above is permitted where the Treasurer determines that action on such an engagement is necessary before the next meeting of the Audit Committee.

Non-audit services provided by a fund audit firm to a Fund Service Provider that do not relate directly to the operations and financial reporting of a Fidelity fund are reported to the Audit Committee on a periodic basis.

Non-Audit Services Approved Pursuant to Rule 2-01(c)(7)(i)(C) and (ii) of Regulation S-X (“De Minimis Exception”)

There were no non-audit services approved or required to be approved by the Audit Committee pursuant to the De Minimis Exception during the Funds’ last two fiscal years relating to services provided to (i) the Funds or (ii) any Fund Service Provider that relate directly to the operations and financial reporting of the Funds.

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 trust’s Board of Trustees.

Item 11.

Controls and Procedures

(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the trust’s 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)	Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH.
(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 III


By:	/s/ Stacie M. Smith
	Stacie M. Smith
	President and Treasurer

Date:	February 22, 2017

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/Stacie M. Smith
	Stacie M. Smith
	President and Treasurer

Date:	February 22, 2017


By:	/s/Howard J. Galligan III
	Howard J. Galligan III
	Chief Financial Officer

Date:	February 22, 2017