(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND
MONEY MARKET PORTFOLIO
HIGH INCOME PORTFOLIO
EQUITY-INCOME PORTFOLIO
GROWTH PORTFOLIO
OVERSEAS PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1994
CONTENTS
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MARKET ENVIRONMENT VIPF-3 A REVIEW OF WHAT HAPPENED DURING THE PAST YEAR
MONEY MARKET PORTFOLIO VIPF-4 PERFORMANCE
VIPF-5 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-6 INVESTMENTS
VIPF-9 FINANCIAL STATEMENTS
HIGH INCOME PORTFOLIO VIPF-11 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-12 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-13 INVESTMENTS
VIPF-19 FINANCIAL STATEMENTS
EQUITY-INCOME PORTFOLIO VIPF-21 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-22 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-23 INVESTMENTS
VIPF-27 FINANCIAL STATEMENTS
GROWTH PORTFOLIO VIPF-29 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-30 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-31 INVESTMENTS
VIPF-35 FINANCIAL STATEMENTS
OVERSEAS PORTFOLIO VIPF-37 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-38 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-39 INVESTMENTS
VIPF-45 FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS VIPF-47 NOTES TO THE FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS VIPF-51 THE AUDITORS' OPINION
DISTRIBUTIONS VIPF-52
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS
NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS
UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND
SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY
INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS
CORPORATION IS A BANK.
MARKET ENVIRONMENT
After producing strong results in 1993, most stock and bond markets
worldwide experienced increased volatility and lower returns in 1994.
Returns were dampened by rising interest rates and fears of inflation that
could result from expanding economies. U.S. stock and bond markets
generally lagged counterparts in the developed world, while emerging
markets struggled despite a mid-year rally.
U.S. STOCK MARKETS
The Standard & Poor's Composite Index of 500 stocks - a broad measure of
U.S. stock performance - rose 1.32% for the 12 months ended December 31,
1994, below the market's long-term average annual return. The NASDAQ
Composite Index - a measure of small stock performance - fell 3.20%. The
Dow Jones Industrial Average - an index of 30 blue-chip stocks - did
somewhat better, returning 4.97%.
There was a tug-of-war in the stock market during much of 1994, fueled by
two competing sentiments. On one side there was concern that rising
interest rates would hurt future corporate earnings. Performance was
dampened in the first part of the year, when four of six Federal Reserve
Board short-term interest rate increases occurred. The market dropped
sharply in November when the Fed raised rates again. On the other hand,
strengthening current corporate earnings and a flurry of merger and
acquisition activity helped the market rally from July through October and
again in December.
Technology was one of the best performing market sectors through the second
half of the year, although many technology stocks suffered corrections in
the second quarter of 1994. Performance was fueled by improving earnings
associated with strong growth in personal computers and related products.
Marked increases in cellular subscriptions helped technology stocks that
focus on microchips, as well as communications companies. Health care
stocks rebounded in the second half of the year, for two reasons. First,
concerns about reform abated,
as President Clinton's health care plan lost momentum. Second, stocks
benefited from a spate of merger and acquisition activity. Consumer
nondurables - such as food, beverage and tobacco companies - also showed
some strength, as investors sought traditional big-name growth stocks,
which may have steady earnings growth in the face of higher interest rates.
Cyclical stocks - those that usually rise and fall in tandem with the
economy - provided mixed returns during 1994. Although they dropped off
late in the year, industrial commodity industries such as chemicals and
paper performed well because the U.S. economic recovery boosted demand for
these products, and many companies successfully cut costs. However, concern
that rising interest rates might slow the economy - and therefore diminish
future earnings growth - hurt other cyclicals such as railroads and
automobiles. Interest rates also hurt financial stocks, notably banks,
because interest margins - the difference between the interest banks earn
through loans and the interest banks pay to depositors - narrowed.
FOREIGN STOCK MARKETS
Foreign markets showed mixed results in 1994. The Morgan Stanley EAFE
(Europe, Australia, Far East) index was up 7.78%. Many European economies
began to recover in 1994. In several nations, however, the positive effects
of that growth on corporate earnings were outweighed by the negative
effects of higher interest rates. The Morgan Stanley Europe Index rose
2.28% in 1994. Japan's stock market showed improvement, as the country's
economy appeared to emerge from a long recession. Even though Japan's
stocks gave back some of their gains over the summer, according to Morgan
Stanley Capital International Japanese stocks rose 21.4% in U.S. dollars
for the year.
Emerging markets were among the most volatile over the past year. As stock
prices relative to earnings reached high levels by early 1994, many
emerging markets began corrections that lasted several months. Over the
summer, strong earnings growth and more attractive valuations gave rise to
a rally in many emerging markets. However, as the year closed, most of
these markets were hurt by negative sentiment created by Mexico's
devaluation of the peso in December; the Morgan Stanley Emerging Markets
Free Index fell 7.32% during 1994.
U.S. BOND MARKETS
Sharply rising interest rates and ongoing inflation worries caused a severe
downturn in U.S. bond markets in 1994. Yields rose sharply - and prices
fell - on virtually all types of fixed-income investments. The Federal
Reserve Board raised the federal funds rate - the rate banks charge each
other for overnight loans - from 3.00% to 5.50% from February to November.
The Fed was hoping to head off future inflation that may be triggered by an
improving U.S. economy. However, investors heavily sold bonds at the very
threat of inflation because inflation diminishes the value of their fixed
payments. After reaching a three-decade low of 5.79% on October 30, 1993,
the yield on the benchmark 30-year Treasury bond broke the 8% barrier in
October 1994. The Lehman Brothers Aggregate Bond Index - a broad measure of
taxable bonds in the U.S. market - declined 2.92% for the year. Rising
interest rates and uncertainty over the future of the economy also hurt
high-yield issues. The Merrill Lynch High Yield Master Index fell 1.17%. In
the mortgage-backed market, the negative effects of rising interest rates
outweighed the positive effects of a decline in refinancings; the Lehman
Brothers mortgage index fell 1.61% in 1994.
FOREIGN BOND MARKETS
Most overseas bond markets were hurt by rising interest rates. The sell-off
was most pronounced in emerging markets earlier in the year, where many
investors held highly leveraged positions - investments made with borrowed
money. Although they showed some signs of strengthening in the second half
of 1994, emerging markets were sent tumbling again when Mexico devalued the
peso in December. The J.P. Morgan Emerging Markets Bond Index fell 18.68%
for the year. Developed markets fared somewhat better, benefiting from
higher yields and lower volatility. The Salomon Brothers World Government
Bond Index - which measures bond market performance in developed nations
including the U.S. - rose 2.34% for the year.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bob Litterst, Portfolio Manager of Money Market Portfolio
Q. BOB, INTEREST RATES HAVE RISEN SHARPLY DURING THE YEAR. CAN YOU BRING US
UP TO DATE?
A. Sure. The world looked a lot different in January 1994, when the period
began. The benchmark federal funds rate-what banks charge each other for
overnight loans-was 3.00%, and most market participants expected short-term
rates to remain stable for the foreseeable future. Then on February 4, the
Federal Reserve reversed three years of policies designed to stimulate
economic growth and raised the federal funds rate to 3.25%. Like most
analysts, I had anticipated the Fed would have to boost rates eventually;
nonetheless, I was surprised by the timing. As it turned out, that was only
the beginning. Six more rate increases followed. By year-end, the federal
funds rate was 5.50%.
Q. WHY WAS THE FED SO AGGRESSIVE WHEN INFLATION REMAINED
SO TAME?
A. I think the Fed's main concern all year has been an excessive rate of
economic growth that, if left alone, would lead to higher inflation. The
foundation for this growth has been the impressive strength of the labor
market. The economy added 3.5 million jobs in 1994. As job growth and
employment improve, it can create a self-perpetuating cycle, leading to
improved consumer confidence, higher incomes, increased demand, and
ultimately increased production to meet that demand. That's been the case
all year, and the upshot has been continued growth in the economy at a rate
that clearly exceeds the Fed's non-inflationary growth target of 2.5%. For
all of 1994, the country's gross domestic product grew at an annual rate of
approximately 4%.
Q. WHAT WAS YOUR STRATEGY IN THE FACE OF RISING RATES?
A. When interest rates are rising, the main thing I can do is shorten the
fund's average maturity. Then as the fund's investments turn over more
frequently, I can reinvest at higher rates and let the fund's yield rise
with the market yield. That was the basis of my strategy all year. At the
start of the period, when interest rates were stable, the fund's average
maturity was an aggressive 80 days. By late January it was down to 71 days.
In retrospect, that was still too long. Had I been able to better predict
the timing of the Fed's initial rate increase, I would have shortened the
fund's maturity sooner.
Q. DID YOU SHORTEN FURTHER AS TIME WENT ON?
A. For the most part, yes. The fund's maturity fell gradually and
significantly over the course of the year, to 39 days by the end of
December. That said, along the way I took advantage of buying opportunities
as they presented themselves, even if it meant briefly extending maturity.
That's because in a volatile environment, the markets sometimes overreact.
Whenever I could find 3- or 6-month securities whose yields already
reflected all the bad news I could imagine, I bought them.
Q. WHAT ABOUT ASSET SELECTION?
A. One thing I've done is build about a 25% stake in variable rate
instruments. Most are securities whose yields adjust to market conditions
at daily, weekly or monthly intervals. For obvious reasons, they're
especially useful in a rising-rate environment. There's one other
development worth mentioning: recently I've added more high-quality private
securities such as commercial paper and bank certificates of deposit at the
expense of U.S. Treasury and agency holdings. That's consistent with my
overall goal of locking in the highest possible yield while still
preserving the fund's stable share price.
Q. WHAT'S THE OUTLOOK FOR THE COMING YEAR?
A. The future looks pretty interesting. Most everyone agrees that the
economy is strong and likely to remain so for the near future. That
suggests the Fed may well see the need for more rate increases in the
months ahead. But this is where opinions differ. Private economists'
forecasts spread across a broad range; but the consensus expects the
federal funds rate to hit 6.50% or 7.00% by mid-year, and stop there. They
expect the Fed's actions to date will cause the economy to slow down by
mid-summer, eliminating the need for further rate increases. If, on the
other hand, you look at certain market gauges, you'll find that many
traders are assuming a 7.50% to 7.75% federal funds rate by June, possibly
reaching 8.00% by the end of the year. I'm not sure who's right, although I
will maintain a cautious stance until I see concrete evidence of a slowdown
in the labor market. The Fed has surprised us all year, and the economists
often have been wrong. In the near term, I will likely preserve the fund's
defensive posture and aim for an average maturity of around 40 days.
FUND FACTS
GOAL: income and share price stability by
investing in high quality, short-term
instruments
START DATE: April 1, 1982
SIZE: As of December 31, 1994, more than
$748 million
MANAGER: Robert Litterst, since 1992;
manager, Capital Reserves Money Market,
Fidelity Cash Reserves, Fidelity Money
Market Trust: Retirement Money Market, since
1992; joined Fidelity in 1991
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
PERFORMANCE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects both the change
in a fund's share price over a given period, and reinvestment of its
dividends (or income). Yield measures the income paid by a fund. Since a
money market fund tries to maintain a $1 share price, yield is an important
measure of performance.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
DECEMBER 31, 1994 YEAR YEARS YEARS
Money Market 4.25% 5.09% 6.31%
Consumer Price Index 2.67% 3.49% 3.58%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
Comparing the fund's performance to the Consumer Price Index (CPI) helps
show how your investment did compared to inflation. (The periods covered by
the CPI numbers are the closest available match to those covered by the
fund.)
PERFORMANCE NUMBERS ARE NET OF ALL 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, IT WOULD HAVE BEEN LOWER.
If the advisor had not reimbursed certain fund expenses during
the periods shown, the total returns would have been lower. Yield
will vary.
YIELD
Row: 1, Col: 1, Value: 3.24
Row: 1, Col: 2, Value: 2.34
Row: 2, Col: 1, Value: 3.47
Row: 2, Col: 2, Value: 2.29
Row: 3, Col: 1, Value: 4.22
Row: 3, Col: 2, Value: 2.38
Row: 4, Col: 1, Value: 4.69
Row: 4, Col: 2, Value: 2.47
Row: 5, Col: 1, Value: 5.619999999999999
Row: 5, Col: 2, Value: 2.7
Money Market
MMDA
6% -
5% -
4% -
3% -
2% -
1% -
0%
12/31/93 3/31/94 6/30/94 9/30/94 12/31/94
Money Market 3.24% 3.47% 4.22% 4.69% 5.62%
MMDA 2.34% 2.29% 2.38% 2.47% 2.70%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods,
expressed as annual percentage rates. A yield that assumes income earned is
reinvested or compounded is called an effective yield. The chart above
shows the fund's current seven-day yield at quarterly intervals over the
past year. This is compared to similar yields for the average bank money
market deposit account (MMDA). The MMDA average is supplied by BANK RATE
MONITOR.(Trademark)
COMPARING PERFORMANCE
There are some important differences between
a bank money market deposit account (MMDA)
and a money market fund. First, the U.S.
government neither insures nor guarantees a
money market fund. In fact, there is no
assurance that a money fund will maintain a $1
share price. Second, a money market fund
returns to its shareholders income earned by the
fund's investments after expenses. This is in
contrast to banks, which set their MMDA rates
periodically based on current interest rates,
competitors' rates, and internal criteria.
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
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DECEMBER 31, 1994
ASSETS
Investment in securities, at value (including repurchase agreements of $85,895,000) (cost $592,148,678) - $ 558,734,266
See accompanying schedule
Cash 480,460
Receivable for investments sold 29,938,603
Receivable for fund shares sold 9,806,779
Dividends receivable 167,080
Interest receivable 7,532,893
Other receivables 9,498
TOTAL ASSETS 606,669,579
LIABILITIES
Payable for investments purchased $ 36,267,849
Payable for fund shares redeemed 608,457
Accrued management fee 264,267
Other payables and accrued expenses 112,250
TOTAL LIABILITIES 37,252,823
NET ASSETS $ 569,416,756
Net Assets consist of:
Paid in capital $ 560,920,581
Undistributed net investment income 42,834,969
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (920,568
)
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies (33,418,226
)
NET ASSETS, for 52,985,957 shares outstanding $ 569,416,756
NET ASSET VALUE, offering price and redemption price per share ($569,416,756 (divided by) 52,985,957 shares) $10.75
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STATEMENT OF OPERATIONS
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YEAR ENDED DECEMBER 31, 1994
INVESTMENT INCOME $ 2,557,972
Dividends
Interest 44,027,810
TOTAL INCOME 46,585,782
EXPENSES
Management fee $ 2,999,205
Transfer agent fees 163,055
Accounting fees and expenses 197,109
Non-interested trustees' compensation 2,971
Custodian fees and expenses 32,795
Registration fees 39,558
Audit 36,639
Legal 7,402
Interest 11,576
Miscellaneous 4,116
TOTAL EXPENSES 3,494,426
Net investment income 43,091,356
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (685,389
)
Foreign currency transactions (40,686 (726,075
) )
Change in net unrealized appreciation (depreciation) on:
Investment securities (49,789,424
)
Assets and liabilities in foreign currencies (3,814 (49,793,238
) )
NET GAIN (LOSS) (50,519,313
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (7,427,957
)
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STATEMENT OF CHANGES IN NET ASSETS
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YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 43,091,356 $ 29,828,034
Net investment income
Net realized gain (loss) (726,075 16,098,896
)
Change in net unrealized appreciation (depreciation) (49,793,238 14,925,422
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (7,427,957 60,852,352
)
Distributions to shareholders: (30,631,598 (16,615,684
From net investment income ) )
In excess of net investment income - (748,060
)
From net realized gain (15,525,605 (1,255,210
) )
TOTAL DISTRIBUTIONS (46,157,203 (18,618,954
) )
Share transactions 498,543,147 445,327,008
Net proceeds from sales of shares
Reinvestment of distributions 46,157,203 18,618,954
Cost of shares redeemed (385,629,739 (242,839,207
) )
Net increase (decrease) in net assets resulting from share transactions 159,070,611 221,106,755
TOTAL INCREASE (DECREASE) IN NET ASSETS 105,485,451 263,340,153
NET ASSETS
Beginning of period 463,931,305 200,591,152
End of period (including undistributed net investment income of $42,834,969 and $29,661,902,
respectively) $ 569,416,756 $ 463,931,305
OTHER INFORMATION
Shares
Sold 45,102,882 40,016,073
Issued in reinvestment of distributions 4,073,892 1,809,421
Redeemed (34,899,979 (21,658,432
) )
Net increase (decrease) 14,276,795 20,167,062
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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FINANCIAL HIGHLIGHTS
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YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 11.990 $ 10.820 $ 9.550 $ 7.070 $ 8.110
Income from Investment Operations .770 .728 .790 .890 .858
Net investment income
Net realized and unrealized gain (loss) (.910) 1.332 1.290 1.590 (1.040)
Total from investment operations (.140) 2.060 2.080 2.480 (.182)
Less Distributions (.730) (.794) (.810) - (.858)
From net investment income
In excess of net investment income - (.036) - - -
From net realized gain on investments (.370) (.060) - - -
Total distributions (1.100) (.890) (.810) - (.858)
Net asset value, end of period $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070
TOTAL RETURN A (1.64)% 20.40% 23.17% 35.08% (2.23)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 569,417 $ 463,931 $ 200,591 $ 70,060 $ 29,990
Ratio of expenses to average net assets B .71% .64% .67% .97% 1.00%
Ratio of expenses to average net assets before expense
reductions B .71% .66% .67% .97% 1.12%
Ratio of net investment income to average net assets 8.75% 8.69% 10.98% 12.94% 11.36%
Portfolio turnover rate 122% 155% 160% 154% 156%
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A TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
B SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
DECEMBER 31, 1994 YEAR YEARS FUND
HIGH INCOME -1.64% 14.01% 10.88%
Merrill Lynch High Yield Master -1.17% 11.99% 11.28%
Consumer Price Index 2.67% 3.49% 3.56%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, move in the opposite direction of
interest rates. In turn, the share price, return, and
yield of a fund that invests in bonds will vary.
That means if you sell your shares during a
market downturn, you might lose money. But if
you can ride out the market's ups and downs,
you may have a gain.
(checkmark)
You can compare the fund's returns to those of the Merrill Lynch High Yield
Master Index - a broad measure of the high yield bond market. This
benchmark includes reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index (CPI) helps
show how your fund did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date).
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, September 19, 1985.
If the adviser had not reimbursed certain fund expenses during the periods
shown, the total returns would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL 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, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. The fund includes high yielding, lower-rated
securities which are subject to greater price volatility and may involve
greater risk of default. The market for these securities may be less
liquid.
$10,000 OVER LIFE OF FUND
VIP High Income (45VHigh Yield Master (J
09/30/85 10000.00 10000.00
10/31/85 10124.78 10113.02
11/30/85 10270.82 10303.28
12/31/85 10614.12 10604.47
01/31/86 10745.59 10676.44
02/28/86 11109.08 11130.10
03/31/86 11383.11 11373.65
04/30/86 11576.25 11551.26
05/31/86 11753.02 11685.98
06/30/86 11900.73 11804.36
07/31/86 11864.54 11648.95
08/31/86 11912.44 11863.93
09/30/86 12013.61 11962.11
10/31/86 12372.55 12172.57
11/30/86 12412.21 12271.68
12/31/86 12490.70 12337.95
01/31/87 12946.07 12686.81
02/28/87 13170.09 12896.26
03/31/87 13290.06 13038.85
04/30/87 12874.73 12754.50
05/31/87 12755.04 12697.03
06/30/87 13030.51 12872.55
07/31/87 13044.44 12942.59
08/31/87 13152.50 13072.28
09/30/87 12694.50 12771.51
10/31/87 12087.45 12430.27
11/30/87 12443.46 12744.62
12/31/87 12642.62 12913.85
01/31/88 13058.27 13267.23
02/29/88 13449.23 13627.23
03/31/88 13352.60 13604.70
04/30/88 13456.68 13643.99
05/31/88 13436.67 13715.20
06/30/88 13718.28 13977.43
07/31/88 13861.09 14125.13
08/31/88 13794.88 14171.55
09/30/88 13905.47 14314.39
10/31/88 14056.83 14537.41
11/30/88 14003.17 14591.87
12/31/88 14114.44 14653.61
01/31/89 14453.61 14873.37
02/28/89 14524.71 14973.32
03/31/89 14338.07 14960.00
04/30/89 14179.28 15004.15
05/31/89 14441.27 15280.37
06/30/89 14854.89 15496.85
07/31/89 14757.09 15570.24
08/31/89 14671.50 15647.15
09/30/89 14158.15 15498.19
10/31/89 13551.17 15253.06
11/30/89 13562.59 15287.24
12/31/89 13525.41 15273.41
01/31/90 13226.43 14974.91
02/28/90 13022.77 14756.83
03/31/90 12885.37 14956.31
04/30/90 12923.55 15032.30
05/31/90 13189.09 15303.83
06/30/90 13396.84 15600.32
07/31/90 13603.77 15929.99
08/31/90 13376.20 15320.16
09/30/90 13059.03 14653.87
10/31/90 12742.14 14280.96
11/30/90 13041.02 14401.94
12/31/90 13223.37 14609.46
01/31/91 13503.93 14815.98
02/28/91 14252.07 15915.67
03/31/91 14757.06 16599.98
04/30/91 15280.76 17191.13
05/31/91 15505.20 17275.07
06/30/91 15841.86 17622.59
07/31/91 16440.38 18044.84
08/31/91 16664.82 18424.11
09/30/91 17038.89 18658.77
10/31/91 17618.70 19213.23
11/30/91 17768.33 19435.16
12/31/91 17861.84 19660.94
01/31/92 18815.72 20348.35
02/29/92 19498.88 20853.71
03/31/92 20129.18 21144.68
04/30/92 20271.51 21298.58
05/31/92 20515.50 21638.31
06/30/92 20739.16 21907.16
07/31/92 21145.81 22351.02
08/31/92 21593.13 22646.93
09/30/92 21816.78 22904.97
10/31/92 21491.46 22615.68
11/30/92 21755.79 22935.97
12/31/92 21999.78 23231.29
01/31/93 22589.42 23803.34
02/28/93 22974.74 24253.90
03/31/93 23504.93 24674.39
04/30/93 23659.57 24851.50
05/31/93 24013.03 25186.03
06/30/93 24631.58 25659.22
07/31/93 24874.58 25935.02
08/31/93 25139.67 26182.25
09/30/93 25228.04 26311.44
10/31/93 25824.50 26807.08
11/30/93 26067.50 26953.70
12/31/93 26487.23 27223.21
01/31/94 27370.87 27819.81
02/28/94 27338.06 27619.74
03/31/94 26417.10 26719.70
04/30/94 26150.50 26407.45
05/31/94 26198.98 26313.37
06/30/94 26102.03 26893.29
07/31/94 26198.98 27082.30
08/31/94 26198.98 27270.47
09/30/94 26392.86 27260.08
10/31/94 26150.50 27329.36
11/30/94 25932.38 27096.87
12/30/94 26077.80 26906.19
Let's say you invested $10,000 in High Income Portfolio on September 30,
1985, shortly after the fund started. By December 31, 1994, your investment
would have grown to $26,054 - a 160.54% increase. That compares to $10,000
invested in the Merrill Lynch High Yield Master Index, which would have
grown to $26,906 over the same period - a 169.06% increase.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF DECEMBER 31, 1994
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
Revlon Worldwide Corp. 4.6
Federated Department Stores, Inc. (Del.) 4.0
First Nationwide Bank 2.4
Harrah's Jazz Co. 2.0
Robin Media Group, Inc. 1.9
TOP FIVE INDUSTRIES AS OF DECEMBER 31, 1994
% OF FUND'S
INVESTMENTS
Media & Leisure 25.2
Nondurables 9.2
Basic Industries 8.5
Retail & Wholesale 7.8
Finance 6.2
QUALITY DIVERSIFICATION AS OF DECEMBER 31, 1994
(MOODY'S RATINGS) % OF FUND'S
INVESTMENTS
Aaa, Aa, A -
Baa -
Ba 2.0
B 45.8
Caa, Ca, C 9.4
Nonrated 15.9
TABLE EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT DECEMBER 31, 1994, ACCOUNT FOR 13.6% OF THE
FUND'S INVESTMENTS.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Barry Coffman, Portfolio Manager of High Income Portfolio
Q. HOW HAS THE FUND PERFORMED, BARRY?
A. The fund held its own in a volatile market. The fund's returns were in
line with its benchmark, which returned -1.17% for the year ended December
31, 1994.
Q. WHAT FACTORS INFLUENCED PERFORMANCE?
A. High-yield securities outperformed the Treasury and investment-grade
market because high-yield securities are more sensitive to individual
credit events than to interest rates in general. The higher coupon
component and shorter average maturities also make them less volatile than
investment-grade bonds. Aside from owning some good securities, we tried to
distinguish ourselves by avoiding many high-yield credit disasters - such
as Grand Union - which occurred in our market this year.
Q. WHAT HAS YOUR INVESTMENT STRATEGY BEEN IN THIS CHALLENGING MARKET
ENVIRONMENT?
A. Well, I started the year heavily weighted in cyclicals - securities that
tend to rise and fall with the economy - and by the end of the year had
sold out of many of the cyclical names and reinvested in more defensive
consumer product-related companies. Since it's more likely than not that
we'll experience slower economic growth over the next year or so, I'm
trying to strike a balance between the conservative and more aggressive
holdings in the fund.
Q. HAVE HIGHER INTEREST RATES INFLUENCED THE NEW ISSUES MARKET?
A. Oh, sure. Early in the year, it was a real seller's market. Coupons were
near 9%, and investment bankers were scrambling to bring new issues to
market. By the time many of those deals were ready to go, however, the
market had changed dramatically. Interest rates were higher and demand for
new issues had declined. Suddenly it was a buyer's market; at year-end
coupons on new issues were 12%-14%, and we were able to buy some solid
credits at very attractive prices. An example of the kind of deal that gets
structured in a soft market like this is Harrah's Jazz. The Harrah's issue,
which will finance the only land-based casino in New Orleans, came in a
fairly weak market, particularly for casinos, and has a 14% coupon.
Q. WHAT OTHER INVESTMENTS HAVE DONE WELL IN THE PAST SIX MONTHS?
A. Our largest holding, Revlon, has performed very well. The company is
beginning to reap the benefits of two years of operational restructuring.
Retailers also have been pleased with Revlon's new product line and the
company has increased its advertising and marketing support. The bonds, at
yields of 12%-17%, remain attractive, and I added to the position between
June and December.
Q. WHAT INVESTMENTS HAVEN'T WORKED OUT AS YOU'D HOPED?
A. There are a few of them. UDC Homes is a highly-leveraged home builder in
the Sunbelt. When interest rates went up, home building bonds traded off
significantly and hurt the fund. Another is El Paso Electric, a utility in
bankruptcy. Its merger with Central and Southwest, another utility, may be
renegotiated and as a result the bonds traded down. In this case, I think
the value will be realized eventually, and I have used the opportunity to
buy more bonds. Finally, Live Entertainment, a video distributor that was
supposed to merge with its affiliated movie studio, Carolco Pictures, has
been a letdown. During the year it became clear that Carolco was having
difficulties financing its new movies, and the merger wasn't going to
happen. The securities that had traded up traded back down and the fund
suffered.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. I'm going to concentrate on companies that have a high profile in the
marketplace and strong fundamentals, like Revlon, for the time being. I'm
also trying to focus on shorter-duration securities - with four- to
seven-year maturities - to minimize volatility from interest rates. Modest
growth and inflation should provide a good backdrop for favorable results
in the high-yield market. Interest rate volatility should decline and the
economy is expected to slow in the second half. It will become important to
focus on companies whose fundamentals can improve in a slowing economy. I
intend to maintain a good balance between stable, liquid credits and more
aggressive securities of companies with improving credit profiles.
FUND FACTS
GOAL: seeks high current income by investing
primarily in high yielding, lower-rated
fixed-income securities
START DATE: September 19, 1985
SIZE: as of December 31, 1994, more than
$569 million
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 71.0%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 0.0%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp., Series C, 0%,
6/30/97 - $ 469,000 $ 146,075
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Farm Fresh, Inc. 7 1/2%,
3/1/10 B3 186,000 102,300
TOTAL CONVERTIBLE BONDS 248,375
NONCONVERTIBLE BONDS - 71.0%
AEROSPACE & DEFENSE - 0.7%
Fairchild Industries, Inc.
12 1/4%, 2/1/99 B2 4,055,000 3,973,900
BASIC INDUSTRIES - 7.9%
CHEMICALS & PLASTICS - 0.7%
American Pacific Corp.
11%, 12/15/02 (f) - 850,000 850,000
Foamex JPS Automotive LP,
Series B,14%, 7/1/04 Caa 3,100,000 1,596,500
Trans Resources, Inc.
14 1/2%, 9/1/96 B2 580,000 591,600
11 7/8%, 7/1/02 (f) B2 910,000 828,100
3,866,200
IRON & STEEL - 2.2%
Republic Engineered Steels, Inc.
9 7/8%, 12/15/01 B2 4,780,000 4,325,900
WCI Steel, Inc., Series B,
10 1/2%, 3/1/02 B1 8,350,000 8,057,750
12,383,650
METALS & MINING - 1.7%
Renco Metals, Inc.
12%, 7/15/00 B3 5,150,000 4,892,500
Sherritt Incorporated
11%, 3/31/04 B1 3,950,000 2,688,173
10 1/2%, 3/31/14 B1 1,870,000 1,802,213
9,382,886
PACKAGING & CONTAINERS - 1.6%
Crown Packaging Holdings Ltd.
0%, 11/1/03 (d) Caa 6,000,000 2,910,000
Crown Packaging Ltd.
10 3/4%, 11/1/00 B3 6,000,000 6,000,000
8,910,000
PAPER & FOREST PRODUCTS - 1.7%
Domtar Inc. 11 3/4%, 3/15/99 Ba1 3,275,000 3,348,688
Mail-Well Corp.
10 1/2%, 2/15/04 B- 1,420,000 1,235,400
Mail-Well Holdings, Inc.
0%, 2/15/06 (d) - 1,850,000 758,500
Stone Container Corp.
9 7/8%, 2/1/01 B1 4,180,000 3,950,100
9,292,688
TOTAL BASIC INDUSTRIES 43,835,424
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
CONGLOMERATES - 1.9%
Jordan Industries, Inc.:
10 3/8%, 8/1/03 B3 $ 3,405,000 $ 3,030,450
0%, 8/1/05 (d) Caa 14,645,000 7,542,175
10,572,625
CONSTRUCTION & REAL ESTATE - 4.6%
BUILDING MATERIALS - 3.6%
Adience, Inc. 11%, 6/15/02 - 745,921 540,793
Building Materials Corp., America
0%, 7/1/04 (d) B1 16,660,000 8,330,000
DAL Tile International, Inc.
secured coupon,
0%, 7/15/98 Caa 15,155,000 9,528,706
USG Corp., Series B,
9 1/4%, 9/15/01 B2 1,620,000 1,514,700
19,914,199
CONSTRUCTION - 0.2%
MDC Holdings, Inc.
8 3/4%, 12/15/05 - 320,000 262,400
UDC Homes
11 3/4%, 4/30/03 B2 1,671,000 827,145
1,089,545
REAL ESTATE - 0.8%
Bramalea Ltd. 0%, 3/22/98 - 3,595,099 2,013,255
Littlefield Co. 10%, 12/31/95 (e) - 2,750,000 2,750,000
4,763,255
TOTAL CONSTRUCTION & REAL ESTATE 25,766,999
DURABLES - 1.6%
AUTOS, TIRES, & ACCESSORIES - 1.0%
Aftermarket Technology Corp.
12%, 8/1/04 B3 5,680,000 5,850,400
TEXTILES & APPAREL - 0.6%
Hat Brands, Inc. 12 5/8%,
9/15/02:
Series B - 1,520,000 1,599,800
Series D - 680,000 715,700
Leslie Fay Cos., Inc. (b)(e):
9.53%, 1/15/00 - 676,319 473,423
10.54%, 1/15/02 - 611,353 366,812
3,155,735
TOTAL DURABLES 9,006,135
ENERGY - 2.7%
ENERGY SERVICES - 1.3%
Falcon Drilling, Inc.
9 3/4%, 1/15/01 B2 7,432,000 7,078,980
OIL & GAS - 1.4%
Deeptech International, Inc.
12%, 12/15/00 B3 7,160,000 6,533,500
Mesa Capital Corp. secured
0%, 6/30/98 (d) B3 1,730,000 1,487,800
8,021,300
TOTAL ENERGY 15,100,280
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 3.7%
CREDIT & OTHER FINANCE - 0.8%
Comdata Network, Inc.
13 1/4%, 12/15/02 B3 $ 4,210,000 $ 4,546,800
INSURANCE - 2.4%
American Annuity Group, Inc.
11 1/8%, 2/1/03 B2 2,210,000 2,176,850
American Life Holdings
11 1/4%, 9/15/04 B1 7,500,000 7,275,000
Americo Life, Inc.
9 1/4%, 6/1/05 Ba2 4,900,000 4,140,500
13,592,350
SAVINGS & LOANS - 0.3%
Chevy Chase Savings Bank
9 1/4%, 12/1/05 B2 1,980,000 1,663,200
SECURITIES INDUSTRY - 0.2%
ECM Corp. extendible 14%,
6/1/02 (f) - 739,195 813,115
TOTAL FINANCE 20,615,465
HOLDING COMPANIES - 0.2%
New Street Capital Corp.
unit 12%, 2/28/98 (e) - 1,125,720 1,080,691
INDUSTRIAL MACHINERY & EQUIPMENT - 1.7%
Rexnord Holdings, Inc.:
11 7/8%, 3/1/99 B2 2,160,000 2,073,600
11 7/8%, 3/1/99 (e) - 550,000 528,000
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 - 1,484,000 1,424,640
10 3/4%, 11/1/03 - 5,756,000 5,525,760
9,552,000
MEDIA & LEISURE - 24.4%
BROADCASTING - 8.3%
Chancellor Broadcasting
12 1/2%, 10/1/04 B3 2,220,000 2,164,500
Citicasters, Inc.
9 3/4%, 2/15/04 B- 7,812,000 7,597,170
Cooke Media Group, Inc.
11 5/8%, 4/1/99 - 350,000 329,000
Diamond Cable Communications
PLC 0%, 9/30/04 (d) B3 10,000,000 4,875,000
Helicon Group LP/Helicon Capital
Corp., 9%, 11/1/03 Caa 5,140,000 4,317,600
NWCG Holdings Corp.
0%, 6/15/99 Caa 2,970,000 1,499,850
Robin Media Group, Inc.
11 1/8%, 4/1/97 - 11,210,000 10,817,650
SCI Television, Inc. secured
11%, 6/30/05 B3 6,710,000 6,793,875
Viacom, Inc. 8%, 7/7/06 B2 9,380,000 8,043,350
46,437,995
ENTERTAINMENT - 1.3%
Carolco Pictures, Inc.
11 1/2%, 10/15/00 (b) - 5,176,079 1,552,824
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - CONTINUED
Casino America, Inc.
11 1/2%, 11/15/96 B1 $ 5,000,000 $ 4,200,000
Live Entertainment, Inc.
10%, 9/1/98 - 2,716,600 1,385,466
7,138,290
LEISURE DURABLES & TOYS - 1.6%
IHF CAP, Inc.
13%, 7/15/02 (f) B3 4,000,000 3,940,000
IHF Holdings, Inc. 0%,
11/15/04 (d)(f) Caa 10,250,000 4,971,250
8,911,250
LODGING & GAMING - 10.1%
Aztar Corp.:
11%, 10/1/02 B2 2,750,000 2,516,250
13 3/4%, 10/1/04 B2 3,500,000 3,552,500
Bally's Casino Holdings, Inc.
0%, 6/15/98 B3 10,450,000 6,531,250
Bally's Gaming International, Inc.,
10 3/8%, 7/15/98 - 3,000,000 2,805,000
Boyd Gaming Corp.
10 3/4%, 9/3/03 B2 5,000,000 4,550,000
California Hotel Finance Corp.
gtd. 11%, 12/1/02 B2 4,825,000 4,414,875
Casino Magic Financial Corp.
11 1/2%, 10/15/01 B1 2,010,000 1,256,250
Four Seasons Hotels, Inc.
9 1/8%, 7/1/00 B1 500,000 455,000
GNF Corp. Series B
10 5/8%, 4/1/03 B2 2,850,000 1,881,000
Grand Casino Resorts, Inc. gtd.
1st mtg. 12 1/2%, 2/1/00 - 1,780,000 1,682,100
HWCC-Tunica, Inc. 1st mtg.
13 1/2%, 9/30/98 (f) - 5,520,000 4,802,400
Harrah's Jazz Co.
14 1/4%, 11/15/01 B1 10,610,000 11,113,975
Host Marriott Corp.:
9 1/8%, 12/1/00 B1 1,008,000 977,760
10 1/2%, 5/1/06 B1 2,824,000 2,809,880
11%, 5/1/06 B1 544,000 544,000
Host Marriott Hospitality, Inc.
10 3/8%, 6/15/11 B1 649,000 644,133
Maritime Group Ltd.
14%, 2/15/97 (b) - 1,592,657 716,696
Motels of America, Inc.
12%, 4/15/04 B3 3,430,000 3,447,150
Resorts International Hotel
Financing, Inc. mtg.
11%, 9/15/03 - 2,079,000 1,392,930
Sun International Hotels Ltd.
10 1/2%, 12/12/95 (e) - 115,256 115,256
56,208,405
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.9%
Marvel Parent Holdings, Inc.
0%, 4/15/98 B3 $ 8,740,000 $ 5,309,550
RESTAURANTS - 2.2%
American Restaurant Group, Inc.:
12%, 9/15/98 B2 2,430,000 2,253,825
12%, 9/15/98 (New) B2 3,170,000 2,940,175
Cafeteria Operators LP
11%, 6/30/98 (b)(e) - 7,000,000 1,750,000
Flagstar Corp.:
10 7/8%, 12/1/02 B2 900,000 839,250
11 1/4%, 11/1/04 Caa 5,270,000 4,334,575
12,117,825
TOTAL MEDIA & LEISURE 136,123,315
NONDURABLES - 7.8%
BEVERAGES - 1.1%
All-American Bottling Corp.
13%, 8/15/01 Caa 1,580,000 1,422,000
Heileman Acquisition Corp.
9 5/8%, 1/31/04 B3 6,500,000 4,420,000
5,842,000
FOODS - 0.2%
McAndrews & Forbes Group, Inc.
12 1/4%, 7/1/96 - 1,360,000 1,360,000
HOUSEHOLD PRODUCTS - 6.5%
Revlon Consumer Products Corp.:
9 3/8%, 4/1/01 B2 7,750,000 6,936,250
10 1/2%, 2/15/03 B3 4,370,000 3,823,750
Revlon Worldwide Corp.
secured 0%, 3/15/98 B3 43,692,000 25,559,820
36,319,820
TOTAL NONDURABLES 43,521,820
RETAIL & WHOLESALE - 5.9%
APPAREL STORES - 0.7%
Apparel Retailers, Inc.
0%, 8/15/05 (d) Caa 5,130,000 2,770,200
Lamonts Apparel Corp.
10 1/4%, 11/1/99 (b) - 2,067,000 1,312,545
Specialty Retailers, Inc.
11%, 8/15/03 B3 110,000 100,100
4,182,845
GENERAL MERCHANDISE STORES - 2.3%
Federated Department Stores, Inc. (Del.):
Series A 10.97%, 6/30/99 5,078,529 5,078,529
Series B 11.29%, 6/30/02 7,617,294 7,674,424
12,752,953
GROCERY STORES - 0.6%
Farm Fresh Holdings Corp.:
12 1/4%, 10/1/00 B2 2,970,000 2,569,050
14 1/4%, 10/1/02 (f) - 1,215,461 625,209
3,194,259
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - 2.3%
Barrys Jewelers, Inc. 11%,
12/22/00 - $ 1,595,000 $ 1,563,100
Color Tile, Inc.
10 3/4%, 12/15/01 B2 7,530,000 6,607,575
Florists Transworld Deliveries
14%, 12/15/01 (f) B3 4,500,000 4,500,000
12,670,675
TOTAL RETAIL & WHOLESALE 32,800,732
SERVICES - 3.2%
LEASING & RENTAL - 1.4%
Acme Holdings, Inc.
11 3/4%, 6/1/00 Ca 2,930,000 937,600
GPA Delaware, Inc.:
8 1/2%, 3/3/97 - 3,500,000 3,005,625
gtd. 8 3/4%, 12/15/98 Caa 360,000 271,800
8 5/8%, 1/15/99 - 2,600,000 1,862,250
Scotsman Holdings, Inc.
pay-in-kind 11%, 3/1/04 (d) - 1,972,277 1,633,696
7,710,971
PRINTING - 1.8%
BFP Holdings Corp. Class B 0%,
4/15/04 (d) Caa 10,000,000 5,700,000
Big Flower Press:
10 3/4%, 8/1/03 B3 1,570,000 1,456,175
10 3/4%, 8/1/03 Class A B3 2,450,000 2,272,375
10 3/4%, 8/1/03 Class B B3 720,000 667,800
10,096,350
TOTAL SERVICES 17,807,321
TECHNOLOGY - 0.7%
ELECTRONICS - 0.7%
Berg Electronics, Inc.
11 3/8%, 5/1/03 B3 3,805,000 3,776,463
TRANSPORTATION - 1.8%
AIR TRANSPORTATION - 1.0%
US Air, Inc.:
9 5/8%, 9/1/03 B2 2,550,000 2,091,000
10 3/8%, 3/1/13 B2 4,790,000 3,832,000
5,923,000
TRUCKING & FREIGHT - 0.8%
Trism, Inc. 10 3/4%, 12/15/00 B2 4,620,000 4,389,000
TOTAL TRANSPORTATION 10,312,000
UTILITIES - 2.2%
CELLULAR - 1.5%
Dial Call Communications, Inc.
0%, 12/15/05 (d) Caa 2,800,000 812,000
Mobilmedia Communications, Inc.
0%, 12/1/03 (d) B3 13,770,000 7,435,800
8,247,800
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
ELECTRIC UTILITY - 0.7%
El Paso Funding Corp. lease oblig. (b):
9 3/8%, 10/1/96 Ca $ 790,000 $ 410,800
9.2%, 7/2/97 Ca 380,000 205,200
10 3/4%, 4/1/13 Ca 6,950,000 3,614,000
4,230,000
TOTAL UTILITIES 12,477,800
TOTAL NONCONVERTIBLE BONDS 396,322,970
TOTAL CORPORATE BONDS
(Cost $425,041,207) 396,571,345
COMMERCIAL MORTGAGE SECURITIES - 2.0%
ACP Mortgage LP Commercial
floater Series E, 6.633%,
2/28/28 (f) - 3,000,000 1,839,900
CBA Mortgage Corp.
Commercial Series 1993-C1
Class E, 7.158%,
12/25/03 (f) Ba2 2,122,000 1,698,926
CS First Boston Mortgage Securities
Corp. Commercial Series
1994-CFB1 Class E, 6.4769%,
1/25/28 (f) Ba2 2,990,622 2,119,604
Nomura Asset Securities Corp.
Commercial Series 1994-MDI
Class B-2, 8.4263%,
3/15/98 (f) - 3,260,000 2,449,075
Resolution Trust Corp.
Commercial Series 1994-C1
Class E, 8%, 6/25/26 - 2,585,041 1,967,055
SML, Inc. Commercial Series
1994-C1 Class B-3,
11.69%, 9/18/99 - 1,500,000 1,317,000
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $11,862,730) 11,391,560
COMMON STOCKS - 5.0%
SHARES
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.6%
Foamex International, Inc.
(warrants) (a) 3,100 31,000
Rexene Corp.(a) 290,500 3,449,688
3,480,688
PAPER & FOREST PRODUCTS - 0.0%
Mail-Well Holdings, Inc (a) 9,250 46,250
TOTAL BASIC INDUSTRIES 3,526,938
CONSTRUCTION & REAL ESTATE - 0.1%
BUILDING MATERIALS - 0.0%
Adience, Inc. (a) 84,365 42,183
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Storage Equities, Inc. 60,700 872,563
TOTAL CONSTRUCTION & REAL ESTATE 914,746
SHARES VALUE
(NOTE 1)
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc. (a)(e):
(warrants) 27,466 $ 302,121
Unit Trust 340,000 340,000
TOTAL DURABLES 642,121
FINANCE - 0.1%
SECURITIES INDUSTRY - 0.1%
ECM Corp. LP interest (f) 3,000 300,000
HOLDING COMPANIES - 0.0%
NH Holdings, Inc. (warrants) (a) 229 11
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp.:
Class A (warrants) 57,599 57,599
Class C (a) 286 286
57,885
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Terex Corp. (rights) (a) 3,150 1,575
Thermadyne Holdings Corp. (a) 65,419 744,141
745,716
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 803,601
MEDIA & LEISURE - 0.4%
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. (warrants) (a)(e):
$2.00 232,000 58,000
$2.72 221,765 55,441
113,441
LODGING & GAMING - 0.4%
Bally Gaming Intl., Inc., (warrants) (a) 90,000 630,000
Host Marriott Corp. (a) 50,000 481,250
Maritime Group Ltd. (warrants) (a) 19,112 191
Motels of America, Inc. (a) 3,000 249,000
Resorts International, Inc.(a) 1,426 1,248
Sun International Hotels Ltd. (a) 15,285 599,936
Trump Plaza Holding Associates (warrants) (a) 270 108,000
2,069,625
PUBLISHING - 0.0%
General Media, Inc. (warrants) (a) 1,310 19,650
RESTAURANTS - 0.0%
American Restaurants
Group Holdings, Inc. (a) 5,557 33,342
TOTAL MEDIA & LEISURE 2,236,058
NONDURABLES - 1.4%
BEVERAGES - 0.0%
Brown Bottling Co. (warrants) (a) 754 3,770
TOBACCO - 1.4%
RJR Nabisco Holdings Corp. (a) 1,407,000 7,738,500
TOTAL NONDURABLES 7,742,270
RETAIL & WHOLESALE - 1.9%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a) 35,870 26,903
Lamonts Apparel Corp. (warrants) (a) 66,214 1
26,904
COMMON STOCKS - CONTINUED
SHARES VALUE
(NOTE 1)
RETAIL & WHOLESALE - CONTINUED
DRUG STORES - 0.0%
Thrifty Payless Holdings, Inc. Class C (a) 19,012 $ 76,048
GENERAL MERCHANDISE STORES - 1.7%
Federated Department Stores, Inc. (Del.) (a) 493,096 9,492,098
GROCERY STORES - 0.1%
MAFCO (warrants) (a) 59 -
FF Holdings Corp. (a)(e) 33,900 67,800
Food 4 Less Holdings, Inc. (warrants) (a) 9,348 283,712
Grand Union Co. (warrants) (a) 342 3,420
354,932
RETAIL & WHOLESALE, MISCELLANEOUS - 0.1%
Barrys Jewelers, Inc. (a) 45,576 319,032
Barrys Jewelers, Inc. (warrants) (a) 5,697 2,136
Finlay Enterprises, Inc. (a) 3,750 56,250
Little Switzerland, Inc. (a) 4,000 21,000
398,418
TOTAL RETAIL & WHOLESALE 10,348,400
SERVICES - 0.3%
LEASING & RENTAL - 0.1%
Scotsman Holdings, Inc. (a) 15,281 199,938
PRINTING - 0.2%
BFP Holdings Class D (a) 160,744 1,237,729
SERVICES - 0.0%
Vestar/LPA Investment, Corp. (a) 5,177 134,602
TOTAL SERVICES 1,572,269
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Berg Electronics Holdings Corp. (a)(f) 20,853 104,265
UTILITIES - 0.0%
CELLULAR - 0.0%
Dial Page, Inc. (warrants) (a) 4,321 7,562
ELECTRIC UTILITY - 0.0%
Eastern Utilities Associates 3 66
Northeast Utilities Associates
(warrants) (a) 21,789 24,513
24,579
GAS - 0.0%
UGI Corp. (warrants) (a) 14,033 2,807
TOTAL UTILITIES 34,948
TOTAL COMMON STOCKS
(Cost $27,939,080) 28,225,627
PREFERRED STOCKS - 6.4%
CONVERTIBLE PREFERRED STOCKS - 2.2%
ENERGY - 1.0%
OIL & GAS - 1.0%
Atlantic Richfield Co. exchangeable 200,200 5,230,225
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp. 8% (a) 1,981 633,920
SHARES VALUE
(NOTE 1)
CONVERTIBLE PREFERRED STOCKS - CONTINUED
MEDIA & LEISURE - 0.4%
ENTERTAINMENT - 0.4%
Live Entertainment, Inc., Series B,
pay-in-kind (a) 581,895 $ 2,291,212
LODGING & GAMING - 0.0%
Bally Entertainment Corp., Series D,
exchangeable 5,178 130,745
TOTAL MEDIA & LEISURE 2,421,957
RETAIL & WHOLESALE - 0.0%
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Town & Country Corp. (a) 4,000 5,000
SERVICES - 0.7%
La Petite Holdings Corp.
exchangeable (a) 160,800 4,020,000
TOTAL CONVERTIBLE PREFERRED STOCKS 12,311,102
NONCONVERTIBLE PREFERRED STOCKS - 4.2%
BASIC INDUSTRIES - 0.0%
IRON & STEEL - 0.0%
Stelco, Inc. cumulative, Series B, 7.76% 7,207 127,237
CONSTRUCTION & REAL ESTATE - 0.1%
CONSTRUCTION - 0.1%
UDC Homes, Inc. prime exchangeable 242,503 666,883
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Harvard Industries, Inc.
pay-in-kind $14.25 (a) 26,230 681,980
ENERGY - 0.9%
OIL & GAS - 0.9%
Gulf Canada Resources Ltd.:
Series 1 1,890,742 4,726,855
Series 2 (e) 31,009 73,646
TOTAL ENERGY 4,800,501
FINANCE - 2.4%
SAVINGS & LOANS - 2.4%
First Nationwide Bank 11 1/2% 135,853 13,279,631
TECHNOLOGY - 0.7%
ELECTRONICS - 0.7%
Berg Electronics Holding Corp.
$3.4687 Series E (a) 147,411 3,758,981
TOTAL NONCONVERTIBLE PREFERRED STOCKS 23,315,213
TOTAL PREFERRED STOCKS
(Cost $40,219,890) 35,626,315
PURCHASED BANK DEBT - 0.2%
PRINCIPAL
AMOUNT
Leslie Fay Cos., Inc. (a):
revolving loan $ 685,856 480,099
term loan 777,600 544,320
TOTAL PURCHASED BANK DEBT
(Cost $1,190,771) 1,024,419
REPURCHASE AGREEMENTS - 15.4%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements,
(U.S.Treasury obligations), in a joint
trading account at 5.77%, dated
12/30/94 due 1/3/95 $ 85,950,068 $ 85,895,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $592,148,678) $ 558,734,266
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(e) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Cafeteria Operators LP 11%,
6/30/98 6/24/93 $ 5,600,000
FF Holdings Corp. 10/2/92
to 1/14/94 $ 135,752
Gulf Canada Resources Ltd.
Series 2 pfd. 10/15/93 $ 76,940
Hat Brands, Inc.:
(warrants) 9/2/92
to 2/23/94 $ -
Unit Trust 2/22/94 $ 340,000
Leslie Fay Companies, Inc.:
9.53%, 1/15/00 7/19/93 $ 512,312
10.54%, 1/15/02 7/19/93
to 11/11/93 $ 404,156
Littlefield Co. 10%, 12/31/95 2/28/94 $ 2,750,000
Live Entertainment, Inc.:
$2.00 (warrants) 3/23/93 $ 220,717
$2.72 (warrants) 3/23/93 $ 131,863
New Street Captial Corp. unit
12%, 2/28/98 2/25/94
to 9/1/94 $ 1,125,720
Rexnord Holdings, Inc.
11 7/8%, 3/1/99 10/15/92 $ 495,000
Sun International Hotels Ltd.
10 1/2%, 12/12/95 12/12/94 $ 115,255
(f) 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 period
end, the value of these securities amounted to $29,841,844 or 5.2% of net
assets.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $621,408,445 and $542,327,724, respectively.
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.0%
Ba 2.0% BB 8.3%
B 45.8% B 39.9%
Caa 8.5% CCC 6.6%
Ca, C 0.9% CC, C 0.0%
D 0.3%
The percentage not rated by either S&P or Moody's amounted to 13.6%
including long-term debt categorized as other securities. FMR has
determined that unrated debt securities that are lower quality account for
13.6% of the total value of investment in securities.
INCOME TAX INFORMATION
At December 31, 1994, the aggregate cost of investment securities for
income tax purposes was $592,439,610. Net unrealized depreciation
aggregated $33,705,344, of which $9,896,863 related to appreciated
investment securities and $43,602,207 related to depreciated investment
securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $1,407,000, all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
DECEMBER 31, 1994 YEAR YEARS FUND
Equity-Income 7.07% 10.51% 10.94%
S&P 500 1.32% 8.70% 11.94%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 stocks- a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL 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, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. The fund includes high yielding, lower-rated
securities which are subject to greater price volatility and may involve
greater risk of default. The market for these securities may be less
liquid.
$10,000 OVER LIFE OF FUND
VIP Equity Income (2Standard & Poor's 50
10/09/86 10000.00 10000.00
10/31/86 10110.00 10337.47
11/30/86 10330.00 10588.67
12/31/86 10020.00 10318.66
01/31/87 11170.00 11708.58
02/28/87 11430.00 12171.07
03/31/87 11720.18 12522.81
04/30/87 11428.43 12411.36
05/31/87 11498.85 12519.34
06/30/87 11738.55 13151.56
07/31/87 12185.74 13818.35
08/31/87 12521.12 14333.77
09/30/87 12258.33 14019.86
10/31/87 9866.21 10999.98
11/30/87 9424.75 10093.59
12/31/87 9906.53 10861.71
01/31/88 10611.14 11318.99
02/29/88 11136.96 11846.45
03/31/88 10943.09 11480.40
04/30/88 11124.23 11607.83
05/31/88 11273.40 11708.82
06/30/88 11914.78 12246.25
07/31/88 11893.19 12199.71
08/31/88 11688.14 11784.92
09/30/88 12035.44 12286.96
10/31/88 12243.13 12628.54
11/30/88 12046.37 12447.95
12/31/88 12156.34 12665.79
01/31/89 12907.14 13592.93
02/28/89 12840.89 13254.46
03/31/89 13119.03 13563.29
04/30/89 13625.34 14267.23
05/31/89 14030.38 14845.05
06/30/89 14040.00 14760.43
07/31/89 14858.52 16093.30
08/31/89 15097.26 16408.73
09/30/89 14927.54 16341.45
10/31/89 14066.33 15962.33
11/30/89 14146.71 16287.96
12/31/89 14264.77 16678.87
01/31/90 13301.40 15559.72
02/28/90 13380.23 15760.44
03/31/90 13402.29 16178.09
04/30/90 12937.62 15773.64
05/31/90 13793.60 17311.57
06/30/90 13656.26 17193.85
07/31/90 13322.27 17138.83
08/31/90 12258.47 15589.48
09/30/90 11307.56 14830.27
10/31/90 11019.23 14766.50
11/30/90 11809.01 15720.42
12/31/90 12083.78 16159.02
01/31/91 12731.80 16863.55
02/28/91 13608.54 18069.30
03/31/91 13890.84 18506.57
04/30/91 13955.75 18550.99
05/31/91 14721.69 19352.39
06/30/91 14119.75 18466.05
07/31/91 14920.21 19326.57
08/31/91 15235.15 19784.61
09/30/91 15130.58 19454.21
10/31/91 15382.54 19714.89
11/30/91 14719.50 18920.38
12/31/91 15882.72 21084.88
01/31/92 16097.17 20692.70
02/29/92 16619.89 20961.70
03/31/92 16416.23 20552.95
04/30/92 16930.51 21157.21
05/31/92 17065.84 21260.88
06/30/92 16916.43 20944.09
07/31/92 17434.83 21800.70
08/31/92 17052.85 21353.79
09/30/92 17229.88 21605.76
10/31/92 17436.14 21681.38
11/30/92 18068.68 22420.72
12/31/92 18564.86 22696.49
01/31/93 19119.03 22887.14
02/28/93 19548.52 23198.41
03/31/93 20131.08 23687.89
04/30/93 20047.37 23114.65
05/31/93 20410.09 23734.12
06/30/93 20650.16 23802.95
07/31/93 20931.12 23707.74
08/31/93 21731.84 24606.26
09/30/93 21648.75 24416.79
10/31/93 21846.72 24922.22
11/30/93 21464.93 24685.46
12/31/93 21961.08 24984.15
01/31/94 22928.28 25833.61
02/28/94 22337.84 25133.52
03/31/94 21403.35 24037.70
04/30/94 22140.87 24345.38
05/31/94 22351.60 24744.65
06/30/94 22213.50 24138.40
07/31/94 22955.47 24930.14
08/31/94 24136.56 25952.28
09/30/94 23741.14 25316.45
10/31/94 24228.45 25886.07
11/30/94 23436.57 24943.30
12/30/94 23512.81 25313.21
Let's say you invested $10,000 in Equity-Income Portfolio on October 9,
1986, when the fund started. By December 31, 1994, your investment would
have grown to $23,513 - a 135.13% increase. That compares to $10,000
invested in the S&P 500, which would have grown to $25,313 over the same
period - a 153.13% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1994
% OF FUND'S
INVESTMENTS
Philip Morris Companies, Inc. 3.1
British Petroleum PLC ADR 2.9
International Business Machines Corp. 2.8
American Express Co. 2.5
Schlumberger 1.9
TOP FIVE INDUSTRIES AS OF DECEMBER 31, 1994
% OF FUND'S
INVESTMENTS
Energy 12.6
Basic Industries 11.4
Health 11.1
Nondurables 7.8
Finance 7.3
ASSET ALLOCATION AS OF DECEMBER 31, 1994
Row: 1, Col: 1, Value: 16.0
Row: 1, Col: 2, Value: 7.6
Row: 1, Col: 3, Value: 76.40000000000001
Stocks 76.4%
Bonds 7.6%
Short-term investments 16.0%
FOREIGN INVESTMENTS 10.4%
*
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bettina Doulton, Portfolio Manager of Equity-Income
Portfolio
Q. BETTINA, HOW DID THE FUND DO?
A. The fund has held up quite well in a turbulent market environment. The
Standard & Poor's 500 stock index had a total return of 1.32% for the 12
months ended December 31, 1994. The fund outpaced the index during that
period.
Q. HOW DID THE FUND MANAGE TO TOP THE INDEX'S RETURN?
A. Successful individual stock picking was the primary contributor to the
fund's performance over the past 12 months. That said, the fund has done
well recently by emphasizing health care stocks, in which it had an 11%
stake on December 31. Stock valuations in the industry had been beaten down
by last summer, mainly due to concerns about impending health care reform.
However, the stocks subsequently took off once reform was shelved, and
investors better understood how an improved environment within the industry
had boosted the growth prospects of these companies.
Q. WHICH WERE AMONG THE TOP PERFORMERS?
A. Pharmaceutical company American Cyanamid did extremely well. New
management was in the process of successfully restructuring the company's
operations, making it an attractive takeover candidate. In August, American
Home Products bid for American Cyanamid at a significant premium, allowing
me to sell the stock
at a nice profit. Interestingly enough, I've bought American Home Products
because I believe that the newly merged company has an excellent
opportunity to grow earnings through aggressive cost cutting. Other top
performers in the health care sector included
St. Jude Medical, and pharmaceutical companies Pfizer, Schering-Plough and
Warner-Lambert.
Q. YOU MENTIONED THAT IT HAS BEEN A STOCK PICKER'S MARKET IN 1994. WHICH
INDIVIDUAL STORIES PROVED INTERESTING?
A. Fortunately, several of the fund's largest investments held up well
despite the difficult market. Although their businesses are vastly
different, the common thread that ties them together is a successful story
of corporate restructuring. Three examples include British Petroleum, IBM
and Scott Paper. These companies are doing what it takes to run more
profitable businesses: cutting expenses, selling non-core assets, paying
down debt and buying back their own stock.
Q. AMID THIS VOLATILE MARKET, WERE THERE SOME INVESTMENTS THAT DIDN'T GO
YOUR WAY?
A. There were. Perhaps the biggest was the performance of the Federal
National Mortgage Association (Fannie Mae), which was among the fund's top
10 investments on December 31. Fannie Mae purchases home mortgages, then
resells them on the secondary market. As interest rates rose in 1994,
earnings growth slowed, which caused investors to sell the stock quite
heavily. However, I still believe the dynamics of the housing market bode
well for the company's business prospects over the long term.
Q. THE FUND'S INVESTMENT IN CASH AND SHORT-TERM INSTRUMENTS WAS 16% ON
DECEMBER 31. IS THIS A DEFENSIVE STANCE?
A. I have been somewhat cautious about investing new money coming into the
fund or proceeds from stock sales. Turbulent markets, such as we've seen
recently, call for investors to be patient and very price selective. In
fact, the larger-than-normal cash position will allow me to upgrade the
fund opportunistically going forward. I believe that the market could
remain volatile over the next several months, and - as stock valuations
move up and down - this cash will allow me to buy the stocks of
high-quality companies at cheap valuations.
Q. WHAT FACTORS COULD AFFECT THE FUND'S PERFORMANCE OVER THE NEXT SIX
MONTHS?
A. I think we're already seeing evidence that stocks are facing increasing
competition for investors' dollars from fixed-income investments such as
bonds, money market funds and savings accounts - all of which are now
offering higher yields thanks to rising interest rates. That could put
pressure on the market in 1995. In addition, the full impact of the Federal
Reserve Board's interest rate hikes on economic growth remains to be seen.
If the economy slows too much, corporate earnings may suffer, which
wouldn't be good for the market. But if the Fed can maintain steady
economic growth without triggering higher inflation, the stocks of
companies that can increase earnings stand to make strong gains.
FUND FACTS
GOAL: to provide current income and increase
the value of the fund's shares
START DATE: October 9, 1986
SIZE: as of December 31, 1994, more than
$2.2 billion
MANAGER: Bettina Doulton, since 1993; manager,
Fidelity Advisor Equity Portfolio Income, since
1993; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 75.5%
SHARES VALUE
(NOTE 1)
AEROSPACE & DEFENSE - 1.8%
AEROSPACE & DEFENSE - 1.3%
Alliant Techsystems, Inc. (a) 217,500 $ 8,835,919
Lockheed Corp. 195,000 14,161,875
Martin Marietta Corp. 146,900 6,518,688
29,516,482
DEFENSE ELECTRONICS - 0.5%
Loral Corp. 193,900 7,323,138
Raytheon Co. 54,600 3,487,575
10,810,713
TOTAL AEROSPACE & DEFENSE 40,327,195
BASIC INDUSTRIES - 11.1%
CHEMICALS & PLASTICS - 8.0%
AKZO Nobel NV Ord. 34,600 3,996,910
du Pont (E.I.) de Nemours & Co. 319,800 17,988,750
Eastman Chemical Co. 90,000 4,545,000
Fuller (H.B.) Co. 173,900 5,934,338
Geon Co. 254,400 6,964,200
Goodrich (B.F.) Company 130,500 5,660,438
Grace (W.R.) & Co. 768,300 29,675,588
Hercules, Inc. 229,100 26,432,413
Hoechst AG Ord. 26,600 5,785,221
Kemira OY sponsored ADR (a)(d) 103,725 1,478,081
Lyondell Petrochemical Co. 342,300 8,857,013
Nalco Chemical Co. 508,900 17,048,150
Olin Corp. 101,600 5,232,400
Union Carbide Corp. 1,385,900 40,710,813
180,309,315
METALS & MINING - 1.3%
Alcan Aluminium Ltd. 836,405 21,254,674
Aluminum Co. of America 97,800 8,471,925
29,726,599
PAPER & FOREST PRODUCTS - 1.8%
Champion International Corp. 411,300 15,012,450
Scott Paper Co. 312,600 21,608,475
Temple-Inland, Inc. 67,700 3,054,963
39,675,888
TOTAL BASIC INDUSTRIES 249,711,802
CONGLOMERATES - 3.3%
Allied-Signal, Inc. 536,700 18,247,800
Crane Co. 183,200 4,923,500
Textron, Inc. 39,800 2,004,925
Tyco Laboratories, Inc. 626,371 29,752,623
United Technologies Corp. 313,200 19,692,450
74,621,298
CONSTRUCTION & REAL ESTATE - 0.5%
REAL ESTATE - 0.2%
Price Enterprises, Inc. (a) 356,500 4,589,938
REAL ESTATE INVESTMENT TRUSTS - 0.3%
Amli Residential Properties Trust (SBI) 64,100 1,201,875
Equity Residential Property Trust (SBI) 154,600 4,638,000
5,839,875
TOTAL CONSTRUCTION & REAL ESTATE 10,429,813
SHARES VALUE
(NOTE 1)
DURABLES - 2.2%
AUTOS, TIRES, & ACCESSORIES - 0.8%
Johnson Controls, Inc. 150,600 $ 7,379,400
Snap-on Tools Corp. 350,500 11,654,125
19,033,525
CONSUMER ELECTRONICS - 0.2%
Sunbeam-Oster, Inc. 210,200 5,412,650
TEXTILES & APPAREL - 1.2%
Jones Apparel Group, Inc. (a) 151,200 3,893,400
Kellwood Co. 217,100 4,559,100
Liz Claiborne, Inc. 515,600 8,700,750
Unifi, Inc. 127,800 3,258,900
Westpoint Stevens, Inc. Class A (a) 441,200 6,342,250
26,754,400
TOTAL DURABLES 51,200,575
ENERGY - 12.1%
ENERGY SERVICES - 4.7%
Baker Hughes, Inc. 324,200 5,916,650
Halliburton Co. 1,211,800 40,140,875
Helmerich & Payne, Inc. 130,400 3,341,500
McDermott International, Inc. 586,000 14,503,500
Schlumberger Ltd. 857,400 43,191,525
107,094,050
OIL & GAS - 7.4%
Amerada Hess Corp. 810,000 36,956,250
Amoco Corp. 103,700 6,131,263
British Petroleum PLC ADR 810,702 64,754,822
Coastal Corp. (The) 307,600 7,920,700
Mobil Corp. 257,800 21,719,650
Pennzoil Co. 123,600 5,453,850
Royal Dutch Petroleum Co. 70,100 7,535,750
Total SA:
Class B 210,425 12,230,435
Class B sponsored ADR 129,500 3,820,250
166,522,970
TOTAL ENERGY 273,617,020
FINANCE - 7.1%
BANKS - 0.7%
Bank of New York Co., Inc. 353,900 10,263,100
Chemical Banking Corp. 125,300 4,495,138
14,758,238
CREDIT & OTHER FINANCE - 2.5%
American Express Co. 1,877,372 55,382,474
GFC Financial Corp. 37,050 1,176,338
56,558,812
FEDERAL SPONSORED CREDIT - 2.3%
Federal Home Loan Mortgage
Corporation 177,500 8,963,750
Federal National Mortgage
Association 576,700 42,027,013
50,990,763
INSURANCE - 1.0%
Allstate Corp. 172,800 4,082,400
Travelers, Inc. (The) 567,933 18,457,833
22,540,233
COMMON STOCKS - CONTINUED
SHARES VALUE
(NOTE 1)
FINANCE - CONTINUED
SAVINGS & LOANS - 0.5%
Ahmanson (H.F.) & Co. 273,900 $ 4,416,638
GP Financial Corp. 362,900 7,484,813
11,901,451
SECURITIES INDUSTRY - 0.1%
Lehman Brothers Holdings, Inc. 151,940 2,241,115
TOTAL FINANCE 158,990,612
HEALTH - 11.1%
DRUGS & PHARMACEUTICALS - 7.7%
Allergan, Inc. 651,800 18,413,350
American Home Products Corp. 518,600 32,542,150
Bristol-Myers Squibb Co. 514,600 29,782,475
Pfizer, Inc. 534,400 41,282,400
Schering AG 30,200 19,821,491
Schering-Plough Corp. 213,400 15,791,600
Warner-Lambert Co. 219,300 16,886,100
174,519,566
MEDICAL EQUIPMENT & SUPPLIES - 3.2%
Baxter International, Inc. 443,700 12,534,525
Beckman Instruments, Inc. 217,900 6,073,963
Becton, Dickinson & Co. 339,200 16,281,600
Boston Scientific Corp. (a) 530,300 9,213,963
Pall Corp. 341,200 6,397,500
St. Jude Medical, Inc. 529,500 21,047,625
71,549,176
MEDICAL FACILITIES MANAGEMENT - 0.2%
Columbia/HCA Healthcare Corp. 100,700 3,675,550
TOTAL HEALTH 249,744,292
INDUSTRIAL MACHINERY & EQUIPMENT - 2.8%
ELECTRICAL EQUIPMENT - 0.8%
General Electric Co. 184,900 9,429,900
Grainger (W.W.), Inc. 163,500 9,442,125
18,872,025
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
Caterpillar, Inc. 251,600 13,869,450
Cooper Industries, Inc. 58,900 2,010,610
Deere & Co. 237,500 15,734,375
31,614,435
POLLUTION CONTROL - 0.6%
Browning-Ferris Industries, Inc. 138,400 3,927,100
Safety Kleen Corp. 627,400 9,254,150
13,181,250
TOTAL INDUSTRIAL MACHINERY
& EQUIPMENT 63,667,710
MEDIA & LEISURE - 1.1%
BROADCASTING - 0.5%
Viacom, Inc. (a) 10,336 430,236
Viacom, Inc. (non-vtg.) (a) 263,714 10,713,381
11,143,617
LEISURE DURABLES & TOYS - 0.4%
Hasbro, Inc. 278,000 8,131,500
LODGING & GAMING - 0.2%
Host Marriott Corp. (a) 366,300 3,525,638
TOTAL MEDIA & LEISURE 22,800,755
SHARES VALUE
(NOTE 1)
NONDURABLES - 7.6%
FOODS - 0.6%
ConAgra, Inc. 413,300 $ 12,915,625
HOUSEHOLD PRODUCTS - 1.3%
Avon Products, Inc. 299,880 17,917,830
Rubbermaid, Inc. 78,300 2,251,125
Tambrands, Inc. 250,500 9,675,563
29,844,518
TOBACCO - 5.7%
Imasco Ltd. 655,000 18,572,119
Philip Morris Companies, Inc. 1,208,800 69,506,000
RJR Nabisco Holdings Corp. (a) 7,343,400 40,388,700
128,466,819
TOTAL NONDURABLES 171,226,962
RETAIL & WHOLESALE - 3.4%
APPAREL STORES - 0.5%
Limited, Inc. (The) 608,300 11,025,438
GENERAL MERCHANDISE STORES - 2.0%
Caldor Corp. (a) 209,800 4,668,050
Consolidated Stores Corp. (a) 408,900 7,615,763
Dillard Department Stores, Inc.
Class A 295,100 7,893,925
May Department Stores Co. (The) 126,100 4,255,875
Sears, Roebuck & Co. 292,400 13,450,400
Wal-Mart Stores, Inc. 378,200 8,036,750
45,920,763
GROCERY STORES - 0.9%
Fleming Companies, Inc. 517,535 12,032,689
Great Atlantic & Pacific Tea Co., Inc. 316,400 5,734,750
Supervalu, Inc. 138,100 3,383,450
21,150,889
TOTAL RETAIL & WHOLESALE 78,097,090
SERVICES - 0.7%
PRINTING - 0.6%
Donnelley (R.R.) & Sons Co. 459,300 13,549,350
SERVICES - 0.1%
Jostens, Inc. 178,200 3,318,975
TOTAL SERVICES 16,868,325
TECHNOLOGY - 4.3%
COMPUTERS & OFFICE EQUIPMENT - 3.1%
Digital Equipment Corp. (a) 239,800 7,973,350
International Business
Machines Corp. 856,100 62,923,350
70,896,700
ELECTRONICS - 0.4%
Thomas & Betts Corp. 143,700 9,645,863
PHOTOGRAPHIC EQUIPMENT - 0.8%
Eastman Kodak Co. 169,600 8,098,400
Polaroid Corp. 316,300 10,279,750
18,378,150
TOTAL TECHNOLOGY 98,920,713
TRANSPORTATION - 0.4%
RAILROADS - 0.4%
Canadian Pacific Ltd. Ord. 622,800 9,273,810
COMMON STOCKS - CONTINUED
SHARES VALUE
(NOTE 1)
UTILITIES - 6.0%
ELECTRIC UTILITY - 0.6%
Veba Vereinigte Elektrizitaets &
Bergwerks AG Ord. 39,900 $ 13,905,131
GAS - 0.3%
Williams Companies, Inc. 249,200 6,261,150
TELEPHONE SERVICES - 5.1%
Ameritech Corp. 875,600 35,352,350
BellSouth Corp. 186,200 10,078,075
Koninklijke PPT Nederland (d) 104,400 3,520,521
NYNEX Corp. 858,800 31,560,900
Rochester Telephone Corp. 501,000 10,583,625
Southern New England
Telecommunications Corp. 20,300 652,138
Southwestern Bell Corp. 594,900 24,019,088
115,766,697
TOTAL UTILITIES 135,932,978
TOTAL COMMON STOCKS
(Cost $1,649,143,530) 1,705,430,950
PREFERRED STOCKS - 0.9%
CONVERTIBLE PREFERRED STOCKS - 0.9%
ENERGY - 0.5%
ENERGY SERVICES - 0.1%
Noble Drilling Corp. $1.50 119,100 2,501,100
OIL & GAS - 0.4%
Atlantic Richfield Co. exchangeable 284,300 7,427,338
TOTAL ENERGY 9,928,438
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.2%
Westinghouse Electric Corp. $1.30 (a)(d) 351,500 4,701,313
UTILITIES - 0.2%
TELEPHONE SERVICES - 0.2%
Philippine Long Distance
Telephone (GDR) 94,600 5,120,225
TOTAL CONVERTIBLE PREFERRED STOCKS 19,749,976
NONCONVERTIBLE PREFERRED STOCKS - 0.0%
UTILITIES - 0.0%
ELECTRIC UTILITY - 0.0%
Gulf States Utilities Co., Series B, ARP 631 30,288
TOTAL PREFERRED STOCKS
(Cost $20,100,739) 19,780,264
CORPORATE BONDS - 2.4%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) (C) AMOUNT
CONVERTIBLE BONDS - 0.9%
CONSTRUCTION & REAL ESTATE - 0.2%
REAL ESTATE INVESTMENT TRUSTS - 0.2%
Centerpoint Properties 8.22%,
1/15/04 - $ 1,510,000 1,555,300
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - CONTINUED
CONSTRUCTION & REAL ESTATE - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - CONTINUED
Liberty Property Limited
Partnership 8%, 7/1/01 - $ 750,000 $ 722,813
Sizeler Property Investors, Inc.
8%, 7/15/03 - 1,500,000 1,290,000
TOTAL CONSTRUCTION & REAL ESTATE 3,568,113
DURABLES - 0.2%
TEXTILES & APPAREL - 0.2%
Interface, Inc. 8%, 9/15/13 Ba3 799,000 726,091
Unifi, Inc. 6%, 3/15/02 Baa1 3,990,000 3,865,313
TOTAL DURABLES 4,591,404
ENERGY - 0.0%
ENERGY SERVICES - 0.0%
Lone Star Technologies, Inc.
euro 8%, 8/27/02 - 290,000 205,175
FINANCE - 0.1%
BANKS - 0.1%
Bank of Boston Corp. 7 3/4%,
6/15/11 Baa2 1,242,000 1,409,670
RETAIL & WHOLESALE - 0.4%
RETAIL & WHOLESALE, MISCELLANEOUS - 0.4%
Home Depot, Inc. 4 1/2%,
2/15/97 A1 7,340,000 8,697,900
UTILITIES - 0.0%
GAS - 0.0%
SFP Pipeline Holdings, Inc.
exchangeable 0%,
8/15/10 (e) Baa3 470,000 554,600
TOTAL CONVERTIBLE BONDS 19,026,862
NONCONVERTIBLE BONDS - 1.5%
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 10 7/8%,
8/15/01 B2 1,220,000 1,171,200
BASIC INDUSTRIES - 0.3%
PACKAGING & CONTAINERS - 0.0%
Owens Illinois, Inc. 10 1/4%,
4/1/99 B2 350,000 346,500
PAPER & FOREST PRODUCTS - 0.3%
Stone Container Corp. 9 7/8%,
2/1/01 B1 7,760,000 7,333,200
TOTAL BASIC INDUSTRIES 7,679,700
CONGLOMERATES - 0.0%
Coltec Industries, Inc. 10 1/4%,
4/1/02 B1 910,000 891,800
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
DURABLES - 0.5%
TEXTILES & APPAREL - 0.5%
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B1 $ 2,660,000 $ 2,453,850
9 3/8%, 12/15/05 B3 7,850,000 7,045,375
TOTAL DURABLES 9,499,225
FINANCE - 0.1%
BANKS - 0.0%
Signet Banking Corp.:
5.9375%, 5/15/97 (e) Baa1 340,000 335,750
5.9375%, 4/15/98 (e) Baa1 190,000 187,863
523,613
CREDIT & OTHER FINANCE - 0.1%
Chrysler Financial Corp. 9 1/2%,
12/15/99 A3 2,990,000 3,102,304
TOTAL FINANCE 3,625,917
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Joy Technologies, Inc. 10 1/4%,
9/1/03 Ba1 3,020,000 3,155,900
MEDIA & LEISURE - 0.2%
ENTERTAINMENT - 0.0%
Live Entertainment, Inc.
10%, 9/1/98 - 56,900 29,019
LEISURE, DURABLES & TOYS - 0.1%
Coleman Worldwide Corp. 2nd
liquid yield option notes 0%,
5/27/13 B2 7,340,000 2,119,425
LODGING & GAMING - 0.1%
Host Marriott Corp.:
9 1/8%, 12/1/00 B1 691,000 670,270
9 7/8%, 5/1/01 B1 239,000 239,000
10 1/2%, 5/1/06 B1 519,000 516,405
1,425,675
TOTAL MEDIA & LEISURE 3,574,119
NONDURABLES - 0.2%
BEVERAGES - 0.2%
Canandaigua Wine, Inc.
8 3/4%, 12/15/03 B1 5,700,000 5,158,500
UTILITIES - 0.0%
GAS - 0.0%
Columbia Gas Systems, Inc.
9.91%, 5/28/20 (b) - 170,000 204,850
TOTAL NONCONVERTIBLE BONDS 34,961,211
TOTAL CORPORATE BONDS
(Cost $56,095,105) 53,988,073
U.S. TREASURY OBLIGATIONS - 5.2%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (C) AMOUNT (NOTE 1)
U.S. Treasury Notes:
6 1/4%, 2/15/03 Aaa $ 21,100,000 $ 19,082,207
5 3/4%, 8/15/03 Aaa 71,980,000 62,554,939
7 7/8%, 11/15/04 Aaa 35,630,000 35,730,120
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $116,702,439) 117,367,266
REPURCHASE AGREEMENTS - 16.0%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.77% dated
12/30/94 due 1/3/95 $ 362,179,048 361,947,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,203,988,813) $ 2,258,513,553
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(d) 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 period
end, the value of these securities amounted to $9,699,915 or .4% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $2,846,732,426 and $2,137,800,209, respectively.
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 5.7% AAA, AA, A 5.6%
Baa 0.3% BBB 0.5%
Ba 0.2% BB 0.2%
B 1.2% B 1.1%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.2% .
INCOME TAX INFORMATION
At December 31, 1994, the aggregate cost of investment securities for
income tax purposes was $2,207,108,686. Net unrealized appreciation
aggregated $51,404,867, of which $113,602,118 related to appreciated
investment securities and $62,197,251 related to depreciated investment
securities.
The fund hereby designates $51,322,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1994
ASSETS
Investment in securities, at value (including repurchase agreements of $361,947,000) (cost $2,203,988,813) - $ 2,258,513,553
See accompanying schedule
Cash 711
Receivable for investments sold 27,932,668
Receivable for fund shares sold 15,355,442
Dividends receivable 5,542,011
Interest receivable 3,369,540
Other receivables 63,282
TOTAL ASSETS 2,310,777,207
LIABILITIES
Payable for investments purchased $ 23,873,170
Payable for fund shares redeemed 1,082,208
Accrued management fee 956,271
Other payables and accrued expenses 453,465
TOTAL LIABILITIES 26,365,114
NET ASSETS $ 2,284,412,093
Net Assets consist of:
Paid in capital $ 2,107,928,643
Undistributed net investment income 4,150,957
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 117,794,977
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 54,537,516
NET ASSETS, for 148,827,792 shares outstanding $ 2,284,412,093
NET ASSET VALUE, offering price and redemption price per share ($2,284,412,093 (divided by) 148,827,792 shares) $15.35
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
INVESTMENT INCOME $ 44,676,881
Dividends
Interest 15,457,640
TOTAL INCOME 60,134,521
EXPENSES
Management fee $ 9,165,293
Transfer agent fees 192,500
Accounting fees and expenses 669,962
Non-interested trustees' compensation 16,144
Custodian fees and expenses 102,509
Registration fees 294,094
Audit 51,440
Legal 17,294
Interest 6,692
Miscellaneous 14,256
Total expenses before reductions 10,530,184
Expense reductions (241,887 10,288,297
)
NET INVESTMENT INCOME 49,846,224
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 121,865,712
Foreign currency transactions 32,759 121,898,471
Change in net unrealized appreciation (depreciation) on:
Investment securities (61,703,739
)
Assets and liabilities in foreign currencies 12,776 (61,690,963
)
NET GAIN (LOSS) 60,207,508
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 110,053,732
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 49,846,224 $ 27,285,969
Net investment income
Net realized gain (loss) 121,898,471 70,742,090
Change in net unrealized appreciation (depreciation) (61,690,963) 46,208,348
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 110,053,732 144,236,407
Distributions to shareholders: (44,739,784) (23,402,249)
From net investment income
In excess of net investment income - (2,791,192)
From net realized gain (68,533,800) -
TOTAL DISTRIBUTIONS (113,273,584) (26,193,441)
Share transactions 1,048,772,904 665,403,591
Net proceeds from sales of shares
Reinvestment of distributions 113,273,584 26,157,025
Cost of shares redeemed (192,914,992) (83,982,840)
Net increase (decrease) in net assets resulting from share transactions 969,131,496 607,577,776
TOTAL INCREASE (DECREASE) IN NET ASSETS 965,911,644 725,620,742
NET ASSETS
Beginning of period 1,318,500,449 592,879,707
End of period (including under (over) distribution of net investment income of $4,150,957 $ 2,284,412,093 $ 1,318,500,449
and $(823,095), respectively)
OTHER INFORMATION
Shares
Sold 68,815,564 45,052,691
Issued in reinvestment of distributions 7,484,681 1,761,238
Redeemed (12,882,315) (5,646,913)
Net increase (decrease) 63,417,930 41,167,016
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
SELECTED PER-SHARE DATA 1994 1993 1992 1991 1990
Net asset value, beginning of period $ 15.44 $ 13.40 $ 11.85 $ 9.51 $ 12.29
Income from Investment Operations
Net investment income .41 .37 .40 .50 .58
Net realized and unrealized gain (loss) .64 2.06 1.57 2.43 (2.38)
Total from investment operations 1.05 2.43 1.97 2.93 (1.80)
Less Distributions (.37) (.35) (.42) (.59) (.59)
From net investment income
In excess of net investment income - (.04) - - -
From net realized gain (.77) - - - (.39)
Total distributions (1.14) (.39) (.42) (.59) (.98)
Net asset value, end of period $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51
TOTAL RETURN A 7.07% 18.29% 16.89% 31.44% (15.29)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 2,284,412 $ 1,318,500 $ 592,880 $ 282,171 $ 154,080
Ratio of expenses to average net assets B .58% .62% .65% .74% .78%
Ratio of expenses to average net assets before expense
reductions B .60% .62% .65% .74% .78%
Ratio of net investment income to average net assets 2.83% 2.87% 3.52% 4.83% 6.01%
Portfolio turnover rate 134% 120% 74% 107% 94%
</TABLE>
A TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
B SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS.
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
DECEMBER 31, 1994 YEAR YEARS FUND
Growth -.02% 10.88% 12.55%
S&P 500 1.32% 8.70% 11.94%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 Stocks- a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any, and
excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL 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, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Growth (212) Standard & Poor's 50
10/09/86 10000.00 10000.00
10/31/86 10000.00 10337.47
11/30/86 10220.00 10588.67
12/31/86 10030.00 10318.66
01/31/87 11100.00 11708.58
02/28/87 11650.00 12171.07
03/31/87 11839.96 12522.81
04/30/87 11839.96 12411.36
05/31/87 11920.10 12519.34
06/30/87 12270.69 13151.56
07/31/87 12761.52 13818.35
08/31/87 13142.16 14333.77
09/30/87 12991.91 14019.86
10/31/87 10137.09 10999.98
11/30/87 9425.89 10093.59
12/31/87 10397.54 10861.71
01/31/88 10623.12 11318.99
02/29/88 11484.46 11846.45
03/31/88 11381.92 11480.40
04/30/88 11525.47 11607.83
05/31/88 11422.93 11708.82
06/30/88 11997.16 12246.25
07/31/88 11935.63 12199.71
08/31/88 11648.52 11784.92
09/30/88 11976.65 12286.96
10/31/88 12007.41 12628.54
11/30/88 11894.62 12447.95
12/31/88 12017.66 12665.79
01/31/89 12879.00 13592.93
02/28/89 12612.40 13254.46
03/31/89 12993.69 13563.29
04/30/89 13680.86 14267.23
05/31/89 14170.20 14845.05
06/30/89 13982.79 14760.43
07/31/89 15232.19 16093.30
08/31/89 15492.48 16408.73
09/30/89 15627.83 16341.45
10/31/89 15190.54 15962.33
11/30/89 15440.42 16287.96
12/31/89 15804.82 16678.87
01/31/90 14888.60 15559.72
02/28/90 15030.81 15760.44
03/31/90 15214.51 16178.09
04/30/90 14771.47 15773.64
05/31/90 16078.97 17311.57
06/30/90 16413.95 17193.85
07/31/90 16154.61 17138.83
08/31/90 14490.52 15589.48
09/30/90 12999.33 14830.27
10/31/90 12534.68 14766.50
11/30/90 13550.42 15720.42
12/31/90 13950.24 16159.02
01/31/91 14879.53 16863.55
02/28/91 15989.61 18069.30
03/31/91 16472.15 18506.57
04/30/91 16318.61 18550.99
05/31/91 17283.69 19352.39
06/30/91 16000.58 18466.05
07/31/91 17524.96 19326.57
08/31/91 18303.61 19784.61
09/30/91 18446.17 19454.21
10/31/91 19016.45 19714.89
11/30/91 17930.73 18920.38
12/31/91 20299.57 21084.88
01/31/92 21538.81 20692.70
02/29/92 21989.40 20961.70
03/31/92 20641.73 20552.95
04/30/92 19833.13 21157.21
05/31/92 19664.68 21260.88
06/30/92 18901.00 20944.09
07/31/92 19630.98 21800.70
08/31/92 19091.92 21353.79
09/30/92 19428.83 21605.76
10/31/92 20181.28 21681.38
11/30/92 21528.95 22420.72
12/31/92 22191.55 22696.49
01/31/93 22629.54 22887.14
02/28/93 22163.03 23198.41
03/31/93 23046.80 23687.89
04/30/93 22805.77 23114.65
05/31/93 24504.44 23734.12
06/30/93 24756.95 23802.95
07/31/93 24688.08 23707.74
08/31/93 25927.65 24606.26
09/30/93 26409.70 24416.79
10/31/93 26662.21 24922.22
11/30/93 25583.33 24685.46
12/31/93 26490.05 24984.15
01/31/94 27155.74 25833.61
02/28/94 26875.66 25133.52
03/31/94 25654.60 24037.70
04/30/94 25813.34 24345.38
05/31/94 25215.01 24744.65
06/30/94 23932.89 24138.40
07/31/94 24763.22 24930.14
08/31/94 26167.44 25952.28
09/30/94 25849.97 25316.45
10/31/94 26900.08 25886.07
11/30/94 25825.55 24943.30
12/30/94 26484.92 25313.21
Let's say you invested $10,000 in Growth Portfolio on October 9, 1986, when
the fund started. By December 31, 1994, your investment would have grown to
$26,485 - a 164.85% increase. That compares to $10,000 invested in the S&P
500, which would have grown to $25,313 over the same period - a 153.13%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1994
% OF FUND'S
INVESTMENTS
Oracle Systems Corp. 3.6
DSC Communications Corp. 3.0
Motorola, Inc. 2.0
General Electric Co. 1.9
Lowe's Companies, Inc. 1.9
TOP FIVE INDUSTRIES AS OF DECEMBER 31, 1994
% OF FUND'S
INVESTMENTS
Technology 39.5
Retail & Wholesale 11.5
Utilities 10.2
Health 7.7
Media & Leisure 5.0
ASSET ALLOCATION AS OF DECEMBER 31, 1994
Row: 1, Col: 1, Value: 11.9
Row: 1, Col: 2, Value: 40.0
Row: 1, Col: 3, Value: 48.1
Stocks 88.1%
Short-term investments 11.9%
FOREIGN INVESTMENTS 6.0%
*
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Lawrence Greenberg, Portfolio
Manager of Growth Portfolio
Q. LARRY, HOW HAS THE FUND PERFORMED?
A. In the past 12 months, the stock market has yielded disappointing
returns. For the year ended December 31, 1994, the Standard & Poor's 500
index had a total return of 1.32%, and the fund's performance has slightly
trailed the index during the period.
Q. WHAT FACTORS CONTRIBUTED TO PERFORMANCE?
A. There's no question that the fund had a tough year. Growth stocks tend
to be hardest hit during periods of market correction because of their
higher-than-average valuations - prices relative to earnings. During most
of the year, cyclicals - those stocks that tend to rise and fall with the
economy - performed much better than the growth stocks that make up this
fund. When the markets stabilized in the second half of the year, the fund
started to perform better. While performance was by no means stellar, the
fund held its own in a very volatile market environment.
Q. HOW DID RISING INTEREST RATES AND A VOLATILE STOCK MARKET INFLUENCE YOUR
INVESTMENT STRATEGY?
A. Rising interest rates impact growth stocks more than value stocks. While
sell-offs in the market tend to impact this fund more than less aggressive
funds, it also gives me the opportunity to buy more of the best performing
companies at more attractive valuations. Ideally, when the market rebounds,
the fund should be well-positioned to bounce back strongly.
Q. WHY DO YOU CONTINUE TO KEEP MORE THAN ONE-THIRD OF THE FUND'S
INVESTMENTS IN TECHNOLOGY?
A. As opposed to the 1980s, when we were in a consumer-driven economy, the
1990s are being driven by capital investment and productivity enhancement,
both of which play directly into the hands of technology. Despite a recent
slowdown in the U.S. economy, the outlook for spending in technology both
here and abroad remains strong. We're seeing strength in virtually every
area of technology, from PCs and semi-conductors to computer networking.
Oracle, the fund's largest investment on December 31, continues to benefit
from the growing acceptance of client-server computing - PCs linked by
networks - over the mainframe systems of the past. I've recently reduced my
position in Compaq by about one-third and decided to take some profits. I
still think Compaq is the top manufacturer of personal computers, but as
its stock climbs, I don't need to own quite so much of it.
Q. WHAT OTHER INDUSTRIES DO YOU LIKE NOW?
A. Well, I look for companies that have the best opportunities for growth
and the best chance for positive earnings surprises. The cellular telephone
industry is exhibiting tremendous momentum. Airtouch and Vanguard Cellular
are two of the fund's top 10 investments. I also own two classes of the
stock of Nokia, a Finnish cellular equipment provider, which, if added
together, would also be a top investment. The number of cellular
subscribers is growing by about 50% a year, and this trend is showing no
signs of slowing down. I continue to believe that cellular is one of the
true growth industries of the 1990s.
Q. WHAT INVESTMENTS HAVEN'T WORKED OUT AS WELL AS YOU'D HOPED IN THE PAST
12 MONTHS?
A. When the information superhighway turned into the information super
"hype" way, stocks such as DSC Communications didn't do well. Though the
business prospects of the company didn't change all that much, the
perception of it did. I would have liked to have been more astute about
these changes in perception and done a better job trading the stock.
Newbridge Networks and Cisco Systems are two other examples of stocks that
didn't work out as I would have liked. Both had been big winners over the
past few years and as their growth rates showed signs of slowing, the
stocks corrected. However, earnings prospects for both companies remain
good, and both stocks have begun to recover from their lows.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. While the direction of the market is always hard to predict, I believe
that the outperformance of cyclical stocks over growth stocks is behind us.
When the market stabilizes, the fund should be in a better position to
outperform the market.
FUND FACTS
GOAL: to increase the value of the fund's
shares over the long term by investing in
stocks with above-average growth potential
START DATE: October 9, 1986
SIZE: as of December 31, 1994, more than
$2.1 billion
MANAGER: Lawrence Greenberg, since 1991;
manager, Emerging Growth Portfolio, since
1993; Fidelity Select Environmental Services
Portfolio, October 1986 - April 1991; Fidelity
Select Medical Delivery Portfolio, July 1989 -
April 1991; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 88.1%
SHARES VALUE
(NOTE 1)
BASIC INDUSTRIES - 1.2%
CHEMICALS & PLASTICS - 0.5%
Airgas, Inc. (a) 282,400 $ 6,000,987
Hanna (M.A.) Co. 100,000 2,375,000
Union Carbide Corp. 110,000 3,231,250
11,607,237
IRON & STEEL - 0.1%
Nucor Corp. 41,200 2,286,600
METALS & MINING - 0.4%
Alcan Aluminium Ltd. 75,000 1,905,896
Aluminum Co. of America 25,000 2,165,625
IMCO Recycling, Inc. 175,000 2,646,875
Reynolds Metals Co. 34,600 1,695,400
8,413,796
PAPER & FOREST PRODUCTS - 0.2%
International Paper Co. 50,000 3,768,750
TOTAL BASIC INDUSTRIES 26,076,383
CONGLOMERATES - 0.3%
Mark IV Industries, Inc. 90,000 1,777,500
Tyco Laboratories, Inc. 100,000 4,750,000
6,527,500
CONSTRUCTION & REAL ESTATE - 0.6%
CONSTRUCTION - 0.4%
Oakwood Homes Corp. 271,700 6,622,688
Schuler Homes, Inc. (a) 86,600 1,234,050
7,856,738
ENGINEERING - 0.2%
Glenayre Technologies, Inc. (a) 85,100 4,914,525
TOTAL CONSTRUCTION & REAL ESTATE 12,771,263
DURABLES - 2.2%
AUTOS, TIRES, & ACCESSORIES - 1.3%
Autozone, Inc. (a) 325,000 7,881,250
Breed Technologies, Inc. 172,900 4,906,038
Chrysler Corp. 210,000 10,290,000
Smith (A.O.) Corp. Class B 127,600 3,126,200
Toyota Motor Corp. ADR 50,000 2,093,750
28,297,238
CONSUMER ELECTRONICS - 0.5%
Harman International Industries, Inc. 194,100 7,181,700
Sony Corp. ADR 45,000 2,525,625
9,707,325
TEXTILES & APPAREL - 0.4%
Reebok International Ltd. 90,000 3,555,000
Tommy Hilfiger (a) 109,300 4,932,163
8,487,163
TOTAL DURABLES 46,491,726
ENERGY - 0.5%
ENERGY SERVICES - 0.1%
Schlumberger Ltd. 60,000 3,022,500
INDEPENDENT POWER - 0.2%
Thermo Electron Corp. (a) 75,000 3,365,625
SHARES VALUE
(NOTE 1)
ENERGY - CONTINUED
OIL & GAS - 0.2%
British Petroleum PLC ADR 50,000 $ 3,993,750
Inverness Petroleum Ltd. (a) 168,000 1,018,618
Petromet Resources Ltd. Ord. (a) 27,900 119,409
5,131,777
TOTAL ENERGY 11,519,902
FINANCE - 1.4%
FEDERAL SPONSORED CREDIT - 1.3%
Federal National Mortgage
Association 375,000 27,328,125
INSURANCE - 0.0%
GMIS, Inc. (a) 55,000 1,072,500
SECURITIES INDUSTRY - 0.1%
Nomura Securities Co. Ltd. 80,000 1,660,150
TOTAL FINANCE 30,060,775
HEALTH - 7.7%
DRUGS & PHARMACEUTICALS - 3.0%
Amgen, Inc. (a) 125,000 7,375,000
Biogen, Inc. (a) 65,000 2,713,750
Bristol-Myers Squibb Co. 130,000 7,523,750
COR Therapeutics, Inc. (a) 65,800 723,800
Dura Pharmaceuticals, Inc. (a) 200,000 2,900,000
Elan Corp. PLC ADR (a) 100,000 3,562,500
North American Biologicals, Inc. (a) 165,000 1,237,500
Pfizer, Inc. 275,000 21,243,750
Schering-Plough Corp. 125,000 9,250,000
Warner-Lambert Co. 100,000 7,700,000
64,230,050
MEDICAL EQUIPMENT & SUPPLIES - 1.9%
Abbott Laboratories 150,000 4,893,750
Becton, Dickinson & Co. 40,200 1,929,600
Boston Scientific Corp. (a) 185,000 3,214,375
Cardinal Health, Inc. 150,000 6,956,250
Johnson & Johnson 115,000 6,296,250
Medtronic, Inc. 50,000 2,781,250
Nellcor, Inc. (a) 66,500 2,194,500
St. Jude Medical, Inc. 216,200 8,593,950
Thermo Cardiosystems, Inc. (a) 122,300 1,956,800
Thermedics, Inc. (a) 150,000 1,912,500
40,729,225
MEDICAL FACILITIES MANAGEMENT - 2.8%
Columbia/HCA Healthcare Corp. 175,025 6,388,413
Health Management, Inc. (Del.) (a) 103,900 1,857,213
Integrated Health Services, Inc. 185,000 7,307,500
Lincare Holdings, Inc. (a) 515,600 14,952,400
Living Centers of America, Inc. (a) 75,000 2,503,125
Sun Healthcare Group (a) 100,000 2,537,500
United HealthCare Corp. 275,000 12,409,375
U.S. Healthcare, Inc. 200,000 8,250,000
Vivra, Inc. (a) 118,000 3,304,000
59,509,526
TOTAL HEALTH 164,468,801
COMMON STOCKS - CONTINUED
SHARES VALUE
(NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 4.7%
ELECTRICAL EQUIPMENT - 3.2%
Adflex Solutions (a) 39,200 $ 656,600
American Power Conversion Corp. (a) 350,000 5,731,250
Avid Technology, Inc. (a) 35,000 1,124,375
California Microwave Corp. (a) 30,400 1,109,600
General Electric Co. 800,000 40,800,000
Oak Industries, Inc. (a) 88,600 2,026,725
Scientific-Atlanta, Inc. 500,000 10,500,000
Sensormatic Electronics Corp. 125,000 4,500,000
United Communication Industry PCL:
(For. Reg.) 77,000 1,073,492
(For. Reg.) (Rights) (a) 77,000 1,042,820
68,564,862
INDUSTRIAL MACHINERY & EQUIPMENT - 1.1%
AGCO Corp. 279,200 8,480,700
Case Corp. 160,000 3,440,000
Caterpillar, Inc. 200,000 11,025,000
Perseptive Technologies Corp. unit
(1 common & 1 warrant) (a) 21,000 94,500
Veeco Instruments, Inc. (a) 38,000 384,750
23,424,950
POLLUTION CONTROL - 0.4%
Browning-Ferris Industries, Inc. 125,000 3,546,875
TETRA Technologies, Inc. (a) 111,200 1,320,500
WMX Technologies, Inc. 165,000 4,331,250
9,198,625
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 101,188,437
MEDIA & LEISURE - 5.0%
BROADCASTING - 1.7%
British Sky Broadcasting Group ADR (a) 100,000 2,400,000
Capital Cities/ABC, Inc. 75,000 6,393,750
Clear Channel Communications, Inc. (a) 50,050 2,540,038
Infinity Broadcasting Corp. (a) 101,072 3,183,768
People's Choice TV Corp. (a) 45,000 708,750
Tele-Communications, Inc. Class A (a) 200,000 4,350,000
Viacom, Inc. (non-vtg.) (a) 400,084 16,253,413
35,829,719
ENTERTAINMENT - 0.5%
Disney (Walt) Co. 40,000 1,845,000
Players International, Inc. (a) 150,000 3,375,000
Royal Carribean Cruises Ltd. 100,000 2,850,000
Scientific Games Holdings Corp. (a) 68,700 3,435,000
11,505,000
LEISURE DURABLES & TOYS - 0.3%
Champion Enterprises, Inc. (a) 69,300 2,113,650
Cobra Golf, Inc. (a) 125,000 4,468,750
6,582,400
LODGING & GAMING - 0.6%
Hospitality Franchise Systems, Inc. 500,000 13,250,000
National Gaming Corp. (a) 14,300 171,600
13,421,600
RESTAURANTS - 1.9%
Apple South, Inc. 324,500 4,259,063
Applebee's International, Inc. 163,200 2,182,800
Brinker International, Inc. (a) 74,100 1,343,063
Landry's Seafood Restaurants, Inc. (a) 170,000 4,823,750
Lone Star Steakhouse Saloon (a) 450,000 9,000,000
SHARES VALUE
(NOTE 1)
MEDIA & LEISURE - CONTINUED
RESTAURANTS - CONTINUED
Outback Steakhouse, Inc. (a) 140,000 $ 3,290,000
Papa John's International, Inc. (a) 150,300 4,321,125
Starbucks Corp. (a) 335,000 9,212,500
Uno Restaurant Corp. (a) 149,200 1,883,650
40,315,951
TOTAL MEDIA & LEISURE 107,654,670
NONDURABLES - 1.6%
BEVERAGES - 0.3%
PepsiCo, Inc. 200,000 7,250,000
HOUSEHOLD PRODUCTS - 0.7%
Colgate-Palmolive Co. 80,000 5,070,000
Gillette Co. 65,000 4,858,750
Procter & Gamble Co. 50,000 3,100,000
Rubbermaid, Inc. 19,500 554,126
Safeskin Corp. (a) 15,400 219,450
13,802,326
TOBACCO - 0.6%
Philip Morris Companies, Inc. 175,000 10,062,500
RJR Nabisco Holdings Corp. (a) 500,000 2,750,000
12,812,500
TOTAL NONDURABLES 33,864,826
RETAIL & WHOLESALE - 11.5%
APPAREL STORES - 0.6%
Baby Superstore, Inc. (a) 25,000 1,143,750
Gymboree Corp. (a) 75,000 2,156,250
Just For Feet, Inc. 295,000 5,051,875
Norton McNaughton, Inc. (a) 85,000 1,296,250
Today's Man, Inc. (a) 125,000 1,312,500
Urban Outfitters, Inc. (a) 70,100 1,910,225
12,870,850
APPLIANCE STORES - 0.3%
Cellstar Corp. (a) 245,000 5,543,125
DRUG STORES - 0.5%
General Nutrition Companies, Inc. (a) 275,000 7,975,000
Rite Aid Corp. 150,000 3,506,250
11,481,250
GENERAL MERCHANDISE STORES - 1.2%
Dollar General Corp. 115,000 3,450,000
Federated Department Stores, Inc. (Del.) (a) 57,100 1,099,175
Michaels Stores, Inc. (a) 213,300 7,412,175
Sears, Roebuck & Co. 175,000 8,050,000
Wal-Mart Stores, Inc. 250,000 5,312,500
25,323,850
RETAIL & WHOLESALE, MISCELLANEOUS - 8.9%
Barnes & Noble, Inc. (a) 165,000 5,156,250
Bed Bath & Beyond, Inc. (a) 275,000 8,250,000
Best Buy Co., Inc. (a) 75,900 2,371,875
Books-A-Million, Inc. (a) 200,000 3,375,000
Circuit City Stores, Inc. 160,050 3,561,113
Gateway 2000, Inc. (a) 100,300 2,168,988
Home Depot, Inc. (The) 800,066 36,803,036
Lowe's Companies, Inc. 1,145,000 39,788,750
Micro Warehouse, Inc. (a) 180,600 6,321,000
Officemax, Inc. (a) 385,000 10,202,500
Office Depot, Inc. (a) 750,000 18,000,000
Petsmart, Inc. (a) 268,600 9,266,700
COMMON STOCKS - CONTINUED
SHARES VALUE
(NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED
Rex Stores Corp. (a) 65,000 $ 1,056,250
Sport Supply Group, Inc. 309,550 3,172,888
Staples, Inc. (a) 439,600 10,880,100
Sunglass Hut International, Inc. (a) 779,500 17,928,500
Tandy Corp. 65,000 3,258,125
Toys "R" Us, Inc. (a) 165,000 5,032,500
Viking Office Products, Inc. (a) 100,000 3,062,500
Williams-Sonoma, Inc. (a) 65,000 1,954,063
191,610,138
TOTAL RETAIL & WHOLESALE 246,829,213
SERVICES - 1.3%
LEASING & RENTAL - 0.3%
Hollywood Entertainment Corp. (a) 219,700 6,645,925
PRINTING - 0.4%
Cyrk, Inc. (a) 113,200 4,683,650
Reynolds & Reynolds Co. Class A 135,000 3,375,000
8,058,650
SERVICES - 0.6%
Emcare Holdings (a) 50,000 725,000
Medaphis Corp. (a) 212,900 9,899,850
On Assignment, Inc. (a) 40,100 641,600
Zebra Technologies Corp. Class A (a) 60,000 2,343,750
13,610,200
TOTAL SERVICES 28,314,775
TECHNOLOGY - 39.5%
COMMUNICATIONS EQUIPMENT - 10.7%
Cabletron Systems, Inc. (a) 674,950 31,385,175
Cisco Systems, Inc. (a) 450,000 15,806,250
DSC Communications Corp. (a) 1,775,000 63,678,125
Dialogic Corp. (a) 142,800 3,355,800
Ericsson (L.M.) Telefon AB Class B ADR 65,000 3,583,125
General DataComm Industries, Inc. (a) 62,000 2,007,250
General Instrument Corp. (a) 385,000 11,550,000
Global Village Communication (a) 275,000 2,509,375
Microtest, Inc. (a) 95,000 2,256,250
Newbridge Networks Corp. (a) 825,000 31,556,250
Nokia Corp. AB sponsored ADR (a) 325,000 24,375,000
Nokia Corp. AB 99,300 14,630,066
Summa Four, Inc. (a) 50,000 1,337,500
3Com Corp. (a) 409,300 21,104,531
229,134,697
COMPUTER SERVICES & SOFTWARE - 11.6%
Alantec Corp. (a) 135,000 4,320,000
Alias Research, Inc. (a) 60,000 1,080,000
America Online, Inc. (a) 90,000 5,040,000
American Business Information, Inc. (a) 103,800 1,920,300
Ascend Communications, Inc. (a) 30,000 1,222,500
Banyan Systems, Inc. (a) 82,500 1,474,688
CUC International, Inc. (a) 325,000 10,887,500
Cambridge Technology Partners
Mass., Inc. (a) 127,500 2,836,875
Ceridian Corp. (a) 115,000 3,090,625
Chipcom Corp. (a) 160,000 8,000,000
Computer Associates International, Inc. 125,000 6,062,500
CompUSA, Inc. (a) 150,000 2,250,000
Compuware Corp. (a) 100,000 3,600,000
SHARES VALUE
(NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE - CONTINUED
Digidesign, Inc. (a) 75,000 $ 1,856,250
General Motors Corp. Class E 55,000 2,117,500
IMRS, Inc. (a) 45,000 1,777,500
Informix Corp. (a) 625,000 20,078,125
Integrated Silicon Systems, Inc. (a) 108,400 3,333,300
Intersolv, Inc. (a) 125,000 2,265,625
Lotus Development Corp. (a) 125,000 5,125,000
Macromedia, Inc. (a) 50,000 1,275,000
Mercury Interactive Group Corp. (a) 130,400 1,727,800
Microsoft Corp. (a) 200,000 12,225,000
Network Peripherals, Inc. (a) 125,400 3,417,150
Novell, Inc. (a) 213,800 3,661,325
Oracle Systems Corp. (a) 1,750,000 77,218,750
Parametric Technology Corp. (a) 175,000 6,037,500
Peoplesoft, Inc. (a) 375,000 14,156,250
Platinum Technology, Inc. (a) 106,300 2,405,038
Powersoft Corp. (a) 160,000 13,160,000
Softkey International, Inc. (a) 150,000 3,825,000
Stratacom, Inc. (a) 314,000 10,990,000
SunGard Data Systems, Inc. (a) 96,100 3,699,850
Sybase, Inc. (a) 131,900 6,858,800
Systems & Computer Technology Corp. (a) 60,000 1,252,500
250,248,251
COMPUTERS & OFFICE EQUIPMENT - 8.1%
ADAPTEC, Inc. (a) 225,000 5,315,625
Apple Computer, Inc. 65,000 2,535,000
Bay Networks, Inc. (a) 328,300 9,684,850
Canon, Inc. ADR representing 5 shares 25,000 2,125,000
Compaq Computer Corp. (a) 775,000 30,612,500
Danka Business Systems PLC
sponsored ADR 250,000 5,406,250
Dell Computer Corp. (a) 100,000 4,100,000
Digital Equipment Corp. (a) 150,000 4,987,500
EMC Corp. (a) 650,000 14,056,250
Hewlett-Packard Co. 115,000 11,485,625
International Business Machines Corp. 380,000 27,930,000
Micom Communication Corp. (a) 176,400 1,543,500
National Computer System, Inc. 60,000 930,000
Read Rite Corp. (a) 299,426 5,558,095
Seagate Technology (a) 214,900 5,157,600
Silicon Graphics, Inc. (a) 850,200 26,249,925
Sun Microsystems, Inc. (a) 215,000 7,632,500
Tech Data Corp. (a) 275,000 4,675,000
Western Digital Corp. (a) 191,600 3,209,300
173,194,520
ELECTRONIC INSTRUMENTS - 1.0%
Applied Materials, Inc. (a) 375,000 15,843,750
Electro Scientific Industries, Inc. (a) 75,000 1,612,500
Novellus System, Inc. (a) 84,000 4,200,000
21,656,250
ELECTRONICS - 8.1%
Advanced Micro Devices, Inc. (a) 400,000 9,950,000
Altera Corp. (a) 131,900 5,523,313
Analog Devices, Inc. (a) 140,000 4,917,500
Atmel Corp. (a) 48,200 1,614,700
Cascade Communications Corp. (a) 35,000 2,161,250
Cypress Semiconductor Corp. (a) 187,600 4,338,250
Electroglas, Inc. (a) 75,000 2,503,125
Hitachi Ltd. ADR 20,000 1,985,000
Integrated Device Technology, Inc. (a) 72,900 2,159,663
COMMON STOCKS - CONTINUED
SHARES VALUE
(NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Intel Corp. 175,000 $ 11,178,125
Kemet Corp. (a) 103,300 3,060,263
LSI Logic Corp. (a) 224,900 9,080,338
Linear Technology Corp. 160,000 7,920,000
Marshall Industries (a) 85,000 2,273,750
Maxim Integrated Products, Inc. (a) 80,000 2,800,000
Microchip Technology, Inc. (a) 175,050 4,813,875
Micron Technology, Inc. 340,000 15,002,500
Motorola, Inc. 750,000 43,406,250
National Semiconductor Corp. (a) 275,000 5,362,500
Opti, Inc. (a) 85,700 1,349,775
Quality Semiconductor, Inc. (a) 101,400 1,267,500
SGS-Thomson Microelectronic NV (a) 92,500 2,104,375
Solectron Corp. (a) 60,000 1,650,000
Standard Microsystems Corp. (a) 45,000 1,350,000
Tencor Instruments (a) 100,000 3,850,000
Texas Instruments, Inc. 190,000 14,226,250
Thomas & Betts Corp. 29,000 1,946,625
Wholesale Cellular USA, Inc. (a) 96,700 1,498,850
Xilinx, Inc. (a) 75,000 4,443,750
173,737,527
TOTAL TECHNOLOGY 847,971,245
TRANSPORTATION - 0.4%
RAILROADS - 0.2%
CSX Corp. 75,000 5,221,875
TRUCKING & FREIGHT - 0.2%
Landstar System, Inc. (a) 45,100 1,477,025
TNT Freightways Corp. 70,000 1,793,750
3,270,775
TOTAL TRANSPORTATION 8,492,650
UTILITIES - 10.2%
CELLULAR - 5.6%
Airtouch Communications (a) 1,250,000 36,406,250
Arch Communications Group, Inc. (a) 100,000 1,762,500
BCE Mobile Communications, Inc. (a) 225,000 7,142,094
Cellular Communications, Inc.,
Series A (redeemable) (a) 103,300 5,526,550
Commnet Cellular, Inc. (a) 260,000 7,540,000
LIN Broadcasting Corp. 40,000 5,340,000
Metrocall, Inc. (a) 158,600 2,696,200
Rogers Cantel Mobile Communications, Inc.
Class B (non-vtg.) (a) 200,000 5,884,870
Technology Resources Industries BHD (a) 650,000 2,074,605
USA Mobile Communication (a) 6,000 61,500
United States Cellular Corp. (a) 239,100 7,830,525
Vanguard Cellular Systems, Inc. Class A (a) 1,204,700 31,021,025
Vodafone Group PLC sponsored ADR 190,100 6,392,113
119,678,232
TELEPHONE SERVICES - 4.6%
ALC Communications Corp. (a) 134,100 4,173,863
AT&T Corp. 550,000 27,637,500
Ameritech Corp. 350,000 14,131,250
Bell Atlantic Corp. 175,000 8,706,250
LCI International, Inc. (a) 215,000 5,751,250
MCI Communications Corp. 200,000 3,675,000
NYNEX Corp. 160,000 5,880,000
Rochester Telephone Corp. 185,000 3,908,125
SHARES VALUE
(NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Southwestern Bell Corp. 355,000 $ 14,333,125
Telephone & Data Systems, Inc. 137,599 6,346,754
U.S. West, Inc. 140,000 4,987,500
99,530,617
TOTAL UTILITIES 219,208,849
TOTAL COMMON STOCKS
(Cost $1,612,919,026) 1,891,441,015
REPURCHASE AGREEMENTS - 11.9%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements,
(U.S.Treasury obligations), in a joint
trading account at 5.77%, dated
12/30/94 due 1/3/95 $255,935,978 255,772,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,868,691,026) $ 2,147,213,015
LEGEND
(a) Non-income producing
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $2,594,540,594 and $1,836,138,572, respectively.
INCOME TAX INFORMATION
At December 31, 1994, the aggregate cost of investment securities for
income tax purposes was $1,882,646,486. Net unrealized appreciation
aggregated $264,566,529, of which $308,027,679 related to appreciated
investment securities and $43,461,150 related to depreciated investment
securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $68,037,000, all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1994
ASSETS
Investment in securities, at value (including repurchase agreements of $255,772,000) (cost $1,868,691,026) - $ 2,147,213,015
See accompanying schedule
Cash 548
Receivable for investments sold 24,851,482
Receivable for fund shares sold 15,932,257
Dividends receivable 1,749,127
Other receivables 100,556
TOTAL ASSETS 2,189,846,985
LIABILITIES
Payable for investments purchased $ 37,461,229
Payable for fund shares redeemed 9,061,731
Accrued management fee 1,040,416
Other payables and accrued expenses 414,275
TOTAL LIABILITIES 47,977,651
NET ASSETS $ 2,141,869,334
Net Assets consist of:
Paid in capital $ 1,933,850,932
Undistributed net investment income 11,472,202
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (81,975,789)
Net unrealized appreciation (depreciation) on investments 278,521,989
NET ASSETS, for 98,743,176 shares outstanding $ 2,141,869,334
NET ASSET VALUE, offering price and redemption price per share ($2,141,869,334 (divided by) 98,743,176 shares) $21.69
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
INVESTMENT INCOME $ 14,474,718
Dividends (including $11,159 received from affiliated issuers)
Interest 9,082,326
TOTAL INCOME 23,557,044
EXPENSES
Management fee $ 10,585,482
Transfer agent fees 212,064
Accounting fees and expenses 664,914
Non-interested trustees' compensation 16,341
Custodian fees and expenses 119,065
Registration fees 255,292
Audit 52,610
Legal 17,495
Interest 9,901
Miscellaneous 18,148
Total expenses before reductions 11,951,312
Expense reductions (204,452 11,746,860
)
NET INVESTMENT INCOME 11,810,184
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including (74,094,758
realized loss of $234,101 )
on sales of investments in
affiliated issuers)
Foreign currency transactions (7,900 (74,102,658
) )
Change in net unrealized appreciation (depreciation) on investment securities 80,193,945
NET GAIN (LOSS) 6,091,287
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 17,901,471
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 11,810,184 $ 7,364,896
Net investment income
Net realized gain (loss) (74,102,658) 77,232,971
Change in net unrealized appreciation (depreciation) 80,193,945 86,481,802
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 17,901,471 171,079,669
Distributions to shareholders: (7,589,523) (4,411,941)
From net investment income
From net realized gain (80,320,550) (8,449,098)
In excess of net realized gain - (4,786,725)
TOTAL DISTRIBUTIONS (87,910,073) (17,647,764)
Share transactions 1,289,938,019 798,421,513
Net proceeds from sales of shares
Reinvestment of distributions 87,909,946 17,647,764
Cost of shares redeemed (549,819,377) (335,488,823)
Net increase (decrease) in net assets resulting from share transactions 828,028,588 480,580,454
TOTAL INCREASE (DECREASE) IN NET ASSETS 758,019,986 634,012,359
NET ASSETS
Beginning of period 1,383,849,348 749,836,989
End of period (including undistributed net investment income of $11,472,202 and $7,251,541,
respectively) $ 2,141,869,334 $ 1,383,849,348
OTHER INFORMATION
Shares
Sold 60,676,019 37,006,075
Issued in reinvestment of distributions 4,039,985 881,947
Redeemed (25,920,211) (15,878,913)
Net increase (decrease) 38,795,793 22,009,109
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
SELECTED PER-SHARE DATA 1994 1993 1992 1991 1990
Net asset value, beginning of period $ 23.08 $ 19.76 $ 18.51 $ 12.91 $ 15.18
Income from Investment Operations
Net investment income .12 .12 .09 .09 C .24
Net realized and unrealized gain (loss) (.12) D 3.64 1.64 5.72 (1.98)
Total from investment operations - 3.76 1.73 5.81 (1.74)
Less Distributions (.12) (.11) (.05) (.21) (.21)
From net investment income
From net realized gain (1.27) (.21) (.43) - (.32)
In excess of net realized gain - (.12) - - -
Total distributions (1.39) (.44) (.48) (.21) (.53)
Net asset value, end of period $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91
TOTAL RETURN A (.02)% 19.37% 9.32% 45.51% (11.73)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 2,141,869 $ 1,383,849 $ 749,837 $ 371,462 $ 135,487
Ratio of expenses to average net assets B .69% .71% .75% .84% .88%
Ratio of expenses to average net assets before
expense reductions B .70% .71% .75% .84% .88%
Ratio of net investment income to average net assets .69% .72% .83% .56% 2.69%
Portfolio turnover rate 122% 159% 262% 261% 88%
</TABLE>
A TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
B SEE NOTE 6 OF NOTES TO FINANCIAL STATEMENTS.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF
SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET
VALUES OF THE INVESTMENTS OF THE FUND.
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
DECEMBER 31, 1994 YEAR YEARS FUND
OVERSEAS 1.72% 5.79% 7.01%
Morgan Stanley EAFE Index 7.78% 1.50% 8.44%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
Many markets around the globe offer the potential
for significant growth over time; however,
investing in foreign markets means assuming
greater risks than investing in the United States.
Factors like changes in a country's financial
markets, its local political and economic
climate, and the fluctuating value of its currency
create these risks. For these reasons an
international fund's performance may be more
volatile than a fund that invests exclusively in the
United States.
(checkmark)
You can compare the fund's figures to the performance of the Morgan Stanley
EAFE index - a broad measure of the performance of stocks in Europe,
Australia, and the Far East. This benchmark includes reinvested dividends
and capital gains, if any, and excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of operations
January 28, 1987.
PERFORMANCE NUMBERS ARE NET OF ALL 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, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. Foreign investments involve greater risks and
potential rewards than U.S. investments. These risks include political and
economic uncertainties of foreign countries, as well as the risk of
currency fluctuations.
$10,000 OVER LIFE OF FUND
VIP Overseas (221) Europe, Australia, a
01/28/87 10000.00 10000.00
01/31/87 10000.00 11052.45
02/28/87 10010.00 11383.22
03/31/87 10460.00 12316.00
04/30/87 11220.00 13619.17
05/31/87 11060.00 13619.12
06/30/87 10520.00 13185.22
07/31/87 10400.00 13162.19
08/31/87 11320.00 14149.11
09/30/87 11070.00 13926.36
10/31/87 8760.00 11914.25
11/30/87 8840.00 12092.96
12/31/87 9462.16 12452.04
01/31/88 9138.32 12674.36
02/29/88 9381.20 13519.19
03/31/88 9806.24 14350.43
04/30/88 9968.16 14558.97
05/31/88 9786.00 14092.26
06/30/88 9613.96 13720.82
07/31/88 9543.12 14151.29
08/31/88 9209.16 13231.20
09/30/88 9603.84 13809.33
10/31/88 10028.88 14990.89
11/30/88 10211.04 15883.84
12/31/88 10231.28 15972.40
01/31/89 10534.88 16253.42
02/28/89 10717.04 16336.97
03/31/89 10707.39 16016.33
04/30/89 11023.51 16164.88
05/31/89 10615.61 15285.46
06/30/89 10574.82 15028.15
07/31/89 11563.98 16915.28
08/31/89 11482.40 16154.53
09/30/89 12196.22 16890.40
10/31/89 11533.38 16211.79
11/30/89 12155.43 17026.75
12/31/89 12920.25 17654.99
01/31/90 12746.89 16998.07
02/28/90 12449.36 15811.70
03/31/90 12919.92 14164.50
04/30/90 12991.53 14052.09
05/31/90 13840.58 15655.45
06/30/90 14147.47 15517.56
07/31/90 14863.54 15736.13
08/31/90 13349.56 14208.02
09/30/90 12081.10 12227.93
10/31/90 13206.35 14133.27
11/30/90 12797.17 13299.58
12/31/90 12705.10 13515.03
01/31/91 12827.86 13952.17
02/28/91 13260.02 15447.83
03/31/91 12872.18 14520.46
04/30/91 13155.20 14663.05
05/31/91 13186.65 14816.05
06/30/91 12463.37 13727.35
07/31/91 13081.82 14401.80
08/31/91 13123.75 14109.33
09/30/91 13658.35 14904.52
10/31/91 13752.69 15115.81
11/30/91 13260.02 14410.13
12/31/91 13721.24 15154.32
01/31/92 13888.95 14830.62
02/29/92 13599.53 14299.80
03/31/92 13323.29 13355.78
04/30/92 14152.01 13419.27
05/31/92 14768.24 14317.50
06/30/92 14492.00 13638.38
07/31/92 13567.65 13289.34
08/31/92 13450.78 14122.85
09/30/92 12908.93 13843.97
10/31/92 12027.08 13117.79
11/30/92 11963.33 13241.23
12/31/92 12250.20 13309.72
01/31/93 12600.81 13308.08
02/28/93 12847.63 13710.08
03/31/93 13738.92 14905.12
04/30/93 14651.95 16319.66
05/31/93 14967.16 16664.32
06/30/93 14597.60 16404.33
07/31/93 15173.68 16978.56
08/31/93 15988.89 17895.11
09/30/93 15901.93 17492.31
10/31/93 16478.01 18031.38
11/30/93 15782.37 16455.25
12/31/93 16825.83 17643.43
01/31/94 17923.64 19135.10
02/28/94 17607.52 19082.10
03/31/94 17170.61 18260.21
04/30/94 17738.59 19034.98
05/31/94 17520.14 18925.69
06/30/94 17334.45 19193.15
07/31/94 17793.21 19377.73
08/31/94 18000.74 19836.50
09/30/94 17531.06 19211.74
10/31/94 17891.51 19851.49
11/30/94 17214.30 18897.42
12/30/94 17116.00 19015.75
Let's say you invested $10,000 in Overseas Portfolio on January 28, 1987,
when the fund started. By December 31, 1994, your investment would have
grown to $17,116 - a 71.16% increase. That compares to $10,000 invested in
the Morgan Stanley EAFE Index, which would have grown to $19,016 over the
same period - a 90.16% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1994
% OF FUND'S
INVESTMENTS
Deutsche Bank AG 1.3
C. S. Holdings (Bearer) 1.2
Total SA Class B 1.0
Nomura Securities Ltd. 1.0
Tokio Marine & Fire Insurance Co. Ltd. (The) 1.0
TOP FIVE INDUSTRIES AS OF DECEMBER 31, 1994
% OF FUND'S
INVESTMENTS
Finance 23.0
Durables 9.4
Basic Industries 8.2
Utilities 6.5
Technolgy 5.5
GEOGRAPHIC DIVERSIFICATION AS OF DECEMBER 31, 1994
(BY LOCATION OF ISSUER) % OF FUND'S
INVESTMENTS
Japan 22.5
United Kingdom 9.6
Switzerland 7.5
France 7.3
Germany 5.6
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with John Hickling, Portfolio Manager of Overseas Portfolio
Q. JOHN, HOW DID THE FUND DO?
A. The fund's performance trailed that of the EAFE index -
a broad measure of stocks in Europe, Australia and the Far East - which had
a total return of 7.78% for the 12 months ended
December 31, 1994.
Q. WHY DID THE FUND LAG THE INDEX DURING 1994?
A. The biggest reason was the strength of the Japanese yen relative to the
U.S. dollar. During 1994, the EAFE index maintained roughly a 50% weighting
in Japan. Although the fund also had a significant Japanese stake, it was
underweighted relative to the index due to stock selection. For example, I
focused on auto and electronics companies, but stayed away from stocks such
as those of Japanese city banks, which I didn't think were attractive.
These banks underperformed as I expected. However, because Japanese stocks
are denominated in yen, and the yen was very strong against the dollar,
these stocks actually ended up boosting the performance of the index in
dollar terms.
Q. THE FUND MAINTAINED AT LEAST A 20% STAKE IN JAPAN DURING MUCH OF 1994.
ASIDE FROM THE SITUATION WITH THE STRONG YEN, HOW DID THAT STRATEGY WORK
OUT?
A. Generally, very well. By the end of 1993, the Japanese stock market
appeared very inexpensive by historical standards. That's when I began to
decrease some of the fund's investments in Southeast Asian markets - which
had become very expensive - and increase investments in Japan. That proved
to be a solid move as the Southeast Asian markets fell in early 1994, while
Japanese stocks rose quickly. Japan's economy slowly began to recover, and
the low valuations of Japanese stocks - their prices relative to earnings -
began to attract more foreign investors. As it turned out, Japan's stock
market was the strongest performer of any developed nation in 1994.
Q. SPECIFICALLY, WHERE DID YOU FOCUS YOUR JAPANESE INVESTMENTS?
A. My goal was to find stocks of companies whose earnings were recovering
faster than the overall Japanese economy. Cyclical stocks - which rise and
fall with economic cycles - benefited from Japan's economic upturn and
performed well. Examples included auto makers Toyota and Honda. In
addition, I focused on other large exporters such as electronics companies
Toshiba and Hitachi. Again, their stocks were very inexpensive at the
beginning of 1994, and these companies have benefited from positive trends
in the global electronics industry.
Q. MANY EMERGING MARKETS SUFFERED IN DECEMBER 1994, AFTER MEXICO DEVALUED
ITS CURRENCY. DID THAT NEGATIVELY AFFECT THE FUND?
A. It didn't have much of an effect on the fund because I didn't have many
investments in emerging markets. At the end of November, the fund had
roughly a 1% stake in Mexico, and less than a 1% stake each in Argentina,
Brazil and Chile. As with Southeast Asia, I had my eye on some of these
emerging markets, but had yet to make any significant moves. However, now
that these markets have fallen, I'll be looking for buy opportunities.
Q. LET'S TURN TO EUROPE. HOW DID THOSE MARKETS PERFORM IN 1994?
A. Overall, European markets were disappointing. When interest rates rose
in the U.S., many European countries followed suit, which put pressure on
stocks. But despite this poor performance, I'm optimistic. Corporate
earnings in Europe generally have been positive. Many companies have been
cutting costs and increasing productivity, which should eventually boost
both earnings and stock prices.
Q. WHAT'S YOUR OUTLOOK?
A. I think Japan's prospects look good for 1995 because I expect the
country's economy to continue to improve. I'm also fairly optimistic about
Europe because I expect - barring any major interest rate increases in the
U.S. - that stock and bond markets there will begin to recover in '95.
However, I remain cautious about Southeast Asia. That's because market
optimists have jumped back on the bandwagon, and I think there's reason to
be concerned that stock prices could become overly inflated. However, I'll
continue to look for opportunities in any markets that appear to have
excellent value.
FUND FACTS
GOAL: to increase the value of the fund's
shares by investing mainly in stocks in Europe,
the Far East, and the Pacific Basin
START DATE: January 28, 1987
SIZE: as of December 31, 1994, more than
$1.2 billion
MANAGER: John Hickling, since 1993;
manager, Fidelity Overseas Fund, since 1993;
Fidelity
Advisor Overseas Portfolio, since 1993;
previously managed the Fidelity Japan, Fidelity
Europe, International Growth and Income,
International Opportunities (now Emerging
Markets), and Pacific Basin funds; joined
Fidelity in 1982
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
INVESTMENTS DECEMBER 31, 1994
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 80.9%
SHARES VALUE
(NOTE 1)
ARGENTINA - 0.4%
Buenos Aires Embotelladora SA
sponsored ADR 41,800 $ 1,347,538
Perez Companc Class B 261,400 1,076,913
Telecom Argentina Stet France
Telecom SA 263,600 1,291,577
YPF Sociedad Anonima sponsored
ADR representing Class D shares 100,500 2,148,188
5,864,216
AUSTRALIA - 1.4%
Ampolex Ltd. Ord. 450,800 1,216,200
Brambles Industries 213,500 2,039,156
FAI Insurance Ltd. Ord. 2,037,900 1,232,318
Lend Lease Corp. Ltd. 81,000 1,002,212
Pioneer International Ltd. 493,300 1,223,779
TNT Ltd. (a) 1,658,800 2,829,166
Westpac Banking Corp. 2,521,000 8,501,669
18,044,500
AUSTRIA - 0.8%
Mayr Melnhof Karton AG (a) 33,400 1,962,814
OEMV AG (a) 62,400 5,286,051
Steyr Daimler Puch AG (a) 41,500 715,288
VA Technologies AG (a) 6,800 684,520
VA Technologie AG (a)(f) 15,000 1,509,970
10,158,643
BELGIUM - 1.2%
Bekaert SA 2,120 1,504,774
Delhaize 102,400 4,148,744
Petrofina SA 11,900 3,528,141
Petrofina SA (warrants) (a) 595 11,623
Solvay 12,762 6,052,330
15,245,612
BERMUDA - 0.2%
Consolidated Electric Power Asia Ltd.
sponsored ADR (a)(f) 30,000 648,750
Jardine Strategic Holdings Ltd. 439,500 1,442,660
2,091,410
BRAZIL - 0.4%
Coteminas PN 2,500,000 855,950
Telebras PN (Pfd. Reg.) 109,237,070 4,888,359
5,744,309
CANADA - 0.5%
Abitibi-Price, Inc. (a) 126,900 1,753,825
Midland Walwyn Inc. 141,000 766,906
Noranda, Inc. 245,400 4,638,777
7,159,508
CHILE - 0.0%
Vina Concha y Toro SA
sponsored ADR 35,300 582,450
FINLAND - 0.3%
Outokumpu OY Class A (a) 125,700 2,308,321
Valmet Corp. Ord. (a) 117,100 2,227,016
4,535,337
SHARES VALUE
(NOTE 1)
FRANCE - 7.1%
Accor SA 65,158 $ 7,081,065
Havas Group SA 53,300 4,164,530
BNP CI Ord. 222,840 10,250,558
Carnaudmetalbox SA 53,100 1,795,869
Club Mediterranee Ord. 15,700 1,314,952
Compagnie Bancaire Ord. 50,300 4,853,757
Credit Lyonnais CI 24,500 2,029,042
Elf Aquitaine 116,928 8,235,570
Eramet SA (a)(f) 9,000 581,788
GAN (Groupe Des Assur Natl.) 70,500 3,606,239
Lafarge Coppee 100,300 7,141,465
Pechiney International 46,200 1,385,048
Peugeot SA Ord. (a) 27,700 3,799,213
Rhone Poulenc SA Class A 348,250 8,084,725
Societe Generale Class A 92,900 9,765,205
Total SA Class B 220,000 12,786,959
Valeo SA 71,100 3,542,344
Vallourec (a) 33,200 1,604,947
92,023,276
GERMANY - 5.4%
Allianz Versich Holdings Ord. (Reg.) 2,250 3,615,682
BASF AG 21,600 4,453,824
BMW AG 13,018 6,469,093
Continental Gummi-Werke AG 25,600 3,733,850
Deutsche Bank AG 35,800 16,635,044
Duerr Beteiligungs AG 7,100 2,680,542
Gildemeister AG (a) 28,620 2,936,806
Hoechst AG Ord. 30,400 6,611,681
Kolbenschmidt AG (a) 16,400 1,968,635
Man AG Ord. 20,000 5,472,733
Schmalbach-Lubeca AG 7,350 1,551,113
Sixt AG Ord. 3,100 780,252
Thyssen AG Ord. 19,700 3,756,922
Veba Vereinigte Elektrizitaets &
Bergwerks AG Ord. 27,400 9,548,887
70,215,064
HONG KONG - 1.6%
Amoy Properties Ltd. 2,084,000 1,885,249
Dickson Concept 2,108,000 1,375,723
HSBC Holdings PLC 768,000 8,287,411
Hong Kong Land Holdings Ltd. 2,217,000 4,326,276
Hopewell Holdings Ltd. 2,242,000 1,854,336
Jardine Matheson Holdings Ltd. 336,659 2,403,775
Peregrine Investments Holdings 300,000 352,803
Semi-tech Microelectronics 100,000 168,648
20,654,221
INDIA - 0.2%
ITC Ltd. (warrants) (a)(f) 8,000 48,000
Reliance Industries Ltd. (a) 106,400 2,074,800
2,122,800
INDONESIA - 0.7%
Astra International (For. Reg.) 160,000 305,733
Bank International Indonesia Ord. 643,500 2,049,361
Jakarta International Hotels &
Development Ord. 1,541,000 1,998,107
Matahari Putra Prima PT (For. Reg.) 350,500 653,798
Sampoerna, Hanjaya Mandala
(For. Reg.) 878,750 4,317,791
9,324,790
COMMON STOCKS - CONTINUED
SHARES VALUE
(NOTE 1)
IRELAND - 0.8%
Bank of Ireland U.S. Holdings, Inc. 880,500 $ 4,137,910
Fyffes PLC (UK) 1,358,000 2,180,486
Independent News 521,050 2,162,998
Smurfit (Jefferson) Group PLC (UK) 194,000 1,129,751
Waterford Wedgwood PLC Unit (a) 1,351,400 1,201,381
10,812,526
ITALY - 1.4%
Alitalia (Linee Aeree Italy) Class A (a) 1,683,700 1,039,163
Assicurazioni Generali SPA 218,570 5,134,660
Editoriale L'Espresso SPA 220,700 569,373
Istituto Mobiliare Italiano 301,400 1,848,115
Istituto Nazionale Delle
Assicurazioni SPA (a) 1,200,500 1,592,271
Montedison SPA Ord. 2,962,700 2,228,987
SAI (Soc. Assicur. Industriale) 189,000 2,138,522
Telecom Italia Ord. 1,597,600 4,146,219
18,697,310
JAPAN - 22.5%
ADO Electronic Industrial Co. 19,000 607,619
AIDA Engineering Ltd. Ord. 176,000 1,552,683
Advantest Corp. 74,000 2,500,050
Akita Bank 73,000 581,805
Alps Electric Co. Ltd. 149,000 1,956,792
Amada Metrecs Co. Ltd. 86,000 1,474,286
Amadasonoike Co. Ltd. 282,000 2,453,894
Autobacs Seven Co. Ltd. 15,600 1,861,053
Bridgestone Corp. 379,000 5,927,219
Canon, Inc. 552,000 9,352,183
Daicel Chemical Industries Co. 397,000 2,236,734
East Japan Railway Ord. 700 3,494,737
Fanuc Ltd. 98,200 4,617,123
Fujitsu Ltd. 726,000 7,350,975
Futaba Industrial Co. Ltd. 126,000 2,627,368
Hachijuni Bank Ltd. 66,000 780,752
Hanshin Department Store 29,000 204,962
Higo Bank Ltd. Ord. 96,000 789,173
Hitachi Ltd. 1,247,000 12,363,743
Honda Motor Co. Ltd. 369,000 6,547,669
Izumi Co. Ord. 42,000 1,073,684
Ishihara Sangyo Kaisha Ltd. (a) 343,000 1,372,000
Japan Airlines Co. Ltd. 302,000 2,128,381
Joshin Denki Co. Ltd. Ord. 92,000 1,300,451
Kawasaki Steel Corp. (a) 1,070,000 4,473,082
Komatsu Limited Ord. 367,000 3,311,280
Kyocera Corporation 17,000 1,259,449
Marubeni Corp. 339,000 1,869,171
Marukyo Corp. 16,000 489,223
Matsushita Electric Industrial Co. Ltd. 281,000 4,619,949
Minebea Co. 432,000 3,637,894
Mitsubishi Chemical Industries Ltd. 421,200 2,313,959
Mitsubishi Estate Co. Ltd. 264,000 2,831,880
Mitsubishi Heavy Industry 492,000 3,748,573
Mitsubishi Trust & Banking 443,000 6,617,242
Mitsui OSK Lines Ltd. 457,000 1,731,788
Mitsui Petrochemical Industries Inc. 270,000 2,381,956
Mitsui Trust and Banking 103,000 1,073,885
Murata Manufacturing Co. Ord. 181,000 6,985,965
Nichido Fire & Marine Insurance Co. 502,000 4,343,118
Nikko Securities Co. Ltd. 373,000 4,225,463
Nisshinbo Industries 248,000 2,859,147
SHARES VALUE
(NOTE 1)
Nippon Telegraph &
Telephone Corp. Ord. 400 $ 3,532,832
Nippon Yusen Kabushiki Kaisha 354,000 2,320,962
Nippon Zeon Co. Ltd. (a) 243,000 1,286,255
Nissan Motor Co. Ltd. Ord. 539,000 4,447,090
Nitto Denko Corp. 97,000 1,536,441
Nomura Securities Ltd. 615,000 12,762,406
Oji Paper Ltd. 154,000 1,621,053
Omron Corp. 137,000 2,527,118
Orix Corp. 242,000 8,927,920
Pioneer Electronic Corp. 241,000 5,798,496
Rohm Co. Ltd. 120,000 5,076,692
Sankyo Co. Ltd. 373,000 9,273,586
Sanwa Bank 95,000 1,885,714
Seino Transpotation Co. Ltd. 144,000 2,627,368
Sharp Corp. 124,000 2,237,594
Sony Corp. 165,500 9,374,186
Sumitomo Marine and Fire 420,000 3,621,051
Sumitomo Realty & Development Co. Ltd. 648,000 3,832,784
Sumitomo Rubber Industries 185,400 1,797,312
Sumitomo Trust & Banking Co. 315,000 4,421,053
Suzuki Motor Corp. 228,000 2,674,285
TDK Corp. 88,000 4,261,052
Takashimaya 198,000 2,977,443
Takeda Chemical Industries Ltd. 496,000 6,016,644
Tokio Marine & Fire Insurance
Co. Ltd. (The) 1,013,000 12,389,578
Tokyo Electron Ltd. 38,000 1,180,953
Tokyo Steel Manufacturing Co. Ltd. 188,400 4,079,640
Tokyo Style Co. Ltd. 335,000 5,675,691
Toshiba Corp. 1,470,000 10,654,736
Toyobo Co. 367,000 1,460,642
Toyota Motor Corp. 514,000 10,821,052
Tsugami Corp. 253,000 1,468,541
Yamanouchi Pharmaceutical 350,000 7,192,983
293,689,513
KOREA (SOUTH) - 0.9%
Cho Hung Bank Co. Ltd. 157,000 2,416,974
Cho Hung Bank Co. Ltd. (New) (a) 34,504 498,853
Korea Electric Power Corp. 147,470 5,201,568
Korea First Securities Co. Ltd (a). 6,422 110,766
Korea First Securities Co. Ltd. (New) (a) 661 10,311
Kyungki Bank Ltd. (a) 135,000 1,455,295
Kyungki Bank Ltd. FP (a) 36,523 275,601
Seoul Securities Co. (a) 72,420 1,258,280
11,227,648
LUXEMBOURG - 0.1%
Quilmes Industries SA 53,975 1,241,425
MALAYSIA - 0.9%
Aokam Perdana BHD 70,000 433,131
Hong Leong Credit BHD 90,000 437,047
KL Industries Holdings BHD (a) 290,000 442,923
Magnum Corp. BHD 262,500 470,825
Malaysian Banking 133,000 802,115
Resorts World BHD 443,000 2,602,310
Sime Darby BHD 786,000 1,800,702
Telekom Malaysia BHD 563,000 3,814,331
Tenega Nasional BHD 3,000 11,866
Time Engineering BHD 161,000 400,372
11,215,622
COMMON STOCKS - CONTINUED
SHARES VALUE
(NOTE 1)
MEXICO - 0.9%
Cemex SA, Series B 498,500 $ 2,597,185
Cifra SA Class C 1,559,100 2,962,290
Consorcio G Grupo Dina SA:
ADR 34,800 330,600
sponsored ADR, Series L 12,543 94,073
Grupo Carso SA de CV Class A-1 157,900 1,152,670
Grupo Financiero Bancomer SA de CV
sponsored ADR, Series C (a)(f) 70,200 772,200
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 102,900 4,218,900
12,127,918
NETHERLANDS - 5.1%
AKZO Nobel NV Ord. 66,800 7,716,578
ABN-AMRO Holdings NV 46,500 1,616,296
Aegon NV Ord. 20,900 1,337,272
Frans Maas Groep NV (Koninklj) 61,400 1,911,229
Heineken NV 24,700 3,727,496
Hoogovens en Staalfabrieken (a) 45,900 2,084,920
International Nederlanden Groep CVA 219,130 10,357,771
KLM Royal Dutch Airlines Ord. (a) 198,200 4,867,027
Koninklijke PPT Nederland 221,500 7,469,306
Koninklijke PPT Nederland (f) 80,600 2,717,950
Oce Van Der Grinten NV 136,700 6,122,659
Philips Electronics 229,700 6,805,731
Pirelli Tyre Holdings NV Ord. 810,300 4,857,692
Unilever N.V. Ord. 43,400 5,101,026
66,692,953
NEW ZEALAND - 0.2%
Fletcher Challenge Ltd. (Reg.) 870,100 2,044,169
NORWAY - 2.6%
Bergesen Group:
Class A 120,600 2,942,159
Class B 301,600 7,313,245
Christiania Bank Free shares Ord. (a) 1,295,000 2,642,305
Den Norske Bank Class A Free shares (a) 1,146,800 3,069,032
Norsk Hydro AS 84,250 3,313,496
Norsk Hydro AS ADR 70,600 2,762,225
Norske Skogindustrier AS A
Free shares 67,100 1,884,999
Orkla AS:
Class B (non-vtg.) 39,500 1,401,662
Class A Free shares 93,250 3,405,498
Saga Petroleum AS B 185,100 1,915,752
Unitor AS 192,300 3,241,299
TOTAL NORWAY 33,891,672
PAKISTAN - 0.1%
Pakistan Telecommunications Voucher
GDR (a)(f) 8,630 1,078,750
SINGAPORE - 0.8%
Kim Eng Holdings Ltd. 2,455,000 2,559,387
Neptune Orient Lines Ltd. 4,125,000 5,658,428
Overseas Union Bank Ltd. (For. Reg.) 265,000 1,544,924
Van Der Horst Ltd. 156,000 479,341
10,242,080
SOUTH AFRICA - 0.0%
De Beers Consolidated Mines Ltd. ADR 24,000 561,000
SHARES VALUE
(NOTE 1)
SPAIN - 3.5%
Banco Bilbao Vizcaya SA Ord. (Reg.) 349,100 $ 8,654,604
Banco Intercontinental Espanol 49,350 4,073,155
Corporacion Mapfre International
Reassurance (Reg.) 156,900 6,552,392
Iberdrola SA 388,500 2,395,308
Mapfre Vida SA 6,950 299,742
Repsol SA Ord. 114,200 3,095,626
Tabacalera, Series A 192,000 5,117,084
Telefonica de Espana SA Ord. 924,950 10,921,014
Union Electrica Fenosa 1,077,400 4,483,029
45,591,954
SWEDEN - 2.7%
Aktiebolaget Electrolux AB 121,800 6,177,086
Investor AB Free shares B 224,700 5,592,033
Marieberg Tidnings 'A' 36,600 827,152
SKF AB Ord. (a) 275,800 4,544,911
Skandia International Holding Co.
AB ADR 35,400 611,929
Skandinaviska Enskilda Banken
Class A Free shares 879,800 5,030,001
Svenska Cellulosa Aktiebolaget
SCA Ord. B 201,700 3,161,016
Volvo Aktiebolaget Class B 476,600 8,975,879
34,920,007
SWITZERLAND - 7.5%
Adia SA (Bearer) 54,800 9,126,356
Alusuisse Lonza (Reg.) 21,039 10,527,536
Ascom Holding Ltd. (Bearer) (a) 1,400 1,486,631
Baloise Holdings (Reg.) 5,635 10,245,455
C. S. Holdings:
(Bearer) 35,641 15,247,487
(Reg.) 68,900 5,895,187
Ciba-Geigy AG (Reg.) 8,680 5,178,824
Fischer (Georg) AG (Reg.) 12,400 2,690,298
Holderbank Financiere AG PC
(Bearer) 13,725 10,390,737
Nestle SA (Reg.) 10,700 10,193,201
Oerlikon-Buhrle Holding Ltd. (Reg.) (a) 12,000 1,191,749
Roche Holdings Ltd.
(participation certificates) 700 3,387,701
Surveillance, Societe Generale (Bearer) 410 566,921
Swiss Bank Corp. (Bearer) 43,450 12,015,966
98,144,049
THAILAND - 1.0%
Bank of Asia Public Co. Ltd (For. Reg.) 322,100 776,222
Krung Thai Bank (For. Reg.) (a) 1,139,400 3,766,982
Ruam Pattana Fund II (For. Reg.) 1,117,000 645,146
Ruang Khao Unit Trust (For. Reg.) (a) 836,800 541,644
Siam City Bank PCL (For. Reg.) 5,898,800 7,518,905
13,248,899
TURKEY - 0.1%
Aksigoria (a)(f) 952,000 191,876
Cimentas AS 500,000 348,840
Tofas Turk Otomobil Fabrikasi AS
ADR (f) 165,600 682,272
1,222,988
COMMON STOCKS - CONTINUED
SHARES VALUE
(NOTE 1)
UNITED KINGDOM - 9.6%
Amstrad 40,000 $ 83,964
Argyll Group PLC Ord. 626,900 2,641,688
Arjo Wiggins Appleton, PLC 842,400 3,140,695
Avon Rubber 81,900 597,861
BET Public Ltd. Co. Ord. 2,629,800 4,181,382
Barclays PLC Ord. 1,107,900 10,604,065
Bass PLC Ord. 590,100 4,755,994
Boots Co. PLC (The) 476,100 3,758,886
British Gas PLC Ord. 310,100 1,520,467
British Sky Broadcast Group 159,600 640,034
British Steel PLC Ord. 1,894,800 4,571,034
De La Rue Co. 370,900 5,490,592
Dixons Group PLC (a) 1,269,700 3,779,072
Electrocomponents PLC 248,300 1,847,571
English China Clay PLC 811,094 4,675,730
Forte PLC 1,706,100 6,440,988
General Electric PLC Ord. 5 pence 634,900 2,745,016
Great Universal Stores PLC Ord
Class A (a) 381,600 3,251,904
Hanson Trust PLC Ord. 674,000 2,438,950
Ladbroke Group PLC Ord. 1,760,200 4,687,501
Lloyds Abbey Life 549,600 2,866,961
London International Group (a) 2,294,600 3,235,042
Morrison (WM) Supermarkets 240,000 530,105
National Westminster Bank PLC Ord. 1,097,920 8,823,050
North West Water Ord. 337,700 2,867,218
Rolls Royce Ltd. Ord. 874,433 2,465,639
Royale Insurance Co. Ltd. 992,600 4,353,742
Sainsbury J PLC Ord. 675,300 4,353,085
Shanks & McEwan Group PLC 926,000 1,225,737
Spring Ram Corp. 2,326,000 1,457,472
TSB Group PLC 300 1,100
Taylor Woodrow PLC 322,500 646,651
Tesco PLC Ord. 1,343,700 5,241,223
Transport Development Group 475,500 1,549,331
Vickers PLC Ord. Unit 1,529,750 4,193,626
Vodafone Group PLC 780,000 2,590,364
Whitbread Class A 715,000 6,328,272
124,582,012
TOTAL COMMON STOCKS
(Cost $985,833,850) 1,054,998,631
PREFERRED STOCKS - 2.5%
NONCONVERTIBLE PREFERRED STOCKS - 2.5%
AUSTRIA - 0.5%
Creditanstaldt Bank 105,900 6,155,452
GERMANY - 0.2%
Boss (Hugo) AG 518 314,243
FAG Kugelfischer Georg Schaef 13,850 1,921,749
Fuchs Petrolub AG Oel & Chemie 4,401 465,804
2,701,796
ITALY - 1.7%
Banco Ambro Veneto N/C Risp 1,197,000 1,704,360
Fiat SPA Priv (a) 1,912,600 4,436,084
SAI (Sta Assicur Industriale)
N/C Risp 650,500 3,412,595
SHARES VALUE
(NOTE 1)
ITALY - CONTINUED
Stet (Societa Finanziaria Telefonica)
SPA 5,075,300 $ 12,037,901
Telecom Italia 150,000 301,343
21,892,283
KOREA (SOUTH) - 0.1%
Korea First Securities Co. (a) 66,140 822,032
Korea First Securities Co. (New) (a) 6,814 84,689
906,721
TOTAL PREFERRED STOCKS
(Cost $26,641,316) 31,656,252
CORPORATE BONDS - 0.0%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) (C) AMOUNT (B)
CONVERTIBLE BONDS - 0.0%
GRAND CAYMAN - 0.0%
CTII Overseas Finance euro
4 1/4%, 11/18/98 (f) - $ 265,000 191,463
TOTAL CORPORATE BONDS
(Cost $265,000) 191,463
FOREIGN GOVERNMENT OBLIGATIONS (D) - 1.1%
ARGENTINA - 0.3%
Argentina Republic BOCON
5 5/8%, 4/1/01 (e) B1 5,817,870 3,693,615
BRAZIL - 0.3%
Brazil Federative Republic IDU
euro 6.0625%, 1/1/01 (e) B1 5,145,000 4,296,075
DENMARK - 0.3%
Danish Government Bullet
7%, 12/15/04 Aa1 DKK 25,000,000 3,562,858
FRANCE - 0.2%
French Government Strips
4/25/23 Aaa FRF 168,000,000 2,785,087
TOTAL GOVERNMENT OBLIGATIONS
(Cost $15,944,236) 14,337,635
REPURCHASE AGREEMENTS - 15.5%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements,
(U.S.Treasury obligations), in a joint
trading account at 5.77%, dated
12/30/94 due 1/3/95 $ 202,391,672 202,262,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,230,946,402) $ 1,303,445,981
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO SELL
10,539,000 NLG 3/01/95 $ 6,085,289 $ (85,289)
228,920,092 FRF 2/16/95 42,905,087 248,301
4,043,255,600 JPY 1/11/95 40,584,513 298,988
19,770,750 CHF 2/09/95 15,141,955 521,767
TOTAL CONTRACTS TO SELL-
(Receivable amount $105,700,611) $ 104,716,844 983,767
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 8.0%
CURRENCY ABBREVIATIONS
CHF - Swiss franc
DKK - Danish krone
FRF - French franc
JPY - Japanese yen
NLG - Dutch guilder
LEGEND
(a) Non-income producing
(b) Principal amount is stated in United States dollars unless otherwise
noted.
(c) Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
(d) Some foreign government obligations have not been individually rated by
S&P or Moody's. The ratings listed are assigned to securities by FMR, the
fund's investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) 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 period
end, the value of these securities amounted to $8,423,019 or .6% of net
assets.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $873,445,945 and $388,846,099, respectively.
INCOME TAX INFORMATION
At December 31, 1994, the aggregate cost of investment securities for
income tax purposes was $1,231,355,402. Net unrealized appreciation
aggregated $72,090,579, of which $125,278,028 related to appreciated
investment securities and $53,187,449 related to depreciated investment
securities.
The fund hereby designates $4,685,000 as a capital gain dividend for the
purpose of the dividend paid deduction.
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Investments
Aerospace & Defense 0.3%
Basic Industries - 8.2%
Chemicals & Plastics 2.9
Metals & Mining 1.8
Nonferrous Metals & Mining 1.8
Packaging & Containers 0.5
Paper & Forest Products 1.2
Conglomerates 0.2
Construction & Real Estate - 3.1%
Building Materials 1.8
Construction 0.4
Engineering 0.2
Real Estate 0.6
Real Estate Investment Trusts 0.1
Durables - 9.4%
Autos, Tires, & Accessories 6.2
Textiles & Apparel 0.8
Consumer Durables 0.1
Consumer Electronics 2.3
Energy - 3.5%
Oil & Gas 3.5
Finance - 23.0%
Banks 14.0
Closed End Investment Company 0.1
Credit & Other Finance 1.1
Insurance 6.0
Securities Industry 1.8
Government Obligations 1.1
Health - 3.0%
Drugs & Pharmaceuticals 3.0
Holding Companies 0.8
Industrial Machinery & Equipment - 4.1%
Electrical Equipment 1.8
Industrial Machinery & Equipment 2.2
Pollution Control 0.1
Media & Leisure - 2.2%
Lodging & Gaming 1.9%
Publishing 0.3
Nondurables - 4.1%
Beverages 1.4
Foods 1.0
Household Products 1.0
Tobacco 0.7
Retail & Wholesale - 3.2%
General Merchandise Stores 0.5
Grocery Stores 1.6
Retail & Wholesals, Miscellaneous 1.1
Services - 3.0%
Advertising 0.3
Leasing & Rental 0.9
Services 1.8
Repurchase Agreements 15.5
Technology - 5.5%
Computer Equipment 0.1
Computers & Office Equipment 1.8
Electronic Instruments 0.2
Electronic 3.4
Transportation - 3.3%
Air Transportation 0.8
Railroads 0.3
Shipping 1.5
Trucking & Freight 0.7
Utilities - 6.5%
Cellular 0.2
Electric Utility 1.7
Gas 0.1
Telephone Services 4.3
Water 0.2
100.0%
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1994
ASSETS
Investment in securities, at value (including repurchase agreements of $202,262,000) (cost $1,230,946,402) - $ 1,303,445,981
See accompanying schedule
Cash 973
Receivable for investments sold 664,108
Unrealized appreciation on foreign currency contracts 1,069,056
Receivable for fund shares sold 3,818,369
Dividends receivable 2,490,622
Interest receivable 198,755
TOTAL ASSETS 1,311,687,864
LIABILITIES
Payable for investments purchased $ 10,761,139
Unrealized depreciation on foreign currency contracts 85,289
Payable for fund shares redeemed 1,701,901
Accrued management fee 817,447
Other payables and accrued expenses 621,037
TOTAL LIABILITIES 13,986,813
NET ASSETS $ 1,297,701,051
Net Assets consist of:
Paid in capital $ 1,220,631,742
Undistributed net investment income 10,987,509
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (7,402,706)
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 73,484,506
NET ASSETS, for 82,811,611 shares outstanding $ 1,297,701,051
NET ASSET VALUE, offering price and redemption price per share ($1,297,701,051 (divided by) 82,811,611 shares) $15.67
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
INVESTMENT INCOME $ 17,617,990
Dividends
Interest 9,382,766
27,000,756
Less foreign taxes withheld (2,280,969
)
TOTAL INCOME 24,719,787
EXPENSES
Management fee $ 8,646,616
Transfer agent fees 173,157
Accounting fees and expenses 491,242
Non-interested trustees' compensation 5,972
Custodian fees and expenses 802,019
Registration fees 180,469
Audit 44,900
Legal 11,125
Miscellaneous 9,339
TOTAL EXPENSES 10,364,839
NET INVESTMENT INCOME 14,354,948
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 13,667,881
Foreign currency transactions (12,079,459 1,588,422
)
Change in net unrealized appreciation (depreciation) on:
Investment securities (19,503,331
)
Assets and liabilities in foreign currencies 83,258 (19,420,073
)
NET GAIN (LOSS) (17,831,651
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (3,476,703
)
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1993
INCREASE (DECREASE) IN NET ASSETS
Operations $ 14,354,948 $ 4,818,178
Net investment income
Net realized gain (loss) 1,588,422 (7,315,062)
Change in net unrealized appreciation (depreciation) (19,420,073) 109,912,298
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (3,476,703) 107,415,414
Distributions to shareholders: (4,465,195) (2,858,933)
From net investment income
In excess of net investment income - (696,125)
In excess of net realized gain - (807,968)
TOTAL DISTRIBUTIONS (4,465,195) (4,363,026)
Share transactions 1,000,905,405 601,451,901
Net proceeds from sales of shares
Reinvestment of distributions 4,465,195 4,363,026
Cost of shares redeemed (477,688,222) (111,743,493)
Net increase (decrease) in net assets resulting from share transactions 527,682,378 494,071,434
TOTAL INCREASE (DECREASE) IN NET ASSETS 519,740,480 597,123,822
NET ASSETS
Beginning of period 777,960,571 180,836,749
End of period (including undistributed net investment income of $14,221,612 and $4,331,859,
respectively) $ 1,297,701,051 $ 777,960,571
OTHER INFORMATION
Shares
Sold 62,240,900 42,197,124
Issued in reinvestment of distributions 274,107 372,271
Redeemed (29,967,241) (7,983,962)
Net increase (decrease) 32,547,766 34,585,433
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,
1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 15.48 $ 11.53 $ 13.09 $ 12.42 $ 12.67
Income from Investment Operations
Net investment income .19 .06 .16 .24 .18
Net realized and unrealized gain (loss) .08 A 4.16 (1.54) .74 (.39)
Total from investment operations .27 4.22 (1.38) .98 (.21)
Less Distributions (.08) (.18) (.18) (.17) (.04)
From net investment income
In excess of net investment income - (.04) - - -
From net realized gain - - - (.14) B -
In excess of net realized gain - (.05) - - -
Total distributions (.08) (.27) (.18) (.31) (.04)
Net asset value, end of period $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42
TOTAL RETURN A 1.72% 37.35% (10.72)% 8.00% (1.67)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,297,701 $ 777,961 $ 180,837 $ 126,490 $ 80,554
Ratio of expenses to average net assets .92% 1.03% 1.14% 1.26% 1.41%
Ratio of net investment income to average net assets 1.28% 1.21% 1.86% 2.33% 1.89%
Portfolio turnover rate 42% 42% 61% 168% 100%
</TABLE>
A THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE
AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF
SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET
VALUES OF THE INVESTMENTS OF THE FUND.
B INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY
RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
