(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND
MONEY MARKET PORTFOLIO
HIGH INCOME PORTFOLIO
EQUITY-INCOME PORTFOLIO
GROWTH PORTFOLIO
OVERSEAS PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1996
CONTENTS
MONEY MARKET PORTFOLIO VIPF-3 PERFORMANCE
VIPF-4 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-5 INVESTMENTS
VIPF-8 FINANCIAL STATEMENTS
HIGH INCOME PORTFOLIO VIPF-10 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-11 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-12 INVESTMENTS
VIPF-18 FINANCIAL STATEMENTS
EQUITY-INCOME PORTFOLIO VIPF-20 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-21 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-22 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-36 FINANCIAL STATEMENTS
OVERSEAS PORTFOLIO VIPF-38 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-39 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-40 INVESTMENTS
VIPF-44 FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS VIPF-46 NOTES TO THE FINANCIAL STATEMENTS
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, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
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
JUNE 30, 1996 YEAR YEARS YEARS
Money Market 5.55% 4.54% 5.99%
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.
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, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
If Fidelity had not reimbursed certain fund expenses, the fund's five year
and 10 year total returns would have been lower. Yield will vary.
YIELD
Row: 1, Col: 1, Value: 5.85
Row: 1, Col: 2, Value: 2.87
Row: 2, Col: 1, Value: 5.64
Row: 2, Col: 2, Value: 2.86
Row: 3, Col: 1, Value: 5.56
Row: 3, Col: 2, Value: 2.83
Row: 4, Col: 1, Value: 5.13
Row: 4, Col: 2, Value: 2.71
Row: 5, Col: 1, Value: 5.159999999999999
Row: 5, Col: 2, Value: 2.66
Money Market
MMDA
6% -
5% -
4% -
3% -
2% -
1% -
0%
6/28/95 9/27/95 12/27/95 4/3/96 6/26/96
Money Market 5.85% 5.64% 5.56% 5.13% 5.16%
MMDA 2.87% 2.86% 2.83% 2.71% 2.66%
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: MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Bob Litterst, Portfolio
Manager of Money
Market Portfolio
Q. BOB, HOW HAS THE INVESTMENT CLIMATE CHANGED DURING THE PAST SIX MONTHS?
A. It has changed dramatically. Six months ago, the economy was growing
slowly, inflationary pressures were mild and, on the fiscal front, Congress
and the White House appeared headed toward a balanced budget agreement. In
December 1995, just before the period began, the Federal Reserve had
lowered the rate banks charge each other for overnight loans - known as the
federal funds rate - one-quarter percentage point. On January 31, 1996, the
Fed cut the federal funds rate again, to 5.25%. By then, market
participants were so optimistic about the prospect of further rate cuts
that the money market yield curve was inverted; that is, rates fell rather
than rose at longer maturities.
Q. WHEN DID THE SHIFT IN SENTIMENT OCCUR?
A. The first indication that conditions might be about to change was Fed
Chairman Alan Greenspan's February testimony before Congress, which
dampened hopes of further rate cuts. Then came the February employment
report, which came in well above analysts' predictions. Because they're so
volatile, monthly employment numbers aren't always very accurate indicators
of long-term trends. But with the release of subsequent monthly employment
numbers, the trend solidified. We know now that during the first six months
of 1996, the economy created more than 230,000 new jobs per month, much
higher than in 1995 and almost double the rate of growth in the labor
force. While the recent strength in the labor market is probably not
sustainable, it has shown no signs of abating and will likely contribute to
robust economic activity in the second quarter and beyond. Meanwhile, the
trend toward lower inflation began to deteriorate, albeit at a moderate
pace. Initially, increases in food and energy prices were the prime
drivers. More recently, signs of rising wage pressures have appeared. As a
result, market participants have pushed short-term interest rates steadily
higher while reassessing when the Fed might choose to raise the federal
funds rate.
Q. HOW DID YOU RESPOND TO CHANGING CONDITIONS?
A. When the period began, the fund's average maturity was 70 days,
reflecting my belief at the time that rates were likely to keep falling. As
market sentiment has shifted, I've shortened the fund's average maturity,
though not as much as you might expect; it was 61 days at the end of March.
Typically during periods of volatility, the market overreacts, creating
buying opportunities. That's why in recent months I've occasionally added
securities with maturities between six and 12 months, rather than shorten
up all at once. At the end of June, the fund's average maturity was 58
days.
Q. WHAT'S THE OUTLOOK?
A. The consensus among most market participants as we head into the third
quarter of 1996 is that the economy has considerable momentum. Job growth
is very strong, unemployment is at a new low for the cycle and wages are
beginning to move higher. It appears that during the second quarter, the
gross domestic product (GDP) expanded at an annual rate of at least 4%, on
the strength of consumer activity and inventory restocking. Earlier
forecasts for slower economic growth in the second half of the year, which
included those made by the Fed staff, appear less likely to be realized.
That increases the probability that the Fed will lift short-term rates to
curtail inflationary pressures in the economy. In the past, the Fed has
been reluctant to intervene on the eve of a presidential election. This
time, however, it may have no choice. If the Fed does act, the most likely
time would be at the next meeting of the Federal Open Market Committee in
August. When the period ended, the fund's average maturity was 58 days, or
slightly longer than neutral. Looking ahead, I'll probably aim to shorten
up even more, at least enough to get the fund on the short side of neutral,
probably between 40 and 50 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 June 30, 1996, more than $826
million
MANAGER: Robert Litterst, since 1992; joined
Fidelity in 1991
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
INVESTMENTS JUNE 30, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
BANKERS' ACCEPTANCES - 0.5%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
CHASE MANHATTAN BANK
7/1/96 5.40% $ 1,241,965 $ 1,241,597
8/13/96 5.45 1,836,798 1,824,376
10/3/96 5.48 446,151 439,786
10/15/96 5.49 460,254 452,867
TOTAL BANKERS' ACCEPTANCES 3,958,626
CERTIFICATES OF DEPOSIT - 27.5%
DOMESTIC CERTIFICATES OF DEPOSIT - 1.9%
Bank of New York
4/29/97 5.80 3,000,000 3,000,000
Chase Manhattan Bank (USA)
7/24/96 5.20 3,000,000 3,000,000
Old Kent Bank & Trust Co.
7/24/96 5.25 10,000,000 10,000,000
16,000,000
CHICAGO BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 0.6%
ABN-AMRO Bank
12/2/96 5.51 5,000,000 5,000,000
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 14.5%
Banque Nationale de Paris
8/5/96 5.42 10,000,000 10,000,000
8/29/96 5.11 3,000,000 3,000,000
Bayerische Landesbank Girozentrale
7/30/96 5.60 (a) 10,000,000 10,000,000
4/22/97 5.85 6,000,000 6,000,000
Canadian Imperial Bank of Commerce
12/5/96 5.63 3,000,000 3,000,000
Commerzbank, Germany
9/3/96 5.18 10,000,000 10,000,000
9/6/96 5.40 4,000,000 4,000,075
Deutsche Bank, A.G.
8/1/96 5.19 10,000,000 10,000,000
Dresdner Bank, A.G.
7/5/96 5.05 2,000,000 2,000,078
12/16/96 5.62 12,000,000 12,000,000
Landesbank Hessen - Thuringen
9/9/96 5.40 4,000,000 4,000,000
Rabobank Nederland, N.V.
7/29/96 5.18 5,000,000 5,000,000
Societe Generale
7/9/96 5.37 5,000,000 5,000,000
7/17/96 5.34 20,000,000 20,000,000
9/3/96 5.13 10,000,000 10,000,000
Swiss Bank Corp.
8/8/96 5.16 3,000,000 2,999,459
Westdeutsche Landesbank
8/26/96 5.08 4,000,000 4,000,000
120,999,612
LONDON BRANCH, EURODOLLAR, DOMESTIC BANKS - 0.5%
Bank of America National Trust & Savings Assoc.
7/16/96 5.02 4,000,000 4,000,000
LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 10.0%
ABN-AMRO Bank
8/19/96 5.00 10,000,000 10,003,170
11/6/96 5.52 5,000,000 4,998,499
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
Abbey National Treasury Services
8/30/96 5.42% $ 3,000,000 $ 2,999,615
12/3/96 5.52 10,000,000 10,000,000
Banco Bilbao Vizcaya, S.A.
7/15/96 5.41 7,000,000 7,000,031
Banque Nationale de Paris
8/8/96 5.00 4,000,000 4,000,149
8/30/96 5.50 4,000,000 3,997,139
Bayerische Hypotheken-und Weschel
9/9/96 5.15 10,000,000 10,000,194
9/17/96 5.40 3,000,000 2,999,897
11/27/96 5.50 3,000,000 2,999,755
Bayerische Vereinsbank A.G.
12/3/96 5.51 5,000,000 5,000,212
Deutsche Bank, A.G.
7/29/96 5.20 5,000,000 5,000,000
9/9/96 5.41 9,000,000 9,000,000
Societe Generale
12/18/96 5.63 5,000,000 5,000,909
82,999,570
TOTAL CERTIFICATES OF DEPOSIT 228,999,182
COMMERCIAL PAPER - 44.8%
ABN-AMRO North America Finance, Inc.
8/26/96 5.10 4,000,000 3,967,972
8/26/96 5.16 5,000,000 4,959,480
8/28/96 5.13 3,000,000 2,974,999
11/8/96 5.55 9,000,000 8,821,800
A.H. Robins Company, Incorporated
8/14/96 5.48 1,253,000 1,244,306
Abbott Laboratories
7/24/96 5.43 2,225,000 2,216,657
7/30/96 5.43 4,625,000 4,603,494
American Brands, Inc.
8/7/96 5.36 5,000,000 4,971,292
American Home Products
8/12/96 5.44 3,000,000 2,980,237
Asset Securitization Cooperative Corporation
8/6/96 5.42 5,000,000 4,971,658
8/19/96 5.44 2,000,000 1,984,700
Associates Corp. of North America
7/1/96 5.17 10,000,000 9,997,178
7/25/96 5.36 3,000,000 2,988,517
8/12/96 5.43 2,000,000 1,986,849
8/19/96 5.45 3,000,000 2,977,050
8/22/96 5.37 2,000,000 1,984,100
8/22/96 5.45 2,000,000 1,983,800
Bear Stearns Cos., Inc.
8/12/96 5.43 5,000,000 4,967,123
Beneficial Corp.
8/19/96 5.37 2,000,000 1,984,983
8/21/96 5.45 3,000,000 2,976,150
CIT Group Holdings, Inc.
8/12/96 5.38 2,000,000 1,987,020
8/12/96 5.44 4,000,000 3,973,600
Cheltenham & Gloucester Building Society
9/9/96 5.41 10,000,000 9,893,600
Chrysler Financial Corporation
7/29/96 5.45 3,000,000 2,986,500
COMMERCIAL PAPER - CONTINUED
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
Citibank Credit Card MasterTrust I (Dakota Certificate Program)
7/8/96 5.35% $ 3,200,000 $ 3,195,744
7/25/96 5.36 1,000,000 996,164
8/20/96 5.46 4,982,000 4,943,141
8/21/96 5.46 5,000,000 4,960,250
Commonwealth Bank of Australia
7/23/96 5.43 2,000,000 1,992,800
CoreStates Capital Corp.
7/2/96 5.43 (a) 5,000,000 5,000,000
7/5/96 5.43 (a) 5,000,000 5,000,000
7/8/96 (c) 5.49 (a) 5,000,000 5,000,000
Corporate Asset Funding Co., Inc.
8/5/96 5.40 2,000,000 1,989,054
Delaware Funding Corporation
8/20/96 5.45 5,000,000 4,961,000
Dresdner U.S. Finance Inc.
8/26/96 5.13 6,500,000 6,447,639
du Pont (E.I.) de Nemours & Co.
8/9/96 5.00 5,400,000 5,369,988
Eiger Capital Corp.
7/22/96 5.42 1,000,000 996,550
Enterprise Funding Corp.
8/20/96 5.45 2,572,000 2,551,938
8/21/96 5.37 1,452,000 1,440,670
8/23/96 5.43 4,000,000 3,967,245
Ford Motor Credit Corp.
7/8/96 5.35 10,000,000 9,986,750
8/30/96 5.46 15,000,000 14,860,500
General Electric Capital Corp.
8/14/96 5.39 10,000,000 9,932,278
8/20/96 5.04 10,000,000 9,928,933
General Electric Capital Services Inc.
9/19/96 5.40 10,000,000 9,879,278
General Motors Acceptance Corp.
7/15/96 5.42 7,000,000 6,983,231
7/22/96 5.42 4,500,000 4,484,562
8/19/96 5.43 1,000,000 992,406
8/20/96 5.50 4,000,000 3,968,570
11/26/96 5.68 3,000,000 2,930,875
12/4/96 5.70 3,000,000 2,927,123
Generale Bank
7/17/96 5.41 2,000,000 1,994,610
Goldman Sachs Group, L.P. (The)
8/19/96 5.40 4,000,000 3,969,741
8/22/96 5.40 10,000,000 9,920,500
Government of Canada
9/6/96 5.15 5,000,000 4,951,892
Morgan (J.P.) & Co.
12/3/96 5.71 2,500,000 2,439,271
Morgan Stanley Group, Inc.
7/11/96 5.35 2,000,000 1,996,468
7/15/96 5.35 5,000,000 4,988,222
7/22/96 5.12 5,000,000 4,984,029
Nationwide Building Society
7/12/96 5.42 2,000,000 1,996,137
9/6/96 5.50 1,000,000 989,574
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
New Center Asset Trust
8/5/96 5.40% $ 2,000,000 $ 1,989,044
8/12/96 5.43 4,000,000 3,973,845
8/19/96 5.41 4,000,000 3,969,684
9/27/96 5.43 4,000,000 3,947,100
11/26/96 5.64 7,475,000 7,303,387
PHH Corp.
7/22/96 5.47 (a) 3,000,000 2,999,832
Preferred Receivables Funding Corp.
7/2/96 5.33 4,270,000 4,268,113
7/25/96 5.36 10,000,000 9,961,723
Sears Roebuck Acceptance Corp.
7/26/96 5.42 5,000,000 4,979,769
8/13/96 5.44 2,000,000 1,986,512
8/14/96 5.44 2,000,000 1,986,212
Sherwood Medical Company
8/12/96 5.40 3,000,000 2,980,383
8/12/96 5.45 2,303,000 2,287,801
8/19/96 5.45 2,000,000 1,984,700
8/20/96 5.41 2,000,000 1,984,545
Textron, Inc.
7/11/96 5.51 1,000,000 998,174
7/15/96 5.54 1,000,000 997,551
U.S.L. Capital, Inc.
7/22/96 5.41 10,600,000 10,563,566
Unifunding, Inc.
9/3/96 5.44 3,000,000 2,970,493
Westpac Capital Corp.
7/25/96 5.24 12,000,000 11,955,756
8/5/96 5.06 10,000,000 9,949,331
10/9/96 5.50 10,000,000 9,848,417
TOTAL COMMERCIAL PAPER 372,186,136
FEDERAL AGENCIES - 4.3%
FEDERAL HOME LOAN BANK - AGENCY COUPONS (A) - 1.2%
7/2/96 5.35 5,000,000 4,998,848
9/20/96 5.44 5,000,000 4,998,504
9,997,352
FEDERAL NATIONAL MORTGAGE ASSOC. - AGENCY COUPONS - 2.5%
5/28/97 6.00 9,500,000 9,500,000
7/29/96 5.37 (a) 6,000,000 5,994,907
9/20/96 5.47 (a) 5,000,000 4,996,166
20,491,073
STUDENT LOAN MARKETING ASSOC. - AGENCY COUPONS (A) - 0.6%
7/16/96 5.50 5,000,000 5,000,000
TOTAL FEDERAL AGENCIES 35,488,425
BANK NOTES - 9.8%
Bank of America National Trust & Savings Assoc.
7/1/96 5.40 (a) 4,000,000 3,999,582
Bank of New York
9/3/96 5.16 3,000,000 3,000,000
Bank of New York - Delaware
7/30/96 5.64 (a) 8,000,000 8,000,000
BANK NOTES - CONTINUED
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
Comerica Bank-Detroit
9/1/96 5.45% (a) $ 5,000,000 $ 4,999,337
Huntington National Bank
7/30/96 5.59 (a) 10,000,000 10,000,000
NationsBank of Texas
10/17/96 5.78 10,000,000 9,997,691
PNC Bank, N.A.
7/8/96 5.46 (a) 4,300,000 4,297,091
7/9/96 5.47 (a) 11,400,000 11,399,427
7/20/96 5.43 (a) 6,000,000 5,998,763
7/20/96 5.45 (a) 5,000,000 4,998,846
Seattle First National Bank
7/5/96 5.43 (a) 5,000,000 4,997,436
Wachovia Bank of North Carolina, N.A.
7/26/96 5.44 (a) 5,000,000 4,999,062
11/15/96 5.02 5,000,000 4,989,668
TOTAL BANK NOTES 81,676,903
MASTER NOTES (A) - 2.0%
Goldman Sachs Group, L.P. (The)
8/14/96 5.50 4,000,000 4,000,000
J.P. Morgan Securities
7/9/96 5.45 6,000,000 6,000,000
7/17/96 5.50 3,000,000 3,000,000
Norwest Corp.
7/1/96 5.53 4,000,000 4,000,000
TOTAL MASTER NOTES 17,000,000
MEDIUM-TERM NOTES - 6.3%
Abbey National Treasury Services (b)
9/9/96 5.57 (a) 10,000,000 10,000,000
Associates Corp. of North America
8/1/96 5.55 2,000,000 1,998,150
Beneficial Corp.
7/19/96 5.47 (a) 5,000,000 4,998,836
8/3/96 5.46 (a) 3,000,000 2,999,213
CIT Group Holdings, Inc.
7/1/96 5.40 (a) 5,000,000 4,998,945
Ford Motor Credit Corp.
7/9/96 5.10 1,700,000 1,701,758
General Motors Acceptance Corp.
7/5/96 5.34 (a) 2,000,000 2,000,090
7/28/96 5.55 (a) 1,000,000 1,001,545
8/1/96 5.48 (a) 5,000,000 5,000,000
Liquid Asset Backed Securities Trust (1996-1) (b)
7/15/96 5.52 (a) 4,000,000 4,000,000
Norwest Corp.
9/10/96 5.61 (a) 6,000,000 6,000,000
Philip Morris Cos., Inc.
7/1/96 5.55 5,000,000 5,000,841
Transamerica Life Insurance and Annuity Co.
9/15/96 5.61 (a) 3,000,000 3,000,000
TOTAL MEDIUM-TERM NOTES 52,699,378
SHORT-TERM NOTES (A) - 4.7%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
Capital One Funding Corp. (1994-B)
7/8/96 5.50% $ 3,490,000 $ 3,490,000
7/8/96 (d) 5.50 79,000 79,000
Capital One Funding Corp. (1995-E)
7/8/96 5.50 5,900,000 5,900,000
SMM Trust (1995-B) (b)
7/2/96 5.49 2,500,000 2,500,000
SMM Trust (1995-D) (b)
7/27/96 5.54 4,000,000 4,000,000
SMM Trust (1995-N) (b)
8/8/96 5.55 3,000,000 3,000,000
SMM Trust (1995-P) (b)
9/15/96 5.66 1,000,000 1,000,000
SMM Trust (1996-I) (b)
7/29/96 5.54 5,000,000 5,000,000
SMM Trust (1996-V) (b)
9/26/96 5.62 14,000,000 14,000,000
TOTAL SHORT-TERM NOTES 38,969,000
REPURCHASE AGREEMENTS - 0.1%
MATURITY
AMOUNT
In a joint trading account
(U.S. Government Obligations)
dated 6/28/96 due 7/1/96:
At 5.62% $ 460,215 460,000
TOTAL INVESTMENTS - 100% $ 831,437,650
Total Cost for Income Tax Purposes - $831,437,650
LEGEND
1. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due date on these types of
securities reflects the next interest rate reset date or, when applicable,
the final maturity date.
2. 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 $43,500,000 or 5.3% of net
assets.
3. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
4. Security sold on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
INCOME TAX INFORMATION
At December 31, 1995, the fund had a capital loss carryforward of
approximately $78,000 which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $460,000) - See accompanying $ 831,437,650
schedule
Receivable for investments sold 79,000
Delayed delivery
Interest receivable 4,893,808
TOTAL ASSETS 836,410,458
LIABILITIES
Payable for investments purchased $ 5,000,000
Delayed delivery
Share transactions in process 4,520,481
Accrued management fee 127,637
Other payables and accrued expenses 108,819
TOTAL LIABILITIES 9,756,937
NET ASSETS $ 826,653,521
Net Assets consist of:
Paid in capital $ 826,685,763
Accumulated net realized gain (loss) on investments (32,242
)
NET ASSETS, for 826,685,763 shares outstanding $ 826,653,521
NET ASSET VALUE, offering price $1.00
and redemption price per share ($826,653,521 (divided by) 826,685,763 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INTEREST INCOME $ 22,606,356
EXPENSES
Management fee $ 843,674
Transfer agent fees 292,564
Accounting fees and expenses 55,938
Non-interested trustees' compensation 2,491
Custodian fees and expenses 21,987
Audit 20,026
Legal 1,669
Miscellaneous 797
Total expenses before reductions 1,239,146
Expense reductions (36,398 1,202,748
)
NET INTEREST INCOME 21,403,608
NET REALIZED GAIN (LOSS) 30,484
ON INVESTMENTS
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 21,434,092
OTHER INFORMATION
Expense reductions $ 1,613
Custodian interest credits
Transfer agent interest credits 34,785
$ 36,398
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 21,403,608 $ 43,984,366
Net interest income
Net realized gain (loss) 30,484 16,876
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 21,434,092 44,001,242
Distributions to shareholders from net interest income (21,403,608) (43,984,366)
Share transactions at net asset value of $1.00 per share 818,118,433 1,212,453,074
Proceeds from sales of shares
Reinvestment of distributions from net interest income 21,396,789 43,984,366
Cost of shares redeemed (821,766,170) (1,196,186,142)
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS 17,749,052 60,251,298
TOTAL INCREASE (DECREASE) IN NET ASSETS 17,779,536 60,268,174
NET ASSETS
Beginning of period 808,873,985 748,605,811
End of period $ 826,653,521 $ 808,873,985
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1996
SELECTED PER-SHARE DATA (UNAUDITED) 1995 1994 1993 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from Investment Operations .026 .057 .042 .032 .038 .059
Net interest income
Less Distributions (.026) (.057) (.042) (.032) (.038) (.059)
From net interest income
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN B, C 2.64% 5.87% 4.25% 3.23% 3.90% 6.09%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 826,654 $ 808,874 $ 748,606 $ 353,104 $ 301,002 $ 271,123
Ratio of expenses to average net assets .30% A .33% .27% .22% .24% .38%
D
Ratio of expenses to average net assets after .29% A, .33% .27% .22% .24% .38%
expense reductions E
Ratio of net interest income to average net assets 5.25% A 5.72% 4.32% 3.16% 3.85% 5.93%
</TABLE>
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS).
C THE TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED
AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION OF THE CHARGES WOULD REDUCE THE TOTAL RETURNS
SHOWN.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE
BEEN HIGHER.
E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES
WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 7 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. A fund's total return 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
securities that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
JUNE 30, 1996 YEAR YEARS YEARS
HIGH INCOME 15.54% 16.33% 10.98%
Merrill Lynch High Yield Master Index 9.37% 13.49% 10.89%
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.
You can compare the fund's returns to those of the Merrill Lynch High Yield
Master Index - a market-capitalization weighted index which includes all
domestic and yankee high-yield bonds. Issues included in the Index have
maturities of at least one year and have a credit rating of less than
BBB-/Baa3, but are not in default.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, generally 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)
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.
If Fidelity had not reimbursed certain fund expenses, the fund's five and
10 year 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, THE TOTAL RETURNS 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 10 YEARS
High Income Portfolio Merrill Lynch High Yield Master Index
$28,355
$28,111
$
'9
6
Let's say hypothetically that $10,000 was invested in High Income Portfolio
on June 30, 1986. As the chart shows, by June 30, 1996, the value of the
investment would have grown to $28,355 - a 183.55% increase on the initial
investment. For comparison, look at how the Merrill Lynch High Yield Master
Index did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $28,111 - a
181.11% increase.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF JUNE 30, 1996
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
PanAmSat Corp. (various issues) 4.6
Marvel Parent Holdings, Inc. (various issues) 2.7
Cablevision System Corp. (various issues) 2.7
Mothers Work, Inc. (various issues) 2.0
American Financial Group, Inc. 1.8
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1996
% OF FUND'S
INVESTMENTS
Media & Leisure 33.2
Retail & Wholesale 9.2
Utilities 8.1
Finance 6.4
Industrial Machinery & Equipment 5.9
QUALITY DIVERSIFICATION AS OF JUNE 30, 1996
(MOODY'S RATINGS) % OF FUND'S
INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.0
Ba 2.1
B 52.4
Caa, Ca, C 9.7
Nonrated 7.7
TABLE EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT JUNE 30, 1996, ACCOUNT FOR 7.7% 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. BARRY, HOW DID THE FUND PERFORM?
A. It did quite well compared to its peers, and significantly outperformed
its benchmark. The Merrill Lynch High Yield Master Index had a total return
of 2.85% for the six months ended June 30, 1996, and 9.37% for the 12-month
period.
Q. WHAT CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The strength of the economy caused credit spreads to narrow during the
period. The securities most affected were the lowest-rated, or B-rated,
issues. That's where the fund is concentrated, while the index has a much
higher weighting in BB-rated securities. BB-rated securities are much more
sensitive to interest rate changes, and therefore traded down along with
U.S. Treasuries during the period.
Q. HOW DID INTEREST RATES FACTOR INTO THIS EQUATION?
A. Interest rates rose because of the unexpected strength of the economy,
which also benefited the stock market in general. In addition, defaults
were less than expected and credit spreads narrowed, which resulted in the
high-yield market significantly outperforming Treasuries. Within the
high-yield market, the fund also benefited from stronger relative
performance of B-rated issues compared to BB-rated securities.
Q. WHAT WAS BEHIND THE FUND'S INCREASE IN MEDIA AND
TELECOMMUNICATIONS-RELATED SECURITIES?
A. There have been a number of ongoing, secular changes occurring in many
of the media and telecommunications industries, which have created
opportunities for many companies. Many of them have huge capital needs and,
as a result, these sectors dominated the market for new issuance of
high-yield securities in the first half of 1996. The growth potential for
this market is still significant and should be independent of the larger
economic environment for the next few years. At the end of the period, we
were well-represented in many of these industries, including satellite
broadcasting, competitive local exchange companies (CLEC), cellular,
paging, wireless cable, and cable and telephone companies in the U.K.
Q. IN THE LAST REPORT, YOU MENTIONED THAT YOU HAD BEEN ADDING SOME SMALLER,
LESS VISIBLE COMPANIES TO THE PORTFOLIO. HOW DID THOSE INVESTMENTS WORK
OUT?
A. Many of them also were solid contributors to performance during the
period. The fund benefited from investing in securities that I was able to
purchase on what I viewed as very favorable terms. Harcor Energy is an
excellent example. I bought a sizable number of its bonds and received
warrants for equity in the company as well. Harcor subsequently boosted its
cash flow through additional drilling, which increased its stock price. In
addition, it announced a secondary stock offering, which could improve the
company's credit standing. In the specialty retail area, the fund also was
helped by some regional retailers such as Specialty Retailers and Mothers
Work, a maternity clothes company I've discussed in the past and which
continued to perform well over the period.
Q. STILL, THERE MUST HAVE BEEN SOME DISAPPOINTMENTS . . .
A. Right, but nothing that negatively impacted the fund very much. Somewhat
ironically, one of the higher-quality positions in the fund, Viacom, was
one of the poorer performers. After acquiring Paramount and Blockbuster,
Viacom planned to sell some cable systems, which I thought would result in
a credit upgrade. But a combination of regulatory delays and weakness in
the Treasury market - the bonds are very sensitive to interest rates
because they trade on a tight spread relative to the price of Treasuries -
hurt the securities.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SEVERAL MONTHS?
A. I'd say that I'm a bit more cautious now than I was a few months ago.
The economy is expected to experience slower growth in the second half of
1996, partly due to the increase in interest rates. Still, I'll continue to
look for companies that I think can prosper independent of the economy and,
within those companies, I'll invest in whichever aspect of their capital
structure looks most attractive from a risk versus reward perspective.
FUND FACTS
GOAL: to seek high current income by
investing in high-yielding, lower-rated fixed
income securities
START DATE: September 19, 1985
SIZE: as of June 30, more than $1.1 billion
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 71.8%
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 1.6%
MEDIA & LEISURE - 0.8%
PUBLISHING - 0.8%
Hollinger liquid yield option
note yankee 0%, 10/5/13 B1 $ 30,000,000 $ 9,787,500
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Farm Fresh, Inc.
7 1/2%, 3/1/10 B3 1,686,000 935,730
UTILITIES - 0.7%
TELEPHONE SERVICES - 0.7%
GST Telecommunications, Inc.
0%, 12/15/05 (c)(e) - 70,000 69,650
Winstar Communications, Inc.
0%, 10/15/05 (c)(e) - 11,550,000 7,969,500
8,039,150
TOTAL CONVERTIBLE BONDS 18,762,380
NONCONVERTIBLE BONDS - 70.2%
AEROSPACE & DEFENSE - 0.6%
RHI Holdings, Inc.
11 7/8%, 3/1/99 B2 2,160,000 2,160,000
Wyman-Gordon Co.
10 3/4%, 3/15/03 B1 4,490,000 4,714,500
6,874,500
BASIC INDUSTRIES - 5.2%
CHEMICALS & PLASTICS - 1.5%
American Pacific Corp.
11%, 2/21/02 (e) B2 743,750 706,563
Atlantis Group, Inc.
11%, 2/15/03 B2 7,785,000 7,434,675
Foamex-JPS Automotive LP/
Foamex-JPS Capital Corp.
Series B, 14%, 7/1/04 Caa 2,760,000 1,938,900
Foamex LP/Foamex Capital
Corp. 11 7/8%, 10/1/04 B3 2,480,000 2,542,000
Foamex LP/Foamex Capital
Corp. 9 1/2%, 6/1/00 B1 380,000 380,000
NL Industries, Inc.:
11 3/4%, 10/15/03 B1 2,270,000 2,321,075
0%, 10/15/05 (c) B2 550,000 428,313
Texas Petrochemicals Corp.
11 1/8%, 7/1/06 (e) B3 1,960,000 1,989,400
17,740,926
METALS & MINING - 0.4%
Renco Metals, Inc.
11 1/2%, 7/1/03 B2 4,190,000 4,190,000
PACKAGING & CONTAINERS - 0.2%
Crown Packaging Holdings Ltd.,
Series B, 0%, 11/1/03 (c) Caa 6,840,000 2,599,200
PAPER & FOREST PRODUCTS - 3.1%
Florida Coast Paper Co. LLC
12 3/4, 6/1/03 (e) B3 7,210,000 7,498,400
Rapp International Finance
Co. BV yankee
13 1/4%, 12/15/05 Ba3 13,980,000 15,133,350
Repap Wisconsin, Inc.
9 7/8%, 5/1/06 B3 1,210,000 1,076,900
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
Riverwood International
10 7/8%, 4/1/08 B3 $ 13,230,000 $ 12,998,475
36,707,125
TOTAL BASIC INDUSTRIES 61,237,251
CONGLOMERATES - 0.7%
Jordan Industries, Inc.
10 3/8%, 8/1/03 B3 9,155,000 8,697,250
CONSTRUCTION & REAL ESTATE - 0.6%
CONSTRUCTION - 0.4%
UDC Homes, Inc. Series B,
12 1/2%, 5/1/00 - 40,000 37,600
WCI Communities LP
17%, 7/24/98 (d) - 5,000,000 5,000,000
5,037,600
REAL ESTATE - 0.2%
Littlefield Co.
10%, 9/30/97 (d)(f) - 2,750,000 2,094,125
TOTAL CONSTRUCTION & REAL ESTATE 7,131,725
DURABLES - 3.1%
AUTOS, TIRES, & ACCESSORIES - 1.3%
APS, Inc.
11 7/8%, 1/15/06 (e) B2 400,000 419,000
Collins & Aikman Products Co.
11 1/2%, 4/15/06 B3 980,000 997,150
Harvard Industries, Inc.:
12%, 7/15/04 B3 740,000 725,200
11 1/8%, 8/1/05 B3 6,320,000 5,940,800
Hayes Wheels International,
Inc. 11%, 7/15/06 B3 4,830,000 4,890,375
Venture Holdings Trust
9 3/4%, 4/1/04 B3 3,280,000 2,706,000
15,678,525
HOME FURNISHINGS - 1.1%
Interlake Corp.
12 1/8%, 3/1/02 B3 7,570,000 7,570,000
Knoll, Inc.
10 7/8%, 3/15/06 B3 5,280,000 5,385,600
12,955,600
TEXTILES & APPAREL - 0.7%
CMI Industries, Inc.
9 1/2%, 10/1/03 B1 4,050,000 3,493,125
Hat Brands, Inc. (f):
Series B, 12 5/8%, 9/15/02 - 1,520,000 1,140,000
Series D, 12 5/8%, 9/15/02 - 680,000 510,000
Synthetic 12 3/4%, 12/01/02 B3 2,590,000 2,745,400
7,888,525
TOTAL DURABLES 36,522,650
ENERGY - 2.1%
OIL & GAS - 2.1%
Clark USA, Inc., Series B,
10 7/8%, 12/1/05 B2 5,420,000 5,555,500
Harcor Energy, Inc., Series B,
14 7/8%, 7/15/02 B3 15,000,000 16,350,000
Mesa Operating Co.
10 5/8%, 7/1/06 B2 2,930,000 2,988,600
24,894,100
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
FINANCE - 3.5%
CREDIT & OTHER FINANCE - 0.6%
Homeside, Inc.
11 1/4%, 5/15/03 (e) B+ $ 3,210,000 $ 3,306,300
Polysindo International Finance
Co. BV yankee
11 3/8%, 6/15/06 Ba3 3,730,000 3,799,938
7,106,238
INSURANCE - 1.9%
American Life Holdings
11 1/4%, 9/15/04 B1 13,350,000 14,050,875
Penncorp Financial Group, Inc.
9 1/4%, 12/15/03 B1 7,950,000 7,989,750
22,040,625
SAVINGS & LOANS - 1.0%
First Nationwide Parent Holdings
Ltd. 12 1/2%, 4/15/03 B2 11,610,000 12,103,425
SECURITIES INDUSTRY - 0.0%
ECM Corp. 14%, 6/1/02 (e) - 415,373 456,910
TOTAL FINANCE 41,707,198
HEALTH - 1.3%
MEDICAL EQUIPMENT & SUPPLIES - 1.3%
Wright Medical Technology, Inc.,
Series B, 10 3/4%,
7/1/00 B3 15,630,000 15,630,000
INDUSTRIAL MACHINERY & EQUIPMENT - 5.2%
ELECTRICAL EQUIPMENT - 1.2%
Magnetek, Inc.
10 3/4%, 11/15/98 B1 10,000,000 9,800,000
Telex Communications, Inc.
12%, 7/15/04 B2 3,500,000 3,745,000
13,545,000
INDUSTRIAL MACHINERY & EQUIPMENT - 2.9%
Exide Corp.:
10 3/4%, 12/15/02 B1 3,375,000 3,442,500
10%, 4/15/05 B1 2,460,000 2,392,350
Howmet Corp.
10%, 12/1/03 (e) B3 2,050,000 2,152,500
MVE, Inc. 12 1/2%,
2/15/02 B3 5,595,000 5,818,800
Specialty Equipment Cos., Inc.
11 3/8%, 12/1/03 B3 13,600,000 14,042,000
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 B3 1,484,000 1,491,420
10 3/4%, 11/1/03 Caa 5,226,000 5,226,000
34,565,570
POLLUTION CONTROL - 1.1%
Norcal Waste System, Inc.
12 3/4%, 11/15/05 (e)(g) B3 12,530,000 13,219,150
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 61,329,720
MEDIA & LEISURE - 19.8%
BROADCASTING - 9.3%
Adelphia Communications Corp.
12 1/2%, 5/15/02 B3 2,460,000 2,499,975
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
Bell Cablemedia PLC yankee
0%, 9/15/05 (c) B2 $ 12,970,000 $ 7,895,488
CS Wireless Systems, Inc.
0%, 3/1/06 unit (c)(e) - 4,810,000 9,908,600
Citicasters, Inc.
9 3/4%, 2/15/04 B2 7,812,000 8,007,300
Cooke Media Group, Inc.
11 5/8%, 4/1/99 - 350,000 332,500
Diamond Cable
Communications PLC yankee
0%, 12/15/05 (c) B3 18,150,000 10,663,125
NWCG Holdings Corp.
0%, 6/15/99 Caa 18,695,000 13,834,300
Peoples Choice TV Corp.
unit 0%, 6/1/04 (c) Caa 20,230,000 11,480,525
Robin Media Group, Inc.
11 1/8%, 4/1/97 - 12,340,000 12,340,000
UIH Australia/Pacific, Inc.
0%, 5/15/06 (c)(e) B2 12,000,000 6,330,000
Viacom, Inc. 8%, 7/7/06 B1 22,780,000 20,843,700
Videotron Group Ltd. yankee
10 5/8%, 2/15/05 Ba3 6,140,000 6,400,950
110,536,463
ENTERTAINMENT - 1.7%
AMF Group, Inc. (e):
10 7/8%, 3/15/06 B2 9,880,000 9,768,850
0%, 3/15/06 (c) B2 14,610,000 8,072,025
Alliance Gaming Corp.
12 7/8%, 6/30/03 B2 2,200,000 2,200,000
20,040,875
LEISURE DURABLES & TOYS - 1.2%
ICON Health and Fitness, Inc.
13%, 7/15/02 B3 5,890,000 6,567,350
IHF Holdings, Inc.
0%, 11/15/04 (c) Caa 10,250,000 7,072,500
13,639,850
LODGING & GAMING - 2.8%
American Skiing Co.
12%, 7/15/06 (e) B3 5,310,000 5,203,800
Casino Magic Financial Corp.
11 1/2%, 10/15/01 B1 2,745,000 2,827,350
HMH Properties, Inc., Series B,
9 1/2%, 5/15/05 B1 13,470,000 12,863,850
Horseshoe Gaming LLC, Series A,
12 3/4%, 9/30/00 B1 10,010,000 10,760,750
Wyndham Hotel Corp.
10 1/2%, 5/15/06 B2 1,810,000 1,800,950
33,456,700
PUBLISHING - 3.0%
Hollinger International Publishing,
Inc. 9 1/4%, 2/1/06 B1 4,350,000 3,980,250
Marvel Holdings, Inc., Series B,
0%, 4/15/98 B3 18,000,000 14,400,000
Marvel Parent Holdings, Inc.
0%, 4/15/98 B3 22,440,000 17,727,600
36,107,850
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 1.8%
Host Marriott Travel Plazas, Inc.
Series B, 9 1/2%, 5/15/05 B1 $ 10,690,000 $ 10,195,588
SC International Services, Inc.
13%, 10/1/05 B3 10,640,000 11,650,800
21,846,388
TOTAL MEDIA & LEISURE 235,628,126
NONDURABLES - 2.4%
AGRICULTURE - 0.1%
Hines Horticulture, Inc., Series B,
11 3/4%, 10/15/05 B3 1,300,000 1,345,500
FOODS - 1.2%
Specialty Foods Corp.:
10 1/4%, 8/15/01 B3 3,410,000 3,205,400
Series B:
11 1/8%, 10/1/02 B3 6,300,000 6,016,500
11 1/4%, 8/15/03 Caa 5,500,000 4,771,250
13,993,150
HOUSEHOLD PRODUCTS - 1.1%
MacAndrews & Forbes Group,
Inc. 12 1/4%, 7/1/96 - 1,360,000 1,360,000
Revlon Worldwide Corp.
secured 0%, 3/15/98 B3 13,510,000 11,247,075
12,607,075
TOTAL NONDURABLES 27,945,725
RETAIL & WHOLESALE - 9.1%
APPAREL STORES - 3.5%
Apparel Retailers, Inc.
0%, 8/15/05 (c) Caa 11,230,000 9,770,100
Lamonts Apparel, Inc.
10 1/4%, 11/1/99
pay-in-kind (e)(f) - 2,201,000 99,045
Mothers Work, Inc.
12 5/8%, 8/1/05 B3 22,500,000 23,793,750
Specialty Retailers, Inc.
11%, 8/15/03 B3 7,220,000 7,508,800
41,171,695
GENERAL MERCHANDISE STORES - 0.8%
Pantry, Inc., Series B,
12%, 11/15/00 B2 10,500,000 9,240,000
GROCERY STORES - 3.4%
Food 4 Less Holdings, Inc.
0%, 7/15/05 (c) Caa 19,430,000 8,549,200
Pathmark Stores, Inc.:
11 5/8%, 6/15/02 B3 5,480,000 5,466,300
9 5/8%, 5/1/03 B2 1,470,000 1,379,963
Ralph's Grocery Co.:
10.45%, 6/15/04 B1 3,230,000 3,092,725
10.45%, 6/15/04 (e) B1 4,500,000 4,308,750
11%, 6/15/05 B3 6,340,000 5,832,800
Star Markets, Inc.
13%, 11/1/04 B3 11,905,000 12,321,675
40,951,413
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
RETAIL & WHOLESALE, MISCELLANEOUS - 1.4%
Alliance Entertainment Corp.
Series B, 11 1/4%, 7/15/05 B3 $ 15,730,000 $ 14,943,500
Brylane LP Series B
10%, 9/1/03 B2 350,000 336,000
Guitar Center Management Co.,
Inc. 11%, 7/1/06 (e) B2 1,470,000 1,495,725
16,775,225
TOTAL RETAIL & WHOLESALE 108,138,333
SERVICES - 3.0%
PRINTING - 1.7%
Big Flower Press:
10 3/4%, 8/1/03 B2 275,000 266,750
Class A, 10 3/4%,
8/1/03 B3 3,219,000 3,122,430
Class B, 10 3/4%,
8/1/03 B2 967,000 937,990
Sullivan Graphics, Inc.
12 3/4%, 8/1/05 Caa 16,980,000 16,406,925
20,734,095
SERVICES - 1.3%
Protection One Alarm Monitoring,
Inc. 13 5/8%, 6/30/05 Caa 18,300,000 15,692,250
TOTAL SERVICES 36,426,345
TECHNOLOGY - 4.4%
COMMUNICATIONS EQUIPMENT - 2.3%
Echostar Satellite Broadcasting
Corp. 0%, 3/15/04 (c)(e) Caa 21,280,000 13,140,400
Hyperion Telecommunication,
Inc. 0%, 4/15/03 unit (c)(e) - 25,950,000 14,402,250
27,542,650
COMPUTERS & OFFICE EQUIPMENT - 2.0%
Dictaphone Corp.
11 3/4%, 8/1/05 B3 8,130,000 7,621,875
Exide Electronics Group, Inc.
11 1/2%, 3/15/06 unit (e) B 3,770,000 3,845,400
Unisys Corp.:
10 5/8%, 10/01/99 B1 4,080,000 4,100,400
12%, 4/15/03 (e) B1 8,530,000 8,700,600
24,268,275
ELECTRONICS - 0.1%
Alpine Group, Inc.
12 1/4%, 7/15/03 B3 940,000 949,400
TOTAL TECHNOLOGY 52,760,325
TRANSPORTATION - 2.5%
AIR TRANSPORTATION - 1.4%
US Air, Inc.:
Series 1993-A1 Pass Thru
Trust 8 5/8%, 9/1/98 B1 5,000,000 4,925,000
9 5/8%, 2/1/01 B3 1,320,000 1,237,500
10%, 7/1/03 B3 980,000 916,300
10 3/8%, 3/1/13 B1 9,115,000 9,092,213
16,171,013
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
TRANSPORTATION - CONTINUED
RAILROADS - 1.1%
Transtar Holdings LP/Transtar
Cap Corp., Series B, 0%,
12/15/03 (c) B- $ 17,941,000 $ 13,276,340
TOTAL TRANSPORTATION 29,447,353
UTILITIES - 6.7%
CELLULAR - 5.1%
Arch Communications Group,
Inc. 0%, 3/15/08 (c) B3 14,800,000 7,622,000
Comunicaciones Celulares SA
yankee 0%, 11/15/03 (c) B3 12,000,000 7,140,000
Intercel, Inc. unit
0%, 2/1/06 (c) B2 16,720,000 10,032,000
International Cabletel, Inc.,
Series B, 0%, 2/1/06 (c) B3 8,220,000 4,623,750
Microcell Telecommunications,
Inc. unit, 0%, 6/1/06 (c)(e) B3 20,900,000 10,188,750
Millicom International Cellular
SA 0%, 6/1/06 (c)(e) B3 35,000,000 18,287,500
Western Wireless Corp.
10 1/2%, 6/1/06 B3 2,870,000 2,862,825
60,756,825
TELEPHONE SERVICES - 1.6%
GST USA, Inc.
0%, 12/15/05 (c) - 560,000 310,800
MFS Communications, Inc.
0%, 1/15/06 (c) B1 1,250,000 759,375
Shared Technologies Fairchild
Corp. 0%, 3/1/06 (c)(e) Caa 6,290,000 4,748,950
Winstar Communications, Inc.
0%, 10/15/05 (c) - 23,100,000 12,705,000
18,524,125
TOTAL UTILITIES 79,280,950
TOTAL NONCONVERTIBLE BONDS 833,651,551
TOTAL CORPORATE BONDS
(Cost $842,876,208) 852,413,931
COMMERCIAL MORTGAGE SECURITIES - 0.2%
Meritor Mortgage Security Corp.
commercial Series 1987-1 Class
B, 9.40%, 2/1/00 (e)(f) - 1,350,000 231,390
SKW Real Estate LP commercial
Series II Class E,
11%, 4/15/05 (e) B 1,500,000 1,502,850
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $1,724,781) 1,734,240
COMMON STOCKS - 8.9%
SHARES
BASIC INDUSTRIES - 0.1%
IRON & STEEL - 0.1%
Republic Engineered Steels, Inc. (a) 116,100 406,350
PAPER & FOREST PRODUCTS - 0.0%
Mail-Well Holdings, Inc. (a)(e) 23,479 205,441
TOTAL BASIC INDUSTRIES 611,791
SHARES VALUE (NOTE 1)
CONGLOMERATES - 0.5%
American Standard Companies, Inc. (a) 164,100 $ 5,415,300
DURABLES - 0.0%
TEXTILES & APPAREL - 0.0%
Hat Brands, Inc. (warrants) (a)(d) 27,466 137,328
HM/Hat Brands Trust
Class I unit (a)(d) 340,000 340,000
477,328
ENERGY - 1.2%
OIL & GAS - 1.2%
Flores & Rucks, Inc. (a) 356,000 12,282,000
Harcor Energy, Inc. (warrants)(a) 330,000 577,500
TransTexas Gas Corp. (a) 180,200 1,711,900
14,571,400
FINANCE - 1.9%
INSURANCE - 1.9%
American Financial Group, Inc. 717,200 21,605,650
Penncorp. Financial Group, Inc. 25,000 793,750
22,399,400
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (e) 3,000 300,000
TOTAL FINANCE 22,699,400
HEALTH - 0.1%
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
MVE, Inc. (warrants) (a) 10,555 316,650
Wright Medical Technology, Inc.
(warrants) (a) 1,976 247,000
563,650
HOLDING COMPANIES - 0.0%
SDW Holdings Corp. (a):
(warrants) 3,720 11,160
Series B (warrants) (e) 4,450 57,850
69,010
INDUSTRIAL MACHINERY & EQUIPMENT - 0.6%
ELECTRICAL EQUIPMENT - 0.6%
Exide Corp. 311,500 7,553,875
Terex Corp. (rights) (a)(d) 3,150 315
7,554,190
MEDIA & LEISURE - 3.2%
BROADCASTING - 1.3%
Adelphia Communications Class A (a) 137,600 1,032,000
Benedek Communications Corp. unit
Class A 5,760 5,760,000
PanAmSat Corp. (a) 316,000 9,164,000
15,956,000
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. (a)(d):
$2.00 (warrants) 232,000 11,600
$2.72 (warrants) 221,765 11,088
22,688
LEISURE DURABLES & TOYS - 0.1%
IHF Capital, Inc. (a)(e):
Series H (warrants) 10,250 968,625
Series I (warrants) 5,890 144,305
1,112,930
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 1.7%
Bally Gaming International, Inc.
(warrants) (a) 90,000 $ 270,000
Grand Casinos, Inc. 446,700 11,502,525
Host Marriott Corp. (a) 597,100 7,836,938
Maritime Group Ltd. (warrants) (a) 17,880 179
Motels of America, Inc. (a) 3,000 195,000
19,804,642
PUBLISHING - 0.1%
American Media, Inc. Class A (a) 339,500 1,782,375
General Media, Inc. (warrants) (a) 1,310 1,310
1,783,685
TOTAL MEDIA & LEISURE 38,679,945
NONDURABLES - 0.3%
HOUSEHOLD PRODUCTS - 0.3%
Revlon, Inc. Class A (a) 113,300 3,299,863
RETAIL & WHOLESALE - 0.0%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a) 35,870 8,968
Lamonts Apparel, Inc. (warrants) (a) 66,214 1
Mothers Work, Inc. 10,950 279,225
288,194
GROCERY STORES - 0.0%
FF Holdings Corp. (a)(d) 33,900 67,800
Food 4 Less Holdings, Inc.
(warrants) (a)(d) 9,348 186,960
MAFCO (warrants) (a) 59 -
254,760
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Barry's Jewelers, Inc. (warrants) (a) 5,697 712
Town & Country Jewelry
Manufacturing Corp. Class A (a) 8,374 8,374
9,086
TOTAL RETAIL & WHOLESALE 552,040
SERVICES - 0.9%
PRINTING- 0.6%
Big Flower Press Holdings, Inc. (a) 474,000 6,695,250
SERVICES - 0.3%
Protection One, Inc. (a) 181,600 2,973,700
Protection One, Inc. (warrants) (a) 74,560 745,600
Vestar/LPA Investment Corp. (a) 5,177 51,770
3,771,070
TOTAL SERVICES 10,466,320
TECHNOLOGY - 0.0%
COMPUTERS & OFFICE EQUIPMENT - 0.0%
Exide Electronics Group, Inc. (a) 25,000 237,500
UTILITIES - 0.1%
CELLULAR - 0.1%
Arch Communications Group, Inc. 1,700 31,663
Comunicaciones Celulares SA
(warrants) (a)(e) 12,000 600,000
631,663
ELECTRIC UTILITY - 0.0%
Eastern Utilities Associates 3 59
El Paso Electric Co. (a) 55,658 333,948
Northeast Utilities Associates (warrants) (a) 21,789 4,766
338,773
SHARES VALUE (NOTE 1)
GAS - 0.0%
UGI Corp. (warrants) (a) 14,033 $ 2,105
TOTAL UTILITIES 972,541
TOTAL COMMON STOCKS
(Cost $94,753,375) 106,170,278
PREFERRED STOCKS - 11.0%
CONVERTIBLE PREFERRED STOCKS - 0.0%
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings Corp.
exchangeable pay-in-kind $3.52 (a) 4,950 128,700
NONCONVERTIBLE PREFERRED STOCKS - 11.0%
BASIC INDUSTRIES - 0.0%
PAPER & FOREST PRODUCTS - 0.0%
S D Warren Co. exchangeable
pay-in-kind 3,720 129,270
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Harvard Industries, Inc. pay-in-kind $14.25 25,979 675,454
ENERGY - 0.3%
OIL & GAS - 0.3%
Gulf Canada Resources Ltd. (d) 31,009 96,903
Gulf Canada Resources Ltd.,
Series 1, adj. rate 924,342 2,881,048
2,977,951
FINANCE - 1.0%
SAVINGS & LOANS - 1.0%
First Nationwide Bank $11.50 110,348 12,083,106
HOLDING COMPANIES - 0.1%
SDW Holdings Corp. (a) 44,500 1,546,375
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp. 8% (d) 1,589 1,142,459
MEDIA & LEISURE - 8.8%
BROADCASTING - 8.6%
Cablevision System Corp.:
$11.125 pay-in-kind (e) 103,616 9,688,096
Series H, $11.75 exchangeable
pay-in-kind (a) 231,437 22,333,671
Chancellor Radio Broadcasting Co.
exchangeable pay-in-kind (e) 64,300 6,526,450
PanAmSat Corp. 12 3/4% pay-in-kind 40,207 45,634,945
Time Warner, Inc., Series K exchangeable 19,102 18,719,960
102,903,122
PUBLISHING - 0.2%
K-III Communications Corp., Series B,
$11.625 pay-in-kind 25,901 2,596,575
TOTAL MEDIA & LEISURE 105,499,697
UTILITIES - 0.6%
TELEPHONE SERVICES - 0.6%
Intelecom Group USA, Inc. (a) 6,567 6,829,675
TOTAL NONCONVERTIBLE PREFERRED STOCKS 130,883,987
TOTAL PREFERRED STOCKS
(Cost $127,614,155) 131,012,687
REPURCHASE AGREEMENTS - 8.1%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.46%, dated
6/28/96 due 7/1/96 $ 96,763,007 $ 96,719,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,163,687,519) $ 1,188,050,136
LEGEND
1. Non-income producing
2. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
3. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
4. 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
Ampex Corp. 8% 2/16/95 $ 834,225
FF Holdings Corp. 10/2/92
to 1/14/94 $ 135,752
Food 4 Less Holdings, 12/30/92
Inc. (warrants) to 5/17/93 $ 229,281
Gulf Canada Resources Ltd. 10/15/93 $ 76,940
Hat Brands, Inc. (warrants) 9/2/92
to 2/23/94 $ -
HM/Hat Brands Trust
Class I unit 2/22/94 $ 340,000
Littlefield Co.
10%, 9/30/97 2/28/94 $ 2,750,000
Live Entertainment, Inc.
(warrants):
$2.00 3/23/93 $ 220,717
$2.72 3/23/93 $ 131,863
Terex Corp. (rights) 7/29/92 $ -
WCI Communities LP
17%, 7/24/98 7/24/95 $ 4,937,231
5. 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 $176,513,025 or 14.8% of net
assets.
6. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
7. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $814,757,806 and $685,837,402, respectively, of which U.S.
government and government agency obligations aggregated $24,243,750 and
$23,786,719, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $1,407 for the period (see
Note 4 of Notes to Financial Statements).
The fund participated in the interfund lending program as a lender. The
maximum loan and the average daily loan balances during the period for
which loans were outstanding amounted to $24,330,000 and $14,516,333,
respectively. The weighted average interest rate was 5.45%. Interest earned
from the interfund lending program amounted to $13,187 and is included in
interest income on the Statement of Operations.
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 2.1% BB 10.0%
B 52.4% B 49.5%
Caa 9.7% CCC 4.3%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 5.9%
including long-term debt categorized as other securities. FMR has
determined that unrated debt securities that are lower quality account for
5.9% of the total value of investment in securities.
INCOME TAX INFORMATION
At June 30, 1996, the aggregate cost of investment securities for income
tax purposes was $1,163,978,551. Net unrealized appreciation aggregated
$24,071,585, of which $47,109,000 related to appreciated investment
securities and $23,037,415 related to depreciated investment securities.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $96,719,000) (cost $1,163,687,519) - $ 1,188,050,136
See accompanying schedule
Receivable for investments sold 8,006,128
Receivable for fund shares sold 2,867,350
Dividends receivable 1,286,174
Interest receivable 16,929,392
TOTAL ASSETS 1,217,139,180
LIABILITIES
Payable to custodian bank $ 22,577
Payable for investments purchased 26,878,636
Payable for fund shares redeemed 465,240
Accrued management fee 580,732
Other payables and 130,376
accrued expenses
TOTAL LIABILITIES 28,077,561
NET ASSETS $ 1,189,061,619
Net Assets consist of:
Paid in capital $ 1,097,088,005
Undistributed net investment income 51,787,017
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 15,828,606
Net unrealized appreciation (depreciation) on investments 24,357,991
and assets and liabilities in
foreign currencies
NET ASSETS, for 100,933,211 $ 1,189,061,619
shares outstanding
NET ASSET VALUE, offering price $11.78
and redemption price per
share ($1,189,061,619 (divided by)
100,933,211 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INVESTMENT INCOME $ 6,676,114
Dividends
Interest 48,932,279
TOTAL INCOME 55,608,393
EXPENSES
Management fee $ 3,285,865
Transfer agent fees 161,007
Accounting fees and expenses 300,553
Non-interested trustees' compensation 1,841
Custodian fees and expenses 30,842
Registration fees 4,022
Audit 19,221
Legal 8,508
Miscellaneous 5,934
Total expenses before reductions 3,817,793
Expense reductions (35,635 3,782,158
)
NET INVESTMENT INCOME 51,826,235
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 16,991,686
Foreign currency transactions 1,007 16,992,693
Change in net unrealized appreciation (depreciation) on:
Investment securities 8,460,085
Assets and liabilities in (56 8,460,029
foreign currencies )
NET GAIN (LOSS) 25,452,722
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 77,278,957
OTHER INFORMATION
Expense reductions $ 29,476
Directed brokerage arrangements
Custodian interest credits 6,159
$ 35,635
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 51,826,235 $ 76,879,046
Net investment income
Net realized gain (loss) 16,992,693 21,706,316
Change in net unrealized appreciation (depreciation) 8,460,029 49,316,188
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 77,278,957 147,901,550
Distributions to shareholders (81,893,762) (43,871,918)
From net investment income
From net realized gain (16,022,693) -
TOTAL DISTRIBUTIONS (97,916,455) (43,871,918)
Share transactions 456,333,503 747,404,302
Net proceeds from sales of shares
Reinvestment of distributions 97,916,454 43,871,918
Cost of shares redeemed (384,550,398) (424,723,050)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 169,699,559 366,553,170
TOTAL INCREASE (DECREASE) IN NET ASSETS 149,062,061 470,582,802
NET ASSETS
Beginning of period 1,039,999,558 569,416,756
End of period (including undistributed net investment income of $51,787,017 and $76,334,012,
respectively) $ 1,189,061,619 $ 1,039,999,558
OTHER INFORMATION
Shares
Sold 39,321,306 66,375,373
Issued in reinvestment of distributions 8,680,536 4,326,619
Redeemed (33,371,112) (37,385,468)
Net increase (decrease) 14,630,730 33,316,524
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1996
SELECTED PER-SHARE DATA (UNAUDITED) 1995 1994 1993 D 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.050 $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070
Income from Investment Operations .549 .856 .770 .728 .790 .890
Net investment income
Net realized and unrealized gain (loss) .281 1.224 (.910) 1.332 1.290 1.590
Total from investment operations .830 2.080 (.140) 2.060 2.080 2.480
Less Distributions (.920) (.780) (.730) (.794) (.810) -
From net investment income
In excess of net investment income - - - (.036) - -
From net realized gain (.180) - (.370) (.060) - -
Total distributions (1.100) (.780) (1.100) (.890) (.810) -
Net asset value, end of period $ 11.780 $ 12.050 $ 10.750 $ 11.990 $ 10.820 $ 9.550
TOTAL RETURN B, C 7.29% 20.72% (1.64)% 20.40% 23.17% 35.08%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,189,062 $ 1,040,000 $ 569,417 $ 463,931 $ 200,591 $ 70,060
Ratio of expenses to average net assets .70% A .71% .71% .64% F .67% .97%
Ratio of expenses to average net assets after .69% A, .71% .71% .64% .67% .97%
expense reductions E
Ratio of net investment income to average net assets 9.46% A 9.32% 8.75% 8.69% 10.98% 12.94%
Portfolio turnover rate 138% A 132% 122% 155% 160% 154%
Average commission rate G $ .0450
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 7 OF NOTES
TO FINANCIAL
STATEMENTS). C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS
SHOWN. D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF
POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF
INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY
INVESTMENT COMPANIES." AS A
RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES. E FMR OR THE FUND
HAS ENTERED INTO VARYING
ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION
OF THE FUND'S EXPENSES (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS).
F FMR VOLUNTARILY
REIMBURSED A PORTION OF THE FUND'S EXPENSES. WITHOUT THIS REIMBURSEMENT,
THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. G FOR FISCAL YEARS
BEGINNING ON OR AFTER
SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION
RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED.
THIS AMOUNT MAY
VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF
TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND
COMMISSION RATE STRUCTURES
MAY DIFFER.
</TABLE>
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. A fund's total return 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
securities that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1996 YEAR YEARS FUND
Equity-Income 22.08% 18.95% 13.27%
S&P 500 26.00% 15.73% 14.80%
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
500 Index - a widely recognized, unmanaged index of common stocks. The S&P
500 returns reflect reinvestment of all dividends paid by stocks included
in the Index, but do not reflect any brokerage commissions or other fees
you might pay if you actually invested in those stocks.
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.
If Fidelity had not reimbursed certain fund expenses, the fund's life of
fund total return 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, THE TOTAL RETURNS 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
Equity-Income Portfolio S&P 500
$38,314
$33,625
$
'9
6
Let's say hypothetically that $10,000 was invested in Equity-Income
Portfolio on October 9, 1986, when the fund started. As the chart shows, by
June 30, 1996, the value of the investment would have grown to $33,625 - a
236.25% increase on the initial investment. For comparison, look at how the
S&P 500 did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $38,314 - a
283.14% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1996
% OF FUND'S
INVESTMENTS
General Electric Co. 2.2
Aetna Life & Casualty Co. 1.9
British Petroleum PLC ADR 1.7
American Express Co. 1.7
RJR Nabisco Holdings Corp. 1.7
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1996
% OF FUND'S
INVESTMENTS
Finance 17.7
Health 12.5
Media & Leisure 10.3
Retail & Wholesale 8.4
Nondurables 6.9
ASSET ALLOCATION AS OF JUNE 30, 1996 *
Row: 1, Col: 1, Value: 2.8
Row: 1, Col: 2, Value: 13.1
Row: 1, Col: 3, Value: 44.1
Row: 1, Col: 4, Value: 40.0
Stocks 84.1%
Bonds 13.1%
Short-term investments 2.8%
FOREIGN INVESTMENTS 5.6%
*
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
NOTE TO SHAREHOLDERS: On March 26, 1996, Andy Offit became manager of
Equity-Income Portfolio.
Q. HOW DID THE FUND PERFORM, ANDY?
A. Overall, a little disappointing. For the six- and 12-month periods
ending June 30, 1996, the fund underperformed its benchmark index, the
Standard & Poor's 500 Index, which returned 10.10% for the six-month and
26.00% for the 12-month periods.
Q. WHY DID THE FUND LAG ITS BENCHMARK DURING THE PAST SIX MONTHS?
A. The past 12 months have not really been a stock picker's market, but
rather one in which the S&P 500 managed to outperform most "bottom up"
mutual funds, such as VIP Equity Income. Additionally, since I took over
the fund in March, I've positioned the fund further from the pure index
stocks. It's a strategy that's not proved successful in the short run but
one I believe may benefit the fund in the long run.
Q. CAN YOU EXPLAIN WHAT CHANGES YOU'VE MADE TO THE FUND SINCE YOU TOOK
OVER?
A. Yes, but before I describe what's changed, I'd like to explain what
stayed the same. The fund continued to invest mainly in U.S. stocks -
mostly large-cap, growth stocks. But I also began to make selective
investments in mid-cap growth stocks of companies with between $2 billion
and $6 billion in market capitalization. As for the income portion, I've
begun to accumulate a position in convertible bond securities.
Q. WHY DO YOU FIND CONVERTIBLE BONDS ATTRACTIVE?
A. First of all, I managed a convertible bond fund for three years and am
very familiar and comfortable with these securities. I believe that
convertible bonds have the potential to add value to the fund on the
upside, while minimizing risk. Second, the fund's prospectus says that the
fund should seek to achieve a yield higher than the S&P 500, and I think
that strategic investments in convertible bonds can potentially add a lot
of yield to the fund. I also think that convertible bonds can potentially
lower the fund's volatility since they don't necessarily move in sync with
the market. At the end of the period, the fund had a 13.1% position in
convertible bonds.
Q. WHAT ABOUT THE FUND'S HOLDINGS IN MID-CAP STOCKS?
A. Although investing in mid-cap stocks is a strategy that I'm enthusiastic
about, I don't expect to make it a very large percentage of the fund's
investments. That said, I think the fund can potentially benefit from
prudent investments in medium-sized companies that have a lot of room to
grow. Mid-cap stocks can be more risky than large-cap stocks, but sometimes
the reward can make the risk worthwhile. At the end of the period, the
portion of the fund's investments in mid-cap stocks was less than three
percent.
Q. WHERE DID YOU FIND INVESTMENT OPPORTUNITIES DURING
THE PERIOD?
A. In pharmaceuticals and defense companies. Both groups have experienced
stable business conditions and attractive valuations relative to their
growth prospects and the overall market. Finally, both industries are
benefiting from growth from new areas and consolidation. Some of the fund's
holdings at the end of the period included Schering-Plough and American
Home Products in the drug sector and Lockheed Martin and General Dynamics
in defense.
Q. WHAT'S BEEN MOST DISAPPOINTING DURING THE PAST SIX MONTHS?
A. That the fund hasn't performed better. I can't point toward one in-
vestment that really hurt performance. I simply owned too many stocks that
didn't go up as much as the market, and not enough of the stocks in the S&P
500 that did.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD, ANDY?
A. My overall outlook is positive. I'm very comfortable with the changes
I've made to the fund's investment strategy. Though the fund's performance
was disappointing during the past six months, I'm pleased with its growth
stock and convertible bond holdings and am looking forward to continuing
with this strategy during the next six months.
FUND FACTS
GOAL: to seek high current income by
investing in high-yielding, lower-rated fixed
income securities
START DATE: September 19, 1985
SIZE: as of June 30, more than $1.1 billion
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 81.5%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 4.4%
AEROSPACE & DEFENSE - 2.4%
Alliant Techsystems, Inc. (a) 215,000 $ 10,131,862
Boeing Co. 40,000 3,485,000
Lockheed Martin Corp. 924,603 77,666,652
Northrop Grumman Corp. 527,900 35,963,188
Thiokol Corp. 376,700 14,879,650
142,126,352
DEFENSE ELECTRONICS - 1.2%
Litton Industries, Inc. (a) 893,100 38,849,850
Raytheon Co. 612,700 31,630,638
70,480,488
SHIP BUILDING & REPAIR - 0.8%
General Dynamics Corp. 825,600 51,187,200
TOTAL AEROSPACE & DEFENSE 263,794,040
BASIC INDUSTRIES - 4.9%
CHEMICALS & PLASTICS - 3.0%
Hercules, Inc. 1,000,100 55,255,525
IMC Fertilizer Group, Inc. 961,300 36,168,913
Monsanto Co. 300,000 9,750,000
Raychem Corp. 225,000 16,171,875
Synetic, Inc. (a)(e) 1,157,582 42,830,534
Union Carbide Corp. 551,100 21,906,225
182,083,072
METALS & MINING - 1.2%
Inco Ltd. 1,364,793 43,990,064
Pechiney SA Class A 741,943 29,922,396
73,912,460
PAPER & FOREST PRODUCTS - 0.7%
Boise Cascade Corp. 569,600 20,861,600
Champion International Corp. 460,100 19,209,175
40,070,775
TOTAL BASIC INDUSTRIES 296,066,307
CONGLOMERATES - 2.4%
Allied-Signal, Inc. 1,463,700 83,613,863
Coltec Industries, Inc. (a) 1,371,600 19,545,300
Tyco International Ltd. 1,052,742 42,899,237
146,058,400
CONSTRUCTION & REAL ESTATE - 0.5%
BUILDING MATERIALS - 0.5%
Masco Corp. 1,045,400 31,623,350
DURABLES - 3.3%
AUTOS, TIRES, & ACCESSORIES - 2.2%
Bandag, Inc. 400,000 19,200,000
Dana Corp. 313,500 9,718,500
Echlin, Inc. 220,300 8,343,863
Fruehauf Trailor Corp. (a) 414,200 258,875
Goodyear Tire & Rubber Co. 853,300 41,171,725
Johnson Controls, Inc. 210,700 14,643,650
Snap-on Tools Corp. 642,900 30,457,388
Volvo AB Class B 430,000 9,767,141
133,561,142
CONSUMER ELECTRONICS - 0.6%
Maytag Co. 676,000 14,111,500
Newell Co. 322,200 9,867,375
Sunbeam-Oster, Inc. 635,600 9,375,100
33,353,975
SHARES VALUE (NOTE 1)
TEXTILES & APPAREL - 0.5%
Nine West Group, Inc. 80,000 $ 4,090,000
Reebok International Ltd. 500,000 16,812,500
Warnaco Group, Inc. Class A 426,300 10,977,225
31,879,725
TOTAL DURABLES 198,794,842
ENERGY - 4.9%
ENERGY SERVICES - 0.8%
Baker Hughes, Inc. 271,800 8,935,425
McDermott International, Inc. 521,100 10,877,963
Schlumberger Ltd. 270,600 22,798,050
Seacor Holdings, Inc. (a) 145,600 6,515,600
49,127,038
OIL & GAS - 4.1%
Amerada Hess Corp. 1,710,100 91,704,113
British Petroleum PLC ADR 981,459 104,893,431
Canada Occidental Petroleum Ltd. 322,200 5,422,969
Royal Dutch Petroleum Co. ADR 200,000 30,750,000
Total SA Class B 200,000 14,812,803
247,583,316
TOTAL ENERGY 296,710,354
FINANCE - 15.3%
BANKS - 4.0%
Bank of New York Co., Inc. 837,500 42,921,875
BankAmerica Corp. 764,700 57,926,025
Citicorp 749,400 61,919,175
First Bank System, Inc. 91,600 5,312,800
Fleet Financial Group, Inc. 538,054 23,405,349
PNC Financial Corp. 700,000 20,825,000
Republic New York Corp. 131,200 8,167,200
U.S. Bancorp. 543,700 19,641,163
240,118,587
CREDIT & OTHER FINANCE - 2.8%
American Express Co. 2,285,172 101,975,801
Beneficial Corp. 398,000 22,337,750
Household International, Inc. 637,825 48,474,700
172,788,251
FEDERAL SPONSORED CREDIT - 2.6%
Federal Home Loan
Mortgage Corporation 496,900 42,484,950
Federal National Mortgage Association 1,526,200 51,127,700
Student Loan Marketing Association 828,200 61,286,800
154,899,450
INSURANCE - 5.7%
Aetna Life & Casualty Co. 1,608,200 114,986,300
Allstate Corp. 914,999 41,746,829
General Re Corp. 652,500 99,343,125
ITT Hartford Group, Inc. 939,200 50,012,400
Loews Corp. 505,700 39,887,088
345,975,742
SECURITIES INDUSTRY - 0.2%
Lehman Brothers Holdings, Inc. 598,800 14,820,300
TOTAL FINANCE 928,602,330
HEALTH - 10.1%
DRUGS & PHARMACEUTICALS - 5.6%
American Home Products Corp. 1,163,000 69,925,375
Barr Laboratories, Inc. (a)(e) 1,141,800 29,401,350
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS - CONTINUED
Genentech, Inc. special (a) 534,400 $ 27,989,200
Lilly (Eli) & Co. 160,000 10,400,000
Pharmacia & Upjohn, Inc. 1,311,600 58,202,250
Schering-Plough Corp. 1,348,900 84,643,475
Warner-Lambert Co. 1,029,000 56,595,000
337,156,650
MEDICAL EQUIPMENT & SUPPLIES - 3.5%
Acuson Corp. (a) 806,300 12,900,800
Advanced Medical, Inc. (a)(e) 1,395,655 4,012,508
Bard (C.R.), Inc. 1,072,700 36,471,800
Cardiac Control Systems, Inc. (a)(e) 99,800 274,450
Cardinal Health, Inc. 620,500 44,753,563
Stryker Corp. 679,000 15,447,250
U.S. Surgical Corp. 3,183,800 98,697,800
212,558,171
MEDICAL FACILITIES MANAGEMENT - 1.0%
Columbia/HCA Healthcare Corp. 584,700 31,208,363
Integramed America, Inc. (a)(e) 605,500 2,081,406
Tenet Healthcare Corp. (a) 685,200 14,646,150
Vencor, Inc. (a) 541,200 16,506,600
64,442,519
TOTAL HEALTH 614,157,340
HOLDING COMPANIES - 0.2%
Koor Industries Ltd. sponsored ADR 552,300 9,527,175
INDUSTRIAL MACHINERY & EQUIPMENT - 4.0%
ELECTRICAL EQUIPMENT - 2.3%
American Superconductor Corp. (a) 419,800 5,982,150
General Electric Co. 1,522,800 131,722,200
137,704,350
INDUSTRIAL MACHINERY & EQUIPMENT - 0.4%
Ingersoll-Rand Co. 610,800 26,722,500
POLLUTION CONTROL - 1.3%
WMX Technologies, Inc. 2,405,200 78,770,300
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 243,197,150
MEDIA & LEISURE - 8.6%
BROADCASTING - 1.2%
Viacom, Inc. Class B (non-vtg.) (a) 1,927,100 74,916,013
ENTERTAINMENT - 0.5%
Disney (Walt) Co. 294,900 18,541,838
GC Cos., Inc. (a) 270,500 10,076,125
28,617,963
LEISURE DURABLES & TOYS - 1.2%
Hasbro, Inc. 2,100,500 75,092,875
LODGING & GAMING - 4.7%
Circus Circus Enterprises, Inc. (a) 1,229,100 50,393,100
Hilton Hotels Corp. 470,400 52,920,000
ITT Corp. 1,055,800 69,946,750
Mirage Resorts, Inc. (a) 1,508,800 81,098,000
WMS Industries, Inc. (a) 1,206,200 29,702,675
284,060,525
PUBLISHING - 0.8%
Harcourt General, Inc. 385,600 19,280,000
Score Board, Inc. (a) 303,900 1,443,525
Times Mirror Co. Class A 641,030 27,884,805
48,608,330
SHARES VALUE (NOTE 1)
RESTAURANTS - 0.2%
Darden Restaurants, Inc. 810,100 $ 8,708,575
TOTAL MEDIA & LEISURE 520,004,281
NONDURABLES - 6.8%
BEVERAGES - 1.6%
PepsiCo, Inc. 2,345,600 82,975,600
Seagram Co. Ltd. 500,000 16,776,063
99,751,663
FOODS - 1.3%
Chock Full-O-Nuts Corp. 132,500 645,938
General Mills, Inc. 1,060,600 57,802,700
Nestle SA (Reg.) 16,900 19,262,293
77,710,931
HOUSEHOLD PRODUCTS - 1.0%
First Brands Corp. 865,900 23,379,300
Playtex Products, Inc. (a) 2,141,500 20,076,563
Premark International, Inc. 231,700 4,286,450
Stanhome, Inc. 474,900 12,584,850
60,327,163
TOBACCO - 2.9%
Philip Morris Companies, Inc. 724,700 75,368,800
RJR Nabisco Holdings Corp. 3,260,739 101,082,909
176,451,709
TOTAL NONDURABLES 414,241,466
PRECIOUS METALS - 0.0%
Naxos Resources Ltd. (a) 60,200 368,648
RETAIL & WHOLESALE - 6.7%
APPAREL STORES - 0.1%
Melville Corp. 121,600 4,924,800
GENERAL MERCHANDISE STORES - 4.2%
Consolidated Stores Corp. (a) 469,900 17,268,825
Dillard Department Stores, Inc. Class A 1,356,400 49,508,600
Federated Department Stores, Inc. (a) 466,600 15,922,725
Sears, Roebuck & Co. 1,768,600 85,998,175
Wal-Mart Stores, Inc. 1,681,600 42,670,600
Woolworth Corp. (a) 1,837,100 41,334,750
252,703,675
RETAIL & WHOLESALE, MISCELLANEOUS - 2.4%
Home Depot, Inc., (The) 1,465,900 79,158,600
Tandy Corp. 846,000 40,079,250
Toys "R" Us, Inc. 930,000 26,505,000
145,742,850
TOTAL RETAIL & WHOLESALE 403,371,325
SERVICES - 1.5%
ADVERTISING - 0.5%
Interpublic Group of Companies, Inc. 658,500 30,867,188
PRINTING - 0.5%
Deluxe Corp. 178,500 6,336,750
Harland (John H.) Co. 948,200 23,349,425
29,686,175
SERVICES - 0.5%
ADT Ltd. (a) 800,900 15,116,988
Manpower, Inc. 415,100 16,292,675
31,409,663
TOTAL SERVICES 91,963,026
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 3.6%
COMMUNICATIONS EQUIPMENT - 1.0%
Cisco Systems, Inc. (a) 560,100 $ 31,715,663
General Instrument Corp. 917,893 26,504,160
58,219,823
COMPUTER SERVICES & SOFTWARE - 0.4%
Softkey International, Inc. (a) 1,257,400 23,812,013
COMPUTERS & OFFICE EQUIPMENT - 0.8%
Pitney Bowes, Inc. 991,000 47,320,250
ELECTRONICS - 0.3%
Storage Technology Corp. (a) 537,500 20,559,375
PHOTOGRAPHIC EQUIPMENT - 1.1%
Eastman Kodak Co. 874,900 68,023,475
TOTAL TECHNOLOGY 217,934,936
TRANSPORTATION - 1.6%
AIR TRANSPORTATION - 0.8%
Northwest Airlines Corp. Class A (a) 1,150,000 45,425,000
RAILROADS - 0.8%
Burlington Northern Santa Fe Corp. 625,540 50,590,548
TOTAL TRANSPORTATION 96,015,548
UTILITIES - 2.7%
TELEPHONE SERVICES - 2.7%
AT&T Corp. 1,509,700 93,601,400
LCI International, Inc. 280,000 8,785,000
Lucent Technologies, Inc. 614,400 23,270,400
Southern New England
Telecommunications Corp. 670,300 28,152,600
WorldCom, Inc. 126,500 7,004,938
160,814,338
TOTAL COMMON STOCKS
(Cost $4,403,590,418) 4,933,244,856
CONVERTIBLE PREFERRED STOCKS - 2.6%
DURABLES - 0.2%
CONSUMER DURABLES - 0.2%
Owens-Corning Capital LLC $3.25 236,800 13,320,000
ENERGY - 0.9%
OIL & GAS - 0.9%
Occidental Petroleum Corp.
Indexed $3.00 218,900 13,599,163
Occidental Petroleum Corp.
$3.875 (d) 682,100 40,584,950
54,184,113
FINANCE - 1.4%
INSURANCE - 0.8%
Conseco, Inc. $4.27875 631,100 48,910,250
SECURITIES INDUSTRY - 0.6%
Merrill Lynch & Co., Inc. $1.3725 400,000 8,850,000
Salomon, Inc. $2.03 840,700 23,014,163
31,864,163
TOTAL FINANCE 80,774,413
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
Cablevision Systems Corp. depositary
shares representing 1/10 pfd.,
Series I, $2.125 307,500 $ 7,995,000
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $156,423,454) 156,273,526
CORPORATE BONDS - 13.1%
MOODY'S PRINCIPAL
RATINGS (B) AMOUNT
CONVERTIBLE BONDS - 13.1%
BASIC INDUSTRIES - 0.9%
CHEMICALS & PLASTICS - 0.3%
IMC Fertilizer Group, Inc.
subnote convertible
6 1/4%, 12/1/2001 B2 $ 16,000,000 19,700,000
IRON & STEEL - 0.1%
Trimas Corp. 5%, 8/1/03 Ba3 3,500,000 3,911,250
METALS & MINING - 0.5%
Inco Ltd. 5 3/4%, 7/1/04 Baa2 25,800,000 32,637,000
TOTAL BASIC INDUSTRIES 56,248,250
CONGLOMERATES - 0.4%
Gencorp, Inc. 8%, 8/1/02 B1 19,500,000 21,108,750
CONSTRUCTION & REAL ESTATE - 0.4%
REAL ESTATE INVESTMENT TRUSTS - 0.4%
Liberty Property exchangeable
8%, 7/1/01 B1 25,110,000 25,926,075
DURABLES - 0.5%
AUTOS, TIRES, & ACCESSORIES - 0.5%
Mascotech, Inc.
4 1/2%, 12/15/03 Ba3 35,400,000 27,966,000
Titan Wheel International, Inc.
4 3/4%, 12/1/00 B2 500,000 642,500
28,608,500
ENERGY - 0.9%
ENERGY SERVICES - 0.1%
Nabors Industries, Inc.
5%, 5/1/06 Ba2 4,347,000 4,825,170
OIL & GAS - 0.8%
Pennzoil 4 3/4%, 10/1/03 Baa3 32,670,000 35,365,275
USX-Marathon Group
7%, 6/15/17 BB- 15,000,000 14,006,250
49,371,525
TOTAL ENERGY 54,196,695
FINANCE - 1.0%
INSURANCE - 1.0%
Chubb Corp., (The)
6%, 5/15/98 Aa3 40,730,000 47,654,100
Mutual Risk Management Ltd.
exchangeable 0%,
10/30/15 (d) Baa3 31,000,000 11,663,750
59,317,850
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - CONTINUED
HEALTH - 2.4%
DRUGS & PHARMACEUTICALS - 0.3%
Bentley Pharmaceuticals, Inc.
12%, 2/13/06 - $ 750,000 $ 952,500
Roche Holdings, Inc. liquid
yield option notes
0%, 4/20/10 (d) - 44,500,000 18,968,125
19,920,625
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
Phoenix Shannon PLC 9 1/2%,
11/1/00 (d) - 3,500,000 3,395,000
MEDICAL FACILITIES MANAGEMENT - 2.0%
Beverly Enterprises, Inc.
5 1/2%, 8/1/18 B3 44,550,000 45,441,000
Integrated Health Services, Inc.
5 3/4%, 1/1/01 B2 22,000,000 21,340,000
NovaCare, Inc.
5 1/2%, 1/15/00 B1 36,787,000 32,372,560
Sun Healthcare Group, Inc.:
6%, 3/1/04 (d) - 15,060,000 13,554,000
euro 6%, 3/1/04 - 6,670,000 6,036,350
118,743,910
TOTAL HEALTH 142,059,535
INDUSTRIAL MACHINERY & EQUIPMENT - 0.7%
Cooper Industries, Inc.
7.05%, 1/1/15 A3 41,665,000 44,894,038
MEDIA & LEISURE - 1.6%
BROADCASTING - 0.8%
Comcast Corp. 3 3/8%,
9/9/05 (c) B1 33,500,000 30,987,500
Time Warner, Inc. liquid yield
option notes 0%, 6/22/13 Ba1 50,000,000 20,750,000
51,737,500
LODGING & GAMING - 0.6%
Hilton Hotels Corp.
5%, 5/15/06 Baa2 32,300,000 34,076,500
RESTAURANTS - 0.2%
Shoney's, Inc. liquid yield
option notes 0%, 4/11/04 B2 26,260,000 12,210,900
TOTAL MEDIA & LEISURE 98,024,900
NONDURABLES - 0.1%
BEVERAGES - 0.1%
Grand Metropolitan PLC euro
6 1/2%, 1/31/00 A2 4,500,000 4,882,500
PRECIOUS METALS - 0.2%
Homestake Mining Co.
5 1/2%, 6/23/00 (d) Ba2 14,700,000 14,700,000
RETAIL & WHOLESALE - 1.7%
APPAREL STORES - 0.1%
Baby Superstore, Inc.
4 7/8%, 10/1/00 B3 7,000,000 5,390,000
DRUG STORES - 0.9%
Rite Aid Corp. liquid yield
option notes 0%, 7/24/06 Baa1 103,000,000 54,203,750
MOODY'S PRINCIPAL VALUE
RATINGS (B) AMOUNT (NOTE 1)
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.7%
Price Co. sub. deb. conv.
6 3/4%, 3/1/01 Baa1 $ 39,330,000 $42,230,588
TOTAL RETAIL & WHOLESALE 101,824,338
TECHNOLOGY - 1.8%
COMMUNICATIONS EQUIPMENT - 0.2%
3Com Corp.
10 1/4%, 11/1/01 (d) Ba3 8,000,000 12,560,000
COMPUTERS & OFFICE EQUIPMENT - 1.3%
Silicon Graphics, Inc. 0%,
11/2/13 (d) B1 19,500,000 9,774,375
Unisys Corp. 8 1/4%, 8/1/00 B3 66,839,000 64,833,830
74,608,205
ELECTRONICS - 0.3%
Xilinx, Inc. 5 1/4%,
11/1/02 B2 21,000,000 19,215,000
TOTAL TECHNOLOGY 106,383,205
UTILITIES - 0.5%
CELLULAR - 0.4%
Cellular Communications, Inc.
0%, 7/27/99 (d) B1 30,000,000 24,300,000
GAS - 0.1%
Consolidated Natural Gas Co.
7 1/4%, 12/15/15 A2 6,400,000 6,840,000
TOTAL UTILITIES 31,140,000
TOTAL CONVERTIBLE BONDS 789,314,636
NONCONVERTIBLE BONDS - 0.0%
NONDURABLES - 0.0%
BEVERAGES - 0.0%
Canandaigua Wine, Inc.
8 3/4%, 12/15/03 B1 2,520,000 2,431,800
TOTAL CORPORATE BONDS
(Cost $790,216,327) 791,746,436
REPURCHASE AGREEMENTS - 2.8%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.46%, dated
6/28/96 due 7/1/96 $ 170,449,519 170,372,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $5,520,602,199) $ 6,051,636,818
LEGEND
1. Non-income producing
2. Standard & Poor's credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
3. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
4. 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 $149,500,200 or 2.5% of net
assets.
5. An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Advanced Medical, Inc. $ - $ - $ - $ 4,012,508
Barr Laboratories, Inc. - - - 29,401,350
Cardiac Control
Systems, Inc - - - 274,450
Integramed America, Inc. - - - 2,081,406
Synetic, Inc. 2,831,088 - - 42,830,534
$ 2,831,088 $ - $ - $ 78,600,248
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $6,769,029,781 and $5,536,451,087, respectively, of which U.S.
govern- ment and government agency obligations aggregated $0 and
$328,865,573, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $2,091,635 for the period
(see Note 4 of Notes to Financial Statements).
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 1.7% AAA, AA, A 1.0%
Baa 3.5% BBB 4.9%
Ba 1.4% BB 2.3%
B 5.5% B 3.6%
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 0.7% includ-
ing long-term debt categorized as other securities. FMR has determined that
unrated debt securities that are lower quality account for 0.0% of the
total value of investment in securities.
The fund participated in the bank borrowing program. The maximum loan and
the average daily loan balances during the period for which loans were
outstanding amounted to $21,073,000 and $11,553,500, respectively. The
weighted average interest rate was 6.4% (see Note 6 of Notes to Financial
Statements).
INCOME TAX INFORMATION
At June 30, 1996, the aggregate cost of investment securities for income
tax purposes was $5,521,135,829. Net unrealized appreciation aggregated
$530,500,989, of which $618,801,558 related to appreciated investment
securities and $88,300,569 related to depreciated investment securities.
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $170,372,000) (cost $5,520,602,199) $ 6,051,636,818
- - See accompanying schedule
Cash 5,000,464
Receivable for investments sold 89,781,950
Receivable for fund shares sold 5,361,337
Dividends receivable 8,649,263
Interest receivable 11,964,344
Other receivables 126,809
TOTAL ASSETS 6,172,520,985
LIABILITIES
Payable for investments purchased $ 111,493,837
Payable for fund shares redeemed 1,200,031
Accrued management fee 2,541,934
Other payables and 450,920
accrued expenses
TOTAL LIABILITIES 115,686,722
NET ASSETS $ 6,056,834,263
Net Assets consist of:
Paid in capital $ 4,993,820,617
Undistributed net investment income 63,832,911
Accumulated undistributed 468,151,713
net realized gain (loss) on investments and foreign
currency transactions
Net unrealized appreciation (depreciation) on investments 531,029,022
and assets and liabilities in
foreign currencies
NET ASSETS, for 310,912,656 shares outstanding $ 6,056,834,263
NET ASSET VALUE, offering price $19.48
and redemption price per
share ($6,056,834,263 (divided by) 310,912,656 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INVESTMENT INCOME $ 52,963,671
Dividends
Interest 24,963,746
TOTAL INCOME 77,927,417
EXPENSES
Management fee $ 14,096,454
Transfer agent fees 1,107,973
Accounting fees and expenses 401,530
Non-interested trustees' compensation 4,613
Custodian fees and expenses 71,778
Registration fees 42,083
Audit 38,357
Legal 10,915
Interest 4,392
Miscellaneous 18,856
Total expenses before reductions 15,796,951
Expense reductions (581,877 15,215,074
)
NET INVESTMENT INCOME 62,712,343
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 477,014,218
Foreign currency transactions 441 477,014,659
Change in net unrealized appreciation (depreciation) on:
Investment securities (239,084,681
)
Assets and liabilities in (11,732 (239,096,413)
foreign currencies )
NET GAIN (LOSS) 237,918,246
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 300,630,589
OTHER INFORMATION
Expense reductions $ 576,280
Directed brokerage arrangements
Custodian interest credits 5,597
$ 581,877
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 62,712,343 $ 88,914,157
Net investment income
Net realized gain (loss) 477,014,659 220,997,465
Change in net unrealized appreciation (depreciation) (239,096,413) 715,587,919
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 300,630,589 1,025,499,541
Distributions to shareholders (7,876,787) (84,729,039)
From net investment income
From net realized gain (225,801,230) (121,254,353)
TOTAL DISTRIBUTIONS (233,678,017) (205,983,392)
Share transactions 1,115,681,821 1,784,340,253
Net proceeds from sales of shares
Reinvestment of distributions 233,678,017 205,981,922
Cost of shares redeemed (238,912,828) (214,815,736)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 1,110,447,010 1,775,506,439
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,177,399,582 2,595,022,588
NET ASSETS
Beginning of period 4,879,434,681 2,284,412,093
End of period (including undistributed net investment income of $63,832,911 and $8,997,355,
respectively) $ 6,056,834,263 $ 4,879,434,681
OTHER INFORMATION
Shares
Sold 57,674,330 103,951,843
Issued in reinvestment of distributions 12,390,139 12,868,445
Redeemed (12,415,210) (12,384,683)
Net increase (decrease) 57,649,259 104,435,605
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1996
SELECTED PER-SHARE DATA (UNAUDITED) 1995 1994 1993 D 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.27 $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51
Income from Investment Operations
Net investment income .20 .41 .41 .37 .40 .50
Net realized and unrealized gain (loss) .90 4.69 .64 2.06 1.57 2.43
Total from investment operations 1.10 5.10 1.05 2.43 1.97 2.93
Less Distributions (.03) (.40) (.37) (.35) (.42) (.59)
From net investment income
In excess of net investment income - - - (.04) - -
From net realized gain (.86) (.78) (.77) - - -
Total distributions (.89) (1.18) (1.14) (.39) (.42) (.59)
Net asset value, end of period $ 19.48 $ 19.27 $ 15.35 $ 15.44 $ 13.40 $ 11.85
TOTAL RETURN B, C 5.86% 35.09% 7.07% 18.29% 16.89% 31.44%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 6,056,834 $ 4,879,435 $ 2,284,412 $ 1,318,500 $ 592,880 $ 282,171
Ratio of expenses to average net assets .57% A .61% .60% .62% .65% .74%
Ratio of expenses to average net assets after
expense .55% A, .61% .58% E .62% .65% .74%
reductions E
Ratio of net investment income to average net
assets 2.27% A 2.56% 2.83% 2.87% 3.52% 4.83%
Portfolio turnover rate 216% A 87% 134% 120% 74% 107%
Average commission rate F $ .0420
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 7 OF
NOTES TO FINANCIAL
STATEMENTS). C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS
SHOWN. D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF
POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF
INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY
INVESTMENT COMPANIES." AS A
RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES.. E FMR OR THE
FUND HAS ENTERED INTO VARYING
ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION
OF THE FUND'S EXPENSES (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS).
F FOR FISCAL YEARS
BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO
DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON
WHICH COMMISSIONS ARE CHARGED.
THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING
ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING
PRACTICES AND COMMISSION
RATE STRUCTURES MAY DIFFER.
</TABLE>
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. A fund's total return 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
securities that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1996 YEAR YEARS FUND
Growth 21.09% 19.93% 15.22%
S&P 500 26.00% 15.73% 14.80%
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
500 Index - a widely recognized, unmanaged index of common stocks. The S&P
500 returns reflect reinvestment of all dividends paid by stocks included
in the Index, but do not reflect any brokerage commissions or other fees
you might pay if you actually invested in those stocks.
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.
If Fidelity had not reimbursed certain fund expenses, the fund's life of
fund total return 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, THE TOTAL RETURNS 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
Growth Portfolio S&P 500
$39,697
$38,314
$
'9
6
Let's say hypothetically that $10,000 was invested in Growth Portfolio on
October 9, 1986, when the fund started. As the chart shows, by June 30,
1996, the value of the investment would have grown to $39,697 - a 296.97%
increase on the initial investment. For comparison, look at how the S&P 500
did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $38,314 - a
283.14% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1996
% OF FUND'S
INVESTMENTS
Cisco Systems, Inc. 2.3
General Electric Co. 2.1
HFS, Inc. 2.0
Oracle Corp. 1.9
Philip Morris Companies, Inc. 1.6
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1996
% OF FUND'S
INVESTMENTS
Technology 22.2
Retail & Wholesale 11.0
Health 10.4
Media & Leisure 8.2
Utilities 8.0
ASSET ALLOCATION AS OF JUNE 30, 1996 *
Row: 1, Col: 1, Value: 9.6
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 40.4
Row: 1, Col: 4, Value: 50.0
Stocks 90.4%
Short-term investments 9.6%
FOREIGN INVESTMENTS 3.1%
*
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Lawrence Greenberg, Portfolio
Manager of Growth Portfolio
Q. HOW DID THE FUND PERFORM, LARRY?
A. For the six months ended June 30, 1996, the fund slightly edged out the
Standard & Poor's 500 Index return of 10.10% and underperformed the 26.00%
return of the index for the past 12 months.
Q. WHY DO YOU THINK THE FUND UNDERPERFORMED OVER THE
PAST YEAR?
A. The fund's position in semiconductor stocks hurt its performance in the
fourth quarter of 1995. Semiconductor company stocks fell as it became
apparent that a worldwide supply glut would reduce prices and therefore
lower profit margins and curb expansion. Unfortunately, I was not able to
reduce the fund's position in these stocks quickly enough to avoid some
losses.
Q. YOU ALSO CONTINUED TO REDUCE THE FUND'S OVERALL TECHNOLOGY POSITION.
SHOULD ONE TAKE THIS AS AN INDICATION THAT YOU HAD A NEGATIVE VIEW ON THE
TECHNOLOGY SECTOR?
A. Absolutely not. During the period, I cut back on technology stocks
because I thought some companies' fundamentals did not justify their stock
prices. Remember, there are always going to be ups and downs in the various
areas that make up the technology sector. However, on a long-term basis, I
believe technology is where an investor is going to find the best growth
opportunities, and I intend to continue to make it a major focus of the
fund. In fact, many technology stocks came back from the fourth-quarter
correction.
Q. SO WHAT WERE THE GROWTH AREAS DURING THE PERIOD?
A. The major growth areas I found revolved around improvement of
communications. This involved the computer networking equipment industry,
modem manufacturers and database vendors. These industries are active in
structuring data so that it can be communicated across corporate networks.
Some examples from the fund's holdings include Cisco Systems in networking,
U.S. Robotics in modems, and Oracle and PeopleSoft in databases.
Q. AS YOU REDUCED YOUR TECHNOLOGY POSITION, IT APPEARS YOU REALLOCATED SOME
OF THE FUND'S ASSETS TO THE HEALTH AND MEDIA/LEISURE SECTORS. WHY?
A. I reinvested these assets in companies within these sectors that offered
good growth potential, solid fundamentals and attractive valuations. Some
examples included the biopharmaceutical firm Biogen, as well as HFS - which
owns several businesses such as Days Inn, Ramada, Century 21, and recently
announced that it intends to acquire rental-car chain Avis.
Q. IN YOUR LAST REPORT, YOU DISCUSSED THE MERITS OF SPECIALTY RETAIL
STOCKS. WHAT'S HAPPENED IN THAT AREA?
A. Many of them have done well. I prefer to own specialty retailers that
are considered to be "category killers" - companies that dominate their
market segment no matter what is happening in the overall retail market or
the economy. Some examples of these included PETsMART and Sunglass Hut
International. The difference from six months ago, however, is that the
general retail environment has recently shown some strength. Therefore, I
added some stocks that benefited from the improving retail environment.
Q. WITH THE STOCK MARKET SURPASSING HISTORICALLY HIGH PRICE
LEVELS, WHAT ADJUSTMENTS HAVE YOU MADE TO THE FUND?
A. I've attempted to spread out the fund's holdings more than in the recent
past. When market valuations get to such high levels, it's often not a good
idea to be counting on the performance of one sector or industry. This
strategy has the potential of lowering the fund's volatility in a market
downturn, while still remaining fully invested.
Q. WHAT'S YOUR OUTLOOK?
A. There is no question that the market has gone a long time without a
meaningful correction and many stocks are approaching fair value. If
interest rates continue to climb - or cash flows into mutual funds begin to
slow - I believe a healthy correction at some point is likely. I use the
word "healthy" because corrections give me an opportunity to reposition the
fund back into the companies that I like the most at more attractive
valuations.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: to seek high current income by
investing in high-yielding, lower-rated fixed
income securities
START DATE: September 19, 1985
SIZE: as of June 30, more than $1.1 billion
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
INVESTMENTS JUNE 30, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 90.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 1.2%
AEROSPACE & DEFENSE - 1.0%
Boeing Co. 225,000 $ 19,603,115
C A E Industries Ltd. 535,900 4,460,757
General Motors Corp. Class H 125,000 7,515,625
Lockheed Martin Corp. 50,000 4,200,000
Rockwell International Corp. 275,000 15,743,750
Special Devices, Inc. (a) 153,400 2,454,400
Wyman-Gordon Co. (a) 132,000 2,343,000
56,320,647
DEFENSE ELECTRONICS - 0.2%
Raytheon Co. 200,000 10,325,000
Stanford Telecommunications, Inc. (a) 3,800 213,750
10,538,750
TOTAL AEROSPACE & DEFENSE 66,859,397
BASIC INDUSTRIES - 1.8%
CHEMICALS & PLASTICS - 1.0%
Dow Chemical Co. 85,000 6,460,000
du Pont (E.I.) de Nemours & Co. 185,000 14,638,125
IMC Fertilizer Group, Inc. 150,000 5,643,750
Monsanto Co. 575,000 18,687,500
Praxair, Inc. 100,000 4,225,000
Union Carbide Corp. 150,000 5,962,500
55,616,875
IRON & STEEL - 0.0%
Nucor Corp. 50,000 2,531,250
METALS & MINING - 0.5%
Alcan Aluminium Ltd. 100,000 3,047,193
Aluminum Co. of America 135,000 7,745,625
Freeport McMoRan Copper & Gold, Inc.
Class A 125,000 3,734,375
Inco Ltd. 175,000 5,640,607
SGL Carbon AG 48,000 5,604,460
25,772,260
PACKAGING & CONTAINERS - 0.1%
Crown Cork & Seal Co., Inc. 50,000 2,250,000
Tupperware Corp. (a) 100,000 4,225,000
6,475,000
PAPER & FOREST PRODUCTS - 0.2%
International Paper Co. 100,000 3,687,500
Pentair, Inc. 165,000 4,950,000
8,637,500
TOTAL BASIC INDUSTRIES 99,032,885
CONGLOMERATES - 0.9%
Allied-Signal, Inc. 235,000 13,424,375
Mark IV Industries, Inc. 350,000 7,918,750
Textron, Inc. 55,000 4,393,125
Tyco International Ltd. 369,500 15,057,125
United Technologies Corp. 85,000 9,775,000
50,568,375
CONSTRUCTION & REAL ESTATE - 0.7%
BUILDING MATERIALS - 0.1%
York International Corp. 75,000 3,881,250
CONSTRUCTION - 0.3%
Oakwood Homes Corp. 900,000 18,562,500
ENGINEERING - 0.2%
Fluor Corp. 85,000 5,556,875
MasTec, Inc. (a) 225,000 5,681,250
11,238,125
SHARES VALUE (NOTE 1)
REAL ESTATE INVESTMENT TRUSTS - 0.1%
First Industrial Realty Trust, Inc. 178,800 $ 4,201,800
RFS Hotel Investors, Inc. 200,000 3,100,000
7,301,800
TOTAL CONSTRUCTION & REAL ESTATE 40,983,675
DURABLES - 4.9%
AUTOS, TIRES, & ACCESSORIES - 2.9%
Autozone, Inc. (a) 775,000 26,931,250
Chrysler Corp. 775,000 48,050,000
Danaher Corp. 125,000 5,437,500
Eaton Corp. 150,000 8,793,750
General Motors Corp. 1,100,046 57,614,909
Honda Motor Co. Ltd. 75,000 1,941,571
Magna International, Inc. Class A 56,800 2,624,326
Scania AB:
Class A 79,000 2,186,588
Class B 79,000 2,192,530
TRW, Inc. 60,000 5,392,500
161,164,924
CONSUMER DURABLES - 0.3%
Minnesota Mining & Manufacturing Co. 225,000 15,525,000
CONSUMER ELECTRONICS - 0.3%
Gemstar International Group Ltd. (a) 65,000 1,950,000
Harman International Industries, Inc. 129,800 6,392,650
Newell Co. 275,000 8,421,875
16,764,525
HOME FURNISHINGS - 0.1%
Garden Ridge Corp. (a) 120,000 3,030,000
TEXTILES & APPAREL - 1.3%
Adidas AG 71,400 5,990,200
Adidas AG (b) 45,600 3,825,674
Donnkenny, Inc. (a) 240,000 4,680,000
Gucci Group NV 100,000 6,450,000
Liz Claiborne, Inc. 100,000 3,462,500
Mohawk Industries, Inc. (a) 216,700 3,846,425
NIKE, Inc. Class B 190,000 19,522,500
Tommy Hilfiger (a) 100,000 5,362,500
Warnaco Group, Inc. Class A 362,500 9,334,375
Wolverine World Wide, Inc. 235,000 7,637,500
70,111,674
TOTAL DURABLES 266,596,123
ENERGY - 3.8%
ENERGY SERVICES - 0.7%
Dresser Industries, Inc. 135,000 3,982,500
Halliburton Co. 114,100 6,332,550
Schlumberger Ltd. 248,600 20,944,550
Varco International, Inc. (a) 239,500 4,340,938
35,600,538
INDEPENDENT POWER - 0.3%
Thermo Electron Corp. (a) 375,000 15,609,375
OIL & GAS - 2.8%
Amerada Hess Corp. 292,800 15,701,400
Anadarko Petroleum Corp. 85,000 4,930,000
Apache Corp. 44,600 1,466,225
Atlantic Richfield Co. 150,000 17,775,000
Barrett Resources Corp. (a) 325,000 9,668,750
Belco Oil & Gas Corp. (a) 200,300 7,110,650
Benton Oil & Gas Co. (a) 305,000 6,710,000
British Petroleum PLC ADR 176,343 18,846,658
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
OIL & GAS - CONTINUED
Chesapeake Energy Corp. (a) 77,700 $ 4,655,525
Louisiana Land & Exploration Co. 177,000 10,199,625
Noble Affiliates, Inc. 200,000 7,550,000
Occidental Petroleum Corp. 166,900 4,130,775
Royal Dutch Petroleum Co. ADR 225,000 34,593,750
Ultramar Corp. 100,000 2,900,000
Unocal Corp. 251,672 8,493,930
154,732,288
TOTAL ENERGY 205,942,201
FINANCE - 5.7%
BANKS - 0.7%
BankAmerica Corp. 175,000 13,256,250
Chase Manhattan Corp. 85,000 6,003,125
Citicorp 185,000 15,285,625
NationsBank Corp. 46,300 3,825,538
38,370,538
CREDIT & OTHER FINANCE - 0.8%
American Express Co. 625,000 27,890,625
Green Tree Financial Corp. 185,000 5,781,250
Household International, Inc. 125,008 9,500,608
43,172,483
FEDERAL SPONSORED CREDIT - 2.1%
Federal Home Loan Mortgage
Corporation 375,000 32,062,500
Federal National Mortgage Association 2,500,000 83,750,000
115,812,500
INSURANCE - 1.6%
Allstate Corp. 300,000 13,687,500
American Financial Group, Inc. 150,000 4,518,750
American International Group, Inc. 275,000 27,121,875
CIGNA Corp. 65,000 7,661,875
Capital Re Corp. 34,000 1,249,500
ITT Hartford Group, Inc. 125,000 6,656,250
MBIA, Inc. 75,000 5,840,625
MGIC Investment Corp. 85,000 4,770,625
SunAmerica, Inc. 100,000 5,650,000
Travelers Group, Inc., (The) 165,000 7,528,125
UNUM Corp. 75,000 4,668,750
89,353,875
SAVINGS & LOANS - 0.1%
California Federal Bancorp., Inc. 400,000 7,300,000
SECURITIES INDUSTRY - 0.4%
Merrill Lynch & Co., Inc. 175,000 11,396,875
Morgan Stanley Group, Inc. 100,000 4,912,500
Schwab (Charles) Corp. 150,000 3,675,000
19,984,375
TOTAL FINANCE 313,993,771
HEALTH - 10.4%
DRUGS & PHARMACEUTICALS - 4.8%
ALZA Corp. Class A (a) 185,000 5,064,375
American Home Products Corp. 250,000 15,031,250
Amgen, Inc. (a) 185,000 9,990,000
Biogen, Inc. (a) 550,000 30,181,250
Bristol-Myers Squibb Co. 340,000 30,600,000
Dura Pharmaceuticals, Inc. (a) 85,000 4,760,000
Elan Corp. PLC ADR (a) 100,000 5,712,500
Genentech, Inc. special (a) 385,000 20,164,375
ICN Pharmaceuticals, Inc. 125,000 2,906,250
SHARES VALUE (NOTE 1)
Jones Medical Industries, Inc. 100,000 $ 3,325,000
Lilly (Eli) & Co. 275,000 17,875,000
Merck & Co., Inc. 625,000 40,390,625
Pfizer, Inc. 425,000 30,334,375
Pharmacia & Upjohn, Inc. 400,000 17,750,000
Protein Design Labs, Inc. (a) 265,000 5,962,500
Schering-Plough Corp. 200,000 12,550,000
Sigma Aldrich Corp. 100,000 5,350,000
Smithkline Beecham PLC ADR 75,000 4,078,125
262,025,625
MEDICAL EQUIPMENT & SUPPLIES - 2.2%
Bergen Brunswig Corp. Class A 350,000 9,712,500
Cardinal Health, Inc. 70,000 5,048,750
Johnson & Johnson 450,000 22,275,000
Medtronic, Inc. 475,000 26,600,000
Millipore Corp. 125,000 5,234,375
Oakley, Inc. (a) 105,300 4,791,150
Pall Corp. 400,000 9,650,000
Physician Sales & Service, Inc. (a) 275,000 6,668,750
St. Jude Medical, Inc. (a) 375,000 12,562,500
Sybron Corp. (a) 235,000 5,875,000
Thermedics, Inc. (a) 200,000 5,000,000
Thermo Cardiosystems, Inc. (a) 97,500 4,363,125
U.S. Surgical Corp. 108,900 3,375,900
121,157,050
MEDICAL FACILITIES MANAGEMENT - 3.4%
American Medical Response, Inc. (a) 200,000 7,050,000
American Oncology Resources, Inc. (a) 122,700 2,668,725
Columbia/HCA Healthcare Corp. 515,025 27,489,459
Coventry Corp. (a) 128,600 2,025,450
Foundation Health Corp. (a) 125,000 4,484,375
HEALTHSOUTH Rehabilitation Corp. (a) 1,130,300 40,690,800
Healthsource, Inc. (a) 100,000 1,750,000
Living Centers of America, Inc. (a) 235,000 8,078,125
Magellan Health Services, Inc. (a) 225,000 4,837,500
Medpartners/Mullikin, Inc. (a) 385,000 8,036,875
Multicare Companies, Inc. (a) 262,500 4,987,500
Occusystems, Inc. (a) 115,000 4,298,125
Oxford Health Plans, Inc. (a) 350,000 14,393,750
Phycor, Inc. (a) 121,050 4,599,900
Physician Reliance Network, Inc. (a) 425,000 9,456,250
Sunrise Assisted Living, Inc. (a) 5,000 120,000
U.S. Healthcare, Inc. 350,000 19,250,000
United HealthCare Corp. 271,400 13,705,700
Vencor, Inc. (a) 246,625 7,522,063
185,444,597
TOTAL HEALTH 568,627,272
INDUSTRIAL MACHINERY & EQUIPMENT - 3.7%
ELECTRICAL EQUIPMENT - 2.8%
Emerson Electric Co. 300,000 27,112,500
General Electric Co. 1,300,000 112,450,000
Glenayre Technologies, Inc. (a) 185,062 9,253,100
Loral Space & Communications Ltd. (a) 85,000 1,158,125
United Communication Industry
PCL (For. Reg.) 154,000 2,061,661
152,035,386
INDUSTRIAL MACHINERY & EQUIPMENT - 0.8%
Case Corp. 175,000 8,400,000
Caterpillar, Inc. 275,000 18,631,250
Ingersoll-Rand Co. 200,000 8,750,000
Stanley Works 205,600 6,116,600
41,897,850
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED
POLLUTION CONTROL - 0.1%
USA Waste Services, Inc. (a) 115,000 $ 3,406,875
Zurn Industries, Inc. 146,500 3,039,875
6,446,750
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 200,379,986
MEDIA & LEISURE - 8.2%
BROADCASTING - 0.7%
Clear Channel Communications, Inc. (a) 23,000 1,894,625
Emmis Broadcasting Corp. Class A (a) 25,900 1,295,000
Evergreen Media Corp. Class A (a) 300,000 12,825,000
Jacor Communications, Inc. Class A (a) 72,900 2,250,788
PanAmSat Corp. (a) 350,000 10,150,000
Paxson Communications Corp. (a) 250,000 2,656,250
Time Warner, Inc. 100,000 3,925,000
Viacom, Inc. Class B (non-vtg.) (a) 125,000 4,859,375
39,856,038
ENTERTAINMENT - 0.6%
Disney (Walt) Co. 200,000 12,575,000
MGM Grand, Inc. 274,500 10,945,688
Regal Cinemas, Inc. (a) 91,600 4,190,700
Scientific Games Holdings Corp. (a) 114,600 3,323,400
31,034,788
LEISURE DURABLES & TOYS - 0.4%
Harley Davidson, Inc. 225,000 9,253,125
Mattel, Inc. 162,500 4,651,563
Nintendo Co. Ltd. Ord. 64,000 4,760,403
18,665,091
LODGING & GAMING - 4.5%
Anchor Gaming (a) 124,800 7,519,200
Circus Circus Enterprises, Inc. (a) 544,800 22,336,800
Doubletree Corp. (a) 432,800 15,364,400
Extended Stay America, Inc. (a) 100,000 3,150,000
HFS, Inc. (a) 1,550,000 108,500,000
Hilton Hotels Corp. 125,000 14,062,500
Host Marriott Corp. (a) 350,000 4,593,750
ITT Corp. 150,000 9,937,500
Mirage Resorts, Inc. (a) 500,000 26,875,000
Penske Motorsports, Inc. (a) 25,000 662,500
Station Casinos, Inc. (a) 175,400 2,521,375
Studio Plus Hotels, Inc. (a) 250,000 8,250,000
Sun International Hotels Ltd. Ord. (a) 273,500 13,264,750
Trump Hotels & Casino Resorts, Inc. (a) 235,000 6,697,500
Wyndham Hotel Corp. (a)(c) 189,700 3,959,988
247,695,263
PUBLISHING - 0.3%
Knight-Ridder, Inc. 50,000 3,625,000
New York Times Co., (The) Class A 131,100 4,277,138
Times Mirror Co. Class A 167,900 7,303,650
15,205,788
RESTAURANTS - 1.7%
Apple South, Inc. 485,000 12,973,750
Applebee's International, Inc. 600,000 19,275,000
Buffets, Inc. (a) 217,400 2,663,150
Landry's Seafood Restaurants, Inc. (a) 496,200 12,280,950
Lone Star Steakhouse Saloon (a) 400,000 15,100,000
Outback Steakhouse, Inc. (a) 300,000 10,345,313
Planet Hollywood International, Inc.
Class A (a) 235,000 6,345,000
Quality Dining, Inc. (a) 125,000 4,093,750
Starbucks Corp. (a) 400,000 11,300,000
94,376,913
TOTAL MEDIA & LEISURE 446,833,881
SHARES VALUE (NOTE 1)
NONDURABLES - 3.7%
BEVERAGES - 1.0%
Coca-Cola Co., (The) 425,000 $ 20,771,875
PepsiCo, Inc. 1,050,000 37,143,750
57,915,625
HOUSEHOLD PRODUCTS - 0.8%
Gillette Co. 250,000 15,593,750
Premark International, Inc. 100,000 1,850,000
Procter & Gamble Co. 225,000 20,390,625
Safeskin Corp. (a) 63,700 2,643,550
USA Detergents, Inc. (a) 48,900 1,949,888
42,427,813
TOBACCO - 1.9%
Philip Morris Companies, Inc. 850,000 88,400,000
RJR Nabisco Holdings Corp. 425,000 13,175,000
101,575,000
TOTAL NONDURABLES 201,918,438
PRECIOUS METALS - 0.6%
Barrick Gold Corp. 385,000 10,461,113
Bre-X Minerals Ltd. (a) 200,000 3,344,212
Getchell Gold Corp. 113,353 3,740,649
Newmont Mining Corp. 295,000 14,565,625
32,111,599
RETAIL & WHOLESALE - 10.9%
APPAREL STORES - 1.2%
Gap, Inc. 425,000 13,653,125
Just for Feet, Inc. (a) 739,100 39,079,913
Melville Corp. 275,000 11,137,500
63,870,538
DRUG STORES - 0.4%
General Nutrition Companies, Inc. (a) 1,325,000 23,187,500
GENERAL MERCHANDISE STORES - 1.9%
Consolidated Stores Corp. (a) 200,000 7,350,000
Dillard Department Stores, Inc. Class A 175,000 6,387,500
Dollar General Corp. 256,312 7,497,126
Family Dollar Stores, Inc. 418,700 7,274,913
K mart Corp. 307,400 3,804,075
Price/Costco, Inc. 131,700 2,848,013
Sears, Roebuck & Co. 125,000 6,078,125
Wal-Mart Stores, Inc. 2,250,000 57,093,750
Woolworth Corp. (a) 218,700 4,920,750
103,254,252
RETAIL & WHOLESALE, MISCELLANEOUS - 7.4%
Barnes & Noble, Inc. (a) 250,000 8,968,750
Bed Bath & Beyond, Inc. (a) 235,000 6,286,250
Corporate Express, Inc. (a) 350,000 14,000,000
Gulf South Medical Supply, Inc. (a) 156,300 6,095,700
Home Depot, Inc., (The) 900,000 48,600,000
Lowe's Companies, Inc. 1,575,000 56,896,875
Office Depot, Inc. (a) 325,000 6,621,875
Officemax, Inc. (a) 1,040,000 24,830,000
PETsMART, Inc. (a) 1,595,600 76,189,900
Petco Animal Supplies, Inc. (a) 525,000 15,093,750
Sports Authority, Inc. (a) 163,700 5,361,175
Staples, Inc. (a) 1,050,000 20,475,000
Sunglass Hut International, Inc. (a)(c) 3,174,300 77,373,563
Toys "R" Us, Inc. 829,400 23,637,900
U.S. Office Products Co. (a) 250,000 10,500,000
Viking Office Products, Inc. (a) 220,000 6,902,500
407,833,238
TOTAL RETAIL & WHOLESALE 598,145,528
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 1.6%
LEASING & RENTAL - 0.7%
Hollywood Entertainment Corp. (a)(c) 1,711,400 $ 26,526,700
Movie Gallery, Inc. (a) 522,800 10,978,800
37,505,500
SERVICES - 0.9%
AccuStaff, Inc. (a) 232,600 6,338,350
Aresco, Inc. 225,000 3,853,125
HCIA, Inc. (a) 175,000 11,025,000
Medaphis Corp. (a) 425,000 16,893,750
Premier Technologies, Inc. (a) 15,000 472,500
Service Corp. International 200,000 11,500,000
Veterinary Centers of America, Inc. (a) 63,500 1,420,813
51,503,538
TOTAL SERVICES 89,009,038
TECHNOLOGY - 22.2%
COMMUNICATIONS EQUIPMENT - 3.8%
ADC Telecommunications, Inc. 60,000 2,700,000
Aspect Telecommunications Corp. (a) 65,000 3,217,500
Cisco Systems, Inc. (a) 2,250,000 127,406,250
DSC Communications Corp. (a) 75,000 2,259,375
Dialogic Corp. (a) 23,900 1,425,038
Pairgain Technologies, Inc. (a) 100,000 6,200,000
U.S. Robotics Corp. (a) 735,000 62,842,500
206,050,663
COMPUTER SERVICES & SOFTWARE - 13.8%
Affiliated Computer Services, Inc.
Class A (a) 200,000 9,400,000
America Online, Inc. (a) 1,225,000 53,593,750
American Management Systems, Inc. (a) 460,000 13,455,000
Ascend Communications, Inc. (a) 1,285,000 72,281,250
Aspect Development, Inc. (a) 3,000 76,500
Automatic Data Processing, Inc. 300,000 11,587,500
BBN Corp. (a) 200,400 4,358,700
BMC Software, Inc. (a) 150,000 8,962,500
Business Objects SA sponsored ADR (a) 137,200 5,522,300
CUC International, Inc. (a) 1,445,000 51,297,500
Cadence Design Systems, Inc. (a) 75,000 2,531,250
Ceridian Corp. (a) 100,000 5,050,000
Citrix Systems, Inc. (a) 30,400 1,155,200
Cognos, Inc. (a) 250,000 5,729,530
CompUSA, Inc. (a) 820,000 27,982,500
Compuserve Corp. (a) 88,300 1,865,338
Computer Sciences Corp. (a) 385,000 28,778,750
DST Systems, Inc. (a) 100,000 3,200,000
Data Broadcasting Corp. (a) 106,000 1,020,250
Electronic Arts, Inc. (a) 115,000 3,076,250
Electronic Data Systems Corp. 700,000 37,625,000
Electronics for Imaging, Inc. (a) 215,000 14,915,625
Equifax Inc. 99,900 2,622,375
FactSet Research Systems, Inc. 19,000 323,000
First Data Corp. 165,090 13,145,291
HBO & Co. 400,000 27,100,000
Henry (Jack) & Associates, Inc. 68,900 2,342,600
Inso Corp. (a) 244,000 12,779,500
Lycos, Inc. (a)(c) 300,000 3,337,500
Macromedia, Inc. (a) 591,600 12,941,250
McAfee Associates, Inc. (a) 360,000 17,640,000
Microsoft Corp. (a) 615,000 73,876,875
Netscape Communications Corp. (a) 400,000 24,900,000
Oracle Corp. (a) 2,600,000 102,537,500
Parametric Technology Corp. (a) 350,000 15,181,250
SHARES VALUE (NOTE 1)
PeopleSoft, Inc. (a) 322,500 $ 22,978,125
Physician Computer Network, Inc. (a) 351,200 4,060,750
Policy Management Systems Corp. (a) 173,600 8,680,000
Sterling Software, Inc. (a) 325,000 25,025,000
SunGard Data Systems, Inc. (a) 275,000 11,034,375
Technology Solutions, Inc. (a) 175,000 6,059,375
Viasoft, Inc. (a) 110,000 7,108,750
757,138,209
COMPUTERS & OFFICE EQUIPMENT - 2.3%
Adaptec, Inc. (a) 625,000 29,609,375
Bay Networks, Inc. (a) 450,000 11,587,500
Compaq Computer Corp. (a) 317,500 15,636,875
Dell Computer Corp. (a) 200,000 10,175,000
FileNet Corp. (a) 286,600 10,460,900
Fore Systems, Inc. (a) 199,400 7,203,325
Hewlett-Packard Co. 100,000 9,962,500
Hutchinson Technology, Inc. (a) 35,800 1,270,900
Pitney Bowes, Inc. 200,000 9,550,000
Radius, Inc. (a) 682 1,876
SCI Systems, Inc. (a) 100,000 4,062,500
Sun Microsystems, Inc. (a) 260,000 15,307,500
Tech Data Corp. (a) 10,300 224,025
125,052,276
ELECTRONICS - 2.2%
Altera Corp. (a) 100,000 3,800,000
Analog Devices, Inc. (a) 375,000 9,562,500
Atmel Corp. (a) 300,000 9,037,500
ESS Technology, Inc. (a) 250,000 4,625,000
Intel Corp. 850,000 62,421,875
Linear Technology Corp. 250,100 7,503,000
Maxim Integrated Products, Inc. (a) 250,000 6,828,125
S-3, Inc. (a) 343,400 4,228,113
Solectron Corp. (a) 110,000 4,166,250
Storage Technology Corp. (a) 116,400 4,452,300
Xilinx, Inc. (a) 175,000 5,556,250
122,180,913
PHOTOGRAPHIC EQUIPMENT - 0.1%
3D Systems Corp. (a) 215,000 4,730,000
TOTAL TECHNOLOGY 1,215,152,061
TRANSPORTATION - 2.0%
AIR TRANSPORTATION - 1.3%
AMR Corp. (a) 125,000 11,375,000
America West Airlines, Inc. Class B (a) 620,000 13,640,000
Atlantic Southeast Airlines, Inc. 250,000 7,062,500
Delta Air Lines, Inc. 150,000 12,450,000
Midwest Express Holdings, Inc. (a) 200,000 6,425,000
Northwest Airlines Corp. Class A (a) 130,900 5,170,550
Southwest Airlines Co. 185,000 5,388,125
Trans World Airlines, Inc. (a) 250,000 3,562,500
UAL Corp. (a) 125,000 6,718,750
71,792,425
RAILROADS - 0.7%
Burlington Northern Santa Fe Corp. 185,025 14,963,897
CSX Corp. 303,300 14,634,225
Union Pacific Corp. 150,000 10,481,250
40,079,372
TOTAL TRANSPORTATION 111,871,797
UTILITIES - 8.0%
CELLULAR - 3.4%
AirTouch Communications, Inc. (a) 2,600,000 73,450,000
Arch Communications Group, Inc. (a) 325,043 6,053,926
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Palmer Wireless, Inc. (a) 978,300 $ 19,566,000
36O Degrees Communications Co. (a) 1,000,000 24,000,000
United States Cellular Corp. (a) 217,800 6,751,800
Vanguard Cellular Systems, Inc.
Class A (a)(c) 2,400,000 52,200,000
182,021,726
GAS - 0.2%
Enron Corp. 274,800 11,232,450
TELEPHONE SERVICES - 4.4%
ALLTEL Corp. 250,000 7,687,500
AT&T Corp. 850,000 52,700,000
Ameritech Corp. 375,000 22,265,625
Bell Atlantic Corp. 400,000 25,500,000
BellSouth Corp. 700,000 29,662,500
Comsat Corp., Series 1 232,200 6,037,200
Frontier Corp. 525,000 16,078,125
LCI International, Inc. (a) 590,400 18,523,800
Lucent Technologies, Inc. 225,000 8,521,875
MCI Communications Corp. 450,000 11,531,250
SBC Communications, Inc. 325,000 16,006,250
Telebras sponsored ADR 75,000 5,221,875
Telefonos de Mexico SA sponsored
ADR representing Ord. Class L shares 75,000 2,512,500
WorldCom, Inc. (a) 350,000 19,381,250
241,629,750
TOTAL UTILITIES 434,883,926
TOTAL COMMON STOCKS
(Cost $3,902,079,925) 4,942,909,953
CONVERTIBLE PREFERRED STOCKS - 0.1%
RETAIL & WHOLESALE - 0.1%
GENERAL MERCHANDISE STORES - 0.1%
K mart Financing I $3.875
(Cost $3,005,000) 60,100 3,260,425
REPURCHASE AGREEMENTS - 9.6%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.46%, dated
6/28/96 due 7/1/96 $527,478,894 527,239,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $4,432,323,925) $ 5,473,409,378
LEGEND
1. Non-income producing
2. 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 $3,825,674 or 0.1% of net
assets.
3. An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions during the period with
companies which are or were affiliates are as follows:
PURCHASE SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Hollywood
Entertainment Corp. $ 172,425 $ - $ - $ 26,526,700
Lycos, Inc. - - - 3,337,500
Microwave Power
Devices, Inc. - 1,172,000 - -
Sunglass Hut
International, Inc. 12,551,057 - - 77,373,563
Vanguard Cellular
Systems, Inc. Class A 1,032,413 7,470,903 - 52,200,000
Wyndham Hotel Corp. 324,910 - - 3,959,988
$ 14,080,805 $ 8,642,903 $ - $ 163,397,751
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $3,276,590,051 and $2,281,838,828, respectively, of which U.S.
govern- ment and government agency obligations aggregated $109,306,406 and
$168,455,938, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $770,670 for the period
(see Note 4 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1996, the aggregate cost of investment securities for income
tax purposes was $4,438,998,615. Net unrealized appreciation aggregated
$1,034,410,763, of which $1,127,724,480 related to appreciated investment
securities and $93,313,717 related to depreciated investment securities.
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $527,239,000) (cost $4,432,323,925) - $ 5,473,409,378
See accompanying schedule
Cash 213
Receivable for investments sold 28,328,495
Receivable for fund shares sold 19,308,458
Dividends receivable 3,742,970
Other receivables 500,919
TOTAL ASSETS 5,525,290,433
LIABILITIES
Payable for investments purchased $ 24,985,858
Payable for fund shares redeemed 735,390
Accrued management fee 2,761,151
Other payables and 419,541
accrued expenses
TOTAL LIABILITIES 28,901,940
NET ASSETS $ 5,496,388,493
Net Assets consist of:
Paid in capital $ 4,287,950,898
Undistributed net investment income 18,822,430
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 148,531,171
Net unrealized appreciation (depreciation) on investments 1,041,083,994
and assets and liabilities in
foreign currencies
NET ASSETS, for 182,841,951 $ 5,496,388,493
shares outstanding
NET ASSET VALUE, offering price $30.06
and redemption price per
share ($5,496,388,493 (divided by) 182,841,951 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INVESTMENT INCOME $ 20,081,809
Dividends
Interest 15,590,569
TOTAL INCOME 35,672,378
EXPENSES
Management fee $ 14,612,883
Transfer agent fees 1,005,170
Accounting fees and expenses 400,818
Non-interested trustees' compensation 8,206
Custodian fees and expenses 73,519
Registration fees 47,314
Audit 25,708
Legal 11,688
Miscellaneous 16,973
Total expenses before reductions 16,202,279
Expense reductions (331,285 15,870,994
)
NET INVESTMENT INCOME 19,801,384
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including 166,407,898
realized loss of $925,483
on sales of investments in
affiliated issuers)
Foreign currency transactions 870 166,408,768
Change in net unrealized appreciation (depreciation) on:
Investment securities 287,572,326
Assets and liabilities in (1,584 287,570,742
foreign currencies )
NET GAIN (LOSS) 453,979,510
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 473,780,894
OTHER INFORMATION
Expense reductions $ 329,209
Directed brokerage arrangements
Custodian interest credits 2,076
$ 331,285
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
(UNAUDITED)
Operations $ 19,801,384 $ 11,674,225
Net investment income
Net realized gain (loss) 166,408,768 361,319,825
Change in net unrealized appreciation (depreciation) 287,570,742 474,991,263
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 473,780,894 847,985,313
Distributions to shareholders (11,769,237) (12,404,421)
From net investment income
From net realized gain (297,173,230) -
TOTAL DISTRIBUTIONS (308,942,467) (12,404,421)
Share transactions 1,449,823,397 2,059,928,760
Net proceeds from sales of shares
Reinvestment of distributions 308,942,467 12,404,421
Cost of shares redeemed (589,917,609) (887,081,596)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 1,168,848,255 1,185,251,585
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,333,686,682 2,020,832,477
NET ASSETS
Beginning of period 4,162,701,811 2,141,869,334
End of period (including undistributed net investment income of $18,822,430 and
$10,790,283, respectively) $ 5,496,388,493 $ 4,162,701,811
OTHER INFORMATION
Shares
Sold 49,509,849 76,302,442
Issued in reinvestment of distributions 11,121,040 568,749
Redeemed (20,365,435) (33,037,870)
Net increase (decrease) 40,265,454 43,833,321
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1996
SELECTED PER-SHARE DATA (UNAUDITED) 1995 1994 1993 D 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 29.20 $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91
Income from Investment Operations .11 .08 .12 .12 .09 .09 G
Net investment income
Net realized and unrealized gain (loss) 2.85 7.55 (.12) H 3.64 1.64 5.72
Total from investment operations 2.96 7.63 - 3.76 1.73 5.81
Less Distributions (.08) (.12) (.12) (.11) (.05) (.21)
From net investment income
From net realized gain (2.02) - (1.27) (.21) (.43) -
In excess of net realized gain - - - (.12) - -
Total distributions (2.10) (.12) (1.39) (.44) (.48) (.21)
Net asset value, end of period $ 30.06 $ 29.20 $ 21.69 $ 23.08 $ 19.76 $ 18.51
TOTAL RETURN B, C 10.73% 35.36% (.02)% 19.37% 9.32% 45.51%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 5,496,388 $ 4,162,702 $ 2,141,869 $ 1,383,849 $ 749,837 $ 371,462
Ratio of expenses to average net assets .68% A .70% .70% .71% .75% .84%
Ratio of expenses to average net assets after
expense .66% A, .70% .69% E .71% .75% .84%
reductions E
Ratio of net investment income to average net
assets .83% A .37% .69% .72% .83% .56%
Portfolio turnover rate 106% A 108% 122% 159% 262% 261%
Average commission rate F $ .0408
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 7 OF
NOTES TO FINANCIAL
STATEMENTS). C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS
SHOWN. D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF
POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION
OF INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY
INVESTMENT COMPANIES." AS A
RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES. E FMR OR THE
FUND HAS ENTERED INTO VARYING
ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A
PORTION OF THE FUND'S EXPENSES (SEE NOTE 7 OF NOTES TO FINANCIAL
STATEMENTS). F FOR FISCAL YEARS
BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO
DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES
ON WHICH COMMISSIONS ARE
CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO
FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS
WHERE TRADING PRACTICES AND
COMMISSION RATE STRUCTURES MAY DIFFER. G NET INVESTMENT INCOME
PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING
DURING THE PERIOD. H 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.
</TABLE>
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. A fund's total return 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
securities that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED JUNE 30, 1996 PAST 1 PAST 5 LIFE OF
YEAR YEARS FUND
OVERSEAS 13.02% 10.11% 7.72%
Morgan Stanley EAFE Index 13.28% 9.99% 7.62%
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
Capital International Europe, Australasia, Far East (EAFE) Index - an
unmanaged index of over 1,000 foreign stocks. The EAFE Index may be
compiled in two ways: a capitalization weighted (cap-weighted) version and
a gross domestic product weighted (GDP-weighted) version.
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.
If Fidelity had not reimbursed certain fund expenses, the fund's life of
fund total return 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, THE TOTAL RETURNS 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
Overseas Portfolio Morgan Stanley EAFE Index
$20,171
$19,993
$
'9
6
Let's say hypothetically that $10,000 was invested in Overseas Portfolio on
January 28, 1987 when the fund started. As the chart shows, by June 30,
1996, the value of the investment would have grown to $20,171 - a 101.71%
increase on the initial investment. For comparison, look at how the Morgan
Stanley EAFE Index did over the same period. With dividends and capital
gains, if any, reinvested, the same $10,000 investment would have grown to
$19,993 - a 99.93% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1996
% OF FUND'S
INVESTMENTS
Veba AG Ord. 3.1
Volvo AB Class B 2.7
Honda Motor Co. Ltd. 2.0
Total SA Class B 2.0
Matsushita Electric Industrial Co. Ltd. 1.9
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1996
% OF FUND'S
INVESTMENTS
Finance 16.8
Durables 15.7
Utilities 10.8
Basic Industries 6.5
Nondurables 5.7
GEOGRAPHIC DIVERSIFICATION AS OF JUNE 30, 1996
(BY LOCATION OF ISSUER) % OF FUND'S
INVESTMENTS
Japan 25.9
United Kingdom 13.2
France 8.6
Germany 7.5
Sweden 6.8
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
NOTE TO SHAREHOLDERS: On March 26, 1996, Rick Mace became manager of
Overseas Portfolio.
Q. HOW DID THE FUND PERFORM, RICK?
A. For the six months ended June 30, 1996, the fund outperformed the Morgan
Stanley Capital International EAFE Index - which tracks the performance of
stocks in Europe, Australia and the Far East. The index had a total return
of 4.52% for the past six months and 13.28% for 12 months.
Q. IN YOUR OPINION, WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A. In my opinion, good individual stock selection was important to the
fund's performance. Because I use a bottom-up, stock-by-stock approach to
investing, I believe stock selection plays a greater role in fund
performance than country or sector investing.
Q. JAPAN CONTINUES TO BE THE TOP WEIGHTING OF THE FUND . . .
A. The fund's Japanese position is somewhat below the Japanese weighting of
the EAFE index, but much larger than many international funds. What made
Japanese equities so attractive was the weak yen, low interest rates, a
recovering economy and a great variety of undervalued stocks. These
characteristics benefited broadly based export companies such as Sony and
Omron, retailers such as Ito-Yokado and auto companies such as Toyota and
Honda.
Q. SPECIFICALLY, WHAT IS THE ADVANTAGE OF A WEAK YEN?
A. It improves the competitiveness of Japanese companies by reducing the
prices of Japanese exports measured in foreign currencies. Additionally,
reported profits are favorably impacted by the translation of overseas
earnings back into yen. For example, when you consider a company like
Canon, a 1% weakening in the yen helps its earnings by almost 5%.
Q. TURNING TO EUROPE, WHAT'S BEEN THE STORY THERE?
A. The new investments in Europe have come mainly in French stocks and, to
a lesser extent, in the United Kingdom and Germany. I believe that the
aggressive cost cutting of many European companies, the cheapness of
European stocks and the potential for a more robust European economy have
provided outstanding investment opportunities. Investors may remember the
spectacular performance of the stocks of U.S. companies in the early 1990s.
This performance was driven by cost cutting, increased corporate earnings
and a strong economy. Of course, there can be no guarantee this scenario
will occur in Europe.
Q. CAN YOU GIVE EXAMPLES OF SOME EUROPEAN COMPANIES YOU PURCHASED DURING
THE PERIOD?
A. Sure. Veba, a German conglomerate; Pechiney, a French aluminum company;
Alcatel Alsthom Compagnie Generale d'Electricite, a French telecom company;
and Volvo, the Swedish car and truck manufacturer; all exemplify my reasons
for raising the fund's European position.
Q. WERE THERE ANY DISAPPOINTMENTS?
A. Unfortunately, Deutsche Bank has not exhibited the ability to cut costs
that I had hoped it would. The stock remains at very inexpensive levels,
and I am hopeful that the bank's continued cost-cutting efforts will
produce more meaningful results.
Q. SINCE THIS IS YOUR FIRST REPORT AS MANAGER OF THE FUND, WOULD YOU MIND
SUMMARIZING YOUR INVESTMENT STYLE?
A. When I look at a stock, I attempt to establish its worth as a means of
determining what return I can expect and as a way of comparing potential
rewards and potential risks. I try to minimize surprises by thoroughly
understanding what the downside possibilities are for each stock I own. I
attempt to select stocks that I believe have two or three times as much
upside potential as downside risk. I also focus on a company's cash flow
and balance sheet. I've found that while accounting conventions vary
dramatically from country to country, the items that are most comparable
are cash flow and balance sheets.
Q. WHAT'S YOUR OUTLOOK?
A. The economy has already begun to recover in Japan - to the benefit of
the fund - and I am hopeful for a similar scenario to occur in Europe. I
believe there is the potential for economic improvement in many areas of
the world and, in my opinion, the fund is well positioned to take advantage
of any recoveries.
FUND FACTS
GOAL: long-term growth of capital by investing in
equity securities outside the United States
START DATE: January 28, 1987
SIZE: as of June 30, 1996, more than $1.6 billion
MANAGER: Richard Mace, since March 1996;
joined Fidelity in 1987
(checkmark)
FUND FACTS
GOAL: to seek high current income by
investing in high-yielding, lower-rated fixed
income securities
START DATE: September 19, 1985
SIZE: as of June 30, more than $1.1 billion
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
INVESTMENTS JUNE 30, 1996 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 88.1%
SHARES VALUE (NOTE 1)
ARGENTINA - 0.9%
Banco de Galicia y Buenos Aires SA
sponsored ADR representing
Class B shares (New) 68,300 $ 1,767,263
Perez Companc Class B 428,780 2,809,549
Telecom Argentina Class B
sponsored ADR 116,500 5,460,938
Telecom Argentina Stet France
Telecom SA 263,600 1,239,379
YPF Sociedad Anonima sponsored ADR
representing Class D shares 161,800 3,640,500
14,917,629
AUSTRALIA - 1.0%
Brambles Industries Ltd. 395,700 5,509,681
CSR Ltd. 403,602 1,427,177
Coles Myer Ltd. 716,900 2,608,427
Western Mining Holdings Ltd. 528,100 3,784,737
Woolworths Ltd. 1,204,600 2,912,456
16,242,478
AUSTRIA - 0.1%
EVN (Energie-Versor Nieder) 14,640 2,020,723
BELGIUM - 0.4%
Bekaert SA 6,000 4,831,072
Delhaize Freres & Cie Le Lion SA 22,000 1,104,928
5,936,000
BRAZIL - 1.8%
Compania Cervejaria Brahma PN
(Pfd. Reg.) 5,984,300 3,569,781
Telebras sponsored ADR 321,500 22,384,438
Telebras PN (Pfd. Reg.) 49,144,970 3,430,825
29,385,044
CANADA - 1.5%
Alcan Aluminium Ltd. 177,800 5,417,909
BCE, Inc. 108,300 4,269,095
Barrick Gold Corp. 62,600 1,700,950
Bre-X Minerals Ltd. 63,400 1,060,115
Canadian Natural Resources Ltd. 63,100 1,177,731
Greenstone Resources Ltd. 90,600 1,063,107
Inco Ltd. 157,800 5,086,216
Magna International, Inc. Class A 33,700 1,557,039
Midland Walwyn, Inc. 289,300 1,856,459
Renaissance Energy Ltd. 45,800 1,209,189
24,397,810
DENMARK - 0.9%
International Service Systems AS,
Series B 371,200 8,278,520
Unidanmark AS Class A 137,650 6,374,096
14,652,616
FINLAND - 1.7%
Cultor OY, Series 1 78,600 3,840,501
Huhtamaki Ord. 179,500 5,988,743
Nokia Corp. AB, Series A 67,800 2,495,544
Pohjola Class B 407,000 6,877,072
Valmet OY Class A 320,300 5,412,103
Valmet OY (b) 175,000 2,956,972
27,570,935
SHARES VALUE (NOTE 1)
FRANCE - 8.6%
Alcatel Alsthom Compagnie Generale
d'Electricite SA 290,800 $ 25,328,652
Axa SA 172,118 9,402,217
Canal Plus SA 27,000 6,594,180
Club Mediterranee SA Ord. 31,600 2,825,917
Credit Commercial de France Ord. 53,200 2,462,371
Eramet SA 94,457 6,349,050
Generale des Eaux 33,800 3,770,126
IMETAL SA Ord. 42,100 5,961,785
Lafarge Coppee SA 46,390 2,803,198
Michelin SA (Compagnie Generale des
Etablissements) Class B 257,100 12,548,275
Nationale Elf Aquitaine 81,728 6,002,371
Pechiney SA Class A 267,300 10,780,149
Peugeot SA Ord. 19,000 2,539,476
Societe Generale Class A 27,200 2,986,460
Total SA Class B 428,880 31,764,575
Usinor Sacilor 276,300 3,979,685
Vallourec SA 65,600 2,977,769
139,076,256
GERMANY - 7.1%
Asko 6,650 4,907,347
BASF AG 52,000 1,483,765
Bayer AG 307,100 10,827,566
Continental Gummi-Werke AG 280,100 4,538,190
Daimler-Benz AG Ord. (a) 142,000 7,586,684
Deutsche Bank AG 152,600 7,207,084
Gildemeister AG (a) 18 767
Hoechst AG Ord. 155,000 5,246,310
Karstadt AG 3,700 1,493,834
Kaufhof Holding AG 12,000 4,532,371
Mannesmann AG Ord. 18,400 6,348,573
Veba AG Ord. 944,000 50,076,274
Volkswagen AG 28,100 10,423,450
114,672,215
HONG KONG - 2.3%
Amoy Properties Ltd. 2,490,000 3,007,557
Consolidated Electric Power Asia Ltd.
sponsored ADR (b) 23,500 381,875
Consolidated Electric Power Asia Ltd. 905,600 1,497,440
Dickson Concepts International Ltd. 2,880,000 3,683,245
Great Eagle Holdings Ltd. 1,048,000 3,066,426
HSBC Holdings PLC 738,000 11,295,954
Hong Kong & China Gas Co. Ltd. 2,340,000 3,733,239
Hysan Development Co. Ltd. 1,561,000 4,779,189
Oriental Press Group Ltd. 3,378,000 1,810,967
Peregrine Investments Holdings Ltd. 1,168,000 1,682,367
Semi-Tech (Global) Ltd. 102,006 157,470
Sun Hung Kai Properties Ltd. 167,000 1,688,122
36,783,851
IRELAND - 0.7%
Bank of Ireland, Inc. 1,052,200 7,199,134
Independent Newspapers PLC 868,416 4,044,257
Independent Newspapers PLC (rights) (a) 173,683 26,962
11,270,353
ITALY - 0.6%
Magneti Marelli SPA 1,753,900 2,517,162
Montedison Spa Ord. (a) 1,749,800 1,016,822
Olivetti & Co. Spa Ord. (a) 4,764,650 2,559,254
Pirelli Spa Ord. 349,600 588,512
SAI (Sta ASsieuratrice Industriale) Spa 249,100 2,376,918
9,058,668
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
JAPAN - 25.8%
Acom Co. Ltd. 24,000 $ 938,517
Amway Japan Ltd. 85,100 4,266,442
Aoyama Trading Co. Ord. 127,800 3,343,385
Bridgestone Corp. 519,000 9,887,517
Canon, Inc. 851,000 17,686,341
Citizen Watch Co. Ltd. Ord. 469,000 3,903,168
DDI Corp. Ord. 1,022 8,905,994
Dai-Ichi Kangyo Bank 153,000 2,845,085
Daito Trust Construction 432,700 6,468,511
Daiwa House Industry Co. Ltd. 590,000 9,142,701
Daiwa Securities Co. Ltd. 855,000 10,989,016
Dennys Japan Co. Ltd. 71,000 2,517,570
East Japan Railway Co. Ord. 700 3,668,930
Fanuc Ltd. 102,300 4,065,704
Fuji Bank Ltd. 206,000 4,431,521
Fuji Photo Film Co. Ltd. 450,000 14,192,608
Hanshin Department Store Ltd. 9,000 63,990
Hitachi Koki Co. Ltd. Ord. 137,000 1,348,708
Hitachi Ltd. 1,261,000 11,724,352
Hitachi Maxell Ltd. 285,000 5,949,136
Honda Motor Co. Ltd. 1,264,000 32,721,937
Ito-Yokado Co. Ltd. 311,000 18,738,526
Japan Airlines Co. Ltd. (a) 375,000 3,031,995
Kao Corp. 136,000 1,834,739
Kobe Steel Ltd. (a) 1,609,000 4,619,981
Komatsu Ltd. Ord. 1,487,000 14,638,896
Komatsu Seiren Co. Ltd. 110,000 1,303,496
Matsushita Electric Industrial Co. Ltd. 1,645,000 30,589,308
Minebea Co. Ltd. 283,000 2,375,853
Mitsubishi Electric Co. Ord. 1,102,000 7,674,473
Mitsubishi Estate Co. Ltd. 279,000 3,840,208
Mitsubishi Heavy Industries Ltd. 552,000 4,795,187
Mitsui Trust and Banking Co. Ltd. 237,000 2,765,234
Mitsukoshi Ltd. 354,000 3,775,398
Nichido Fire & Marine Insurance Co. Ltd. 670,950 5,180,207
Nikko Securities Co. Ltd. 566,000 6,345,928
Nintendo Co. Ltd. Ord. 44,600 3,317,406
Nippon Shokubai Co. Ltd. 228,000 2,202,999
Nippon Thompson Co. Ltd. 163,000 1,404,084
Nitto Denko Corp. 107,000 1,882,412
Nomura Securities Co. Ltd. 795,000 15,507,953
Omron Corp. 164,000 3,483,159
Onward Kashiyama & Co. Ltd. 323,000 5,270,225
Orix Corp. 255,000 9,437,127
Ricoh Co. Ltd. Ord. 609,000 6,439,451
Rohm Co. Ltd. 57,000 3,761,725
Sakura Bank Ltd. 125,000 1,390,092
Sankyo Co. Ltd. 198,000 5,125,746
Seino Transportation Co. Ltd. 155,000 2,444,282
Sekisui Chemical Co. Ltd. 360,000 4,397,247
Sho Bond Corp. Ord. 28,700 1,072,604
Sony Corp. 189,500 12,454,264
Sumitomo Marine and Fire Insurance
Co. Ltd. 420,000 3,656,169
Sumitomo Realty & Development Co. Ltd. 796,000 6,290,798
Sumitomo Trust & Banking Co. Ltd. 349,000 4,771,888
TDK Corp. 107,000 6,378,743
Tadano Ltd. 17,000 164,259
Takashimaya Co. Ltd. 357,000 5,532,109
Takeda Chemical Industries Ltd. 532,000 9,407,776
Tokio Marine & Fire Insurance
Co. Ltd. (The) 280,000 3,726,357
SHARES VALUE (NOTE 1)
Toyota Motor Corp. 765,000 $ 19,106,696
Uny Co. Ltd. 113,000 2,235,176
Yamanouchi Pharmaceutical Co. Ltd. 209,000 4,534,160
York Benimaru Co. 44,700 1,776,510
417,741,979
KOREA (SOUTH) - 0.5%
Korea Electric Power Corp. 200,070 8,079,753
MEXICO - 0.2%
Banacci SA de CV Class B (a) 426,200 885,552
Cifra SA Class C (a) 1,824,100 2,602,078
3,487,630
NETHERLANDS - 5.4%
AKZO NV 113,500 13,575,919
DSM NV 33,500 3,321,197
ING Groep NV 632,362 18,826,242
KLM Royal Dutch Air Lines NV 132,273 4,224,195
Philips Electronics NV (Bearer) 44,400 1,441,305
Pirelli Tyre Holdings NV Ord. (a) 596,200 5,265,614
Royal Dutch Petroleum Co. Ord. 109,600 16,898,029
Royal Ptt Nederland NV 230,900 8,724,419
Unilever NV Ord. 55,000 7,945,838
Vendex International NV 21,200 737,790
Vendex International NV (b) 198,600 6,911,563
87,872,111
NORWAY - 1.5%
Den Norske Bank Class A Free shares 1,357,200 4,109,567
Norsk Hydro AS 160,450 7,842,468
Orkla AS:
Class A Free shares 93,250 4,901,860
Class B (non-vtg.) 62,200 3,021,088
Saga Petroleum AS Class B 268,500 3,631,725
23,506,708
PERU - 0.1%
Compania de Minas Buenaventura SA
Class B sponsored ADR (a) 78,600 1,562,175
SINGAPORE - 0.3%
Kim Engineering Holdings Ltd. 2,665,000 2,511,123
Overseas Union Bank Ltd. (For . Reg.) 286,000 1,965,427
Van Der Horst Ltd. 156,000 729,437
5,205,987
SOUTH AFRICA - 0.1%
De Beers Consolidated Mines Ltd. ADR 24,000 810,000
SPAIN - 3.4%
Banco Bilbao Vizcaya SA Ord. (Reg.) 352,700 14,279,129
Banco de Santander SA Ord. (Reg.) 226,403 10,561,176
Banco Intercontinental Espanol 63,400 7,087,031
Tabacalera SA, Series A 279,100 14,042,630
Telefonica de Espana SA Ord. 500,000 9,204,727
55,174,693
SWEDEN - 6.8%
Bure Investment AB (b) 62,000 568,910
Electrolux AB 164,500 8,252,467
Ericsson (L.M.) Telephone Co. Class B 126,700 2,725,428
Esselte AB Class B Free shares 79,600 1,622,462
Investor AB Class B Free shares 170,000 6,354,734
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SWEDEN - CONTINUED
SKF AB Ord. 146,000 $ 3,459,039
Scania AB:
Class A 124,800 3,454,256
Class B 661,800 18,367,294
Series B (warrants) 170,000 184,121
Skandia Foersaekrings AB 302,700 7,991,193
Skandinaviska Enskilda Banken
Class A Free shares 1,008,100 8,037,140
Swedish Match AB 1,538,100 4,766,217
Volvo AB Class B 1,930,900 43,859,006
109,642,267
SWITZERLAND - 2.4%
CIBA-GEIGY AG (Reg.) 8,580 10,436,291
Nestle SA (Reg.) 12,425 14,161,775
Roche Holdings Ltd. participation
certificates 1,300 9,897,109
Sandoz AG (Reg.) 4,100 4,679,641
39,174,816
THAILAND - 0.3%
Ruang Khao Unit Trust (For. Reg.) 744,900 476,616
Siam City Bank PCL (For. Reg.) 4,763,700 5,111,266
5,587,882
UNITED KINGDOM - 13.2%
Allied Domecq PLC 457,026 3,213,873
Argyll Group PLC Ord. 6,554 35,304
Barclays PLC Ord. 877,200 10,519,298
Barratt Developments PLC 1,571,125 6,194,897
Bass PLC Ord. 638,300 8,011,144
Booker PLC 383,500 2,220,567
Boots Co. PLC (The) 319,900 2,875,295
British Airways PLC Ord. 540,200 4,637,344
British Petroleum PLC Ord. 1,766,100 15,490,070
British Telecommunications PLC Ord. 764,400 4,105,693
Cable & Wireless PLC Ord. 687,200 4,539,127
Caradon PLC 1,322,400 4,423,844
Christies International PLC 98,000 320,995
Cookson Group PLC 2,967,600 13,037,113
Courtaulds PLC Ord. 42,800 282,372
Dixons Group PLC 1,235,200 10,105,029
Glaxo Holdings PLC 440,600 5,929,980
Granada Group PLC 344,500 4,607,169
Grand Metropolitan PLC 1,306,645 8,661,141
Hanson Trust PLC Ord. 739,400 2,066,054
Lloyds Abbey Life PLC 642,100 5,063,561
Lloyds TSB Group PLC 598,702 2,927,594
MFI Furniture Group PLC 1,379,900 3,716,522
Mirror Group Newspaper PLC 2,066,000 6,526,561
National Westminster Bank PLC Ord. 954,820 9,100,799
Prudential Corp. PLC 382,413 2,410,174
RTZ Corp. PLC Ord. 197,800 2,926,233
Redland PLC Ord. 350,700 2,166,748
Rolls Royce PLC Ord. 996,084 3,463,647
Royal Insurance Holdings PLC 1,145,900 7,070,881
Rugby Group 691,100 1,180,112
Scottish Hydro-Electric PLC Ord. 300 1,378
Scottish Power PLC ADR 118,400 558,747
Shell Transport & Trading Co. PLC:
ADR 17,300 1,522,400
(Reg.) 1,102,100 16,150,376
SHARES VALUE (NOTE 1)
Sema Group PLC 304,600 $ 3,475,417
Smithkline Beecham PLC Ord. 256,500 2,741,454
South West Water PLC Ord. 421,800 4,282,269
T & N PLC 822,000 1,786,444
Unigate Ltd. Ord. 330,600 2,042,564
United Utilities PLC 291,189 2,447,728
Vodafone Group PLC 1,331,004 4,948,511
WPP Group PLC (b) 1,357,800 4,573,884
WPP Group PLC ADR 26,100 874,350
Whitbread & Co. PLC Class A 588,100 6,472,724
Wickes PLC 806,200 857,281
Yorkshire Water PLC Ord. 251,200 2,573,672
213,138,340
UNITED STATES OF AMERICA - 0.5%
Dresser Industries, Inc. 49,200 1,451,400
Newmont Mining Corp. 27,500 1,357,813
Pharmacia & Upjohn, Inc. 110,000 4,881,250
7,690,463
TOTAL COMMON STOCKS
(Cost $1,263,543,603) 1,424,659,382
PREFERRED STOCKS - 2.0%
CONVERTIBLE PREFERRED STOCKS - 0.1%
JAPAN - 0.1%
AJL participating trust exchangeable 71,700 1,514,663
NONCONVERTIBLE PREFERRED STOCKS - 1.9%
AUSTRIA - 0.3%
Creditanstalt Bankverein 105,900 5,353,024
GERMANY - 0.4%
Porsche AG (a) 3,750 2,250,738
Volkswagen AG 4% 14,600 3,998,360
6,249,098
ITALY - 1.2%
Fiat Spa 591,600 1,034,819
SAI Sta Assicuratrice Industriale Spa 650,500 2,510,465
Stet (Societa Finanziaria Telefonica) Spa 5,976,400 15,690,488
19,235,772
TOTAL NONCONVERTIBLE PREFERRED STOCKS 30,837,894
TOTAL PREFERRED STOCKS
(Cost $27,285,280) 32,352,557
CONVERTIBLE BONDS - 0.3%
MOODY'S PRINCIPAL
RATINGS AMOUNT
BERMUDA - 0.3%
MBL International Finance of
Bermuda 3%, 11/30/02
(Cost $4,974,627) Aa3 $4,392,000 5,127,660
REPURCHASE AGREEMENTS - 9.6%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 5.46%, dated
6/28/96 due 7/1/96 $ 155,694,809 $ 155,624,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,451,427,510) $ 1,617,763,599
LEGEND
1. Non-income producing
2. 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 $15,393,204 or 1.0% of net
assets.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $845,532,811 and $666,830,168, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $125,063 for the period
(see Note 4 of Notes to Financial Statements).
MARKET SECTOR DIVERSIFICATION
As a Percentage of Total Value of Investment in Securities
Aerospace & Defense 0.2%
Basic Industries 6.5
Conglomerates 0.1
Construction & Real Estate 3.8
Durables 15.7
Energy 5.7
Finance 16.8
Health 3.6
Holding Companies 1.1
Industrial Machinery & Equipment 4.7
Media & Leisure 2.0
Nondurables 5.7
Precious Metals 0.7
Retail & Wholesale 5.4
Services 0.9
Repurchase Agreements 9.6
Technology 5.2
Transportation 1.5
Utilities 10.8
100.0%
INCOME TAX INFORMATION
At June 30,1996, the aggregate cost of investment securities for income tax
purposes was $1,451,764,296. Net unrealized appreciation aggregated
$165,999,303, of which $201,517,356 related to appreciated investment
securities and $35,518,053 related to depreciated investment securities.
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1996 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $155,624,000) (cost $1,451,427,510) - $ 1,617,763,599
See accompanying schedule
Cash 145
Receivable for investments sold 6,907,853
Receivable for fund shares sold 1,426,835
Dividends receivable 5,208,210
Interest receivable 10,593
Other receivables 900
TOTAL ASSETS 1,631,318,135
LIABILITIES
Payable for investments purchased $ 25,450,937
Payable for fund shares redeemed 2,908,321
Accrued management fee 995,084
Other payables and 373,638
accrued expenses
TOTAL LIABILITIES 29,727,980
NET ASSETS $ 1,601,590,155
Net Assets consist of:
Paid in capital $ 1,343,799,674
Undistributed net investment income 15,365,533
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 76,142,317
Net unrealized appreciation (depreciation) on investments 166,282,631
and assets and liabilities in
foreign currencies
NET ASSETS, for 89,553,847 $ 1,601,590,155
shares outstanding
NET ASSET VALUE, offering price $17.88
and redemption price per
share ($1,601,590,155 (divided by) 89,553,847 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INVESTMENT INCOME $ 26,007,078
Dividends
Interest 5,229,423
31,236,501
Less foreign taxes withheld (3,560,017
)
TOTAL INCOME 27,676,484
EXPENSES
Management fee $ 5,651,511
Transfer agent fees 311,446
Accounting fees and expenses 364,979
Non-interested trustees' compensation 2,564
Custodian fees and expenses 504,353
Registration fees 7,263
Audit 22,050
Legal 10,205
Miscellaneous 3,156
Total expenses before reductions 6,877,527
Expense reductions (32,610 6,844,917
)
NET INVESTMENT INCOME 20,831,567
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 77,024,385
Foreign currency transactions (146,148 76,878,237
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 7,721,171
Assets and liabilities in (54,691 7,666,480
foreign currencies )
NET GAIN (LOSS) 84,544,717
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 105,376,284
OTHER INFORMATION
Expense reductions $ 30,765
Directed brokerage arrangements
Custodian interest credits 1,845
$ 32,610
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
(UNAUDITED)
Operations $ 20,831,567 $ 24,265,663
Net investment income
Net realized gain (loss) 76,878,237 10,642,375
Change in net unrealized appreciation (depreciation) 7,666,480 85,131,645
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 105,376,284 120,039,683
Distributions to shareholders (16,689,141) (4,893,543)
From net investment income
From net realized gain (18,358,055) (1,797,170)
In excess of net realized gain - (3,096,373)
TOTAL DISTRIBUTIONS (35,047,196) (9,787,086)
Share transactions 371,027,321 466,436,535
Net proceeds from sales of shares
Reinvestment of distributions 35,047,195 9,787,086
Cost of shares redeemed (217,947,394) (541,043,324)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 188,127,122 (64,819,703)
TOTAL INCREASE (DECREASE) IN NET ASSETS 258,456,210 45,432,894
NET ASSETS
Beginning of period 1,343,133,945 1,297,701,051
End of period (including undistributed net investment income of $15,365,533 and
$18,738,964, respectively) $ 1,601,590,155 $ 1,343,133,945
OTHER INFORMATION
Shares
Sold 21,423,198 29,090,043
Issued in reinvestment of distributions 2,053,145 652,472
Redeemed (12,673,890) (33,802,732)
Net increase (decrease) 10,802,453 (4,060,217)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED
JUNE 30, 1996
SELECTED PER-SHARE DATA (UNAUDITED) 1995 1994 1993 D 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.06 $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42
Income from Investment Operations
Net investment income .13 .17 .19 .06 .16 .24
Net realized and unrealized gain (loss) 1.11 1.34 .08 H 4.16 (1.54) .74
Total from investment operations 1.24 1.51 .27 4.22 (1.38) .98
Less Distributions (.20) (.06) (.08) (.18) (.18) (.17)
From net investment income
In excess of net investment income - - - (.04) - -
From net realized gain (.22) (.02) - - - (.14) G
In excess of net realized gain - (.04) - (.05) - -
Total distributions (.42) (.12) (.08) (.27) (.18) (.31)
Net asset value, end of period $ 17.88 $ 17.06 $ 15.67 $ 15.48 $ 11.53 $ 13.09
TOTAL RETURN B, C 7.39% 9.74% 1.72% 37.35% (10.72) 8.00%
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,601,590 $ 1,343,134 $ 1,297,701 $ 777,961 $ 180,837 $ 126,490
Ratio of expenses to average net assets .93% A .91% .92% 1.03% 1.14% 1.26%
Ratio of expenses to average net assets after
expense reductions .92% A, .91% .92% 1.03% 1.14% 1.26%
E
Ratio of net investment income to average net
assets 2.81% A 1.88% 1.28% 1.21% 1.86% 2.33%
Portfolio turnover rate 102% A 50% 42% 42% 61% 168%
Average Commission rate F $ .0141
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 7 OF
NOTES TO FINANCIAL
STATEMENTS). C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS
SHOWN. D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF
POSITION 93-2,
"DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF
INCOME, CAPITAL GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY
INVESTMENT COMPANIES." AS A
RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES E FMR OR THE
FUND HAS ENTERED INTO VARYING
ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION
OF THE FUND'S EXPENSES (SEE NOTE 7 OF NOTES TO FINANCIAL STATEMENTS).
F FOR FISCAL YEARS
BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO
DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON
WHICH COMMISSIONS ARE
CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND
DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE
TRADING PRACTICES AND
COMMISSION RATE STRUCTURES MAY DIFFER. G INCLUDES AMOUNTS DISTRIBUTED
FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS
TAXABLE AS ORDINARY
INCOME. H 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.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1996 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
The Money Market Portfolio, High Income Portfolio, Equity-Income Portfolio,
Growth Portfolio and Overseas Portfolio (the funds) are funds of Variable
Insurance Products Fund (the trust). The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business trust.
Each fund is authorized to issue an unlimited number of shares. Shares of
each fund may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts. The
financial statements have been prepared in conformity with generally
accepted accounting principles which permit management to make certain
estimates and assumptions at the date of the financial statements. The
following summarizes the significant accounting policies of the funds:
SECURITY VALUATION:
MONEY MARKET PORTFOLIO. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
HIGH INCOME PORTFOLIO. Debt securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market (sales
prices if the principal market is an exchange) in which such securities are
normally traded. Equity securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
EQUITY-INCOME AND GROWTH PORTFOLIOS. Securities for which exchange
quotations are readily available are valued at the last sale price, or if
no sale price, at the closing bid price. Securities (including restricted
securities) for which exchange quotations are not readily available (and in
certain cases debt securities which trade on an exchange) are valued
primarily using dealer-supplied valuations or at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
OVERSEAS PORTFOLIO. Securities for which quotations are readily available
are valued at the last sale price, or if no sale price, at the closing bid
price in the principal market in which
such securities are normally traded. Securities (including restricted
securities) for which quotations are not readily available are valued
primarily using dealer-supplied valuations or at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The Overseas Portfolio may be subject to foreign taxes on
income, gains on investments or currency repatriation. The schedules of
investments include information regarding income taxes under the caption
"Income Tax Information."
INVESTMENT INCOME:
MONEY MARKET PORTFOLIO. Interest income, which includes amortization of
premium and accretion of discount, is accrued as earned.
HIGH INCOME, EQUITY-INCOME, GROWTH AND OVERSEAS PORTFOLIOS. Dividend income
is recorded on the ex-dividend date, except certain dividends from foreign
securities where the ex-dividend date may have passed, are recorded as soon
as the funds are informed of the ex-dividend date. Interest income, which
includes accretion of original issue discount, is accrued as earned.
Investment income is recorded net of foreign taxes withheld where recovery
of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income for the Money Market Portfolio.
Distributions are recorded on the ex-dividend date for all other funds.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for defaulted
bonds, foreign currency transactions, passive foreign investment companies
(PFIC), market discount, partnerships, non-taxable dividends, capital loss
carryforwards and losses deferred due to wash sales. Certain foreign
currency gains (losses) are taxable as ordinary income and, therefore,
increase (decrease) taxable ordinary income available for distributions
with respect to the Overseas Portfolio.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net interest/investment income and
realized and unrealized gain (loss). Undistributed net investment income
and accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of trade
date. Gains and losses on securities sold are determined on the basis of
identified cost.
2. OPERATING POLICIES.
FORWARD FOREIGN CURRENCY CONTRACTS. The funds, (excluding the Money Market
Portfolio), may use foreign currency contracts to facilitate transactions
in foreign securities and to manage the funds' currency exposure. Contracts
to buy generally are used to acquire exposure to foreign currencies, while
contracts to sell are used to hedge the fund's investments against currency
fluctuations. Also, a contract to buy or sell can offset a previous
contract. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested
in one or more repurchase agreements that mature in 60 days or less from
the date of purchase, and are collateralized by U.S. Treasury or Federal
Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the funds, or to the Joint
Trading Account, at a bank custodian. The securities are marked-to-market
daily and maintained at a value at least equal to the principal amount of
the repurchase agreement (including accrued interest). FMR, the funds'
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The funds may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The
market value of the securities purchased or sold on a when-issued or
forward commitment basis is identified as such in the fund's schedule of
investments. The funds may receive compensation for interest forgone in the
purchase of a delayed delivery security. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty does
not perform under the contract.
RESTRICTED SECURITIES. The funds are permitted to invest in securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) amounted to $9,088,578 or
0.8% of net assets of the the High Income Portfolio.
3. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities) is included under the caption "Other Information" at
the end of each applicable fund's schedule of investments.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly
fee.
For the Money Market Portfolio, FMR receives a monthly fee that is
calculated on the basis of a basic fund fee rate of .03% of the fund's
average net assets, plus a fixed income group fee rate and an income-based
fee. The group fee rate is the weighted average of a series of rates
ranging from .1100% to .3700% and is based on the monthly average net
assets of all the mutual funds advised by FMR. The income-based fee is
added only when the
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
fund's gross yield exceeds 5%. At that time the income-based fee would
equal 6% of that portion of the fund's gross income that represents a gross
yield of more than 5% per year. The maximum income-based component is 0.24%
of average net assets. For the period, the management fee was equivalent to
an annualized rate of .21% of average net assets.
For all other funds, FMR receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1100% to
.3700% for the High Income Portfolio and .2500% to .5200% for the
Equity-Income, Growth, and Overseas Portfolios for the period. In the event
that these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted in
the same or a lower management fee. The annual individual fund fee rates
are .45%, .20%, .30% and .45% for High Income, Equity-Income, Growth, and
Overseas Portfolios, respectively. For the period, the management fee was
equivalent to an annualized rate of .60%, .51%, .61%, and .76% of average
net assets for the High Income, Equity-Income, Growth, and Overseas
Portfolios, respectively.
SUB-ADVISER FEE. As the Money Market Portfolio's investment sub-adviser,
FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR
of 50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect.
FMR, on behalf of the High Income and Overseas Portfolios, entered into
sub-advisory agreements with Fidelity Management & Research (U.K.) Inc.,
Fidelity Management & Research (Far East) Inc., and with respect only to
Overseas Portfolio, Fidelity International Investment Advisors (FIIA). In
addition, FIIA entered into a sub-advisory agreement with its subsidiary,
Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.).
Under the sub-advisory arrangements, FMR may receive investment advice and
research services and may grant the sub-advisers investment management
authority to buy and sell securities. FMR pays its sub-advisers either a
portion of its management fee or a fee based on costs incurred for these
services. FIIA pays FIIAL U.K. a fee based on costs incurred for either
service.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. FIIOC receives account fees and
asset-based fees that vary according to account size and type of account.
FIIOC pays for typesetting,
printing and mailing of all shareholder reports, except proxy statements.
For the period, transfer agent fees were equivalent to an annualized rate
of .07% of average net assets for the Money Market Portfolio, .03% of
average net assets for the High Income Portfolio, and .04% of average net
assets for the Equity-Income, Growth, and Overseas Portfolios.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms are shown under the caption
"Other Information" at the end of each applicable fund's schedule of
investments.
5. INTERFUND LENDING PROGRAM.
Each fund is permitted to participate in the interfund lending program as
either a borrower or a lender. Information regarding each fund's
participation in the program is included under the caption "Other
Information" at the end of each applicable fund's schedule of investments.
6. BANK BORROWINGS.
The funds are permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. Each fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, each fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time.
Information regarding each fund's participation in the program is included
under the caption "Other Information" at the end of each applicable fund's
schedule of investments.
7. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the funds' operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of 1.00% of average net assets for the High
Income Portfolio and 1.50% of average net assets for the Equity-Income,
Growth, and Overseas Portfolios.
FMR has directed certain portfolio trades to brokers who paid a portion of
certain funds' expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent whereby interest
earned on uninvested cash balances was used to offset a portion of certain
funds' expenses.
For the period, the reductions under these arrangements are shown under the
caption "Other Information" on each applicable fund's Statement of
Operations.
8. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI) and its subsidiaries, affiliates of FMR, were the record owners of
more than 5% of the outstanding shares and certain unaffiliated insurance
companies were record owners of approximately 10% or more of the total
outstanding shares of the following funds:
FILI UNAFFILIATED INSURANCE COMPANIES
FUND % OF OWNERSHIP # OF % OF OWNERSHIP
Money Market 50 1 13
High Income 18 2 51
Equity-Income 25 1 28
Growth 19 1 29
Overseas 16 1 37
9. TRANSACTIONS WITH AFFILIATED COMPANIES.
Information regarding transactions with affiliated companies is included
under the caption "Legend" at the end of each applicable fund's schedule of
investments.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
FMR Texas Inc., Irving, TX
MONEY MARKET PORTFOLIO
Fidelity Management & Research (U.K.) Inc.,
London, England
HIGH INCOME AND OVERSEAS PORTFOLIOS
Fidelity Management & Research (Far East) Inc.,
Tokyo, Japan
HIGH INCOME AND OVERSEAS PORTFOLIOS
Fidelity International Investment Advisors
Pembroke, Bermuda
OVERSEAS PORTFOLIO
Fidelity International Investment Advisors (U.K.) Limited
Kent, England
OVERSEAS PORTFOLIO
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
William J. Hayes, VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT
Robert A. Lawrence, VICE PRESIDENT
Lawrence Greenberg, VICE PRESIDENT
Richard R. Mace, VICE PRESIDENT
Barry J. Coffman, VICE PRESIDENT
Robert Litterst, VICE PRESIDENT
Andrew Offit, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Kenneth A. Rathgeber, TREASURER
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
Thomas J. Simpson, ASSISTANT TREASURER -
MONEY MARKET PORTFOLIO
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox *
Phyllis Burke Davis *
Richard J. Flynn *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Edward H. Malone *
Marvin L. Mann *
Gerald C. McDonough *
Thomas R. Williams *
ADVISORY BOARD
William O. McCoy
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Co.
Boston, MA
CUSTODIAN
The Bank of New York, New York, NY
MONEY MARKET AND HIGH INCOME PORTFOLIOS
The Chase Manhattan Bank, N.A., New York, NY
EQUITY-INCOME AND OVERSEAS PORTFOLIOS
Brown Brothers Harriman & Co., Boston, MA
GROWTH PORTFOLIO
* INDEPENDENT TRUSTEES
