VARIABLE INSURANCE PRODUCTS FUND, N-30D, 1997-02-27

VARIABLE INSURANCE PRODUCTS FUND
N-30D, 1997-02-27

Previous: MAXIM SERIES FUND INC, 485BPOS, 1997-02-27

Next: VARIABLE INSURANCE PRODUCTS FUND, NSAR-B, 1997-02-27

(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND: GROWTH PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS

<TABLE>
<CAPTION>
<S> <C> <C>
MARKET ENVIRONMENT 3 A review of what happened in world markets
during the last year.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 5 The manager's review of fund performance, strategy
and outlook.

INVESTMENTS 6 A complete list of the fund's investments with their
market values.

FINANCIAL STATEMENTS 11 Statements of assets and liabilities, operations, and
changes in net assets, as well as financial highlights.

NOTES 13 Notes to the financial statements.

REPORT OF INDEPENDENT ACCOUNTANTS 15 The auditors' opinion.

DISTRIBUTIONS 16

</TABLE>

THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. THIS REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
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 FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
MARKET ENVIRONMENT

Most stock and bond markets posted positive returns in 1996, aided by
moderate growth and low inflation. Sustained corporate earnings growth and
a favorable interest rate environment also proved beneficial. Japan,
however, was the major exception as an underperforming stock market and a
weak yen undermined returns for U.S.-based investors. The strongest gains
came from the often-volatile emerging bond markets in 1996, while
performance of the bond markets of developed countries was mixed.
U.S. STOCK MARKETS
The Standard & Poor's 500 Index - a broad measure of U.S. stock market
performance - rose 22.96% for the 12 months that ended December 31, 1996,
well above the index's long-term average annual return of about 12%. The
Russell 2000 Index - a measure of small stock performance - rose 16.49%.
The Dow Jones Industrial Average - an index of 30 blue-chip stocks - posted
a return of 28.70%, closing above 6500 for the first time in November.
The U.S. stock market spent much of the past year breaking price and
trading volume records. Solid corporate earnings reports, large cash
inflows into mutual funds, widespread optimism and a generally favorable
interest rate environment propelled share prices higher.
Large-capitalization stocks thrived as investors sought their lower
volatility and higher degree of liquidity over smaller-cap stocks in an
environment where it was sometimes difficult to discern the health of the
economy.
Most industry sectors experienced positive, if not strong performance. At
mid-year, technology stocks suffered from a sell-off sparked by fears that
company earnings were weakening. Nevertheless, this sector proved to be the
strongest in the U.S. market in 1996. Earnings surprises and positive
earnings projections were the main drivers of solid performance, especially
among semiconductor manufacturers, companies that make disk drives and
monitors, and software firms. Even though consensus estimates pointed
toward increases in short-term interest rates by the Fed, financial stocks
- - usually sensitive to changes in interest rates - shrugged off this
concern and posted solid performance based on low interest rates and
positive business prospects. Energy stocks reaped the benefits of
higher-than-expected energy prices, which resulted in part from the delayed
re-entry of Iraq into the world market. Uncertainty over the direction of
the economy benefited consumer nondurables - such as food, beverage and
tobacco companies - health care and traditional big-name growth stocks, as
these companies tend to post steady earnings growth in many economic
environments.
Utilities stocks struggled in 1996 for two reasons. First, and most
important, uncertainty over the direction and form of deregulation in the
sector tended to diminish investor interest. Second, stocks in the sector
tend to move in concert with bonds, which lagged due to periodic inflation
fears and confusing economic signals. Stocks in the telecommunications
field especially were affected by uncertainty over legislation signed into
law in February 1996. Biotechnology issues had a hard time recovering from
a correction in stock prices from overvalued levels that they experienced
earlier in 1996. Cyclical stocks - those that usually rise and fall with
the economy - posted mixed results that largely depended on the outlook for
companies in the specific sector rather than the direction of the economy.
FOREIGN STOCK MARKETS
Foreign stock markets posted mixed results in 1996. The Morgan Stanley
Capital International (MSCI) EAFE Index - which measures stock performance
in Europe, Australia and the Far East - returned 6.05% in 1996. Europe
posted the most consistently strong equity markets due to stronger economic
growth, lower interest rates, higher corporate earnings, the relative
weakness of the continent's major currencies and a new emphasis on
shareholder friendliness by many of the region's corporations. The MSCI
Europe Index was up 21.09% in 1996. The Japanese stock market
underperformed on the weakness of the economic recovery and the uncertainty
for any substantial economic reform. The Tokyo Stock Exchange TOPIX Total
Return Index was off 16.26%. Emerging market equity performance ran the
gamut from negative to positive, with the MSCI Emerging Markets Free Index
returning 6.03% for 1996. While Hong Kong was a top performer - benefiting
from the rising value of the property sector, solid economic growth and
stable interest rates - other Asian markets posted mixed returns as
concerns rose over declining export growth in the region. Latin America
enjoyed a strong first half, but faded toward the end of 1996 due to low
domestic savings rates and inefficient governments, among other factors.
U.S. BOND MARKETS
Uncertainty over the direction of the economy led to mixed performance in
U.S. bond markets in 1996. For the year, the Lehman Brothers Aggregate Bond
Index - a broad measure of the performance of the U.S. taxable bond market
- - posted a total return of 3.63%. Stronger-than-expected economic signals
rattled the bond market in the early spring. Investors spent most of the
summer anticipating a short-term interest rate increase by the Federal
Reserve Board. However, the Fed neither raised nor lowered rates through
the end of 1996. Interest rates responded to the Fed's inaction by falling
during much of October and November. In December, though, bond prices
dropped due to inflation concerns, stronger-than-expected economic data and
comments by Fed Chairman Alan Greenspan that the stock markets may be
overvalued.
FOREIGN BOND MARKETS
While low inflation and moderate growth helped provide a positive backdrop
for most bond markets in 1996, performance in overseas bond markets was
mixed. The Salomon Brothers World Government Bond Index - a measure of
government bond market performance in developed nations - returned 3.62%
for the 12 months that ended December 31, 1996. In Europe, focus centered
on the continuing progress toward the European Monetary Union (EMU).
Attractive opportunities arose as countries worked to meet the requirements
for joining the EMU. However, Germany and Japan - two of the larger
components of the Salomon Brothers World Government Bond Index -
experienced currency problems that hurt returns. In stark contrast to the
developed world, the often-volatile emerging debt markets enjoyed a
particularly strong year, helped by inflows of foreign capital, low
interest rates and the implementation of country-specific reforms -
especially in Latin America. The J.P. Morgan Emerging Markets Bond Index -
of which Latin America is a large component - posted a return of 34.16%
during the period.
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY

PERFORMANCE
There are several ways to evaluate a fund's historical performance. You can
look at the total percentage change in value, the average annual percentage
change, or the growth of a hypothetical $10,000 investment. Total return
reflects the change in the value of an investment, assuming reinvestment of
the fund's dividend income and capital gains (the profits earned upon the
sale of securities that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
DECEMBER 31, 1996 YEAR YEARS YEARS

Growth 14.71% 15.16% 15.15%

S&P 500(registered trademark) 22.96% 15.22% 15.27%

AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what
would have happened if the fund had performed at a constant rate each year.
You can compare these figures to the performance of the Standard & Poor's
500 Index - a widely recognized, unmanaged index of common stocks. This
benchmark reflects the reinvestment of dividends and capital gains, if any.

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)
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 past 10
years 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 THE PAST 10 YEARS
IMAHDR PRASUN SHR__CHT 19961231 19970108 094950 S00000000000001
VIP: Growth SP Standard & Poor 500
00151 SP001
1986/12/31 10000.00 10000.00
1987/01/31 11066.80 11347.00
1987/02/28 11615.15 11795.21
1987/03/31 11804.55 12136.09
1987/04/30 11804.55 12028.08
1987/05/31 11884.45 12132.72
1987/06/30 12233.99 12745.42
1987/07/31 12723.35 13391.62
1987/08/31 13102.85 13891.12
1987/09/30 12953.05 13586.91
1987/10/31 10106.77 10660.29
1987/11/30 9397.70 9781.88
1987/12/31 10366.43 10526.28
1988/01/31 10591.35 10969.44
1988/02/29 11450.11 11480.61
1988/03/31 11347.87 11125.86
1988/04/30 11491.00 11249.36
1988/05/31 11388.77 11347.23
1988/06/30 11961.27 11868.07
1988/07/31 11899.93 11822.97
1988/08/31 11613.68 11420.99
1988/09/30 11940.82 11907.52
1988/10/31 11971.49 12238.55
1988/11/30 11859.04 12063.54
1988/12/31 11981.72 12274.65
1989/01/31 12840.48 13173.16
1989/02/28 12574.67 12845.14
1989/03/31 12954.82 13144.44
1989/04/30 13639.93 13826.63
1989/05/31 14127.81 14386.61
1989/06/30 13940.96 14304.61
1989/07/31 15186.62 15596.31
1989/08/31 15446.13 15902.00
1989/09/30 15581.07 15836.80
1989/10/31 15145.09 15469.39
1989/11/30 15394.23 15784.96
1989/12/31 15757.54 16163.80
1990/01/31 14844.06 15079.21
1990/02/28 14985.85 15273.73
1990/03/31 15169.00 15678.49
1990/04/30 14727.29 15286.53
1990/05/31 16030.87 16776.96
1990/06/30 16364.85 16662.88
1990/07/31 16106.29 16609.56
1990/08/31 14447.18 15108.05
1990/09/30 12960.44 14372.29
1990/10/31 12497.19 14310.49
1990/11/30 13509.89 15234.95
1990/12/31 13908.51 15660.00
1991/01/31 14835.02 16342.78
1991/02/28 15941.78 17511.29
1991/03/31 16422.88 17935.06
1991/04/30 16269.80 17978.11
1991/05/31 17231.99 18754.76
1991/06/30 15952.72 17895.79
1991/07/31 17472.54 18729.74
1991/08/31 18248.86 19173.63
1991/09/30 18391.00 18853.43
1991/10/31 18959.57 19106.07
1991/11/30 17877.10 18336.09
1991/12/31 20238.85 20433.74
1992/01/31 21474.39 20053.67
1992/02/29 21923.63 20314.37
1992/03/31 20579.99 19918.24
1992/04/30 19773.81 20503.84
1992/05/31 19605.86 20604.31
1992/06/30 18844.46 20297.30
1992/07/31 19572.27 21127.46
1992/08/31 19034.81 20694.35
1992/09/30 19370.72 20938.54
1992/10/31 20120.92 21011.83
1992/11/30 21464.55 21728.33
1992/12/31 22125.17 21995.59
1993/01/31 22561.85 22180.35
1993/02/28 22096.74 22482.00
1993/03/31 22977.86 22956.37
1993/04/30 22737.56 22400.83
1993/05/31 24431.14 23001.17
1993/06/30 24682.89 23067.88
1993/07/31 24614.23 22975.60
1993/08/31 25850.09 23846.38
1993/09/30 26330.71 23662.76
1993/10/31 26582.46 24152.58
1993/11/30 25506.80 23923.13
1993/12/31 26410.81 24212.60
1994/01/31 27074.51 25035.83
1994/02/28 26795.26 24357.36
1994/03/31 25577.85 23295.38
1994/04/30 25736.12 23593.56
1994/05/31 25139.58 23980.49
1994/06/30 23861.30 23392.97
1994/07/31 24689.14 24160.26
1994/08/31 26089.17 25150.83
1994/09/30 25772.64 24534.64
1994/10/31 26819.61 25086.67
1994/11/30 25748.29 24173.01
1994/12/31 26405.69 24531.50
1995/01/31 25906.55 25167.60
1995/02/28 26979.42 26148.38
1995/03/31 27958.71 26920.02
1995/04/30 28901.27 27712.81
1995/05/31 30027.46 28820.49
1995/06/30 32683.78 29489.99
1995/07/31 35915.43 30467.88
1995/08/31 36356.11 30544.36
1995/09/30 37298.68 31833.33
1995/10/31 36919.20 31719.68
1995/11/30 36894.72 33112.18
1995/12/31 35744.06 33749.92
1996/01/31 36307.15 34898.76
1996/02/29 37524.44 35222.28
1996/03/31 37669.27 35561.47
1996/04/30 39143.91 36085.64
1996/05/31 40368.39 37016.29
1996/06/30 39578.41 37157.32
1996/07/31 36550.12 35515.71
1996/08/31 37642.94 36264.74
1996/09/30 40170.90 38305.72
1996/10/31 40078.73 39362.19
1996/11/30 42303.87 42337.58
1996/12/31 41000.39 41498.87
IMATRL PRASUN SHR__CHT 19961231 19970108 094953 R00000000000123

Let's say hypothetically that $10,000 was invested in Growth Portfolio on
December 31, 1986. As the chart shows, by December 31, 1996, the value of
the investment would have grown to $41,000 - a 310.00% increase on the
initial investment. With reinvested dividends and capital gains, if any, a
$10,000 investment in the S&P 500 would have grown to $41,499 over the same
period - a 314.99% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1996
% OF FUND'S
INVESTMENTS

Intel Corp. 2.5

General Electric Co. 2.4

Cisco Systems, Inc. 2.4

HFS, Inc. 1.9

Oracle Systems Corp. 1.8

TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S
INVESTMENTS

Technology 25.6

Health 11.0

Retail & Wholesale 9.0

Finance 8.2

Media & Leisure 6.3

ASSET ALLOCATION AS OF DECEMBER 31, 1996 *
Row: 1, Col: 1, Value: 9.199999999999999
Row: 1, Col: 2, Value: 45.0
Row: 1, Col: 3, Value: 45.8
Stocks 90.8%
Short-term investments 9.2%
FOREIGN INVESTMENTS 3.6%
*
(% OF FUND'S INVESTMENTS)
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW

NOTE TO SHAREHOLDERS: Jennifer Uhrig became Portfolio Manager of Growth
Portfolio on January 7, 1997, after the period ended.
Q. WHAT CAN YOU TELL US ABOUT THE FUND'S PERFORMANCE, JENNIFER?
A. During the 12 months that ended December 31, 1996, the fund
significantly underperformed the Standard & Poor's 500 Index, which
returned 22.96% during the past one year.
Q. WHAT WERE THE CAUSES OF THE FUND'S RELATIVELY POOR PERFORMANCE?
A. There were three reasons for the fund's underperformance, and most of
them affected the fourth quarter. First, the fund was significantly
underweighted compared to the S&P 500 in financial services and energy
stocks. Financial services was one of the best-performing groups in the
stock market in 1996. In fact, it was one of only a few sectors that
outperformed the general market. However, financial services is not what
one would typically consider to be a growth area, and the fund
traditionally has not had a strong weighting in this sector. Second, the
fund's cash position was high - over 9% both six months ago and when the
period ended - while the market was very strong throughout. Third and
perhaps most important, the fund had twice the market's weighting in
retail. This sector as a whole performed poorly, and some of the fund's
retail holdings blew up, including Sunglass Hut. So those are three key
reasons why the fund lagged its index.
Q. WHAT TYPE OF IMPACT DID THE FUND'S TECHNOLOGY INVESTMENTS HAVE ON
PERFORMANCE?
A. As it turned out, the technology investments did not help, relatively
speaking. With about 26% of its holdings in technology at year-end, the
fund had about twice the weighting of its index in this market sector.
While technology generally performed well, the sector's strength came from
just a few very large capitalization stocks - including Microsoft and IBM.
The fund did own these stocks, but was not overweighted in them. In
retrospect, larger investments in these stocks would have helped the fund.
Q. WHAT WAS THE STORY WITH THE FUND'S HEALTH CARE POSITION?
A. Health care was a strong sector, with the drug stocks doing quite well,
particularly in the second half of the year. Unit growth has been better
than expected, and pricing has stabilized. So the earnings momentum across
this sector has been strong. Drug therapy is a lot cheaper than other types
of therapy, such as hospitalization. Therefore, it is being preferred over
hospital stays - hence the unit growth in prescription medicine. Drug
stocks were also helped by the stock market's concern about the economy.
Drug stocks such as Merck, Pfizer and Bristol-Myers Squibb are what I
consider strong non-cyclical or economically defensive investments, meaning
that they are not as influenced by the strength of the economy. If your
health is at risk, you'll spend money on medicine, whether the economy is
strong, weak or in-between.
Q. HOW ABOUT RETAIL?
A. Retailers are early cyclicals - what I call the "front end of the
economy." They typically lead economic cycles up and lead economic cycles
down. In this respect, they're the other side of the coin from health care.
People who are worried about the economy typically are not spending as much
money on retail goods. I believe investors' concern about the health of the
economy was justified by the relatively lackluster Christmas season for
retail. The fund's overweighting in this sector hurt, and investments in
PETsMART, Staples and Lowe's - as well as Sunglass Hut that I mentioned
earlier - dragged performance down.
Q. WHAT'S YOUR OUTLOOK FOR THE FIRST HALF OF THE YEAR, JENNIFER?
A. A lot depends on how well the economy does, and chances are it will be
slower in 1997 than it was in 1996. I believe consumers are somewhat
over-extended on their borrowing, and that's an environment that typically
doesn't bode well for economic growth. Another argument for a slowdown in
the economy is that we're five years into a recovery, which is a long time
without a breather. I don't know if there will be a recession, but I can't
really see the economy taking off a whole lot from the level it's at today.
The good news is that growth stocks - because they tend to be less
influenced by general economic cycles - can still do well if things slow
down.

FUND FACTS
GOAL: to increase the value of the fund's
shares over the long term by investing in stocks
with above-average growth potential
START DATE: October 9, 1986
SIZE: as of December 31, 1996, more than
$6.0 billion
MANAGER: Jennifer Uhrig, since January 1997;
joined Fidelity in 1987
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
INVESTMENTS DECEMBER 31, 1996

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 90.8%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 1.4%
AEROSPACE & DEFENSE - 1.2%
Boeing Co. 467,200 $ 49,698,363
Gulfstream Aerospace Corp. (a) 185,300 4,493,525
Lockheed Martin Corp. 165,000 15,097,500
Wyman-Gordon Co. (a) 132,000 2,937,000
72,226,388
DEFENSE ELECTRONICS - 0.2%
Raytheon Co. 259,100 12,469,188
TOTAL AEROSPACE & DEFENSE 84,695,576
BASIC INDUSTRIES - 1.8%
CHEMICALS & PLASTICS - 1.0%
Air Products & Chemicals, Inc. 71,100 4,914,788
Airgas, Inc. (a) 177,600 3,907,200
du Pont (E.I.) de Nemours & Co. 250,000 23,593,750
Monsanto Co. 600,000 23,325,000
Praxair, Inc. 150,000 6,918,750
62,659,488
IRON & STEEL - 0.1%
Nucor Corp. 133,500 6,808,500
METALS & MINING - 0.3%
Aluminum Co. of America 155,500 9,913,125
Freeport McMoRan Copper & Gold, Inc.
Class A 125,000 3,515,625
Inco Ltd. 151,800 4,844,622
Titanium Metals Corp. (a) 30,100 989,538
19,262,910
PACKAGING & CONTAINERS - 0.3%
Crown Cork & Seal Co., Inc. 175,100 9,521,063
Tupperware Corp. 100,000 5,362,500
14,883,563
PAPER & FOREST PRODUCTS - 0.1%
Kimberly-Clark Corp. 85,400 8,134,350
TOTAL BASIC INDUSTRIES 111,748,811
CONGLOMERATES - 1.0%
AlliedSignal, Inc. 300,000 20,100,000
Tyco International Ltd. 369,500 19,537,313
United Technologies Corp. 273,400 18,044,400
57,681,713
CONSTRUCTION & REAL ESTATE - 0.7%
CONSTRUCTION - 0.3%
Oakwood Homes Corp. 875,000 20,015,625
ENGINEERING - 0.2%
MasTec, Inc. (a) 250,000 13,250,000
REAL ESTATE INVESTMENT TRUSTS - 0.2%
First Industrial Realty Trust, Inc. 178,800 5,431,050
RFS Hotel Investors, Inc. 343,300 6,780,175
12,211,225
TOTAL CONSTRUCTION & REAL ESTATE 45,476,850
DURABLES - 4.1%
AUTOS, TIRES, & ACCESSORIES - 2.3%
AutoZone, Inc. (a) 775,000 21,312,500
Chrysler Corp. 1,285,700 42,428,100
Danaher Corp. 140,000 6,527,500
Eaton Corp. 150,000 10,462,500
General Motors Corp. 834,846 46,542,665

SHARES VALUE (NOTE 1)
Honda Motor Co. Ltd. 165,000 $ 4,710,220
PACCAR, Inc. 60,400 4,107,200
TRW, Inc. 100,000 4,950,000
141,040,685
CONSUMER DURABLES - 0.4%
Minnesota Mining & Manufacturing Co. 302,900 25,102,838
CONSUMER ELECTRONICS - 0.3%
Harman International Industries, Inc. 150,100 8,349,313
Newell Co. 218,000 6,867,000
15,216,313
HOME FURNISHINGS - 0.0%
Furniture Brands International, Inc. (a) 85,700 1,199,800
TEXTILES & APPAREL - 1.1%
Adidas AG 63,300 5,461,499
Adidas AG (b) 45,600 3,934,350
Gucci Group NV 100,000 6,387,500
Liz Claiborne, Inc. 107,400 4,148,325
Mohawk Industries, Inc. (a) 216,700 4,767,400
NIKE, Inc. Class B 625,800 37,391,550
Tommy Hilfiger (a) 100,000 4,800,000
66,890,624
TOTAL DURABLES 249,450,260
ENERGY - 6.0%
ENERGY SERVICES - 1.6%
Baker Hughes, Inc. 204,600 7,058,700
Diamond Offshore Drilling, Inc. (a) 145,100 8,270,700
Dresser Industries, Inc. 197,100 6,110,100
Halliburton Co. 269,800 16,255,450
Schlumberger Ltd. 350,000 34,956,250
Tidewater, Inc. 113,800 5,149,450
Transocean Offshore, Inc. 101,300 6,343,913
Varco International, Inc. (a) 239,500 5,538,438
Western Atlas, Inc. (a) 100,000 7,087,500
96,770,501
OIL & GAS - 4.4%
Abacan Resource Corp. (a) 274,600 2,385,588
Amerada Hess Corp. 315,800 18,276,925
Anadarko Petroleum Corp. 103,300 6,688,675
Apache Corp. 263,900 9,335,463
Atlantic Richfield Co. 250,700 33,217,750
Barrett Resources Corp. (a) 300,000 12,787,500
Belco Oil & Gas Corp. (a) 69,000 1,888,875
Benton Oil & Gas Co. (a) 240,000 5,430,000
British Petroleum PLC ADR 209,871 29,670,513
Burlington Resources, Inc. 104,600 5,269,225
Chesapeake Energy Corp. (a) 209,400 11,647,875
Kerr-McGee Corp. 98,000 7,056,000
Louisiana Land & Exploration Co. 177,000 9,491,625
Nationale Elf Aquitaine 67,800 6,169,931
Noble Affiliates, Inc. 200,000 9,575,000
Occidental Petroleum Corp. 315,200 7,367,800
Parker & Parsley Petroleum Co. 137,200 5,042,100
Pennzoil Co. 89,500 5,056,750
Royal Dutch Petroleum Co. ADR 333,300 56,910,975
Texaco, Inc. 60,500 5,936,563
Titan Exploration, Inc. 141,700 1,700,400
Union Pacific Resources Group, Inc. 247,441 7,237,649
Unocal Corp. 254,601 10,343,166
268,486,348
TOTAL ENERGY 365,256,849
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - 8.2%
BANKS - 2.3%
Bank of New York Co., Inc. 150,000 $ 5,062,500
BankAmerica Corp. 365,000 36,408,750
Chase Manhattan Corp. 60,400 5,390,700
Citicorp 467,300 48,131,900
First Bank System, Inc. 144,000 9,828,000
NationsBank Corp. 300,200 29,344,550
Norwest Corp. 130,200 5,663,700
139,830,100
CREDIT & OTHER FINANCE - 1.1%
American Express Co. 625,000 35,312,500
Beneficial Corp. 136,100 8,625,338
Concord EFS, Inc. (a) 12,100 341,825
Green Tree Financial Corp. 230,000 8,883,750
Household International, Inc. 150,008 13,838,238
67,001,651
FEDERAL SPONSORED CREDIT - 2.4%
Federal Home Loan Mortgage
Corporation 400,000 44,050,000
Federal National Mortgage Association 2,650,000 98,712,500
Student Loan Marketing Association 15,000 1,396,875
144,159,375
INSURANCE - 2.2%
Allstate Corp. 275,000 15,915,625
American General Corp. 75,400 3,081,975
American International Group, Inc. 300,000 32,475,000
CIGNA Corp. 80,000 10,930,000
Capital Re Corp. 94,400 4,401,400
General Re Corp. 75,200 11,862,800
ITT Hartford Group, Inc. 125,000 8,437,500
MBIA, Inc. 90,100 9,122,625
MGIC Investment Corp. 129,800 9,864,800
Marsh & McLennan Companies, Inc. 52,900 5,501,600
SunAmerica, Inc. 150,000 6,656,250
Travelers Group, Inc. (The) 220,000 9,982,500
UNUM Corp. 75,000 5,418,750
133,650,825
SECURITIES INDUSTRY - 0.2%
Schwab (Charles) Corp. 311,300 9,961,600
United Asset Management Corp. 75,300 2,004,863
11,966,463
TOTAL FINANCE 496,608,414
HEALTH - 11.0%
DRUGS & PHARMACEUTICALS - 5.9%
ALZA Corp. Class A (a) 176,500 4,566,938
American Home Products Corp. 550,000 32,243,750
Amgen, Inc. (a) 221,900 12,065,813
Biochem Pharmaceuticals, Inc. (a) 134,500 6,755,170
Biogen, Inc. (a) 579,400 22,451,750
Bristol-Myers Squibb Co. 422,800 45,979,500
Dura Pharmaceuticals, Inc. (a) 50,000 2,387,500
Elan Corp. PLC ADR (a) 200,000 6,650,000
Genentech, Inc. special (a) 385,000 20,645,625
Lilly (Eli) & Co. 275,000 20,075,000
Merck & Co., Inc. 895,500 70,968,375
Perseptive Biosystem, Inc. Class G
(warrants) (a) 1,390 0
Pfizer, Inc. 645,300 53,479,238
Protein Design Labs, Inc. (a) 225,000 8,212,500
Schering-Plough Corp. 398,100 25,776,975

SHARES VALUE (NOTE 1)
SmithKline Beecham PLC ADR 352,300 $ 23,956,400
Thermotrex Corp. (a) 2,800 76,650
356,291,184
MEDICAL EQUIPMENT & SUPPLIES - 2.6%
Bergen Brunswig Corp. Class A 375,000 10,687,500
Boston Scientific Corp. (a) 215,700 12,942,000
Cardinal Health, Inc. 270,900 15,779,925
Johnson & Johnson 1,030,400 51,262,400
Medtronic, Inc. 552,500 37,570,000
Pall Corp. 200,000 5,100,000
St. Jude Medical, Inc. (a) 375,000 15,984,375
Sofamor/Danek Group, Inc. (a) 137,000 4,178,500
Sybron International, Inc. (a) 235,000 7,755,000
161,259,700
MEDICAL FACILITIES MANAGEMENT - 2.5%
American Medical Response, Inc. (a) 185,000 6,012,500
Carematrix Corp. (a) 205,300 2,694,563
Columbia/HCA Healthcare Corp. 815,037 33,212,758
HEALTHSOUTH Rehabilitation Corp. (a) 1,320,300 50,996,588
Lincare Holdings, Inc. (a) 276,900 11,352,900
Oxford Health Plans, Inc. (a) 363,000 21,258,188
PacifiCare Health Systems, Inc. Class B (a) 168,300 14,347,575
United HealthCare Corp. 215,900 9,715,500
Vencor, Inc. (a) 76,925 2,432,753
152,023,325
TOTAL HEALTH 669,574,209
HOLDING COMPANIES - 0.1%
Norfolk Southern Corp. 45,300 3,963,750
INDUSTRIAL MACHINERY & EQUIPMENT - 3.9%
ELECTRICAL EQUIPMENT - 3.0%
Alcatel Alsthom Compagnie Generale
d'Electricite SA 67,900 5,452,933
American Power Conversion Corp. (a) 150,400 4,098,400
Duracell International, Inc. 25,500 1,781,813
Emerson Electric Co. 214,800 20,781,900
General Electric Co. 1,505,200 148,826,650
United Communication Industry PCL
(For. Reg.) 154,000 1,656,947
182,598,643
INDUSTRIAL MACHINERY & EQUIPMENT - 0.7%
Case Corp. 175,000 9,537,500
Caterpillar, Inc. 176,100 13,251,525
Illinois Tool Works, Inc. 67,600 5,399,550
Ingersoll-Rand Co. 200,000 8,900,000
MSC Industrial Direct, Inc. (a) 72,000 2,664,000
Stanley Works (The) 205,600 5,551,200
45,303,775
POLLUTION CONTROL - 0.2%
USA Waste Services, Inc. (a) 160,000 5,100,000
WMX Technologies, Inc. 75,400 2,459,925
Zurn Industries, Inc. 146,500 3,827,313
11,387,238
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 239,289,656
MEDIA & LEISURE - 6.3%
BROADCASTING - 0.4%
Clear Channel Communications, Inc. (a) 82,800 2,991,150
Evergreen Media Corp. Class A (a) 275,000 6,875,000
Lin Television Corp. (a) 105,800 4,470,050
PanAmSat Corp. (a) 320,000 8,960,000
Time Warner, Inc. 252 9,450
23,305,650
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 0.5%
Disney (Walt) Co. 157,600 $ 10,972,900
MGM Grand, Inc. (a) 184,900 6,448,388
Regal Cinemas, Inc. (a) 150,000 4,612,500
Viacom, Inc. Class B (non-vtg.) (a) 175,000 6,103,125
28,136,913
LEISURE DURABLES & TOYS - 0.3%
Harley-Davidson, Inc. 240,000 11,280,000
Nintendo Co. Ltd. Ord. 64,000 4,575,765
15,855,765
LODGING & GAMING - 3.6%
Anchor Gaming (a) 100,000 4,025,000
Circus Circus Enterprises, Inc. (a) 640,700 22,024,063
Doubletree Corp. (a) 100,000 4,500,000
Extended Stay America, Inc. (a) 234,400 4,717,300
HFS, Inc. (a) 1,900,900 113,578,775
Hilton Hotels Corp. 500,000 13,062,500
Host Marriott Corp. (a) 350,000 5,600,000
ITT Corp. (a) 100,000 4,337,500
Mirage Resorts, Inc. (a) 1,281,100 27,703,788
Prime Hospitality Corp. (a) 76,500 1,233,563
Studio Plus Hotels, Inc. (a) 375,000 5,906,250
Sun International Hotels Ltd. Ord. (a) 198,600 7,248,900
Wyndham Hotel Corp. (a) 189,700 4,671,363
218,609,002
PUBLISHING - 0.4%
Gannett Co., Inc. 75,000 5,615,625
Knight-Ridder, Inc. 100,000 3,825,000
New York Times Co. (The) Class A 131,100 4,981,800
Scholastic Corp. (a) 74,000 4,976,500
Times Mirror Co. Class A 167,900 8,353,025
27,751,950
RESTAURANTS - 1.1%
Apple South, Inc. 505,600 6,825,600
Applebee's International, Inc. 235,000 6,462,500
Landry's Seafood Restaurants, Inc. (a) 518,100 11,074,388
Lone Star Steakhouse Saloon (a) 543,400 14,535,950
Outback Steakhouse, Inc. (a) 137,700 3,683,475
Planet Hollywood International, Inc.
Class A (a) 275,000 5,431,250
Rainforest Cafe, Inc. (a) 45,100 1,059,850
Starbucks Corp. (a) 678,200 19,413,475
68,486,488
TOTAL MEDIA & LEISURE 382,145,768
NONDURABLES - 4.1%
BEVERAGES - 1.3%
Anheuser-Busch Companies, Inc. 451,700 18,068,000
Coca-Cola Co. (The) 623,700 32,822,213
PepsiCo, Inc. 1,004,600 29,384,550
80,274,763
FOODS - 0.2%
General Mills, Inc. 105,500 6,686,063
Smithfield Foods, Inc. (a) 28,100 1,067,800
7,753,863
HOUSEHOLD PRODUCTS - 1.5%
Avon Products, Inc. 97,700 5,581,113
Clorox Co. 75,600 7,588,350
Gillette Co. 495,600 38,532,900
Premark International, Inc. 100,000 2,225,000

SHARES VALUE (NOTE 1)
Procter & Gamble Co. 340,300 $ 36,582,250
USA Detergents, Inc. (a) 48,900 2,035,463
92,545,076
TOBACCO - 1.1%
Philip Morris Companies, Inc. 538,500 60,648,563
RJR Nabisco Holdings Corp. 150,900 5,130,600
65,779,163
TOTAL NONDURABLES 246,352,865
PRECIOUS METALS - 0.6%
Barrick Gold Corp. 415,000 11,882,226
Bre-X Minerals Ltd. (a) 259,800 4,112,529
Getchell Gold Corp. (a) 191,853 7,362,359
Newmont Mining Corp. 295,000 13,201,250
36,558,364
RETAIL & WHOLESALE - 9.0%
APPAREL STORES - 1.0%
Footstar, Inc. (a) 79,172 1,969,404
Gap, Inc. 515,000 15,514,375
Just for Feet, Inc. (a) 1,313,800 34,487,250
Loehmanns, Inc. (a) 145,600 3,348,800
Saks Holdings, Inc. (a) 194,200 5,243,400
60,563,229
DRUG STORES - 0.3%
CVS Corp. 275,000 11,378,125
General Nutrition Companies, Inc. (a) 63,700 1,074,938
Revco (D.S.), Inc. (a) 120,600 4,462,200
16,915,263
GENERAL MERCHANDISE STORES - 2.2%
Consolidated Stores Corp. (a) 385,250 12,376,156
Dayton Hudson Corp. 195,900 7,689,075
Dollar General Corp. 135,312 4,329,984
Family Dollar Stores, Inc. 500,100 10,189,538
Federated Department Stores, Inc. (a) 300,000 10,237,500
Meyer (Fred), Inc. (a) 107,200 3,805,600
Price/Costco, Inc. (a) 131,700 3,308,963
Sears, Roebuck & Co. 275,000 12,684,375
Stein Mart, Inc. (a) 107,800 2,182,950
Wal-Mart Stores, Inc. 2,828,500 64,701,938
Woolworth Corp. (a) 218,700 4,784,063
136,290,142
GROCERY STORES - 0.1%
Safeway, Inc. (a) 200,500 8,571,375
RETAIL & WHOLESALE, MISCELLANEOUS - 5.4%
Barnes & Noble, Inc. (a) 128,000 3,456,000
Bed Bath & Beyond, Inc. (a) 401,100 9,726,675
Circuit City Stores, Inc. 140,300 4,226,538
Corporate Express, Inc. (a) 496,200 14,606,888
Home Depot, Inc. (The) 1,018,500 51,052,313
Lowe's Companies, Inc. 1,700,000 60,350,000
Officemax, Inc. (a) 1,335,400 14,188,625
Office Depot, Inc. (a) 1,130,200 20,061,050
Petco Animal Supplies, Inc. (a) 88,100 1,828,075
PETsMART, Inc. (a) 2,937,900 64,266,563
Sports Authority, Inc. (a) 200,550 4,361,963
Staples, Inc. (a) 1,361,700 24,595,706
Sunglass Hut International, Inc. (a) 1,793,200 13,000,700
Toys "R" Us, Inc. (a) 829,400 24,882,000
U.S. Office Products Co. (a) 130,000 4,436,250
Viking Office Products, Inc. (a) 451,500 12,049,406
327,088,752
TOTAL RETAIL & WHOLESALE 549,428,761
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 1.4%
ADVERTISING - 0.1%
Omnicom Group, Inc. 75,700 $ 3,463,275
Universal Outdoor Holdings, Inc. (a) 112,100 2,634,350
6,097,625
EDUCATIONAL SERVICES - 0.1%
Sylvan Learning Systems (a) 101,000 2,878,500
LEASING & RENTAL - 0.4%
Hollywood Entertainment Corp. (a) 1,250,000 23,125,000
Movie Gallery, Inc. (a) 309,000 4,017,000
27,142,000
SERVICES - 0.8%
ADT Ltd. (a) 271,600 6,212,850
APAC Teleservices, Inc. (a) 223,700 8,584,488
AccuStaff, Inc. (a) 435,000 9,189,375
Employee Solutions, Inc. (a) 30,000 615,000
Medpartners, Inc. (a) 205,500 4,315,500
Service Corp. International 585,700 16,399,600
Sitel Corp. (a) 150,100 2,120,163
Teletech Holdings, Inc. (a) 90,300 2,347,800
Zebra Technologies Corp. Class A (a) 32,300 755,013
50,539,789
TOTAL SERVICES 86,657,914
TECHNOLOGY - 25.6%
COMMUNICATIONS EQUIPMENT - 4.1%
ADC Telecommunications, Inc. (a) 120,000 3,735,000
Ascend Communications, Inc. (a) 476,700 29,614,988
Aspect Telecommunications Corp. (a) 197,000 12,509,500
Checkpoint Systems, Inc. (a) 130,000 3,217,500
Cisco Systems, Inc. (a) 2,255,500 143,506,188
Lucent Technologies, Inc. 470,200 21,746,750
Nokia Corp. AB sponsored ADR 115,900 6,678,738
P-COM, Inc. (a) 22,500 666,563
Tellabs, Inc. (a) 188,900 7,107,363
3Com Corp. (a) 249,300 18,292,388
U.S. Robotics Corp. (a) 57,500 4,140,000
251,214,978
COMPUTER SERVICES & SOFTWARE - 10.8%
Affiliated Computer Services, Inc.
Class A (a) 300,000 8,925,000
America Online, Inc. (a) 224,500 7,464,625
American Management Systems, Inc. (a) 250,000 6,125,000
Automatic Data Processing, Inc. 547,700 23,482,638
BBN Corp. (a) 100,000 2,250,000
BMC Software, Inc. (a) 300,000 12,412,500
CUC International, Inc. (a) 3,977,600 94,468,000
Cadence Design Systems, Inc. (a) 450,000 17,887,500
Ceridian Corp. (a) 120,000 4,860,000
Citrix Systems, Inc. (a) 42,300 1,652,344
Computer Associates International, Inc. 354,600 17,641,350
Computer Horizons Corp. (a) 15,000 577,500
Computer Sciences Corp. (a) 294,800 24,210,450
CompUSA, Inc. (a) 1,479,000 30,504,375
DST Systems, Inc. (a) 100,000 3,137,500
Electronic Data Systems Corp. 244,300 10,565,975
Electronics for Imaging, Inc. (a) 160,000 13,160,000
Equifax, Inc. 225,300 6,899,813
First Data Corp. 322,380 11,766,870
HBO & Co. 435,800 25,875,625
Henry (Jack) & Associates, Inc. 53,900 1,926,925

SHARES VALUE (NOTE 1)
Inso Corp. (a) 132,300 $ 5,258,925
McAfee Associates, Inc. (a) 466,500 20,526,000
Microsoft Corp. (a) 725,000 59,903,125
Netscape Communications Corp. (a) 412,100 23,438,188
Oracle Systems Corp. (a) 2,636,700 110,082,225
Parametric Technology Corp. 531,000 27,280,125
Paychex, Inc. 287,500 14,788,281
PeopleSoft, Inc. (a) 540,000 25,886,250
Physician Computer Network, Inc. (a) 351,200 2,985,200
Policy Management Systems Corp. (a) 150,000 6,918,750
Remedy Corp. (a) 120,400 6,471,500
Sabre Group Holdings, Inc. Class A (a) 76,200 2,124,075
SunGard Data Systems, Inc. (a) 275,000 10,862,500
Sybase, Inc. (a) 136,400 2,276,175
Technology Solutions, Inc. (a) 175,000 7,262,500
Viasoft, Inc. (a) 125,000 5,906,250
657,764,059
COMPUTERS & OFFICE EQUIPMENT - 5.5%
Adaptec, Inc. (a) 1,040,800 41,632,000
Bay Networks, Inc. (a) 270,000 5,636,250
Compaq Computer Corp. (a) 701,400 52,078,950
Dell Computer Corp. (a) 454,700 24,155,938
Diebold, Inc. 28,600 1,798,225
EMC Corp. (a) 563,000 18,649,375
FileNet Corp. (a) 236,600 7,571,200
Gateway 2000, Inc. (a) 89,300 4,783,131
Hewlett-Packard Co. 356,500 17,914,125
Ingram Micro, Inc. Class A (a) 162,200 3,730,600
International Business Machines Corp. 615,000 92,865,000
Lexmark International Group, Inc. (a) 142,700 3,942,088
Micron Electronics, Inc. (a) 322,600 6,270,538
Pitney Bowes, Inc. 200,000 10,900,000
Quantum Corp. (a) 231,600 6,629,550
Seagate Technology (a) 668,200 26,393,900
Tech Data Corp. (a) 275,500 7,541,813
332,492,683
ELECTRONIC INSTRUMENTS - 0.4%
Applied Materials, Inc. (a) 184,000 6,612,500
Perkin-Elmer Corp. 79,700 4,692,338
Thermo Electron Corp. 275,000 11,343,750
22,648,588
ELECTRONICS - 4.6%
Analog Devices, Inc. (a) 300,000 10,162,500
Atmel Corp. (a) 398,500 13,200,313
Cirrus Logic, Inc. (a) 225,900 3,501,450
Etec Systems, Inc. (a) 151,000 5,775,750
Intel Corp. 1,150,000 150,578,125
KEMET Corp. (a) 199,700 4,643,025
Linear Technology Corp. 515,000 22,595,625
Maxim Integrated Products, Inc. (a) 530,400 22,939,800
Micron Technology, Inc. 256,500 7,470,563
Motorola, Inc. 135,400 8,310,175
Solectron Corp. (a) 95,100 5,075,963
Storage Technology Corp. (a) 162,300 7,729,538
Texas Instruments, Inc. 152,300 9,709,125
Xilinx, Inc. (a) 159,300 5,864,231
277,556,183
PHOTOGRAPHIC EQUIPMENT - 0.2%
Eastman Kodak Co. 185,100 14,854,275
TOTAL TECHNOLOGY 1,556,530,766
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - 1.0%
AIR TRANSPORTATION - 0.8%
AMR Corp. (a) 185,000 $ 16,303,125
America West Airlines, Inc. Class B (a) 529,600 8,407,400
Atlantic Southeast Airlines, Inc. 269,700 5,899,688
Comair Holdings, Inc. 150,000 3,600,000
Delta Air Lines, Inc. 37,600 2,664,900
Midwest Express Holdings, Inc. (a) 200,000 7,200,000
UAL Corp. (a) 125,000 7,812,500
51,887,613
RAILROADS - 0.2%
CSX Corp. 244,000 10,309,000
TOTAL TRANSPORTATION 62,196,613
UTILITIES - 4.6%
CELLULAR - 1.6%
AirTouch Communications, Inc. (a) 1,851,800 46,757,950
Arch Communications Group, Inc. (a) 325,043 3,047,278
Palmer Wireless, Inc. (a) 947,200 9,945,600
360 Degrees Communications Co. (a) 675,800 15,627,875
Vanguard Cellular Systems, Inc.
Class A (a) 1,146,700 18,060,525
93,439,228
GAS - 0.2%
Enron Corp. 304,900 13,148,813
TELEPHONE SERVICES - 2.8%
Ameritech Corp. 190,500 11,549,063
Bell Atlantic Corp. 183,700 11,894,575
BellSouth Corp. 374,700 15,128,513
Cincinnati Bell, Inc. 65,400 4,030,275
Comsat Corp., Series 1 125,000 3,078,125
GTE Corp. 75,500 3,435,250
LCI International, Inc. (a) 771,200 16,580,800
MCI Communications Corp. 806,200 26,352,663
MFS Communications, Inc. 641,700 34,972,650
Mastech Corp. 56,400 1,071,600
SBC Communications, Inc. 162,500 8,409,375
Sprint Corp. 258,500 10,307,688
Telebras sponsored ADR 75,000 5,737,500
Telefonos de Mexico SA sponsored
ADR representing Ord. Class L shares 75,000 2,475,000
WorldCom, Inc. (a) 625,600 16,304,700
171,327,777
TOTAL UTILITIES 277,915,818
TOTAL COMMON STOCKS
(Cost $4,316,599,345) 5,521,532,957
CASH EQUIVALENTS - 9.2%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 6.75%, dated
12/31/96 due 1/2/97 $ 556,529,620 556,321,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $4,872,920,345) $ 6,077,853,957
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 $3,934,350 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 VALUE
AFFILIATE COST COST INCOME
Hollywood
Entertainment Corp. $ 172,425 $ 546,875 $ - $ -
Lycos, Inc. - - - -
Microwave Power
Devices, Inc. - 1,172,000 - -
Sunglass Hut
International, Inc. 17,079,408 19,336,265 - -
Vanguard Cellular
Systems, Inc. Class A 1,032,413 15,999,485 - -
Wyndham Hotel Corp. 324,910 - - -
TOTALS $ 18,609,156 $ 37,054,625 $ - $ -
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $5,184,860,168 and $3,798,902,641, respectively, of which U.S.
government 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 $1,209,835 for the period
(see Note 4 of Notes to Financial Statements).
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $4,886,896,501. Net unrealized appreciation
aggregated $1,190,957,456, of which $1,309,441,776 related to appreciated
investment securities and $118,484,320 related to depreciated investment
securities.
The fund hereby designates approximately $182,971,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1996

ASSETS

Investment in securities, at $ 6,077,853,957
value (including repurchase agreements of $556,321,000) (cost $4,872,920,345) -
See accompanying schedule

Cash 832

Receivable for investments sold 6,982,553

Receivable for fund shares sold 8,213,411

Dividends receivable 4,888,033

Other receivables 435,798

TOTAL ASSETS 6,098,374,584

LIABILITIES

Payable for fund shares redeemed $ 8,403,261

Accrued management fee 3,074,604

Other payables and 473,065
accrued expenses

TOTAL LIABILITIES 11,950,930

NET ASSETS $ 6,086,423,654

Net Assets consist of:

Paid in capital $ 4,671,288,904

Undistributed net investment income 41,404,557

Accumulated undistributed 168,796,602
net realized gain (loss) on
investments and foreign
currency transactions

Net unrealized appreciation (depreciation) on investments 1,204,933,591
and assets and liabilities in
foreign currencies

NET ASSETS, for 195,423,359 shares outstanding $ 6,086,423,654

NET ASSET VALUE, offering price $31.14
and redemption price per
share ($6,086,423,654 (divided by) 195,423,359 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996

INVESTMENT INCOME $ 44,216,166
Dividends

Interest 33,387,635

TOTAL INCOME 77,603,801

EXPENSES

Management fee $ 31,760,621

Transfer agent fees 3,029,150

Accounting fees and expenses 808,115

Non-interested trustees' compensation 29,313

Custodian fees and expenses 156,863

Registration fees 47,360

Audit 66,493

Legal 33,943

Miscellaneous 28,325

Total expenses before reductions 35,960,183

Expense reductions (701,029 35,259,154
)

NET INVESTMENT INCOME 42,344,647

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities (including 186,716,014
realized loss of $15,650,936
on sales of investments in
affiliated issuers)

Foreign currency transactions (2,445 186,713,569
)

Change in net unrealized appreciation (depreciation) on:

Investment securities 451,420,485

Assets and liabilities in (146 451,420,339
foreign currencies )

NET GAIN (LOSS) 638,133,908

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 680,478,555

OTHER INFORMATION

Expense reductions $ 694,383
Directed brokerage arrangements

Custodian interest credits 6,646

$ 701,029

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995

Operations $ 42,344,647 $ 11,674,225

Net investment income

Net realized gain (loss) 186,713,569 361,319,825

Change in net unrealized appreciation (depreciation) 451,420,339 474,991,263

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 680,478,555 847,985,313

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 2,599,782,601 2,059,928,760

Net proceeds from sales of shares

Reinvestment of distributions 308,942,467 12,404,421

Cost of shares redeemed (1,356,539,313) (887,081,596)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 1,552,185,755 1,185,251,585

TOTAL INCREASE (DECREASE) IN NET ASSETS 1,923,721,843 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 $41,404,557 and $10,790,283, $ 6,086,423,654 $ 4,162,701,811

respectively)

OTHER INFORMATION

Sold 87,784,118 76,302,442

Issued in reinvestment of distributions 11,121,040 568,749

Redeemed (46,058,296) (33,037,870)

Net increase (decrease) 52,846,862 43,833,321

</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>
YEARS ENDED DECEMBER 31,

SELECTED PER-SHARE DATA 1996 1995 1994 1993 C 1992

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 29.20 $ 21.69 $ 23.08 $ 19.76 $ 18.51

Income from Investment Operations

Net investment income .22 .08 .12 .12 .09

Net realized and unrealized gain (loss) 3.82 7.55 (.12) 3.64 1.64

Total from investment operations 4.04 7.63 - 3.76 1.73

Less Distributions

From net investment income (.08) (.12) (.12) (.11) (.05)

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)

Net asset value, end of period $ 31.14 $ 29.20 $ 21.69 $ 23.08 $ 19.76

TOTAL RETURN A, B 14.71% 35.36% (.02)% 19.37% 9.32%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 6,086,424 $ 4,162,702 $ 2,141,869 $ 1,383,849 $ 749,837

Ratio of expenses to average net assets .69% .70% .70% .71% .75%

Ratio of expenses to average net assets
after expense reductions .67% D .70% .69% .71% .75%
D

Ratio of net investment income to average
net assets .81% .37% .69% .72% .83%

Portfolio turnover rate 81% 108% 122% 159% 262%

Average commission rate E $ .0416

A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS). B TOTAL
RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS
SHOWN. C 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. D 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 5 OF NOTES TO FINANCIAL STATEMENTS). E 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>

NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996

1. SIGNIFICANT ACCOUNTING POLICIES.
Growth Portfolio (the fund) is a fund of Variable Insurance Products Fund
(the trust) and is authorized to issue an unlimited number of shares. The
trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a
Massachusetts business trust. Shares of the fund may only be purchased by
insurance companies for the purpose of funding variable annuity or variable
life insurance contracts. The 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 fund:
SECURITY VALUATION. 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 with remaining maturities
of sixty days or less for which quotations are not readily available 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 fund 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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, 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, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. 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 fund is informed of the
ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. 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.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
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 litigation
proceeds, foreign currency transactions and losses deferred due to wash
sales.
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 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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, 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 for U.S. Treasury or
Federal Agency obligations.
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
Securities are transferred to an account of the fund, 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 fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
RESTRICTED SECURITIES. The fund is 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, the
fund had no investments in restricted securities (excluding 144A issues).
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 the fund's schedule of investments.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, 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 .2500% to .5200% 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 rate is .30%. For
the period, the management fee was equivalent to an annual rate of .61% of
average net assets.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the fund's 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, the transfer agent fees
were equivalent to an annual rate of .06% of average net assets.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the months plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its 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 the fund's schedule of investments.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of 1.50% of average net assets.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. In addition, the fund has entered into an arrangement
with its custodian whereby interest earned on uninvested cash balances was
used to offset a portion of the fund's expenses.
For the period, the reduction under these arrangements are shown under the
caption "Other Information" on the fund's Statement of Operations.
6. 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
approximately 16% of the outstanding shares of the fund. In addition, one
unaffiliated insurance company was record owner of 10% or more of the total
outstanding shares of the fund, totaling 28%.
7. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Information regarding transactions with
affiliated companies is included under the caption "Legend" at the end of
the fund's schedule of investments.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Variable Insurance Products Fund and the Shareholders of
Growth Portfolio:
We have audited the accompanying statement of assets and liabilities of
Variable Insurance Products Fund: Growth Portfolio, including the schedule
of portfolio investments, as of December 31, 1996, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Variable Insurance Products Fund: Growth Portfolio as of December 31,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 10, 1997
DISTRIBUTIONS

The Board of Trustees of Growth Portfolio voted to pay on February 7, 1997,
to shareholders of record at the opening of business on February 7, 1997, a
distribution of $.94 per share derived from capital gains realized from
sales of portfolio securities and a dividend of $.21 per share from net
investment income.

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
William J. Hayes, VICE PRESIDENT
Jennifer Uhrig, 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
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
Brown Brothers Harriman & Co., Boston, MA
* INDEPENDENT TRUSTEES

(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND: EQUITY-INCOME PORTFOLIO

ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS

<TABLE>
<CAPTION>
<S> <C> <C>
MARKET ENVIRONMENT 3 A review of what happened in world markets
during the last year.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 5 The manager's review of fund performance, strategy
and outlook.

INVESTMENTS 6 A complete list of the fund's investments with their
market values.

FINANCIAL STATEMENTS 10 Statements of assets and liabilities, operations, and
changes in net assets, as well as financial highlights.

NOTES 12 Notes to the financial statements.

REPORT OF INDEPENDENT ACCOUNTANTS 14 The auditors' opinion.

DISTRIBUTIONS 15

</TABLE>

Most stock and bond markets posted positive returns in 1996, aided by
moderate growth and low inflation. Sustained corporate earnings growth and
a favorable interest rate environment also proved beneficial. Japan,
however, was the major exception as an underperforming stock market and a
weak yen undermined returns for U.S.-based investors. The strongest gains
came from the often-volatile emerging bond markets in 1996, while
performance of the bond markets of developed countries was mixed.
U.S. STOCK MARKETS
The Standard & Poor's 500 Index - a broad measure of U.S. stock market
performance - rose 22.96% for the 12 months that ended December 31, 1996,
well above the index's long-term average annual return of about 12%. The
Russell 2000 Index - a measure of small stock performance - rose 16.49%.
The Dow Jones Industrial Average - an index of 30 blue-chip stocks - posted
a return of 28.70%, closing above 6500 for the first time in November.
The U.S. stock market spent much of the past year breaking price and
trading volume records. Solid corporate earnings reports, large cash
inflows into mutual funds, widespread optimism and a generally favorable
interest rate environment propelled share prices higher.
Large-capitalization stocks thrived as investors sought their lower
volatility and higher degree of liquidity over smaller-cap stocks in an
environment where it was sometimes difficult to discern the health of the
economy.
Most industry sectors experienced positive, if not strong performance. At
mid-year, technology stocks suffered from a sell-off sparked by fears that
company earnings were weakening. Nevertheless, this sector proved to be the
strongest in the U.S. market in 1996. Earnings surprises and positive
earnings projections were the main drivers of solid performance, especially
among semiconductor manufacturers, companies that make disk drives and
monitors, and software firms. Even though consensus estimates pointed
toward increases in short-term interest rates by the Fed, financial stocks
- - usually sensitive to changes in interest rates - shrugged off this
concern and posted solid performance based on low interest rates and
positive business prospects. Energy stocks reaped the benefits of
higher-than-expected energy prices, which resulted in part from the delayed
re-entry of Iraq into the world market. Uncertainty over the direction of
the economy benefited consumer nondurables - such as food, beverage and
tobacco companies - health care and traditional big-name growth stocks, as
these companies tend to post steady earnings growth in many economic
environments.
Utilities stocks struggled in 1996 for two reasons. First, and most
important, uncertainty over the direction and form of deregulation in the
sector tended to diminish investor interest. Second, stocks in the sector
tend to move in concert with bonds, which lagged due to periodic inflation
fears and confusing economic signals. Stocks in the telecommunications
field especially were affected by uncertainty over legislation signed into
law in February 1996. Biotechnology issues had a hard time recovering from
a correction in stock prices from overvalued levels that they experienced
earlier in 1996. Cyclical stocks - those that usually rise and fall with
the economy - posted mixed results that largely depended on the outlook for
companies in the specific sector rather than the direction of the economy.
FOREIGN STOCK MARKETS
Foreign stock markets posted mixed results in 1996. The Morgan Stanley
Capital International (MSCI) EAFE Index - which measures stock performance
in Europe, Australia and the Far East - returned 6.05% in 1996. Europe
posted the most consistently strong equity markets due to stronger economic
growth, lower interest rates, higher corporate earnings, the relative
weakness of the continent's major currencies and a new emphasis on
shareholder friendliness by many of the region's corporations. The MSCI
Europe Index was up 21.09% in 1996. The Japanese stock market
underperformed on the weakness of the economic recovery and the uncertainty
for any substantial economic reform. The Tokyo Stock Exchange TOPIX Total
Return Index was off 16.26%. Emerging market equity performance ran the
gamut from negative to positive, with the MSCI Emerging Markets Free Index
returning 6.03% for 1996. While Hong Kong was a top performer - benefiting
from the rising value of the property sector, solid economic growth and
stable interest rates - other Asian markets posted mixed returns as
concerns rose over declining export growth in the region. Latin America
enjoyed a strong first half, but faded toward the end of 1996 due to low
domestic savings rates and inefficient governments, among other factors.
U.S. BOND MARKETS
Uncertainty over the direction of the economy led to mixed performance in
U.S. bond markets in 1996. For the year, the Lehman Brothers Aggregate Bond
Index - a broad measure of the performance of the U.S. taxable bond market
- - posted a total return of 3.63%. Stronger-than-expected economic signals
rattled the bond market in the early spring. Investors spent most of the
summer anticipating a short-term interest rate increase by the Federal
Reserve Board. However, the Fed neither raised nor lowered rates through
the end of 1996. Interest rates responded to the Fed's inaction by falling
during much of October and November. In December, though, bond prices
dropped due to inflation concerns, stronger-than-expected economic data and
comments by Fed Chairman Alan Greenspan that the stock markets may be
overvalued.
FOREIGN BOND MARKETS
While low inflation and moderate growth helped provide a positive backdrop
for most bond markets in 1996, performance in overseas bond markets was
mixed. The Salomon Brothers World Government Bond Index - a measure of
government bond market performance in developed nations - returned 3.62%
for the 12 months that ended December 31, 1996. In Europe, focus centered
on the continuing progress toward the European Monetary Union (EMU).
Attractive opportunities arose as countries worked to meet the requirements
for joining the EMU. However, Germany and Japan - two of the larger
components of the Salomon Brothers World Government Bond Index -
experienced currency problems that hurt returns. In stark contrast to the
developed world, the often-volatile emerging debt markets enjoyed a
particularly strong year, helped by inflows of foreign capital, low
interest rates and the implementation of country-specific reforms -
especially in Latin America. The J.P. Morgan Emerging Markets Bond Index -
of which Latin America is a large component - posted a return of 34.16%
during the period.
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY

EQUITY-INCOME 14.28% 17.98% 13.74%

S&P 500 (registered trademark) 22.96% 15.22% 15.27%

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)
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.
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 THE PAST 10 YEARS
IMAHDR PRASUN SHR__CHT 19961231 19970120 075109 S00000000000001
VIP: Equity-Income SP Standard & Poor 500
00150 SP001
1986/12/31 10000.00 10000.00
1987/01/31 11147.70 11347.00
1987/02/28 11407.19 11795.21
1987/03/31 11696.79 12136.09
1987/04/30 11405.62 12028.08
1987/05/31 11475.90 12132.72
1987/06/30 11715.12 12745.42
1987/07/31 12161.41 13391.62
1987/08/31 12496.13 13891.12
1987/09/30 12233.85 13586.91
1987/10/31 9846.51 10660.29
1987/11/30 9405.93 9781.88
1987/12/31 9886.75 10526.28
1988/01/31 10589.95 10969.44
1988/02/29 11114.72 11480.61
1988/03/31 10921.23 11125.86
1988/04/30 11102.01 11249.36
1988/05/31 11250.88 11347.23
1988/06/30 11890.98 11868.07
1988/07/31 11869.44 11822.97
1988/08/31 11664.79 11420.99
1988/09/30 12011.40 11907.52
1988/10/31 12218.68 12238.55
1988/11/30 12022.31 12063.54
1988/12/31 12132.06 12274.65
1989/01/31 12881.37 13173.16
1989/02/28 12815.25 12845.14
1989/03/31 13092.83 13144.44
1989/04/30 13598.12 13826.63
1989/05/31 14002.36 14386.61
1989/06/30 14011.95 14304.61
1989/07/31 14828.85 15596.31
1989/08/31 15067.11 15902.00
1989/09/30 14897.72 15836.80
1989/10/31 14038.23 15469.39
1989/11/30 14118.45 15784.96
1989/12/31 14236.27 16163.80
1990/01/31 13274.83 15079.21
1990/02/28 13353.50 15273.73
1990/03/31 13375.52 15678.49
1990/04/30 12911.77 15286.53
1990/05/31 13766.04 16776.96
1990/06/30 13628.98 16662.88
1990/07/31 13295.66 16609.56
1990/08/31 12233.98 15108.05
1990/09/30 11284.97 14372.29
1990/10/31 10997.21 14310.49
1990/11/30 11785.41 15234.95
1990/12/31 12059.63 15660.00
1991/01/31 12706.36 16342.78
1991/02/28 13581.35 17511.29
1991/03/31 13863.09 17935.06
1991/04/30 13927.87 17978.11
1991/05/31 14692.28 18754.76
1991/06/30 14091.53 17895.79
1991/07/31 14890.40 18729.74
1991/08/31 15204.71 19173.63
1991/09/30 15100.36 18853.43
1991/10/31 15351.81 19106.07
1991/11/30 14690.09 18336.09
1991/12/31 15851.00 20433.74
1992/01/31 16065.02 20053.67
1992/02/29 16586.70 20314.37
1992/03/31 16383.45 19918.24
1992/04/30 16896.70 20503.84
1992/05/31 17031.76 20604.31
1992/06/30 16882.65 20297.30
1992/07/31 17400.02 21127.46
1992/08/31 17018.80 20694.35
1992/09/30 17195.47 20938.54
1992/10/31 17401.32 21011.83
1992/11/30 18032.60 21728.33
1992/12/31 18527.78 21995.59
1993/01/31 19080.85 22180.35
1993/02/28 19509.47 22482.00
1993/03/31 20090.87 22956.37
1993/04/30 20007.33 22400.83
1993/05/31 20369.33 23001.17
1993/06/30 20608.92 23067.88
1993/07/31 20889.31 22975.60
1993/08/31 21688.44 23846.38
1993/09/30 21605.52 23662.76
1993/10/31 21803.09 24152.58
1993/11/30 21422.06 23923.13
1993/12/31 21917.23 24212.60
1994/01/31 22882.50 25035.83
1994/02/28 22293.23 24357.36
1994/03/31 21360.60 23295.38
1994/04/30 22096.65 23593.56
1994/05/31 22306.96 23980.49
1994/06/30 22169.14 23392.97
1994/07/31 22909.62 24160.26
1994/08/31 24088.35 25150.83
1994/09/30 23693.72 24534.64
1994/10/31 24180.06 25086.67
1994/11/30 23389.76 24173.01
1994/12/31 23465.84 24531.50
1995/01/31 23832.73 25167.60
1995/02/28 24741.48 26148.38
1995/03/31 25595.80 26920.02
1995/04/30 26307.69 27712.81
1995/05/31 27100.48 28820.49
1995/06/30 27489.85 29489.99
1995/07/31 28547.77 30467.88
1995/08/31 28905.84 30544.36
1995/09/30 29865.49 31833.33
1995/10/31 29521.83 31719.68
1995/11/30 30798.28 33112.18
1995/12/31 31700.57 33749.92
1996/01/31 32621.81 34898.76
1996/02/29 32731.39 35222.28
1996/03/31 33075.93 35561.47
1996/04/30 33506.60 36085.64
1996/05/31 33868.37 37016.29
1996/06/30 33558.28 37157.32
1996/07/31 31921.71 35515.71
1996/08/31 32576.34 36264.74
1996/09/30 33971.73 38305.72
1996/10/31 34523.00 39362.19
1996/11/30 36831.42 42337.58
1996/12/31 36228.48 41498.87
IMATRL PRASUN SHR__CHT 19961231 19970120 075111 R00000000000123

Let's say hypothetically $10,000 was invested in Equity-Income Portfolio on
December 31, 1986. As the chart shows, by December 31, 1996, the value of
the investment would have grown to $36,228 - a 262.28% increase on the
initial investment. With reinvested dividends and capital gains, if any, a
$10,000 investment in the S&P 500 would have grown to $41,499 over the same
period - a 314.99% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1996
% OF FUND'S
INVESTMENTS

British Petroleum PLC ADR 3.2

Aetna, Inc. 2.5

General Electric Co. 2.2

Intel Corp. 2.0

Royal Dutch Petroleum Co. ADR 1.8

TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 19966
% OF FUND'S
INVESTMENTS

Finance 16.4

Energy 14.6

Health 13.3

Technology 7.9

Nondurables 7.9

ASSET ALLOCATION AS OF DECEMBER 31, 1996 *
Row: 1, Col: 1, Value: 6.8
Row: 1, Col: 2, Value: 1.7
Row: 1, Col: 3, Value: 91.5
Stocks 91.5%
Bonds 1.7%
Short-term investments 6.8%
FOREIGN INVESTMENTS 8.1%
*
(% OF FUND'S INVESTMENTS)
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW

NOTE TO SHAREHOLDERS: Stephen Petersen became Portfolio Manager of
Equity-Income Portfolio on January 6, 1997, after the period ended.
Q. HOW DID THE FUND PERFORM, STEPHEN?
A. While performing well on an absolute basis, the fund underperformed the
Standard & Poor's 500 Index, which returned 22.96% for the 12 months ended
December 31, 1996.
Q. WHY WERE THE FUND'S RETURNS DISAPPOINTING DURING THE PAST SIX MONTHS?
A. There are a couple of reasons. Primarily, though, it's because of the
equity-income style of investing that the fund follows. Equity-income fund
managers seek to own stocks of quality companies that also have attractive
dividend yields equal to or greater than the market average. Having that
sort of orientation attracts equity-income style managers to utility
stocks, financial stocks and cyclical stocks such as automobiles and basic
industries. As a group, the industries I just mentioned - with the
exception of financial stocks - performed well on an absolute basis but
underperformed the overall market during the past year. As in 1995, the
strong performance of the overall stock market was primarily concentrated
in technology stocks and larger market-capitalization stocks such as Coca
Cola and Gillette.
Q. AND THE FUND DIDN'T HAVE LARGE HOLDINGS IN MANY OF THE OUTPERFORMING
STOCKS?
A. Exactly. The past 12 months have not really been a stock picker's
market, but one in which the S&P 500 managed to outperform most actively
managed mutual funds such as this one. Also, the fund had a fairly large
weighting in mid-cap stocks that also underperformed the market average.
Q. WHAT HOLDINGS DID PERFORM WELL?
A. Some of the fund's top holdings performed well, including General
Electric, IBM and Philip Morris. The fund also was helped by its weighting
in financial stocks such as Aetna, the Federal National Mortgage
Association, Citicorp and American Express. However, some of the fund's
utility stocks and convertible bonds were drags on performance.
Q. YOU TOOK OVER THE FUND IN EARLY JANUARY 1997. WHAT ARE YOUR PLANS FOR
THE FUND? WHAT CHANGES CAN SHAREHOLDERS EXPECT FROM YOU?
A. As an equity-income manager, my investment strategy is to look for
better-than-average yielding large-cap stocks with attractive attributes
that will lead to capital appreciation over time. I try to buy stocks that
are currently out-of-favor within this framework, and try to avoid taking
large positions in certain segments of the market, such as mid-cap stocks
or convertible bonds. Once the out-of-favor stocks appreciate, I sell them
and buy other out-of-favor stocks. Mine is a methodical, straight-forward
process that emphasizes individual stock picking more than anything else.
Q. WHAT DO YOU LOOK FOR IN DIVIDEND-YIELDING STOCKS?
A. I usually buy stocks that have dividend yields equal to or above the
average yield of the S&P 500 - currently about 2%. If I own companies with
lower yields, it's because the company has decided to distribute excess
capital to shareholders in other ways, such as stock repurchase programs.
This is consistent with my strategy of owning companies that are strong
income producers with higher-than-average dividends, along with stocks of
undervalued companies that I think have the potential to appreciate over
time.
Q. DOES THE FUND OWN TURNAROUND STOCKS OR COMPANIES THAT ARE UNDERGOING
POSITIVE CHANGE?
A. Yes. While my goal is to have the fund primarily invested in quality
companies with consistent earnings growth, I would like to own some
companies that haven't performed well in the market recently, and therefore
may have lower valuations and better opportunity for capital appreciation.
It's an approach I've used in the past with some other funds I've managed
and it's worked well.
Q. WHAT'S YOUR OUTLOOK FOR THE MONTHS AHEAD?
A. I don't sense that there's been any significant change in the mood of
the market - it still favors consistent earnings growth. Since the market
continues to reward stocks of large-cap companies with consistent earnings,
it's quite difficult to outperform the general market, especially with the
equity-income style of investing. However, as everyone knows, the economic
recovery has been underway since 1991 - historically, quite a long period
of time for a strong economy without an interruption or correction.
Therefore, I'm trying to structure the fund so it can perform relatively
well when and if the market changes course. While I think the outlook for
this fund remains good, investors should be cautious after the past two
years of more than 20% returns from the overall market.

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 89.7%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 5.0%
AEROSPACE & DEFENSE - 3.3%
Alliant Techsystems, Inc. (a) 215,000 $ 11,825,000
Boeing Co. 834,000 88,716,750
Lockheed Martin Corp. 425,603 38,942,675
Northrop Grumman Corp. 874,500 72,364,875
Thiokol Corp. 376,700 16,857,325
228,706,625
DEFENSE ELECTRONICS - 0.7%
Litton Industries, Inc. (a) 1,042,500 49,649,063
SHIP BUILDING & REPAIR - 1.0%
General Dynamics Corp. 991,500 69,900,750
TOTAL AEROSPACE & DEFENSE 348,256,438
BASIC INDUSTRIES - 4.6%
CHEMICALS & PLASTICS - 2.8%
IMC Fertilizer Group, Inc. 1,084,900 42,446,713
Monsanto Co. 1,940,000 75,417,500
Raychem Corp. 239,400 19,181,925
Synetic, Inc. (a)(d) 1,157,582 56,142,727
193,188,865
METALS & MINING - 1.8%
Alcan Aluminium Ltd. 1,400,000 47,233,468
Aluminum Co. of America 740,900 47,232,375
Inco Ltd. 1,029,193 32,846,186
127,312,029
TOTAL BASIC INDUSTRIES 320,500,894
CONGLOMERATES - 2.1%
AlliedSignal, Inc. 1,055,100 70,691,700
Coltec Industries, Inc. (a) 1,371,600 25,888,950
Tyco International Ltd. 962,742 50,904,983
147,485,633
CONSTRUCTION & REAL ESTATE - 0.5%
BUILDING MATERIALS - 0.5%
Masco Corp. 1,045,400 37,634,400
DURABLES - 2.1%
AUTOS, TIRES, & ACCESSORIES - 0.2%
Snap-on Tools Corp. 335,150 11,939,719
CONSUMER DURABLES - 0.3%
Minnesota Mining &
Manufacturing Co. 269,500 22,334,813
CONSUMER ELECTRONICS - 1.2%
Sunbeam-Oster, Inc. 3,092,300 79,626,725
TEXTILES & APPAREL - 0.4%
Reebok International Ltd. 687,700 28,883,400
TOTAL DURABLES 142,784,657
ENERGY - 14.5%
ENERGY SERVICES - 1.1%
BJ Services Co. (a) 144,100 7,349,100
Schlumberger Ltd. 720,600 71,969,925
79,319,025
OIL & GAS - 13.4%
Amerada Hess Corp. 464,500 26,882,938
Amoco Corp. 150,000 12,075,000
British Petroleum PLC ADR 1,591,493 224,997,323
Burlington Resources, Inc. 566,700 28,547,513

SHARES VALUE (NOTE 1)
Chevron Corp. 929,600 $ 60,424,000
Exxon Corp. 1,040,000 101,920,000
Lomak Petroleum, Inc. 329,000 5,634,125
Mobil Corp. 136,300 16,662,675
Occidental Petroleum Corp. 1,665,200 38,924,050
Pennzoil Co. 1,100,400 62,172,600
Royal Dutch Petroleum Co. ADR 724,500 123,708,375
Texaco, Inc. 1,080,000 105,975,000
Tosco Corp. 216,600 17,138,475
Total SA Class B 594,700 48,355,183
Unocal Corp. 1,447,665 58,811,391
932,228,648
TOTAL ENERGY 1,011,547,673
FINANCE - 15.2%
BANKS - 7.8%
Bank of Boston Corp. 1,127,100 72,416,175
Bank of New York Co., Inc. 1,675,000 56,531,250
BankAmerica Corp. 734,700 73,286,325
Chase Manhattan Corp. 1,040,000 92,820,000
Citicorp 874,400 90,063,200
First Bank System, Inc. 592,530 40,440,173
National City Corp. 1,057,785 47,468,102
SunTrust Banks, Inc. 767,300 37,789,525
U.S. Bancorp 728,700 32,745,956
543,560,706
CREDIT & OTHER FINANCE - 0.7%
American Express Co. 905,172 51,142,218
FEDERAL SPONSORED CREDIT - 1.5%
Federal Home Loan
Mortgage Corporation 100,900 11,111,613
Federal National Mortgage
Association 2,478,700 92,331,575
103,443,188
INSURANCE - 4.4%
Aetna, Inc. 2,135,700 170,856,000
Allstate Corp. 774,999 44,853,056
ITT Hartford Group, Inc. 663,300 44,772,750
Travelers Group, Inc. (The) 1,011,667 45,904,375
306,386,181
SAVINGS & LOANS - 0.5%
Great Western Financial Corp. 1,184,100 34,338,900
SECURITIES INDUSTRY - 0.3%
Lehman Brothers Holdings, Inc. 598,800 18,787,350
TOTAL FINANCE 1,057,658,543
HEALTH - 12.2%
DRUGS & PHARMACEUTICALS - 5.4%
American Home Products Corp. 1,773,000 103,942,125
Barr Laboratories, Inc. (a)(d) 1,141,800 28,973,175
Bristol-Myers Squibb Co. 675,400 73,449,750
Genentech, Inc. special (a) 534,400 28,657,200
Lilly (Eli) & Co. 495,800 36,193,400
Schering-Plough Corp. 219,700 14,225,575
Sepracor, Inc. (a) 475,000 7,896,875
Warner-Lambert Co. 1,049,000 78,675,000
372,013,100
MEDICAL EQUIPMENT & SUPPLIES - 3.6%
Bard (C.R.), Inc. 1,173,500 32,858,000
Cardiac Control Systems, Inc. (a)(d) 99,800 149,700
Cardinal Health, Inc. 1,768,700 103,026,775
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - CONTINUED
Nellcor, Inc. (a) 421,700 $ 9,224,688
U.S. Surgical Corp. 2,707,000 106,588,125
251,847,288
MEDICAL FACILITIES MANAGEMENT - 3.2%
Beverly Enterprises, Inc. (a)(d) 5,522,000 70,405,500
Columbia/HCA Healthcare Corp. 2,422,350 98,710,763
Integramed America, Inc. (a)(d) 605,500 983,938
PacifiCare Health Systems, Inc.
Class B (a) 624,000 53,196,000
US Diagnostic Labs, Inc. (a) 100,000 925,000
224,221,201
TOTAL HEALTH 848,081,589
HOLDING COMPANIES - 0.1%
Koor Industries Ltd. sponsored ADR 617,300 10,494,100
INDUSTRIAL MACHINERY & EQUIPMENT - 4.2%
ELECTRICAL EQUIPMENT - 2.3%
American Superconductor Corp. (a) 419,800 4,460,375
General Electric Co. 1,572,800 155,510,600
159,970,975
INDUSTRIAL MACHINERY & EQUIPMENT - 0.8%
Caterpillar, Inc. 695,000 52,298,750
POLLUTION CONTROL - 1.1%
WMX Technologies, Inc. 2,405,200 78,469,650
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 290,739,375
MEDIA & LEISURE - 4.4%
ENTERTAINMENT - 1.7%
All American Communications, Inc. (a) 280,434 3,785,859
GC Cos., Inc. (a) 251,100 8,694,338
Viacom, Inc. Class B (non-vtg.)(a) 3,148,500 109,803,938
122,284,135
LEISURE DURABLES & TOYS - 1.4%
Hasbro, Inc. 2,490,500 96,818,188
LODGING & GAMING - 0.7%
HFS, Inc. 365,000 21,808,750
Mirage Resorts, Inc. (a) 266,600 5,765,225
WMS Industries, Inc. (a) 981,800 19,636,000
47,209,975
PUBLISHING - 0.6%
Harcourt General, Inc. 385,600 17,785,800
Hollinger International, Inc. Class A 1,989,400 22,878,100
40,663,900
TOTAL MEDIA & LEISURE 306,976,198
NONDURABLES - 7.9%
BEVERAGES - 0.9%
Anheuser-Busch Companies, Inc. 1,595,300 63,812,000
FOODS - 1.0%
General Mills, Inc. 1,060,600 67,215,525
HOUSEHOLD PRODUCTS - 4.5%
Avon Products, Inc. 90,600 5,175,525
Colgate-Palmolive Co. 330,000 30,442,500
Gillette Co. 1,250,700 97,241,925
Procter & Gamble Co. 810,800 87,161,000
Stanhome, Inc. 474,900 12,584,850

SHARES VALUE (NOTE 1)
Unilever NV ADR 200,000 $ 35,050,000
Unilever PLC Ord. 1,705,400 41,337,105
308,992,905
TOBACCO - 1.5%
Philip Morris Companies, Inc. 944,800 106,408,100
TOTAL NONDURABLES 546,428,530
PRECIOUS METALS - 0.0%
Naxos Resources Ltd. (a) 60,200 233,275
RETAIL & WHOLESALE - 5.4%
APPAREL STORES - 0.0%
Limited, Inc. (The) 90,800 1,668,450
DRUG STORES - 1.0%
Rite Aid Corp. 1,187,100 47,187,225
Walgreen Co. 634,200 25,368,000
72,555,225
GENERAL MERCHANDISE STORES - 1.8%
Consolidated Stores Corp. (a) 2,066,125 66,374,266
Wal-Mart Stores, Inc. 573,800 13,125,675
Woolworth Corp. (a) 2,100,800 45,955,000
125,454,941
RETAIL & WHOLESALE, MISCELLANEOUS - 2.6%
Staples, Inc. (a) 2,095,700 37,853,581
Tandy Corp. 1,817,800 79,983,200
Toys "R" Us, Inc. (a) 1,180,000 35,400,000
U.S. Office Products Co. (a) 750,800 25,621,050
178,857,831
TOTAL RETAIL & WHOLESALE 378,536,447
SERVICES - 1.2%
ADVERTISING - 0.5%
Interpublic Group of Companies, Inc. 658,500 31,278,750
PRINTING - 0.6%
Harland (John H.) Co. 1,251,300 41,292,900
SERVICES - 0.1%
HealthCare COMPARE Corp. (a) 223,800 9,483,525
TOTAL SERVICES 82,055,175
TECHNOLOGY - 7.6%
COMPUTER SERVICES & SOFTWARE - 0.7%
Equifax, Inc. 1,568,900 48,047,563
COMPUTERS & OFFICE EQUIPMENT - 3.2%
Hewlett-Packard Co. 1,000,000 50,250,000
International Business Machines Corp. 730,000 110,230,000
Pitney Bowes, Inc. 991,000 54,009,500
Silicon Graphics, Inc. (a) 444,200 11,327,100
225,816,600
ELECTRONIC INSTRUMENTS - 0.3%
Varian Associates, Inc. 360,900 18,360,788
ELECTRONICS - 2.1%
AMP, Inc. 187,500 7,195,313
Intel Corp. 1,059,000 138,662,813
145,858,126
PHOTOGRAPHIC EQUIPMENT - 1.3%
Eastman Kodak Co. 988,500 79,327,125
Panavision, Inc. (a)(d) 437,400 9,076,050
88,403,175
TOTAL TECHNOLOGY 526,486,252
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - 1.7%
AIR TRANSPORTATION - 1.1%
Northwest Airlines Corp. Class A (a) 1,976,200 $ 77,318,825
RAILROADS - 0.6%
CSX Corp. 217,900 9,206,275
Conrail, Inc. 286,826 28,575,040
37,781,315
TOTAL TRANSPORTATION 115,100,140
UTILITIES - 1.0%
TELEPHONE SERVICES - 1.0%
LCI International, Inc. (a) 649,400 13,962,100
Southern New England
Telecommunications Corp. 670,300 26,057,913
WorldCom, Inc. (a) 1,103,800 28,767,788
68,787,801
TOTAL COMMON STOCKS
(Cost $5,403,361,996) 6,239,787,120
CONVERTIBLE PREFERRED STOCKS - 1.8%
FINANCE - 1.2%
INSURANCE - 0.8%
Aetna, Inc. Class C 6.25% 760,000 60,325,000
SECURITIES INDUSTRY - 0.4%
Salomon, Inc. $2.03 840,700 25,641,350
TOTAL FINANCE 85,966,350
HEALTH - 0.6%
MEDICAL EQUIPMENT & SUPPLIES - 0.6%
U.S. Surgical Corp. $2.20 (c) 1,027,500 39,301,875
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $109,599,084) 125,268,225
CONVERTIBLE BONDS - 1.7%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) (B) AMOUNT
CONSTRUCTION & REAL ESTATE - 0.5%
REAL ESTATE INVESTMENT TRUSTS - 0.5%
Liberty Property exchangeable
8%, 7/1/01 B1 $ 27,985,000 35,785,819
ENERGY - 0.1%
OIL & GAS - 0.1%
Lomak Petroleum, Inc.
6%, 2/1/07 (c) - 10,000,000 10,750,000
HEALTH - 0.5%
MEDICAL FACILITIES MANAGEMENT - 0.5%
NovaCare, Inc.
5 1/2%, 1/15/00 B1 38,787,000 34,811,333
MEDIA & LEISURE - 0.1%
LEISURE DURABLES & TOYS - 0.1%
Hasbro Corp. 6%, 11/15/98 A3 3,000,000 3,952,500

MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
RETAIL & WHOLESALE - 0.2%
RETAIL & WHOLESALE, MISCELLANEOUS - 0.2%
US Office Products Co.
5 1/2%, 2/1/01 B3 $ 10,000,000 $ 13,200,000
TECHNOLOGY - 0.3%
COMPUTERS & OFFICE EQUIPMENT - 0.3%
Unisys Corp.
8 1/4%, 8/1/00 B3 22,579,000 21,901,630
TOTAL CONVERTIBLE BONDS
(Cost $111,371,760) 120,401,282
CASH EQUIVALENTS - 6.8%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 6.75%, dated
12/31/96 due 1/2/97 $ 468,719,704 468,544,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $6,092,876,840) $ 6,954,000,627
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. 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 $50,051,875 or 0.7% of net
assets.
4. 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 VALUE
AFFILIATE COST COST INCOME
Advanced Medical, Inc. $ - $ 2,059,931 $ - $ -
Barr Laboratories, Inc. - - - 28,973,175
Beverly Enterprises, Inc. - - - 70,405,500
Cardiac Control
Systems, Inc. - - - 149,700
Integramed
America, Inc. - - - 983,938
Panavision, Inc. 527,021 - - 9,076,050
Synetic, Inc. 2,831,088 - - 56,142,727
TOTALS $ 3,358,109 $ 2,059,931 $ - $ 165,731,090
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $11,836,384,153 and $10,451,663,817, respectively, of which U.S.
government and government agency obligations aggregated $0 and
$328,865,673, 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 $3,583,630, 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 0.1% AAA, AA, A 0.1%
Baa 0.0% BBB 0.0%
Ba 0.0% BB 0.0%
B 1.5% B 0.8%
Caa 0.0% CCC 0.2%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by both S&P and Moody's amounted to 0.1%. FMR has
determined that unrated debt securities that are lower quality account for
0.1% of the total value of investment in securities.
The fund participated in the bank borrowing program. The maximum loan and
average daily balances during the period for which loans were outstanding
amounted to $21,073,000 and $6,793,750, respectively. The weighted average
interest rate was 5.8% (see Note 5 of Notes to Financial Statements).
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $6,108,113,364. Net unrealized appreciation
aggregated $845,887,263, of which $912,793,695 related to appreciated
investment securities and $66,906,432 related to depreciated investment
securities.
The fund hereby designates approximately $446,325,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1996

ASSETS

Investment in securities, at $ 6,954,000,627
value (including repurchase agreements of $468,544,000) (cost $6,092,876,840) -
See accompanying schedule

Cash 1,686,975

Receivable for investments sold 20,320,841

Receivable for fund shares sold 4,023,402

Dividends receivable 8,912,470

Interest receivable 3,117,054

Other receivables 122,761

TOTAL ASSETS 6,992,184,130

LIABILITIES

Payable for investments purchased $ 22,508,059

Payable for fund shares redeemed 5,207,198

Accrued management fee 2,904,152

Other payables and 474,698
accrued expenses

TOTAL LIABILITIES 31,094,107

NET ASSETS $ 6,961,090,023

Net Assets consist of:

Paid in capital $ 5,393,181,590

Undistributed net investment income 117,454,549

Accumulated undistributed net realized gain (loss) on investments and foreign 589,335,531
currency transactions

Net unrealized appreciation (depreciation) on investments 861,118,353
and assets and liabilities in
foreign currencies

NET ASSETS, for 330,981,233 $ 6,961,090,023
shares outstanding

NET ASSET VALUE, offering price $21.03
and redemption price per
share ($6,961,090,023 (divided by) 330,981,233 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996

INVESTMENT INCOME $ 103,954,015
Dividends

Interest 46,819,075

TOTAL INCOME 150,773,090

EXPENSES

Management fee $ 30,150,885

Transfer agent fees 3,382,642

Accounting fees and expenses 809,457

Non-interested trustees' compensation 37,037

Custodian fees and expenses 148,790

Registration fees 42,083

Audit 88,174

Legal 36,257

Interest 4,392

Miscellaneous 34,321

Total expenses before reductions 34,734,038

Expense reductions (1,419,527 33,314,511
)

NET INVESTMENT INCOME 117,458,579

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities (including 597,126,563
realized gain of $529,821
on sales of investments in
affiliated issuers)

Foreign currency transactions (9,078 597,117,485
)

Change in net unrealized appreciation (depreciation) on:

Investment securities 91,004,487

Assets and liabilities in (11,569 90,992,918
foreign currencies )

NET GAIN (LOSS) 688,110,403

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 805,568,982

OTHER INFORMATION $ 1,390,319
Expense reductions
Directed brokerage arrangements

Custodian interest credits 29,208

$ 1,419,527

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995

Operations $ 117,458,579 $ 88,914,157

Net investment income

Net realized gain (loss) 597,117,485 220,997,465

Change in net unrealized appreciation (depreciation) 90,992,918 715,587,919

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 805,568,982 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 1,829,128,598 1,784,340,253

Net proceeds from sales of shares

Reinvestment of distributions 233,678,017 205,981,922

Cost of shares redeemed (553,042,238) (214,815,736)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 1,509,764,377 1,775,506,439

TOTAL INCREASE (DECREASE) IN NET ASSETS 2,081,655,342 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 $117,454,549 and $8,997,355, $ 6,961,090,023 $ 4,879,434,681

respectively)

OTHER INFORMATION

Sold 93,794,843 103,951,843

Issued in reinvestment of distributions 12,390,139 12,868,445

Redeemed (28,467,146) (12,384,683)

Net increase (decrease) 77,717,836 104,435,605

</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>
YEARS ENDED DECEMBER 31,

SELECTED PER-SHARE DATA 1996 1995 1994 1993 C 1992

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.27 $ 15.35 $ 15.44 $ 13.40 $ 11.85

Income from Investment Operations

Net investment income .35 .41 .41 .37 .40

Net realized and unrealized gain (loss) 2.30 4.69 .64 2.06 1.57

Total from investment operations 2.65 5.10 1.05 2.43 1.97

Less Distributions

From net investment income (.03) (.40) (.37) (.35) (.42)

In excess of net investment income - - - (.04) -

From net realized gain (.86) (.78) (.77) - -

Total distributions (.89) (1.18) (1.14) (.39) (.42)

Net asset value, end of period $ 21.03 $ 19.27 $ 15.35 $ 15.44 $ 13.40

TOTAL RETURN A, B 14.28% 35.09% 7.07% 18.29% 16.89%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 6,961,090 $ 4,879,435 $ 2,284,412 $ 1,318,500 $ 592,880

Ratio of expenses to average net assets .58% .61% .60% .62% .65%

Ratio of expenses to average net assets after expense reductions.56% D .61% .58% .62% .65%
D

Ratio of net investment income to average net assets 1.97% 2.56% 2.83% 2.87% 3.52%

Portfolio turnover rate 186% 87% 134% 120% 74%

Average commission rate E $ .0426

THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 6 OF NOTES TO FINANCIAL
STATEMENTS).
TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
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.
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 6 OF NOTES TO
FINANCIAL STATEMENTS).
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>

NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996

5. SIGNIFICANT ACCOUNTING POLICIES.
Equity-Income Portfolio (the fund) is a fund of Variable Insurance Products
Fund (the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. Shares of the fund may only be
purchased by insurance companies for the purpose of funding variable
annuity or variable life insurance contracts. The 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 fund:
SECURITY VALUATION. 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 with remaining maturities
of sixty days or less for which quotations are not readily available 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 fund 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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, 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, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. 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 fund is informed of the
ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. 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.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
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 market
discount and losses deferred due to wash sales.
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 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.
6. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, 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 for 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 fund, 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 fund's
investment
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS - CONTINUED
adviser, is responsible for determining that the value of the underlying
securities remains in accordance with the market value requirements stated
above.
RESTRICTED SECURITIES. The fund is 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, the
fund had no investments in restricted securities (excluding 144A issues).
7. 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 the fund's schedule of investments.
8. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, 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 .2500% to .5200% 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 rate is .20%. For
the period, the management fee was equivalent to an annual rate of .51% of
average net assets.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the fund's 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, the transfer agent fees
were equivalent to an annual rate of .06% of average net assets.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its 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 the fund's schedule of investments.
9. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, the 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 the fund's participation in the program is included
under the caption "Other Information" at the end of the fund's schedule of
investments.
10. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of 1.50% of average net assets.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. In addition, the fund has entered into an arrangement
with its custodian whereby interest earned on uninvested cash balances was
used to offset a portion of the fund's expenses.
For the period, the reduction under these arrangements are shown under the
caption "Other Information" on the fund's Statement of Operations.
11. 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
approximately 20% of the outstanding shares of the fund. In addition, one
unaffiliated insurance company was record owner of 10% or more of the total
outstanding shares of the fund, totaling 29%.
12. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Information regarding transactions with
affiliated companies is included under the caption "Legend" at the end of
the fund's schedule of investments.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Variable Insurance Products Fund and the Shareholders of
Equity-Income Portfolio:
We have audited the accompanying statement of assets and liabilities of
Variable Insurance Products Fund: Equity-Income Portfolio, including the
schedule of portfolio investments, as of December 31, 1996, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Variable Insurance Products Fund: Equity-Income Portfolio as of December
31, 1996, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 10, 1997
DISTRIBUTIONS

The Board of Trustees of Equity-Income Portfolio voted to pay on February
7, 1997, to shareholders of record at the opening of business on February
7, 1997, a distribution of $1.81 per share derived from capital gains
realized from sales of portfolio securities and a dividend of $.36 per
share from net investment income.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
William J. Hayes, VICE PRESIDENT
Stephen Petersen, 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
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 Chase Manhattan Bank, N.A., New York, NY
* INDEPENDENT TRUSTEES

(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND: MONEY MARKET PORTFOLIO

ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS

<TABLE>
<CAPTION>
<S> <C> <C>
PERFORMANCE 3 How the fund has done over time.

FUND TALK 4 The manager's review of fund performance, strategy
and outlook.

INVESTMENTS 5 A complete list of the fund's investments with their
market values.

FINANCIAL STATEMENTS 9 Statements of assets and liabilities, operations, and
changes in net assets, as well as financial highlights.

NOTES 11 Notes to the financial statements.

REPORT OF INDEPENDENT ACCOUNTANTS 12 The auditors' opinion.

</TABLE>

To evaluate a money market fund's historical performance, you can look at
either total return or yield. Total return reflects the change in value of
an investment, assuming reinvestment of the fund's dividend income. Yield
measures the income paid by a fund. Since a money market fund tries to
maintain a $1 share price, yield is an important measure of performance.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
DECEMBER 31, 1996 YEAR YEARS YEARS

MONEY MARKET 5.41% 4.53% 5.96%

AVERAGE ANNUAL TOTAL RETURNS take the fund's 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 past five and ten
year total returns would have been lower. Yield will vary.
YIELD
Row: 1, Col: 1, Value: 5.56
Row: 1, Col: 2, Value: 2.83
Row: 2, Col: 1, Value: 5.13
Row: 2, Col: 2, Value: 2.71
Row: 3, Col: 1, Value: 5.159999999999999
Row: 3, Col: 2, Value: 2.66
Row: 4, Col: 1, Value: 5.3
Row: 4, Col: 2, Value: 2.67
Row: 5, Col: 1, Value: 5.28
Row: 5, Col: 2, Value: 2.64
Money Market
MMDA
6% -
5% -
4% -
3% -
2% -
1% -
0%
12/27/95 4/3/96 6/26/96 10/2/96 12/30/96

MONEY MARKET 5.56% 5.13% 5.16% 5.30% 5.28%

MMDA 2.83% 2.71% 2.66% 2.67% 2.64
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. You can
compare these yields to the all taxable money market funds average and the
bank money market deposit account (MMDA) average. The MMDA average is
supplied by BANK RATE MONITOR. TM

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, WHAT WAS THE INVESTING ENVIRONMENT LIKE OVER THE PAST YEAR?
A. It has gone through some interesting changes. At the beginning of the
period, the economy was growing slowly, inflationary pressures were mild
and it seemed a balanced budget agreement was in the offing. The Federal
Reserve Board reduced short-term rates in January, and market participants
were optimistic that additional rate cuts would occur in the months ahead.
But things changed dramatically, beginning with Fed Chairman Alan
Greenspan's Congressional testimony in February suggesting that market
expectations of further rate cuts were excessive. February's employment
report then came in well above most analysts' predictions, depicting a much
stronger labor market than previously thought. Stronger economic signals
caused participants to revise their expectations regarding monetary policy,
and short-term rates rose. Ultimately, the economy grew at a 4.7% annual
rate in the second quarter, well above a non-inflationary pace. As a
result, short-term interest rates rose higher through the second quarter
and into the summer.
Q. BUT THE FED DIDN'T RAISE RATES . . .
A. That's right, for two reasons. First, the key inflation indices were
well-behaved. Rising wages didn't get translated into higher prices. And
second, the Fed anticipated a slowdown in economic activity in the second
half of the year. Minutes from the Fed's Open Market Committee meetings
indicated that the Fed did adopt a tightening bias in July and maintained
it through its November meeting. Nonetheless, the Fed did not take direct
action on short-term interest rates. During September and October, the
market breathed a sigh of relief as the Fed's economic projections turned
out to be correct. Job growth decelerated, third quarter gross domestic
product (GDP) slowed sharply and inflation numbers were reassuring. With
the economy slowing and inflation subdued, tightening fears subsided and
short-term rates retraced their earlier rise.
Q. WHAT HAS YOUR STRATEGY BEEN THROUGH THIS FLUCTUATING MARKET?
A. At the start of the period, the fund's average maturity was 70 days
because I felt rates were on a downward trend and I wanted to lock in
higher yields. When market sentiment shifted and rates rose in anticipation
of an increase in the federal funds rate, I shortened the average maturity
somewhat - to help me position the fund so I could reinvest at ever-higher
yields as the fund's existing holdings matured. In the summer, I shortened
the maturity further to the 50-day range because the potential for Fed
tightening was strong, and, again, I wanted to be able to obtain higher
yields going forward. From that point, I increased the average maturity of
the fund by purchasing some securities further out on the yield curve that
I felt were factoring in the worst case scenario regarding potential Fed
tightening. At the end of September, the fund's average maturity was back
out to 70 days, reflecting my opinion that Fed policy would remain steady
for the foreseeable future. Since that time, I've kept the maturity in the
60-70 day range.
Q. WHAT DO YOU SEE LOOKING OUT OVER THE NEXT SEVERAL MONTHS?
A. The consumer retrenched a great deal in the third quarter after
contributing to strong GDP growth in the first half of the year. The debate
at this point is whether this slowdown is a "pause to refresh" or the
beginning of a new trend where consumers are too debt-strapped to keep on
spending. Recent economic data suggest that fourth-quarter real GDP growth
may be stronger than initially expected, led by consumption, trade and
construction spending. Nevertheless, I expect Fed monetary policy to be
stable at least through the first quarter of 1997. If the economy grows at
an above-trend pace and/or wage and price pressures accelerate,
expectations of tightening should reappear. On the other hand, I think it's
unlikely the Fed will ease because of concern about tight labor market
conditions and rising wage pressures. Additionally, in December Greenspan
warned of "irrational exuberance" in the equity markets, a condition that
probably would not cause the Fed to increase rates, but might restrict its
ability to ease if the economy weakens.
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.

Showing Percentage of Total Value of Investment in Securities

BANKERS' ACCEPTANCES - 0.7%
DUE ANNUALIZED YIELD AT PRINCIPAL VALUE DATE TIME OF PURCHASE AMOUNT
(NOTE 1)
Chase Manhattan Bank
2/3/97 5.42% $ 3,062,567 $ 3,047,547
5/13/97 5.64 3,000,000 2,939,280
6/12/97 5.54 2,270,786 2,215,811
TOTAL BANKERS' ACCEPTANCES 8,202,638
CERTIFICATES OF DEPOSIT - 33.0%
DOMESTIC CERTIFICATES OF DEPOSIT - 5.5%
American Express Centurion Bank
1/13/97 5.47 10,000,000 10,000,000
1/16/97 5.50 3,000,000 3,000,000
Bank of America-Illinois
3/24/97 5.43 500,000 500,288
Bank of New York, NY
1/29/97 5.31 (a) 3,000,000 3,000,000
Chase Manhattan Bank
1/8/97 5.85 10,000,000 10,000,000
Corestates Bank
1/10/97 5.58 (a) 10,000,000 9,997,181
Mellon Bank, N.A.
1/29/97 5.60 15,000,000 15,000,000
Morgan Guaranty Trust, NY
8/12/97 5.78 4,000,000 3,998,612
8/12/97 5.80 5,000,000 4,997,870
60,493,951
CHICAGO BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 1.9%
ABN-AMRO Bank
3/10/97 5.40 10,000,000 10,000,000
3/18/97 5.80 2,000,000 1,998,271
12/23/97 5.70 5,000,000 4,997,659
Bank of Montreal
1/7/97 5.45 4,000,000 3,999,290
20,995,220
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 17.3%
Bank of Scotland Treasury Services
3/20/97 5.48 10,000,000 10,000,000
Bank of Tokyo-Mitsubishi Ltd.
1/6/97 5.60 5,000,000 5,000,000
1/16/97 5.48 4,000,000 3,999,996
2/24/97 5.45 3,000,000 3,000,000
3/3/97 5.50 7,000,000 7,000,000
Bayerische Hypotheken-und Weschel
4/7/97 5.40 6,000,000 6,000,000
Bayerische Landesbank Girozentrale
1/22/97 5.53 6,000,000 6,000,000
Bayerische Vereinsbank A.G.
2/3/97 5.57 25,000,000 25,000,000
Caisse Nationale de Credit Agricole
2/18/97 5.41 5,000,000 5,000,000
6/16/97 5.50 5,000,000 5,000,000
Canadian Imperial Bank of Commerce
1/27/97 5.40 8,000,000 8,000,000
Commerzbank, Germany
2/26/97 5.42 10,000,000 10,001,825
2/26/97 5.73 1,000,000 999,764

DUE ANNUALIZED YIELD AT PRINCIPAL VALUE DATE TIME OF PURCHASE AMOUNT
(NOTE 1)
Landesbank Hessen-Thuringen
9/5/97 6.20% $ 15,000,000 $ 15,000,968
9/11/97 6.11 14,000,000 13,998,147
National Bank of Canada
2/24/97 5.40 4,000,000 4,000,000
National Westminster Bank, PLC
2/18/97 5.42 5,000,000 5,000,000
5/1/97 5.42 3,000,000 3,000,163
Royal Bank of Canada
8/13/97 5.80 5,000,000 4,997,861
Sanwa Bank, Ltd.
1/13/97 5.50 4,000,000 4,000,000
1/17/97 5.52 2,000,000 2,000,000
2/28/97 5.50 2,000,000 2,000,016
3/27/97 5.71 2,000,000 2,000,000
Societe Generale, France
1/9/97 5.50 8,000,000 7,999,941
5/22/97 5.53 7,000,000 7,000,877
6/10/97 5.53 5,000,000 5,007,585
Sumitomo Bank, Ltd.
1/13/97 5.55 3,000,000 3,000,000
1/17/97 5.53 2,000,000 2,000,000
1/21/97 5.54 3,000,000 3,000,000
2/18/97 5.50 4,000,000 4,000,000
Westdeutsche Landesbank
3/10/97 5.40 2,000,000 2,000,000
4/9/97 5.45 3,000,000 3,000,000
4/21/97 5.50 2,000,000 2,000,000
190,007,143
LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 8.3%
ABN-AMRO Bank
3/27/97 5.60 15,000,000 15,000,344
Abbey National, Treasury Services
2/14/97 5.40 2,000,000 1,999,911
2/18/97 5.42 4,000,000 4,000,000
3/17/97 5.43 10,000,000 10,000,000
4/16/97 5.50 5,000,000 4,999,260
Bank of Nova Scotia
3/6/97 5.40 10,000,000 10,000,000
Bank of Tokyo-Mitsubishi Ltd.
1/28/97 5.50 1,000,000 1,000,037
2/18/97 5.46 3,000,000 2,999,987
2/25/97 5.46 2,000,000 2,000,000
3/3/97 5.48 3,000,000 3,000,050
Banque Nationale de Paris
2/13/97 5.56 5,000,000 5,000,105
Bayerische Hypotheken-und Weschel
3/10/97 5.80 4,000,000 4,000,000
Bayerische Vereinsbank A.G.
3/11/97 5.42 6,000,000 6,000,113
Canadian Imperial Bank of Commerce
3/19/97 5.45 2,000,000 2,000,000
Sanwa Bank, Ltd.
1/24/97 5.49 1,000,000 1,000,019
1/29/97 5.51 2,000,000 2,000,029
1/31/97 5.51 2,000,000 2,000,031
CERTIFICATES OF DEPOSIT - CONTINUED
DUE ANNUALIZED YIELD AT PRINCIPAL VALUE DATE TIME OF PURCHASE AMOUNT
(NOTE 1)
LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - CONTINUED
Sumitomo Bank, Ltd.
1/6/97 5.50% $ 3,000,000 $ 3,000,009
1/6/97 5.55 1,000,000 1,000,010
2/21/97 5.49 2,000,000 2,000,028
Westpac Banking Corp.
3/24/97 5.52 8,000,000 8,003,610
91,003,543
TOTAL CERTIFICATES OF DEPOSIT 362,499,857
COMMERCIAL PAPER - 45.3%
ABN-AMRO North America Finance, Inc.
3/10/97 5.57 5,000,000 4,949,000
6/19/97 5.50 5,000,000 4,874,424
A.H. Robins Company, Inc.
2/27/97 5.40 1,000,000 991,561
AVCO Financial Services
2/10/97 5.39 10,000,000 9,941,000
American Express Credit Corp.
3/19/97 5.37 25,000,000 24,717,667
Asset Securitization Coop. Corp.
2/18/97 5.43 2,000,000 1,985,680
2/18/97 5.44 2,000,000 1,985,627
2/26/97 5.44 1,000,000 991,631
BHF Finance (Delaware), Inc.
2/19/97 5.50 3,000,000 2,977,746
Bank of Nova Scotia
3/17/97 5.40 5,000,000 4,944,583
Bayerische Vereinsbank A.G.
2/18/97 5.42 5,000,000 4,964,533
Bear Stearns Cos., Inc.
2/14/97 5.41 2,000,000 1,986,922
2/26/97 5.38 3,000,000 2,975,243
Beneficial Corp.
3/17/97 5.48 5,000,000 4,943,646
CIT Group Holdings, Inc.
3/17/97 5.48 8,000,000 7,909,833
Caisse d'Amortissement de la Dette Sociale
2/24/97 5.42 15,000,000 14,880,300
2/24/97 5.43 10,000,000 9,920,050
6/3/97 6.01 10,000,000 9,755,625
6/24/97 5.60 2,000,000 1,947,800
Caisse des Depots et Consignations
2/19/97 5.41 2,000,000 1,985,518
3/13/97 5.47 5,000,000 4,946,750
Cheltenham & Gloucester PLC
2/28/97 5.41 10,000,000 9,914,289
Chrysler Financial Corporation
1/23/97 5.50 2,000,000 1,993,339
1/24/97 5.50 2,000,000 1,993,036
1/27/97 5.51 2,000,000 1,992,128
2/24/97 5.60 4,000,000 3,966,760
Citibank Credit Card Master Trust I (Dakota Certificate Program)
1/23/97 5.43 2,000,000 1,993,449
2/6/97 5.41 1,000,000 994,660
2/21/97 5.40 5,000,000 4,962,246
Commercial Credit Co.
2/26/97 5.52 5,000,000 4,957,455
CoreStates Capital Corp.
1/8/97 5.55 (a) 5,000,000 5,000,000

DUE ANNUALIZED YIELD AT PRINCIPAL VALUE DATE TIME OF PURCHASE AMOUNT
(NOTE 1)
Delaware Funding Corporation
1/27/97 5.65% $ 4,678,000 $ 4,659,013
Electronic Data Systems
1/24/97 5.68 2,000,000 1,992,780
2/14/97 5.58 4,000,000 3,972,965
Eiger Capital Corp.
1/13/97 5.45 2,000,000 1,996,387
1/23/97 5.65 4,000,000 3,986,263
Enterprise Funding Corp.
1/29/97 5.41 4,000,000 3,983,293
1/31/97 5.61 2,553,000 2,541,150
2/19/97 5.43 1,540,000 1,528,744
2/20/97 5.49 2,000,000 1,984,916
2/25/97 5.49 2,000,000 1,983,408
2/27/97 5.51 4,000,000 3,965,483
Ford Motor Credit Corp.
3/17/97 5.66 10,000,000 9,885,417
3/24/97 5.66 24,000,000 23,699,333
GTE Corp.
1/15/97 5.53 2,000,000 1,995,722
Generale Bank
4/10/97 5.44 5,000,000 4,926,850
6/19/97 5.53 15,000,000 14,621,158
General Electric Capital Corp.
2/19/97 5.42 15,000,000 14,891,383
3/3/97 5.52 1,000,000 990,731
3/12/97 5.76 6,000,000 5,934,667
3/18/97 5.39 15,000,000 14,832,484
6/4/97 5.44 10,000,000 9,773,706
General Electric Co.
3/3/97 5.37 3,000,000 2,973,058
General Motors Acceptance Corp.
2/20/97 5.70 2,000,000 1,984,597
2/24/97 5.71 2,000,000 1,983,350
2/25/97 5.71 4,000,000 3,966,083
3/3/97 5.45 10,000,000 9,909,008
3/31/97 5.70 5,000,000 4,931,520
5/7/97 5.51 5,000,000 4,906,200
4/14/97 5.63 4,000,000 3,937,342
4/15/97 5.63 2,000,000 1,968,367
6/23/97 5.62 5,000,000 4,868,688
6/30/97 5.62 3,000,000 2,918,025
Goldman Sachs Group, L.P. (The)
4/29/97 5.50 10,000,000 9,824,639
5/12/97 5.45 7,000,000 6,864,997
IBM Credit Corp.
3/3/97 5.39 1,000,000 991,020
3/10/97 5.38 5,000,000 4,949,945
3/12/97 5.38 2,000,000 1,979,389
Matterhorn Capital Corp.
1/10/97 5.50 3,647,000 3,642,013
Merrill Lynch & Co., Inc.
2/4/97 5.43 5,000,000 4,974,760
2/4/97 5.63 15,000,000 14,922,508
2/27/97 5.45 4,000,000 3,966,117
3/11/97 5.76 3,000,000 2,967,800
3/12/97 5.68 1,000,000 989,257
5/15/97 5.44 10,000,000 9,802,722
Morgan Stanley Group, Inc.
2/4/97 5.40 3,000,000 2,984,927
2/10/97 5.40 7,000,000 6,958,623
COMMERCIAL PAPER - CONTINUED
DUE ANNUALIZED YIELD AT PRINCIPAL VALUE DATE TIME OF PURCHASE AMOUNT
(NOTE 1)
National Australia Funding, Inc.
1/27/97 5.78% $ 5,000,000 $ 4,979,723
3/13/97 5.60 5,000,000 4,946,553
National Bank of Canada
1/6/97 5.50 1,000,000 999,240
Nationwide Building Society
2/25/97 5.45 1,000,000 991,826
3/6/97 5.40 10,000,000 9,905,334
New Center Asset Trust
2/19/97 5.63 2,000,000 1,985,082
3/17/97 5.39 3,000,000 2,966,875
J.C. Penney Funding Corp.
2/10/97 5.50 5,000,000 4,969,722
2/13/97 5.50 1,000,000 993,490
PHH Corp.
1/24/97 5.45 2,000,000 1,993,100
2/6/97 5.43 1,000,000 994,630
2/7/97 5.43 1,000,000 994,481
2/14/97 5.51 5,000,000 4,966,694
Preferred Receivables Funding Corp.
1/16/97 5.39 2,000,000 1,995,542
1/23/97 5.65 3,000,000 2,989,697
1/24/97 5.40 1,000,000 996,582
1/27/97 5.40 1,000,000 996,136
1/28/97 5.66 3,950,000 3,933,351
2/25/97 5.53 2,000,000 1,983,286
Sherwood Medical Company
2/26/97 5.51 5,751,000 5,702,244
Southern Company Group
1/21/97 5.40 5,000,000 4,985,139
Textron, Inc.
1/15/97 5.63 1,000,000 997,822
1/16/97 5.63 1,000,000 997,666
Unifunding, Inc.
1/21/97 5.41 2,000,000 1,994,067
3/4/97 5.45 3,000,000 2,972,229
Westpac Capital Corp.
3/13/97 5.70 10,000,000 9,890,739
TOTAL COMMERCIAL PAPER 498,774,559
FEDERAL AGENCIES (A) - 6.9%
FEDERAL HOME LOAN BANK - AGENCY COUPONS - 0.5%
3/4/97 5.40 5,000,000 4,995,982
FEDERAL NATIONAL MORTGAGE ASSOC. - AGENCY COUPONS - 6.4%
1/2/97 4.97 9,500,000 9,500,000
1/2/97 5.42 15,000,000 14,991,002
1/29/97 5.60 6,000,000 5,998,023
3/9/97 5.40 25,000,000 24,979,620
3/13/97 5.43 10,000,000 9,993,023
3/20/97 5.49 5,000,000 4,998,867
70,460,535
TOTAL FEDERAL AGENCIES 75,456,517
BANK NOTES - 2.4%
Fifth Third Bank - Cincinnati
2/24/97 5.80 5,000,000 4,997,971

DUE ANNUALIZED YIELD AT PRINCIPAL VALUE DATE TIME OF PURCHASE AMOUNT
(NOTE 1)
First National Bank of Boston
3/6/97 5.44% $ 12,000,000 $ 12,000,000
Key Bank of New York
1/2/97 4.93 (a) 5,000,000 4,998,034
PNC Bank
1/8/97 5.56 (a) 4,300,000 4,298,820
TOTAL BANK NOTES 26,294,825
MASTER NOTES (A) - 2.2%
Goldman Sachs Group, L.P. (The) (c)
2/8/97 5.50 5,000,000 5,000,000
J.P. Morgan Securities
1/7/97 5.60 13,000,000 13,000,000
Norwest Corp.
1/2/97 5.99 6,000,000 6,000,000
TOTAL MASTER NOTES 24,000,000
MEDIUM-TERM NOTES - 2.8%
Associates Corp. of North America
7/15/97 5.95 2,250,000 2,257,754
Beneficial Corp.
1/19/97 5.50 (a) 5,000,000 4,999,777
General Motors Acceptance Corp.
2/1/97 5.50 (a) 5,000,000 5,000,000
2/13/97 5.64 (a) 2,000,000 1,999,952
Merrill Lynch & Co., Inc.
1/21/97 5.62 (a) 4,000,000 3,999,505
Morgan Stanley Group, Inc.
1/2/97 4.95 (a) 4,000,000 4,000,000
Norwest Corp.
4/22/97 5.55 (a) 6,000,000 6,000,000
Transamerica Life Insurance and Annuity Co. (c)
3/16/97 5.57 (a) 3,000,000 3,000,000
TOTAL MEDIUM-TERM NOTES 31,256,988
SHORT-TERM NOTES (A) - 4.7%
Capital One Funding Corp. (1994-B)
1/8/97 5.84 3,477,000 3,477,000
Capital One Funding Corp. (1995-E)
1/8/97 5.84 5,800,000 5,800,000
Liquid Asset Backed Securities Trust (1996-1) (b)
1/15/97 5.63 4,000,000 4,000,000
Liquid Asset Backed Securities Trust (1996-2) (b)
1/2/97 5.59 7,000,000 7,000,000
SMM Trust (1996-B) (b)
1/6/97 5.61 5,500,000 5,500,000
SMM Trust (1996-I) (b)
1/29/97 5.71 5,000,000 5,000,000
SMM Trust (1996-P) (b)
1/16/97 5.64 7,000,000 7,000,000
SMM Trust (1996-V) (b)
3/26/97 5.64 14,000,000 14,000,000
TOTAL SHORT-TERM NOTES 51,777,000
REPURCHASE AGREEMENTS - 2.0%
MATURITY VALUE
AMOUNT (NOTE 1)
In a joint trading account
(U.S. Government Obligations)
dated 12/31/96 due 1/2/97:
At 7.32% $ 11,619,725 $ 11,615,000
(U.S. Government Obligations)
dated 12/12/96 due 1/15/97:
At 5.50% 10,051,944 10,000,000
TOTAL REPURCHASE AGREEMENTS 21,615,000
TOTAL INVESTMENTS - 100% $1,099,877,384
Total Cost for Income Tax Purposes - $ 1,099,877,384
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 $42,500,000 or 3.8% of net
assets.
3. Restricted security; subject to resale restrictions.
INCOME TAX INFORMATION
At December 31, 1996, the fund had a capital loss carryforward of
approximately $29,000 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>
DECEMBER 31, 1996

ASSETS

Investment in securities, at value (including repurchase agreements of $21,615,000) - See accompanying $ 1,099,877,384
schedule

Cash 20,039,138

Receivable for investments sold 92,000

Interest receivable 6,464,974

TOTAL ASSETS 1,126,473,496

LIABILITIES

Accrued management fee $ 197,699

Other payables and 120,704
accrued expenses

TOTAL LIABILITIES 318,403

NET ASSETS $ 1,126,155,093

Net Assets consist of:

Paid in capital $ 1,126,168,743

Accumulated net realized gain (loss) on investments (13,650)

NET ASSETS, for 1,126,168,743 $ 1,126,155,093
shares outstanding

NET ASSET VALUE, offering price $1.00
and redemption price per
share ($1,126,155,093 (divided by) 1,126,168,743 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996

INTEREST INCOME $ 52,233,571

EXPENSES

Management fee $ 1,949,037

Transfer agent fees 695,000

Accounting fees and expenses 120,582

Non-interested trustees' compensation 10,374

Custodian fees and expenses 32,905

Audit 31,416

Legal 5,045

Miscellaneous 2,722

Total expenses before reductions 2,847,081

Expense reductions (34,785 2,812,296
)

NET INTEREST INCOME 49,421,275

NET REALIZED GAIN (LOSS) 49,076
ON INVESTMENTS

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 49,470,351

OTHER INFORMATION
Expense reductions

Transfer agent interest credits $ 34,785

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995

<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 49,421,275 $ 43,984,366
Net interest income

Net realized gain (loss) 49,076 16,876

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 49,470,351 44,001,242

Distributions to shareholders from net interest income (49,421,275) (43,984,366)

Share transactions at net asset value of $1.00 per share 1,994,407,823 1,212,453,074
Proceeds from sales of shares

Reinvestment of distributions from net interest income 49,421,275 43,984,366

Cost of shares redeemed (1,726,597,066) (1,196,186,142)

NET INCREASE (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS 317,232,032 60,251,298

TOTAL INCREASE (DECREASE) IN NET ASSETS 317,281,108 60,268,174

NET ASSETS

Beginning of period 808,873,985 748,605,811

End of period $ 1,126,155,093 $ 808,873,985

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

</TABLE>

FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,

SELECTED PER-SHARE DATA 1996 1995 1994 1993 1992

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000

Income from Investment Operations .052 .057 .042 .032 .038
Net interest income

Less Distributions

From net interest income (.052) (.057) (.042) (.032) (.038)

Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000

TOTAL RETURN A 5.41% 5.87% 4.25% 3.23% B 3.90%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 1,126,155 $ 808,874 $ 748,606 $ 353,104 $ 301,002

Ratio of expenses to average net assets after expense .30% .33% .27% .22% C .24%
reductions

Ratio of net interest income to average net assets 5.28% 5.72% 4.32% 3.16% 3.85%

</TABLE>

A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE
TOTAL RETURNS.
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIOD.
C 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.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996

4. SIGNIFICANT ACCOUNTING POLICIES.
Money Market Portfolio (the fund) is a fund of Variable Insurance Products
Fund (the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. 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 fund:
SECURITY VALUATION. 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.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INTEREST INCOME. Interest income, which includes amortization of premium
and accretion of discount, is accrued as earned.
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.
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income.
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.
5. OPERATING POLICIES.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, 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 for 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 fund, 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 fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
6. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, 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 a
income-based fee. 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
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 income-based
fee is added only when the 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 annual rate of .21% of average net
assets.
SUB-ADVISER FEE. As the fund'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.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the fund's 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, the transfer agent fees
were equivalent to an annual rate of .07% of average net assets.
ACCOUNTING FEES. Fidelity Service Co., an affiliate of FMR, maintains the
fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
7. EXPENSE REDUCTIONS.
The fund has entered into an arrangement with its transfer agent whereby
interest earned on uninvested cash balances was used to offset a portion of
the fund's expenses. For the period, the reduction under this arrangement
is shown under the caption "Other Information" on the 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 record owners of
approximately 50% of the outstanding shares of the fund. In addition, an
unaffiliated insurance company was record owner of 11% of the total
outstanding shares of the fund.
9. ASSET TRANSFER INFORMATION.
In September 1996, the Board of Trustees approved a proposal to liquidate
Fidelity Advisor Annuity Money Market Fund and transfer the assets of
Fidelity Advisor Annuity Money Market Fund to the fund. The liquidation and
transfer of assets are expected to occur in the first quarter of 1997.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Variable Insurance Products Fund and the Shareholders of
Money Market Portfolio:
We have audited the accompanying statement of assets and liabilities of
Variable Insurance Products Fund: Money Market Portfolio, including the
schedule of portfolio investments, as of December 31, 1996, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Variable Insurance Products Fund: Money Market Portfolio as of December
31, 1996, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
February 11, 1997

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
FMR Texas Inc., Irving, TX
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
Sarah H. Zenoble, VICE PRESIDENT
Robert Litterst, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Kenneth A. Rathgeber, TREASURER
Thomas D. Maher, ASSISTANT VICE PRESIDENT
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
Thomas J. Simpson, ASSISTANT TREASURER
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
* INDEPENDENT TRUSTEES

(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND: HIGH INCOME PORTFOLIO

ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS

<TABLE>
<CAPTION>
<S> <C> <C>
MARKET ENVIRONMENT 3 A review of what happened in world markets
during the last year.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 5 The manager's review of fund performance, strategy
and outlook.

INVESTMENTS 6 A complete list of the fund's investments with their
market values.

FINANCIAL STATEMENTS 13 Statements of assets and liabilities, operations, and
changes in net assets, as well as financial highlights.

NOTES 15 Notes to the financial statements.

REPORT OF INDEPENDENT ACCOUNTANTS 17 The auditors' opinion.

DISTRIBUTIONS 18

</TABLE>

Most stock and bond markets posted positive returns in 1996, aided by
moderate growth and low inflation. Sustained corporate earnings growth and
a favorable interest rate environment also proved beneficial. Japan,
however, was the major exception as an underperforming stock market and a
weak yen undermined returns for U.S.-based investors. The strongest gains
came from the often-volatile emerging bond markets in 1996, while
performance of the bond markets of developed countries was mixed.
U.S. STOCK MARKETS
The Standard & Poor's 500 Index - a broad measure of U.S. stock market
performance - rose 22.96% for the 12 months that ended December 31, 1996,
well above the index's long-term average annual return of about 12%. The
Russell 2000 Index - a measure of small stock performance - rose 16.49%.
The Dow Jones Industrial Average - an index of 30 blue-chip stocks - posted
a return of 28.70%, closing above 6500 for the first time in November.
The U.S. stock market spent much of the past year breaking price and
trading volume records. Solid corporate earnings reports, large cash
inflows into mutual funds, widespread optimism and a generally favorable
interest rate environment propelled share prices higher.
Large-capitalization stocks thrived as investors sought their lower
volatility and higher degree of liquidity over smaller-cap stocks in an
environment where it was sometimes difficult to discern the health of the
economy.
Most industry sectors experienced positive, if not strong performance. At
mid-year, technology stocks suffered from a sell-off sparked by fears that
company earnings were weakening. Nevertheless, this sector proved to be the
strongest in the U.S. market in 1996. Earnings surprises and positive
earnings projections were the main drivers of solid performance, especially
among semiconductor manufacturers, companies that make disk drives and
monitors, and software firms. Even though consensus estimates pointed
toward increases in short-term interest rates by the Fed, financial stocks
- - usually sensitive to changes in interest rates - shrugged off this
concern and posted solid performance based on low interest rates and
positive business prospects. Energy stocks reaped the benefits of
higher-than-expected energy prices, which resulted in part from the delayed
re-entry of Iraq into the world market. Uncertainty over the direction of
the economy benefited consumer nondurables - such as food, beverage and
tobacco companies - health care and traditional big-name growth stocks, as
these companies tend to post steady earnings growth in many economic
environments.
Utilities stocks struggled in 1996 for two reasons. First, and most
important, uncertainty over the direction and form of deregulation in the
sector tended to diminish investor interest. Second, stocks in the sector
tend to move in concert with bonds, which lagged due to periodic inflation
fears and confusing economic signals. Stocks in the telecommunications
field especially were affected by uncertainty over legislation signed into
law in February 1996. Biotechnology issues had a hard time recovering from
a correction in stock prices from overvalued levels that they experienced
earlier in 1996. Cyclical stocks - those that usually rise and fall with
the economy - posted mixed results that largely depended on the outlook for
companies in the specific sector rather than the direction of the economy.
FOREIGN STOCK MARKETS
Foreign stock markets posted mixed results in 1996. The Morgan Stanley
Capital International (MSCI) EAFE Index - which measures stock performance
in Europe, Australia and the Far East - returned 6.05% in 1996. Europe
posted the most consistently strong equity markets due to stronger economic
growth, lower interest rates, higher corporate earnings, the relative
weakness of the continent's major currencies and a new emphasis on
shareholder friendliness by many of the region's corporations. The MSCI
Europe Index was up 21.09% in 1996. The Japanese stock market
underperformed on the weakness of the economic recovery and the uncertainty
for any substantial economic reform. The Tokyo Stock Exchange TOPIX Total
Return Index was off 16.26%. Emerging market equity performance ran the
gamut from negative to positive, with the MSCI Emerging Markets Free Index
returning 6.03% for 1996. While Hong Kong was a top performer - benefiting
from the rising value of the property sector, solid economic growth and
stable interest rates - other Asian markets posted mixed returns as
concerns rose over declining export growth in the region. Latin America
enjoyed a strong first half, but faded toward the end of 1996 due to low
domestic savings rates and inefficient governments, among other factors.
U.S. BOND MARKETS
Uncertainty over the direction of the economy led to mixed performance in
U.S. bond markets in 1996. For the year, the Lehman Brothers Aggregate Bond
Index - a broad measure of the performance of the U.S. taxable bond market
- - posted a total return of 3.63%. Stronger-than-expected economic signals
rattled the bond market in the early spring. Investors spent most of the
summer anticipating a short-term interest rate increase by the Federal
Reserve Board. However, the Fed neither raised nor lowered rates through
the end of 1996. Interest rates responded to the Fed's inaction by falling
during much of October and November. In December, though, bond prices
dropped due to inflation concerns, stronger-than-expected economic data and
comments by Fed Chairman Alan Greenspan that the stock markets may be
overvalued.
FOREIGN BOND MARKETS
While low inflation and moderate growth helped provide a positive backdrop
for most bond markets in 1996, performance in overseas bond markets was
mixed. The Salomon Brothers World Government Bond Index - a measure of
government bond market performance in developed nations - returned 3.62%
for the 12 months that ended December 31, 1996. In Europe, focus centered
on the continuing progress toward the European Monetary Union (EMU).
Attractive opportunities arose as countries worked to meet the requirements
for joining the EMU. However, Germany and Japan - two of the larger
components of the Salomon Brothers World Government Bond Index -
experienced currency problems that hurt returns. In stark contrast to the
developed world, the often-volatile emerging debt markets enjoyed a
particularly strong year, helped by inflows of foreign capital, low
interest rates and the implementation of country-specific reforms -
especially in Latin America. The J.P. Morgan Emerging Markets Bond Index -
of which Latin America is a large component - posted a return of 34.16%
during the period.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY

High Income 14.03% 14.96% 11.12%

Merrill Lynch High Yield Master Index 11.06% 12.76% 11.25%

AVERAGE ANNUAL RETURNS take the fund's 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 of all domestic and
yankee high-yield bonds. Issues included in the index have maturities of at
least one year and have a credit rating lower than BBB-/Baa3, but are not
in default. This benchmark reflects the reinvestment of dividends and
capital gains, if any.

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
IMAHDR PRASUN SHR__CHT 19961231 19970110 144943 S00000000000001
VIP: High Income ML High Yield Master
00152 ML002
1986/12/31 10000.00 10000.00
1987/01/31 10364.57 10282.75
1987/02/28 10543.92 10452.51
1987/03/31 10639.95 10568.08
1987/04/30 10307.45 10337.62
1987/05/31 10211.62 10291.04
1987/06/30 10432.16 10433.29
1987/07/31 10443.32 10490.06
1987/08/31 10529.83 10595.18
1987/09/30 10163.16 10351.40
1987/10/31 9677.16 10074.83
1987/11/30 9962.17 10329.61
1987/12/31 10121.62 10466.77
1988/01/31 10454.39 10753.19
1988/02/29 10767.39 11044.97
1988/03/31 10690.03 11026.71
1988/04/30 10773.35 11058.55
1988/05/31 10757.33 11116.27
1988/06/30 10982.80 11328.81
1988/07/31 11097.12 11448.53
1988/08/31 11044.12 11486.14
1988/09/30 11132.65 11601.92
1988/10/31 11253.84 11782.68
1988/11/30 11210.87 11826.82
1988/12/31 11299.96 11876.86
1989/01/31 11571.50 12054.97
1989/02/28 11628.42 12135.98
1989/03/31 11479.00 12125.19
1989/04/30 11351.87 12160.97
1989/05/31 11561.62 12384.85
1989/06/30 11892.76 12560.32
1989/07/31 11814.47 12619.80
1989/08/31 11745.94 12682.14
1989/09/30 11334.95 12561.40
1989/10/31 10849.01 12362.72
1989/11/30 10858.15 12390.42
1989/12/31 10828.39 12379.22
1990/01/31 10589.03 12137.27
1990/02/28 10425.98 11960.52
1990/03/31 10315.98 12122.20
1990/04/30 10346.54 12183.79
1990/05/31 10559.13 12403.87
1990/06/30 10725.46 12644.18
1990/07/31 10891.12 12911.38
1990/08/31 10708.93 12417.11
1990/09/30 10455.01 11877.07
1990/10/31 10201.31 11574.83
1990/11/30 10440.59 11672.88
1990/12/31 10586.58 11841.08
1991/01/31 10811.19 12008.46
1991/02/28 11410.15 12899.77
1991/03/31 11814.44 13454.41
1991/04/30 12233.71 13933.54
1991/05/31 12413.40 14001.58
1991/06/30 12682.93 14283.24
1991/07/31 13162.10 14625.48
1991/08/31 13341.78 14932.88
1991/09/30 13641.26 15123.08
1991/10/31 14105.46 15572.46
1991/11/30 14225.25 15752.34
1991/12/31 14300.12 15935.34
1992/01/31 15063.79 16492.49
1992/02/29 15610.72 16902.09
1992/03/31 16115.35 17137.92
1992/04/30 16229.29 17262.66
1992/05/31 16424.63 17538.01
1992/06/30 16603.69 17755.91
1992/07/31 16929.25 18115.67
1992/08/31 17287.37 18355.50
1992/09/30 17466.43 18564.65
1992/10/31 17205.98 18330.18
1992/11/30 17417.60 18589.77
1992/12/31 17612.93 18829.13
1993/01/31 18085.00 19292.78
1993/02/28 18393.49 19657.97
1993/03/31 18817.96 19998.78
1993/04/30 18941.76 20142.33
1993/05/31 19224.74 20413.47
1993/06/30 19719.95 20796.99
1993/07/31 19914.49 21020.53
1993/08/31 20126.73 21220.91
1993/09/30 20197.47 21325.62
1993/10/31 20674.99 21727.34
1993/11/30 20869.54 21846.17
1993/12/31 21205.57 22064.62
1994/01/31 21913.02 22548.16
1994/02/28 21886.74 22386.01
1994/03/31 21149.43 21656.52
1994/04/30 20935.99 21403.44
1994/05/31 20974.80 21327.18
1994/06/30 20897.18 21405.68
1994/07/31 20974.80 21556.15
1994/08/31 20974.80 21705.88
1994/09/30 21130.02 21697.66
1994/10/31 20935.99 21752.80
1994/11/30 20761.36 21567.76
1994/12/31 20858.38 21807.67
1995/01/31 21091.22 22115.82
1995/02/28 21815.10 22805.86
1995/03/31 22086.75 23123.24
1995/04/30 22734.51 23664.64
1995/05/31 23319.59 24403.97
1995/06/30 23382.28 24590.37
1995/07/31 23946.46 24871.49
1995/08/31 24134.52 25022.44
1995/09/30 24531.54 25308.72
1995/10/31 24761.39 25488.13
1995/11/30 24886.77 25736.93
1995/12/31 25179.31 26150.05
1996/01/31 25764.39 26563.05
1996/02/29 26189.93 26603.04
1996/03/31 26121.13 26530.79
1996/04/30 26511.00 26542.81
1996/05/31 26877.94 26734.23
1996/06/30 27015.54 26894.82
1996/07/31 26923.80 27077.42
1996/08/31 27313.67 27357.05
1996/09/30 28116.34 27944.01
1996/10/31 28024.61 28250.25
1996/11/30 28322.74 28821.39
1996/12/31 28712.61 29043.17
IMATRL PRASUN SHR__CHT 19961231 19970110 144946 R00000000000123

Let's say hypothetically that $10,000 was invested in High Income Portfolio
on December 31, 1986. As the chart shows, by December 31, 1996, the value
of the investment would have grown to $28,713 - a 187.13% increase on the
initial investment. With reinvested dividends and capital gains, if any, a
$10,000 investment in the Merrill Lynch High Yield Master Index would have
grown to $29,043 over the same period - a 190.43% increase.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF DECEMBER 31, 1996
(BY ISSUER, EXCLUDING CASH EQUIVALENTS) % OF FUND'S
INVESTMENTS

PanAmSat Corp. 3.5

U.S. Government Obligations 3.2

Time Warner, Inc., Series M, exchangeable 2.3
pay-in-kind

Millicom International Cellular SA 0%, 6/1/06 2.2

Viacom, Inc. 8% 7/7/06 1.9

TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S
INVESTMENTS

Media & Leisure 29.3

Utilities 8.5

Basic Industries 7.3

Industrial Machinery & Equipment 5.4

Technology 5.4

QUALITY DIVERSIFICATION AS OF DECEMBER 31, 1996
(MOODY'S RATINGS) % OF FUND'S
INVESTMENTS

Aaa, Aa, A 3.2

Baa 0.0

Ba 5.7

B 49.5

Caa, Ca, C 7.4

Nonrated 2.9

TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE
UNAVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT DECEMBER 31, 1996, ACCOUNT FOR 2.9% OF THE
FUND'S INVESTMENTS.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW

An interview with
Barry Coffman, Portfolio Manager of High Income Portfolio
Q. HOW DID THE FUND PERFORM, BARRY?
A. Last year was a good year for the high-yield market and the fund's
performance reflects that. The fund performed well and outperformed its
benchmark, the Merrill Lynch High Yield Master Index, which had a total
return of 11.06% for the 12 months ending December 31, 1996.
Q. WHY DID THE FUND BEAT THE BENCHMARK?
A. Credit spreads - which measure the difference in yields between bonds of
various credit qualities - narrowed during the year, primarily due to the
economy's continued strength and strong demand for high-yield bonds from
mutual funds, pension plans and insurance companies. As spreads narrowed,
lower-quality B-rated securities - which the fund emphasizes - did better
than higher-quality BB-rated securities. The latter are much more sensitive
to interest rate changes than B-rated securities, and went down in value
when interest rates rose.
Q. WHICH HOLDINGS WERE AMONG THE FUND'S BEST PERFORMERS DURING THE YEAR?
A. Satellite company PanAmSat, which was the fund's largest holding at the
end of the year, as well as one of its best performers, continued to post
strong revenues and cash flows. In addition, the company announced a merger
with a division of GM Hughes, giving its bonds an added boost. The fund's
holdings in Harcor Energy, Inc. also performed well thanks to rising energy
prices, its drilling successes and the relatively high coupon the bonds
carried. The company also did an equity offering during the year to help
reduce its debt, which had a very positive effect on its bond prices.
Q. THE FUND'S STAKE IN STOCKS ISSUED BY HIGH-YIELD COMPANIES (THOSE WITH
BELOW-INVESTMENT-GRADE CREDIT RATINGS) ROSE DURING THE YEAR. HOW DID THE
FUND'S EQUITY HOLDINGS PERFORM?
A. Generally speaking, the fund's holdings in common stocks did well. One
worth particular note was the stock of Flores & Rucks - another energy
company - which more than tripled in price during the year. The fund also
owned the high-yield debt issued by the company, which also performed
relatively well. Another strong equity performer was Host Marriott. The
full-service hotel industry had a tremendous year, benefiting from rising
occupancy rates and the lack of any new supply in most major markets. The
fund's debt holdings issued by Host Marriott also performed well.
Q. EVEN THOUGH THE HIGH-YIELD MARKET HAD A GOOD YEAR, THERE MUST HAVE BEEN
SOME DISAPPOINTMENTS.
A. That's true, and two come to mind. First, bonds issued by Marvel
Entertainment - best known for its comic books and trading cards - tumbled
when the company declared bankruptcy. The fund no longer holds these bonds.
The second disappointment was the fund's holdings in wireless cable
companies. Investors had anticipated that the regional Bell operating
companies would partner with these companies to deliver wireless cable
services. But when some of those expected combinations failed to
materialize, it sent shock waves throughout the industry. However, I
continued to hold onto People's Choice and CS Wireless Systems because I
felt that their balance sheets were solid enough to allow them to proceed
on rolling out wireless cable services.
Q. AT THE END OF THE PERIOD, 11.5% OF THE FUND'S INVESTMENTS WERE IN CASH
OR CASH EQUIVALENTS. WHAT WAS THE RATIONALE FOR THAT?
A. There were several reasons. First, there were rather healthy new cash
inflows coming into the fund at the end of the period. Second, as has been
the case historically there was a relatively low level of news bonds issued
in December. Finally, given current spreads, I was being very selective in
adding new positions to the fund.
Q. WHAT IS YOUR OUTLOOK?
A. It's been a while since the high-yield market has witnessed credit
spreads as narrow as they were at the end of the period. Given that, it's
hard for me to be extremely bullish about the prospects for the high-yield
market. However, I believe that there are still attractive opportunities
out there. The economy looks like it is cooperating now, but given current
spread levels and the increasing likelihood of a slowdown in economic
growth in 1997, I'll likely look to relatively higher-quality companies in
more defensive industries, such as media and telecommunications. In my
view, the penalty for being wrong with riskier situations outweighs the
potential rewards. As a result, capital preservation has become a priority
and earning an attractive coupon could look favorable relative to the
returns from other markets.

VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
INVESTMENTS DECEMBER 31, 1996

Showing Percentage of Total Value of Investment in Securities

CORPORATE BONDS - 65.5%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 1.1%
MEDIA & LEISURE - 0.6%
PUBLISHING - 0.6%
Hollinger liquid yield option
note yankee 0%, 10/5/13 B2 $ 30,000,000 $ 10,612,500
RETAIL & WHOLESALE - 0.5%
RETAIL & WHOLESALE, MISCELLANEOUS - 0.5%
Comcast Corp. 1 1/8%,
4/15/07 B1 15,000,000 7,518,750
UTILITIES - 0.0%
TELEPHONE SERVICES - 0.0%
GST Telecommunications, Inc.
0%, 12/15/05 (c)(f) - 70,000 53,900
TOTAL CONVERTIBLE BONDS 18,185,150
NONCONVERTIBLE BONDS - 64.4%
AEROSPACE & DEFENSE - 0.5%
AEROSPACE & DEFENSE - 0.4%
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 Ba3 4,490,000 4,815,525
6,975,525
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, Inc.
9 1/4%, 12/1/06 (f) B1 1,430,000 1,476,475
TOTAL AEROSPACE & DEFENSE 8,452,000
BASIC INDUSTRIES - 6.9%
CHEMICALS & PLASTICS - 2.4%
American Pacific Corp.
11%, 2/21/02 (f) - 743,750 706,559
Atlantis Group, Inc.
11%, 2/15/03 B2 7,785,000 8,096,400
Foamex-JPS Automotive LP/
Foamex JPS Capital Corp.
0%, 7/1/04 (c) Caa 2,760,000 2,290,800
Foamex LP/Foamex Capital Corp.:
9 1/2%, 6/1/00 B1 380,000 381,900
11 7/8%, 10/1/04 B3 2,480,000 2,653,600
Freedom Chemical Co. 10 5/8%,
10/15/06 (f) B3 5,940,000 6,237,000
Plastic Containers, Inc.
10%, 12/15/06 (f) B1 1,285,000 1,323,550
Plastic Specialties &
Technologies, Inc.
11 1/4%, 12/1/03 B3 9,770,000 10,258,500
Sterling Chemicals Holdings, Inc.
11 3/4%, 8/15/06 B3 5,420,000 5,718,100
37,666,409
IRON & STEEL - 1.3%
AK Steel Corp. 9 1/8%,
12/15/06 (f) Ba2 8,340,000 8,558,925
Republic Engineered Steels, Inc.
9 7/8%, 12/15/01 B3 4,620,000 4,319,700
WCI Steel, Inc. 10%,
12/1/04 (f) B1 6,840,000 6,908,400
19,787,025

MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
METALS & MINING - 0.8%
Commonwealth Aluminum Corp.
10 3/4%, 10/1/06 B2 $ 7,190,000 $ 7,405,700
Renco Metals, Inc.
11 1/2%, 7/1/03 B2 4,660,000 4,893,000
12,298,700
PACKAGING & CONTAINERS - 0.1%
Crown Packaging Holdings Ltd.
0%, 11/1/03 (c) Ca 6,840,000 1,710,000
PAPER & FOREST PRODUCTS - 2.3%
Doman Industries Ltd. yankee
8 3/4%, 3/15/04 Ba3 12,660,000 11,868,750
Repap New Brunswick, Inc.
yankee 10 5/8%, 4/15/05 B3 8,390,000 8,851,450
SD Warren Co., Series B,
12%, 12/15/04 B1 3,790,000 4,093,200
Specialty Paperboard, Inc.
9 3/8%, 10/15/06 (f) B1 5,000,000 5,100,000
Stone Container Corp.
11 7/8%, 8/1/16 B1 6,290,000 6,667,400
36,580,800
TOTAL BASIC INDUSTRIES 108,042,934
CONGLOMERATES - 0.8%
Jordan Industries, Inc.:
10 3/8%, 8/1/03 B3 11,895,000 11,776,050
0%, 8/1/05 (c) Caa 1,070,000 850,650
12,626,700
CONSTRUCTION & REAL ESTATE - 1.0%
CONSTRUCTION - 1.0%
McDermott J Ray SA
9 3/8%, 7/15/06 B1 10,000,000 10,500,000
WCI Communities LP
17%, 7/24/98 (e) - 5,000,000 5,000,000
15,500,000
DURABLES - 2.7%
AUTOS, TIRES, & ACCESSORIES - 1.2%
APS, Inc. 11 7/8%, 1/15/06 B2 960,000 1,039,200
Blue Bird Body Co. 10 3/4%,
11/15/06 (f) B2 6,645,000 6,944,025
Delco Remy International, Inc.
10 5/8%, 8/1/06 (f) B2 4,840,000 5,130,400
Lear Corp. 9 1/2%, 7/15/06 B1 5,150,000 5,510,500
18,624,125
HOME FURNISHINGS - 1.0%
Interlake Corp.
12 1/8%, 3/1/02 B3 10,000,000 10,350,000
Knoll, Inc. 10 7/8%, 3/15/06 B3 5,280,000 5,834,400
16,184,400
TEXTILES & APPAREL - 0.5%
Dan River, Inc.
10 1/8%, 12/15/03 B3 4,620,000 4,666,200
Hat Brands, Inc. (g):
Series B, 12 5/8%, 9/15/02 - 1,520,000 836,000
Series D, 12 5/8%, 9/15/02 - 680,000 374,000
Pillowtex Corp.
10%, 11/15/06 (f) B2 1,710,000 1,782,675
7,658,875
TOTAL DURABLES 42,467,400
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
ENERGY - 2.1%
OIL & GAS - 2.1%
Flores & Rucks, Inc.
9 3/4%, 10/1/06 B3 $ 8,360,000 $ 8,861,600
Forcenergy, Inc.
9 1/2%, 11/1/06 B2 2,520,000 2,627,100
Harcor Energy, Inc.
14 7/8%, 7/15/02 B3 13,060,000 15,051,650
KCS Energy, Inc.
11%, 1/15/03 B1 4,725,000 5,126,625
Plains Resources, Inc., Series B,
10 1/4%, 3/15/06 B2 790,000 841,350
TOTAL ENERGY 32,508,325
FINANCE - 2.2%
SAVINGS & LOANS - 2.2%
First Nationwide Parent Holdings
Ltd. 12 1/2%, 4/15/03 B2 17,480,000 19,359,100
First Nationwide Escrow Corp.
10 5/8%, 10/1/03 (f) Ba3 12,970,000 14,007,600
33,366,700
SECURITIES INDUSTRY - 0.0%
ECM Corp. extendible
14%, 6/1/02 (f) - 288,264 317,090
TOTAL FINANCE 33,683,790
HEALTH - 1.5%
MEDICAL EQUIPMENT & SUPPLIES - 1.4%
Wright Medical Technology, Inc.
10 3/4%, 7/1/00 B3 20,920,000 21,129,200
MEDICAL FACILITIES MANAGEMENT - 0.1%
Quest Diagnostics, Inc.
10 3/4%, 12/15/06 B2 1,810,000 1,905,025
TOTAL HEALTH 23,034,225
HOLDING COMPANIES - 0.5%
Gray Communications System, Inc.
10 5/8%, 10/1/06 B3 5,135,000 5,443,100
Veritas Holding GMBH
9 5/8%, 12/15/03 (f) BB- 2,140,000 2,161,400
7,604,500
INDUSTRIAL MACHINERY & EQUIPMENT - 4.8%
ELECTRICAL EQUIPMENT - 2.8%
Magnetek, Inc.
10 3/4%, 11/15/98 B1 11,675,000 12,112,813
Motors & Gears, Inc.
10 3/4%, 11/15/06 (f) B3 15,170,000 15,625,100
Omnipoint Corp.:
11 5/8%, 8/15/06 B2 9,280,000 9,628,000
11 5/8%, 8/15/06 (f) B2 3,190,000 3,309,625
Telex Communications, Inc.
12%, 7/15/04 B2 3,500,000 3,745,000
44,420,538

MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 1.3%
Goss Graphic System, Inc.
12%, 10/15/06 B2 $ 2,090,000 $ 2,152,700
Howmet Corp. 10%, 12/1/03 B3 2,050,000 2,219,125
International Knife & Saw, Inc.
11 3/8%, 11/15/06 (f) B3 2,310,000 2,385,075
MVE, Inc. 12 1/2%, 2/15/02 B3 5,595,000 5,930,700
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 B1 1,484,000 1,541,505
10 3/4%, 11/1/03 B3 5,226,000 5,435,040
19,664,145
POLLUTION CONTROL - 0.7%
Allied Waste of North America, Inc.
10 1/4%, 12/1/06 (f) B3 3,570,000 3,748,500
Norcal Waste Systems, Inc.
13%, 11/15/05 (d) B3 6,850,000 7,603,500
11,352,000
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 75,436,683
MEDIA & LEISURE - 17.4%
BROADCASTING - 5.3%
American Telecasting, Inc. (c):
0%, 6/15/04 Caa 2,500,000 1,000,000
0%, 8/15/05 Caa 500,000 185,000
Benedek Communications Corp.
0%, 5/15/06 (c) - 2,880,000 1,648,800
Comcast UK Cable Partners Ltd.
0%, 11/15/07 B2 952,000 661,640
CS Wireless Systems, Inc.
0%, 3/1/06 (c) Caa 24,360,000 8,769,600
Diamond Cable Communications
PLC yankee
0%,12/15/05 (c) B3 17,110,000 12,169,488
Granite Broadcasting Corp.:
10 3/8%, 5/15/05 B3 3,360,000 3,444,000
9 3/8%, 12/1/05 B3 2,010,000 1,944,675
Jacor Communications Co.
9 3/4%, 12/15/06 B2 3,190,000 3,253,800
NWCG Holdings Corp.
0%, 6/15/99 Caa 21,815,000 18,106,450
Peoples Choice TV Corp. unit
0%, 6/1/04 (c) Caa 23,430,000 9,840,600
SFX Broadcasting, Inc.
10 3/4%, 5/15/06 B3 2,375,000 2,493,750
Telewest PLC 0%, 10/1/07 (c) B1 4,770,000 3,315,150
Tevecap SA 12 5/8%,
11/26/04 (f) B2 7,200,000 7,362,000
UIH Australia/PAC, Inc.,
Series B, 0%, 5/15/06 (c) B2 15,870,000 8,252,400
United International Holdings, Inc.
0%, 11/15/99:
Discount Notes B3 1,070,000 765,050
Sr. Discount Notes B3 1,000,000 715,000
83,927,403
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
MEDIA & LEISURE - CONTINUED
ENTERTAINMENT - 4.3%
AMF Group, Inc., Series B:
10 7/8%, 3/15/06 B2 $ 11,900,000 $ 12,554,500
Alliance Gaming Corp.
12 7/8%, 6/30/03 B2 8,560,000 9,095,000
0%, 3/15/06 (c) B2 17,280,000 11,426,400
Cinemark USA, Inc.
9 5/8%, 8/1/08 B2 4,300,000 4,353,750
Viacom, Inc. 8%, 7/7/06 B1 30,620,000 29,701,400
67,131,050
LEISURE DURABLES & TOYS - 2.0%
ICON Fitness Corp.
0%, 11/15/06 (f) - 9,440,000 4,956,000
ICON Health and Fitness, Inc.
13%, 7/15/02 B3 16,480,000 18,540,000
IHF Holdings, Inc.
0%, 11/15/04 (c) Caa 10,250,000 8,097,500
31,593,500
LODGING & GAMING - 4.8%
American Skiing Co.
12%, 7/15/06 (f) B3 5,310,000 5,588,775
Aztar Corp.
13 3/4%, 10/1/04 B2 1,570,000 1,672,050
Grand Casinos, Inc.
10 1/8%, 12/1/03 Ba3 24,720,000 24,843,600
HMH Properties, Inc.
9 1/2%, 5/15/05 Ba3 20,510,000 21,381,675
Horseshoe Gaming LLC
12 3/4%, 9/30/00 B1 17,850,000 19,278,000
Wyndham Hotel Corp.
10 1/2%, 5/15/06 B2 1,810,000 1,918,600
74,682,700
PUBLISHING - 0.3%
Hollinger International
Publishing, Inc.
9 1/4%, 2/1/06 B1 4,830,000 4,781,700
RESTAURANTS - 0.7%
Host Marriott Travel Plazas, Inc.
9 1/2%, 5/15/05 B1 10,690,000 11,144,325
TOTAL MEDIA & LEISURE 273,260,678
NONDURABLES - 3.3%
FOODS - 1.4%
International Home Foods, Inc.
10 3/8%, 11/1/06 (f) B2 8,070,000 8,412,975
Specialty Foods Corp.:
10 1/4%, 8/15/01 B3 4,030,000 3,768,050
11 1/8%, 10/1/02 B3 10,670,000 10,136,500
22,317,525
HOUSEHOLD PRODUCTS - 1.9%
Revlon Worldwide Corp. secured
0%, 3/15/98 B3 34,100,000 29,539,125
TOTAL NONDURABLES 51,856,650

MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
RETAIL & WHOLESALE - 4.4%
APPAREL STORES - 2.3%
Lamonts Apparel, Inc. 10 1/4%,
11/1/99 pay-in-kind (f)(g) - $ 2,201,000 $ 93,543
Mothers Work, Inc.
12 5/8%, 8/1/05 B3 25,190,000 26,197,600
Specialty Retailers, Inc.:
10%, 8/15/00 B1 2,250,000 2,340,000
11%, 8/15/03 B3 7,220,000 7,581,000
36,212,143
GENERAL MERCHANDISE STORES - 0.4%
Pantry, Inc. 12%, 11/15/00 B2 7,260,000 6,951,450
GROCERY STORES - 1.4%
Food 4 Less Holdings, Inc.
0%, 7/15/05 (c) Caa 17,500,000 10,937,500
Pathmark Stores, Inc.
11 5/8%, 6/15/02 Caa 2,382,000 2,435,595
Star Markets, Inc.
13%, 11/1/04 B3 6,905,000 7,785,388
21,158,483
RETAIL & WHOLESALE, MISCELLANEOUS - 0.3%
Guitar Center Management Co.,
Inc. 11%, 7/1/06 B2 3,650,000 3,869,000
TOTAL RETAIL & WHOLESALE 68,191,076
SERVICES - 3.1%
PRINTING - 1.0%
Sullivan Graphics, Inc.
12 3/4%, 8/1/05 Caa 16,010,000 15,449,650
SERVICES - 2.1%
Celestica International, Inc. yankee
10 1/2%, 12/31/06 (f) B2 10,060,000 10,563,000
Outsourcing Solutions, Inc.
11%, 11/1/06 (f) B3 3,860,000 4,043,350
Prime Succession Acquisition Corp.
10 3/4%, 8/15/04 (f) B 1,390,000 1,508,150
Protection One Alarm
Monitoring, Inc.
13 5/8%, 6/30/05 Caa 18,300,000 17,019,000
33,133,500
TOTAL SERVICES 48,583,150
TECHNOLOGY - 4.3%
COMMUNICATIONS EQUIPMENT - 1.7%
Echostar Satellite Broadcasting
Corp. 0%, 3/15/04 (c) Caa 17,390,000 13,172,925
Hyperion Telecommunications, Inc.,
Series B, 0%, 4/15/03 (c) - 23,550,000 13,364,625
26,537,550
COMPUTERS & OFFICE EQUIPMENT - 2.6%
Dictaphone Corp.
11 3/4%, 8/1/05 B3 14,440,000 12,923,800
Exide Electronics Group, Inc.
11 1/2%, 5/15/06 B3 6,380,000 6,794,700
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - CONTINUED
Unisys Corp.:
10 5/8%, 10/01/99 B1 $ 4,080,000 $ 4,222,800
12%, 4/15/03 B1 12,300,000 13,161,000
11 3/4%, 10/15/04 B1 3,190,000 3,401,338
40,503,638
TOTAL TECHNOLOGY 67,041,188
TRANSPORTATION - 1.2%
AIR TRANSPORTATION - 0.3%
US Air Inc., pass through trust
8 5/8%, 9/1/98 B1 5,000,000 5,012,500
RAILROADS - 0.9%
Transtar Holdings LP/Transtar
Cap Corp. 0%, 12/15/03 (c) B- 17,941,000 14,173,390
TOTAL TRANSPORTATION 19,185,890
UTILITIES - 7.7%
CELLULAR - 4.7%
Arch Communications Group, Inc.
0%, 3/15/08 (c) B3 23,890,000 13,647,163
Microcell Telecommunications, Inc.
0%, 6/1/06 (c) B3 29,540,000 16,468,550
Millicom International Cellular SA
0%, 6/1/06 (c) B3 56,710,000 35,160,200
Mobile Telecommunications
Technologies Corp.
13 1/2%, 12/15/02 B3 7,555,000 7,555,000
USA Mobile Communications, Inc.
9 1/2%, 2/1/04 B2 1,280,000 1,209,600
74,040,513
ELECTRIC UTILITY - 0.2%
AES China Generating Ltd.
yankee 10 1/8%, 12/15/06 Ba3 2,200,000 2,282,500
TELEPHONE SERVICES - 2.8%
Brooks Fiber Properties, Inc.
0%, 11/1/06 (c)(f) - 13,850,000 8,829,375
GST USA, Inc.
0%, 12/15/05 (c) - 12,430,000 7,613,375
MFS Communications, Inc. (c):
0%, 1/15/04 B1 9,520,000 8,258,600
0%, 1/15/06 B1 18,490,000 13,497,700
Pagemart, Inc.
0%, 11/1/03 (c) - 1,330,000 1,050,700
Shared Technologies Fairchild
Communications Corp.
0%, 3/1/06 (c) Caa 6,290,000 5,252,150
44,501,900
TOTAL UTILITIES 120,824,913
TOTAL NONCONVERTIBLE BONDS 1,008,300,102
TOTAL CORPORATE BONDS
(Cost $999,782,437) 1,026,485,252
U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS - 3.2%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
U.S. TREASURY OBLIGATIONS - 3.2%
5.875%, 11/30/01
(Cost $49,531,250) Aaa $ 50,000,000 $ 49,273,500
COMMERCIAL MORTGAGE SECURITIES - 0.0%
Meritor Mortgage Security Corp.
commercial Series 1987-1
Class B, 9.40%, 2/1/00 (f)(g)
(Cost $182,359) - 1,350,000 208,440
COMMON STOCKS - 9.2%
SHARES
AEROSPACE & DEFENSE - 0.4%
Thiokol Corp. 133,900 5,992,025
BASIC INDUSTRIES - 0.4%
CHEMICALS & PLASTICS - 0.3%
American Azide (warrants) (a)(e) 102 1
American Pacific Corp. (warrants) (a)(e) 60,714 15,179
Foamex International, Inc. 307,600 5,075,400
5,090,580
PACKAGING & CONTAINERS - 0.1%
Gaylord Container Corp. Class A (a) 240,800 1,474,900
TOTAL BASIC INDUSTRIES 6,565,480
DURABLES - 0.0%
TEXTILES & APPAREL - 0.0%
Hat Brands, Inc. (warrants) (a)(e) 27,466 89,263
HM/Hat Brands Trust Class I Unit (a)(e) 340,000 210,800
300,063
ENERGY - 0.7%
OIL & GAS - 0.7%
Flores & Rucks, Inc. (a) 150,000 7,987,500
Harcor Energy, Inc. (a) 355,000 1,730,625
Harcor Energy, Inc. (warrants) (a) 330,000 660,000
10,378,125
FINANCE - 1.2%
INSURANCE - 1.2%
American Financial Group, Inc. 474,700 17,919,925
Penncorp. Financial Group, Inc. 25,000 900,000
18,819,925
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (f) 3,000 300,000
TOTAL FINANCE 19,119,925
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
Wright Medical Technology, Inc.
(warrants) (a) 3,212 417,560
HOLDING COMPANIES - 0.0%
SDW Holdings Corp. (a):
(warrants) 3,720 19,158
Series B (warrants) 4,450 75,650
94,808
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 0.5%
POLLUTION CONTROL - 0.5%
Allied Waste Industries, Inc. (a) 755,300 $ 6,986,525
MEDIA & LEISURE - 3.2%
BROADCASTING - 1.7%
American Radio Systems Corp.
Class A (a) 342,800 9,341,300
Benedek Communications Corp.
(warrants) (a) 57,600 172,800
CS Wireless Systems, Inc. (a)(f) 6,699 0
Jacor Communications, Inc. Class A (a) 209,400 5,732,325
PanAmSat Corp. (a) 254,200 7,117,600
United International Holdings, Inc.
Class A (a) 441,100 5,403,475
27,767,500
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. (a)(e):
$2.00 (warrant) 232,000 11,600
$2.72 (warrant) 221,765 11,088
22,688
LEISURE DURABLES & TOYS - 0.1%
IHF Capital, Inc. (a)(f):
Series H (warrants) 10,250 1,127,500
Series I (warrants) 5,890 206,150
1,333,650
LODGING & GAMING - 0.7%
Bally Gaming International, Inc.
(warrants) (a) 90,000 157,500
Host Marriott Corp. (a) 651,300 10,420,800
Motels of America, Inc. (a) 3,000 105,000
10,683,300
PUBLISHING - 0.7%
Big Flower Press Holdings, Inc. (a) 580,500 10,884,375
TOTAL MEDIA & LEISURE 50,691,513
NONDURABLES - 1.0%
HOUSEHOLD PRODUCTS - 1.0%
Renaissance Cosmetics, Inc. unit (f) 12,750 12,750,000
Revlon, Inc. Class A (a) 113,300 3,384,838
16,134,838
RETAIL & WHOLESALE - 0.4%
APPAREL STORES - 0.1%
Lamonts Apparel, Inc. (a) 35,870 4,484
Lamonts Apparel, Inc. (warrants) (a) 66,214 1
Mothers Work (a)(h) 209,100 2,143,275
2,147,760
GROCERY STORES - 0.3%
Food 4 Less Holdings, Inc.
(warrants) (a)(e) 9,348 112,176
Smith's Food & Drug Center, Inc. 149,100 4,622,100
4,734,276
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Barry's Jewelers, Inc. (warrants) (a) 5,697 712
Town & Country Jewelry Manufacturing
Corp. Class A (a) 8,374 3,140
3,852
TOTAL RETAIL & WHOLESALE 6,885,888

SHARES VALUE (NOTE 1)
SERVICES - 0.4%
Protection One, Inc. (a) 505,900 $ 4,995,763
Protection One, Inc. (warrants) (a) 74,560 521,920
Vestar/LPA Investment Corp. (a) 5,177 51,770
5,569,453
TECHNOLOGY - 0.2%
COMMUNICATIONS EQUIPMENT - 0.1%
Hyperion Telecommunications, Inc.
(warrants) (a)(f) 23,550 471,000
COMPUTERS & OFFICE EQUIPMENT - 0.1%
Exide Electronics Group, Inc. (a) 117,600 1,734,600
Exide Electronics Group, Inc.
(warrants) (a)(f) 6,380 191,400
1,926,000
TOTAL TECHNOLOGY 2,397,000
UTILITIES - 0.8%
CELLULAR - 0.3%
Arch Communications Group, Inc. (a) 351,737 3,297,534
Intercel, Inc. (warrants) (a) 53,504 374,528
Microcell Telecommunications, Inc. (a):
(warrants) 118,160 1,477,000
(conditional warrants) 118,160 73,850
5,222,912
ELECTRIC UTILITY - 0.0%
El Paso Electric Co. (a) 6,900 44,850
TELEPHONE SERVICES - 0.5%
WorldCom, Inc. (a) 300,000 7,818,750
TOTAL UTILITIES 13,086,512
TOTAL COMMON STOCKS
(Cost $131,566,252) 144,619,715
PREFERRED STOCKS - 10.6%
CONVERTIBLE PREFERRED STOCKS - 1.4%
FINANCE - 0.5%
INSURANCE - 0.5%
Pennsylvania Corp. Financial Group, Inc.
Series II, $3.50 (f) 150,000 8,700,000
MEDIA & LEISURE - 0.9%
BROADCASTING - 0.4%
Benedek Communications Corp. 15% 57,600 5,673,600
LODGING & GAMING - 0.5%
Host Marriott Financial Trust
$3.375 (a)(f) 151,200 8,070,300
TOTAL MEDIA & LEISURE 13,743,900
RETAIL & WHOLESALE - 0.0%
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Town & Country Corp. pay-in-kind 128 96
TOTAL CONVERTIBLE PREFERRED STOCKS 22,443,996
NONCONVERTIBLE PREFERRED STOCKS - 9.2%
ENERGY - 0.0%
OIL & GAS - 0.0%
Gulf Canada Resources Ltd.,
Series 1, adj. rate 193,351 627,648
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED STOCKS - CONTINUED
FINANCE - 0.7%
SAVINGS & LOANS - 0.7%
California Federal Bank
Series B, $10.625 15,610 $ 1,726,856
Chevy Chase Capital Corp.,
Series A, $5.1875 180,000 9,315,000
11,041,856
HOLDING COMPANIES - 0.1%
SDW Holdings Corp. (f) 44,500 1,624,250
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp. 8% (a)(e) 1,589 1,235,114
MEDIA & LEISURE - 7.2%
BROADCASTING - 7.0%
Cablevision Systems Corp., Series H,
$11.75 exchangeable pay-in-kind 193,949 18,134,232
Chancellor Radio Broadcasting Co.,
Series A, exchangeable (a) 64,300 7,137,300
PanAmSat Corp. 12 3/4% pay-in-kind 39,533 48,427,925
Time Warner, Inc., Series M,
exchangeable pay-in-kind 33,341 36,174,985
109,874,442
PUBLISHING - 0.2%
K-III Communications Corp., Series B,
$11.625 pay-in-kind (a) 27,428 2,777,085
TOTAL MEDIA & LEISURE 112,651,527
NONDURABLES - 0.0%
HOUSEHOLD PRODUCTS - 0.0%
Renaissance Cosmetics, Inc.
pay-in-kind 14% (f) 446 383,560
SERVICES - 0.2%
Loewen Group Capital LP,
Series A, $2.36 91,000 2,411,500
TECHNOLOGY - 0.9%
COMPUTER SERVICES & SOFTWARE - 0.9%
ICG Holdings, Inc.
exchangeable pay-in-kind 12,269 13,557,245
TOTAL NONCONVERTIBLE PREFERRED STOCKS 143,532,700
TOTAL PREFERRED STOCKS
(Cost $154,537,705) 165,976,696
CASH EQUIVALENTS - 11.5%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 6.75%, dated
12/31/96 due 1/2/97 $ 179,625,334 $179,558,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,515,158,003) $ 1,566,121,603
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. Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date.
5. 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 COST
SECURITY DATE (000S)
American Azide (warrants) 2/5/92 $ 1
American Pacific Corp. (warrants) 2/5/92 $ 15,179
Ampex Corp. 8% 2/16/95 $ 834,225
Food 4 Less Holdings, Inc. 12/30/92
(warrants) to 5/17/93 $ 229,281
Hat Brands, Inc. 9/2/92 to
(warrants) 2/23/94 $ -
HM/Hat Brands Trust
Class I Unit 2/22/94 $ 340,000
Live Entertainment, Inc.
(warrants):
$2.00 3/23/93 $ 220,717
$2.72 3/23/93 $ 131,863
WCI Communities LP
17%, 7/24/98 7/24/95 $ 4,937,231
6. 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 $171,166,067 or 10.8% of net
assets.
7. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
8. 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 VALUE
AFFILIATE COST COST INCOME
Mothers Work 153,555 - - 2,143,275
TOTALS $ 153,555 $ - $ - $ 2,143,275
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $1,751,402,823 and $1,372,062,734, respectively, of which U.S.
government and government agency obligations aggregated $123,798,438 and
$76,085,547, 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 $10,168 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 3.2% AAA, AA, A 3.2%
Baa 0.0% BBB 0.0%
Ba 5.6% BB 11.0%
B 48.6% B 45.1%
Caa 7.2% CCC 4.1%
Ca, C 0.1% CC, C 0.0%
D 0.0%
The percentage not rated by both S&P and Moody's amounted to 2.9%. FMR has
determined that unrated debt securities that are lower quality account for
2.9% of the total value of investment in securities.
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $1,515,230,055. Net unrealized appreciation
aggregated $50,891,548, of which $82,915,487 related to appreciated
investment securities and $32,023,939 related to depreciated investment
securities.
The fund hereby designates approximately $5,382,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1996

ASSETS

Investment in securities, at value (including repurchase agreements of $179,558,000) (cost $1,515,158,003) $ 1,566,121,603
- - See accompanying schedule

Cash 837

Receivable for investments sold 2,334,175

Receivable for fund shares sold 6,562,145

Dividends receivable 1,357,186

Interest receivable 20,619,080

TOTAL ASSETS 1,596,995,026

LIABILITIES

Payable for investments purchased $ 6,205,205

Payable for fund shares redeemed 1,019,389

Accrued management fee 759,029

Other payables and 189,597
accrued expenses

TOTAL LIABILITIES 8,173,220

NET ASSETS $ 1,588,821,806

Net Assets consist of:

Paid in capital $ 1,409,715,693

Undistributed net investment income 113,174,121

Accumulated undistributed net realized gain (loss) on investments and foreign 14,968,408
currency transactions

Net unrealized appreciation (depreciation) on investments 50,963,584
and assets and liabilities in foreign currencies

NET ASSETS, for 126,885,405 shares outstanding $ 1,588,821,806

NET ASSET VALUE, offering price $12.52
and redemption price per share ($1,588,821,806 (divided by) 126,885,405 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996

INVESTMENT INCOME $ 14,136,865
Dividends

Interest 108,216,784

TOTAL INCOME 122,353,649

EXPENSES

Management fee $ 7,422,311

Transfer agent fees 670,254

Accounting fees and expenses 662,535

Non-interested trustees' compensation 9,623

Registration fees 4,022

Custodian fees and expenses 57,474

Audit 47,856

Legal 15,253

Miscellaneous 9,056

Total expenses before reductions 8,898,384

Expense reductions (53,442 8,844,942
)

NET INVESTMENT INCOME 113,508,707

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities 15,835,086

Foreign currency transactions 2,041 15,837,127

Change in net unrealized appreciation (depreciation) on:

Investment securities 35,061,068

Assets and liabilities in 4,554 35,065,622
foreign currencies

NET GAIN (LOSS) 50,902,749

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 164,411,456

OTHER INFORMATION $ 36,272
Expense reductions
Directed brokerage arrangements

Custodian interest credits 17,170

$ 53,442

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995

<TABLE>
<CAPTION>
<S> <C>
<C>
Operations $ 113,508,707 $ 76,879,046
Net investment income

Net realized gain (loss) 15,837,127 21,706,316

Change in net unrealized appreciation (depreciation) 35,065,622 49,316,188

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 164,411,456 147,901,550

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 1,058,212,273 747,404,302
Net proceeds from sales of shares

Reinvestment of distributions 97,916,455 43,871,918

Cost of shares redeemed (673,801,481) (424,723,050)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 482,327,247 366,553,170

TOTAL INCREASE (DECREASE) IN NET ASSETS 548,822,248 470,582,802

NET ASSETS

Beginning of period 1,039,999,558 569,416,756

End of period (including undistributed net investment income of $113,174,121 and
$76,334,012, respectively) $ 1,588,821,806 $ 1,039,999,558

OTHER INFORMATION
Shares

Sold 89,104,560 66,375,373

Issued in reinvestment of distributions 8,680,536 4,326,619

Redeemed (57,202,172) (37,385,468)

Net increase (decrease) 40,582,924 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>
YEARS ENDED DECEMBER 31,

SELECTED PER-SHARE DATA 1996 1995 1994 1993 C 1992

Net asset value, beginning of period $ 12.050 $ 10.750 $ 11.990 $ 10.820 $ 9.550

Income from Investment Operations .927 .856 .770 .728 .790
Net investment income

Net realized and unrealized gain (loss) .643 1.224 (.910) 1.332 1.290

Total from investment operations 1.570 2.080 (.140) 2.060 2.080

Less Distributions

From net investment income (.920) (.780) (.730) (.794) (.810)

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 $ 12.520 $ 12.050 $ 10.750 $ 11.990 $ 10.820

TOTAL RETURN A, B 14.03% 20.72% (1.64)% 20.40% 23.17%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 1,588,822 $ 1,040,000 $ 569,417 $ 463,931 $ 200,591

Ratio of expenses to average net assets .71% .71% .71% .64% .67%
D

Ratio of net investment income to average net assets 9.09% 9.32% 8.75% 8.69% 10.98%

Portfolio turnover rate 123% 132% 122% 155% 160%

Average commission rate E $ .0370

A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT
REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE
CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN. C 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. 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 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>

NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996

1. SIGNIFICANT ACCOUNTING POLICIES.
High Income Portfolio (the fund) is a fund of Variable Insurance Products
Fund (the trust) and is authorized to issue an unlimited number of shares.
The trust is registered under the Investment Company Act of 1940, as
amended (the 1940 Act), as an open-end management investment company
organized as a Massachusetts business trust. Shares of the fund may only be
purchased by insurance companies for the purpose of funding variable
annuity of variable life insurance products. 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 fund:
SECURITY VALUATION. 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. 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 with
remaining maturities of sixty days or less for which quotations are not
readily available 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 fund 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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, 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, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. 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 fund is informed of the
ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. 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.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
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 foreign
currency transactions, market discount, partnerships, and losses deferred
due to wash sales.
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 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.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, 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 for 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 fund, or to the Joint
Trading Account, at a bank custodian. The
2. OPERATING POLICIES - CONTINUED
REPURCHASE AGREEMENTS - CONTINUED
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 fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
RESTRICTED SECURITIES. The fund is 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 $6,685,221 or
0.4% of net assets.
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 the fund's schedule of investments.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, 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 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 rate is .45%. For
the period, the management fee was equivalent to an annual rate of .59% of
average net assets.
SUB-ADVISER FEE. As the fund's investment sub-advisers, Fidelity Management
& Research (U.K.) Inc., and Fidelity Management & Research (Far East) Inc.,
each a wholly owned subsidiary of FMR, receive a fee from FMR of 110% and
105% respectively, of costs incurred in connection with each sub-advisory
agreement.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the fund's 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, the transfer agent fees
were equivalent to an annual rate of .05% of average net assets.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its 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 the fund's schedule of investments.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of 1.00% of average net assets.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. In addition, the fund has entered into an arrangement
with its custodian whereby interest earned on uninvested cash balances was
used to offset a portion of the fund's expenses.
For the period, the reduction under these arrangements are shown under the
caption "Other Information" on the fund's Statement of Operations.
6. 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
approximately 16% of the outstanding shares of the fund. In addition, two
unaffiliated insurance companies were each record owner of 10% or more of
the total outstanding shares of the fund, totaling 53%.
7. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Information regarding transactions with
affiliated companies is included under the caption "Legend" at the end of
the fund's schedule of investments.
8. ASSET TRANSFER INFORMATION.
In September 1996, the Board of Trustees approved a proposal to liquidate
Fidelity Advisor Annuity High Yield Fund and transfer the assets of
Fidelity Advisor Annuity High Yield Fund to the fund. The liquidation and
transfer of assets are expected to occur in the first quarter of 1997.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Variable Insurance Products Fund and the Shareholders of
High Income Portfolio:
We have audited the accompanying statement of assets and liabilities of
Variable Insurance Products Fund: High Income Portfolio, including the
schedule of portfolio investments, as of December 31, 1996, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Variable Insurance Products Fund: High Income Portfolio as of December
31, 1996, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 10, 1997
DISTRIBUTIONS

The Board of Trustees of High Income Portfolio voted to pay on February 7,
1997, to shareholders of record at the opening of business on February 7,
1997, a distribution of $.11 per share derived from capital gains realized
from sales of portfolio securities and a dividend of $.89 per share from
net investment income.

INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.,
London, England
Fidelity Management & Research (Far East) Inc.,
Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT
Robert A. Lawrence, VICE PRESIDENT
Barry J. Coffman, 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
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
* INDEPENDENT TRUSTEES
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

(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND: OVERSEAS PORTFOLIO

ANNUAL REPORT
DECEMBER 31, 1996
CONTENTS

<TABLE>
<CAPTION>
<S> <C> <C>
MARKET ENVIRONMENT 3 A review of what happened in world markets during
the
last year.

PERFORMANCE 4 How the fund has done over time.

FUND TALK 5 The manager's review of fund performance, strategy
and outlook.

INVESTMENTS 6 A complete list of the fund's investments with their
market values.

FINANCIAL STATEMENTS 10 Statements of assets and liabilities, operations, and
changes in net assets, as well as financial highlights.

NOTES 12 Notes to the financial statements.

REPORT OF INDEPENDENT ACCOUNTANTS 15 The auditors' opinion.

</TABLE>

DISTRIBUTIONS
The Board of Trustees of Overseas Portfolio voted to pay on February 7,
1997, to shareholders of record at the opening of business on
February 7, 1997, a distribution of $1.31 per share derived from capital
gains realized from sales of portfolio securities and a dividend of
$.33 per share from net investment income.

Most stock and bond markets posted positive returns in 1996, aided by
moderate growth and low inflation. Sustained corporate earnings growth and
a favorable interest rate environment also proved beneficial. Japan,
however, was the major exception as an underperforming stock market and a
weak yen undermined returns for U.S.-based investors. The strongest gains
came from the often-volatile emerging bond markets in 1996, while
performance of the bond markets of developed countries was mixed.
U.S. STOCK MARKETS
The Standard & Poor's 500 Index - a broad measure of U.S. stock market
performance - rose 22.96% for the 12 months that ended December 31, 1996,
well above the index's long-term average annual return of about 12%. The
Russell 2000 Index - a measure of small stock performance - rose 16.49%.
The Dow Jones Industrial Average - an index of 30 blue-chip stocks - posted
a return of 28.70%, closing above 6500 for the first time in November.
The U.S. stock market spent much of the past year breaking price and
trading volume records. Solid corporate earnings reports, large cash
inflows into mutual funds, widespread optimism and a generally favorable
interest rate environment propelled share prices higher.
Large-capitalization stocks thrived as investors sought their lower
volatility and higher degree of liquidity over smaller-cap stocks in an
environment where it was sometimes difficult to discern the health of the
economy.
Most industry sectors experienced positive, if not strong performance. At
mid-year, technology stocks suffered from a sell-off sparked by fears that
company earnings were weakening. Nevertheless, this sector proved to be the
strongest in the U.S. market in 1996. Earnings surprises and positive
earnings projections were the main drivers of solid performance, especially
among semiconductor manufacturers, companies that make disk drives and
monitors, and software firms. Even though consensus estimates pointed
toward increases in short-term interest rates by the Fed, financial stocks
- - usually sensitive to changes in interest rates - shrugged off this
concern and posted solid performance based on low interest rates and
positive business prospects. Energy stocks reaped the benefits of
higher-than-expected energy prices, which resulted in part from the delayed
re-entry of Iraq into the world market. Uncertainty over the direction of
the economy benefited consumer nondurables - such as food, beverage and
tobacco companies - health care and traditional big-name growth stocks, as
these companies tend to post steady earnings growth in many economic
environments.
Utilities stocks struggled in 1996 for two reasons. First, and most
important, uncertainty over the direction and form of deregulation in the
sector tended to diminish investor interest. Second, stocks in the sector
tend to move in concert with bonds, which lagged due to periodic inflation
fears and confusing economic signals. Stocks in the telecommunications
field especially were affected by uncertainty over legislation signed into
law in February 1996. Biotechnology issues had a hard time recovering from
a correction in stock prices from overvalued levels that they experienced
earlier in 1996. Cyclical stocks - those that usually rise and fall with
the economy - posted mixed results that largely depended on the outlook for
companies in the specific sector rather than the direction of the economy.
FOREIGN STOCK MARKETS
Foreign stock markets posted mixed results in 1996. The Morgan Stanley
Capital International (MSCI) EAFE Index - which measures stock performance
in Europe, Australia and the Far East - returned 6.05% in 1996. Europe
posted the most consistently strong equity markets due to stronger economic
growth, lower interest rates, higher corporate earnings, the relative
weakness of the continent's major currencies and a new emphasis on
shareholder friendliness by many of the region's corporations. The MSCI
Europe Index was up 21.09% in 1996. The Japanese stock market
underperformed on the weakness of the economic recovery and the uncertainty
for any substantial economic reform. The Tokyo Stock Exchange TOPIX Total
Return Index was off 16.26%. Emerging market equity performance ran the
gamut from negative to positive, with the MSCI Emerging Markets Free Index
returning 6.03% for 1996. While Hong Kong was a top performer - benefiting
from the rising value of the property sector, solid economic growth and
stable interest rates - other Asian markets posted mixed returns as
concerns rose over declining export growth in the region. Latin America
enjoyed a strong first half, but faded toward the end of 1996 due to low
domestic savings rates and inefficient governments, among other factors.
U.S. BOND MARKETS
Uncertainty over the direction of the economy led to mixed performance in
U.S. bond markets in 1996. For the year, the Lehman Brothers Aggregate Bond
Index - a broad measure of the performance of the U.S. taxable bond market
- - posted a total return of 3.63%. Stronger-than-expected economic signals
rattled the bond market in the early spring. Investors spent most of the
summer anticipating a short-term interest rate increase by the Federal
Reserve Board. However, the Fed neither raised nor lowered rates through
the end of 1996. Interest rates responded to the Fed's inaction by falling
during much of October and November. In December, though, bond prices
dropped due to inflation concerns, stronger-than-expected economic data and
comments by Fed Chairman Alan Greenspan that the stock markets may be
overvalued.
FOREIGN BOND MARKETS
While low inflation and moderate growth helped provide a positive backdrop
for most bond markets in 1996, performance in overseas bond markets was
mixed. The Salomon Brothers World Government Bond Index - a measure of
government bond market performance in developed nations - returned 3.62%
for the 12 months that ended December 31, 1996. In Europe, focus centered
on the continuing progress toward the European Monetary Union (EMU).
Attractive opportunities arose as countries worked to meet the requirements
for joining the EMU. However, Germany and Japan - two of the larger
components of the Salomon Brothers World Government Bond Index -
experienced currency problems that hurt returns. In stark contrast to the
developed world, the often-volatile emerging debt markets enjoyed a
particularly strong year, helped by inflows of foreign capital, low
interest rates and the implementation of country-specific reforms -
especially in Latin America. The J.P. Morgan Emerging Markets Bond Index -
of which Latin America is a large component - posted a return of 34.16%
during the period.
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY

OVERSEAS 13.15% 9.15% 7.88%

Morgan Stanley EAFE Index 6.05% 8.15% 7.38%

AVERAGE ANNUAL RETURNS take the fund's 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 figures to the performance of the Morgan Stanley
Capital International Europe, Australasia, Far East (EAFE) Index - a market
capitalization weighted, unmanaged index of over 1,000 foreign stocks.

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)
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
IMAHDR PRASUN SHR__CHT 19961231 19970114 110207 S00000000000001
VIP: Overseas MS EAFE Index
00154 MS001
1987/01/28 10000.00 10000.00
1987/01/31 10000.00 9997.46
1987/02/28 10010.00 10296.66
1987/03/31 10460.00 11140.41
1987/04/30 11220.00 12319.18
1987/05/31 11060.00 12319.14
1987/06/30 10520.00 11926.66
1987/07/31 10400.00 11905.82
1987/08/31 11320.00 12798.54
1987/09/30 11070.00 12597.05
1987/10/31 8760.00 10831.98
1987/11/30 8840.00 10938.65
1987/12/31 9462.16 11263.46
1988/01/31 9138.32 11464.55
1988/02/29 9381.20 12228.75
1988/03/31 9806.24 12980.64
1988/04/30 9968.16 13169.27
1988/05/31 9786.00 12747.12
1988/06/30 9613.96 12411.13
1988/07/31 9543.12 12800.51
1988/08/31 9209.16 11968.24
1988/09/30 9603.84 12491.19
1988/10/31 10028.88 13559.96
1988/11/30 10211.04 14367.68
1988/12/31 10231.28 14447.79
1989/01/31 10534.87 14701.99
1989/02/28 10717.03 14777.56
1989/03/31 10707.38 14487.53
1989/04/30 11023.50 14621.89
1989/05/31 10615.60 13826.42
1989/06/30 10574.81 13593.67
1989/07/31 11563.97 15300.67
1989/08/31 11482.39 14612.54
1989/09/30 12196.21 15278.16
1989/10/31 11533.38 14664.33
1989/11/30 12155.42 15401.50
1989/12/31 12920.24 15969.77
1990/01/31 12746.88 15375.56
1990/02/28 12449.36 14302.43
1990/03/31 12919.92 12812.46
1990/04/30 12991.52 12710.78
1990/05/31 13840.58 14161.09
1990/06/30 14147.46 14036.37
1990/07/31 14863.53 14234.08
1990/08/31 13349.56 12851.83
1990/09/30 12081.09 11060.74
1990/10/31 13206.34 12784.21
1990/11/30 12797.16 12030.10
1990/12/31 12705.10 12224.98
1991/01/31 12827.85 12620.40
1991/02/28 13260.02 13973.29
1991/03/31 12872.18 13134.44
1991/04/30 13155.20 13263.42
1991/05/31 13186.64 13401.82
1991/06/30 12463.37 12417.04
1991/07/31 13081.82 13027.11
1991/08/31 13123.75 12762.56
1991/09/30 13658.34 13481.84
1991/10/31 13752.68 13672.96
1991/11/30 13260.02 13034.64
1991/12/31 13721.24 13707.79
1992/01/31 13888.95 13415.00
1992/02/29 13599.52 12934.85
1992/03/31 13323.28 12080.93
1992/04/30 14152.01 12138.36
1992/05/31 14768.23 12950.85
1992/06/30 14491.99 12336.56
1992/07/31 13567.65 12020.83
1992/08/31 13450.78 12774.79
1992/09/30 12908.92 12522.52
1992/10/31 12027.08 11865.66
1992/11/30 11963.33 11977.32
1992/12/31 12250.20 12039.27
1993/01/31 12600.81 12037.79
1993/02/28 12847.62 12401.41
1993/03/31 13738.91 13482.39
1993/04/30 14651.94 14761.90
1993/05/31 14967.16 15073.67
1993/06/30 14597.60 14838.49
1993/07/31 15173.67 15357.91
1993/08/31 15988.88 16186.97
1993/09/30 15901.92 15822.62
1993/10/31 16478.00 16310.23
1993/11/30 15782.36 14884.55
1993/12/31 16825.82 15959.32
1994/01/31 17923.63 17308.60
1994/02/28 17607.51 17260.66
1994/03/31 17170.60 16517.22
1994/04/30 17738.58 17218.03
1994/05/31 17520.13 17119.18
1994/06/30 17334.44 17361.11
1994/07/31 17793.20 17528.07
1994/08/31 18000.73 17943.05
1994/09/30 17531.05 17377.92
1994/10/31 17891.50 17956.61
1994/11/30 17214.29 17093.61
1994/12/31 17115.99 17200.65
1995/01/31 16406.01 16539.88
1995/02/28 16449.17 16492.41
1995/03/31 16955.64 17521.06
1995/04/30 17440.09 18180.00
1995/05/31 17682.31 17963.28
1995/06/30 17847.46 17648.27
1995/07/31 18640.19 18746.98
1995/08/31 18122.72 18031.85
1995/09/30 18386.96 18384.02
1995/10/31 18023.62 17889.85
1995/11/30 18232.82 18387.61
1995/12/31 18783.33 19128.45
1996/01/31 19135.65 19206.98
1996/02/29 19177.79 19271.92
1996/03/31 19471.10 19681.17
1996/04/30 20012.59 20253.37
1996/05/31 20023.87 19880.67
1996/06/30 20170.53 19992.56
1996/07/31 19572.63 19408.23
1996/08/31 19719.29 19450.76
1996/09/30 20294.62 19967.48
1996/10/31 20091.56 19763.16
1996/11/30 21140.70 20549.50
1996/12/31 21253.51 20285.15
IMATRL PRASUN SHR__CHT 19961231 19970114 110211 R00000000000123

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 December
31, 1996, the value of the investment would have grown to $21,254 - a
112.54% increase on the initial investment. With reinvested dividends and
capital gains, if any, a $10,000 investment in the Morgan Stanley EAFE
Index would have grown to $20,285 over the same period - a 102.85%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1996
% OF FUND'S
INVESTMENTS

Veba AG Ord 2.6

Volvo AB Class B 2.2

Toyota Motor Corp. 2.0

Novartis AG (Reg.) 1.8

Total SA Class B 1.7

TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1996
% OF FUND'S
INVESTMENTS

Finance 14.3

Durables 12.4

Basic Industries 10.7

Utilities 8.5

Energy 8.3

TOP FIVE COUNTRIES AS OF DECEMBER 31, 1996
(EXCLUDING CASH EQUIVALENTS) % OF FUND'S
INVESTMENTS

Japan 22.4

United Kingdom 12.7

France 9.4

Germany 6.6

Netherlands 6.0

TOP COUNTRIES ARE BASED ON THE LOCATION OF THE ISSUER OF EACH SECURITY,
INDICATING WHERE THE FUND IS EXPOSED TO POLITICAL AND CREDIT RISKS.
PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS, IF
APPLICABLE.
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW

An interview with
Richard Mace,
Portfolio Manager
of Overseas Portfolio
Q. RICK, HOW DID THE FUND PERFORM?
A. Quite well. For the 12-month period that ended December 31, 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 6.05% for the period.
Q. WHAT WERE SOME OF THE MORE SIGNIFICANT CHANGES YOU MADE TO THE PORTFOLIO
OVER THE COURSE OF THE YEAR?
A. I continued to sell Japanese stocks in order to keep the fund
underweighted in Japan relative to the EAFE Index. I've placed the proceeds
from these sales in European cyclical stocks, which tend to benefit from a
strong economy. This strategy has been effective in moving the fund into
undervalued European equities that I believe have appealing risk/reward
characteristics. It also has limited the fund's exposure to the negative
effects of the weak Japanese yen and the underperforming Japanese stock
market.
Q. DOES THIS MEAN YOU HAVE A NEGATIVE VIEW ON JAPAN?
A. Not at all. In fact, I solidified the fund's position in what I consider
my value holdings in Japan. These are companies that I believe will benefit
from the weak yen, the recent Japanese economic revival, world economic
growth and solid management intent on raising the value of their
businesses. I only invest with conviction, and I believed in the fund's
remaining Japanese holdings. Some examples included Toyota and Honda, and
broad-based export companies such as Canon.
Q. BASED ON YOUR INVESTMENTS DURING THE PERIOD, YOU SAW OPPORTUNITIES IN
EUROPE . . .
A. Six months ago, I saw great potential in Europe. Stocks were generally
undervalued, there was the potential for economic recovery and some
companies were taking steps to raise shareholder value. Some stocks have
appreciated and realized their underlying value. Economic growth has come,
although not as uniformly as I would have hoped. Additionally, many more
corporate managements have been proactive in growing the value of their
businesses by restructuring their balance sheets, selling off
poor-performing subsidiaries and redeploying excess cash more efficiently.
Q. WHAT SPECIFIC TYPES OF COMPANIES DID YOU LIKE IN EUROPE?
A. As I said before, I looked for cyclical names - especially in the energy
sector. I believed many European energy stocks' prices did not reflect
rising oil prices and were discounting lower oil prices that never came to
pass. Some energy stocks in the fund were Total, Royal Dutch Petroleum,
Shell Transport & Trading and British Petroleum.
Q. MANY OF THE FUND'S CANADIAN HOLDINGS ARE RELATIVELY NEW TO THE
PORTFOLIO. WHAT WAS THE STORY THERE?
A. Many Canadian oil and gas, natural resources and bank stocks were
attractively valued during the period. Two additions included Canadian
Natural Resources and Inco.
Q. DID YOU HAVE ANY DISAPPOINTMENTS?
A. Yes. One would be the weakness of the Japanese market. I consider
another to be the legal and governmental impediments to recognizing
shareholder value in Europe. For example, it's not yet legal in many
European countries for corporations to buy back stock, even though many
corporate managements seek to do so. I also continue to be disappointed by
the problems that arise from partial government ownership of companies.
Take the case of Eramet, which is one of the fund's French holdings. It's
been reported in the media that the French government, a partial owner of
Eramet, is pressuring the company's management to sell a nickel mine it
owns in the colony of New Caledonia. The government has denied the report.
However, it's also been reported that the government will take steps to
oust the management if they choose not to comply. I think it's unfortunate
that the government may be unduly influencing management's decision-making
process.
Q. WHAT'S YOUR OUTLOOK?
A. I'm hopeful that the economic recoveries that have begun in Europe and
Japan will continue. I think the key to a company's stock price will be the
company's shareholder-friendly attitude, reflected in stock buybacks or a
proactive management. Therefore, I will try to position the fund in
companies that could benefit from economic growth and that are focused on
providing returns for shareholders.

VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
INVESTMENTS DECEMBER 31, 1996

Showing Percentage of Total Value of Investment in Securities

COMMON STOCKS - 86.9%
SHARES VALUE (NOTE 1)
ARGENTINA - 0.2%
Perez Companc Class B 406,980 $ 2,861,596
AUSTRALIA - 1.4%
Brambles Industries Ltd. 375,600 7,329,296
CSR Ltd. 1,521,102 5,319,811
Coles Myer Ltd. 680,400 2,801,427
Western Mining Holdings Ltd. 917,611 5,783,849
Woolworths Ltd. 1,143,300 2,753,519
23,987,902
BELGIUM - 0.2%
Credit Communal Holding/Dexia (b) 26,000 2,371,343
Delhaize Freres & Cie Le Lion SA 22,000 1,306,491
3,677,834
BERMUDA - 0.2%
Fuji International Trust unit
sponsored ADR (a)(b) 100 2,630,565
BRAZIL - 1.0%
Multicanal Participacoes SA
sponsored ADR (a) 90,500 1,159,531
Telebras sponsored ADR 213,300 16,317,450
17,476,981
CANADA - 2.5%
Alliance Communications Corp.
Class B (non-vtg.) (a) 28,900 255,090
Alcan Aluminium Ltd. 259,900 8,768,556
BCE, Inc. 102,800 4,896,845
Bre-X Minerals Ltd. (a) 289,700 4,585,834
Bro-X Minerals Ltd. (a) 41,630 72,883
Canada Occidental Petroleum Ltd. 66,600 1,071,255
Canadian Natural Resources Ltd. (a) 190,400 5,222,337
Greenstone Resources Ltd. (a) 138,000 1,605,646
Inco Ltd. 403,600 12,880,694
Renaissance Energy Ltd. (a) 64,100 2,181,322
41,540,462
DENMARK - 0.5%
Den Danske Bank Group AS 31,900 2,570,617
International Service Systems AS,
Series B 178,100 4,683,264
Unidanmark AS Class A 32,500 1,681,652
8,935,533
EMERGING MARKETS - 0.1%
GT Global Developing Markets Fund 51,000 592,875
Templeton Dragon Fund, Inc. 22,500 362,812
955,687
FINLAND - 1.8%
Cultor OY, Series 1 56,100 3,045,470
Huhtamaki Ord. 176,300 8,192,521
Metsa-Serla Ltd. Class B 343,400 2,572,592
Nokia Corp. AB, Series A 31,800 1,842,317
Pohjola Class B 226,500 5,090,496
UPM-Kymmene Corp. 77,200 1,617,693
Valmet OY 317,100 5,577,412
Valmet OY (b) 108,000 1,885,521
29,824,022
FRANCE - 9.4%
Alcatel Alsthom Compagnie
Generale d'Electricite SA 280,739 22,545,668
Axa SA 134,018 8,521,376
CLF-Dexia 56,000 4,877,071

SHARES VALUE (NOTE 1)
Canal Plus SA 35,300 $ 7,794,566
Compagnie de Saint Gobain 9,500 1,343,545
Credit Commercial de France Ord. 50,500 2,335,260
Eramet SA 159,097 8,338,032
Generale des Eaux, Cie 18,500 2,292,004
Groupe Danone 33,000 4,597,110
Lafarge Coppee SA 70,190 4,210,048
Michelin SA (Compagnie Generale des
Etablissements) Class B 325,824 17,584,451
Nationale Elf Aquitaine 139,400 12,685,669
Paribas SA (Cie Financiere) Class A 13,300 899,224
Pechiney SA Class A 468,480 19,623,806
Peugeot SA Ord. 18,000 2,025,434
Rhone Poulenc SA Class A 24,800 845,303
Societe Generale Class A 25,800 2,788,786
Total SA Class B 338,215 27,500,333
Usinor Sacilor 374,300 5,445,019
Valeo SA 4,900 302,119
156,554,824
GERMANY - 6.3%
Allianz Versich Holdings Ord. (Reg.) 450 817,094
BASF AG 125,100 4,747,551
Bayer AG 291,500 11,913,396
Buderus AG 2,900 1,429,776
Continental Gummi-Werke AG 207,200 3,736,724
Daimler-Benz AG Ord. (a) 151,600 10,439,403
Dresdner Bank AG Ord. 55,700 1,663,954
Hoechst AG Ord. 98,900 4,629,020
Karstadt AG 3,700 1,200,130
Mannesmann AG Ord. 10,500 4,550,114
New Germany Fund, Inc. (The) 106,000 1,417,750
Veba AG Ord. 756,800 43,822,230
Volkswagen AG 35,600 14,757,314
105,124,456
HONG KONG - 2.1%
Great Eagle Holdings Ltd. 994,000 4,099,632
HSBC Holdings PLC 700,000 15,228,570
Hong Kong & China Gas Co. Ltd. 2,220,000 4,291,034
Hutchison Whampoa Ltd. Ord. 234,000 1,837,934
Hysan Development Co. Ltd. 1,481,000 5,897,576
Oriental Press Group Ltd. (warrants) (a) 337,800 24,021
Peregrine Investments Holdings Ltd. 1,168,000 2,000,905
Wharf Holdings Ltd. (b) 380,000 1,896,438
35,276,110
INDONESIA - 0.2%
Matahari Putra Prima PT (For. Reg.) 2,724,000 3,171,465
IRELAND - 0.8%
Bank of Ireland, Inc. 998,600 9,117,508
Independent Newspapers PLC 824,216 4,094,458
13,211,966
ITALY - 1.5%
Credito Italiano Ord. 1,430,300 1,571,635
Eni Spa 2,141,500 11,007,995
Magneti Marelli Spa 1,524,400 1,897,970
Montedison Spa Ord. (a) 1,294,852 885,413
Olivetti & Co. Spa Ord. (a) 4,522,150 1,586,031
Pirelli Spa Ord. 1,593,200 2,941,860
SAI (Sta Assieuratrice Industriale) Spa 193,100 1,772,756
Telecom Italia Mobile Spa 711,400 1,801,933
Telecom Italia Spa 709,700 1,842,042
25,307,635
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
JAPAN - 22.3%
Acom Co. Ltd. 35,900 $ 1,529,504
Amway Japan Ltd. 159,900 5,130,039
Aoyama Trading Co. Ord. 221,800 5,891,712
Asahi Breweries Ltd. 241,000 2,494,179
Asahi Chemical Industry Co. Ltd. 250,000 1,414,403
Bank of Tokyo-Mitsubishi Ltd. 120,000 2,225,097
Bridgestone Corp. 160,000 3,035,791
Canon, Inc. 886,000 19,561,535
Citizen Watch Co. Ltd. Ord. 445,000 3,185,425
DDI Corp. Ord. 802 5,298,249
Daito Trust Construction Co. 704,400 7,836,792
Daiwa House Industry Co. Ltd. 280,000 3,598,103
Daiwa Securities Co. Ltd. 811,000 7,204,226
Denny's Japan Co. Ltd. 67,000 2,045,537
Fuji Bank Ltd. 256,000 3,731,263
Fuji Photo Film Co. Ltd. 775,000 25,532,557
Fujitsu Ltd. 346,000 3,222,768
Hitachi Koki Co. Ltd. Ord. 144,000 1,029,547
Hitachi Ltd. 1,041,000 9,696,248
Hitachi Maxell Ltd. 353,000 7,793,704
Honda Motor Co. Ltd. 541,000 15,443,812
Hoya Corp. 31,000 1,216,473
Ito-Yokado Co. Ltd. 277,000 12,040,362
Jusco Co. Ltd. 51,000 1,728,590
Kao Corp. 136,000 1,583,441
Kobe Steel Ltd. Ord. (a) 733,000 1,542,492
Komatsu Ltd. Ord. 1,144,000 9,373,006
Kyocera Corp. 26,000 1,618,974
Matsushita Electric Industrial Co. Ltd. 877,000 14,295,213
Minebea Co. Ltd. 707,000 5,902,337
Minolta Camera Co. Ltd. 141,000 852,445
Mitsubishi Electric Co. Ord. 672,000 3,998,965
Mitsubishi Estate Co. Ltd. 265,000 2,719,707
Mitsubishi Heavy Industries Ltd. 1,001,000 7,942,389
NEC Corp. 132,000 1,593,790
NKK Corp. (a) 684,000 1,539,664
Namco Ltd. 69,100 2,115,610
Nichiei Co. Ltd. 27,900 2,057,309
Nikko Securities Co. Ltd. 537,000 4,001,449
Nintendo Co. Ltd. Ord. 190,800 13,641,501
Nippon Telegraph &
Telephone Corp. Ord. 220 1,665,890
Nitto Denko Corp. 107,000 1,568,780
Nomura Securities Co. Ltd. 755,000 11,329,883
Omron Corp. 156,000 2,932,988
Onward Kashiyama & Co. Ltd. 307,000 4,315,740
Orix Corp. 242,000 10,059,853
Ricoh Co. Ltd. Ord. 578,000 6,629,927
Rohm Co. Ltd. 80,000 5,243,639
Sakura Bank Ltd. 913,000 6,519,741
Sankyo Co. Ltd. 216,000 6,110,220
Sekisui Chemical Co. Ltd. 232,000 2,341,009
Sho Bond Corp. Ord. 1,800 48,435
Sony Corp. 211,500 13,844,631
TDK Corp. 106,000 6,902,113
Tadano Ltd. 17,000 120,664
Takeda Chemical Industries Ltd. (a) 1,216,000 25,484,088
Toyota Motor Corp. 1,148,000 32,969,728
Uni Charm Corp. Ord. 75,000 1,836,999
Uny Co. Ltd. 221,000 4,040,707
York Benimaru Co. 22,300 621,207
371,250,450

SHARES VALUE (NOTE 1)
KOREA (SOUTH) - 0.3%
Korea Electric Power Corp. 200,070 $ 5,824,523
MEXICO - 0.4%
Cifra SA Class C (a) 1,824,100 2,220,282
Gruma SA Class B sponsored ADR (a)(b) 83,400 2,001,600
Tubos De Acero De Mexico ADR (a) 144,900 2,300,288
6,522,170
MALAYSIA - 0.1%
Arab Malaysian Corp. BHD 362,000 1,806,058
MULTI-NATIONAL - 0.0%
Morgan Stanley Asia-Pacific Fund, Inc. 35,200 343,200
NETHERLANDS - 6.0%
AKZO Nobel NV 112,000 15,293,641
DSM NV 61,900 6,102,968
ING Groep NV 426,862 15,362,389
KBB NV Ord. 34,300 2,470,838
KLM Royal Dutch Air Lines NV 76,896 2,162,325
Koninklijke KNP BT NV 32,600 711,115
New Holland NV (a) 146,000 3,047,750
Philips Electronics NV (Bearer) 292,900 11,863,102
Royal Dutch Petroleum Co. Ord. 115,500 20,242,406
Unilever NV Ord. 76,600 13,544,500
Vendex International NV 18,400 786,762
Vendex International NV (b) 188,500 8,060,030
99,647,826
NETHERLANDS ANTILLES - 0.4%
Schlumberger Ltd. 60,300 6,022,463
NORWAY - 1.4%
Den Norske Bank AS Class A
Free shares 1,903,000 7,310,050
Norsk Hydro AS 156,350 8,481,828
Orkla AS Class B (non-vtg.) 30,400 1,925,619
Saga Petroleum AS Class B 323,100 5,065,851
22,783,348
PERU - 0.1%
Compania de Minas Buenaventura SA
Class B sponsored ADR (a) 78,600 1,326,375
PORTUGAL - 0.1%
Telecel Comunicacoes Pessoais SA (a) 19,700 1,257,041
SINGAPORE - 0.1%
Kim Engineering Holdings Ltd. 2,529,000 2,313,055
SOUTH AFRICA - 0.2%
JCI Ltd. (a) 280,000 2,753,019
SPAIN - 3.6%
ACERINOX SA (Reg.) 27,050 3,906,829
Banco Bilbao Vizcaya SA Ord. (Reg.) 258,000 13,923,935
Banco de Santander SA Ord. (Reg.) 193,000 12,347,602
Banco Intercontinental Espanol 30,600 4,742,305
FOCSA (Fomento Construcciones y
Contratas SA) 30,664 2,856,528
Tabacalera SA, Series A 276,700 11,908,176
Telefonica de Espana SA Ord. 474,500 11,014,069
60,699,444
SWEDEN - 5.6%
ABB AB, Series B 15,000 1,690,597
Assi Doman AB Free shares 59,500 1,650,449
Astra AB Class A Free shares 102,400 5,038,038
Bure Investment AB (b) 62,000 733,176
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SWEDEN - CONTINUED
Electrolux AB 115,000 $ 6,648,515
Esselte AB Class B Free shares 86,700 1,911,295
Investor AB Class B Free shares 161,300 7,099,918
Nordbanken AB 113,900 3,433,803
Scania AB Class B 377,500 9,396,648
Scania AB, Series B (warrants) (a) 170,000 151,395
Skandia Foersaekrings AB 230,000 6,480,623
Skandinaviska Enskilda Banken Class A
Free shares 198,600 2,029,593
Svenska Cellulosa AB (SCA)
Class B Ord. 95,400 1,928,989
Svenska Handelsbanken 54,000 1,545,188
Swedish Match Co. 1,807,000 6,331,418
Volvo AB Class B 1,674,500 36,791,989
92,861,634
SWITZERLAND - 3.3%
Credit Suisse Group (Reg.) 88,700 9,091,502
Julius Baer Holding AG 1,600 1,673,351
Nestle SA (Reg.) 5,925 6,346,795
Novartis AG (Reg.) 26,258 30,006,347
Roche Holding AG
participation certificates 900 6,987,328
54,105,323
UNITED KINGDOM - 12.7%
Asda Group PLC 1,738,900 3,663,845
BAT Industries PLC Ord. 200,100 1,659,013
Barclays PLC Ord. 518,000 8,864,467
Barratt Developments PLC 1,384,725 5,977,525
Bass PLC Ord. 236,100 3,324,491
Blue Circle Industries PLC 409,800 2,506,095
Boots Co. PLC (The) 303,600 3,130,802
British Airways PLC Ord. 203,600 2,115,271
British Aerospace PLC 134,500 2,944,493
British Petroleum PLC Ord. 1,498,136 17,964,149
British Telecommunications PLC Ord. 725,500 4,908,987
Cable & Wireless PLC Ord. 321,400 2,686,724
Caradon PLC 2,104,700 8,652,843
Christies International PLC 86,800 344,957
Cookson Group PLC 3,517,200 14,188,789
Courtaulds PLC Ord. 42,800 289,600
Dixons Group PLC 1,022,700 9,512,736
Glaxo Holdings PLC 524,800 8,540,333
Granada Group PLC 652,900 9,651,945
Grand Metropolitan PLC 1,446,745 11,350,496
ICI (Imperial Chemical Industries)
PLC Ord. 123,300 1,625,283
Ladbroke Group PLC Ord. 463,000 1,840,036
Lloyds TSB Group PLC 2,158,267 15,934,550
Lucas Varity PLC 210,000 802,198
National Grid Co. PLC 1,046,400 3,495,342
National Westminster Bank PLC Ord. 304,020 3,572,594
Prudential Corp. PLC 362,913 3,058,616
Redland PLC Ord. 428,000 2,705,375
Rentokil Group PLC 112,800 850,196
Rolls Royce PLC Ord. 945,384 4,161,968
Rugby Group PLC 1,465,600 2,359,938
Sears PLC 2,152,400 3,465,838
Shell Transport & Trading Co. PLC:
(Reg.) 940,000 16,279,324
ADR 17,300 1,771,088
SmithKline Beecham PLC Ord. 786,347 10,883,860

SHARES VALUE (NOTE 1)
Unigate PLC 313,800 $ 2,236,164
Unilever PLC Ord. 269,600 6,534,821
Vodafone Group PLC 1,713,404 7,249,601
Vodafone Group PLC sponsored ADR 18,400 761,300
Wickes PLC 806,200 276,204
212,141,857
UNITED STATES OF AMERICA - 2.1%
Alumax, Inc. (a) 360,100 12,018,338
Aluminum Co. of America 196,000 12,495,000
Jefferson Smurfit Corp. (a) 20,700 332,494
Kaiser Aluminum Corp. (a) 414,300 4,816,238
MCI Communications Corp. 115,500 3,775,406
Newmont Mining Corp. 42,500 1,901,875
35,339,351
TOTAL COMMON STOCKS
(Cost $1,250,112,325) 1,447,534,175
PREFERRED STOCKS - 1.6%
CONVERTIBLE PREFERRED STOCKS - 0.1%
JAPAN - 0.1%
AJL participating trust exchangeable 71,700 1,174,088
NONCONVERTIBLE PREFERRED STOCKS - 1.5%
GERMANY - 0.3%
Volkswagen AG 13,900 4,499,578
ITALY - 1.2%
SAI (Sta Assicuratrice Industriale) Spa 587,000 2,098,584
Stet (Societa Finanziaria
Telefonica) Spa 4,463,700 15,061,323
Telecom Italia Mobile Spa de Risp 2,219,000 3,217,406
20,377,313
TOTAL NONCONVERTIBLE PREFERRED STOCKS 24,876,891
TOTAL PREFERRED STOCKS
(Cost $17,409,312) 26,050,979
CORPORATE BONDS - 0.3%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
BERMUDA - 0.3%
MBL International Finance of
Bermuda 3%, 11/30/02
(Cost $4,974,627) Aa2 $ 4,392,000 4,655,520
GOVERNMENT OBLIGATIONS - 0.0%
U.S. Treasury Bills, yield at date of purchase
4.97% to 5.33%, 3/6/97 (c)
(Cost $491,752) 500,000 495,650
CASH EQUIVALENTS - 11.2%
MATURITY
AMOUNT
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 6.75%, dated
12/31/96 due 1/2/97 $ 186,103,763 $ 186,034,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,459,022,016) $ 1,664,770,324
FUTURES CONTRACTS
EXPIRATION UNDERLYING FACE UNREALIZED
DATE AMOUNT AT VALUE GAIN/(LOSS)
PURCHASED
142 Nikkei 225 Stock
Index Contracts Mar. 1997 $ 13,759,800 $ (470,340)
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 0.8%
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 $19,578,673 or 1.2% of net
assets.
3. A portion of the security was pledged to cover margin requirements for
futures contracts. At the period end, the value of securities pledged
amounted to $421,303.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $1,375,490,679 and $1,257,669,344, respectively.
The market value of futures contracts opened and closed during the period
amounted to $21,162,620 and $6,694,480 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 $362,193 for the period
(see Note 4 of Notes to Financial Statements).
MARKET SECTOR DIVERSIFICATION (UNAUDITED)
As a Percentage of Total Value of Investment in Securities
Aerospace & Defense 0.4%
Basic Industries 10.7
Construction & Real Estate 3.3
Durables 12.4
Energy 8.3
Finance 14.3
Health 5.7
Holding Companies 0.1
Industrial Machinery & Equipment 4.3
Media & Leisure 2.6
Nondurables 5.3
Precious Metals 0.9
Retail & Wholesale 4.5
Services 0.7
Repurchase Agreements 11.2
Technology 6.1
Transportation 0.7
Utilities 8.5
100.0%
INCOME TAX INFORMATION
At December 31, 1996, the aggregate cost of investment securities for
income tax purposes was $1,461,448,025. Net unrealized appreciation
aggregated $203,322,299, of which $263,621,221 related to appreciated
investment securities and $60,298,922 related to depreciated investment
securities.
The fund hereby designates approximately $90,538,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
For the period, interest and dividends from foreign countries were
$36,399,701. Taxes accrued or paid to foreign countries were $4,140,215.
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES

<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1996

ASSETS

Investment in securities, at value (including repurchase agreements of $186,034,000) (cost $1,459,022,016) $ 1,664,770,324
- -
See accompanying schedule

Cash 343,982

Receivable for investments sold 4,499,183

Receivable for fund shares sold 1,381,858

Dividends receivable 2,631,493

Interest receivable 10,980

Other receivables 48,345

TOTAL ASSETS 1,673,686,165

LIABILITIES

Payable for investments purchased $ 3,244,113

Payable for fund shares redeemed 1,450,217

Accrued management fee 1,031,065

Payable for daily variation on 16,374
futures contracts

Other payables and 343,158
accrued expenses

TOTAL LIABILITIES 6,084,927

NET ASSETS $ 1,667,601,238

Net Assets consist of:

Paid in capital $ 1,325,904,904

Undistributed net investment income 22,748,929

Accumulated undistributed net realized gain (loss) on investments and foreign 113,659,177
currency transactions

Net unrealized appreciation (depreciation) on investments 205,288,228
and assets and liabilities in foreign currencies

NET ASSETS, for 88,524,438 $ 1,667,601,238
shares outstanding

NET ASSET VALUE, offering price $18.84
and redemption price per share ($1,667,601,238 (divided by) 88,524,438 shares)

</TABLE>

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996

INVESTMENT INCOME $ 4,427,657
Special dividend from Volvo AB
Class B

Dividends 31,954,205

Interest 10,284,426

46,666,288

Less foreign taxes withheld (4,140,215
)

TOTAL INCOME 42,526,073

EXPENSES

Management fee $ 11,667,177

Transfer agent fees 892,751

Accounting fees and expenses 760,136

Non-interested trustees' compensation 8,998

Custodian fees and expenses 881,998

Registration fees 7,276

Audit 50,845

Legal 22,968

Miscellaneous 6,000

Total expenses before reductions 14,298,149

Expense reductions (132,276 14,165,873
)

NET INVESTMENT INCOME 28,360,200

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:

Investment securities 114,832,092

Foreign currency transactions (198,995
)

Futures contracts (238,000 114,395,097
)

Change in net unrealized appreciation (depreciation) on:

Investment securities 47,133,390

Assets and liabilities in 9,027
foreign currencies

Futures contracts (470,340 46,672,077
)

NET GAIN (LOSS) 161,067,174

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 189,427,374

OTHER INFORMATION $ 131,377
Expense reductions
Directed brokerage arrangements

Custodian interest credits 899

$ 132,276

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995

<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 28,360,200 $ 24,265,663
Net investment income

Net realized gain (loss) 114,395,097 10,642,375

Change in net unrealized appreciation (depreciation) 46,672,077 85,131,645

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 189,427,374 120,039,683

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 649,592,564 466,436,535
Net proceeds from sales of shares

Reinvestment of distributions 35,047,196 9,787,086

Cost of shares redeemed (514,552,645) (541,043,324)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 170,087,115 (64,819,703)

TOTAL INCREASE (DECREASE) IN NET ASSETS 324,467,293 45,432,894

NET ASSETS 1,343,133,945 1,297,701,051
Beginning of period

End of period (including undistributed net investment income of $22,748,929 and
$18,738,964, respectively) $ 1,667,601,238 $ 1,343,133,945

OTHER INFORMATION
Shares

Sold 37,069,614 29,090,043

Issued in reinvestment of distributions 2,053,145 652,472

Redeemed (29,349,715) (33,802,732)

Net increase (decrease) 9,773,044 (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>
YEARS ENDED DECEMBER 31,

SELECTED PER-SHARE DATA 1996 1995 1994 1993 C 1992

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.06 $ 15.67 $ 15.48 $ 11.53 $ 13.09

Income from Investment Operations

Net investment income .32 F, G .17 .19 .06 .16

Net realized and unrealized gain (loss) 1.88 1.34 .08 4.16 (1.54)

Total from investment operations 2.20 1.51 .27 4.22 (1.38)

Less Distributions

From net investment income (.20) (.06) (.08) (.18) (.18)

In excess of net investment income - - - (.04) -

From net realized gain (.22) (.02) - - -

In excess of net realized gain - (.04) - (.05) -

Total distributions (.42) (.12) (.08) (.27) (.18)

Net asset value, end of period $ 18.84 $ 17.06 $ 15.67 $ 15.48 $ 11.53

TOTAL RETURN A, B 13.15% 9.74% 1.72% 37.35% (10.72)%

RATIOS AND SUPPLEMENTAL DATA

Net assets, end of period (000 omitted) $ 1,667,601 $ 1,343,134 $ 1,297,701 $ 777,961 $ 180,837

Ratio of expenses to average net assets .93% .91% .92% 1.03% 1.14%

Ratio of expenses to average net assets after expense reductions .92% D .91% .92% 1.03% 1.14%

Ratio of net investment income to average net assets 1.84% 1.88% 1.28% 1.21% 1.86%

Portfolio turnover rate 92% 50% 42% 42% 61%

Average commission rate E $ .0137

A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES
NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
FINANCIAL STATEMENTS). B TOTAL
RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS
SHOWN. C 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. D 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 5 OF NOTES TO FINANCIAL STATEMENTS). E 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. F NET INVESTMENT INCOME
PER SHARE INCLUDES A
SPECIAL DIVIDEND FROM VOLVO AB CLASS B WHICH AMOUNTED TO $.05 PER
SHARE. G NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED
ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.

</TABLE>

NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1996

4. SIGNIFICANT ACCOUNTING POLICIES.
Overseas Portfolio (the fund) is a fund of Variable Insurance Products Fund
(the trust) and is authorized to issue an unlimited number of shares. The
trust is registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as an open-end management investment company organized as a
Massachusetts business trust. Shares of the fund may only be purchased by
insurance companies for the purpose of funding variable annuity or variable
life insurance contracts. The 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 fund:
SECURITY VALUATION. 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 with remaining maturities of sixty days or less for
which quotations are not readily available 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 fund 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. Income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Purchases and
sales of securities are translated into U.S. dollars at the contractual
currency exchange rates established at the time of each trade.
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, 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, the fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
its fiscal year. The fund may be subject to foreign taxes on income, gains
on investments or currency repatriation. The fund accrues such taxes as
applicable. The schedule of investments includes information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME. 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 fund is informed of the
ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at the fair market value of the securities received. 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.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. Certain foreign currency gains (losses) are taxable as
ordinary income and, therefore, increase (decrease) taxable ordinary income
available for distribution.
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 paydown
gains/losses on certain securities, futures and options transactions,
foreign currency transactions, passive foreign investment companies (PFIC),
market discount and losses deferred due to wash sales.
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 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.
5. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated securities.
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 foreign currency contracts is determined using contractual
currency exchange rates established at the time of each trade. The cost of
the foreign currency contracts is included in the cost basis of the
associated investment.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, 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
2. OPERATING POLICIES - CONTINUED
JOINT TRADING ACCOUNT - CONTINUED
are invested in one or more repurchase agreements that mature in 60 days or
less from the date of purchase for 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 fund, 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 fund's
investment adviser, is responsible for determining that the value of the
underlying securities remains in accordance with the market value
requirements stated above.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock market. Buying futures tends to increase the fund's
exposure to the underlying instrument, while selling futures tends to
decrease the fund's exposure to the underlying instrument or hedge other
fund investments. Futures contracts involve, to varying degrees, risk of
loss in excess of the futures variation margin reflected in the Statement
of Assets and Liabilities. The underlying face amount at value of any open
futures contracts at period end, is shown in the schedule of investments
under the caption "Futures Contracts." This amount reflects each contract's
exposure to the underlying instrument at period end. Losses may arise from
changes in the value of the underlying instruments, if there is an illiquid
secondary market for the contracts, or if the counterparties do not perform
under the contracts' terms. Futures contracts are valued at the settlement
price established each day by the board of trade or exchange on which they
are traded.
RESTRICTED SECURITIES. The fund is 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, the
fund had no investments in restricted securities (excluding 144A issues).
6. 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 the fund's schedule of investments.
7. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, 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
.2500% to .5200% 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 rate is .45%. For the
period, the management fee was equivalent to an annual rate of .76% of
average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, entered into sub-advisory
agreements with Fidelity Management & Research (U.K.) Inc., Fidelity
Management & Research Far East Inc., and 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 fund's 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, the transfer agent fees
were equivalent to an annual rate of .06% of average net assets.
ACCOUNTING FEES. Fidelity Service Co. (FSC), an affiliate of FMR, maintains
the fund's accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its 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 the fund's schedule of investments.
8. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of 1.50% of average net assets.
FMR has directed certain portfolio trades to brokers who paid a portion of
the fund's expenses. In addition, the fund has entered into an arrangement
with its custodian whereby interest earned on uninvested cash balances was
used to offset a portion of the fund's expenses.
For the period, the reduction under these arrangements are shown under the
caption "Other Information" on the fund's Statement of Operations.
9. 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
approximately 15% of the outstanding shares of the fund. In addition, one
unaffiliated insurance company was record owner of 10% or more of the total
outstanding shares of the fund, totaling 35%.
10. ASSET TRANSFER INFORMATION.
In September 1996, the Board of Trustees approved a proposal to liquidate
Fidelity Advisor Annuity Overseas Fund and transfer the assets of Fidelity
Advisor Annuity Overseas Fund to the fund. The liquidation and transfer of
assets are expected to occur in the first quarter of 1997.
REPORT OF INDEPENDENT ACCOUNTANTS

To the Trustees of Variable Insurance Products Fund and the Shareholders of
Overseas Portfolio:
We have audited the accompanying statement of assets and liabilities of
Variable Insurance Products Fund: Overseas Portfolio, including the
schedule of portfolio investments, as of December 31, 1996, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility
of the fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1996 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Variable Insurance Products Fund: Overseas Portfolio as of December 31,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended,
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 10, 1997
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.,
London, England
Fidelity Management & Research (Far East) Inc.,
Tokyo, Japan
Fidelity International Investment Advisors
Pembroke, Bermuda
Fidelity International Investment Advisors (U.K.) Limited
Kent, England
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
William J. Hayes, VICE PRESIDENT
Robert A. Lawrence, VICE PRESIDENT
Richard R. Mace, 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

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 Chase Manhattan Bank, N.A., New York, NY
* INDEPENDENT TRUSTEES