(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND
MONEY MARKET PORTFOLIO
HIGH INCOME PORTFOLIO
EQUITY-INCOME PORTFOLIO
GROWTH PORTFOLIO
OVERSEAS PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1995
CONTENTS
MONEY MARKET PORTFOLIO VIPF-3 PERFORMANCE
VIPF-4 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-5 INVESTMENTS
VIPF-9 FINANCIAL STATEMENTS
HIGH INCOME PORTFOLIO VIPF-11 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-12 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-13 INVESTMENTS
VIPF-19 FINANCIAL STATEMENTS
EQUITY-INCOME PORTFOLIO VIPF-21 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-22 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-23 INVESTMENTS
VIPF-27 FINANCIAL STATEMENTS
GROWTH PORTFOLIO VIPF-29 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-30 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-31 INVESTMENTS
VIPF-35 FINANCIAL STATEMENTS
OVERSEAS PORTFOLIO VIPF-37 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-38 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-39 INVESTMENTS
VIPF-44 FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS VIPF-46 NOTES TO THE FINANCIAL STATEMENTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS
NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
PERFORMANCE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects both the change
in a fund's share price over a given period, and reinvestment of its
dividends (or income). Yield measures the income paid by a fund. Since a
money market fund tries to maintain a $1 share price, yield is an important
measure of performance.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
JUNE 30, 1995 YEAR YEARS YEARS
Money Market 5.44% 4.88% 6.19%
Consumer Price Index 3.04% 3.26% 3.55%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
Comparing the fund's performance to the Consumer Price Index (CPI) helps
show how your investment did compared to inflation. (The periods covered by
the CPI numbers are the closest available match to those covered by the
fund.)
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
If the advisor had not reimbursed certain fund expenses, the past five
years and life of fund total returns would have been lower. Yield
will vary.
YIELD
Row: 1, Col: 1, Value: 4.21
Row: 1, Col: 2, Value: 2.41
Row: 2, Col: 1, Value: 4.7
Row: 2, Col: 2, Value: 2.5
Row: 3, Col: 1, Value: 5.609999999999999
Row: 3, Col: 2, Value: 2.74
Row: 4, Col: 1, Value: 5.91
Row: 4, Col: 2, Value: 2.89
Row: 5, Col: 1, Value: 5.85
Row: 5, Col: 2, Value: 2.87
Money Market
MMDA
6% -
5% -
4% -
3% -
2% -
1% -
0%
6/28/94 10/2/94 12/28/94 3/29/95 6/28/95
Money Market 4.21% 4.70% 5.61% 5.91% 5.85%
MMDA 2.41% 2.50% 2.74% 2.89% 2.87%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods,
expressed as annual percentage rates. A yield that assumes income earned is
reinvested or compounded is called an effective yield. The chart above
shows the fund's current seven-day yield at quarterly intervals over the
past year. This is compared to similar yields for the average bank money
market deposit account (MMDA). The MMDA average is supplied by BANK RATE
MONITOR.(Trademark)
COMPARING PERFORMANCE
There are some important differences between
a bank money market deposit account (MMDA)
and a money market fund. First, the U.S.
government neither insures nor guarantees a
money market fund. In fact, there is no
assurance that a money fund will maintain a $1
share price. Second, a money market fund
returns to its shareholders income earned by the
fund's investments after expenses. This is in
contrast to banks, which set their MMDA rates
periodically based on current interest rates,
competitors' rates, and internal criteria.
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Bob Litterst, Portfolio
Manager of Money
Market Portfolio
Q. BOB, CAN YOU BRING US UP TO DATE ON MARKET CONDITIONS?
A. Sure. The economic growth rate has slowed dramatically during the past
six months. During the fourth quarter of 1994, the gross domestic product
expanded at a rate of 5.1%, a very strong showing. Moreover, final sales
rose 5.7%, meaning sales exceeded production and depleted inventories.
Those signs of growth, along with disturbing trends in such leading
indicators of inflation as unemployment and capacity utilization, prompted
the Federal Reserve to raise the federal funds rate, the rate banks charge
each other for overnight loans, another one-half percentage point in
February.
Q. HOW HAS THE INTEREST RATE ENVIRONMENT CHANGED SINCE THEN?
A. Even as the Fed was tightening credit for the seventh time in a little
more than a year, there were signs that the economy was beginning to lose
steam. Led by softening consumer activity and weakness in
interest-sensitive sectors such as housing and autos, the growth rate
during the first quarter of 1995 slowed to 2.7%. Currently, most economists
have long since stopped worrying about the economy overheating. Now they
have an altogether different concern: that we might be headed for another
recession. By the end of June, it was clear to all that the latest cycle of
interest rate increases was over. Instead, speculation centered on when the
Fed might feel compelled to lower rates.
Q. HOW DID YOU RESPOND TO CHANGING CONDITIONS?
A. The fund's average maturity six months ago, when the period began, was
39 days. That was a defensive number. It reflected my view at the time that
further rate increases were likely. As it became apparent that the economy
was slowing more rapidly than initially expected, my expectations regarding
Fed policy changed, and I gradually extended the fund's average maturity. I
moved cautiously at first because conditions were unsettled and it seemed
prudent to maintain flexibility. But as signs of weakness accumulated, I
began to prepare for a shift in Fed policy, including the possibility of an
eventual rate cut. By the end of June, the fund's average maturity was more
aggressive than that of most other taxable money market funds-around 60
days, compared to about 50 days for most competitors.
Q. HOW DID YOU ACHIEVE THAT LONGER AVERAGE MATURITY?
A. Mainly by focusing on three-month and six-month securities, rather than
moving further out the yield curve. That's because by the end of the
period, expectations for declining short-term rates caused longer-term
yields on some money market securities to fall below shorter-term yields, a
situation known as an inverted yield curve.
Q. WHAT ABOUT ASSET SELECTION?
A. I've reduced the fund's stake in U.S. Treasury and agency securities.
Normally the fund averages about 10% in government securities, although
it's been as high as 20% at times during the past year or two. But in
recent months, technical factors affecting supply and demand have priced
government securities unusually high. The main cause seems to be heavy
buying on the part of foreign central banks with funds accumulated in
support of the U.S. dollar. With so many other creditworthy alternatives
available, I've looked elsewhere for value, adding higher-yielding
commercial paper and bank certificates of deposit. At the end of June,
government securities totaled less than 3% of the fund's assets.
Q. WHAT'S THE OUTLOOK?
A. The next few months should be interesting. We know that on July 6,
shortly after the period ended, the Fed lowered the federal funds rate
one-quarter percentage point, but as we look ahead, much uncertainty
remains. Some market participants believe that we're in the early stages of
an extended downturn. Others believe that what's happening is merely a
brief but severe inventory correction, and that the economy will resume
growing at its long-term trend rate of around 2.5% once the temporary
buildup in inventories sells off.
Q. WHAT'S YOUR VIEW?
A. I tend to side with those in the latter camp. The typical prerequisites
for a recession, including high inflation and tight bank lending standards,
simply don't exist. That said, I'm concerned that if this Spring's weakness
in the labor market persists, it could evolve into a self-reinforcing
slowdown, forcing the Fed to continue lowering rates. While I don't think
that will happen, I have to respect the possibility of such a development.
Accordingly, I'll probably maintain a neutral to aggressive average
maturity of between 60 and 65 days for the foreseeable future.
FUND FACTS
GOAL: Income and share price stability by
investing in high quality, short-term instruments
START DATE: April 1, 1982
SIZE: As of June 30, 1995, more than $768
million
MANAGER: Robert Litterst, since 1992; manager,
Capital Reserves Money Market, Fidelity Cash
Reserves, Fidelity Money Market Trust:
Retirement Money Market, since 1992; joined
Fidelity in 1991
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
BANKERS' ACCEPTANCES - 4.2%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
DOMESTIC BANKERS' ACCEPTANCES - 2.8%
CHASE MANHATTAN BANK
11/1/95 6.09% $ 4,500,000 $ 4,408,980
CHEMICAL BANK
9/28/95 6.02 5,723,026 5,639,549
MELLON BANK, N.A.
11/24/95 5.81 7,500,000 7,325,700
NBD BANK, N.A.
12/11/95 5.87 4,000,000 3,896,767
21,270,996
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 1.4%
BANK OF TOKYO
8/14/95 6.39 6,000,000 5,954,533
RABOBANK NEDERLAND, N.V.
8/3/95 6.22 1,000,000 994,408
SANWA BANK, LTD.
7/31/95 6.08 4,000,000 3,980,033
10,928,974
TOTAL BANKERS' ACCEPTANCES 32,199,970
CERTIFICATES OF DEPOSIT - 20.3%
CHICAGO BRANCH, YANKEE DOLLAR, FOREIGN BRANCH - 3.9%
ABN-AMRO BANK
8/3/95 6.25 5,000,000 5,000,045
9/20/95 6.19 5,000,000 5,000,000
9/25/95 6.00 5,000,000 5,000,000
10/19/95 6.25 10,000,000 10,000,000
SANWA BANK, LTD.
8/15/95 6.04 5,000,000 5,000,062
30,000,107
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 9.4%
BANQUE NATIONALE DE PARIS
11/13/95 6.05 5,000,000 5,000,000
CANADIAN IMPERIAL BANK OF COMMERCE
11/1/95 6.25 4,000,000 3,998,110
COMMERZBANK, GERMANY
8/24/95 6.35 5,000,000 4,999,596
DRESDNER BANK, A.G.
3/15/96 6.44 1,000,000 1,000,875
FUJI BANK, LTD.
7/19/95 6.18 5,000,000 5,000,000
HYPO U.S. FINANCE
11/8/95 6.03 5,000,000 5,000,823
INDUSTRIAL BANK OF JAPAN, LTD.
7/31/95 6.30 5,000,000 5,000,000
ROYAL BANK OF CANADA
10/5/95 6.25 1,000,000 1,000,294
SANWA BANK, LTD.
7/7/95 6.21 3,000,000 3,000,000
SOCIETE GENERALE
8/14/95 6.02 14,000,000 14,000,000
8/21/95 6.00 10,000,000 10,000,000
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - CONTINUED
SUMITOMO BANK, LTD.
8/7/95 6.01% $ 5,000,000 $ 5,000,000
8/21/95 6.41 5,000,000 5,000,465
8/22/95 6.03 5,000,000 5,000,000
73,000,163
LONDON BRANCH, EURODOLLAR, DOMESTIC BANKS - 2.6%
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOC.
9/29/95 5.91 5,000,000 5,000,000
11/27/95 6.00 5,000,000 5,000,000
BANK OF NEW YORK
7/17/95 6.15 10,000,000 10,000,000
20,000,000
LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 3.8%
BANK OF SCOTLAND
7/5/95 6.15 4,000,000 4,000,015
MITSUBISHI BANK, LTD.
8/10/95 6.04 5,000,000 5,000,377
NORDDEUTSCHE LANDESBANK
12/8/95 5.75 5,000,000 4,998,563
SANWA BANK, LTD.
8/7/95 6.02 5,000,000 4,998,917
TORONTO-DOMINION BANK
12/11/95 5.74 10,000,000 10,013,064
29,010,936
PORTLAND BRANCH, EURODOLLAR, FOREIGN BANKS - 0.6%
BANK OF NOVA SCOTIA
7/11/95 6.13 5,000,000 5,000,008
TOTAL CERTIFICATES OF DEPOSIT 157,011,214
COMMERCIAL PAPER - 52.0%
ANZ (DE), INC.
7/7/95 6.52 1,273,000 1,271,653
8/8/95 6.03 220,000 218,611
ABBEY NATIONAL TREASURY SERVICES
8/21/95 6.04 5,000,000 4,957,854
AMERICAN EXPRESS CREDIT CORP.
8/9/95 6.21 5,000,000 4,967,067
8/14/95 6.20 5,000,000 4,962,875
11/9/95 5.89 5,000,000 4,895,382
AMERICAN HOME FOOD PRODUCTS, INC.
7/10/95 6.17 11,000,000 10,983,280
AMERICAN HOME PRODUCTS
8/29/95 6.00 6,000,000 5,941,688
AMERICAN TELEPHONE & TELEGRAPH CO.
9/27/95 6.09 5,000,000 4,927,400
ASSOCIATES CORP. OF NORTH AMERICA
9/1/95 5.98 6,000,000 5,938,930
9/28/95 6.10 5,000,000 4,926,451
BANC ONE CORP.
9/22/95 5.99 5,000,000 4,931,986
BEAR STEARNS COS., INC.
7/12/95 6.14 5,000,000 4,990,757
8/1/95 6.06 6,000,000 5,969,155
8/1/95 6.13 5,000,000 4,974,016
COMMERCIAL PAPER - CONTINUED
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
BENEFICIAL CORP.
9/18/95 5.99% $ 5,000,000 $ 4,935,264
9/29/95 5.81 5,000,000 4,928,750
CIT GROUP HOLDINGS, INC.
9/21/95 6.20 5,000,000 4,931,211
CHRYSLER FINANCIAL CORPORATION
7/6/95 6.05 5,000,000 4,995,826
7/12/95 6.05 5,000,000 4,990,803
7/13/95 6.04 2,000,000 1,996,000
7/17/95 6.05 3,000,000 2,991,973
COMMERZBANK U.S. FINANCE, INC.
9/25/95 5.89 5,000,000 4,930,722
9/29/95 5.91 140,000 137,977
9/29/95 6.30 600,000 590,820
10/20/95 6.23 4,000,000 3,925,507
12/15/95 5.76 1,120,000 1,090,905
COMPAGNIE BANCAIRE
7/6/95 6.20 5,000,000 4,995,764
7/12/95 6.15 5,000,000 4,990,742
CORESTATES CAPITAL CORP.
7/8/95 6.01 (a) 5,000,000 5,000,000
7/15/95 6.09 (a) 5,000,000 5,000,000
DEN DANSKE CORP., INC.
7/12/95 6.15 3,000,000 2,994,445
DU PONT (E.I.) DE NEMOURS & CO.
9/19/95 6.09 2,500,000 2,466,833
FORD MOTOR CREDIT CORP.
7/21/95 6.23 5,000,000 4,983,056
8/30/95 6.23 15,000,000 14,848,000
9/11/95 6.25 5,000,000 4,939,100
10/27/95 5.86 6,000,000 5,887,507
FORD MOTOR CREDIT, PLC
8/1/95 6.10 4,500,000 4,476,711
GENERALE BANK
10/17/95 6.07 5,000,000 4,911,200
GENERAL ELECTRIC CAPITAL CORP.
7/3/95 5.97 (a) 5,000,000 5,000,000
7/5/95 6.19 5,000,000 4,996,628
8/1/95 5.94 170,000 169,139
9/15/95 6.68 4,000,000 3,945,787
10/5/95 6.79 2,400,000 2,358,400
10/12/95 6.80 1,000,000 981,403
11/1/95 6.13 10,000,000 9,796,708
GENERAL ELECTRIC CORP.
9/27/95 6.25 10,000,000 9,851,622
GENERAL MOTORS ACCEPTANCE CORP.
7/31/95 6.22 5,000,000 4,974,500
8/2/95 6.19 11,000,000 10,940,453
8/16/95 6.12 6,000,000 5,953,770
8/16/95 6.15 5,000,000 4,961,347
8/22/95 6.10 1,000,000 991,319
9/15/95 6.05 5,000,000 4,936,983
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
GEORGIA POWER CO.
7/5/95 6.20% $ 5,000,000 $ 4,996,611
GOLDMAN SACHS GROUP, L.P. (THE)
9/7/95 6.01 10,000,000 9,888,367
9/18/95 6.02 6,000,000 5,922,185
HANSON FINANCE (UK), PLC
8/7/95 6.03 10,000,000 9,938,950
8/22/95 6.04 6,000,000 5,948,477
IBM CORP.
9/1/95 5.97 5,000,000 4,949,194
INTERNATIONAL NEDERLANDEN U.S. FUNDING CORP.
8/28/95 6.35 4,000,000 3,960,367
MERRILL LYNCH & CO., INC.
9/28/95 6.00 5,000,000 4,927,317
MONSANTO CO.
8/14/95 6.19 2,500,000 2,481,453
9/12/95 6.17 1,525,000 1,506,353
12/21/95 5.90 10,000,000 9,724,642
MORGAN STANLEY GROUP, INC.
10/6/95 5.91 5,000,000 4,921,592
NATIONAL & PROVINCIAL BUILDING SOCIETY
10/16/95 5.89 5,350,000 5,258,249
NATIONWIDE BUILDING SOCIETY
8/11/95 6.06 5,000,000 4,966,004
NEW CENTER ASSET TRUST
7/12/95 6.16 5,000,000 4,990,726
7/17/95 6.15 10,000,000 9,973,067
NORWEST CORP.
9/19/95 5.99 400,000 394,773
NORWEST FINANCIAL
7/10/95 6.14 5,000,000 4,992,438
PENNSYLVANIA LIGHT & POWER COMPANY
7/5/95 6.06 1,650,000 1,648,895
7/10/95 6.05 3,200,000 2,196,689
PHILIP MORRIS COS., INC.
9/5/95 6.07 4,500,000 4,450,913
PRUDENTIAL FUNDING CORP.
7/3/95 6.30 10,000,000 9,996,500
SEARS ROEBUCK ACCEPTANCE CORP.
9/18/95 6.00 5,000,000 4,935,154
SHERWOOD MEDICAL COMPANY
8/21/95 5.99 5,000,000 4,957,925
TEXTRON, INC.
7/14/95 6.06 3,500,000 3,492,391
TORONTO DOMINION HOLDINGS USA, INC.
9/11/95 6.11 5,000,000 4,940,200
9/29/95 5.90 10,000,000 9,854,750
TRANSAMERICA FINANCE CORP.
8/7/95 6.03 220,000 218,648
WOOLWICH EQUITABLE BUILDING SOCIETY
10/16/95 5.94 5,000,000 4,913,508
TOTAL COMMERCIAL PAPER 402,000,618
FEDERAL AGENCIES - 3.2%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
FEDERAL FARM CREDIT BANK - AGENCY COUPONS - 0.6%
7/3/95 6.17% (a) $ 5,000,000 $ 4,997,271
FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 2.6%
7/17/95 6.27 5,000,000 4,986,422
9/11/95 6.32 10,000,000 9,877,600
10/20/95 6.04 5,000,000 4,909,350
19,773,372
TOTAL FEDERAL AGENCIES 24,770,643
BANK NOTES - 7.2%
BANK OF NEW YORK
8/28/95 6.35 5,000,000 4,999,748
BOATMEN'S NATIONAL BANK OF ST. LOUIS
9/22/95 6.04 (a) 5,000,000 4,995,859
COMERICA BANK - DETROIT
5/28/96 5.83 5,000,000 5,014,775
FIFTH THIRD BANK - CINCINNATI
10/27/95 6.07 5,000,000 5,001,981
HOUSEHOLD BANK, N.A.
9/21/95 5.93 1,000,000 1,000,000
KEY BANK OF NEW YORK
7/3/95 6.11 (a) 5,000,000 4,999,374
MELLON BANK, N.A.
11/1/95 6.24 5,000,000 5,000,000
NBD BANK, N.A.
10/16/95 6.27 5,000,000 5,000,000
NATIONSBANK OF TEXAS
9/26/95 6.38 5,000,000 5,000,000
10/27/95 6.25 5,000,000 5,000,000
PNC BANK, N.A.
7/4/95 6.15 (a) 5,000,000 4,999,589
U.S. NATIONAL BANK OF OREGON
8/22/95 6.37 5,000,000 5,000,070
TOTAL BANK NOTES 56,011,396
MASTER NOTES (A) - 1.2%
J.P. MORGAN SECURITIES
7/3/95 6.58 9,000,000 9,000,000
MEDIUM-TERM NOTES (A) - 5.9%
ABBEY NATIONAL, NORTH AMERICA
7/3/95 5.97 5,000,000 4,999,151
ABBEY NATIONAL TREASURY SERVICES (C)
9/30/95 6.00 10,000,000 10,000,000
BENEFICIAL CORP.
7/15/95 6.09 5,000,000 4,999,453
DEAN WITTER, DISCOVER & CO.
7/15/95 6.10 5,000,000 5,004,526
GENERAL ELECTRIC CAPITAL CORP.
7/3/95 6.27 5,000,000 4,998,997
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
GENERAL MOTORS ACCEPTANCE CORP.
8/7/95 6.25% $ 3,000,000 $ 3,000,000
GOLDMAN SACHS GROUP, L.P. (THE) (C)
9/1/95 6.03 3,000,000 3,000,000
9/16/95 5.95 4,000,000 4,000,000
NORWEST CORP.
9/15/95 6.06 6,000,000 6,000,000
TOTAL MEDIUM-TERM NOTES 46,002,127
SHORT-TERM NOTES (A) - 3.2%
CAPITAL ONE FUNDING CORP.
7/10/95 6.07 4,072,000 4,072,000
SMM TRUST COMPANY (1994-D) (B)
7/28/95 6.17 4,000,000 4,000,000
SMM TRUST COMPANY (1995-I) (B)
7/5/95 6.16 6,000,000 5,998,411
SMM TRUST COMPANY (1995-J) (B)
7/15/95 6.06 11,000,000 11,000,000
TOTAL SHORT-TERM NOTES 25,070,411
MUNICIPAL SECURITIES (A) - 1.1%
GARDENA CALIFORNIA CERTIFICATES OF PARTNERSHIP
7/10/95 6.35 6,550,000 6,550,000
NEW ORLEANS AVIATION BOARD
7/10/95 6.26 1,800,000 1,800,000
TOTAL MUNICIPAL SECURITIES 8,350,000
REPURCHASE AGREEMENTS - 1.7%
MATURITY
AMOUNT
In a joint trading account
(U.S. Government Obligations)
dated 6/30/95 due 7/3/95:
At 6.28% $ 12,806,699 12,800,000
TOTAL INVESTMENTS - 100% $ 773,216,379
Total Cost for Income Tax Purposes - $773,216,379
LEGEND
(a) 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.
(b) Restricted securities - Investment in securities not registered under
the Securities Act of 1933.
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
SMM Trust Company:
(1994-D) 10/28/94 $ 4,000,000
(1995-I)) 5/25/95 $ 6,000,000
(1995-J) 5/15/95 $ 11,000,000
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $17,000,000 or 2.2% of net
assets.
INCOME TAX INFORMATION
At December 31, 1994, the fund had a capital loss carryforward of
approximately $94,600 of which $4,100, $500, $4,900, $4,300 and $80,800
will expire on December 31, 1995, 1996, 1997, 2000 and 2002, respectively.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $12,800,000) - See accompanying $ 773,216,379
schedule
Cash 673,210
Receivable for investments sold 104,000
Interest receivable 2,641,686
TOTAL ASSETS 776,635,275
LIABILITIES
Payable for investments purchased $ 7,463,678
Accrued management fee 157,028
Other payables and accrued expenses 64,485
TOTAL LIABILITIES 7,685,191
NET ASSETS $ 768,950,084
Net Assets consist of:
Paid in capital $ 769,022,085
Accumulated net realized gain (72,001
(loss) on investments )
NET ASSETS, for 769,022,085 $ 768,950,084
shares outstanding
NET ASSET VALUE, offering price and redemption price per share ($768,950,084 (divided by) 769,022,085 shares) $1.00
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INTEREST INCOME $ 22,651,404
EXPENSES
Management fee $ 934,903
Transfer agent fees 176,682
Accounting fees and expenses 52,708
Non-interested trustees' 2,520
compensation
Custodian fees and expenses 36,594
Audit 11,536
Legal 1,454
Miscellaneous 2,459
TOTAL EXPENSES 1,218,856
NET INTEREST INCOME 21,432,548
NET REALIZED GAIN (LOSS) ON 7,601
INVESTMENTS
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 21,440,149
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS END YEAR ENDED
ED DECEMBER 31,
JUNE 30, 1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 21,432,548 $ 25,859,424
Net interest income
Net realized gain (loss) 7,601 (80,853
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 21,440,149 25,778,571
Distributions to shareholders from net interest income (21,432,548 (25,859,424
) )
Share transactions at net asset value of $1.00 per share 512,023,023 1,187,546,448
Proceeds from sales of shares
Reinvestment of distributions from net interest income 21,432,548 25,859,424
Cost of shares redeemed (513,118,899 (817,822,836
) )
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS 20,336,672 395,583,036
TOTAL INCREASE (DECREASE) IN NET ASSETS 20,344,273 395,502,183
NET ASSETS
Beginning of period 748,605,811 353,103,628
End of period $ 768,950,084 $ 748,605,811
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995
(UNAUDITED) 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from Investment Operations .029 .042 .032 .038 .059 .078
Net interest income
Less Distributions (.029) (.042) (.032) (.038) (.059) (.078)
From net interest income
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN B C 2.95% 4.25% 3.23% 3.90% 6.09% 8.04%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 768,950 $ 748,606 $ 353,104 $ 301,002 $ 271,123 $ 254,585
Ratio of expenses to average net assets .33% A .27% .22% .24% .38% .56%
Ratio of expenses to average net assets before .33% A .27% .23% .24% .38% .56%
expense reductions
Ratio of net interest income to average net assets 5.84% A 4.32% 3.16% 3.85% 5.93% 7.76%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT.
INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
HIGH INCOME 11.89% 16.87% 11.60%
Merrill Lynch High Yield Master 14.88% 14.23% n/a
Consumer Price Index 3.04% 3.26% 3.57%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, 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)
You can compare the fund's returns to those of the Merrill Lynch High Yield
Master Index - a broad measure of the high yield bond market. This
benchmark includes reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index (CPI) helps
show how your fund did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date).
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, September 19, 1985.
If the adviser had not reimbursed certain fund expenses during the periods
shown, the total returns would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. The fund includes high yielding, lower-rated
securities which are subject to greater price volatility and may involve
greater risk of default. The market for these securities may be less
liquid.
$10,000 OVER LIFE OF FUND
VIP High Income (4High Yield Maste
09/30/85 10000.00 10000.00
10/31/85 10124.78 10113.02
11/30/85 10270.82 10303.28
12/31/85 10614.12 10604.47
01/31/86 10745.58 10676.44
02/28/86 11109.08 11130.10
03/31/86 11383.10 11373.65
04/30/86 11576.24 11551.26
05/31/86 11753.01 11685.98
06/30/86 11900.72 11804.36
07/31/86 11864.53 11648.95
08/31/86 11912.43 11863.93
09/30/86 12013.59 11962.11
10/31/86 12372.53 12172.57
11/30/86 12412.20 12271.68
12/31/86 12490.69 12337.95
01/31/87 12946.06 12686.81
02/28/87 13170.08 12896.26
03/31/87 13290.04 13038.85
04/30/87 12874.71 12754.50
05/31/87 12755.02 12697.03
06/30/87 13030.49 12872.55
07/31/87 13044.43 12942.59
08/31/87 13152.49 13072.28
09/30/87 12694.49 12771.51
10/31/87 12087.43 12430.27
11/30/87 12443.44 12744.62
12/31/87 12642.60 12913.85
01/31/88 13058.25 13267.23
02/29/88 13449.21 13627.23
03/31/88 13352.58 13604.70
04/30/88 13456.66 13643.99
05/31/88 13436.65 13715.20
06/30/88 13718.27 13977.43
07/31/88 13861.07 14125.13
08/31/88 13794.86 14171.55
09/30/88 13905.45 14314.39
10/31/88 14056.82 14537.41
11/30/88 14003.15 14591.87
12/31/88 14114.42 14653.61
01/31/89 14453.60 14873.37
02/28/89 14524.70 14973.32
03/31/89 14338.06 14960.00
04/30/89 14179.27 15004.15
05/31/89 14441.26 15280.37
06/30/89 14854.88 15496.85
07/31/89 14757.08 15570.24
08/31/89 14671.49 15647.15
09/30/89 14158.14 15498.19
10/31/89 13551.16 15253.06
11/30/89 13562.58 15287.24
12/31/89 13525.40 15273.41
01/31/90 13226.43 14974.91
02/28/90 13022.77 14756.83
03/31/90 12885.36 14956.31
04/30/90 12923.54 15032.30
05/31/90 13189.08 15303.83
06/30/90 13396.83 15600.32
07/31/90 13603.76 15929.99
08/31/90 13376.19 15320.16
09/30/90 13059.02 14653.87
10/31/90 12742.13 14280.96
11/30/90 13041.01 14401.94
12/31/90 13223.36 14609.46
01/31/91 13503.92 14815.98
02/28/91 14252.06 15915.67
03/31/91 14757.05 16599.98
04/30/91 15280.75 17191.13
05/31/91 15505.19 17275.07
06/30/91 15841.85 17622.59
07/31/91 16440.36 18044.84
08/31/91 16664.81 18424.11
09/30/91 17038.88 18658.77
10/31/91 17618.68 19213.23
11/30/91 17768.31 19435.16
12/31/91 17861.83 19660.94
01/31/92 18815.71 20348.35
02/29/92 19498.87 20853.71
03/31/92 20129.17 21144.68
04/30/92 20271.50 21298.58
05/31/92 20515.49 21638.31
06/30/92 20739.15 21907.16
07/31/92 21145.80 22351.02
08/31/92 21593.11 22646.93
09/30/92 21816.77 22904.97
10/31/92 21491.45 22615.68
11/30/92 21755.77 22935.97
12/31/92 21999.76 23231.29
01/31/93 22589.41 23803.34
02/28/93 22974.74 24253.90
03/31/93 23504.92 24674.39
04/30/93 23659.56 24851.50
05/31/93 24013.02 25186.03
06/30/93 24631.57 25659.22
07/31/93 24874.57 25935.02
08/31/93 25139.66 26182.25
09/30/93 25228.03 26311.44
10/31/93 25824.49 26807.08
11/30/93 26067.49 26953.70
12/31/93 26487.22 27223.21
01/31/94 27370.86 27819.81
02/28/94 27338.05 27619.74
03/31/94 26417.09 26719.70
04/30/94 26150.49 26407.45
05/31/94 26198.96 26313.37
06/30/94 26102.02 26893.29
07/31/94 26198.96 27082.30
08/31/94 26198.96 27270.47
09/30/94 26392.85 27260.08
10/31/94 26150.49 27329.36
11/30/94 25932.37 27096.87
12/31/94 26053.55 26906.19
01/31/95 26344.38 27286.38
02/28/95 27248.56 28137.75
03/31/95 27587.86 28529.34
04/30/95 28396.97 29197.31
05/31/95 29127.77 30109.50
06/30/95 29206.07 30339.47
Let's say you invested $10,000 in High Income Portfolio on September 30,
1985, shortly after the fund started. By June 30, 1995, your investment
would have grown to $29,206 - a 192.06% increase. That compares to $10,000
invested in the Merrill Lynch High Yield Master Index, which would have
grown to $30,339 over the same period - a 203.39% increase.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF JUNE 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
PanAmSat Corp. 12 3/4% 4.2
TransTexas Gas Corp. (various issues) 3.5
Revlon Worldwide Corp. secured 0%, 3/15/98 2.6
Flagstar Corp. 11 1/4%, 11/1/04 2.3
American Financial Corp. (various issues) 2.3
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Media & Leisure 29.9
Finance 9.5
Energy 8.8
Services 6.6
Basic Industries 6.4
QUALITY DIVERSIFICATION AS OF JUNE 30, 1995
(MOODY'S RATINGS) % OF FUND'S
INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.0
Ba 6.4
B 41.9
Caa, Ca, C 16.6
Nonrated 10.4
TABLE EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT JUNE 30, 1995, ACCOUNT FOR 7.9% 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 HAS THE FUND PERFORMED, BARRY?
A. Although the fund did well relative to its peers, it trailed the
performance of the Merrill Lynch High Yield Master Index, which returned
12.76% and 14.88%, respectively, for the six and 12-month periods ended
June 30, 1995. The index has a larger percentage of Ba-rated bonds than
most high-yield mutual funds, which tend to be more concentrated in B-rated
bonds. Generally speaking, Ba-rated bonds are more sensitive to changing
interest rates, and therefore, benefited more from the recent decline in
interest rates than B-rated bonds. As a result, very few high yield funds
outperformed the index.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The fund's relatively low weighting in Ba-rated securities was the
primary reason for its underperformance relative to its benchmark during
the most recent period. On the positive side, we have maintained a high
weighting, compared to the benchmark, in deferred coupon securities. These
bonds sell at a deep discount because they do not pay current interest for
some period, usually three to five years. They generally have longer
durations - which measures how sensitive their price is to changes in
interest rates - and therefore, their prices are more volatile. We also
avoided most of the credit disasters that occurred in the market.
Q. WHAT INVESTMENTS HAVE DONE WELL IN THE PAST SIX MONTHS?
A. Revlon continued to benefit from an operational restructuring and the
very successful launch of two key new products: Color Stay Lipstick and Age
Defying Makeup. Our Revlon position is concentrated in the most junior
securities that are most sensitive to changes in credit quality, which has
been a recent plus. Another strong performer was Big Flower Press, a large
commercial printer of advertising inserts, comics and television guides.
The company was helped by the strong growth in advertising and the
synergies it gained from some recent acquisitions. Finally, our
concentration in casinos and hotels did relatively well during the period.
Q. GIVEN THE MARKET'S STRENGTH SO FAR IN 1995, WAS IT DIFFICULT TO FIND
OPPORTUNITIES?
A. Not particularly. The new issues market was active and provided ample
opportunity to selectively add new names to the fund. One example was
PanAmSat Corp., which operates an international satellite communications
system and provides satellite services to the broadcasting and business
communications markets. It currently has two satellites operating and also
has a large backlog of contracted time from companies including ESPN and
Viacom for two new satellites it will be launching later this year. The
company is participating in a joint venture to provide Direct to Home (DTH)
television broadcasting service to Latin America, similar to the Direct TV
service in the United States. Another new issue we purchased was
Stratosphere Corp., a Las Vegas-based casino owned by industry-leader Grand
Casino. These bonds are attractive, in part, because in addition to their
14.25% coupon, they pay additional interest based on a percentage of the
company's cash flow.
Q. WHAT INVESTMENTS DIDN'T FARE AS WELL?
A. The high-yield restaurant sector, in general, did not perform well
during the period due to competitive pressures and a slowing economy. One
of our largest holdings is Flagstar, the parent of Denny's and the largest
franchisee of Hardees. Although Denny's has benefited from an aggressive
remodeling program, Hardees has suffered due to aggressive price promotions
from the major burger chains. Another restaurant chain, American Restaurant
Group, also underperformed partly due to the concentration of its chains in
California, where the economy continues to be weaker than the rest of the
country.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. The probability of the soft landing scenario is increasing, which could
provide a favorable backdrop for the high-yield bond market. Slow economic
growth and low inflation could allow many companies in the high-yield
market to improve their credit quality. Absolute yields remain attractive,
and absent a sharp drop in interest rates from current levels, high-yield
bonds could perform well relative to other fixed-income investments. In my
view, the key is to be selective. I'm focusing on companies that are less
cyclical, or sensitive to the economy, and choosing companies that I think
can perform well in a slow-growth environment.
FUND FACTS
GOAL: seeks high current income by investing
in high yielding, lower-rated fixed-income
securities
START DATE: September 19, 1985
SIZE: as of June 30, 1995, more than $813 million
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 74.8%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 0.2%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp., 0%, 6/30/97 - $ 469,000 $ 328,685
MEDIA & LEISURE - 0.2%
LODGING & GAMING - 0.2%
Argosy Gaming Co.
12%, 6/1/01 B3 1,290,000 1,290,000
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Farm Fresh, Inc.
7 1/2%, 3/1/10 B3 186,000 112,264
TOTAL CONVERTIBLE BONDS 1,730,949
NONCONVERTIBLE BONDS - 74.6%
AEROSPACE & DEFENSE - 0.3%
RHI Holdings, Inc.:
11 7/8%, 3/1/99 B2 2,160,000 2,062,800
11 7/8%, 3/1/99 (e) - 550,000 525,250
2,588,050
BASIC INDUSTRIES - 6.3%
CHEMICALS & PLASTICS - 2.1%
American Pacific Corp.
11%, 12/15/02 (f) - 850,000 765,000
Foamex LP 11 7/8%, 10/1/04 B3 5,000,000 4,725,000
Pioneer Americas Acquisition
Corp. 13 3/8%, 4/1/05 (f) B2 10,000,000 10,325,000
Trans Resources, Inc.
14 1/2%, 9/1/96 B2 580,000 585,800
16,400,800
IRON & STEEL - 0.9%
Republic Engineered Steels, Inc.
9 7/8%, 12/15/01 B2 5,230,000 4,772,375
WCI Steel, Inc.
10 1/2%, 3/1/02 B1 2,420,000 2,359,500
7,131,875
METALS & MINING - 0.7%
International Wire Group, Inc.
11 3/4%, 6/1/05 (f) B3 5,850,000 5,886,563
PACKAGING & CONTAINERS - 0.8%
Crown Packaging Holdings Ltd.
0%, 11/1/03 (d) Caa 6,840,000 3,129,300
Grupo Industrial Durango euro
9.6367%, 11/18/96 (g) 4,000,000 3,380,000
6,509,300
PAPER & FOREST PRODUCTS - 1.8%
Indah Kiat International Finance
Co. 11 3/8%, 6/15/99 Ba3 9,000,000 9,022,500
Mail-Well Holdings, Inc.
0%, 2/15/06 (d) - 1,190,000 511,700
Tjiwi Kimia International Finance
Co. 13 1/4%, 8/1/01 B1 4,130,000 4,377,800
13,912,000
TOTAL BASIC INDUSTRIES 49,840,538
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONGLOMERATES - 0.6%
Jordan Industries, Inc.:
10 3/8%, 8/1/03 B3 $ 3,155,000 $ 2,902,600
0%, 8/1/05 (d) Caa 3,135,000 1,849,650
4,752,250
CONSTRUCTION & REAL ESTATE - 1.6%
BUILDING MATERIALS - 1.3%
Adience, Inc.
11%, 6/15/02 - 745,921 540,793
Building Materials Corp.,
America 0%, 7/1/04 (d) B1 12,610,000 7,502,950
DAL Tile International, Inc. secured
coupon, 0%, 7/15/98 Caa 3,435,000 2,279,981
10,323,724
REAL ESTATE - 0.3%
Littlefield Co.
10%, 12/31/95 (e) - 2,750,000 2,491,913
TOTAL CONSTRUCTION & REAL ESTATE 12,815,637
DURABLES - 2.9%
AUTOS, TIRES, & ACCESSORIES - 1.9%
Harvard Industries, Inc.
12%, 7/15/04 B2 5,000,000 5,137,500
Poindexter (JB), Inc.
12 1/2%, 5/15/04 B2 10,000,000 9,700,000
14,837,500
TEXTILES & APPAREL - 1.0%
Hat Brands, Inc.
12 5/8%, 9/15/02:
Series B - 1,520,000 1,599,800
Series D - 680,000 715,700
Leslie Fay Cos., Inc. (b)(e):
9.53%, 1/15/00 - 676,319 399,028
10.54%, 1/15/02 - 611,353 299,563
United States Leather, Inc.
10 1/4%, 7/31/03 B2 6,010,000 5,153,575
8,167,666
TOTAL DURABLES 23,005,166
ENERGY - 7.2%
ENERGY SERVICES - 1.0%
Falcon Drilling, Inc.:
9 3/4%, 1/15/01 B2 3,512,000 3,441,760
12 1/2%, 3/15/05 B3 4,000,000 4,160,000
7,601,760
OIL & GAS - 6.2%
Chesapeake Energy Corp.
10 1/2%, 6/1/02 (f) B1 6,000,000 5,910,000
Deeptech International, Inc.
12%, 12/15/00 B3 4,660,000 3,168,800
Mesa Capital Corp.
secured 0%, 6/30/98 (d) Caa 5,710,000 5,181,825
TransTexas Gas Corp.
11 1/2%, 6/15/02 B2 20,000,000 20,450,000
Transamerican Refining
Corp. (g):
0%, 2/15/02 Caa 6,746,000 4,435,495
16 1/2%, 2/15/02 Caa 9,620,000 10,173,150
49,319,270
TOTAL ENERGY 56,921,030
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 6.0%
INSURANCE - 5.1%
American Annuity Group, Inc.
11 1/8%, 2/1/03 Ba3 $ 3,500,000 $ 3,640,000
American Financial Corp.:
10%, 10/20/99 Ba3 5,000,000 5,037,500
9 3/4%, 4/20/04 Ba3 6,570,000 6,504,300
9 3/4%, 4/20/04 (e) Ba3 6,770,000 6,702,300
American Life Holdings
11 1/4%, 9/15/04 B1 13,350,000 13,884,000
Americo Life, Inc.
9 1/4%, 6/1/05 Ba2 4,900,000 4,557,000
40,325,100
SAVINGS & LOANS - 0.8%
First Nationwide Holdings, Inc.
12 1/4%, 5/15/01 Ba3 5,790,000 6,166,350
SECURITIES INDUSTRY - 0.1%
ECM Corp. extendible
14%, 6/1/02 (f) - 570,198 627,218
TOTAL FINANCE 47,118,668
HEALTH - 0.6%
MEDICAL EQUIPMENT & SUPPLIES - 0.6%
Wright Medical Technology, Inc.,
Series B, 10 3/4%, 7/1/00 B3 5,200,000 5,083,000
HOLDING COMPANIES - 0.1%
New Street Capital Corp.
pay-in-kind (e):
12%, 2/28/98 - 67,416 64,697
Unit 12%, 2/28/98 - 1,123,600 1,078,285
1,142,982
INDUSTRIAL MACHINERY & EQUIPMENT - 3.4%
MVE, Inc. Unit
12 1/2%, 2/15/02 B3 8,545,000 8,886,800
Specialty Equipment Cos., Inc.
11 3/8%, 12/1/03 B3 10,640,000 10,932,600
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 B3 1,484,000 1,417,220
10 3/4%, 11/1/03 Caa 5,756,000 5,583,320
26,819,940
MEDIA & LEISURE - 24.5%
BROADCASTING - 8.0%
Chancellor Broadcasting
12 1/2%, 10/1/04 B3 6,560,000 6,543,600
Citicasters, Inc.
9 3/4%, 2/15/04 B- 7,812,000 7,792,470
Cooke Media Group, Inc.
11 5/8%, 4/1/99 - 350,000 334,250
Marcus Cable Capital Corp.
0%, 12/15/05 (d)(f) Caa 26,580,000 14,054,175
NWCG Holdings Corp.
0%, 6/15/99 Caa 26,925,000 16,693,500
Peoples Choice TV Corp. Unit
0%, 6/1/04 (d) Caa 11,340,000 5,485,725
Robin Media Group, Inc.
11 1/8%, 4/1/97 - 12,340,000 12,525,100
63,428,820
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 1.5%
ICON Health And Fitness, Inc.
13%, 7/15/02 B3 $ 5,890,000 $ 5,948,900
IHF Holdings, Inc.
0%, 11/15/04 (d) Caa 10,250,000 5,637,500
11,586,400
LODGING & GAMING - 9.9%
Bally's Casino Holdings, Inc.
10 1/2%, 6/15/98 B3 12,630,000 8,841,000
Bally Gaming International, Inc.
10 3/8%, 7/15/98 - 3,000,000 3,090,000
Boyd Gaming Corp.
10 3/4%, 9/3/03 B2 7,350,000 7,570,500
GNF Corp., Series B,
10 5/8%, 4/1/03 B2 19,730,000 16,375,900
Grand Casino Resorts, Inc. gtd.
12 1/2%, 2/1/00 Ba3 2,200,000 2,464,000
HMH Properties, Inc.
9 1/2%, 5/15/05 (f) B1 10,000,000 9,700,000
Maritime Group Ltd. pay-in-
kind 14%, 2/15/97 (b) - 1,648,399 741,780
Players International, Inc.
10 7/8%, 4/15/05 (f) Ba3 7,050,000 6,944,250
President Riverboat Casinos
13%, 9/15/01 B 7,000,000 5,950,000
Stratosphere Corp.
14 1/4%, 5/15/02 B2 12,740,000 12,994,800
Trump Plaza Funding, Inc. gtd.
mtg. 10 7/8%, 6/15/01 B3 4,713,000 4,335,960
79,008,190
RESTAURANTS - 5.1%
American Restaurant Group, Inc.:
12%, 9/15/98 B2 3,930,000 3,144,000
12%, 9/15/98 (New) B2 3,580,000 2,864,000
Cafeteria Operators LP
11%, 6/30/98 (b)(e) - 7,000,000 1,750,000
Flagstar Corp.
11 1/4%, 11/1/04 Caa 23,555,000 18,372,900
Host Marriott Travel Plazas, Inc.
9 1/2%, 5/15/05 (f) B1 15,000,000 14,325,000
40,455,900
TOTAL MEDIA & LEISURE 194,479,310
NONDURABLES - 4.2%
BEVERAGES - 0.5%
Heileman Acquisition Corp.
9 5/8%, 1/31/04 B3 6,500,000 4,095,000
HOUSEHOLD PRODUCTS - 3.7%
McAndrews & Forbes Group,
Inc. 12 1/4%, 7/1/96 - 1,360,000 1,360,000
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 7,230,000 7,103,475
Revlon Worldwide Corp. secured
0%, 3/15/98 B3 30,342,000 20,860,125
29,323,600
TOTAL NONDURABLES 33,418,600
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - 5.5%
APPAREL STORES - 2.8%
Apparel Retailers, Inc.
12 3/4%, 8/15/05 Caa $ 11,230,000 $ 6,625,700
Lamonts Apparel Corp.
10 1/4%, 11/1/99 (b)(f) - 2,201,000 1,078,490
Specialty Retailers, Inc.:
10%, 8/15/00 B1 2,890,000 2,759,950
11%, 8/15/03 B3 12,220,000 11,364,600
21,828,740
GENERAL MERCHANDISE STORES - 1.4%
Parisian, Inc.
9 7/8%, 7/15/03 Caa 14,322,000 11,027,940
RETAIL & WHOLESALE, MISCELLANEOUS - 1.3%
Barrys Jewelers, Inc.
11%, 12/22/00 - 1,595,000 1,563,100
Finlay Fine Jewelry Corp.
10 5/8%, 5/1/03 B1 4,960,000 4,786,400
Florists Transworld Delivery, Inc.
14%, 12/15/01 B3 4,500,000 4,297,500
10,647,000
TOTAL RETAIL & WHOLESALE 43,503,680
SERVICES - 5.7%
ADVERTISING - 0.8%
Outdoor Systems, Inc.
10 3/4%, 8/15/03 B2 7,000,000 6,720,000
LEASING & RENTAL - 1.7%
Acme Holdings, Inc.
11 3/4%, 6/1/00 (b) Ca 2,930,000 1,465,000
GPA Delaware, Inc.:
8 1/2%, 3/3/97 Ca 3,500,000 3,176,250
gtd. 8 3/4%, 12/15/98 Caa 990,000 831,600
8 5/8%, 1/15/99 - 2,600,000 2,067,000
Scotsman Group, Inc.
9 1/2%, 12/15/00 B1 3,950,000 3,821,625
Scotsman Holdings, Inc.
pay-in-kind 11%, 3/1/04 - 2,080,752 1,712,521
13,073,996
PRINTING - 1.7%
BFP Holdings Corp.
0%, 4/15/04 (d) Caa 5,000,000 3,300,000
Big Flower Press:
10 3/4%, 8/1/03 B3 3,555,000 3,546,113
Class A, 10 3/4%, 8/1/03 B3 4,910,000 4,897,725
Class B, 10 3/4%, 8/1/03 B3 1,480,000 1,476,300
13,220,138
SERVICES - 1.5%
Protection One Alarm
Monitoring, Inc. Unit
0%, 6/30/05 (d)(f) Caa 1,860,000 12,136,500
TOTAL SERVICES 45,150,634
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc.
13 1/2%, 1/5/96 (e) Caa $ 130,000 $ 130,000
TRANSPORTATION - 2.6%
AIR TRANSPORTATION - 1.7%
US Air, Inc.:
Series 1993-A1 Pass Thru
Trust 8 5/8%, 9/1/98 B1 5,000,000 4,725,000
9 5/8%, 2/1/01 B3 930,000 804,450
9 5/8%, 9/1/03 B1 2,550,000 2,422,500
10 3/8%, 3/1/13 B1 5,470,000 5,169,150
13,121,100
RAILROADS - 0.9%
Transtar Holdings L.P./Transtar
Cap. Corp., Series B,
0%, 12/15/03 (d) B- 12,270,000 7,239,300
TOTAL TRANSPORTATION 20,360,400
UTILITIES - 3.1%
CELLULAR - 2.5%
Dial Call Communications,
Inc. 0%, 12/15/05 (d) Caa 2,800,000 1,288,000
Dial Page, Inc.
12 1/4%, 2/15/00 Caa 950,000 985,625
Pagemart Nationwide, Inc. Unit
0%, 2/1/05 (d)(f) - 29,020,000 17,629,650
19,903,275
ELECTRIC UTILITY - 0.1%
El Paso Funding Corp.
lease oblig. (b):
9 3/8%, 10/1/96 Ca 790,000 422,650
9.20%, 7/2/97 Ca 380,000 203,300
625,950
GAS - 0.1%
Columbia Gas Systems, Inc.
9%, 8/1/95 (b) B3 670,000 938,000
TELEPHONE SERVICES - 0.4%
Call-Net Enterprises, Inc.
yankee 0%, 12/1/04 (d) B2 330,000 198,000
Pagemart, Inc.
0%, 11/1/03 (d) - 4,820,000 3,048,650
3,246,650
TOTAL UTILITIES 24,713,875
TOTAL NONCONVERTIBLE BONDS 591,843,760
TOTAL CORPORATE BONDS
(Cost $594,159,103) 593,574,709
COMMERCIAL MORTGAGE SECURITIES - 0.4%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CS First Boston Mortgage
Securities Corp. Commercial
Series 1994-CFB1 Class E,
7.8751%, 1/25/28 (f) Ba2 $ 7,355 $ 5,784
Meritor Mortgage Security Corp.
commercial Series 1987-1
Class B, 9.40%, 2/1/00 (f) - 1,350,000 272,016
SKW Real Estate LP commercial
Series II Class E, 11%,
4/15/05 (f) B 1,500,000 1,500,469
SML, Inc. commercial Series
1994-C1 Class B-3, 11.69%,
9/18/99 - 1,500,000 1,413,750
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $3,126,994) 3,192,019
COMMON STOCKS - 5.5%
SHARES
AEROSPACE & DEFENSE - 0.0%
DEFENSE ELECTRONICS - 0.0%
Tracor, Inc. (a) 18,900 257,513
BASIC INDUSTRIES - 0.1%
IRON & STEEL - 0.1%
WCI Steel, Inc. (a) 67,700 423,125
PAPER & FOREST PRODUCTS - 0.0%
Mail-Well Holdings, Inc. (a) 9,250 55,500
TOTAL BASIC INDUSTRIES 478,625
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc. (warrants) (a)(e) 27,466 302,121
HM/Hat Brands Trust Class I Units (a)(e) 340,000 340,000
642,121
ENERGY - 1.1%
OIL & GAS - 1.1%
Flores & Rucks, Inc. (a) 125,900 1,542,275
TransTexas Gas Corp. (a) 479,600 7,253,950
TOTAL ENERGY 8,796,225
FINANCE - 1.7%
INSURANCE - 1.7%
American Financial Group, Inc. 519,600 13,509,600
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (f) 3,000 300,000
TOTAL FINANCE 13,809,600
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
Wright Medical Technology, Inc.
(warrants) (a) 1,729 285,334
HOLDING COMPANIES - 0.2%
SDW Holdings Corp. (a):
Unit (f) 4,450 1,203,369
(warrants) 3,720 22,320
1,225,689
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp.(a):
Class A 20,681 $ 46,532
Class A (warrants) 57,599 129,598
Class C 230,212 517,977
694,107
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Terex Corp. (rights) (a) 3,150 788
Thermadyne Holdings Corp. (a) 65,419 924,043
924,831
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,618,938
MEDIA & LEISURE - 1.0%
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. (warrants) (a)(e):
$2.00 232,000 58,000
$2.72 221,765 55,441
113,441
LEISURE & DURABLES - 0.1%
IHF Capital, Inc. (a)(f):
Series H (warrants) 10,250 820,000
Series I (warrants) 5,890 147,250
967,250
LODGING & GAMING - 0.9%
Bally Gaming International, Inc.
(warrants) (a) 90,000 618,750
Hollywood Casino Corp. Class A (a) 139,000 1,233,625
Host Marriott Corp. (a) 383,000 4,069,375
Maritime Group Ltd. (warrants) (a) 17,880 179
Motels of America, Inc. (a) 3,000 225,000
Sun International Hotels Ltd. (a) 15,285 687,825
Sun International Hotels Ltd. Class B (a) 3,209 139,592
6,974,346
PUBLISHING - 0.0%
General Media, Inc. (warrant) (a) 1,310 13,100
TOTAL MEDIA & LEISURE 8,068,137
NONDURABLES - 0.6%
TOBACCO - 0.6%
RJR Nabisco Holdings Corp. 161,400 4,499,025
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a):
(New) 35,870 13,452
(warrants) 66,214 -
13,452
GROCERY STORES - 0.1%
FF Holdings Corp. (a)(e) 33,900 67,800
Food 4 Less Holdings, Inc.
(warrants) (a) 9,348 283,712
MAFCO (warrants) (a) 59 -
351,512
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Barrys Jewelers, Inc. (a) 45,576 148,122
Barrys Jewelers, Inc. (warrants) (a) 5,697 1,424
Finlay Enterprises, Inc. (a) 2,500 35,000
184,546
TOTAL RETAIL & WHOLESALE 549,510
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 0.4%
LEASING & RENTAL - 0.0%
Scotsman Holdings, Inc. (a) 15,281 $ 199,875
PRINTING - 0.4%
BFP Holdings Class D (a) 160,744 3,214,880
SERVICES - 0.0%
Perry Capital Corp. (warrants) (a)(f) 4,500 22,500
Vestar/LPA Investment Corp. (a) 5,177 129,425
151,925
TOTAL SERVICES 3,566,680
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Berg Electronics Holdings Corp. (a)(f) 20,853 104,265
UTILITIES - 0.0%
CELLULAR - 0.0%
Dial Page, Inc. (warrants) (a) 4,321 5,401
ELECTRIC UTILITY - 0.0%
Eastern Utilities Associates 3 68
Northeast Utilities Associates
(warrants) (a) 21,789 27,236
27,304
GAS - 0.0%
UGI Corp. (warrants) (a) 14,033 2,105
TOTAL UTILITIES 34,810
TOTAL COMMON STOCKS
(Cost $38,165,942) 43,936,472
PREFERRED STOCKS - 7.9%
CONVERTIBLE PREFERRED STOCKS - 0.7%
RETAIL & WHOLESALE - 0.2%
GROCERY STORES - 0.2%
Supermarkets General Holdings Corp.
exchangeable pay-in-kind $3.52 (a) 39,189 1,058,103
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Town & Country Corp. (a) 4,000 3,000
TOTAL RETAIL & WHOLESALE 1,061,103
SERVICES - 0.5%
La Petite Holdings Corp. exchangeable (a) 160,800 4,020,000
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc. cumulative 8% (a) 835 37,575
TOTAL CONVERTIBLE PREFERRED STOCKS 5,118,678
NONCONVERTIBLE PREFERRED STOCKS - 7.2%
BASIC INDUSTRIES - 0.0%
IRON & STEEL - 0.0%
Stelco, Inc. cumulative, Series B, 7.76% 7,207 115,518
PAPER & FOREST PRODUCTS - 0.0%
SD Warren Co. exchangeable
pay-in-kind (a) 3,720 104,160
TOTAL BASIC INDUSTRIES 219,678
SHARES VALUE (NOTE 1)
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Harvard Industries, Inc.
pay-in-kind $14.25 (a) 22,739 $ 625,323
ENERGY - 0.5%
OIL & GAS - 0.5%
Gulf Canada Resources Ltd. (a)(e) 31,009 89,151
Gulf Canada Resources Ltd., Series 1,
adj. rate 1,321,942 3,717,962
3,807,113
FINANCE - 1.8%
SAVINGS & LOANS - 1.8%
First Nationwide Bank 11 1/2% 112,852 12,188,016
Greater New York Savings Bank,
Series B, perpetual 12% 78,751 2,165,653
14,353,669
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp. 8% (a)(e) 1,589 911,927
MEDIA & LEISURE - 4.2%
BROADCASTING - 4.2%
PanAmSat Corp. 12 3/4% 32,700 33,190,500
TECHNOLOGY - 0.5%
ELECTRONICS - 0.5%
Berg Electronics Holding Corp.,
Series E, $3.4687 157,433 4,250,691
TOTAL NONCONVERTIBLE PREFERRED STOCKS 57,358,901
TOTAL PREFERRED STOCKS
(Cost $60,943,714) 62,477,579
PURCHASED BANK DEBT - 0.1%
PRINCIPAL
AMOUNT
Leslie Fay Cos., Inc.:
revolving loan $ 685,856 404,655
term loan 777,600 458,784
TOTAL PURCHASED BANK DEBT
(Cost $1,190,771) 863,439
REPURCHASE AGREEMENTS - 11.3%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 6.22%
dated 6/30/95 due 7/3/95 $ 89,902,575 $ 89,856,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $787,442,524) $ 793,900,218
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(e) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
ACQUISITION ACQUISITION
SECURITY DATE COST
Alpine Group, Inc.
13 1/2%, 1/5/96 1/4/95 $ 128,339
American Financial Corp.
9 3/4%, 4/20/04 5/24/95 $ 6,634,600
Ampex Corp. 8% 2/16/95 $ 834,225
Cafeteria Operators LP
11%, 6/30/98 6/24/93 $ 5,600,000
FF Holdings Corp. 10/2/92 to 1/14/94 $ 135,753
Gulf Canada Resources
Ltd. 10/15/93 $ 76,940
Hat Brands,
Inc. (warrants) 9/2/92 to 2/23/94 $ -
HM/Hat Brands Trust
Class I Units 2/22/94 $ 340,000
Leslie Fay Cos., Inc.:
9.53%, 1/15/00 7/19/93 $ 512,312
10.54%, 1/15/02 7/19/93 to 11/11/93 $ 404,156
Littlefield Co.
10%, 12/31/95 2/28/94 $ 2,750,000
Live Entertainment, Inc.
(warrants):
$2.00 3/23/93 $ 220,717
$2.72 3/23/93 $ 131,863
New Street Capital Corp.
pay-in-kind:
12%, 2/28/98 2/15/95 $ 67,416
Unit 12%, 2/28/98 2/25/94 to 9/1/94 $ 1,123,600
RHI Holdings, Inc.
11 7/8%, 3/1/99 10/15/92 $ 495,000
(f) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $103,757,499 or 12.8% of net
assets.
(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $643,634,101 and $467,491,408, 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 $21,896 for the period (see
Note 3 of Notes to the Financial Statements).
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.0%
Ba 6.4% BB 17.3%
B 41.9% B 41.6%
Caa 16.3% CCC 4.8%
Ca, C 0.3% CC, C 0.0%
D 0.4%
The percentage not rated by either S&P or Moody's amounted to 7.9%
including long-term debt categorized as other securities. FMR has
determined that unrated debt securities that are lower quality account for
7.9% of the total value of investment in securities.
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $787,696,044. Net unrealized appreciation aggregated
$6,204,174, of which $27,367,484 related to appreciated investment
securities and $21,163,310 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $1,148,000 all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $89,856,000) (cost $787,442,524) - $ 793,900,218
See accompanying schedule
Cash 506,521
Receivable for investments sold 10,050,335
Receivable for fund shares sold 5,462,661
Dividends receivable 1,104,845
Interest receivable 12,928,622
TOTAL ASSETS 823,953,202
LIABILITIES
Payable for investments purchased $ 9,912,131
Payable for fund shares redeemed 178,315
Accrued management fee 405,377
Other payables and accrued expenses 77,305
TOTAL LIABILITIES 10,573,128
NET ASSETS $ 813,380,074
Net Assets consist of:
Paid in capital $ 767,990,586
Undistributed net investment income 33,139,910
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 5,795,848
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 6,453,730
NET ASSETS, for 72,678,030 shares outstanding $ 813,380,074
NET ASSET VALUE, offering price and redemption price per share ($813,380,074 (divided by) 72,678,030 shares) $11.19
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 2,728,599
Dividends
Interest 33,425,785
TOTAL INCOME 36,154,384
EXPENSES
Management fee $ 2,138,740
Transfer agent fees 183,111
Accounting fees and expenses 121,670
Non-interested trustees' compensation 1,780
Custodian fees and expenses 6,018
Audit 17,965
Interest 2,621
Total expenses before reductions 2,471,905
Expense reductions (5,422 2,466,483
)
NET INVESTMENT INCOME 33,687,901
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 7,181,679
Foreign currency transactions (978 7,180,701
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 39,872,106
Assets and liabilities in foreign currencies (150 39,871,956
)
NET GAIN (LOSS) 47,052,657
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 80,740,558
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 33,687,901 $ 43,091,356
Net investment income
Net realized gain (loss) 7,180,701 (726,075
)
Change in net unrealized appreciation (depreciation) 39,871,956 (49,793,238
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 80,740,558 (7,427,957
)
Distributions to shareholders (43,871,918 (30,631,598
From net investment income ) )
From net realized gain - (15,525,605
)
TOTAL DISTRIBUTIONS (43,871,918 (46,157,203
) )
Share transactions 333,374,520 498,543,147
Net proceeds from sales of shares
Reinvestment of distributions 43,871,918 46,157,203
Cost of shares redeemed (170,151,760 (385,629,739
) )
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 207,094,678 159,070,611
TOTAL INCREASE (DECREASE) IN NET ASSETS 243,963,318 105,485,451
NET ASSETS
Beginning of period 569,416,756 463,931,305
End of period (including undistributed net investment income of $33,139,910 and $42,834,969,
respectively) $ 813,380,074 $ 569,416,756
OTHER INFORMATION
Shares
Sold 31,093,586 45,102,882
Issued in reinvestment of distributions 4,326,619 4,073,892
Redeemed (15,728,132 (34,899,979
) )
Net increase (decrease) 19,692,073 14,276,795
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 D 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070 $ 8.110
Income from Investment Operations .428 .770 .728 .790 .890 .858
Net investment income
Net realized and unrealized gain (loss) .792 (.910) 1.332 1.290 1.590 (1.040)
Total from investment operations 1.220 (.140) 2.060 2.080 2.480 (.182)
Less Distributions (.780) (.730) (.794) (.810) - (.858)
From net investment income
In excess of net investment income - - (.036) - - -
From net realized gain on investments - (.370) (.060) - - -
Total distributions (.780) (1.100) (.890) (.810) - (.858)
Net asset value, end of period $ 11.190 $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070
TOTAL RETURN B, C 12.10% (1.64) 20.40% 23.17% 35.08% (2.23)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 813,380 $ 569,417 $ 463,931 $ 200,591 $ 70,060 $ 29,990
Ratio of expenses to average net assets .70% .71% .64% .67% .97% 1.00%
A
Ratio of expenses to average net assets before expense .70% .71% .66% .67% .97% 1.12%
reductions A
Ratio of net investment income to average net assets 9.58% 8.75% 8.69% 10.98% 12.94% 11.36%
A
Portfolio turnover rate 154% 122% 155% 160% 154% 156%
A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. 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 THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES
TO THE FINANCIAL
STATEMENTS).
D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT
PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
Equity-Income 24.00% 15.06% 12.30%
S&P 500 26.07% 12.09% 13.58%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 stocks - a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Equity Income (Standard & Poor's 50
10/09/86 10000.00 10000.00
10/31/86 10110.00 10329.97
11/30/86 10330.00 10580.99
12/31/86 10020.00 10311.18
01/31/87 11170.00 11700.09
02/28/87 11430.00 12162.25
03/31/87 11720.18 12513.74
04/30/87 11428.43 12402.36
05/31/87 11498.86 12510.26
06/30/87 11738.55 13142.03
07/31/87 12185.73 13808.33
08/31/87 12521.12 14323.38
09/30/87 12258.32 14009.70
10/31/87 9866.20 10992.01
11/30/87 9424.74 10086.27
12/31/87 9906.52 10853.84
01/31/88 10611.13 11310.78
02/29/88 11136.95 11837.86
03/31/88 10943.07 11472.07
04/30/88 11124.21 11599.41
05/31/88 11273.39 11700.33
06/30/88 11914.76 12237.37
07/31/88 11893.18 12190.87
08/31/88 11688.12 11776.38
09/30/88 12035.42 12278.06
10/31/88 12243.12 12619.39
11/30/88 12046.36 12438.93
12/31/88 12156.33 12656.61
01/31/89 12907.13 13583.07
02/28/89 12840.88 13244.86
03/31/89 13119.01 13553.46
04/30/89 13625.32 14256.89
05/31/89 14030.37 14834.29
06/30/89 14039.98 14749.73
07/31/89 14858.50 16081.64
08/31/89 15097.24 16396.84
09/30/89 14927.51 16329.61
10/31/89 14066.31 15950.76
11/30/89 14146.69 16276.16
12/31/89 14264.74 16666.78
01/31/90 13301.38 15548.44
02/28/90 13380.20 15749.02
03/31/90 13402.27 16166.37
04/30/90 12937.59 15762.21
05/31/90 13793.57 17299.02
06/30/90 13656.23 17181.39
07/31/90 13322.25 17126.41
08/31/90 12258.45 15578.18
09/30/90 11307.54 14819.52
10/31/90 11019.21 14755.80
11/30/90 11808.98 15709.03
12/31/90 12083.75 16147.31
01/31/91 12731.78 16851.33
02/28/91 13608.52 18056.20
03/31/91 13890.81 18493.16
04/30/91 13955.72 18537.54
05/31/91 14721.66 19338.37
06/30/91 14119.72 18452.67
07/31/91 14920.19 19312.56
08/31/91 15235.12 19770.27
09/30/91 15130.56 19440.11
10/31/91 15382.51 19700.60
11/30/91 14719.47 18906.67
12/31/91 15882.70 21069.59
01/31/92 16097.15 20677.70
02/29/92 16619.87 20946.51
03/31/92 16416.22 20538.05
04/30/92 16930.49 21141.87
05/31/92 17065.83 21245.47
06/30/92 16916.41 20928.91
07/31/92 17434.82 21784.90
08/31/92 17052.84 21338.31
09/30/92 17229.86 21590.10
10/31/92 17436.12 21665.67
11/30/92 18068.66 22404.47
12/31/92 18564.83 22680.04
01/31/93 19119.01 22870.55
02/28/93 19548.49 23181.59
03/31/93 20131.05 23670.73
04/30/93 20047.35 23097.89
05/31/93 20410.07 23716.92
06/30/93 20650.14 23785.70
07/31/93 20931.09 23690.55
08/31/93 21731.81 24588.43
09/30/93 21648.73 24399.09
10/31/93 21846.69 24904.16
11/30/93 21464.91 24667.57
12/31/93 21961.06 24966.04
01/31/94 22928.26 25814.89
02/28/94 22337.82 25115.31
03/31/94 21403.32 24020.28
04/30/94 22140.85 24327.74
05/31/94 22351.57 24726.71
06/30/94 22213.48 24120.91
07/31/94 22955.44 24912.07
08/31/94 24136.53 25933.47
09/30/94 23741.11 25298.10
10/31/94 24228.42 25867.31
11/30/94 23436.54 24925.22
12/31/94 23512.77 25294.86
01/31/95 23880.40 25950.76
02/28/95 24790.97 26962.06
03/31/95 25646.99 27757.71
04/30/95 26360.31 28575.17
05/31/95 27154.68 29717.32
06/30/95 27544.83 30407.65
Let's say you invested $10,000 in Equity-Income Portfolio on October 9,
1986, when the fund started. By June 30, 1995, your investment would have
grown to $27,545 - a 175.45% increase. That compares to $10,000 invested in
the S&P 500, which would have grown to $30,408 over the same period - a
204.08% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Philip Morris Companies, Inc. 4.2
Federal National Mortgage Association 2.8
International Business Machines Corp. 2.1
American Express Co. 2.1
British Petroleum PLC ADR 2.0
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Finance 18.0
Energy 10.1
Nondurables 8.8
Basic Industries 7.7
Industrial Machinery & Equipment 7.3
ASSET ALLOCATION AS OF JUNE 30, 1995*
Row: 1, Col: 1, Value: 7.3
Row: 1, Col: 2, Value: 6.2
Row: 1, Col: 3, Value: 86.5
Stocks 86.5%
Bonds 6.2%
Short-term investments 7.3%
FOREIGN INVESTMENTS 6.2%
*
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bettina Doulton, Portfolio Manager of Equity-Income
Portfolio
Q. BETTINA, HOW DID THE FUND PERFORM?
A. Although the fund did well relative to its peers, it slightly trailed
the performance of the Standard & Poor's 500 stock index for the six- and
12-month periods ended June 30, 1995. The index had total returns of 20.21%
and 26.07% for those periods, respectively. Because this recent stock
market rally was quite narrow - led by a few sectors, namely technology,
financials and the large-cap and blue-chip stocks - the average stock
mutual fund has not topped the performance of the index thus far in 1995.
Q. THE STOCK MARKET SHOWED A RENEWED VIGOR OVER THE PAST SIX MONTHS. WHAT
ACCOUNTED FOR THIS?
A. The market's strength was driven by investors' belief that the Federal
Reserve Board would manage the economy to a soft landing - steady, albeit
slower, economic growth and continued low inflation. If achieved, those
conditions are ideal for Corporate America to sustain strong profit growth.
During the six-month period, corporate earnings reports were excellent,
which provided the fuel for stock prices to move higher. Excluding the
consistently outstanding performance of the technology and financial
sectors, the market has been characterized by rapid industry rotation.
Investors have spent the past six months racing from one industry to the
next, trying to stay one step ahead of the crowd. Sometimes, the fund was
in the right place at the right time, and sometimes it wasn't.
Q. WHAT CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Several of the fund's largest holdings have driven returns recently.
Highlights include Philip Morris. The stock has been rewarded for the
company's strong profit growth and free cash flow; both are attributable to
terrific results in the company's domestic and international tobacco
businesses, which more than offset mediocre results in its food division.
Second in line is the Federal National Mortgage Association (Fannie Mae).
Although its stock price suffered a significant setback last fall, it has
since recovered as conditions in the secondary mortgage market have turned
more favorable. IBM was another strong performer. The company has done an
excellent job cutting costs and cleaning up its balance sheet. In addition,
global economic growth and wide acceptance of the company's new products
have contributed to accelerating revenue growth. Finally, in the energy
sector, the energy service company Schlumberger performed well. It
benefited from improving worldwide supply/demand dynamics for oil and
corporate restructuring efforts. Elsewhere in the energy sector, however,
British Petroleum (BP) and Amerada Hess have been somewhat disappointing in
terms of stock performance. Both are restructuring stories; BP's stock may
just be taking a breather after making significant gains, while Amerada
Hess' turnaround may be just taking a bit longer than investors had
expected.
Q. YOU MORE THAN DOUBLED THE FUND'S STAKE IN FINANCIAL STOCKS; THEY WENT
FROM 7.1% OF THE FUND SIX MONTHS AGO TO 18.0% ON JUNE 30 . . .
A. Recent purchases of bank stocks made up most of that increase. Along
with the diversified financial services companies such as American Express
and Fannie Mae, banks had a strong, if volatile, run. My only regret is not
owning more of them early in the period, when they began to outperform.
Prices did fall in the spring, however, which allowed me to buy stocks such
as Chemical Banking and BankAmerica off their highs. In the coming months,
I expect the market to drive bank stock valuations - prices relative to
earnings - higher. That's because earnings are becoming more consistent,
the industry is consolidating, and companies are using excess capital to
repurchase shares of their own stocks.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. When interest rates fall, as they've done over the past few months, the
market usually rewards stocks with higher valuations. However, we have to
keep in mind that the economy has slowed, which could negatively affect
corporate earnings going forward. The 64-thousand-dollar question then
becomes: will the market's willingness to drive up valuations and look
toward an economic resurgence be enough to offset the negative effects of
potential short-term earnings disappointments? I'm afraid not. Companies
that report less-than-expected earnings growth in the coming months will
most likely pay dearly with falling stock prices. In light of this, I plan
to focus intensely on owning companies that trade at attractive valuations,
offer good prospects for higher earnings through 1996, and are working to
enhance shareholder value.
FUND FACTS
GOAL: to provide current income and increase
the value of the fund's shares
START DATE: October 9, 1986
SIZE: as of June 30, 1995, more than $3.4 billion
MANAGER: Bettina Doulton, since 1993;
manager, Fidelity Value Fund, since March
1995; Fidelity Advisor Equity-Income Fund,
since 1993; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 85.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 5.7%
AEROSPACE & DEFENSE - 3.8%
Alliant Techsystems, Inc. (a) 421,700 $ 17,605,959
Boeing Co. 353,800 22,156,725
General Motors Corp. Class H 426,200 16,834,900
Lockheed Martin Corp. 434,803 27,446,939
McDonnell Douglas Corp. 131,000 10,054,250
Rockwell International Corp. 429,600 19,654,200
Sundstrand Corp. 183,000 10,934,250
Thiokol Corp. 186,400 5,638,600
130,325,823
DEFENSE ELECTRONICS - 1.4%
Litton Industries, Inc. (a) 268,700 9,908,313
Loral Corp. 214,700 11,110,725
Raytheon Co. 342,300 26,571,038
47,590,076
SHIP BUILDING & REPAIR - 0.5%
General Dynamics Corp. 420,400 18,655,250
TOTAL AEROSPACE & DEFENSE 196,571,149
BASIC INDUSTRIES - 7.5%
CHEMICALS & PLASTICS - 4.7%
du Pont (E.I.) de Nemours & Co. 571,100 39,263,125
Grace (W.R.) & Co. 503,600 30,908,450
Hercules, Inc. 810,900 39,531,375
Nalco Chemical Co. 462,300 16,816,163
Raychem Corp. 284,300 10,910,013
Union Carbide Corp. 713,100 23,799,713
161,228,839
IRON & STEEL - 0.1%
Nucor Corp. 38,600 2,065,100
METALS & MINING - 1.3%
Alcan Aluminium Ltd. 746,183 22,562,179
Aluminum Co. of America 467,200 23,418,400
45,980,579
PAPER & FOREST PRODUCTS - 1.4%
Scott Paper Co. 966,600 47,846,700
TOTAL BASIC INDUSTRIES 257,121,218
CONGLOMERATES - 2.8%
Allied-Signal, Inc. 382,600 17,025,700
GenCorp, Inc. 33,600 361,200
Tyco International Ltd. 857,071 46,281,834
United Technologies Corp. 398,900 31,164,063
94,832,797
CONSTRUCTION & REAL ESTATE - 0.2%
REAL ESTATE INVESTMENT TRUSTS - 0.2%
Starwood Lodging Trust combined
certificate (SBI) 125,900 2,909,045
Storage Equities, Inc. 145,800 2,387,475
5,296,520
DURABLES - 2.6%
AUTOS, TIRES, & ACCESSORIES - 1.6%
Chrysler Corp. 140,600 6,731,225
Dana Corp. 438,200 12,543,475
General Motors Corp. 269,800 12,646,875
Johnson Controls, Inc. 61,100 3,452,150
PACCAR, Inc. 93,500 4,371,125
Snap-on Tools Corp. 374,000 14,492,500
54,237,350
SHARES VALUE (NOTE 1)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.7%
Black & Decker Corp. 222,600 $ 6,872,775
Whirlpool Corp. 341,200 18,766,000
25,638,775
HOME FURNISHINGS - 0.1%
Heilig-Meyers Co. 104,700 2,669,850
TEXTILES & APPAREL - 0.2%
Westpoint Stevens, Inc. Class A (a) 397,100 7,098,163
TOTAL DURABLES 89,644,138
ENERGY - 9.7%
ENERGY SERVICES - 3.1%
Baker Hughes, Inc. 521,800 10,696,900
Halliburton Co. 959,000 34,284,250
Helmerich & Payne, Inc. 130,400 3,846,800
McDermott International, Inc. 575,000 13,871,875
Schlumberger Ltd. 691,300 42,947,013
105,646,838
OIL & GAS - 6.6%
Amerada Hess Corp. 929,700 45,439,088
British Petroleum PLC ADR 823,528 70,514,585
Canada Occidental Petroleum Ltd. 239,500 7,438,025
Coastal Corp. (The) 459,800 13,966,425
Kerr-McGee Corp. 157,400 8,440,575
Mobil Corp. 353,700 33,955,200
Occidental Petroleum Corp. 1,047,000 23,950,125
Tosco Corp. 279,100 8,896,313
Total SA:
Class B 210,425 12,691,129
sponsored ADR 129,500 3,917,375
229,208,840
TOTAL ENERGY 334,855,678
FINANCE - 18.0%
BANKS - 6.6%
Bank of Boston Corp. 482,800 18,105,000
Bank of New York Co., Inc. 163,000 6,581,125
BankAmerica Corp. 511,100 26,896,638
Bankers Trust New York Corp. 430,400 26,684,800
Chase Manhattan Corp. 480,041 22,561,927
Chemical Banking Corp. 670,100 31,662,225
Citicorp 647,300 37,462,488
First Chicago Corp. 119,100 7,131,113
First Union Corp. 192,700 8,719,675
Fleet Financial Group, Inc. 328,900 12,210,413
Mellon Bank Corp. 59,600 2,480,850
NationsBank Corp. 35,400 1,898,325
Republic New York Corp. 230,700 12,919,200
Shawmut National Corp. 345,200 11,003,250
226,317,029
CREDIT & OTHER FINANCE - 2.8%
American Express Co. 2,012,672 70,695,104
Countrywide Credit Industries, Inc. 886,700 18,620,700
Greenpoint Financial Corp. 362,900 8,573,513
97,889,317
FEDERAL SPONSORED CREDIT - 4.1%
Federal Home Loan Mortgage
Corporation 625,400 42,996,250
Federal National Mortgage Association 1,023,900 96,630,563
139,626,813
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - 3.4%
Allstate Corp. 182,900 $ 5,418,413
American International Group, Inc. 197,200 22,480,800
American Reinsurance Corp. 11,300 420,925
General Re Corp. 193,700 25,931,588
Loews Corp. 266,500 32,246,500
PMI Group, Inc. 100,600 4,363,525
Reliastar Financial Corp. 252,100 9,642,825
Travelers, Inc. (The) 359,233 15,716,458
116,221,034
SAVINGS & LOANS - 0.3%
Ahmanson (H.F.) & Co. 273,900 6,025,800
Charter One Financial Corp. 162,000 3,969,000
9,994,800
SECURITIES INDUSTRY - 0.8%
Merrill Lynch & Co., Inc. 522,600 27,436,500
TOTAL FINANCE 617,485,493
HEALTH - 4.3%
DRUGS & PHARMACEUTICALS - 1.8%
Allergan, Inc. 340,100 9,225,213
American Home Products Corp. 360,000 27,855,000
Pfizer, Inc. 297,800 13,754,638
SmithKline Beecham PLC ADR 266,000 12,036,500
62,871,351
MEDICAL EQUIPMENT & SUPPLIES - 1.7%
Baxter International, Inc. 971,300 35,331,038
Beckman Instruments, Inc. 800 22,300
I-Stat Corp. (a) 173,100 6,318,150
Puritan Bennett Corp. 257,500 9,945,938
St. Jude Medical, Inc. 105,400 5,283,175
56,900,601
MEDICAL FACILITIES MANAGEMENT - 0.8%
Columbia/HCA Healthcare Corp. 621,800 26,892,850
TOTAL HEALTH 146,664,802
INDUSTRIAL MACHINERY & EQUIPMENT - 7.2%
ELECTRICAL EQUIPMENT - 1.0%
Emerson Electric Co. 211,700 15,136,550
General Electric Co. 175,500 9,893,813
Philips Electronics NV 196,600 8,404,650
Philips Electronics NV (Bearer) 45,200 1,915,824
35,350,837
INDUSTRIAL MACHINERY & EQUIPMENT - 3.5%
Caterpillar, Inc. 415,100 26,670,175
Cooper Industries, Inc. 467,000 18,446,500
Deere & Co. 474,400 40,620,500
Dover Corp. 145,100 10,556,025
Ingersoll-Rand Co. 574,300 21,966,975
Varity Corp. (a) 62,800 2,763,200
121,023,375
POLLUTION CONTROL - 2.7%
Browning-Ferris Industries, Inc. 870,700 31,454,038
Safety Kleen Corp. 583,600 9,410,550
WMX Technologies, Inc. 1,537,600 43,629,400
Wheelabrator Technologies, Inc. 453,200 6,967,950
91,461,938
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 247,836,150
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 2.1%
BROADCASTING - 1.2%
Viacom, Inc. Class B (non-vtg.) (a) 851,614 $ 39,493,599
PUBLISHING - 0.9%
Meredith Corp. 102,000 2,588,250
News Corp. Ltd.:
ADR 741,700 16,780,963
(vtg.) pfd. sponsored ADR 74,900 1,498,000
Times Mirror Co. Class A 461,800 11,025,475
31,892,688
TOTAL MEDIA & LEISURE 71,386,287
NONDURABLES - 8.6%
BEVERAGES - 0.9%
PepsiCo, Inc. 647,100 29,523,938
FOODS - 0.6%
ConAgra, Inc. 483,700 16,869,038
Dole Food, Inc. 157,600 4,590,100
21,459,138
HOUSEHOLD PRODUCTS - 1.3%
Avon Products, Inc. 285,480 19,127,160
First Brands Corp. 329,800 14,140,175
Rubbermaid, Inc. 168,800 4,684,200
Tambrands, Inc. 172,300 7,365,825
45,317,360
TOBACCO - 5.8%
Imasco Ltd. 1,453,600 25,815,296
Philip Morris Companies, Inc. 1,927,300 143,342,938
RJR Nabisco Holdings Corp. 1,054,639 29,398,062
198,556,296
TOTAL NONDURABLES 294,856,732
RETAIL & WHOLESALE - 3.2%
APPAREL STORES - 0.4%
Limited, Inc. (The) 618,400 13,604,800
GENERAL MERCHANDISE STORES - 2.1%
Dayton Hudson Corp. 293,400 21,051,450
May Department Stores Co. (The) 95,700 3,983,513
Wal-Mart Stores, Inc. 1,604,500 42,920,375
Woolworth Corp. 322,200 4,873,275
72,828,613
GROCERY STORES - 0.7%
Fleming Companies, Inc. 230,445 6,106,793
Great Atlantic & Pacific Tea Co., Inc. 397,600 10,486,700
Vons Companies, Inc. (a) 384,200 7,732,025
24,325,518
TOTAL RETAIL & WHOLESALE 110,758,931
SERVICES - 0.4%
PRINTING - 0.2%
Wallace Computer Services, Inc. 168,200 6,454,675
SERVICES - 0.2%
ADT Ltd. (a) 640,900 7,530,575
TOTAL SERVICES 13,985,250
TECHNOLOGY - 4.9%
COMPUTERS & OFFICE EQUIPMENT - 3.9%
Hewlett-Packard Co. 405,000 30,172,500
International Business Machines Corp. 755,700 72,547,200
Pitney Bowes, Inc. 792,200 30,400,675
133,120,375
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.2%
Perkin-Elmer Corp. 226,200 $ 8,030,100
ELECTRONICS - 0.8%
AMP, Inc. 385,600 16,291,600
Kemet Corp. 46,700 2,451,750
Thomas & Betts Corp. 143,700 9,825,488
28,568,838
TOTAL TECHNOLOGY 169,719,313
TRANSPORTATION - 1.8%
RAILROADS - 1.8%
Burlington Northern, Inc. 534,200 33,854,925
CSX Corp. 195,300 14,671,913
Southern Pacific Rail Corp. (a) 919,300 14,478,975
TOTAL TRANSPORTATION 63,005,813
UTILITIES - 6.3%
GAS - 0.5%
Williams Companies, Inc. 489,200 17,060,850
TELEPHONE SERVICES - 5.8%
Ameritech Corp. 1,067,900 46,987,600
Bell Atlantic Corp. 210,100 11,765,600
BellSouth Corp. 576,200 36,588,700
Koninklijke PPT Nederland 165,600 5,959,760
Koninklijke PPT Nederland (a)(d) 104,400 3,757,240
NYNEX Corp. 1,200,400 48,316,100
SBC Communications, Inc. 871,300 41,495,663
Southern New England
Telecommunications Corp. 175,700 6,193,425
201,064,088
TOTAL UTILITIES 218,124,938
TOTAL COMMON STOCKS
(Cost $2,563,116,541) 2,932,145,209
PREFERRED STOCKS - 1.2%
CONVERTIBLE PREFERRED STOCKS - 0.8%
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES - 0.3%
Chrysler Corp., Series A, $4.625 (d) 85,200 11,374,200
ENERGY - 0.4%
ENERGY SERVICES - 0.1%
Noble Drilling Corp. $1.50 119,100 2,828,625
OIL & GAS - 0.3%
Atlantic Richfield Co.
exchangeable $.5575 431,300 11,213,800
TOTAL ENERGY 14,042,425
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Westinghouse Electric Corp. $1.30 (d) 351,500 5,140,688
TOTAL CONVERTIBLE PREFERRED STOCKS 30,557,313
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED STOCKS - 0.4%
MEDIA & LEISURE - 0.4%
PUBLISHING - 0.4%
News Corp. Ltd. (ltd. vtg.) 2,510,505 $ 12,393,685
UTILITIES - 0.0%
ELECTRIC UTILITY - 0.0%
Gulf States Utilities Co., Series B,
adj. rate 586 28,348
TOTAL NONCONVERTIBLE PREFERRED STOCKS 12,422,033
TOTAL PREFERRED STOCKS
(Cost $39,195,081) 42,979,346
CORPORATE BONDS - 2.4%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (C)
CONVERTIBLE BONDS - 0.8%
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Centerpoint Properties 8.22%,
1/15/04 - $ 1,510,000 1,683,650
Liberty Property LP 8%, 7/1/01 - 750,000 735,000
Sizeler Property Investors, Inc.
8%, 7/15/03 - 1,500,000 1,312,500
TOTAL CONSTRUCTION & REAL ESTATE 3,731,150
HEALTH - 0.6%
DRUGS & PHARMACEUTICALS - 0.6%
Roche Holdings, Inc. liquid
yield option notes
0%, 4/20/10 (d) - 48,340,000 19,336,000
PRECIOUS METALS - 0.1%
Pegasus Gold, Inc. euro
6 1/4%, 4/30/02 (d) Baa3 1,860,000 1,755,375
SERVICES - 0.0%
SERVICES - 0.0%
ADT Operations, Inc. liquid
yield option notes
0%, 7/6/10 Ba3 3,670,000 1,405,940
UTILITIES - 0.0%
GAS - 0.0%
SFP Pipeline Holdings, Inc.
exchangeable
0%, 8/15/10 (e) Baa3 470,000 606,300
TOTAL CONVERTIBLE BONDS 26,834,765
NONCONVERTIBLE BONDS - 1.6%
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 10 7/8%, 8/15/01 B2 1,220,000 1,250,500
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - 0.2%
PACKAGING & CONTAINERS - 0.0%
Owens Illinois, Inc. 10 1/4%,
4/1/99 B2 $ 350,000 $ 357,000
PAPER & FOREST PRODUCTS - 0.2%
Stone Container Corp. 9 7/8%,
2/1/01 B1 7,760,000 7,682,400
TOTAL BASIC INDUSTRIES 8,039,400
CONGLOMERATES - 0.0%
Coltec Industries, Inc. 10 1/4%,
4/1/02 B1 910,000 941,850
DURABLES - 0.3%
TEXTILES & APPAREL - 0.3%
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B1 2,660,000 2,620,100
9 3/8%, 12/15/05 B3 7,850,000 7,575,250
TOTAL DURABLES 10,195,350
FINANCE - 0.0%
BANKS - 0.0%
Signet Banking Corp.:
6 1/4%, 5/15/97 (e) Baa2 340,000 337,025
6.4375%, 4/15/98 (e) Baa2 190,000 187,150
TOTAL FINANCE 524,175
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.8%
Viacom, Inc. 8%, 7/7/06 B1 28,240,000 27,463,400
NONDURABLES - 0.2%
BEVERAGES - 0.2%
Canandaigua Wine, Inc.
8 3/4%, 12/15/03 (b) B1 5,700,000 5,586,000
UTILITIES - 0.0%
GAS - 0.0%
Columbia Gas Systems Inc.
9.91%, 5/28/20 (b) - 170,000 250,325
TOTAL NONCONVERTIBLE BONDS 54,251,000
TOTAL CORPORATE BONDS
(Cost $76,398,754) 81,085,765
U.S. TREASURY OBLIGATIONS - 3.8%
6 1/4%, 2/15/03 Aaa 17,860,000 17,907,508
5 3/4%, 8/15/03 Aaa 81,220,000 78,745,227
7 1/4%, 5/15/04 Aaa 24,291,000 25,934,529
11 5/8%, 11/15/04 Aaa 6,810,000 9,361,639
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $118,810,332) 131,948,903
REPURCHASE AGREEMENTS - 7.3%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 252,910,024 $ 252,779,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,050,299,708) $ 3,440,938,223
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $41,363,503 or 1.2% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $2,163,942,745 and $1,281,174,381, respectively, of which U.S.
government and government agency obligations aggregated $42,997,272 and
$41,828,379, 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 $1,153,411 for the period
(see Note 3 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 3.8% AAA, AA, A 3.8%
Baa 0.1% BBB 0.0%
Ba 0.0% BB 0.9%
B 1.6% B 0.7%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.7%.
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $3,052,199,640. Net unrealized appreciation aggregated
$388,738,583, of which $407,074,046 related to appreciated investment
securities and $18,335,463 related to depreciated investment securities.
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $252,779,000) (cost $ 3,440,938,223
$3,050,299,708) -
See accompanying schedule
Cash 864
Receivable for investments sold 66,280,607
Receivable for fund shares sold 5,980,486
Dividends receivable 8,213,745
Interest receivable 4,230,266
Other receivables 42,410
TOTAL ASSETS 3,525,686,601
LIABILITIES
Payable for investments purchased $ 63,785,673
Payable for fund shares redeemed 629,290
Accrued management fee 1,452,585
Other payables and accrued expenses 513,611
TOTAL LIABILITIES 66,381,159
NET ASSETS $ 3,459,305,442
Net Assets consist of:
Paid in capital $ 2,994,274,835
Undistributed net investment income 5,530,661
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 68,857,443
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 390,642,503
NET ASSETS, for 204,803,927 shares outstanding $ 3,459,305,442
NET ASSET VALUE, offering price and redemption price per share ($3,459,305,442 (divided by) 204,803,927 shares) $16.89
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 31,571,004
Dividends
Interest 16,392,102
TOTAL INCOME 47,963,106
EXPENSES
Management fee $ 7,399,646
Transfer agent fees 727,522
Accounting fees and expenses 378,208
Non-interested trustees' compensation 5,452
Custodian fees and expenses 39,578
Registration fees 251,928
Audit 24,512
Legal 4,441
Interest 9,801
Miscellaneous 7,582
TOTAL EXPENSES 8,848,670
NET INVESTMENT INCOME 39,114,436
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 72,417,571
Foreign currency transactions (3,308 72,414,263
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 336,113,775
Assets and liabilities in foreign currencies (8,788 336,104,987
)
NET GAIN (LOSS) 408,519,250
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 447,633,686
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 39,114,436 $ 49,846,224
Net investment income
Net realized gain (loss) 72,414,263 121,898,471
Change in net unrealized appreciation (depreciation) 336,104,987 (61,690,963)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 447,633,686 110,053,732
Distributions to shareholders (37,713,247) (44,739,784)
From net investment income
From net realized gain (121,254,353) (68,533,800)
TOTAL DISTRIBUTIONS (158,967,600) (113,273,584)
Share transactions 802,500,637 1,048,772,904
Net proceeds from sales of shares
Reinvestment of distributions 158,967,516 113,273,584
Cost of shares redeemed (75,240,890) (192,914,992)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 886,227,263 969,131,496
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,174,893,349 965,911,644
NET ASSETS
Beginning of period 2,284,412,093 1,318,500,449
End of period (including undistributed net investment income of $5,530,661 and $4,150,957,
respectively) $ 3,459,305,442 $ 2,284,412,093
OTHER INFORMATION
Shares
Sold 50,281,447 68,815,564
Issued in reinvestment of distributions 10,351,678 7,484,681
Redeemed (4,656,990) (12,882,315)
Net increase (decrease) 55,976,135 63,417,930
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 D 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51 $ 12.29
Income from Investment Operations
Net investment income .20 .41 .37 .40 .50 .58
Net realized and unrealized gain (loss) 2.32 .64 2.06 1.57 2.43 (2.38)
Total from investment operations 2.52 1.05 2.43 1.97 2.93 (1.80)
Less Distributions (.20) (.37) (.35) (.42) (.59) (.59)
From net investment income
In excess of net investment income - - (.04) - - -
From net realized gain (.78) (.77) - - - (.39)
Total distributions (.98) (1.14) (.39) (.42) (.59) (.98)
Net asset value, end of period $ 16.89 $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51
TOTAL RETURN B, C 17.15% 7.07% 18.29% 16.89% 31.44% (15.29)
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,459,305 $ 2,284,412 $ 1,318,500 $ 592,880 $ 282,171 $ 154,080
Ratio of expenses to average net assets .62% A .58% .62% .65% .74% .78%
Ratio of expenses to average net assets before .62% A .60% .62% .65% .74% .78%
expense reductions
Ratio of net investment income to average net assets 2.72% A 2.83% 2.87% 3.52% 4.83% 6.01%
Portfolio turnover rate 100% A 134% 120% 74% 107% 94%
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
THE FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
D 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.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
Growth 36.97% 14.84% 14.56%
S&P 500 26.07% 12.09% 13.58%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 Stocks- a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any, and
excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Growth (212) Standard & Poor's 500
10/09/86 10000.00 10000.00
10/31/86 10000.00 10329.97
11/30/86 10220.00 10580.99
12/31/86 10030.00 10311.18
01/31/87 11100.00 11700.09
02/28/87 11650.00 12162.25
03/31/87 11839.97 12513.74
04/30/87 11839.97 12402.36
05/31/87 11920.10 12510.26
06/30/87 12270.69 13142.03
07/31/87 12761.52 13808.33
08/31/87 13142.16 14323.38
09/30/87 12991.91 14009.70
10/31/87 10137.09 10992.01
11/30/87 9425.90 10086.27
12/31/87 10397.53 10853.84
01/31/88 10623.12 11310.78
02/29/88 11484.46 11837.86
03/31/88 11381.92 11472.07
04/30/88 11525.47 11599.41
05/31/88 11422.93 11700.33
06/30/88 11997.15 12237.37
07/31/88 11935.63 12190.87
08/31/88 11648.52 11776.38
09/30/88 11976.65 12278.06
10/31/88 12007.41 12619.39
11/30/88 11894.61 12438.93
12/31/88 12017.66 12656.61
01/31/89 12879.00 13583.07
02/28/89 12612.39 13244.86
03/31/89 12993.68 13553.46
04/30/89 13680.85 14256.89
05/31/89 14170.19 14834.29
06/30/89 13982.78 14749.73
07/31/89 15232.18 16081.64
08/31/89 15492.47 16396.84
09/30/89 15627.82 16329.61
10/31/89 15190.53 15950.76
11/30/89 15440.41 16276.16
12/31/89 15804.81 16666.78
01/31/90 14888.59 15548.44
02/28/90 15030.81 15749.02
03/31/90 15214.51 16166.37
04/30/90 14771.47 15762.21
05/31/90 16078.97 17299.02
06/30/90 16413.95 17181.39
07/31/90 16154.61 17126.41
08/31/90 14490.52 15578.18
09/30/90 12999.33 14819.52
10/31/90 12534.68 14755.80
11/30/90 13550.42 15709.03
12/31/90 13950.23 16147.31
01/31/91 14879.53 16851.33
02/28/91 15989.61 18056.20
03/31/91 16472.15 18493.16
04/30/91 16318.61 18537.54
05/31/91 17283.69 19338.37
06/30/91 16000.57 18452.67
07/31/91 17524.96 19312.56
08/31/91 18303.60 19770.27
09/30/91 18446.17 19440.11
10/31/91 19016.45 19700.60
11/30/91 17930.73 18906.67
12/31/91 20299.56 21069.59
01/31/92 21538.81 20677.70
02/29/92 21989.40 20946.51
03/31/92 20641.73 20538.05
04/30/92 19833.13 21141.87
05/31/92 19664.67 21245.47
06/30/92 18901.00 20928.91
07/31/92 19630.98 21784.90
08/31/92 19091.92 21338.31
09/30/92 19428.83 21590.10
10/31/92 20181.28 21665.67
11/30/92 21528.94 22404.47
12/31/92 22191.55 22680.04
01/31/93 22629.54 22870.55
02/28/93 22163.03 23181.59
03/31/93 23046.80 23670.73
04/30/93 22805.77 23097.89
05/31/93 24504.44 23716.92
06/30/93 24756.94 23785.70
07/31/93 24688.08 23690.55
08/31/93 25927.65 24588.43
09/30/93 26409.70 24399.09
10/31/93 26662.20 24904.16
11/30/93 25583.32 24667.57
12/31/93 26490.04 24966.04
01/31/94 27155.74 25814.89
02/28/94 26875.65 25115.31
03/31/94 25654.59 24020.28
04/30/94 25813.32 24327.74
05/31/94 25215.00 24726.71
06/30/94 23932.88 24120.91
07/31/94 24763.21 24912.07
08/31/94 26167.43 25933.47
09/30/94 25849.96 25298.10
10/31/94 26900.07 25867.31
11/30/94 25825.53 24925.22
12/31/94 26484.91 25294.86
01/31/95 25984.27 25950.76
02/28/95 27060.36 26962.06
03/31/95 28042.58 27757.71
04/30/95 28987.98 28575.17
05/31/95 30117.54 29717.32
06/30/95 32781.83 30407.65
Let's say you invested $10,000 in Growth Portfolio on October 9, 1986, when
the fund started. By June 30, 1995, your investment would have grown to
$32,782 - a 227.82% increase. That compares to $10,000 invested in the S&P
500, which would have grown to $30,408 over the same period - a 204.08%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Oracle Systems Corp. 3.6
Intel Corp. 3.1
DSC Communications Corp. 2.7
Applied Materials, Inc. 2.3
Compaq Computer Corp. 2.3
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Technology 52.6
Utilities 9.4
Retail & Wholesale 8.7
Media & Leisure 4.5
Industrial Machinery & Equipment 4.1
ASSET ALLOCATION AS OF JUNE 30, 1995*
Row: 1, Col: 1, Value: 3.4
Row: 1, Col: 2, Value: 96.59999999999999
Stocks 96.6%
Short-term investment 3.4%
FOREIGN INVESTMENTS 6.3%
*
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Lawrence Greenberg, Portfolio
Manager of Growth Portfolio
Q. LARRY, HOW HAS THE FUND DONE OVER THE PAST SIX MONTHS?
A. Quite well. From December 31, 1994, through June 30, 1995, the fund beat
the Standard & Poor's 500 index, which returned 20.21%.
Q. WHAT MADE THE DIFFERENCE?
A. In the second half of 1994, growth stocks began outperforming cyclicals
- stocks in sectors like autos and steel that tend to rise or fall with the
economy. Since then, the economy has slowed and interest rates have been
flat or falling - a perfect environment for growth stocks. My strategy was
to concentrate on those companies with the fastest earnings growth
opportunities for `95 and `96. This aggressive position, especially in
technology, paid off handsomely when growth stocks rebounded.
Q. IN FACT, OVER 50% OF THE FUND WAS IN TECHNOLOGY AT THE END OF JUNE. WHY
SUCH A HUGE BET?
A. Because on a stock-by-stock basis that's where I'm still finding what I
believe are the best growth opportunities. Technology stocks are benefiting
from strong corporate and consumer demand. Business is booming across all
segments - from PCs and software to semiconductors and networking. Plus,
unlike a retailer, which can only grow as fast as it can build bricks and
mortar, a technology company can grow at any rate. The fund has dozens of
companies that are growing sales well over 100% per year. Finally, despite
the fastest sales and earnings growth of any stocks in the market, many of
these companies still have attractive prices compared to other measures
like earnings.
Q. WHERE DID YOU FIND THE BEST OPPORTUNITIES?
A. Across the board. I added new technology names, but I also made bigger
investments in the companies I have the most confidence in. For example, I
significantly boosted the fund's stake in both Intel, which makes
microprocessors like the Pentium chip that are the brains of PCs, and
Micron Technology, one of the few manufacturers of memory chips called
DRAMs that go inside PCs and other electronic equipment. Both stocks posted
sizable gains for the period. I also added to our stake in Applied
Materials, the leading supplier of semiconductor manufacturing equipment,
whose sales grew more than 60% this year. Our biggest investment is still
Oracle, the leading provider of software for client-server set-ups; it
continued to benefit as more companies moved away from mainframes toward
PCs linked through networks.
Q. WERE THERE DISAPPOINTMENTS?
A. Sure. The stock price of Sybase, a competitor to Oracle, fell nearly 50%
in the last six months as it ran into problems launching a new product. One
of our biggest positions six months ago was Motorola; it started having
some near-term problems related to oversupply on its cellular handsets, so
I cut back even though the stock's long-term outlook remained attractive.
Finally, some retailers like Home Depot and Lowe's turned in disappointing
short-term results as heavy rains in California and the Southeast hurt
business. But many of the "hard good category killers" (or superstores) I
focused on continued to grow despite the slowdown in overall retail sales
that we saw this spring.
Q. WHY DID YOU CUT BACK IN HEALTH CARE?
A. The fund's health care stake was around 3% at the end of June, down from
7.7% six months earlier. During the first half of 1994, uncertainty
surrounding President Clinton's plans for health care reform had hurt the
sector. Then, last fall, the stocks rallied as it became apparent that
health care legislation wouldn't pass anytime soon. But once the
Republicans took charge in January, they cast another cloud over the sector
as they promised to re-examine programs like Medicare. So I decided to
watch from the sidelines.
Q. LOOKING AHEAD, WHAT SHOULD SHAREHOLDERS EXPECT?
A. In the past, technology stocks haven't done as well over the summer, as
European demand dries up and new product launches disappear. But this year,
since demand has been so strong, we may see no summer slowdown or one
that's much less pronounced. Nevertheless, shareholders should expect
volatility because the fund is aggressively invested in the fastest-growing
companies. If either the technology sector or the market declines, the fund
will suffer more than other stock funds. But it's also in a good position
to benefit more than its peers from a long-term up market, which I believe
is more likely.
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 June 30, 1995, more than $3.1 billion
MANAGER: Lawrence Greenberg, since 1991;
manager, Fidelity Emerging Growth Portfolio,
since 1993; Fidelity Select Environmental
Services Portfolio, October 1986 - April 1991;
Fidelity Select Medical Delivery Portfolio July
1989 - April 1991; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 96.0%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.4%
AEROSPACE & DEFENSE - 0.3%
Rockwell International Corp. 125,000 $ 5,718,750
Special Devices, Inc. (a) 173,900 3,869,263
9,588,013
DEFENSE ELECTRONICS - 0.1%
Trimble Navigation Ltd. (a) 100,000 2,837,500
TOTAL AEROSPACE & DEFENSE 12,425,513
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 0.5%
Airgas, Inc. (a) 445,000 11,959,375
du Pont (E.I.) de Nemours & Co. 75,000 5,156,250
17,115,625
METALS & MINING - 0.6%
Alcan Aluminium Ltd. 100,000 3,023,679
Aluminum Co. of America 175,000 8,771,875
IMCO Recycling, Inc. 299,000 5,606,250
Reynolds Metals Co. 40,000 2,070,000
19,471,804
TOTAL BASIC INDUSTRIES 36,587,429
CONGLOMERATES - 0.2%
Tyco International Ltd. 125,000 6,750,000
CONSTRUCTION & REAL ESTATE - 0.8%
BUILDING MATERIALS - 0.1%
Elcor Corp. (a) 36,700 816,575
Sherwin-Williams Co. 85,000 3,028,125
3,844,700
CONSTRUCTION - 0.3%
Oakwood Homes Corp. 271,700 6,962,313
Standard Pacific Corp. 300,000 2,062,500
9,024,813
ENGINEERING - 0.4%
Fluor Corp. 65,000 3,380,000
Glenayre Technologies, Inc. (a) 172,575 8,801,325
12,181,325
TOTAL CONSTRUCTION & REAL ESTATE 25,050,838
DURABLES - 3.2%
AUTOS, TIRES, & ACCESSORIES - 2.6%
Chrysler Corp. 400,000 19,150,000
Ford Motor Co. 400,000 11,900,000
General Motors Corp. 877,634 41,139,094
Safety Components International, Inc. 220,000 3,630,000
Smith (A.O.) Corp. Class B 127,600 2,998,600
TRW, Inc. 34,100 2,723,738
81,541,432
CONSUMER ELECTRONICS - 0.1%
Whirlpool Corp. 60,000 3,300,000
HOME FURNISHINGS - 0.2%
Heilig-Meyers Co. 100,000 2,550,000
Leggett & Platt, Inc. 75,000 3,300,000
5,850,000
TEXTILES & APPAREL - 0.3%
Shaw Industries, Inc. 112,500 1,912,500
Tommy Hilfiger (a) 300,500 8,414,000
10,326,500
TOTAL DURABLES 101,017,932
SHARES VALUE (NOTE 1)
ENERGY - 0.7%
ENERGY SERVICES - 0.1%
Baker Hughes, Inc. 175,000 $ 3,587,500
INDEPENDENT POWER - 0.2%
Thermo Electron Corp. (a) 111,100 4,471,775
OIL & GAS - 0.4%
British Petroleum PLC ADR 75,030 6,424,444
Chesapeake Energy Corp. (a) 75,000 1,931,250
Kerr-McGee Corp. 76,000 4,075,500
12,431,194
TOTAL ENERGY 20,490,469
FINANCE - 3.5%
BANKS - 0.7%
Banc One Corp. 200,000 6,450,000
Bank of New York Co., Inc. 100,000 4,037,500
Bankers Trust New York Corp. 105,000 6,510,000
Chemical Banking Corp. 135,000 6,378,750
23,376,250
CREDIT & OTHER FINANCE - 0.5%
American Express Co. 400,000 14,050,000
FEDERAL SPONSORED CREDIT - 1.3%
Federal National Mortgage Association 425,000 40,109,375
INSURANCE - 0.5%
American International Group, Inc. 65,000 7,410,000
Travelers, Inc. (The) 200,000 8,750,000
16,160,000
SECURITIES INDUSTRY - 0.5%
Alliance Entertainment Corp. (a) 525,000 4,921,875
Edwards (A.G.), Inc. 111,100 2,499,750
Merrill Lynch & Co., Inc. 156,500 8,216,250
15,637,875
TOTAL FINANCE 109,333,500
HEALTH - 2.9%
DRUGS & PHARMACEUTICALS - 0.7%
Biogen, Inc. (a) 95,000 4,227,500
Dura Pharmaceuticals, Inc. (a) 160,000 3,010,000
Elan Corp. PLC ADR (a) 100,000 4,075,000
North American Biologicals, Inc. (a) 165,000 1,546,875
Pfizer, Inc. 200,000 9,237,500
US Bioscience, Inc. (a) 190 819
US Bioscience, Inc. (warrants) (a) 569 676
22,098,370
MEDICAL EQUIPMENT & SUPPLIES - 0.7%
Cardinal Health, Inc. 236,100 11,155,725
Millipore Corp. 800 53,698
St. Jude Medical, Inc. 60,000 3,007,500
Thermedics, Inc. (a) 175,000 3,412,500
Thermo Cardiosystems, Inc. (a) 100,000 3,662,500
21,291,923
MEDICAL FACILITIES MANAGEMENT - 1.5%
American Medical Response (a) 195,000 5,460,000
Apria Healthcare Group, Inc. (a) 126,000 3,559,500
Columbia/HCA Healthcare Corp. 375,025 16,219,831
HEALTHSOUTH Rehabilitation Corp. 950,000 16,506,250
Rotech Medical Corp. (a) 40,000 1,110,000
United HealthCare Corp. 75,000 3,103,125
Vivra, Inc. (a) 44,000 1,193,500
47,152,206
TOTAL HEALTH 90,542,499
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 4.1%
ELECTRICAL EQUIPMENT - 2.2%
Avid Technology, Inc. (a) 70,050 $ 2,626,875
General Electric Co. 875,000 49,328,125
General Signal Corp. 100,000 3,975,000
Oak Industries, Inc. (a) 105,300 2,711,475
Scientific-Atlanta, Inc. 370,000 8,140,000
United Communication Industry PCL
(For. Reg.) 154,000 2,245,899
69,027,374
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
AGCO Corp. 298,300 11,186,250
Case Corp. 200,000 5,950,000
Caterpillar, Inc. 350,000 22,487,500
Ingersoll-Rand Co. 125,000 4,781,250
Semitool, Inc. 22,700 726,400
45,131,400
POLLUTION CONTROL - 0.5%
Browning-Ferris Industries, Inc. 210,000 7,586,250
TETRA Technologies, Inc. (a) 185,000 2,243,125
WMX Technologies, Inc. 175,000 4,965,625
14,795,000
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 128,953,774
MEDIA & LEISURE - 4.5%
BROADCASTING - 1.1%
Capital Cities/ABC, Inc. 65,000 6,816,875
Citicasters, Inc. 65,000 1,787,500
Clear Channel Communications, Inc. 25,000 1,609,375
EZ Communications, Inc. 44,400 821,400
Infinity Broadcasting Corp. (a) 50,000 1,668,750
Jacor Communications, Inc. Class A 73,400 1,174,400
Lin Television Corp. 50,000 1,681,250
Renaissance Communications Corp. (a) 65,000 2,177,500
Tele-Communications, Inc. Class A 225,000 5,273,438
Viacom, Inc. Class B (non-vtg.) (a) 250,084 11,597,646
34,608,134
ENTERTAINMENT - 0.4%
Casino America, Inc. (a) 100,000 1,512,500
Disney (Walt) Co. 110,000 6,118,750
Players International, Inc. (a) 217,500 4,350,000
11,981,250
LEISURE DURABLES & TOYS - 0.3%
Cobra Golf, Inc. (a) 204,900 6,479,963
Hasbro, Inc. 84,000 2,667,000
9,146,963
LODGING & GAMING - 0.7%
Doubletree Corp. (a) 300,000 6,468,750
Hospitality Franchise Systems, Inc. 453,600 15,705,900
22,174,650
PUBLISHING - 0.1%
Houghton Mifflin Co. 50,000 2,637,500
RESTAURANTS - 1.9%
Apple South, Inc. 500,000 9,750,000
Applebee's International, Inc. 275,000 7,081,250
Landry's Seafood Restaurants, Inc. (a) 334,200 6,684,000
Lone Star Steakhouse Saloon (a) 375,000 11,367,188
Outback Steakhouse, Inc. (a) 385,000 11,116,875
Papa John's International, Inc. (a) 161,800 5,663,000
Starbucks Corp. (a) 180,000 6,412,500
Uno Restaurant Corp. (a) 226,625 2,351,234
60,426,047
TOTAL MEDIA & LEISURE 140,974,544
SHARES VALUE (NOTE 1)
NONDURABLES - 1.3%
BEVERAGES - 0.3%
PepsiCo, Inc. 225,000 $ 10,265,625
HOUSEHOLD PRODUCTS - 0.3%
Colgate-Palmolive Co. 50,000 3,656,250
Gillette Co. 130,000 5,801,250
9,457,500
TOBACCO - 0.7%
Philip Morris Companies, Inc. 225,000 16,734,375
RJR Nabisco Holdings Corp. 200,000 5,575,000
22,309,375
TOTAL NONDURABLES 42,032,500
RETAIL & WHOLESALE - 8.7%
APPAREL STORES - 0.7%
Baby Superstore, Inc. (a) 65,000 3,063,125
Gymboree Corp. (a) 135,000 3,923,438
Just For Feet, Inc. (a)(c) 402,000 16,029,750
23,016,313
APPLIANCE STORES - 0.1%
Cellstar Corp. (a) 165,700 3,873,238
DRUG STORES - 0.4%
General Nutrition Companies, Inc. (a) 365,000 12,820,625
GENERAL MERCHANDISE STORES - 1.5%
Dollar General Corp. 150,050 4,745,331
Wal-Mart Stores, Inc. 1,600,000 42,800,000
47,545,331
RETAIL & WHOLESALE, MISCELLANEOUS - 6.0%
Barnes & Noble, Inc. (a) 153,100 5,205,400
Bed Bath & Beyond, Inc. (a) 700,000 16,975,000
Borders Group, Inc. (a) 80,000 1,150,000
Circuit City Stores, Inc. 150,000 4,743,750
Corporate Express (a) 275,000 5,878,125
Home Depot, Inc. (The) 345,066 14,018,306
Lowe's Companies, Inc. 1,175,000 35,103,125
Officemax, Inc. (a) 525,000 14,634,375
Office Depot, Inc. (a) 320,000 9,000,000
Petco Animal Supplies, Inc. (a) 378,700 8,804,775
Petsmart, Inc. (a) 600,000 17,250,000
Sport Supply Group, Inc. 309,550 3,869,375
Staples, Inc. (a) 550,000 15,881,250
Sunglass Hut International, Inc. (a) 886,500 31,027,500
Viking Office Products, Inc. (a) 150,000 5,493,750
189,034,731
TOTAL RETAIL & WHOLESALE 276,290,238
SERVICES - 2.3%
LEASING & RENTAL - 0.9%
Hollywood Entertainment Corp. (a) 605,000 27,225,000
SERVICES - 1.4%
Adia SA (Bearer) (a) 25,000 5,202,438
Block (H & R), Inc. 100,000 4,112,500
Children's Discovery Centers of
America, Inc. (a) 135,000 2,261,250
First Financial Management Corp. 75,000 6,412,500
Medaphis Corp. (a) 950,000 20,662,500
Zebra Technologies Corp. Class A (a) 100,000 5,325,000
43,976,188
TOTAL SERVICES 71,201,188
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 52.0%
COMMUNICATIONS EQUIPMENT - 10.9%
Apertus Technologies, Inc. (a) 57,000 $ 498,750
Cabletron Systems, Inc. (a) 85,000 4,526,250
Cisco Systems, Inc. (a) 1,215,000 61,433,438
DSC Communications Corp. (a) 1,850,000 86,025,000
Dialogic Corp. (a) 34,800 617,700
Ericsson (L.M.) Telephone Co.
Class B ADR 900,000 18,000,000
General Instrument Corp. (a) 350,000 13,431,250
Global Village Communication (a) 573,800 8,965,625
Inter-Tel, Inc. (a) 62,300 942,288
InterVoice, Inc. (a) 250,000 4,375,000
Lo Jack Corp. (a) 240,000 2,655,000
Microtest, Inc. (a) 125,000 2,781,250
Newbridge Networks Corp. (a) 525,000 18,506,250
Nokia Corp. AB :
Series A 160,000 9,377,565
sponsored ADR 915,000 54,556,875
Tellabs, Inc. (a) 147,800 7,112,875
3Com Corp. (a) 600,000 40,200,000
U.S. Robotics Corp. 74,600 8,131,400
342,136,516
COMPUTER SERVICES & SOFTWARE - 12.9%
Adobe Systems, Inc. 60,000 3,480,000
Alantec Corp. 65,000 2,226,250
America Online, Inc. (a) 240,500 10,582,000
American Business Information, Inc. (a) 140,800 3,801,600
Ascend Communications, Inc. (a) 60,000 3,030,000
Automatic Data Processing, Inc. 125,000 7,859,375
Broderbund Software, Inc. (a) 72,800 4,641,000
CUC International, Inc. (a) 502,500 14,070,000
Cambridge Technology Partners
Mass., Inc. (a) 90,000 2,970,000
Ceridian Corp. (a) 140,000 5,162,500
Cerner Corp. (a) 40,000 2,450,000
CompUSA, Inc. (a) 290,000 9,642,500
Computer Sciences Corp. (a) 160,000 9,100,000
Davidson & Associates, Inc. (a) 65,000 2,583,750
GMIS, Inc. (a) 212,600 4,849,938
Hyperion Software, Inc. (a) 60,000 2,715,000
Informix Corp. (a) 800,000 20,300,000
Inso Corp. (a) 30,000 1,792,500
Integrated Silicon Systems, Inc. (a) 108,400 4,092,100
Intersolv, Inc. (a) 315,000 7,323,750
Mercury Interactive Group Corp. (a) 252,500 5,081,563
Microsoft Corp. (a) 740,000 66,877,500
Network Peripherals, Inc. (a) 260,000 5,671,250
Novell, Inc. (a) 524,200 10,451,238
Oracle Systems Corp. (a) 2,900,000 112,012,500
Parametric Technology Corp. (a) 296,900 14,770,775
Paychex, Inc. 85,000 3,081,250
Peoplesoft, Inc. (a) 375,000 20,343,750
Platinum Technology, Inc. (a) 100,000 1,812,500
Reuters Holdings PLC ADR Class B 65,000 3,258,125
SAP AG sponsored ADR (a)(b) 35,000 1,461,250
Softkey International, Inc. (a) 150,000 4,781,250
Stratacom, Inc. (a) 490,400 23,907,000
SunGard Data Systems, Inc. (a) 110,000 5,747,500
Systems & Computer Technology Corp. (a) 125,000 2,500,000
Wonderware Corp. (a) 77,600 3,123,400
407,553,114
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 10.5%
ADAPTEC, Inc. (a) 375,000 $ 13,875,000
Apple Computer, Inc. 165,000 7,662,188
Bay Networks, Inc. (a) 800,000 33,100,000
Compaq Computer Corp. (a) 1,579,800 71,683,425
Comverse Technology, Inc. (a) 75,000 1,331,250
Dell Computer Corp. (a) 125,000 7,515,625
Digital Equipment Corp. (a) 200,000 8,150,000
Fore Systems, Inc. (a) 65,000 1,966,250
Gateway 2000, Inc. (a) 200,000 4,550,000
General Motors Corp. Class E (a) 505,600 21,993,600
Hewlett-Packard Co. 315,000 23,467,500
International Business Machines Corp. 635,000 60,960,000
Micom Communication Corp. (a) 146,100 949,650
Pitney Bowes, Inc. 110,000 4,221,250
Radius, Inc. (a) 290,000 3,190,000
Read Rite Corp. (a) 225,026 6,019,446
Seagate Technology (a) 214,900 8,434,825
Silicon Graphics, Inc. (a) 888,100 35,412,988
Sun Microsystems, Inc. (a) 224,000 10,864,000
Xerox Corp. (a) 45,000 5,276,250
330,623,247
ELECTRONIC INSTRUMENTS - 2.8%
Applied Materials, Inc. (a) 835,000 72,331,875
Electro Scientific Industries, Inc. (a) 117,500 3,906,875
Kulicke & Soffa Industries, Inc. 40,000 2,652,500
Novellus System, Inc. (a) 143,000 9,688,250
88,579,500
ELECTRONICS - 14.7%
AMP, Inc. 150,000 6,337,500
Advanced Micro Devices, Inc. 400,000 14,550,000
Alliance Semiconductor Corp. (a) 160,000 7,840,000
Altera Corp. (a) 387,400 16,755,050
Analog Devices, Inc. (a) 275,000 9,350,000
Atmel Corp. (a) 160,000 8,860,000
Avnet, Inc. 282,800 13,680,450
C-Cube Microsystems, Inc. (a) 75,000 2,043,750
Cascade Communications Corp. (a) 75,000 3,243,750
Chips & Technologies, Inc. (a) 201,300 2,642,063
Cirrus Logic, Inc. (a) 80,000 5,015,000
Cypress Semiconductor Corp. (a) 275,000 11,137,500
Hitachi Ltd. ADR 35,000 3,508,750
Integrated Device Technology, Inc. (a) 72,900 3,371,625
Integrated Silicon Solution (a) 147,800 7,722,550
Intel Corp. 1,530,000 96,868,125
Kemet Corp. (a) 135,000 7,087,500
LSI Logic Corp. (a) 758,930 29,693,136
Linear Technology Corp. 225,000 14,850,000
Marshall Industries (a) 102,700 3,440,450
Maxim Integrated Products, Inc. (a) 90,000 4,590,000
Microchip Technology, Inc. (a) 275,050 10,004,944
Micron Technology, Inc. 1,300,000 71,337,500
Motorola, Inc. 235,000 15,774,375
National Semiconductor Corp. (a) 225,000 6,243,750
SGS-Thomson Microelectronic NV (a) 275,000 11,171,875
S-3, Inc. (a) 81,700 2,941,200
Samsung Electronics Co. Ltd.:
GDR (b) 55,000 5,280,000
GDS (non-vtg.) (Reg.) (a) 102,800 5,345,600
Tencor Instruments (a) 80,000 3,280,000
Texas Instruments, Inc. 235,000 31,460,625
Thomas & Betts Corp. 34,600 2,365,775
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
VLSI Technology, Inc. (a) 135,000 $ 4,066,875
Wholesale Cellular USA, Inc. (a) 150,000 3,225,000
Wyle Laboratories 74,800 2,103,750
Xilinx, Inc. (a) 175,000 16,450,000
463,638,468
PHOTOGRAPHIC EQUIPMENT - 0.2%
3D Systems Corp. 375,000 6,937,500
TOTAL TECHNOLOGY 1,639,468,345
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.4%
AMR Corp. (a) 110,000 8,208,750
Atlantic Southeast Airlines, Inc. 59,700 1,798,463
Comair Holdings, Inc. 25,000 946,875
Southwest Airlines Co. 137,700 3,287,588
14,241,676
RAILROADS - 0.5%
ABC Rail Products Corp. (a) 150,000 3,450,000
CSX Corp. 151,200 11,358,900
14,808,900
TOTAL TRANSPORTATION 29,050,576
UTILITIES - 9.4%
CELLULAR - 5.9%
AirTouch Communications, Inc. (a) 2,300,000 65,550,000
Arch Communications Group, Inc. (a) 150,000 3,337,500
BCE Mobile Communications, Inc. (a) 275,000 9,166,666
Cellular Communications, Inc.,
Series A (redeemable) (a) 200,000 9,100,000
Metrocall, Inc. (a) 150,000 2,737,500
Mobile Telecommunications
Technologies, Inc. (a) 75,000 2,053,125
Mobilemedia Corp. (a) 13,000 240,500
Palmer Wireless, Inc. (a) 575,300 9,420,538
USA Mobile Communications (a) 116,600 2,040,500
United States Cellular Corp. (a) 315,000 9,528,750
Vanguard Cellular Systems, Inc.
Class A (a)(c) 2,176,000 52,224,000
Vodafone Group PLC sponsored ADR 548,700 20,782,013
186,181,092
TELEPHONE SERVICES - 3.5%
ALC Communications Corp. (a) 215,000 9,701,875
AT&T Corp. 425,000 22,578,125
Ameritech Corp. 493,700 21,722,800
Bell Atlantic Corp. 375,000 21,000,000
BellSouth Corp. 150,000 9,525,000
LCI International, Inc. (a) 125,000 3,828,125
SBC Communications, Inc. 475,000 22,621,875
110,977,800
TOTAL UTILITIES 297,158,892
TOTAL COMMON STOCKS
(Cost $2,234,010,970) 3,027,328,237
NONCONVERTIBLE PREFERRED STOCKS - 0.6%
SHARES VALUE (NOTE 1)
TECHNOLOGY - 0.6%
COMPUTER SERVICES & SOFTWARE - 0.2%
SAP AG (a) 5,250 $ 6,622,118
COMPUTERS & OFFICE EQUIPMENT - 0.4%
Silicon Graphics CDA Ltd.
exchangeable (non-vtg.) (a) 280,080 11,132,774
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $15,178,912) 17,754,892
REPURCHASE AGREEMENTS - 3.4%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 106,155,996 106,101,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,355,290,882) $ 3,151,184,129
LEGEND
(a) Non-income producing
(b) 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 $6,741,250 or 0.2% of net
assets.
(c) A company in which the fund has ownership of at least 5% of the voting
securities is an affiliated company. Transactions during the period with
companies that are or were affiliates are as follows:
PURCHASES SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Just For Feet, Inc. (a) $ 2,342,009 - - $ 16,029,750
Vanguard Cellular Systems, Inc.
Class A (a) 1,588,387 - - 52,224,000
TOTAL $ 3,930,396 $ - $ - $ 68,253,750
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $1,556,970,263 and $967,373,548, 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 $555,941 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $2,361,955,662. Net unrealized appreciation aggregated
$789,228,467, of which $809,605,722 related to appreciated investment
securities and $20,377,255 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $68,037,000 all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $106,101,000) (cost $2,355,290,882) $ 3,151,184,129
- See accompanying schedule
Receivable for investments sold 15,240,448
Receivable for fund shares sold 4,631,877
Dividends receivable 1,976,933
Other receivables 241,989
TOTAL ASSETS 3,173,275,376
LIABILITIES
Payable for investments purchased $ 31,104,827
Payable for fund shares redeemed 2,527,529
Accrued management fee 1,523,671
Other payables and accrued expenses 374,992
TOTAL LIABILITIES 35,531,019
NET ASSETS $ 3,137,744,357
Net Assets consist of:
Paid in capital $ 2,373,300,032
Undistributed net investment income 3,900,899
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (35,349,821)
Net unrealized appreciation (depreciation) on investments 795,893,247
NET ASSETS, for 117,514,234 shares outstanding $ 3,137,744,357
NET ASSET VALUE, offering price and redemption price per share ($3,137,744,357 (divided by) 117,514,234 shares) $26.70
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 8,244,859
Dividends
Interest 5,551,271
TOTAL INCOME 13,796,130
EXPENSES
Management fee $ 7,756,500
Transfer agent fees 627,931
Accounting fees and expenses 378,173
Non-interested trustees' compensation 4,869
Custodian fees and expenses 69,955
Registration fees 147,294
Audit 14,797
Legal 4,080
Miscellaneous 7,349
TOTAL EXPENSES 9,010,948
NET INVESTMENT INCOME 4,785,182
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 46,674,141
Foreign currency transactions 395 46,674,536
Change in net unrealized appreciation (depreciation) on investment securities 517,371,258
NET GAIN (LOSS) 564,045,794
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 568,830,976
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 4,785,182 $ 11,810,184
Net investment income
Net realized gain (loss) 46,674,536 (74,102,658)
Change in net unrealized appreciation (depreciation) 517,371,258 80,193,945
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 568,830,976 17,901,471
Distributions to shareholders (12,404,421) (7,589,523)
From net investment income
From net realized gain - (80,320,550)
TOTAL DISTRIBUTIONS (12,404,421) (87,910,073)
Share transactions 750,772,650 1,289,938,019
Net proceeds from sales of shares
Reinvestment of distributions 12,404,421 87,909,946
Cost of shares redeemed (323,728,603) (549,819,377)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 439,448,468 828,028,588
TOTAL INCREASE (DECREASE) IN NET ASSETS 995,875,023 758,019,986
NET ASSETS
Beginning of period 2,141,869,334 1,383,849,348
End of period (including undistributed net investment income of $3,900,899 and $11,472,202, $ 3,137,744,357 $ 2,141,869,334
respectively)
OTHER INFORMATION
Shares 32,171,873 60,676,019
Sold
Issued in reinvestment of distributions 568,749 4,039,985
Redeemed (13,969,564) (25,920,211)
Net increase (decrease) 18,771,058 38,795,793
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 F 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91 $ 15.18
Income from Investment Operations
Net investment income .04 .12 .12 .09 D .09 D .24
Net realized and unrealized gain (loss) 5.09 (.12) E 3.64 1.64 5.72 (1.98)
Total from investment operations 5.13 - 3.76 1.73 5.81 (1.74)
Less Distributions (.12) (.12) (.11) (.05) (.21) (.21)
From net investment income
From net realized gain - (1.27) (.21) (.43) - (.32)
In excess of net realized gain - - (.12) - - -
Total distributions (.12) (1.39) (.44) (.48) (.21) (.53)
Net asset value, end of period $ 26.70 $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91
TOTAL RETURN B, C 23.78% (.02) 19.37% 9.32% 45.51% (11.73)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,137,744 $ 2,141,869 $ 1,383,849 $ 749,837 $ 371,462 $ 135,487
Ratio of expenses to average net assets .72% A .69% .71% .75% .84% .88%
Ratio of expenses to average net assets before
expense .72% A .70% .71% .75% .84% .88%
reductions
Ratio of net investment income to average net assets .38% A .69% .72% .83% .56% 2.69%
Portfolio turnover rate 82% A 122% 159% 262% 261% 88%
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
THE FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD
ENDED DUE TO THE TIMING OF SALES
AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
F 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.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
OVERSEAS 2.96% 4.76% 7.12%
Morgan Stanley EAFE Index 1.65% 4.69% 6.97%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
Many markets around the globe offer the potential
for significant growth over time; however,
investing in foreign markets means assuming
greater risks than investing in the United States.
Factors like changes in a country's financial
markets, its local political and economic
climate, and the fluctuating value of its currency
create these risks. For these reasons an
international fund's performance may be more
volatile than a fund that invests exclusively in the
United States.
(checkmark)
You can compare the fund's figures to the performance of the Morgan Stanley
EAFE index - a broad measure of the performance of stocks in Europe,
Australia, and the Far East. This benchmark includes reinvested dividends
and capital gains, if any, and excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of operations
January 28, 1987.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. Foreign investments involve greater risks and
potential rewards than U.S. investments. These risks include political and
economic uncertainties of foreign countries, as well as the risk of
currency fluctuations.
$10,000 OVER LIFE OF FUND
VIP Overseas (22Europe, Australia,
01/28/87 10000.00 10000.00
01/31/87 10000.00 9997.46
02/28/87 10010.00 10296.66
03/31/87 10460.00 11140.41
04/30/87 11220.00 12319.18
05/31/87 11060.00 12319.14
06/30/87 10520.00 11926.66
07/31/87 10400.00 11905.82
08/31/87 11320.00 12798.54
09/30/87 11070.00 12597.05
10/31/87 8760.00 10777.00
11/30/87 8840.00 10938.65
12/31/87 9462.16 11263.46
01/31/88 9138.32 11464.55
02/29/88 9381.20 12228.75
03/31/88 9806.24 12980.64
04/30/88 9968.16 13169.27
05/31/88 9786.00 12747.12
06/30/88 9613.96 12411.13
07/31/88 9543.12 12800.51
08/31/88 9209.16 11968.24
09/30/88 9603.84 12491.19
10/31/88 10028.88 13559.96
11/30/88 10211.04 14367.68
12/31/88 10231.28 14447.79
01/31/89 10534.87 14701.99
02/28/89 10717.03 14777.56
03/31/89 10707.38 14487.53
04/30/89 11023.50 14621.89
05/31/89 10615.60 13826.42
06/30/89 10574.81 13593.67
07/31/89 11563.97 15300.67
08/31/89 11482.39 14612.54
09/30/89 12196.21 15278.16
10/31/89 11533.38 14664.33
11/30/89 12155.42 15401.50
12/31/89 12920.24 15969.77
01/31/90 12746.88 15375.56
02/28/90 12449.36 14302.43
03/31/90 12919.92 12812.46
04/30/90 12991.52 12710.78
05/31/90 13840.58 14161.09
06/30/90 14147.46 14036.37
07/31/90 14863.53 14234.08
08/31/90 13349.56 12851.83
09/30/90 12081.09 11060.74
10/31/90 13206.34 12784.21
11/30/90 12797.16 12030.10
12/31/90 12705.10 12224.98
01/31/91 12827.85 12620.40
02/28/91 13260.02 13973.29
03/31/91 12872.18 13134.44
04/30/91 13155.20 13263.42
05/31/91 13186.64 13401.82
06/30/91 12463.37 12417.04
07/31/91 13081.82 13027.11
08/31/91 13123.75 12762.56
09/30/91 13658.34 13481.84
10/31/91 13752.68 13672.96
11/30/91 13260.02 13034.64
12/31/91 13721.24 13707.79
01/31/92 13888.95 13415.00
02/29/92 13599.52 12934.85
03/31/92 13323.28 12080.93
04/30/92 14152.01 12138.36
05/31/92 14768.23 12950.85
06/30/92 14491.99 12336.56
07/31/92 13567.65 12020.83
08/31/92 13450.78 12774.79
09/30/92 12908.92 12522.52
10/31/92 12027.08 11865.66
11/30/92 11963.33 11977.32
12/31/92 12250.20 12039.27
01/31/93 12600.81 12037.79
02/28/93 12847.62 12401.41
03/31/93 13738.91 13482.39
04/30/93 14651.94 14761.90
05/31/93 14967.16 15073.67
06/30/93 14597.60 14838.49
07/31/93 15173.67 15357.91
08/31/93 15988.88 16186.97
09/30/93 15901.92 15822.62
10/31/93 16478.00 16310.23
11/30/93 15782.36 14884.55
12/31/93 16825.82 15959.32
01/31/94 17923.63 17308.60
02/28/94 17607.51 17260.66
03/31/94 17170.60 16517.22
04/30/94 17738.58 17218.03
05/31/94 17520.13 17119.18
06/30/94 17334.44 17361.11
07/31/94 17793.20 17528.07
08/31/94 18000.73 17943.05
09/30/94 17531.05 17377.92
10/31/94 17891.50 17956.61
11/30/94 17214.29 17093.61
12/31/94 17115.99 17200.65
01/31/95 16406.01 16539.88
02/28/95 16449.17 16492.41
03/31/95 16955.64 17521.06
04/30/95 17440.09 18180.00
05/31/95 17682.31 17963.28
06/30/95 17847.46 17648.27
Let's say you invested $10,000 in Overseas Portfolio on January 28, 1987,
when the fund started. By June 30, 1995, your investment would have grown
to $17,847 - a 78.47% increase. That compares to $10,000 invested in the
Morgan Stanley EAFE Index, which would have grown to $17,648 over the same
period - a 76.48% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
C. S. Holdings (Reg.) 1.8
Nestle SA (Reg.) 1.5
Deutsche Bank AG 1.3
Unilever NV Ord. 1.2
Swiss Bank Corp. (Bearer) 1.2
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Finance 26.4
Utilities 8.8
Nondurables 8.4
Durables 8.1
Basic Industries 6.2
GEOGRAPHIC DIVERSIFICATION AS OF JUNE 30, 1995
(BY LOCATION OF ISSUER) % OF FUND'S
INVESTMENTS
Japan 18.5
United Kingdom 12.4
Switzerland 9.8
France 7.5
Netherlands 6.9
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with John Hickling, Portfolio Manager of Overseas Portfolio
Q. JOHN, HOW HAS THE FUND PERFORMED?
A. For the six months and one year ended June 30, 1995, the fund's
performance topped that of the Morgan Stanley EAFE index - a broad measure
of stocks in Europe, Australia and the Far East. The index had total
returns of 2.60% and 1.65% for the six- and 12-month periods, respectively.
Q. WHAT WERE THE KEYS TO THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A. First, I kept the fund fully invested through much of the period.
Second, some of the stocks I picked in Japan and Europe fared well. And
finally, the fund was able to benefit from new investments in emerging
markets.
Q. WHY DID THE EAFE INDEX OFFER RELATIVELY LOW RETURNS?
A. While European markets have performed relatively well - though not as
well as the U.S. market - emerging markets and Japan have not. Japan was
affected by a number of factors that dampened investor enthusiasm: the
Barings debacle, the Kobe earthquake and the subway gas attack. The
Japanese market also was hurt by the strength of the yen versus the dollar.
On the heels of Mexico's devaluation of the peso in late 1994, emerging
markets also struggled, although they appear to have pretty much bottomed
out.
Q. WHAT'S THE STORY BEHIND THE FUND'S INVESTMENTS IN JAPAN?
A. Even though Japan has the highest country representation in the fund,
I've kept the fund underweighted there, relative to the index. I've focused
much of the fund's Japanese investments in technology, including consumer
electronics companies Toshiba and Hitachi, and other manufacturers and
exporters that are poised to take advantage of economic activity both in
Japan and globally. While the technology sector has done well in the U.S.,
it has been weak in Japan, so I found valuations to be attractive. The
sector recently has shown some strong gains. In addition, I've targeted
some financial stocks. The Japanese market has started to pick up a bit
lately, and brokerage house Nomura Securities is poised to take advantage
because it has been cutting costs aggressively. In addition, it appears
trust banks such as Sumitomo Trust will be able to improve interest margins
- the difference between what they charge for loans and what they pay to
depositors - because of changing regulations.
Q. THE FUND IS OVERWEIGHTED IN EUROPE, RELATIVE TO THE INDEX. WHERE HAVE
YOU FOUND OPPORTUNITIES THERE?
A. Mainly in financial and consumer nondurable stocks, as well as interest
rate-sensitive issues - because European bond markets have been rallying -
and cyclicals - those that tend to rise and fall with the economy. European
stocks have rallied lately, mainly on the strength of the technology
sector. In the short run, I've missed some opportunity there, because I
found the tech stocks to be too expensive and risky. Some of the appealing
consumer nondurable names have been Guinness, Cadbury-Schweppes, Bass and
Nestle. Barclays, National Westminster, Swiss Bank and C.S. Holdings were
among the fund's financial stock investments. I've added investments in
cyclical stocks because they became cheap. Those include paper companies Mo
Och Domsjoe and Svenska Cellulosa; auto stocks Volvo and Peugeot; and tire
companies such as Michelin.
Q. WHAT ABOUT THE FUND'S EMERGING MARKET INVESTMENTS?
A. I've been more active there because, as I said, I felt they had hit
bottom, and there were a lot of very interesting stocks. Among the stocks
that have caught my eye have been Hong Kong/Shanghai Bank (HSBC) and Hong
Kong Land Holdings; Philippine Long Distance Telephone; the department
store Matahari and cigarette manufacturer Gudang Garam in Indonesia; Krung
Thai Bank; Telecom Argentina; and Mexican companies Bancomer, Telmex, Cemex
and Grupo Carso.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. Several factors are important to consider. First of all, it seems most
stock markets reflect the sentiment that any worldwide recession will stay
pretty shallow and that growth will resume. Of course, this is the best
possible scenario. At the same time, if the U.S. market stumbles, one would
expect there to be a drop in foreign markets. In such a scenario, I believe
overseas markets wouldn't drop as far as the U.S, because they haven't
gained as much recently, but it's impossible to say for sure. How the
dollar does also will be important. Going forward, I'll stay with my usual
game plan, looking for opportunities in any markets that appear to have
excellent value.
FUND FACTS
GOAL: to increase the value of the fund's
shares by investing mainly in stocks in
Europe, the Far East, and the Pacific Basin
START DATE: January 28, 1987
SIZE: as of June 30, 1995, more than $1.2 billion
MANAGER: John Hickling, since 1993; manager
Fidelity Overseas Fund, since 1993; Fidelity
Advisor Overseas Fund, since 1993; Fidelity
Advisor Annuity Overseas Portfolio, since
January 1995; previously managed several
Fidelity international funds; joined Fidelity in
1982
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 89.2%
SHARES VALUE (NOTE 1)
ARGENTINA - 0.8%
Buenos Aires Embotelladora SA
sponsored ADR 41,800 $ 1,050,301
Perez Companc Class B 308,452 1,295,822
Telecom Argentina sponsored
ADR Class B 83,400 3,794,700
Telecom Argentina Stet France
Telecom SA 263,600 1,199,681
YPF Sociedad Anonima sponsored
ADR representing Class D shares 150,500 2,840,688
10,181,192
AUSTRALIA - 1.4%
Brambles Industries Ltd. 276,500 2,616,260
FAI Insurance Ltd. Ord. 2,037,900 809,474
Lend Lease Corp. Ltd. 81,000 1,033,010
Pioneer International Ltd. 493,300 1,224,642
TNT Ltd. (a) 1,658,800 2,176,694
Westpac Banking Corp. 2,912,700 10,536,488
18,396,568
AUSTRIA - 0.9%
Mayr Melnhof Karton AG 24,200 1,398,830
OEMV AG 62,400 7,194,579
VA Technologie AG 6,800 851,047
VA Technologie AG (d) 15,000 1,877,310
11,321,766
BELGIUM - 1.6%
Bekaert SA 4,005 3,197,654
Delhaize Freres & Cie Le Lion SA 135,300 6,183,782
Petrofina SA 11,900 3,590,951
Petrofina SA (warrants) (a) 595 8,380
Solvay & Cie SA 14,062 7,724,197
20,704,964
BERMUDA - 0.2%
Consolidated Electric Power Asia Ltd.
sponsored ADR (d) 30,000 682,500
Jardine Strategic Holdings Ltd. Ord. 529,500 1,704,990
2,387,490
BRAZIL - 0.2%
Coteminas PN 2,500,000 788,675
Telebras PN (Pfd. Reg.) 60,298,770 1,987,447
2,776,122
CANADA - 0.5%
Midland Walwyn, Inc. 269,000 2,106,921
Noranda, Inc. 245,400 4,827,541
6,934,462
CHILE - 0.1%
Vina Concha Stet y Toro SA
sponsored ADR 51,100 990,063
FINLAND - 0.8%
Kymmene Corp. 53,900 1,680,624
Pohjola Class B 291,000 4,570,859
Valmet Corp. OY Ord. 167,700 3,793,939
10,045,422
FRANCE - 7.2%
Accor SA 65,158 8,694,014
Axa SA 91,718 4,963,362
BQE National Paris Ord. 222,840 10,770,332
Club Mediterranee SA Ord. 42,500 4,340,855
Compagnie Bancaire Ord. 65,670 7,867,107
Credit Lyonnais 24,500 1,413,880
SHARES VALUE (NOTE 1)
FRANCE - CONTINUED
Elf Aquitaine 112,128 $ 8,302,776
Generale des Eaux 90,600 10,105,133
Havas SA 53,300 4,227,450
IMETAL SA Ord. 9,200 1,083,135
L'Oreal Co. Ord. 10,200 2,563,957
Lafarge Coppee SA 63,900 4,978,432
Lyonnaise des Eaux Dumez SA 30,700 2,909,255
Michelin SA Cie Generale des
Etablissements, Class B (a) 76,900 3,413,366
Peugeot SA Ord. 19,500 2,710,627
Total SA Class B 190,600 11,495,446
Vallourec SA (a) 60,000 3,010,224
92,849,351
GERMANY - 6.0%
Allianz Versich Holdings Ord. (Reg.) 1,450 2,590,467
Asko 2,900 1,813,746
BMW AG 9,918 5,463,533
Bayerische Vereinsbank AG Ord. 11,000 3,340,331
Continental Gummi-Werke AG 25,600 3,721,076
Deutsche Bank AG 352,000 17,122,878
Duerr Beteiligungs AG (RFD) 8,777 3,119,553
Gildemeister AG (a) 28,620 2,372,138
Hoechst AG Ord. 38,900 8,413,855
Karstadt AG 17,800 7,821,202
Kaufhof Holding AG 20,000 7,151,906
Metallgesellschaft AG (a)(d) 86,700 1,587,832
SGL Carbon AG (a)(d) 28,000 1,250,570
Schmalbach-Lubeca AG 4,250 855,261
Veba AG Ord. 27,400 10,779,905
77,404,253
HONG KONG - 2.1%
Amoy Properties Ltd. 2,084,000 1,831,440
Consolidated Electric Power Asia Ltd. 604,000 1,401,165
Dickson Concepts International Ltd. 2,108,000 1,259,994
HSBC Holdings PLC 834,000 10,697,560
Hong Kong Land Holdings Ltd. 2,337,000 4,253,340
Hopewell Holdings Ltd. 3,944,000 3,338,596
Hysan Development Co. Ltd. 643,000 1,470,863
Peregrine Investments Holdings Ltd. 832,000 1,182,780
Semi-Tech (Global) Ltd. 100,000 160,901
Sun Hung Kai Properties Ltd. 153,000 1,132,023
26,728,662
INDIA - 0.1%
Reliance Industries Ltd. GDS (a) 106,400 1,902,432
INDONESIA - 1.0%
Astra International PT (For. Reg.) 160,000 283,790
Bank International Indonesia PT Ord. 921,000 2,843,238
Gudang Garam PT Perusahaan 42,500 326,336
Jakarta International Hotels &
Development Ord. 1,541,000 1,937,499
Matahari Putra Prima PT:
(For. Reg.) 552,000 879,927
(For. Reg.) (rights) (a) 276,000 266,459
Sampoerna Hanjaya Mandala (For. Reg.) 735,750 5,781,604
12,318,853
IRELAND - 1.0%
Bank of Ireland U.S. Holdings, Inc. 1,009,200 5,793,010
Fyffes PLC 1,358,000 2,479,301
Independent Newspapers PLC 521,050 2,866,312
Waterford Wedgwood PLC Unit 1,751,400 1,494,049
12,632,672
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ITALY - 1.3%
Alitalia Linee Aeree Italiane Class A (a) 136,400 $ 65,201
Assicurazioni Generali Spa 218,570 5,128,878
Fiat Spa 1,121,000 3,965,325
Istituto Mobiliare Italiano 301,400 1,848,206
Italgas Spa 512,200 1,334,373
Montedison Spa Ord. (a) 2,962,700 2,120,701
SAI Sta Assieuratrice Industriale Spa 189,000 2,017,120
16,479,804
JAPAN - 18.5%
ADO Electronic Industrial Co. Ltd. 19,000 410,750
Advantest Corp. 74,000 2,797,401
Aida Engineering Ltd. Ord. 176,000 1,199,669
Akita Bank Ltd. 76,650 656,483
Amada Metrecs Co. Ltd. 86,000 1,107,383
Amadasonoike Co. Ltd. 282,000 1,632,368
Autobacs Seven Co. Ltd. 20,600 2,007,679
Bridgestone Corp. 339,000 5,005,908
Canon, Inc. 526,000 8,575,073
Daicel Chemical Industries Ltd. 397,000 2,035,415
East Japan Railway Co. Ord. 700 3,597,165
Fanuc Ltd. 98,200 4,245,860
Fujitsu Ltd. 726,000 7,247,135
Futaba Industrial Co. Ltd. 126,000 2,054,105
Hachijuni Bank Ltd. 92,000 1,141,170
Hanshin Department Store Ltd. 29,000 205,210
Higo Bank Ltd. Ord. 96,000 941,288
Hitachi Ltd. 1,126,000 11,240,047
Honda Motor Co. Ltd. 432,000 6,634,375
Ishihara Sangyo Kaisha Ltd. (a) 343,000 1,021,097
Japan Airlines Co. Ltd. 302,000 2,008,578
Komatsu Ltd. Ord. 410,000 3,133,728
Marubeni Corp. 339,000 1,726,035
Matsushita Electric Industrial Co. Ltd. 303,000 4,724,867
Marukyo Corp. 16,000 255,168
Minebea Co. Ltd. 546,000 3,508,847
Mitsubishi Chemical Industries Ltd. 89,000 381,654
Mitsubishi Estate Co. Ltd. 264,000 2,978,382
Mitsubishi Heavy Industries Ltd. 492,000 3,347,809
Mitsubishi Trust & Banking Corp. 486,000 6,889,546
Mitsui OSK Lines Ltd. 457,000 1,268,696
Murata Mfg. Co. Ltd. 171,000 6,484,465
Nichido Fire & Marine
Insurance Co. Ltd. 502,000 4,062,254
Nikko Securities Co. Ltd. 373,000 3,031,587
Nippon Telegraph &
Telephone Corp. Ord. 400 3,354,991
Nippon Yusen Kabushiki Kaisha 354,000 1,986,414
Nissan Motor Co. Ltd. Ord. 388,000 2,484,302
Nisshinbo Industries 154,000 1,217,082
Nitto Denko Corp. 97,000 1,512,581
Nomura Securities Co. Ltd. 664,000 11,609,217
Omron Corp. 139,000 2,660,131
Orix Corp. 242,000 8,061,901
Pioneer Electronic Corp. 241,000 4,099,704
Rohm Co. Ltd. 120,000 6,209,096
Sankyo Co. Ltd. 258,300 6,011,235
Sanwa Bank Ltd. 95,000 1,795,629
Seino Transpotation Co. Ltd. 144,000 2,432,605
Sony Corp. 209,700 10,082,445
Sumitomo Marine and Fire
Insurance Co. Ltd. 420,000 3,339,160
Sumitomo Realty &
Development Co. Ltd. 648,000 3,873,452
Sumitomo Rubber Industries Ltd. 185,000 1,376,846
Sumitomo Trust & Banking Co. Ltd. 363,000 4,416,893
Suzuki Motor Corp. 228,000 2,545,303
SHARES VALUE (NOTE 1)
JAPAN - CONTINUED
TDK Corp. 88,000 $ 4,012,759
Takashimaya Co. Ltd. 198,000 2,666,510
Takeda Chemical Industries Ltd. 397,000 5,252,687
Tokio Marine & Fire
Insurance Co. Ltd. (The) 1,065,000 12,228,948
Toshiba Corp. 1,626,000 10,314,970
Toyota Motor Corp. 474,000 9,407,208
Tsugami Corp. 253,000 911,577
Yamanouchi Pharmaceutical Co. Ltd. 302,000 6,814,177
238,235,020
KOREA (SOUTH) - 0.8%
Cho Hung Bank Co. Ltd. 191,504 2,273,043
Korea Electric Power Corp. (a) 147,470 5,647,716
Korea First Securities Co. Ltd. 14,218 187,136
Kyungki Bank (a) 171,523 1,628,705
Seoul Securities Co. 74,592 924,714
10,661,314
MEXICO - 1.2%
Banacci SA de CV:
Class B 352,200 540,979
Class L 17,610 26,767
Cemex SA, Series B 1,071,800 3,875,630
Cifra SA Class C 1,559,100 2,055,517
Consorcio G Grupo Dina SA ADR 34,800 108,750
Empresas Ica Sociedad Controladora
SA de CV sponsored ADR
representing Ord. (part. cert.) 208,700 2,139,175
Grupo Carso SA de CV Class A-1 (a) 287,800 1,574,842
Grupo Dina sponsored ADR, Series L 12,543 25,086
Grupo Financiero Bancomer SA de CV:
Class B (a) 4,451,800 1,303,487
Series L (a) 216,878 57,256
sponsored ADR, Series C (a) (d) 70,200 412,425
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 93,200 2,761,050
14,880,964
MALAYSIA - 0.9%
Kuala Lumpur Industries Holdings BHD (a) 290,000 394,913
Magnum Corp. BHD 567,500 1,326,804
Malaysian Banking BHD 133,000 1,052,871
Resorts World BHD 443,000 2,598,399
Telekom Malaysia BHD 614,000 4,659,149
Tenega Nasional BHD 251,000 1,024,384
Time Engineering BHD 161,000 541,509
11,598,029
NETHERLANDS - 6.9%
ABN-AMRO Holdings NV 46,500 1,796,666
Aegon NV Ord. 68,250 2,363,636
AKZO NV Ord. 103,800 12,420,856
Heineken NV 24,200 3,666,667
IHC Caland NV 48,300 1,373,134
International Nederlanden Groep NV 249,108 13,793,730
KLM Royal Dutch Airlines Ord. (a) 198,200 6,441,468
Koninklijke PPT Nederland 221,500 7,971,539
Koninklijke PPT Nederland (a) (d) 80,600 2,900,705
Oce Van der Grinten NV 136,700 7,719,571
Pirelli Tyre Holdings NV Ord. (a) 633,700 4,258,242
Royal Dutch Petroleum Co. Ord. 50,900 6,222,317
Unilever NV Ord. 122,000 15,891,452
Vendex International Bearer (a) (d) 81,400 2,156,361
88,976,344
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NETHERLANDS ANTILLES - 0.3%
Schlumberger Ltd. 68,200 $ 4,236,925
NORWAY - 2.4%
Bergesen Group:
Class A 35,500 807,408
Class B 301,600 6,859,557
Christiania Bank Free shares Ord. 1,475,000 3,426,617
Den Norske Bank Class A Free shares 1,146,800 3,111,291
Norsk Hydro AS 100,850 4,218,809
Orkla AS:
Class A Free shares 93,250 4,173,564
Class B (non-vtg.) 47,800 2,026,773
Saga Petroleum AS Class B 261,600 3,463,634
Unitor AS 192,300 3,358,339
31,445,992
PAKISTAN - 0.1%
Pakistan Telecommunications Voucher
GDR (a) (d) 8,630 837,110
PHILLIPINES - 0.1%
Philippine Long Distance Telephone Co.
sponsored ADR 21,500 1,542,625
SINGAPORE - 1.0%
Jardine Matheson Holdings Ltd. Ord. 506,659 3,723,944
Kim Engineering Holdings Ltd. 2,455,000 2,565,721
Neptune Orient Lines Ltd. 3,377,000 3,916,071
Overseas Union Bank Ltd. (For.) 265,000 1,669,291
Van Der Horst Ltd. 156,000 748,174
12,623,201
SOUTH AFRICA - 0.0%
De Beers Consolidated Mines Ltd. ADR 24,000 621,000
SPAIN - 4.2%
Banco Bilbao Vizcaya SA Ord. (Reg.) 349,100 10,102,294
Banco Intercontinental Espanol 59,550 5,374,415
Corporacion Mapfrecia International
de Reaseguros SA (Reg.) 183,400 9,035,230
EL Aguila SA (a) 56,540 423,669
Repsol SA Ord. 172,500 5,441,730
Tabacalera SA, Series A 205,200 7,696,592
Telefonica de Espana SA Ord. 845,150 10,916,448
Union Electrica Fenosa SA 1,216,100 5,719,270
54,709,648
SWEDEN - 3.5%
Electrolux AB 117,600 5,358,737
Investor AB Class B Free shares 314,700 9,097,942
Mo Och Domsjoe (MoDo) Class B
Free shares 83,100 4,799,104
SKF AB Ord. 75,800 1,533,959
Skandia International Holding 35,400 687,147
Svenska Cellulosa Aktiebolaget SCA
Class B Ord. 362,700 6,740,754
Skandinaviska Enskilda Banken
Class A Free shares 948,300 4,934,745
Volvo AB Class B 637,400 12,153,153
45,305,541
SWITZERLAND - 9.8%
Adia SA (Bearer) (a) 54,800 11,403,744
Alusuisse-Lonza Holding AG (Reg.) 15,939 10,019,990
Baloise Holding (Reg.) 5,635 12,879,299
CIBA-GEIGY AG (Reg.) 14,380 10,567,453
C. S. Holdings (Reg.) 258,405 23,736,812
Fischer (Georg) AG (Reg.) 12,400 3,228,211
Holderbank Financiere Glarus
AG (Bearer) 2,825 2,324,445
SHARES VALUE (NOTE 1)
SWITZERLAND - CONTINUED
Holderbank Financial Glarus
(warrants) (a) 14,125 $ 19,678
Nestle SA (Reg.) 18,800 19,626,644
Roche Holdings Ltd. (part. certs.) 1,700 10,990,422
Surveillance, Societe Generale (Bearer) 1,010 1,758,816
Swiss Bank Corp. (Bearer) 43,450 15,435,437
Zurich Versicherung (Reg.) 3,405 4,289,973
126,280,924
THAILAND - 1.6%
Bank of Asia PCL (For. Reg.) 354,310 1,004,727
Krung Thai Bank (For. Reg.) 1,698,840 6,882,069
Ruam Pattana Fund II (For. Reg.) (a) 1,117,000 712,691
Ruang Khao Unit Trust (For. Reg.) (a) 836,800 601,709
Siam City Bank PCL (For. Reg.) 6,828,500 9,405,234
Telecomasia Corp. PCL (For. Reg.) (a) 394,000 1,460,440
20,066,870
TURKEY - 0.3%
Aksigorta (a) 280,000 54,463
Aksigoria (a) (d) 952,000 185,174
Cimentas AS (a) 500,000 322,290
Tofas Turk Otomobil Fabrikasi
AS ADR (a) (d) 165,600 712,080
Tofas Turk Otomobil Fabrikasi AS (a) 2,400,600 2,117,473
3,391,480
UNITED KINGDOM - 12.4%
Argyll Group PLC Ord. 626,900 3,353,633
Avon Rubber 81,900 666,007
BTR PLC Ord. 625,100 3,184,528
Barclays PLC Ord. 980,300 10,558,664
Bass PLC Ord. 763,700 7,324,586
Berkeley Group PLC 159,600 904,685
Booker PLC 364,200 2,415,782
Boots Co. PLC 287,600 2,334,164
British Land Ord. 289,500 1,844,124
Burmah Oil 190,700 2,768,567
Cadbury-Schweppes PLC Ord. 955,700 6,994,539
Commercial Union PLC (a) 225,100 2,099,695
De La Rue PLC 488,300 7,287,643
Dixons Group PLC 937,500 3,826,800
Forte PLC 1,806,100 6,551,610
Glaxo Holdings PLC Ord. 378,100 4,651,224
Great Universal Stores PLC Ord Class A 381,600 3,574,711
Guinness PLC Ord. 1,154,300 8,705,719
Hanson Trust PLC Ord. 674,000 2,358,953
Iceland Group PLC 637,600 1,829,976
Lasmo PLC 858,400 2,347,355
Ladbroke Group PLC Ord. 1,032,400 2,782,019
Lloyds Abbey Life PLC 549,600 3,426,481
London International Group PLC 2,561,200 4,492,217
National Westminster Bank PLC Ord. 1,097,920 9,567,209
Nurdin & Peacock PLC Ord. 375,000 1,046,393
North West Water Group PLC Ord. 337,700 2,988,469
Redland PLC Ord. 147,800 969,770
Rolls Royce PLC Ord. 874,433 2,433,022
Royal Insurance Holdings PLC 992,600 4,890,550
Sainsbury (J.) PLC Ord. 566,367 3,987,065
Scottish Hydro-Electric PLC Ord. 723,700 3,681,071
Scottish Power PLC ADR 960,500 4,954,461
Shell Transport & Trading PLC 581,900 6,972,716
TSB Group PLC 300 1,155
Tesco PLC Ord. 1,425,100 6,589,734
Unigate Ltd. Ord. 312,800 2,022,471
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UNITED KINGDOM - CONTINUED
Vodafone Group PLC 1,890,600 $ 7,039,006
Whitbread Co. PLC Class A 715,700 6,847,100
160,273,874
TOTAL COMMON STOCKS
(Cost $1,041,443,013) 1,149,740,937
NONCONVERTIBLE PREFERRED STOCKS - 2.5%
AUSTRIA - 0.5%
Creditanstalt Bankverein 105,900 6,099,579
GERMANY - 0.5%
Henkel KGAA 10,300 3,974,013
Porsche AG Ord. (a) 6,050 2,638,622
6,612,635
ITALY - 1.5%
Banco Ambro Veneto 1,197,000 1,627,788
Fiat Spa 1,350,600 2,937,514
SAI Sta Assicuratrice Industriale Spa 650,500 2,800,526
Stet (Societa Finanziaria Telefonica) Spa 5,075,300 11,278,078
18,643,906
KOREA (SOUTH) - 0.0%
Korea First Securities Co. Ltd. 68,124 575,898
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $29,697,172) 31,932,018
FOREIGN GOVERNMENT OBLIGATIONS (F) - 1.1%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
ARGENTINA - 0.3%
Argentina Republic BOCON
6.0625%, 4/1/01 (e) B1 $ 5,993,570 3,738,969
BRAZIL - 0.2%
Brazil Federative Republic IDU
euro 6.6875%, 1/1/01 (e) B1 2,570,500 2,069,253
DENMARK - 0.3%
Danish Government Bullet
7%, 12/15/04 Aa1 DKK 25,000,000 4,181,735
FRANCE - 0.3%
French Government Strips
4/25/23 Aaa FRF 168,000,000 3,508,764
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $14,123,089) 13,498,721
REPURCHASE AGREEMENTS - 7.2%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 92,390,864 92,343,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,177,606,274) $ 1,287,514,676
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO SELL
810,720,000 ESP 7/12/95 $ 6,704,431 $ (278,432)
228,920,092 FRF 8/16/95 47,220,286 (1,965,746)
2,043,255,600 JPY 7/11/95 24,176,080 411,833
TOTAL CONTRACTS TO SELL-
(Receivable amount $76,268,452) $ 78,100,797 $ (1,832,345)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 6.1%
CURRENCY ABBREVIATIONS
DKK - Danish krone
ESP - Spanish peseta
FRF - French franc
JPY - Japanese yen
LEGEND
(a) Non-income producing
(b) Principal amount is stated in United States dollars unless otherwise
noted.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) 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 $12,602,067 or 1.0% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Some foreign government obligations have not been individually rated
by S&P or Moody's. The ratings listed are assigned to securities by FMR,
the fund's investment adviser, based principally on S&P and Moody's ratings
of the sovereign credit of the issuing government.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $307,494,270 and $257,850,752, 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 $152,215 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $1,177,807,984. Net unrealized appreciation aggregated
$109,706,692, of which $162,739,035 related to appreciated investment
securities and $53,032,343 related to depreciated investment securities.
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Investments
Basic Industries 6.2
Construction & Real Estate 3.2
Durables 8.1
Energy 5.1
Finance 26.4
Government Obligations 1.1
Health 3.4
Holding Companies 1.0
Industrial Machinery & Equipment 2.8
Media & Leisure 2.4
Nondurables 8.4
Retail & Wholesale 4.8
Services 3.0
Repurchase Agreements 7.2
Technology 4.9
Transportation 2.8
Utilities 8.8
Others (individually less than 1%) 0.4
Total 100.0%
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $92,343,000) (cost $1,177,606,274) - $ 1,287,514,676
See accompanying schedule
Cash 655
Receivable for investments sold 20,207,922
Unrealized appreciation on foreign currency contracts 411,833
Dividends receivable 7,490,524
Interest receivable 304,815
TOTAL ASSETS 1,315,930,425
LIABILITIES
Payable for investments purchased $ 10,265,923
Unrealized depreciation on foreign currency contracts 2,244,178
Payable for fund shares redeemed 5,303,385
Accrued management fee 832,243
Other payables and accrued expenses 336,394
TOTAL LIABILITIES 18,982,123
NET ASSETS $ 1,296,948,302
Net Assets consist of:
Paid in capital $ 1,177,330,987
Undistributed net investment income 11,730,370
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (279,038)
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 108,165,983
NET ASSETS, for 80,033,348 shares outstanding $ 1,296,948,302
NET ASSET VALUE, offering price and redemption price per share ($1,296,948,302 (divided by) 80,033,348 shares) $16.21
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 21,509,202
Dividends
Interest 4,660,220
26,169,422
Less foreign taxes withheld (2,979,305)
TOTAL INCOME 23,190,117
EXPENSES
Management fee $ 4,861,229
Transfer agent fees 316,317
Accounting fees and expenses 267,409
Non-interested trustees' compensation 3,447
Custodian fees and expenses 311,947
Registration fees 24
Audit 22,683
Legal 2,524
Miscellaneous 2,230
TOTAL EXPENSES 5,787,810
NET INVESTMENT INCOME 17,402,307
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 6,935,354
Foreign currency transactions (6,677,005) 258,349
Change in net unrealized appreciation (depreciation) on:
Investment securities 37,408,823
Assets and liabilities in foreign currencies (2,727,346) 34,681,477
NET GAIN (LOSS) 34,939,826
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 52,342,133
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
Operations $ 17,402,307 $ 14,354,948
Net investment income
Net realized gain (loss) 258,349 1,588,422
Change in net unrealized appreciation (depreciation) 34,681,477 (19,420,073)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 52,342,133 (3,476,703)
Distributions to shareholders (4,893,543) (4,465,195)
From net investment income
From net realized gain (1,797,170) -
In excess of net realized gain (3,096,373) -
TOTAL DISTRIBUTIONS (9,787,086) (4,465,195)
Share transactions 235,046,856 1,000,905,405
Net proceeds from sales of shares
Reinvestment of distributions 9,787,086 4,465,195
Cost of shares redeemed (288,141,738) (477,688,222)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (43,307,796) 527,682,378
TOTAL INCREASE (DECREASE) IN NET ASSETS (752,749) 519,740,480
NET ASSETS
Beginning of period 1,297,701,051 777,960,571
End of period (including undistributed net investment income of $11,730,370 and $10,987,509, $ 1,296,948,302 $ 1,297,701,051
respectively)
OTHER INFORMATION
Shares 15,188,474 62,240,900
Sold
Issued in reinvestment of distributions 652,472 274,107
Redeemed (18,619,209) (29,967,241)
Net increase (decrease) (2,778,263) 32,547,766
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 E 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42 $ 12.67
Income from Investment Operations
Net investment income .07 .19 .06 .16 .24 .18
Net realized and unrealized gain (loss) .59 .08 C 4.16 (1.54) .74 (.39)
Total from investment operations .66 .27 4.22 (1.38) .98 (.21)
Less Distributions (.06) (.08) (.18) (.18) (.17) (.04)
From net investment income
In excess of net investment income - - (.04) - - -
From net realized gain (.02) - - - (.14) D -
In excess of net realized gain (.04) - (.05) - - -
Total distributions (.12) (.08) (.27) (.18) (.31) (.04)
Net asset value, end of period $ 16.21 $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42
TOTAL RETURN B 4.27% 1.72% 37.35% (10.72) 8.00% (1.67)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,296,948 $ 1,297,701 $ 777,961 $ 180,837 $ 126,490 $ 80,554
Ratio of expenses to average net assets .91% A .92% 1.03% 1.14% 1.26% 1.41%
Ratio of net investment income to average net assets 2.74% A 1.28% 1.21% 1.86% 2.33% 1.89%
Portfolio turnover rate 46% A 42% 42% 61% 168% 100%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. 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 THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD
ENDED DUE TO THE TIMING OF SALES AND
REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
D INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
E 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.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
The Money Market Portfolio, High Income Portfolio, Equity-Income Portfolio,
Growth Portfolio and Overseas Portfolio (the funds) are funds of Variable
Insurance Products Fund (the trust). The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business trust.
Each fund is authorized to issue an unlimited number of shares. Shares of
each fund may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts. The
following summarizes the significant accounting policies of the funds:
SECURITY VALUATION:
MONEY MARKET PORTFOLIO. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
HIGH INCOME PORTFOLIO. 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
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus interest, both of which approximate current
value.
EQUITY-INCOME AND GROWTH PORTFOLIOS. Securities for which exchange
quotations are readily available are valued at the last sale price, or if
no sale price, at the closing bid price. Securities for which exchange
quotations are not readily available (and in certain cases debt securities
which trade on an exchange), are valued primarily using dealer-supplied
valuations or at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees. Short-term securities maturing within sixty days of their
purchase date are valued at amortized cost or original cost plus accrued
interest, both of which approximate current value.
OVERSEAS PORTFOLIO. Securities for which quotations are readily available
are valued at the last sales price, or if no sale price, at the closing bid
prices in the principal market in which such securities are normally
traded. Securities for which market quotations are not readily available
are valued
primarily using dealer-supplied valuations or at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME:
MONEY MARKET PORTFOLIO. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as earned.
HIGH INCOME, EQUITY-INCOME, GROWTH AND OVERSEAS PORTFOLIOS. Dividend income
is recorded on the ex-dividend date, except certain dividends from foreign
securities where the ex-dividend date may have passed, are recorded as soon
as the funds are informed of the ex-dividend date. Interest income, which
includes accretion of original issue discount, is accrued as earned.
Investment income is recorded net of foreign taxes withheld where recovery
of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income for the Money Market Portfolio.
Distributions are recorded on the ex-dividend date for all other funds.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, passive foreign investment companies (PFIC), market
discount, partnerships, non-taxable dividends and losses deferred due to
wash sales and excise tax regulations.
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.
FORWARD FOREIGN CURRENCY CONTRACTS. The funds, except for the Money Market
Portfolio, may use foreign currency contracts to facilitate transactions in
foreign securities and to manage the funds' currency exposure. Contracts to
buy generally are used to acquire exposure to foreign currencies, while
contracts to sell are used to hedge the funds' investments against currency
fluctuations. Also, a contract to buy or sell can offset a previous
contract. These contracts involve market risk in excess of the unrealized
gain or loss reflected in the funds' Statement of Assets and Liabilities.
The U.S. dollar value of the currencies each applicable fund has committed
to buy or sell is shown in the schedule of investments under the caption
"Forward Foreign Currency Contracts." This amount represents the aggregate
exposure to each currency acquired or hedged through currency contracts at
period end. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
Contracts that have been offset with different counterparties are reflected
as both a contract to buy and a contract to sell in each applicable fund's
schedule of investments under the caption "Forward Foreign Currency
Contracts."
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. FMR, the funds'
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
INDEXED SECURITIES. The funds, (excluding the Money Market Portfolio) may
invest in indexed securities whose values are linked either directly or
inversely to changes in foreign currencies, interest rates, commodities,
indices, or other underlying instruments. The funds use these securities to
increase or decrease their exposure to different underlying instruments and
to gain exposure to markets that might be difficult to invest in through
conventional securities. Indexed securities may be more volatile than their
underlying instruments, but any loss is limited to the amount of the
original investment.
RESTRICTED SECURITIES. The funds are permitted to invest in privately
placed restricted securities. These securities 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 $20,998,411 or 2.7% of net assets for the Money Market
Portfolio and $15,265,476 or 1.9% of net assets for the High Income
Portfolio.
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly
fee.
For the Money Market Portfolio, FMR receives a monthly fee that is
calculated on the basis of a basic fund fee rate of .03% of the fund's
average net assets, plus a fixed income group fee rate and an income-based
fee. The group fee rate is the weighted average of a series of rates
ranging from .1200% to .3700% and is based on the monthly average net
assets of all the mutual funds advised by FMR. The income-based fee is
added only when the 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
3. FEES AND OTHER TRANSACTIONS
WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
income-based component is .24% of average net assets. For the period, the
management fee was equivalent to an annualized rate of .25% of average net
assets.
For all other funds, FMR receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1200% to
.3700% for the High Income Portfolio and .2700% to .5200% for the
Equity-Income, Growth and Overseas Portfolios for the period. In the event
that these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted in
the same or a lower management fee. The annual individual fund fee rates
are .20%, .30%, .45% and .45% for the Equity-Income, Growth, Overseas, and
High Income Portfolios, respectively. For the period, the management fees
were equivalent to annualized rates of .60%, .52%, .62%, and .77% of
average net assets for the High Income, Equity-Income, Growth, and Overseas
Portfolios, respectively.
SUB-ADVISER FEE. As the Money Market Portfolio's investment sub-adviser,
FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR
of 50% of the management fee payable to FMR. The fees are paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
FMR, on behalf of the High Income and Overseas Portfolios, entered into
sub-advisory agreements with affiliates of FMR. In addition, one of the
sub-advisers of the Overseas Portfolio, Fidelity International Investment
Advisors (FIIA), entered into a sub-advisory agreement with its subsidiary,
Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.).
Under the sub-advisory arrangements, FMR may receive investment advice and
research services and may grant the sub-advisers investment management
authority to buy and sell securities. FMR pays its sub-advisers either a
portion of its management fee or a fee based on costs incurred for these
services. FIIA pays FIIAL U.K. a fee based on costs incurred for either
service.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. Effective January 1, 1995, the Board of
Trustees approved a revised transfer agent contract pursuant to which FIIOC
receives account fees and asset-based fees that vary according to account
size and type of account. Under the prior transfer agent contract, FIIOC
received fees based on the type, size, number of accounts, and number of
transactions made by shareholders. FIIOC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEES. Fidelity Service Co.(FSC) an affiliate of FMR, maintains
the funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms are shown under the caption
"Other Information" at the end of each applicable fund's schedule of
investments.
4. BANK BORROWINGS.
Each fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. Each fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, each fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. For
the High Income and Equity-Income portfolios, the maximum loans during the
periods for which loans were outstanding amounted to $4,885,000 and
$18,269,000 respectively, and the average daily loan balances were
$4,885,000 and $18,269,000, respectively. The weighted average interest
rate was 6.4% for both the High Income Portfolio and for the Equity-Income
Portfolio.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the funds' operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of 1.00% of average net assets for the High
Income Portfolio and 1.50% of average net assets for the Equity-Income,
Growth, and Overseas Portfolios. For the period, there was no reimbursement
under this arrangement.
FMR has directed certain portfolio trades of the High Income Portfolio to
brokers who paid a portion of the fund's expenses. For the period, the High
Income Portfolio's expenses were reduced by $5,422 under this agreement.
6. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI), an affiliate of FMR, was the record owner of more than 5% of the
outstanding shares and certain unaffiliated insurance companies were record
owners of approximately 10% of the total outstanding shares of the
following funds:
FILI UNAFFILIATED INSURANCE COMPANIES
FUND % OF OWNERSHIP # OF % OF OWNERSHIP
Money Market 48 1 16
High Income 17 1 41
Equity-Income 26 1 30
Growth 17 1 31
Overseas 15 1 40
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 each applicable fund's schedule of investments.
8. TRANSACTIONS WITH AFFILIATED COMPANIES.
Information regarding transactions with affiliated companies is included
under the caption "Other Information" at the end of each applicable fund's
schedule of investments.
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
Fred L. Henning, Jr., VICE PRESIDENT, MONEY MARKET PORTFOLIO
Robert A. Lawrence, VICE PRESIDENT
Lawrence Greenberg, VICE PRESIDENT
Barry J. Coffman, VICE PRESIDENT
Robert Litterst, VICE PRESIDENT
John R. Hickling, VICE PRESIDENT
Bettina Doulton, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Stephen P. Jonas, TREASURER
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
Michael D. Conway, ASSISTANT TREASURER, MONEY MARKET PORTFOLIO
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
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Co.
Boston, MA
CUSTODIAN
Morgan Guaranty Trust Company of New York,
New York, NY
MONEY MARKET PORTFOLIO
The Bank of New York, New York, NY
HIGH INCOME PORTFOLIO
The Chase Manhattan Bank, N.A., New York, NY
EQUITY-INCOME AND OVERSEAS PORTFOLIOS
Brown Brothers Harriman & Co., Boston, MA
GROWTH PORTFOLIO
(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND
MONEY MARKET PORTFOLIO
HIGH INCOME PORTFOLIO
EQUITY-INCOME PORTFOLIO
GROWTH PORTFOLIO
OVERSEAS PORTFOLIO
SEMIANNUAL REPORT
JUNE 30, 1995
CONTENTS
MONEY MARKET PORTFOLIO VIPF-3 PERFORMANCE
VIPF-4 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-5 INVESTMENTS
VIPF-9 FINANCIAL STATEMENTS
HIGH INCOME PORTFOLIO VIPF-11 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-12 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-13 INVESTMENTS
VIPF-19 FINANCIAL STATEMENTS
EQUITY-INCOME PORTFOLIO VIPF-21 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-22 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-23 INVESTMENTS
VIPF-27 FINANCIAL STATEMENTS
GROWTH PORTFOLIO VIPF-29 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-30 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-31 INVESTMENTS
VIPF-35 FINANCIAL STATEMENTS
OVERSEAS PORTFOLIO VIPF-37 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-38 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-39 INVESTMENTS
VIPF-44 FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS VIPF-46 NOTES TO THE FINANCIAL STATEMENTS
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS
NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
PERFORMANCE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects both the change
in a fund's share price over a given period, and reinvestment of its
dividends (or income). Yield measures the income paid by a fund. Since a
money market fund tries to maintain a $1 share price, yield is an important
measure of performance.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
JUNE 30, 1995 YEAR YEARS YEARS
Money Market 5.44% 4.88% 6.19%
Consumer Price Index 3.04% 3.26% 3.55%
AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return
and show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
Comparing the fund's performance to the Consumer Price Index (CPI) helps
show how your investment did compared to inflation. (The periods covered by
the CPI numbers are the closest available match to those covered by the
fund.)
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
If the advisor had not reimbursed certain fund expenses, the past five
years and life of fund total returns would have been lower. Yield
will vary.
YIELD
Row: 1, Col: 1, Value: 4.21
Row: 1, Col: 2, Value: 2.41
Row: 2, Col: 1, Value: 4.7
Row: 2, Col: 2, Value: 2.5
Row: 3, Col: 1, Value: 5.609999999999999
Row: 3, Col: 2, Value: 2.74
Row: 4, Col: 1, Value: 5.91
Row: 4, Col: 2, Value: 2.89
Row: 5, Col: 1, Value: 5.85
Row: 5, Col: 2, Value: 2.87
Money Market
MMDA
6% -
5% -
4% -
3% -
2% -
1% -
0%
6/28/94 10/2/94 12/28/94 3/29/95 6/28/95
Money Market 4.21% 4.70% 5.61% 5.91% 5.85%
MMDA 2.41% 2.50% 2.74% 2.89% 2.87%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods,
expressed as annual percentage rates. A yield that assumes income earned is
reinvested or compounded is called an effective yield. The chart above
shows the fund's current seven-day yield at quarterly intervals over the
past year. This is compared to similar yields for the average bank money
market deposit account (MMDA). The MMDA average is supplied by BANK RATE
MONITOR.(Trademark)
COMPARING PERFORMANCE
There are some important differences between
a bank money market deposit account (MMDA)
and a money market fund. First, the U.S.
government neither insures nor guarantees a
money market fund. In fact, there is no
assurance that a money fund will maintain a $1
share price. Second, a money market fund
returns to its shareholders income earned by the
fund's investments after expenses. This is in
contrast to banks, which set their MMDA rates
periodically based on current interest rates,
competitors' rates, and internal criteria.
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Bob Litterst, Portfolio
Manager of Money
Market Portfolio
Q. BOB, CAN YOU BRING US UP TO DATE ON MARKET CONDITIONS?
A. Sure. The economic growth rate has slowed dramatically during the past
six months. During the fourth quarter of 1994, the gross domestic product
expanded at a rate of 5.1%, a very strong showing. Moreover, final sales
rose 5.7%, meaning sales exceeded production and depleted inventories.
Those signs of growth, along with disturbing trends in such leading
indicators of inflation as unemployment and capacity utilization, prompted
the Federal Reserve to raise the federal funds rate, the rate banks charge
each other for overnight loans, another one-half percentage point in
February.
Q. HOW HAS THE INTEREST RATE ENVIRONMENT CHANGED SINCE THEN?
A. Even as the Fed was tightening credit for the seventh time in a little
more than a year, there were signs that the economy was beginning to lose
steam. Led by softening consumer activity and weakness in
interest-sensitive sectors such as housing and autos, the growth rate
during the first quarter of 1995 slowed to 2.7%. Currently, most economists
have long since stopped worrying about the economy overheating. Now they
have an altogether different concern: that we might be headed for another
recession. By the end of June, it was clear to all that the latest cycle of
interest rate increases was over. Instead, speculation centered on when the
Fed might feel compelled to lower rates.
Q. HOW DID YOU RESPOND TO CHANGING CONDITIONS?
A. The fund's average maturity six months ago, when the period began, was
39 days. That was a defensive number. It reflected my view at the time that
further rate increases were likely. As it became apparent that the economy
was slowing more rapidly than initially expected, my expectations regarding
Fed policy changed, and I gradually extended the fund's average maturity. I
moved cautiously at first because conditions were unsettled and it seemed
prudent to maintain flexibility. But as signs of weakness accumulated, I
began to prepare for a shift in Fed policy, including the possibility of an
eventual rate cut. By the end of June, the fund's average maturity was more
aggressive than that of most other taxable money market funds-around 60
days, compared to about 50 days for most competitors.
Q. HOW DID YOU ACHIEVE THAT LONGER AVERAGE MATURITY?
A. Mainly by focusing on three-month and six-month securities, rather than
moving further out the yield curve. That's because by the end of the
period, expectations for declining short-term rates caused longer-term
yields on some money market securities to fall below shorter-term yields, a
situation known as an inverted yield curve.
Q. WHAT ABOUT ASSET SELECTION?
A. I've reduced the fund's stake in U.S. Treasury and agency securities.
Normally the fund averages about 10% in government securities, although
it's been as high as 20% at times during the past year or two. But in
recent months, technical factors affecting supply and demand have priced
government securities unusually high. The main cause seems to be heavy
buying on the part of foreign central banks with funds accumulated in
support of the U.S. dollar. With so many other creditworthy alternatives
available, I've looked elsewhere for value, adding higher-yielding
commercial paper and bank certificates of deposit. At the end of June,
government securities totaled less than 3% of the fund's assets.
Q. WHAT'S THE OUTLOOK?
A. The next few months should be interesting. We know that on July 6,
shortly after the period ended, the Fed lowered the federal funds rate
one-quarter percentage point, but as we look ahead, much uncertainty
remains. Some market participants believe that we're in the early stages of
an extended downturn. Others believe that what's happening is merely a
brief but severe inventory correction, and that the economy will resume
growing at its long-term trend rate of around 2.5% once the temporary
buildup in inventories sells off.
Q. WHAT'S YOUR VIEW?
A. I tend to side with those in the latter camp. The typical prerequisites
for a recession, including high inflation and tight bank lending standards,
simply don't exist. That said, I'm concerned that if this Spring's weakness
in the labor market persists, it could evolve into a self-reinforcing
slowdown, forcing the Fed to continue lowering rates. While I don't think
that will happen, I have to respect the possibility of such a development.
Accordingly, I'll probably maintain a neutral to aggressive average
maturity of between 60 and 65 days for the foreseeable future.
FUND FACTS
GOAL: Income and share price stability by
investing in high quality, short-term instruments
START DATE: April 1, 1982
SIZE: As of June 30, 1995, more than $768
million
MANAGER: Robert Litterst, since 1992; manager,
Capital Reserves Money Market, Fidelity Cash
Reserves, Fidelity Money Market Trust:
Retirement Money Market, since 1992; joined
Fidelity in 1991
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
BANKERS' ACCEPTANCES - 4.2%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
DOMESTIC BANKERS' ACCEPTANCES - 2.8%
CHASE MANHATTAN BANK
11/1/95 6.09% $ 4,500,000 $ 4,408,980
CHEMICAL BANK
9/28/95 6.02 5,723,026 5,639,549
MELLON BANK, N.A.
11/24/95 5.81 7,500,000 7,325,700
NBD BANK, N.A.
12/11/95 5.87 4,000,000 3,896,767
21,270,996
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 1.4%
BANK OF TOKYO
8/14/95 6.39 6,000,000 5,954,533
RABOBANK NEDERLAND, N.V.
8/3/95 6.22 1,000,000 994,408
SANWA BANK, LTD.
7/31/95 6.08 4,000,000 3,980,033
10,928,974
TOTAL BANKERS' ACCEPTANCES 32,199,970
CERTIFICATES OF DEPOSIT - 20.3%
CHICAGO BRANCH, YANKEE DOLLAR, FOREIGN BRANCH - 3.9%
ABN-AMRO BANK
8/3/95 6.25 5,000,000 5,000,045
9/20/95 6.19 5,000,000 5,000,000
9/25/95 6.00 5,000,000 5,000,000
10/19/95 6.25 10,000,000 10,000,000
SANWA BANK, LTD.
8/15/95 6.04 5,000,000 5,000,062
30,000,107
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 9.4%
BANQUE NATIONALE DE PARIS
11/13/95 6.05 5,000,000 5,000,000
CANADIAN IMPERIAL BANK OF COMMERCE
11/1/95 6.25 4,000,000 3,998,110
COMMERZBANK, GERMANY
8/24/95 6.35 5,000,000 4,999,596
DRESDNER BANK, A.G.
3/15/96 6.44 1,000,000 1,000,875
FUJI BANK, LTD.
7/19/95 6.18 5,000,000 5,000,000
HYPO U.S. FINANCE
11/8/95 6.03 5,000,000 5,000,823
INDUSTRIAL BANK OF JAPAN, LTD.
7/31/95 6.30 5,000,000 5,000,000
ROYAL BANK OF CANADA
10/5/95 6.25 1,000,000 1,000,294
SANWA BANK, LTD.
7/7/95 6.21 3,000,000 3,000,000
SOCIETE GENERALE
8/14/95 6.02 14,000,000 14,000,000
8/21/95 6.00 10,000,000 10,000,000
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - CONTINUED
SUMITOMO BANK, LTD.
8/7/95 6.01% $ 5,000,000 $ 5,000,000
8/21/95 6.41 5,000,000 5,000,465
8/22/95 6.03 5,000,000 5,000,000
73,000,163
LONDON BRANCH, EURODOLLAR, DOMESTIC BANKS - 2.6%
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOC.
9/29/95 5.91 5,000,000 5,000,000
11/27/95 6.00 5,000,000 5,000,000
BANK OF NEW YORK
7/17/95 6.15 10,000,000 10,000,000
20,000,000
LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 3.8%
BANK OF SCOTLAND
7/5/95 6.15 4,000,000 4,000,015
MITSUBISHI BANK, LTD.
8/10/95 6.04 5,000,000 5,000,377
NORDDEUTSCHE LANDESBANK
12/8/95 5.75 5,000,000 4,998,563
SANWA BANK, LTD.
8/7/95 6.02 5,000,000 4,998,917
TORONTO-DOMINION BANK
12/11/95 5.74 10,000,000 10,013,064
29,010,936
PORTLAND BRANCH, EURODOLLAR, FOREIGN BANKS - 0.6%
BANK OF NOVA SCOTIA
7/11/95 6.13 5,000,000 5,000,008
TOTAL CERTIFICATES OF DEPOSIT 157,011,214
COMMERCIAL PAPER - 52.0%
ANZ (DE), INC.
7/7/95 6.52 1,273,000 1,271,653
8/8/95 6.03 220,000 218,611
ABBEY NATIONAL TREASURY SERVICES
8/21/95 6.04 5,000,000 4,957,854
AMERICAN EXPRESS CREDIT CORP.
8/9/95 6.21 5,000,000 4,967,067
8/14/95 6.20 5,000,000 4,962,875
11/9/95 5.89 5,000,000 4,895,382
AMERICAN HOME FOOD PRODUCTS, INC.
7/10/95 6.17 11,000,000 10,983,280
AMERICAN HOME PRODUCTS
8/29/95 6.00 6,000,000 5,941,688
AMERICAN TELEPHONE & TELEGRAPH CO.
9/27/95 6.09 5,000,000 4,927,400
ASSOCIATES CORP. OF NORTH AMERICA
9/1/95 5.98 6,000,000 5,938,930
9/28/95 6.10 5,000,000 4,926,451
BANC ONE CORP.
9/22/95 5.99 5,000,000 4,931,986
BEAR STEARNS COS., INC.
7/12/95 6.14 5,000,000 4,990,757
8/1/95 6.06 6,000,000 5,969,155
8/1/95 6.13 5,000,000 4,974,016
COMMERCIAL PAPER - CONTINUED
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
BENEFICIAL CORP.
9/18/95 5.99% $ 5,000,000 $ 4,935,264
9/29/95 5.81 5,000,000 4,928,750
CIT GROUP HOLDINGS, INC.
9/21/95 6.20 5,000,000 4,931,211
CHRYSLER FINANCIAL CORPORATION
7/6/95 6.05 5,000,000 4,995,826
7/12/95 6.05 5,000,000 4,990,803
7/13/95 6.04 2,000,000 1,996,000
7/17/95 6.05 3,000,000 2,991,973
COMMERZBANK U.S. FINANCE, INC.
9/25/95 5.89 5,000,000 4,930,722
9/29/95 5.91 140,000 137,977
9/29/95 6.30 600,000 590,820
10/20/95 6.23 4,000,000 3,925,507
12/15/95 5.76 1,120,000 1,090,905
COMPAGNIE BANCAIRE
7/6/95 6.20 5,000,000 4,995,764
7/12/95 6.15 5,000,000 4,990,742
CORESTATES CAPITAL CORP.
7/8/95 6.01 (a) 5,000,000 5,000,000
7/15/95 6.09 (a) 5,000,000 5,000,000
DEN DANSKE CORP., INC.
7/12/95 6.15 3,000,000 2,994,445
DU PONT (E.I.) DE NEMOURS & CO.
9/19/95 6.09 2,500,000 2,466,833
FORD MOTOR CREDIT CORP.
7/21/95 6.23 5,000,000 4,983,056
8/30/95 6.23 15,000,000 14,848,000
9/11/95 6.25 5,000,000 4,939,100
10/27/95 5.86 6,000,000 5,887,507
FORD MOTOR CREDIT, PLC
8/1/95 6.10 4,500,000 4,476,711
GENERALE BANK
10/17/95 6.07 5,000,000 4,911,200
GENERAL ELECTRIC CAPITAL CORP.
7/3/95 5.97 (a) 5,000,000 5,000,000
7/5/95 6.19 5,000,000 4,996,628
8/1/95 5.94 170,000 169,139
9/15/95 6.68 4,000,000 3,945,787
10/5/95 6.79 2,400,000 2,358,400
10/12/95 6.80 1,000,000 981,403
11/1/95 6.13 10,000,000 9,796,708
GENERAL ELECTRIC CORP.
9/27/95 6.25 10,000,000 9,851,622
GENERAL MOTORS ACCEPTANCE CORP.
7/31/95 6.22 5,000,000 4,974,500
8/2/95 6.19 11,000,000 10,940,453
8/16/95 6.12 6,000,000 5,953,770
8/16/95 6.15 5,000,000 4,961,347
8/22/95 6.10 1,000,000 991,319
9/15/95 6.05 5,000,000 4,936,983
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
GEORGIA POWER CO.
7/5/95 6.20% $ 5,000,000 $ 4,996,611
GOLDMAN SACHS GROUP, L.P. (THE)
9/7/95 6.01 10,000,000 9,888,367
9/18/95 6.02 6,000,000 5,922,185
HANSON FINANCE (UK), PLC
8/7/95 6.03 10,000,000 9,938,950
8/22/95 6.04 6,000,000 5,948,477
IBM CORP.
9/1/95 5.97 5,000,000 4,949,194
INTERNATIONAL NEDERLANDEN U.S. FUNDING CORP.
8/28/95 6.35 4,000,000 3,960,367
MERRILL LYNCH & CO., INC.
9/28/95 6.00 5,000,000 4,927,317
MONSANTO CO.
8/14/95 6.19 2,500,000 2,481,453
9/12/95 6.17 1,525,000 1,506,353
12/21/95 5.90 10,000,000 9,724,642
MORGAN STANLEY GROUP, INC.
10/6/95 5.91 5,000,000 4,921,592
NATIONAL & PROVINCIAL BUILDING SOCIETY
10/16/95 5.89 5,350,000 5,258,249
NATIONWIDE BUILDING SOCIETY
8/11/95 6.06 5,000,000 4,966,004
NEW CENTER ASSET TRUST
7/12/95 6.16 5,000,000 4,990,726
7/17/95 6.15 10,000,000 9,973,067
NORWEST CORP.
9/19/95 5.99 400,000 394,773
NORWEST FINANCIAL
7/10/95 6.14 5,000,000 4,992,438
PENNSYLVANIA LIGHT & POWER COMPANY
7/5/95 6.06 1,650,000 1,648,895
7/10/95 6.05 3,200,000 2,196,689
PHILIP MORRIS COS., INC.
9/5/95 6.07 4,500,000 4,450,913
PRUDENTIAL FUNDING CORP.
7/3/95 6.30 10,000,000 9,996,500
SEARS ROEBUCK ACCEPTANCE CORP.
9/18/95 6.00 5,000,000 4,935,154
SHERWOOD MEDICAL COMPANY
8/21/95 5.99 5,000,000 4,957,925
TEXTRON, INC.
7/14/95 6.06 3,500,000 3,492,391
TORONTO DOMINION HOLDINGS USA, INC.
9/11/95 6.11 5,000,000 4,940,200
9/29/95 5.90 10,000,000 9,854,750
TRANSAMERICA FINANCE CORP.
8/7/95 6.03 220,000 218,648
WOOLWICH EQUITABLE BUILDING SOCIETY
10/16/95 5.94 5,000,000 4,913,508
TOTAL COMMERCIAL PAPER 402,000,618
FEDERAL AGENCIES - 3.2%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
FEDERAL FARM CREDIT BANK - AGENCY COUPONS - 0.6%
7/3/95 6.17% (a) $ 5,000,000 $ 4,997,271
FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 2.6%
7/17/95 6.27 5,000,000 4,986,422
9/11/95 6.32 10,000,000 9,877,600
10/20/95 6.04 5,000,000 4,909,350
19,773,372
TOTAL FEDERAL AGENCIES 24,770,643
BANK NOTES - 7.2%
BANK OF NEW YORK
8/28/95 6.35 5,000,000 4,999,748
BOATMEN'S NATIONAL BANK OF ST. LOUIS
9/22/95 6.04 (a) 5,000,000 4,995,859
COMERICA BANK - DETROIT
5/28/96 5.83 5,000,000 5,014,775
FIFTH THIRD BANK - CINCINNATI
10/27/95 6.07 5,000,000 5,001,981
HOUSEHOLD BANK, N.A.
9/21/95 5.93 1,000,000 1,000,000
KEY BANK OF NEW YORK
7/3/95 6.11 (a) 5,000,000 4,999,374
MELLON BANK, N.A.
11/1/95 6.24 5,000,000 5,000,000
NBD BANK, N.A.
10/16/95 6.27 5,000,000 5,000,000
NATIONSBANK OF TEXAS
9/26/95 6.38 5,000,000 5,000,000
10/27/95 6.25 5,000,000 5,000,000
PNC BANK, N.A.
7/4/95 6.15 (a) 5,000,000 4,999,589
U.S. NATIONAL BANK OF OREGON
8/22/95 6.37 5,000,000 5,000,070
TOTAL BANK NOTES 56,011,396
MASTER NOTES (A) - 1.2%
J.P. MORGAN SECURITIES
7/3/95 6.58 9,000,000 9,000,000
MEDIUM-TERM NOTES (A) - 5.9%
ABBEY NATIONAL, NORTH AMERICA
7/3/95 5.97 5,000,000 4,999,151
ABBEY NATIONAL TREASURY SERVICES (C)
9/30/95 6.00 10,000,000 10,000,000
BENEFICIAL CORP.
7/15/95 6.09 5,000,000 4,999,453
DEAN WITTER, DISCOVER & CO.
7/15/95 6.10 5,000,000 5,004,526
GENERAL ELECTRIC CAPITAL CORP.
7/3/95 6.27 5,000,000 4,998,997
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
GENERAL MOTORS ACCEPTANCE CORP.
8/7/95 6.25% $ 3,000,000 $ 3,000,000
GOLDMAN SACHS GROUP, L.P. (THE) (C)
9/1/95 6.03 3,000,000 3,000,000
9/16/95 5.95 4,000,000 4,000,000
NORWEST CORP.
9/15/95 6.06 6,000,000 6,000,000
TOTAL MEDIUM-TERM NOTES 46,002,127
SHORT-TERM NOTES (A) - 3.2%
CAPITAL ONE FUNDING CORP.
7/10/95 6.07 4,072,000 4,072,000
SMM TRUST COMPANY (1994-D) (B)
7/28/95 6.17 4,000,000 4,000,000
SMM TRUST COMPANY (1995-I) (B)
7/5/95 6.16 6,000,000 5,998,411
SMM TRUST COMPANY (1995-J) (B)
7/15/95 6.06 11,000,000 11,000,000
TOTAL SHORT-TERM NOTES 25,070,411
MUNICIPAL SECURITIES (A) - 1.1%
GARDENA CALIFORNIA CERTIFICATES OF PARTNERSHIP
7/10/95 6.35 6,550,000 6,550,000
NEW ORLEANS AVIATION BOARD
7/10/95 6.26 1,800,000 1,800,000
TOTAL MUNICIPAL SECURITIES 8,350,000
REPURCHASE AGREEMENTS - 1.7%
MATURITY
AMOUNT
In a joint trading account
(U.S. Government Obligations)
dated 6/30/95 due 7/3/95:
At 6.28% $ 12,806,699 12,800,000
TOTAL INVESTMENTS - 100% $ 773,216,379
Total Cost for Income Tax Purposes - $773,216,379
LEGEND
(a) 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.
(b) Restricted securities - Investment in securities not registered under
the Securities Act of 1933.
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
SMM Trust Company:
(1994-D) 10/28/94 $ 4,000,000
(1995-I)) 5/25/95 $ 6,000,000
(1995-J) 5/15/95 $ 11,000,000
(c) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $17,000,000 or 2.2% of net
assets.
INCOME TAX INFORMATION
At December 31, 1994, the fund had a capital loss carryforward of
approximately $94,600 of which $4,100, $500, $4,900, $4,300 and $80,800
will expire on December 31, 1995, 1996, 1997, 2000 and 2002, respectively.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $12,800,000) - See accompanying $ 773,216,379
schedule
Cash 673,210
Receivable for investments sold 104,000
Interest receivable 2,641,686
TOTAL ASSETS 776,635,275
LIABILITIES
Payable for investments purchased $ 7,463,678
Accrued management fee 157,028
Other payables and accrued expenses 64,485
TOTAL LIABILITIES 7,685,191
NET ASSETS $ 768,950,084
Net Assets consist of:
Paid in capital $ 769,022,085
Accumulated net realized gain (72,001
(loss) on investments )
NET ASSETS, for 769,022,085 $ 768,950,084
shares outstanding
NET ASSET VALUE, offering price and redemption price per share ($768,950,084 (divided by) 769,022,085 shares) $1.00
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INTEREST INCOME $ 22,651,404
EXPENSES
Management fee $ 934,903
Transfer agent fees 176,682
Accounting fees and expenses 52,708
Non-interested trustees' 2,520
compensation
Custodian fees and expenses 36,594
Audit 11,536
Legal 1,454
Miscellaneous 2,459
TOTAL EXPENSES 1,218,856
NET INTEREST INCOME 21,432,548
NET REALIZED GAIN (LOSS) ON 7,601
INVESTMENTS
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 21,440,149
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS END YEAR ENDED
ED DECEMBER 31,
JUNE 30, 1995 1994
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations $ 21,432,548 $ 25,859,424
Net interest income
Net realized gain (loss) 7,601 (80,853
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 21,440,149 25,778,571
Distributions to shareholders from net interest income (21,432,548 (25,859,424
) )
Share transactions at net asset value of $1.00 per share 512,023,023 1,187,546,448
Proceeds from sales of shares
Reinvestment of distributions from net interest income 21,432,548 25,859,424
Cost of shares redeemed (513,118,899 (817,822,836
) )
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS 20,336,672 395,583,036
TOTAL INCREASE (DECREASE) IN NET ASSETS 20,344,273 395,502,183
NET ASSETS
Beginning of period 748,605,811 353,103,628
End of period $ 768,950,084 $ 748,605,811
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995
(UNAUDITED) 1994 1993 1992 1991 1990
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER-SHARE DATA
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from Investment Operations .029 .042 .032 .038 .059 .078
Net interest income
Less Distributions (.029) (.042) (.032) (.038) (.059) (.078)
From net interest income
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN B C 2.95% 4.25% 3.23% 3.90% 6.09% 8.04%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $ 768,950 $ 748,606 $ 353,104 $ 301,002 $ 271,123 $ 254,585
Ratio of expenses to average net
assets .33% A .27% .22% .24% .38% .56%
Ratio of expenses to average net
assets before .33% A .27% .23% .24% .38% .56%
expense reductions
Ratio of net interest income to
average net assets 5.84% A 4.32% 3.16% 3.85% 5.93% 7.76%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES
ATTRIBUTABLE TO YOUR INSURANCE COMPANY'S SEPARATE ACCOUNT.
INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
C TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
HIGH INCOME 11.89% 16.87% 11.60%
Merrill Lynch High Yield Master 14.88% 14.23% n/a
Consumer Price Index 3.04% 3.26% 3.57%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, 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)
You can compare the fund's returns to those of the Merrill Lynch High Yield
Master Index - a broad measure of the high yield bond market. This
benchmark includes reinvested dividends and capital gains, if any.
Comparing the fund's performance to the consumer price index (CPI) helps
show how your fund did compared to inflation. (The CPI returns begin on the
month end closest to the fund's start date).
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, September 19, 1985.
If the adviser had not reimbursed certain fund expenses during the periods
shown, the total returns would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. The fund includes high yielding, lower-rated
securities which are subject to greater price volatility and may involve
greater risk of default. The market for these securities may be less
liquid.
$10,000 OVER LIFE OF FUND
VIP High Income (4High Yield Maste
09/30/85 10000.00 10000.00
10/31/85 10124.78 10113.02
11/30/85 10270.82 10303.28
12/31/85 10614.12 10604.47
01/31/86 10745.58 10676.44
02/28/86 11109.08 11130.10
03/31/86 11383.10 11373.65
04/30/86 11576.24 11551.26
05/31/86 11753.01 11685.98
06/30/86 11900.72 11804.36
07/31/86 11864.53 11648.95
08/31/86 11912.43 11863.93
09/30/86 12013.59 11962.11
10/31/86 12372.53 12172.57
11/30/86 12412.20 12271.68
12/31/86 12490.69 12337.95
01/31/87 12946.06 12686.81
02/28/87 13170.08 12896.26
03/31/87 13290.04 13038.85
04/30/87 12874.71 12754.50
05/31/87 12755.02 12697.03
06/30/87 13030.49 12872.55
07/31/87 13044.43 12942.59
08/31/87 13152.49 13072.28
09/30/87 12694.49 12771.51
10/31/87 12087.43 12430.27
11/30/87 12443.44 12744.62
12/31/87 12642.60 12913.85
01/31/88 13058.25 13267.23
02/29/88 13449.21 13627.23
03/31/88 13352.58 13604.70
04/30/88 13456.66 13643.99
05/31/88 13436.65 13715.20
06/30/88 13718.27 13977.43
07/31/88 13861.07 14125.13
08/31/88 13794.86 14171.55
09/30/88 13905.45 14314.39
10/31/88 14056.82 14537.41
11/30/88 14003.15 14591.87
12/31/88 14114.42 14653.61
01/31/89 14453.60 14873.37
02/28/89 14524.70 14973.32
03/31/89 14338.06 14960.00
04/30/89 14179.27 15004.15
05/31/89 14441.26 15280.37
06/30/89 14854.88 15496.85
07/31/89 14757.08 15570.24
08/31/89 14671.49 15647.15
09/30/89 14158.14 15498.19
10/31/89 13551.16 15253.06
11/30/89 13562.58 15287.24
12/31/89 13525.40 15273.41
01/31/90 13226.43 14974.91
02/28/90 13022.77 14756.83
03/31/90 12885.36 14956.31
04/30/90 12923.54 15032.30
05/31/90 13189.08 15303.83
06/30/90 13396.83 15600.32
07/31/90 13603.76 15929.99
08/31/90 13376.19 15320.16
09/30/90 13059.02 14653.87
10/31/90 12742.13 14280.96
11/30/90 13041.01 14401.94
12/31/90 13223.36 14609.46
01/31/91 13503.92 14815.98
02/28/91 14252.06 15915.67
03/31/91 14757.05 16599.98
04/30/91 15280.75 17191.13
05/31/91 15505.19 17275.07
06/30/91 15841.85 17622.59
07/31/91 16440.36 18044.84
08/31/91 16664.81 18424.11
09/30/91 17038.88 18658.77
10/31/91 17618.68 19213.23
11/30/91 17768.31 19435.16
12/31/91 17861.83 19660.94
01/31/92 18815.71 20348.35
02/29/92 19498.87 20853.71
03/31/92 20129.17 21144.68
04/30/92 20271.50 21298.58
05/31/92 20515.49 21638.31
06/30/92 20739.15 21907.16
07/31/92 21145.80 22351.02
08/31/92 21593.11 22646.93
09/30/92 21816.77 22904.97
10/31/92 21491.45 22615.68
11/30/92 21755.77 22935.97
12/31/92 21999.76 23231.29
01/31/93 22589.41 23803.34
02/28/93 22974.74 24253.90
03/31/93 23504.92 24674.39
04/30/93 23659.56 24851.50
05/31/93 24013.02 25186.03
06/30/93 24631.57 25659.22
07/31/93 24874.57 25935.02
08/31/93 25139.66 26182.25
09/30/93 25228.03 26311.44
10/31/93 25824.49 26807.08
11/30/93 26067.49 26953.70
12/31/93 26487.22 27223.21
01/31/94 27370.86 27819.81
02/28/94 27338.05 27619.74
03/31/94 26417.09 26719.70
04/30/94 26150.49 26407.45
05/31/94 26198.96 26313.37
06/30/94 26102.02 26893.29
07/31/94 26198.96 27082.30
08/31/94 26198.96 27270.47
09/30/94 26392.85 27260.08
10/31/94 26150.49 27329.36
11/30/94 25932.37 27096.87
12/31/94 26053.55 26906.19
01/31/95 26344.38 27286.38
02/28/95 27248.56 28137.75
03/31/95 27587.86 28529.34
04/30/95 28396.97 29197.31
05/31/95 29127.77 30109.50
06/30/95 29206.07 30339.47
Let's say you invested $10,000 in High Income Portfolio on September 30,
1985, shortly after the fund started. By June 30, 1995, your investment
would have grown to $29,206 - a 192.06% increase. That compares to $10,000
invested in the Merrill Lynch High Yield Master Index, which would have
grown to $30,339 over the same period - a 203.39% increase.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF JUNE 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
PanAmSat Corp. 12 3/4% 4.2
TransTexas Gas Corp. (various issues) 3.5
Revlon Worldwide Corp. secured 0%, 3/15/98 2.6
Flagstar Corp. 11 1/4%, 11/1/04 2.3
American Financial Corp. (various issues) 2.3
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Media & Leisure 29.9
Finance 9.5
Energy 8.8
Services 6.6
Basic Industries 6.4
QUALITY DIVERSIFICATION AS OF JUNE 30, 1995
(MOODY'S RATINGS) % OF FUND'S
INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.0
Ba 6.4
B 41.9
Caa, Ca, C 16.6
Nonrated 10.4
TABLE EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT JUNE 30, 1995, ACCOUNT FOR 7.9% 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 HAS THE FUND PERFORMED, BARRY?
A. Although the fund did well relative to its peers, it trailed the
performance of the Merrill Lynch High Yield Master Index, which returned
12.76% and 14.88%, respectively, for the six and 12-month periods ended
June 30, 1995. The index has a larger percentage of Ba-rated bonds than
most high-yield mutual funds, which tend to be more concentrated in B-rated
bonds. Generally speaking, Ba-rated bonds are more sensitive to changing
interest rates, and therefore, benefited more from the recent decline in
interest rates than B-rated bonds. As a result, very few high yield funds
outperformed the index.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. The fund's relatively low weighting in Ba-rated securities was the
primary reason for its underperformance relative to its benchmark during
the most recent period. On the positive side, we have maintained a high
weighting, compared to the benchmark, in deferred coupon securities. These
bonds sell at a deep discount because they do not pay current interest for
some period, usually three to five years. They generally have longer
durations - which measures how sensitive their price is to changes in
interest rates - and therefore, their prices are more volatile. We also
avoided most of the credit disasters that occurred in the market.
Q. WHAT INVESTMENTS HAVE DONE WELL IN THE PAST SIX MONTHS?
A. Revlon continued to benefit from an operational restructuring and the
very successful launch of two key new products: Color Stay Lipstick and Age
Defying Makeup. Our Revlon position is concentrated in the most junior
securities that are most sensitive to changes in credit quality, which has
been a recent plus. Another strong performer was Big Flower Press, a large
commercial printer of advertising inserts, comics and television guides.
The company was helped by the strong growth in advertising and the
synergies it gained from some recent acquisitions. Finally, our
concentration in casinos and hotels did relatively well during the period.
Q. GIVEN THE MARKET'S STRENGTH SO FAR IN 1995, WAS IT DIFFICULT TO FIND
OPPORTUNITIES?
A. Not particularly. The new issues market was active and provided ample
opportunity to selectively add new names to the fund. One example was
PanAmSat Corp., which operates an international satellite communications
system and provides satellite services to the broadcasting and business
communications markets. It currently has two satellites operating and also
has a large backlog of contracted time from companies including ESPN and
Viacom for two new satellites it will be launching later this year. The
company is participating in a joint venture to provide Direct to Home (DTH)
television broadcasting service to Latin America, similar to the Direct TV
service in the United States. Another new issue we purchased was
Stratosphere Corp., a Las Vegas-based casino owned by industry-leader Grand
Casino. These bonds are attractive, in part, because in addition to their
14.25% coupon, they pay additional interest based on a percentage of the
company's cash flow.
Q. WHAT INVESTMENTS DIDN'T FARE AS WELL?
A. The high-yield restaurant sector, in general, did not perform well
during the period due to competitive pressures and a slowing economy. One
of our largest holdings is Flagstar, the parent of Denny's and the largest
franchisee of Hardees. Although Denny's has benefited from an aggressive
remodeling program, Hardees has suffered due to aggressive price promotions
from the major burger chains. Another restaurant chain, American Restaurant
Group, also underperformed partly due to the concentration of its chains in
California, where the economy continues to be weaker than the rest of the
country.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. The probability of the soft landing scenario is increasing, which could
provide a favorable backdrop for the high-yield bond market. Slow economic
growth and low inflation could allow many companies in the high-yield
market to improve their credit quality. Absolute yields remain attractive,
and absent a sharp drop in interest rates from current levels, high-yield
bonds could perform well relative to other fixed-income investments. In my
view, the key is to be selective. I'm focusing on companies that are less
cyclical, or sensitive to the economy, and choosing companies that I think
can perform well in a slow-growth environment.
FUND FACTS
GOAL: seeks high current income by investing
in high yielding, lower-rated fixed-income
securities
START DATE: September 19, 1985
SIZE: as of June 30, 1995, more than $813 million
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 74.8%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 0.2%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.0%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp., 0%, 6/30/97 - $ 469,000 $ 328,685
MEDIA & LEISURE - 0.2%
LODGING & GAMING - 0.2%
Argosy Gaming Co.
12%, 6/1/01 B3 1,290,000 1,290,000
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Farm Fresh, Inc.
7 1/2%, 3/1/10 B3 186,000 112,264
TOTAL CONVERTIBLE BONDS 1,730,949
NONCONVERTIBLE BONDS - 74.6%
AEROSPACE & DEFENSE - 0.3%
RHI Holdings, Inc.:
11 7/8%, 3/1/99 B2 2,160,000 2,062,800
11 7/8%, 3/1/99 (e) - 550,000 525,250
2,588,050
BASIC INDUSTRIES - 6.3%
CHEMICALS & PLASTICS - 2.1%
American Pacific Corp.
11%, 12/15/02 (f) - 850,000 765,000
Foamex LP 11 7/8%, 10/1/04 B3 5,000,000 4,725,000
Pioneer Americas Acquisition
Corp. 13 3/8%, 4/1/05 (f) B2 10,000,000 10,325,000
Trans Resources, Inc.
14 1/2%, 9/1/96 B2 580,000 585,800
16,400,800
IRON & STEEL - 0.9%
Republic Engineered Steels, Inc.
9 7/8%, 12/15/01 B2 5,230,000 4,772,375
WCI Steel, Inc.
10 1/2%, 3/1/02 B1 2,420,000 2,359,500
7,131,875
METALS & MINING - 0.7%
International Wire Group, Inc.
11 3/4%, 6/1/05 (f) B3 5,850,000 5,886,563
PACKAGING & CONTAINERS - 0.8%
Crown Packaging Holdings Ltd.
0%, 11/1/03 (d) Caa 6,840,000 3,129,300
Grupo Industrial Durango euro
9.6367%, 11/18/96 (g) 4,000,000 3,380,000
6,509,300
PAPER & FOREST PRODUCTS - 1.8%
Indah Kiat International Finance
Co. 11 3/8%, 6/15/99 Ba3 9,000,000 9,022,500
Mail-Well Holdings, Inc.
0%, 2/15/06 (d) - 1,190,000 511,700
Tjiwi Kimia International Finance
Co. 13 1/4%, 8/1/01 B1 4,130,000 4,377,800
13,912,000
TOTAL BASIC INDUSTRIES 49,840,538
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CONGLOMERATES - 0.6%
Jordan Industries, Inc.:
10 3/8%, 8/1/03 B3 $ 3,155,000 $ 2,902,600
0%, 8/1/05 (d) Caa 3,135,000 1,849,650
4,752,250
CONSTRUCTION & REAL ESTATE - 1.6%
BUILDING MATERIALS - 1.3%
Adience, Inc.
11%, 6/15/02 - 745,921 540,793
Building Materials Corp.,
America 0%, 7/1/04 (d) B1 12,610,000 7,502,950
DAL Tile International, Inc. secured
coupon, 0%, 7/15/98 Caa 3,435,000 2,279,981
10,323,724
REAL ESTATE - 0.3%
Littlefield Co.
10%, 12/31/95 (e) - 2,750,000 2,491,913
TOTAL CONSTRUCTION & REAL ESTATE 12,815,637
DURABLES - 2.9%
AUTOS, TIRES, & ACCESSORIES - 1.9%
Harvard Industries, Inc.
12%, 7/15/04 B2 5,000,000 5,137,500
Poindexter (JB), Inc.
12 1/2%, 5/15/04 B2 10,000,000 9,700,000
14,837,500
TEXTILES & APPAREL - 1.0%
Hat Brands, Inc.
12 5/8%, 9/15/02:
Series B - 1,520,000 1,599,800
Series D - 680,000 715,700
Leslie Fay Cos., Inc. (b)(e):
9.53%, 1/15/00 - 676,319 399,028
10.54%, 1/15/02 - 611,353 299,563
United States Leather, Inc.
10 1/4%, 7/31/03 B2 6,010,000 5,153,575
8,167,666
TOTAL DURABLES 23,005,166
ENERGY - 7.2%
ENERGY SERVICES - 1.0%
Falcon Drilling, Inc.:
9 3/4%, 1/15/01 B2 3,512,000 3,441,760
12 1/2%, 3/15/05 B3 4,000,000 4,160,000
7,601,760
OIL & GAS - 6.2%
Chesapeake Energy Corp.
10 1/2%, 6/1/02 (f) B1 6,000,000 5,910,000
Deeptech International, Inc.
12%, 12/15/00 B3 4,660,000 3,168,800
Mesa Capital Corp.
secured 0%, 6/30/98 (d) Caa 5,710,000 5,181,825
TransTexas Gas Corp.
11 1/2%, 6/15/02 B2 20,000,000 20,450,000
Transamerican Refining
Corp. (g):
0%, 2/15/02 Caa 6,746,000 4,435,495
16 1/2%, 2/15/02 Caa 9,620,000 10,173,150
49,319,270
TOTAL ENERGY 56,921,030
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 6.0%
INSURANCE - 5.1%
American Annuity Group, Inc.
11 1/8%, 2/1/03 Ba3 $ 3,500,000 $ 3,640,000
American Financial Corp.:
10%, 10/20/99 Ba3 5,000,000 5,037,500
9 3/4%, 4/20/04 Ba3 6,570,000 6,504,300
9 3/4%, 4/20/04 (e) Ba3 6,770,000 6,702,300
American Life Holdings
11 1/4%, 9/15/04 B1 13,350,000 13,884,000
Americo Life, Inc.
9 1/4%, 6/1/05 Ba2 4,900,000 4,557,000
40,325,100
SAVINGS & LOANS - 0.8%
First Nationwide Holdings, Inc.
12 1/4%, 5/15/01 Ba3 5,790,000 6,166,350
SECURITIES INDUSTRY - 0.1%
ECM Corp. extendible
14%, 6/1/02 (f) - 570,198 627,218
TOTAL FINANCE 47,118,668
HEALTH - 0.6%
MEDICAL EQUIPMENT & SUPPLIES - 0.6%
Wright Medical Technology, Inc.,
Series B, 10 3/4%, 7/1/00 B3 5,200,000 5,083,000
HOLDING COMPANIES - 0.1%
New Street Capital Corp.
pay-in-kind (e):
12%, 2/28/98 - 67,416 64,697
Unit 12%, 2/28/98 - 1,123,600 1,078,285
1,142,982
INDUSTRIAL MACHINERY & EQUIPMENT - 3.4%
MVE, Inc. Unit
12 1/2%, 2/15/02 B3 8,545,000 8,886,800
Specialty Equipment Cos., Inc.
11 3/8%, 12/1/03 B3 10,640,000 10,932,600
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 B3 1,484,000 1,417,220
10 3/4%, 11/1/03 Caa 5,756,000 5,583,320
26,819,940
MEDIA & LEISURE - 24.5%
BROADCASTING - 8.0%
Chancellor Broadcasting
12 1/2%, 10/1/04 B3 6,560,000 6,543,600
Citicasters, Inc.
9 3/4%, 2/15/04 B- 7,812,000 7,792,470
Cooke Media Group, Inc.
11 5/8%, 4/1/99 - 350,000 334,250
Marcus Cable Capital Corp.
0%, 12/15/05 (d)(f) Caa 26,580,000 14,054,175
NWCG Holdings Corp.
0%, 6/15/99 Caa 26,925,000 16,693,500
Peoples Choice TV Corp. Unit
0%, 6/1/04 (d) Caa 11,340,000 5,485,725
Robin Media Group, Inc.
11 1/8%, 4/1/97 - 12,340,000 12,525,100
63,428,820
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
MEDIA & LEISURE - CONTINUED
LEISURE DURABLES & TOYS - 1.5%
ICON Health And Fitness, Inc.
13%, 7/15/02 B3 $ 5,890,000 $ 5,948,900
IHF Holdings, Inc.
0%, 11/15/04 (d) Caa 10,250,000 5,637,500
11,586,400
LODGING & GAMING - 9.9%
Bally's Casino Holdings, Inc.
10 1/2%, 6/15/98 B3 12,630,000 8,841,000
Bally Gaming International, Inc.
10 3/8%, 7/15/98 - 3,000,000 3,090,000
Boyd Gaming Corp.
10 3/4%, 9/3/03 B2 7,350,000 7,570,500
GNF Corp., Series B,
10 5/8%, 4/1/03 B2 19,730,000 16,375,900
Grand Casino Resorts, Inc. gtd.
12 1/2%, 2/1/00 Ba3 2,200,000 2,464,000
HMH Properties, Inc.
9 1/2%, 5/15/05 (f) B1 10,000,000 9,700,000
Maritime Group Ltd. pay-in-
kind 14%, 2/15/97 (b) - 1,648,399 741,780
Players International, Inc.
10 7/8%, 4/15/05 (f) Ba3 7,050,000 6,944,250
President Riverboat Casinos
13%, 9/15/01 B 7,000,000 5,950,000
Stratosphere Corp.
14 1/4%, 5/15/02 B2 12,740,000 12,994,800
Trump Plaza Funding, Inc. gtd.
mtg. 10 7/8%, 6/15/01 B3 4,713,000 4,335,960
79,008,190
RESTAURANTS - 5.1%
American Restaurant Group, Inc.:
12%, 9/15/98 B2 3,930,000 3,144,000
12%, 9/15/98 (New) B2 3,580,000 2,864,000
Cafeteria Operators LP
11%, 6/30/98 (b)(e) - 7,000,000 1,750,000
Flagstar Corp.
11 1/4%, 11/1/04 Caa 23,555,000 18,372,900
Host Marriott Travel Plazas, Inc.
9 1/2%, 5/15/05 (f) B1 15,000,000 14,325,000
40,455,900
TOTAL MEDIA & LEISURE 194,479,310
NONDURABLES - 4.2%
BEVERAGES - 0.5%
Heileman Acquisition Corp.
9 5/8%, 1/31/04 B3 6,500,000 4,095,000
HOUSEHOLD PRODUCTS - 3.7%
McAndrews & Forbes Group,
Inc. 12 1/4%, 7/1/96 - 1,360,000 1,360,000
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 7,230,000 7,103,475
Revlon Worldwide Corp. secured
0%, 3/15/98 B3 30,342,000 20,860,125
29,323,600
TOTAL NONDURABLES 33,418,600
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
RETAIL & WHOLESALE - 5.5%
APPAREL STORES - 2.8%
Apparel Retailers, Inc.
12 3/4%, 8/15/05 Caa $ 11,230,000 $ 6,625,700
Lamonts Apparel Corp.
10 1/4%, 11/1/99 (b)(f) - 2,201,000 1,078,490
Specialty Retailers, Inc.:
10%, 8/15/00 B1 2,890,000 2,759,950
11%, 8/15/03 B3 12,220,000 11,364,600
21,828,740
GENERAL MERCHANDISE STORES - 1.4%
Parisian, Inc.
9 7/8%, 7/15/03 Caa 14,322,000 11,027,940
RETAIL & WHOLESALE, MISCELLANEOUS - 1.3%
Barrys Jewelers, Inc.
11%, 12/22/00 - 1,595,000 1,563,100
Finlay Fine Jewelry Corp.
10 5/8%, 5/1/03 B1 4,960,000 4,786,400
Florists Transworld Delivery, Inc.
14%, 12/15/01 B3 4,500,000 4,297,500
10,647,000
TOTAL RETAIL & WHOLESALE 43,503,680
SERVICES - 5.7%
ADVERTISING - 0.8%
Outdoor Systems, Inc.
10 3/4%, 8/15/03 B2 7,000,000 6,720,000
LEASING & RENTAL - 1.7%
Acme Holdings, Inc.
11 3/4%, 6/1/00 (b) Ca 2,930,000 1,465,000
GPA Delaware, Inc.:
8 1/2%, 3/3/97 Ca 3,500,000 3,176,250
gtd. 8 3/4%, 12/15/98 Caa 990,000 831,600
8 5/8%, 1/15/99 - 2,600,000 2,067,000
Scotsman Group, Inc.
9 1/2%, 12/15/00 B1 3,950,000 3,821,625
Scotsman Holdings, Inc.
pay-in-kind 11%, 3/1/04 - 2,080,752 1,712,521
13,073,996
PRINTING - 1.7%
BFP Holdings Corp.
0%, 4/15/04 (d) Caa 5,000,000 3,300,000
Big Flower Press:
10 3/4%, 8/1/03 B3 3,555,000 3,546,113
Class A, 10 3/4%, 8/1/03 B3 4,910,000 4,897,725
Class B, 10 3/4%, 8/1/03 B3 1,480,000 1,476,300
13,220,138
SERVICES - 1.5%
Protection One Alarm
Monitoring, Inc. Unit
0%, 6/30/05 (d)(f) Caa 1,860,000 12,136,500
TOTAL SERVICES 45,150,634
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc.
13 1/2%, 1/5/96 (e) Caa $ 130,000 $ 130,000
TRANSPORTATION - 2.6%
AIR TRANSPORTATION - 1.7%
US Air, Inc.:
Series 1993-A1 Pass Thru
Trust 8 5/8%, 9/1/98 B1 5,000,000 4,725,000
9 5/8%, 2/1/01 B3 930,000 804,450
9 5/8%, 9/1/03 B1 2,550,000 2,422,500
10 3/8%, 3/1/13 B1 5,470,000 5,169,150
13,121,100
RAILROADS - 0.9%
Transtar Holdings L.P./Transtar
Cap. Corp., Series B,
0%, 12/15/03 (d) B- 12,270,000 7,239,300
TOTAL TRANSPORTATION 20,360,400
UTILITIES - 3.1%
CELLULAR - 2.5%
Dial Call Communications,
Inc. 0%, 12/15/05 (d) Caa 2,800,000 1,288,000
Dial Page, Inc.
12 1/4%, 2/15/00 Caa 950,000 985,625
Pagemart Nationwide, Inc. Unit
0%, 2/1/05 (d)(f) - 29,020,000 17,629,650
19,903,275
ELECTRIC UTILITY - 0.1%
El Paso Funding Corp.
lease oblig. (b):
9 3/8%, 10/1/96 Ca 790,000 422,650
9.20%, 7/2/97 Ca 380,000 203,300
625,950
GAS - 0.1%
Columbia Gas Systems, Inc.
9%, 8/1/95 (b) B3 670,000 938,000
TELEPHONE SERVICES - 0.4%
Call-Net Enterprises, Inc.
yankee 0%, 12/1/04 (d) B2 330,000 198,000
Pagemart, Inc.
0%, 11/1/03 (d) - 4,820,000 3,048,650
3,246,650
TOTAL UTILITIES 24,713,875
TOTAL NONCONVERTIBLE BONDS 591,843,760
TOTAL CORPORATE BONDS
(Cost $594,159,103) 593,574,709
COMMERCIAL MORTGAGE SECURITIES - 0.4%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
CS First Boston Mortgage
Securities Corp. Commercial
Series 1994-CFB1 Class E,
7.8751%, 1/25/28 (f) Ba2 $ 7,355 $ 5,784
Meritor Mortgage Security Corp.
commercial Series 1987-1
Class B, 9.40%, 2/1/00 (f) - 1,350,000 272,016
SKW Real Estate LP commercial
Series II Class E, 11%,
4/15/05 (f) B 1,500,000 1,500,469
SML, Inc. commercial Series
1994-C1 Class B-3, 11.69%,
9/18/99 - 1,500,000 1,413,750
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $3,126,994) 3,192,019
COMMON STOCKS - 5.5%
SHARES
AEROSPACE & DEFENSE - 0.0%
DEFENSE ELECTRONICS - 0.0%
Tracor, Inc. (a) 18,900 257,513
BASIC INDUSTRIES - 0.1%
IRON & STEEL - 0.1%
WCI Steel, Inc. (a) 67,700 423,125
PAPER & FOREST PRODUCTS - 0.0%
Mail-Well Holdings, Inc. (a) 9,250 55,500
TOTAL BASIC INDUSTRIES 478,625
DURABLES - 0.1%
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc. (warrants) (a)(e) 27,466 302,121
HM/Hat Brands Trust Class I Units (a)(e) 340,000 340,000
642,121
ENERGY - 1.1%
OIL & GAS - 1.1%
Flores & Rucks, Inc. (a) 125,900 1,542,275
TransTexas Gas Corp. (a) 479,600 7,253,950
TOTAL ENERGY 8,796,225
FINANCE - 1.7%
INSURANCE - 1.7%
American Financial Group, Inc. 519,600 13,509,600
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (f) 3,000 300,000
TOTAL FINANCE 13,809,600
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES - 0.0%
Wright Medical Technology, Inc.
(warrants) (a) 1,729 285,334
HOLDING COMPANIES - 0.2%
SDW Holdings Corp. (a):
Unit (f) 4,450 1,203,369
(warrants) 3,720 22,320
1,225,689
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 0.2%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp.(a):
Class A 20,681 $ 46,532
Class A (warrants) 57,599 129,598
Class C 230,212 517,977
694,107
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Terex Corp. (rights) (a) 3,150 788
Thermadyne Holdings Corp. (a) 65,419 924,043
924,831
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,618,938
MEDIA & LEISURE - 1.0%
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. (warrants) (a)(e):
$2.00 232,000 58,000
$2.72 221,765 55,441
113,441
LEISURE & DURABLES - 0.1%
IHF Capital, Inc. (a)(f):
Series H (warrants) 10,250 820,000
Series I (warrants) 5,890 147,250
967,250
LODGING & GAMING - 0.9%
Bally Gaming International, Inc.
(warrants) (a) 90,000 618,750
Hollywood Casino Corp. Class A (a) 139,000 1,233,625
Host Marriott Corp. (a) 383,000 4,069,375
Maritime Group Ltd. (warrants) (a) 17,880 179
Motels of America, Inc. (a) 3,000 225,000
Sun International Hotels Ltd. (a) 15,285 687,825
Sun International Hotels Ltd. Class B (a) 3,209 139,592
6,974,346
PUBLISHING - 0.0%
General Media, Inc. (warrant) (a) 1,310 13,100
TOTAL MEDIA & LEISURE 8,068,137
NONDURABLES - 0.6%
TOBACCO - 0.6%
RJR Nabisco Holdings Corp. 161,400 4,499,025
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a):
(New) 35,870 13,452
(warrants) 66,214 -
13,452
GROCERY STORES - 0.1%
FF Holdings Corp. (a)(e) 33,900 67,800
Food 4 Less Holdings, Inc.
(warrants) (a) 9,348 283,712
MAFCO (warrants) (a) 59 -
351,512
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Barrys Jewelers, Inc. (a) 45,576 148,122
Barrys Jewelers, Inc. (warrants) (a) 5,697 1,424
Finlay Enterprises, Inc. (a) 2,500 35,000
184,546
TOTAL RETAIL & WHOLESALE 549,510
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 0.4%
LEASING & RENTAL - 0.0%
Scotsman Holdings, Inc. (a) 15,281 $ 199,875
PRINTING - 0.4%
BFP Holdings Class D (a) 160,744 3,214,880
SERVICES - 0.0%
Perry Capital Corp. (warrants) (a)(f) 4,500 22,500
Vestar/LPA Investment Corp. (a) 5,177 129,425
151,925
TOTAL SERVICES 3,566,680
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Berg Electronics Holdings Corp. (a)(f) 20,853 104,265
UTILITIES - 0.0%
CELLULAR - 0.0%
Dial Page, Inc. (warrants) (a) 4,321 5,401
ELECTRIC UTILITY - 0.0%
Eastern Utilities Associates 3 68
Northeast Utilities Associates
(warrants) (a) 21,789 27,236
27,304
GAS - 0.0%
UGI Corp. (warrants) (a) 14,033 2,105
TOTAL UTILITIES 34,810
TOTAL COMMON STOCKS
(Cost $38,165,942) 43,936,472
PREFERRED STOCKS - 7.9%
CONVERTIBLE PREFERRED STOCKS - 0.7%
RETAIL & WHOLESALE - 0.2%
GROCERY STORES - 0.2%
Supermarkets General Holdings Corp.
exchangeable pay-in-kind $3.52 (a) 39,189 1,058,103
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Town & Country Corp. (a) 4,000 3,000
TOTAL RETAIL & WHOLESALE 1,061,103
SERVICES - 0.5%
La Petite Holdings Corp. exchangeable (a) 160,800 4,020,000
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc. cumulative 8% (a) 835 37,575
TOTAL CONVERTIBLE PREFERRED STOCKS 5,118,678
NONCONVERTIBLE PREFERRED STOCKS - 7.2%
BASIC INDUSTRIES - 0.0%
IRON & STEEL - 0.0%
Stelco, Inc. cumulative, Series B, 7.76% 7,207 115,518
PAPER & FOREST PRODUCTS - 0.0%
SD Warren Co. exchangeable
pay-in-kind (a) 3,720 104,160
TOTAL BASIC INDUSTRIES 219,678
SHARES VALUE (NOTE 1)
DURABLES - 0.1%
AUTOS, TIRES, & ACCESSORIES - 0.1%
Harvard Industries, Inc.
pay-in-kind $14.25 (a) 22,739 $ 625,323
ENERGY - 0.5%
OIL & GAS - 0.5%
Gulf Canada Resources Ltd. (a)(e) 31,009 89,151
Gulf Canada Resources Ltd., Series 1,
adj. rate 1,321,942 3,717,962
3,807,113
FINANCE - 1.8%
SAVINGS & LOANS - 1.8%
First Nationwide Bank 11 1/2% 112,852 12,188,016
Greater New York Savings Bank,
Series B, perpetual 12% 78,751 2,165,653
14,353,669
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp. 8% (a)(e) 1,589 911,927
MEDIA & LEISURE - 4.2%
BROADCASTING - 4.2%
PanAmSat Corp. 12 3/4% 32,700 33,190,500
TECHNOLOGY - 0.5%
ELECTRONICS - 0.5%
Berg Electronics Holding Corp.,
Series E, $3.4687 157,433 4,250,691
TOTAL NONCONVERTIBLE PREFERRED STOCKS 57,358,901
TOTAL PREFERRED STOCKS
(Cost $60,943,714) 62,477,579
PURCHASED BANK DEBT - 0.1%
PRINCIPAL
AMOUNT
Leslie Fay Cos., Inc.:
revolving loan $ 685,856 404,655
term loan 777,600 458,784
TOTAL PURCHASED BANK DEBT
(Cost $1,190,771) 863,439
REPURCHASE AGREEMENTS - 11.3%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a
joint trading account at 6.22%
dated 6/30/95 due 7/3/95 $ 89,902,575 $ 89,856,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $787,442,524) $ 793,900,218
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
(e) Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
ACQUISITION ACQUISITION
SECURITY DATE COST
Alpine Group, Inc.
13 1/2%, 1/5/96 1/4/95 $ 128,339
American Financial Corp.
9 3/4%, 4/20/04 5/24/95 $ 6,634,600
Ampex Corp. 8% 2/16/95 $ 834,225
Cafeteria Operators LP
11%, 6/30/98 6/24/93 $ 5,600,000
FF Holdings Corp. 10/2/92 to 1/14/94 $ 135,753
Gulf Canada Resources
Ltd. 10/15/93 $ 76,940
Hat Brands,
Inc. (warrants) 9/2/92 to 2/23/94 $ -
HM/Hat Brands Trust
Class I Units 2/22/94 $ 340,000
Leslie Fay Cos., Inc.:
9.53%, 1/15/00 7/19/93 $ 512,312
10.54%, 1/15/02 7/19/93 to 11/11/93 $ 404,156
Littlefield Co.
10%, 12/31/95 2/28/94 $ 2,750,000
Live Entertainment, Inc.
(warrants):
$2.00 3/23/93 $ 220,717
$2.72 3/23/93 $ 131,863
New Street Capital Corp.
pay-in-kind:
12%, 2/28/98 2/15/95 $ 67,416
Unit 12%, 2/28/98 2/25/94 to 9/1/94 $ 1,123,600
RHI Holdings, Inc.
11 7/8%, 3/1/99 10/15/92 $ 495,000
(f) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $103,757,499 or 12.8% of net
assets.
(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $643,634,101 and $467,491,408, 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 $21,896 for the period (see
Note 3 of Notes to the Financial Statements).
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows:
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.0%
Ba 6.4% BB 17.3%
B 41.9% B 41.6%
Caa 16.3% CCC 4.8%
Ca, C 0.3% CC, C 0.0%
D 0.4%
The percentage not rated by either S&P or Moody's amounted to 7.9%
including long-term debt categorized as other securities. FMR has
determined that unrated debt securities that are lower quality account for
7.9% of the total value of investment in securities.
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $787,696,044. Net unrealized appreciation aggregated
$6,204,174, of which $27,367,484 related to appreciated investment
securities and $21,163,310 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $1,148,000 all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $89,856,000) (cost $787,442,524) - $ 793,900,218
See accompanying schedule
Cash 506,521
Receivable for investments sold 10,050,335
Receivable for fund shares sold 5,462,661
Dividends receivable 1,104,845
Interest receivable 12,928,622
TOTAL ASSETS 823,953,202
LIABILITIES
Payable for investments purchased $ 9,912,131
Payable for fund shares redeemed 178,315
Accrued management fee 405,377
Other payables and accrued expenses 77,305
TOTAL LIABILITIES 10,573,128
NET ASSETS $ 813,380,074
Net Assets consist of:
Paid in capital $ 767,990,586
Undistributed net investment income 33,139,910
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 5,795,848
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 6,453,730
NET ASSETS, for 72,678,030 shares outstanding $ 813,380,074
NET ASSET VALUE, offering price and redemption price per share ($813,380,074 (divided by) 72,678,030 shares) $11.19
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 2,728,599
Dividends
Interest 33,425,785
TOTAL INCOME 36,154,384
EXPENSES
Management fee $ 2,138,740
Transfer agent fees 183,111
Accounting fees and expenses 121,670
Non-interested trustees' compensation 1,780
Custodian fees and expenses 6,018
Audit 17,965
Interest 2,621
Total expenses before reductions 2,471,905
Expense reductions (5,422 2,466,483
)
NET INVESTMENT INCOME 33,687,901
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 7,181,679
Foreign currency transactions (978 7,180,701
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 39,872,106
Assets and liabilities in foreign currencies (150 39,871,956
)
NET GAIN (LOSS) 47,052,657
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 80,740,558
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1995 1994
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 33,687,901 $ 43,091,356
Net investment income
Net realized gain (loss) 7,180,701 (726,075
)
Change in net unrealized appreciation (depreciation) 39,871,956 (49,793,238
)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 80,740,558 (7,427,957
)
Distributions to shareholders (43,871,918 (30,631,598
From net investment income ) )
From net realized gain - (15,525,605
)
TOTAL DISTRIBUTIONS (43,871,918 (46,157,203
) )
Share transactions 333,374,520 498,543,147
Net proceeds from sales of shares
Reinvestment of distributions 43,871,918 46,157,203
Cost of shares redeemed (170,151,760 (385,629,739
) )
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 207,094,678 159,070,611
TOTAL INCREASE (DECREASE) IN NET ASSETS 243,963,318 105,485,451
NET ASSETS
Beginning of period 569,416,756 463,931,305
End of period (including undistributed net investment income of $33,139,910 and $42,834,969,
respectively) $ 813,380,074 $ 569,416,756
OTHER INFORMATION
Shares
Sold 31,093,586 45,102,882
Issued in reinvestment of distributions 4,326,619 4,073,892
Redeemed (15,728,132 (34,899,979
) )
Net increase (decrease) 19,692,073 14,276,795
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 D 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070 $ 8.110
Income from Investment Operations .428 .770 .728 .790 .890 .858
Net investment income
Net realized and unrealized gain (loss) .792 (.910) 1.332 1.290 1.590 (1.040)
Total from investment operations 1.220 (.140) 2.060 2.080 2.480 (.182)
Less Distributions (.780) (.730) (.794) (.810) - (.858)
From net investment income
In excess of net investment income - - (.036) - - -
From net realized gain on investments - (.370) (.060) - - -
Total distributions (.780) (1.100) (.890) (.810) - (.858)
Net asset value, end of period $ 11.190 $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070
TOTAL RETURN B, C 12.10% (1.64) 20.40% 23.17% 35.08% (2.23)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 813,380 $ 569,417 $ 463,931 $ 200,591 $ 70,060 $ 29,990
Ratio of expenses to average net assets .70% .71% .64% .67% .97% 1.00%
A
Ratio of expenses to average net assets before expense .70% .71% .66% .67% .97% 1.12%
reductions A
Ratio of net investment income to average net assets 9.58% 8.75% 8.69% 10.98% 12.94% 11.36%
A
Portfolio turnover rate 154% 122% 155% 160% 154% 156%
A
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. 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 THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF
NOTES TO THE FINANCIAL
STATEMENTS).
D EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION 93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT
PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK TO
TAX DIFFERENCES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
Equity-Income 24.00% 15.06% 12.30%
S&P 500 26.07% 12.09% 13.58%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 stocks - a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Equity Income (Standard & Poor's 50
10/09/86 10000.00 10000.00
10/31/86 10110.00 10329.97
11/30/86 10330.00 10580.99
12/31/86 10020.00 10311.18
01/31/87 11170.00 11700.09
02/28/87 11430.00 12162.25
03/31/87 11720.18 12513.74
04/30/87 11428.43 12402.36
05/31/87 11498.86 12510.26
06/30/87 11738.55 13142.03
07/31/87 12185.73 13808.33
08/31/87 12521.12 14323.38
09/30/87 12258.32 14009.70
10/31/87 9866.20 10992.01
11/30/87 9424.74 10086.27
12/31/87 9906.52 10853.84
01/31/88 10611.13 11310.78
02/29/88 11136.95 11837.86
03/31/88 10943.07 11472.07
04/30/88 11124.21 11599.41
05/31/88 11273.39 11700.33
06/30/88 11914.76 12237.37
07/31/88 11893.18 12190.87
08/31/88 11688.12 11776.38
09/30/88 12035.42 12278.06
10/31/88 12243.12 12619.39
11/30/88 12046.36 12438.93
12/31/88 12156.33 12656.61
01/31/89 12907.13 13583.07
02/28/89 12840.88 13244.86
03/31/89 13119.01 13553.46
04/30/89 13625.32 14256.89
05/31/89 14030.37 14834.29
06/30/89 14039.98 14749.73
07/31/89 14858.50 16081.64
08/31/89 15097.24 16396.84
09/30/89 14927.51 16329.61
10/31/89 14066.31 15950.76
11/30/89 14146.69 16276.16
12/31/89 14264.74 16666.78
01/31/90 13301.38 15548.44
02/28/90 13380.20 15749.02
03/31/90 13402.27 16166.37
04/30/90 12937.59 15762.21
05/31/90 13793.57 17299.02
06/30/90 13656.23 17181.39
07/31/90 13322.25 17126.41
08/31/90 12258.45 15578.18
09/30/90 11307.54 14819.52
10/31/90 11019.21 14755.80
11/30/90 11808.98 15709.03
12/31/90 12083.75 16147.31
01/31/91 12731.78 16851.33
02/28/91 13608.52 18056.20
03/31/91 13890.81 18493.16
04/30/91 13955.72 18537.54
05/31/91 14721.66 19338.37
06/30/91 14119.72 18452.67
07/31/91 14920.19 19312.56
08/31/91 15235.12 19770.27
09/30/91 15130.56 19440.11
10/31/91 15382.51 19700.60
11/30/91 14719.47 18906.67
12/31/91 15882.70 21069.59
01/31/92 16097.15 20677.70
02/29/92 16619.87 20946.51
03/31/92 16416.22 20538.05
04/30/92 16930.49 21141.87
05/31/92 17065.83 21245.47
06/30/92 16916.41 20928.91
07/31/92 17434.82 21784.90
08/31/92 17052.84 21338.31
09/30/92 17229.86 21590.10
10/31/92 17436.12 21665.67
11/30/92 18068.66 22404.47
12/31/92 18564.83 22680.04
01/31/93 19119.01 22870.55
02/28/93 19548.49 23181.59
03/31/93 20131.05 23670.73
04/30/93 20047.35 23097.89
05/31/93 20410.07 23716.92
06/30/93 20650.14 23785.70
07/31/93 20931.09 23690.55
08/31/93 21731.81 24588.43
09/30/93 21648.73 24399.09
10/31/93 21846.69 24904.16
11/30/93 21464.91 24667.57
12/31/93 21961.06 24966.04
01/31/94 22928.26 25814.89
02/28/94 22337.82 25115.31
03/31/94 21403.32 24020.28
04/30/94 22140.85 24327.74
05/31/94 22351.57 24726.71
06/30/94 22213.48 24120.91
07/31/94 22955.44 24912.07
08/31/94 24136.53 25933.47
09/30/94 23741.11 25298.10
10/31/94 24228.42 25867.31
11/30/94 23436.54 24925.22
12/31/94 23512.77 25294.86
01/31/95 23880.40 25950.76
02/28/95 24790.97 26962.06
03/31/95 25646.99 27757.71
04/30/95 26360.31 28575.17
05/31/95 27154.68 29717.32
06/30/95 27544.83 30407.65
Let's say you invested $10,000 in Equity-Income Portfolio on October 9,
1986, when the fund started. By June 30, 1995, your investment would have
grown to $27,545 - a 175.45% increase. That compares to $10,000 invested in
the S&P 500, which would have grown to $30,408 over the same period - a
204.08% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Philip Morris Companies, Inc. 4.2
Federal National Mortgage Association 2.8
International Business Machines Corp. 2.1
American Express Co. 2.1
British Petroleum PLC ADR 2.0
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Finance 18.0
Energy 10.1
Nondurables 8.8
Basic Industries 7.7
Industrial Machinery & Equipment 7.3
ASSET ALLOCATION AS OF JUNE 30, 1995*
Row: 1, Col: 1, Value: 7.3
Row: 1, Col: 2, Value: 6.2
Row: 1, Col: 3, Value: 86.5
Stocks 86.5%
Bonds 6.2%
Short-term investments 7.3%
FOREIGN INVESTMENTS 6.2%
*
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bettina Doulton, Portfolio Manager of Equity-Income
Portfolio
Q. BETTINA, HOW DID THE FUND PERFORM?
A. Although the fund did well relative to its peers, it slightly trailed
the performance of the Standard & Poor's 500 stock index for the six- and
12-month periods ended June 30, 1995. The index had total returns of 20.21%
and 26.07% for those periods, respectively. Because this recent stock
market rally was quite narrow - led by a few sectors, namely technology,
financials and the large-cap and blue-chip stocks - the average stock
mutual fund has not topped the performance of the index thus far in 1995.
Q. THE STOCK MARKET SHOWED A RENEWED VIGOR OVER THE PAST SIX MONTHS. WHAT
ACCOUNTED FOR THIS?
A. The market's strength was driven by investors' belief that the Federal
Reserve Board would manage the economy to a soft landing - steady, albeit
slower, economic growth and continued low inflation. If achieved, those
conditions are ideal for Corporate America to sustain strong profit growth.
During the six-month period, corporate earnings reports were excellent,
which provided the fuel for stock prices to move higher. Excluding the
consistently outstanding performance of the technology and financial
sectors, the market has been characterized by rapid industry rotation.
Investors have spent the past six months racing from one industry to the
next, trying to stay one step ahead of the crowd. Sometimes, the fund was
in the right place at the right time, and sometimes it wasn't.
Q. WHAT CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. Several of the fund's largest holdings have driven returns recently.
Highlights include Philip Morris. The stock has been rewarded for the
company's strong profit growth and free cash flow; both are attributable to
terrific results in the company's domestic and international tobacco
businesses, which more than offset mediocre results in its food division.
Second in line is the Federal National Mortgage Association (Fannie Mae).
Although its stock price suffered a significant setback last fall, it has
since recovered as conditions in the secondary mortgage market have turned
more favorable. IBM was another strong performer. The company has done an
excellent job cutting costs and cleaning up its balance sheet. In addition,
global economic growth and wide acceptance of the company's new products
have contributed to accelerating revenue growth. Finally, in the energy
sector, the energy service company Schlumberger performed well. It
benefited from improving worldwide supply/demand dynamics for oil and
corporate restructuring efforts. Elsewhere in the energy sector, however,
British Petroleum (BP) and Amerada Hess have been somewhat disappointing in
terms of stock performance. Both are restructuring stories; BP's stock may
just be taking a breather after making significant gains, while Amerada
Hess' turnaround may be just taking a bit longer than investors had
expected.
Q. YOU MORE THAN DOUBLED THE FUND'S STAKE IN FINANCIAL STOCKS; THEY WENT
FROM 7.1% OF THE FUND SIX MONTHS AGO TO 18.0% ON JUNE 30 . . .
A. Recent purchases of bank stocks made up most of that increase. Along
with the diversified financial services companies such as American Express
and Fannie Mae, banks had a strong, if volatile, run. My only regret is not
owning more of them early in the period, when they began to outperform.
Prices did fall in the spring, however, which allowed me to buy stocks such
as Chemical Banking and BankAmerica off their highs. In the coming months,
I expect the market to drive bank stock valuations - prices relative to
earnings - higher. That's because earnings are becoming more consistent,
the industry is consolidating, and companies are using excess capital to
repurchase shares of their own stocks.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. When interest rates fall, as they've done over the past few months, the
market usually rewards stocks with higher valuations. However, we have to
keep in mind that the economy has slowed, which could negatively affect
corporate earnings going forward. The 64-thousand-dollar question then
becomes: will the market's willingness to drive up valuations and look
toward an economic resurgence be enough to offset the negative effects of
potential short-term earnings disappointments? I'm afraid not. Companies
that report less-than-expected earnings growth in the coming months will
most likely pay dearly with falling stock prices. In light of this, I plan
to focus intensely on owning companies that trade at attractive valuations,
offer good prospects for higher earnings through 1996, and are working to
enhance shareholder value.
FUND FACTS
GOAL: to provide current income and increase
the value of the fund's shares
START DATE: October 9, 1986
SIZE: as of June 30, 1995, more than $3.4 billion
MANAGER: Bettina Doulton, since 1993;
manager, Fidelity Value Fund, since March
1995; Fidelity Advisor Equity-Income Fund,
since 1993; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 85.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 5.7%
AEROSPACE & DEFENSE - 3.8%
Alliant Techsystems, Inc. (a) 421,700 $ 17,605,959
Boeing Co. 353,800 22,156,725
General Motors Corp. Class H 426,200 16,834,900
Lockheed Martin Corp. 434,803 27,446,939
McDonnell Douglas Corp. 131,000 10,054,250
Rockwell International Corp. 429,600 19,654,200
Sundstrand Corp. 183,000 10,934,250
Thiokol Corp. 186,400 5,638,600
130,325,823
DEFENSE ELECTRONICS - 1.4%
Litton Industries, Inc. (a) 268,700 9,908,313
Loral Corp. 214,700 11,110,725
Raytheon Co. 342,300 26,571,038
47,590,076
SHIP BUILDING & REPAIR - 0.5%
General Dynamics Corp. 420,400 18,655,250
TOTAL AEROSPACE & DEFENSE 196,571,149
BASIC INDUSTRIES - 7.5%
CHEMICALS & PLASTICS - 4.7%
du Pont (E.I.) de Nemours & Co. 571,100 39,263,125
Grace (W.R.) & Co. 503,600 30,908,450
Hercules, Inc. 810,900 39,531,375
Nalco Chemical Co. 462,300 16,816,163
Raychem Corp. 284,300 10,910,013
Union Carbide Corp. 713,100 23,799,713
161,228,839
IRON & STEEL - 0.1%
Nucor Corp. 38,600 2,065,100
METALS & MINING - 1.3%
Alcan Aluminium Ltd. 746,183 22,562,179
Aluminum Co. of America 467,200 23,418,400
45,980,579
PAPER & FOREST PRODUCTS - 1.4%
Scott Paper Co. 966,600 47,846,700
TOTAL BASIC INDUSTRIES 257,121,218
CONGLOMERATES - 2.8%
Allied-Signal, Inc. 382,600 17,025,700
GenCorp, Inc. 33,600 361,200
Tyco International Ltd. 857,071 46,281,834
United Technologies Corp. 398,900 31,164,063
94,832,797
CONSTRUCTION & REAL ESTATE - 0.2%
REAL ESTATE INVESTMENT TRUSTS - 0.2%
Starwood Lodging Trust combined
certificate (SBI) 125,900 2,909,045
Storage Equities, Inc. 145,800 2,387,475
5,296,520
DURABLES - 2.6%
AUTOS, TIRES, & ACCESSORIES - 1.6%
Chrysler Corp. 140,600 6,731,225
Dana Corp. 438,200 12,543,475
General Motors Corp. 269,800 12,646,875
Johnson Controls, Inc. 61,100 3,452,150
PACCAR, Inc. 93,500 4,371,125
Snap-on Tools Corp. 374,000 14,492,500
54,237,350
SHARES VALUE (NOTE 1)
DURABLES - CONTINUED
CONSUMER ELECTRONICS - 0.7%
Black & Decker Corp. 222,600 $ 6,872,775
Whirlpool Corp. 341,200 18,766,000
25,638,775
HOME FURNISHINGS - 0.1%
Heilig-Meyers Co. 104,700 2,669,850
TEXTILES & APPAREL - 0.2%
Westpoint Stevens, Inc. Class A (a) 397,100 7,098,163
TOTAL DURABLES 89,644,138
ENERGY - 9.7%
ENERGY SERVICES - 3.1%
Baker Hughes, Inc. 521,800 10,696,900
Halliburton Co. 959,000 34,284,250
Helmerich & Payne, Inc. 130,400 3,846,800
McDermott International, Inc. 575,000 13,871,875
Schlumberger Ltd. 691,300 42,947,013
105,646,838
OIL & GAS - 6.6%
Amerada Hess Corp. 929,700 45,439,088
British Petroleum PLC ADR 823,528 70,514,585
Canada Occidental Petroleum Ltd. 239,500 7,438,025
Coastal Corp. (The) 459,800 13,966,425
Kerr-McGee Corp. 157,400 8,440,575
Mobil Corp. 353,700 33,955,200
Occidental Petroleum Corp. 1,047,000 23,950,125
Tosco Corp. 279,100 8,896,313
Total SA:
Class B 210,425 12,691,129
sponsored ADR 129,500 3,917,375
229,208,840
TOTAL ENERGY 334,855,678
FINANCE - 18.0%
BANKS - 6.6%
Bank of Boston Corp. 482,800 18,105,000
Bank of New York Co., Inc. 163,000 6,581,125
BankAmerica Corp. 511,100 26,896,638
Bankers Trust New York Corp. 430,400 26,684,800
Chase Manhattan Corp. 480,041 22,561,927
Chemical Banking Corp. 670,100 31,662,225
Citicorp 647,300 37,462,488
First Chicago Corp. 119,100 7,131,113
First Union Corp. 192,700 8,719,675
Fleet Financial Group, Inc. 328,900 12,210,413
Mellon Bank Corp. 59,600 2,480,850
NationsBank Corp. 35,400 1,898,325
Republic New York Corp. 230,700 12,919,200
Shawmut National Corp. 345,200 11,003,250
226,317,029
CREDIT & OTHER FINANCE - 2.8%
American Express Co. 2,012,672 70,695,104
Countrywide Credit Industries, Inc. 886,700 18,620,700
Greenpoint Financial Corp. 362,900 8,573,513
97,889,317
FEDERAL SPONSORED CREDIT - 4.1%
Federal Home Loan Mortgage
Corporation 625,400 42,996,250
Federal National Mortgage Association 1,023,900 96,630,563
139,626,813
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - 3.4%
Allstate Corp. 182,900 $ 5,418,413
American International Group, Inc. 197,200 22,480,800
American Reinsurance Corp. 11,300 420,925
General Re Corp. 193,700 25,931,588
Loews Corp. 266,500 32,246,500
PMI Group, Inc. 100,600 4,363,525
Reliastar Financial Corp. 252,100 9,642,825
Travelers, Inc. (The) 359,233 15,716,458
116,221,034
SAVINGS & LOANS - 0.3%
Ahmanson (H.F.) & Co. 273,900 6,025,800
Charter One Financial Corp. 162,000 3,969,000
9,994,800
SECURITIES INDUSTRY - 0.8%
Merrill Lynch & Co., Inc. 522,600 27,436,500
TOTAL FINANCE 617,485,493
HEALTH - 4.3%
DRUGS & PHARMACEUTICALS - 1.8%
Allergan, Inc. 340,100 9,225,213
American Home Products Corp. 360,000 27,855,000
Pfizer, Inc. 297,800 13,754,638
SmithKline Beecham PLC ADR 266,000 12,036,500
62,871,351
MEDICAL EQUIPMENT & SUPPLIES - 1.7%
Baxter International, Inc. 971,300 35,331,038
Beckman Instruments, Inc. 800 22,300
I-Stat Corp. (a) 173,100 6,318,150
Puritan Bennett Corp. 257,500 9,945,938
St. Jude Medical, Inc. 105,400 5,283,175
56,900,601
MEDICAL FACILITIES MANAGEMENT - 0.8%
Columbia/HCA Healthcare Corp. 621,800 26,892,850
TOTAL HEALTH 146,664,802
INDUSTRIAL MACHINERY & EQUIPMENT - 7.2%
ELECTRICAL EQUIPMENT - 1.0%
Emerson Electric Co. 211,700 15,136,550
General Electric Co. 175,500 9,893,813
Philips Electronics NV 196,600 8,404,650
Philips Electronics NV (Bearer) 45,200 1,915,824
35,350,837
INDUSTRIAL MACHINERY & EQUIPMENT - 3.5%
Caterpillar, Inc. 415,100 26,670,175
Cooper Industries, Inc. 467,000 18,446,500
Deere & Co. 474,400 40,620,500
Dover Corp. 145,100 10,556,025
Ingersoll-Rand Co. 574,300 21,966,975
Varity Corp. (a) 62,800 2,763,200
121,023,375
POLLUTION CONTROL - 2.7%
Browning-Ferris Industries, Inc. 870,700 31,454,038
Safety Kleen Corp. 583,600 9,410,550
WMX Technologies, Inc. 1,537,600 43,629,400
Wheelabrator Technologies, Inc. 453,200 6,967,950
91,461,938
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 247,836,150
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 2.1%
BROADCASTING - 1.2%
Viacom, Inc. Class B (non-vtg.) (a) 851,614 $ 39,493,599
PUBLISHING - 0.9%
Meredith Corp. 102,000 2,588,250
News Corp. Ltd.:
ADR 741,700 16,780,963
(vtg.) pfd. sponsored ADR 74,900 1,498,000
Times Mirror Co. Class A 461,800 11,025,475
31,892,688
TOTAL MEDIA & LEISURE 71,386,287
NONDURABLES - 8.6%
BEVERAGES - 0.9%
PepsiCo, Inc. 647,100 29,523,938
FOODS - 0.6%
ConAgra, Inc. 483,700 16,869,038
Dole Food, Inc. 157,600 4,590,100
21,459,138
HOUSEHOLD PRODUCTS - 1.3%
Avon Products, Inc. 285,480 19,127,160
First Brands Corp. 329,800 14,140,175
Rubbermaid, Inc. 168,800 4,684,200
Tambrands, Inc. 172,300 7,365,825
45,317,360
TOBACCO - 5.8%
Imasco Ltd. 1,453,600 25,815,296
Philip Morris Companies, Inc. 1,927,300 143,342,938
RJR Nabisco Holdings Corp. 1,054,639 29,398,062
198,556,296
TOTAL NONDURABLES 294,856,732
RETAIL & WHOLESALE - 3.2%
APPAREL STORES - 0.4%
Limited, Inc. (The) 618,400 13,604,800
GENERAL MERCHANDISE STORES - 2.1%
Dayton Hudson Corp. 293,400 21,051,450
May Department Stores Co. (The) 95,700 3,983,513
Wal-Mart Stores, Inc. 1,604,500 42,920,375
Woolworth Corp. 322,200 4,873,275
72,828,613
GROCERY STORES - 0.7%
Fleming Companies, Inc. 230,445 6,106,793
Great Atlantic & Pacific Tea Co., Inc. 397,600 10,486,700
Vons Companies, Inc. (a) 384,200 7,732,025
24,325,518
TOTAL RETAIL & WHOLESALE 110,758,931
SERVICES - 0.4%
PRINTING - 0.2%
Wallace Computer Services, Inc. 168,200 6,454,675
SERVICES - 0.2%
ADT Ltd. (a) 640,900 7,530,575
TOTAL SERVICES 13,985,250
TECHNOLOGY - 4.9%
COMPUTERS & OFFICE EQUIPMENT - 3.9%
Hewlett-Packard Co. 405,000 30,172,500
International Business Machines Corp. 755,700 72,547,200
Pitney Bowes, Inc. 792,200 30,400,675
133,120,375
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONIC INSTRUMENTS - 0.2%
Perkin-Elmer Corp. 226,200 $ 8,030,100
ELECTRONICS - 0.8%
AMP, Inc. 385,600 16,291,600
Kemet Corp. 46,700 2,451,750
Thomas & Betts Corp. 143,700 9,825,488
28,568,838
TOTAL TECHNOLOGY 169,719,313
TRANSPORTATION - 1.8%
RAILROADS - 1.8%
Burlington Northern, Inc. 534,200 33,854,925
CSX Corp. 195,300 14,671,913
Southern Pacific Rail Corp. (a) 919,300 14,478,975
TOTAL TRANSPORTATION 63,005,813
UTILITIES - 6.3%
GAS - 0.5%
Williams Companies, Inc. 489,200 17,060,850
TELEPHONE SERVICES - 5.8%
Ameritech Corp. 1,067,900 46,987,600
Bell Atlantic Corp. 210,100 11,765,600
BellSouth Corp. 576,200 36,588,700
Koninklijke PPT Nederland 165,600 5,959,760
Koninklijke PPT Nederland (a)(d) 104,400 3,757,240
NYNEX Corp. 1,200,400 48,316,100
SBC Communications, Inc. 871,300 41,495,663
Southern New England
Telecommunications Corp. 175,700 6,193,425
201,064,088
TOTAL UTILITIES 218,124,938
TOTAL COMMON STOCKS
(Cost $2,563,116,541) 2,932,145,209
PREFERRED STOCKS - 1.2%
CONVERTIBLE PREFERRED STOCKS - 0.8%
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES - 0.3%
Chrysler Corp., Series A, $4.625 (d) 85,200 11,374,200
ENERGY - 0.4%
ENERGY SERVICES - 0.1%
Noble Drilling Corp. $1.50 119,100 2,828,625
OIL & GAS - 0.3%
Atlantic Richfield Co.
exchangeable $.5575 431,300 11,213,800
TOTAL ENERGY 14,042,425
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Westinghouse Electric Corp. $1.30 (d) 351,500 5,140,688
TOTAL CONVERTIBLE PREFERRED STOCKS 30,557,313
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED STOCKS - 0.4%
MEDIA & LEISURE - 0.4%
PUBLISHING - 0.4%
News Corp. Ltd. (ltd. vtg.) 2,510,505 $ 12,393,685
UTILITIES - 0.0%
ELECTRIC UTILITY - 0.0%
Gulf States Utilities Co., Series B,
adj. rate 586 28,348
TOTAL NONCONVERTIBLE PREFERRED STOCKS 12,422,033
TOTAL PREFERRED STOCKS
(Cost $39,195,081) 42,979,346
CORPORATE BONDS - 2.4%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT (C)
CONVERTIBLE BONDS - 0.8%
CONSTRUCTION & REAL ESTATE - 0.1%
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Centerpoint Properties 8.22%,
1/15/04 - $ 1,510,000 1,683,650
Liberty Property LP 8%, 7/1/01 - 750,000 735,000
Sizeler Property Investors, Inc.
8%, 7/15/03 - 1,500,000 1,312,500
TOTAL CONSTRUCTION & REAL ESTATE 3,731,150
HEALTH - 0.6%
DRUGS & PHARMACEUTICALS - 0.6%
Roche Holdings, Inc. liquid
yield option notes
0%, 4/20/10 (d) - 48,340,000 19,336,000
PRECIOUS METALS - 0.1%
Pegasus Gold, Inc. euro
6 1/4%, 4/30/02 (d) Baa3 1,860,000 1,755,375
SERVICES - 0.0%
SERVICES - 0.0%
ADT Operations, Inc. liquid
yield option notes
0%, 7/6/10 Ba3 3,670,000 1,405,940
UTILITIES - 0.0%
GAS - 0.0%
SFP Pipeline Holdings, Inc.
exchangeable
0%, 8/15/10 (e) Baa3 470,000 606,300
TOTAL CONVERTIBLE BONDS 26,834,765
NONCONVERTIBLE BONDS - 1.6%
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Tracor, Inc. 10 7/8%, 8/15/01 B2 1,220,000 1,250,500
CORPORATE BONDS - CONTINUED
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
BASIC INDUSTRIES - 0.2%
PACKAGING & CONTAINERS - 0.0%
Owens Illinois, Inc. 10 1/4%,
4/1/99 B2 $ 350,000 $ 357,000
PAPER & FOREST PRODUCTS - 0.2%
Stone Container Corp. 9 7/8%,
2/1/01 B1 7,760,000 7,682,400
TOTAL BASIC INDUSTRIES 8,039,400
CONGLOMERATES - 0.0%
Coltec Industries, Inc. 10 1/4%,
4/1/02 B1 910,000 941,850
DURABLES - 0.3%
TEXTILES & APPAREL - 0.3%
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B1 2,660,000 2,620,100
9 3/8%, 12/15/05 B3 7,850,000 7,575,250
TOTAL DURABLES 10,195,350
FINANCE - 0.0%
BANKS - 0.0%
Signet Banking Corp.:
6 1/4%, 5/15/97 (e) Baa2 340,000 337,025
6.4375%, 4/15/98 (e) Baa2 190,000 187,150
TOTAL FINANCE 524,175
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.8%
Viacom, Inc. 8%, 7/7/06 B1 28,240,000 27,463,400
NONDURABLES - 0.2%
BEVERAGES - 0.2%
Canandaigua Wine, Inc.
8 3/4%, 12/15/03 (b) B1 5,700,000 5,586,000
UTILITIES - 0.0%
GAS - 0.0%
Columbia Gas Systems Inc.
9.91%, 5/28/20 (b) - 170,000 250,325
TOTAL NONCONVERTIBLE BONDS 54,251,000
TOTAL CORPORATE BONDS
(Cost $76,398,754) 81,085,765
U.S. TREASURY OBLIGATIONS - 3.8%
6 1/4%, 2/15/03 Aaa 17,860,000 17,907,508
5 3/4%, 8/15/03 Aaa 81,220,000 78,745,227
7 1/4%, 5/15/04 Aaa 24,291,000 25,934,529
11 5/8%, 11/15/04 Aaa 6,810,000 9,361,639
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $118,810,332) 131,948,903
REPURCHASE AGREEMENTS - 7.3%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 252,910,024 $ 252,779,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,050,299,708) $ 3,440,938,223
LEGEND
(a) Non-income producing
(b) Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $41,363,503 or 1.2% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $2,163,942,745 and $1,281,174,381, respectively, of which U.S.
government and government agency obligations aggregated $42,997,272 and
$41,828,379, 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 $1,153,411 for the period
(see Note 3 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 3.8% AAA, AA, A 3.8%
Baa 0.1% BBB 0.0%
Ba 0.0% BB 0.9%
B 1.6% B 0.7%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.7%.
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $3,052,199,640. Net unrealized appreciation aggregated
$388,738,583, of which $407,074,046 related to appreciated investment
securities and $18,335,463 related to depreciated investment securities.
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $252,779,000) (cost $ 3,440,938,223
$3,050,299,708) -
See accompanying schedule
Cash 864
Receivable for investments sold 66,280,607
Receivable for fund shares sold 5,980,486
Dividends receivable 8,213,745
Interest receivable 4,230,266
Other receivables 42,410
TOTAL ASSETS 3,525,686,601
LIABILITIES
Payable for investments purchased $ 63,785,673
Payable for fund shares redeemed 629,290
Accrued management fee 1,452,585
Other payables and accrued expenses 513,611
TOTAL LIABILITIES 66,381,159
NET ASSETS $ 3,459,305,442
Net Assets consist of:
Paid in capital $ 2,994,274,835
Undistributed net investment income 5,530,661
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 68,857,443
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 390,642,503
NET ASSETS, for 204,803,927 shares outstanding $ 3,459,305,442
NET ASSET VALUE, offering price and redemption price per share ($3,459,305,442 (divided by) 204,803,927 shares) $16.89
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 31,571,004
Dividends
Interest 16,392,102
TOTAL INCOME 47,963,106
EXPENSES
Management fee $ 7,399,646
Transfer agent fees 727,522
Accounting fees and expenses 378,208
Non-interested trustees' compensation 5,452
Custodian fees and expenses 39,578
Registration fees 251,928
Audit 24,512
Legal 4,441
Interest 9,801
Miscellaneous 7,582
TOTAL EXPENSES 8,848,670
NET INVESTMENT INCOME 39,114,436
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 72,417,571
Foreign currency transactions (3,308 72,414,263
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 336,113,775
Assets and liabilities in foreign currencies (8,788 336,104,987
)
NET GAIN (LOSS) 408,519,250
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 447,633,686
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 39,114,436 $ 49,846,224
Net investment income
Net realized gain (loss) 72,414,263 121,898,471
Change in net unrealized appreciation (depreciation) 336,104,987 (61,690,963)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 447,633,686 110,053,732
Distributions to shareholders (37,713,247) (44,739,784)
From net investment income
From net realized gain (121,254,353) (68,533,800)
TOTAL DISTRIBUTIONS (158,967,600) (113,273,584)
Share transactions 802,500,637 1,048,772,904
Net proceeds from sales of shares
Reinvestment of distributions 158,967,516 113,273,584
Cost of shares redeemed (75,240,890) (192,914,992)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 886,227,263 969,131,496
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,174,893,349 965,911,644
NET ASSETS
Beginning of period 2,284,412,093 1,318,500,449
End of period (including undistributed net investment income of $5,530,661 and $4,150,957,
respectively) $ 3,459,305,442 $ 2,284,412,093
OTHER INFORMATION
Shares
Sold 50,281,447 68,815,564
Issued in reinvestment of distributions 10,351,678 7,484,681
Redeemed (4,656,990) (12,882,315)
Net increase (decrease) 55,976,135 63,417,930
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 D 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51 $ 12.29
Income from Investment Operations
Net investment income .20 .41 .37 .40 .50 .58
Net realized and unrealized gain (loss) 2.32 .64 2.06 1.57 2.43 (2.38)
Total from investment operations 2.52 1.05 2.43 1.97 2.93 (1.80)
Less Distributions (.20) (.37) (.35) (.42) (.59) (.59)
From net investment income
In excess of net investment income - - (.04) - - -
From net realized gain (.78) (.77) - - - (.39)
Total distributions (.98) (1.14) (.39) (.42) (.59) (.98)
Net asset value, end of period $ 16.89 $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51
TOTAL RETURN B, C 17.15% 7.07% 18.29% 16.89% 31.44% (15.29)
%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,459,305 $ 2,284,412 $ 1,318,500 $ 592,880 $ 282,171 $ 154,080
Ratio of expenses to average net assets .62% A .58% .62% .65% .74% .78%
Ratio of expenses to average net assets before .62% A .60% .62% .65% .74% .78%
expense reductions
Ratio of net investment income to average net assets 2.72% A 2.83% 2.87% 3.52% 4.83% 6.01%
Portfolio turnover rate 100% A 134% 120% 74% 107% 94%
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
THE FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
D 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.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
Growth 36.97% 14.84% 14.56%
S&P 500 26.07% 12.09% 13.58%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of growth in the long run
and volatility in the short run. In turn, the share
price and return of a fund that invests in stocks
will vary. That means if you sell your shares
during a market downturn, you might lose
money. But if you can ride out the market's ups
and downs, you may have a gain.
(checkmark)
You can compare these figures to the performance of the Standard & Poor's
Composite Index of 500 Stocks- a common proxy for the U.S. stock market.
This benchmark includes reinvested dividends and capital gains, if any, and
excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of
operations, October 9, 1986.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Growth (212) Standard & Poor's 500
10/09/86 10000.00 10000.00
10/31/86 10000.00 10329.97
11/30/86 10220.00 10580.99
12/31/86 10030.00 10311.18
01/31/87 11100.00 11700.09
02/28/87 11650.00 12162.25
03/31/87 11839.97 12513.74
04/30/87 11839.97 12402.36
05/31/87 11920.10 12510.26
06/30/87 12270.69 13142.03
07/31/87 12761.52 13808.33
08/31/87 13142.16 14323.38
09/30/87 12991.91 14009.70
10/31/87 10137.09 10992.01
11/30/87 9425.90 10086.27
12/31/87 10397.53 10853.84
01/31/88 10623.12 11310.78
02/29/88 11484.46 11837.86
03/31/88 11381.92 11472.07
04/30/88 11525.47 11599.41
05/31/88 11422.93 11700.33
06/30/88 11997.15 12237.37
07/31/88 11935.63 12190.87
08/31/88 11648.52 11776.38
09/30/88 11976.65 12278.06
10/31/88 12007.41 12619.39
11/30/88 11894.61 12438.93
12/31/88 12017.66 12656.61
01/31/89 12879.00 13583.07
02/28/89 12612.39 13244.86
03/31/89 12993.68 13553.46
04/30/89 13680.85 14256.89
05/31/89 14170.19 14834.29
06/30/89 13982.78 14749.73
07/31/89 15232.18 16081.64
08/31/89 15492.47 16396.84
09/30/89 15627.82 16329.61
10/31/89 15190.53 15950.76
11/30/89 15440.41 16276.16
12/31/89 15804.81 16666.78
01/31/90 14888.59 15548.44
02/28/90 15030.81 15749.02
03/31/90 15214.51 16166.37
04/30/90 14771.47 15762.21
05/31/90 16078.97 17299.02
06/30/90 16413.95 17181.39
07/31/90 16154.61 17126.41
08/31/90 14490.52 15578.18
09/30/90 12999.33 14819.52
10/31/90 12534.68 14755.80
11/30/90 13550.42 15709.03
12/31/90 13950.23 16147.31
01/31/91 14879.53 16851.33
02/28/91 15989.61 18056.20
03/31/91 16472.15 18493.16
04/30/91 16318.61 18537.54
05/31/91 17283.69 19338.37
06/30/91 16000.57 18452.67
07/31/91 17524.96 19312.56
08/31/91 18303.60 19770.27
09/30/91 18446.17 19440.11
10/31/91 19016.45 19700.60
11/30/91 17930.73 18906.67
12/31/91 20299.56 21069.59
01/31/92 21538.81 20677.70
02/29/92 21989.40 20946.51
03/31/92 20641.73 20538.05
04/30/92 19833.13 21141.87
05/31/92 19664.67 21245.47
06/30/92 18901.00 20928.91
07/31/92 19630.98 21784.90
08/31/92 19091.92 21338.31
09/30/92 19428.83 21590.10
10/31/92 20181.28 21665.67
11/30/92 21528.94 22404.47
12/31/92 22191.55 22680.04
01/31/93 22629.54 22870.55
02/28/93 22163.03 23181.59
03/31/93 23046.80 23670.73
04/30/93 22805.77 23097.89
05/31/93 24504.44 23716.92
06/30/93 24756.94 23785.70
07/31/93 24688.08 23690.55
08/31/93 25927.65 24588.43
09/30/93 26409.70 24399.09
10/31/93 26662.20 24904.16
11/30/93 25583.32 24667.57
12/31/93 26490.04 24966.04
01/31/94 27155.74 25814.89
02/28/94 26875.65 25115.31
03/31/94 25654.59 24020.28
04/30/94 25813.32 24327.74
05/31/94 25215.00 24726.71
06/30/94 23932.88 24120.91
07/31/94 24763.21 24912.07
08/31/94 26167.43 25933.47
09/30/94 25849.96 25298.10
10/31/94 26900.07 25867.31
11/30/94 25825.53 24925.22
12/31/94 26484.91 25294.86
01/31/95 25984.27 25950.76
02/28/95 27060.36 26962.06
03/31/95 28042.58 27757.71
04/30/95 28987.98 28575.17
05/31/95 30117.54 29717.32
06/30/95 32781.83 30407.65
Let's say you invested $10,000 in Growth Portfolio on October 9, 1986, when
the fund started. By June 30, 1995, your investment would have grown to
$32,782 - a 227.82% increase. That compares to $10,000 invested in the S&P
500, which would have grown to $30,408 over the same period - a 204.08%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Oracle Systems Corp. 3.6
Intel Corp. 3.1
DSC Communications Corp. 2.7
Applied Materials, Inc. 2.3
Compaq Computer Corp. 2.3
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Technology 52.6
Utilities 9.4
Retail & Wholesale 8.7
Media & Leisure 4.5
Industrial Machinery & Equipment 4.1
ASSET ALLOCATION AS OF JUNE 30, 1995*
Row: 1, Col: 1, Value: 3.4
Row: 1, Col: 2, Value: 96.59999999999999
Stocks 96.6%
Short-term investment 3.4%
FOREIGN INVESTMENTS 6.3%
*
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Lawrence Greenberg, Portfolio
Manager of Growth Portfolio
Q. LARRY, HOW HAS THE FUND DONE OVER THE PAST SIX MONTHS?
A. Quite well. From December 31, 1994, through June 30, 1995, the fund beat
the Standard & Poor's 500 index, which returned 20.21%.
Q. WHAT MADE THE DIFFERENCE?
A. In the second half of 1994, growth stocks began outperforming cyclicals
- stocks in sectors like autos and steel that tend to rise or fall with the
economy. Since then, the economy has slowed and interest rates have been
flat or falling - a perfect environment for growth stocks. My strategy was
to concentrate on those companies with the fastest earnings growth
opportunities for `95 and `96. This aggressive position, especially in
technology, paid off handsomely when growth stocks rebounded.
Q. IN FACT, OVER 50% OF THE FUND WAS IN TECHNOLOGY AT THE END OF JUNE. WHY
SUCH A HUGE BET?
A. Because on a stock-by-stock basis that's where I'm still finding what I
believe are the best growth opportunities. Technology stocks are benefiting
from strong corporate and consumer demand. Business is booming across all
segments - from PCs and software to semiconductors and networking. Plus,
unlike a retailer, which can only grow as fast as it can build bricks and
mortar, a technology company can grow at any rate. The fund has dozens of
companies that are growing sales well over 100% per year. Finally, despite
the fastest sales and earnings growth of any stocks in the market, many of
these companies still have attractive prices compared to other measures
like earnings.
Q. WHERE DID YOU FIND THE BEST OPPORTUNITIES?
A. Across the board. I added new technology names, but I also made bigger
investments in the companies I have the most confidence in. For example, I
significantly boosted the fund's stake in both Intel, which makes
microprocessors like the Pentium chip that are the brains of PCs, and
Micron Technology, one of the few manufacturers of memory chips called
DRAMs that go inside PCs and other electronic equipment. Both stocks posted
sizable gains for the period. I also added to our stake in Applied
Materials, the leading supplier of semiconductor manufacturing equipment,
whose sales grew more than 60% this year. Our biggest investment is still
Oracle, the leading provider of software for client-server set-ups; it
continued to benefit as more companies moved away from mainframes toward
PCs linked through networks.
Q. WERE THERE DISAPPOINTMENTS?
A. Sure. The stock price of Sybase, a competitor to Oracle, fell nearly 50%
in the last six months as it ran into problems launching a new product. One
of our biggest positions six months ago was Motorola; it started having
some near-term problems related to oversupply on its cellular handsets, so
I cut back even though the stock's long-term outlook remained attractive.
Finally, some retailers like Home Depot and Lowe's turned in disappointing
short-term results as heavy rains in California and the Southeast hurt
business. But many of the "hard good category killers" (or superstores) I
focused on continued to grow despite the slowdown in overall retail sales
that we saw this spring.
Q. WHY DID YOU CUT BACK IN HEALTH CARE?
A. The fund's health care stake was around 3% at the end of June, down from
7.7% six months earlier. During the first half of 1994, uncertainty
surrounding President Clinton's plans for health care reform had hurt the
sector. Then, last fall, the stocks rallied as it became apparent that
health care legislation wouldn't pass anytime soon. But once the
Republicans took charge in January, they cast another cloud over the sector
as they promised to re-examine programs like Medicare. So I decided to
watch from the sidelines.
Q. LOOKING AHEAD, WHAT SHOULD SHAREHOLDERS EXPECT?
A. In the past, technology stocks haven't done as well over the summer, as
European demand dries up and new product launches disappear. But this year,
since demand has been so strong, we may see no summer slowdown or one
that's much less pronounced. Nevertheless, shareholders should expect
volatility because the fund is aggressively invested in the fastest-growing
companies. If either the technology sector or the market declines, the fund
will suffer more than other stock funds. But it's also in a good position
to benefit more than its peers from a long-term up market, which I believe
is more likely.
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 June 30, 1995, more than $3.1 billion
MANAGER: Lawrence Greenberg, since 1991;
manager, Fidelity Emerging Growth Portfolio,
since 1993; Fidelity Select Environmental
Services Portfolio, October 1986 - April 1991;
Fidelity Select Medical Delivery Portfolio July
1989 - April 1991; joined Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 96.0%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.4%
AEROSPACE & DEFENSE - 0.3%
Rockwell International Corp. 125,000 $ 5,718,750
Special Devices, Inc. (a) 173,900 3,869,263
9,588,013
DEFENSE ELECTRONICS - 0.1%
Trimble Navigation Ltd. (a) 100,000 2,837,500
TOTAL AEROSPACE & DEFENSE 12,425,513
BASIC INDUSTRIES - 1.1%
CHEMICALS & PLASTICS - 0.5%
Airgas, Inc. (a) 445,000 11,959,375
du Pont (E.I.) de Nemours & Co. 75,000 5,156,250
17,115,625
METALS & MINING - 0.6%
Alcan Aluminium Ltd. 100,000 3,023,679
Aluminum Co. of America 175,000 8,771,875
IMCO Recycling, Inc. 299,000 5,606,250
Reynolds Metals Co. 40,000 2,070,000
19,471,804
TOTAL BASIC INDUSTRIES 36,587,429
CONGLOMERATES - 0.2%
Tyco International Ltd. 125,000 6,750,000
CONSTRUCTION & REAL ESTATE - 0.8%
BUILDING MATERIALS - 0.1%
Elcor Corp. (a) 36,700 816,575
Sherwin-Williams Co. 85,000 3,028,125
3,844,700
CONSTRUCTION - 0.3%
Oakwood Homes Corp. 271,700 6,962,313
Standard Pacific Corp. 300,000 2,062,500
9,024,813
ENGINEERING - 0.4%
Fluor Corp. 65,000 3,380,000
Glenayre Technologies, Inc. (a) 172,575 8,801,325
12,181,325
TOTAL CONSTRUCTION & REAL ESTATE 25,050,838
DURABLES - 3.2%
AUTOS, TIRES, & ACCESSORIES - 2.6%
Chrysler Corp. 400,000 19,150,000
Ford Motor Co. 400,000 11,900,000
General Motors Corp. 877,634 41,139,094
Safety Components International, Inc. 220,000 3,630,000
Smith (A.O.) Corp. Class B 127,600 2,998,600
TRW, Inc. 34,100 2,723,738
81,541,432
CONSUMER ELECTRONICS - 0.1%
Whirlpool Corp. 60,000 3,300,000
HOME FURNISHINGS - 0.2%
Heilig-Meyers Co. 100,000 2,550,000
Leggett & Platt, Inc. 75,000 3,300,000
5,850,000
TEXTILES & APPAREL - 0.3%
Shaw Industries, Inc. 112,500 1,912,500
Tommy Hilfiger (a) 300,500 8,414,000
10,326,500
TOTAL DURABLES 101,017,932
SHARES VALUE (NOTE 1)
ENERGY - 0.7%
ENERGY SERVICES - 0.1%
Baker Hughes, Inc. 175,000 $ 3,587,500
INDEPENDENT POWER - 0.2%
Thermo Electron Corp. (a) 111,100 4,471,775
OIL & GAS - 0.4%
British Petroleum PLC ADR 75,030 6,424,444
Chesapeake Energy Corp. (a) 75,000 1,931,250
Kerr-McGee Corp. 76,000 4,075,500
12,431,194
TOTAL ENERGY 20,490,469
FINANCE - 3.5%
BANKS - 0.7%
Banc One Corp. 200,000 6,450,000
Bank of New York Co., Inc. 100,000 4,037,500
Bankers Trust New York Corp. 105,000 6,510,000
Chemical Banking Corp. 135,000 6,378,750
23,376,250
CREDIT & OTHER FINANCE - 0.5%
American Express Co. 400,000 14,050,000
FEDERAL SPONSORED CREDIT - 1.3%
Federal National Mortgage Association 425,000 40,109,375
INSURANCE - 0.5%
American International Group, Inc. 65,000 7,410,000
Travelers, Inc. (The) 200,000 8,750,000
16,160,000
SECURITIES INDUSTRY - 0.5%
Alliance Entertainment Corp. (a) 525,000 4,921,875
Edwards (A.G.), Inc. 111,100 2,499,750
Merrill Lynch & Co., Inc. 156,500 8,216,250
15,637,875
TOTAL FINANCE 109,333,500
HEALTH - 2.9%
DRUGS & PHARMACEUTICALS - 0.7%
Biogen, Inc. (a) 95,000 4,227,500
Dura Pharmaceuticals, Inc. (a) 160,000 3,010,000
Elan Corp. PLC ADR (a) 100,000 4,075,000
North American Biologicals, Inc. (a) 165,000 1,546,875
Pfizer, Inc. 200,000 9,237,500
US Bioscience, Inc. (a) 190 819
US Bioscience, Inc. (warrants) (a) 569 676
22,098,370
MEDICAL EQUIPMENT & SUPPLIES - 0.7%
Cardinal Health, Inc. 236,100 11,155,725
Millipore Corp. 800 53,698
St. Jude Medical, Inc. 60,000 3,007,500
Thermedics, Inc. (a) 175,000 3,412,500
Thermo Cardiosystems, Inc. (a) 100,000 3,662,500
21,291,923
MEDICAL FACILITIES MANAGEMENT - 1.5%
American Medical Response (a) 195,000 5,460,000
Apria Healthcare Group, Inc. (a) 126,000 3,559,500
Columbia/HCA Healthcare Corp. 375,025 16,219,831
HEALTHSOUTH Rehabilitation Corp. 950,000 16,506,250
Rotech Medical Corp. (a) 40,000 1,110,000
United HealthCare Corp. 75,000 3,103,125
Vivra, Inc. (a) 44,000 1,193,500
47,152,206
TOTAL HEALTH 90,542,499
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY & EQUIPMENT - 4.1%
ELECTRICAL EQUIPMENT - 2.2%
Avid Technology, Inc. (a) 70,050 $ 2,626,875
General Electric Co. 875,000 49,328,125
General Signal Corp. 100,000 3,975,000
Oak Industries, Inc. (a) 105,300 2,711,475
Scientific-Atlanta, Inc. 370,000 8,140,000
United Communication Industry PCL
(For. Reg.) 154,000 2,245,899
69,027,374
INDUSTRIAL MACHINERY & EQUIPMENT - 1.4%
AGCO Corp. 298,300 11,186,250
Case Corp. 200,000 5,950,000
Caterpillar, Inc. 350,000 22,487,500
Ingersoll-Rand Co. 125,000 4,781,250
Semitool, Inc. 22,700 726,400
45,131,400
POLLUTION CONTROL - 0.5%
Browning-Ferris Industries, Inc. 210,000 7,586,250
TETRA Technologies, Inc. (a) 185,000 2,243,125
WMX Technologies, Inc. 175,000 4,965,625
14,795,000
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 128,953,774
MEDIA & LEISURE - 4.5%
BROADCASTING - 1.1%
Capital Cities/ABC, Inc. 65,000 6,816,875
Citicasters, Inc. 65,000 1,787,500
Clear Channel Communications, Inc. 25,000 1,609,375
EZ Communications, Inc. 44,400 821,400
Infinity Broadcasting Corp. (a) 50,000 1,668,750
Jacor Communications, Inc. Class A 73,400 1,174,400
Lin Television Corp. 50,000 1,681,250
Renaissance Communications Corp. (a) 65,000 2,177,500
Tele-Communications, Inc. Class A 225,000 5,273,438
Viacom, Inc. Class B (non-vtg.) (a) 250,084 11,597,646
34,608,134
ENTERTAINMENT - 0.4%
Casino America, Inc. (a) 100,000 1,512,500
Disney (Walt) Co. 110,000 6,118,750
Players International, Inc. (a) 217,500 4,350,000
11,981,250
LEISURE DURABLES & TOYS - 0.3%
Cobra Golf, Inc. (a) 204,900 6,479,963
Hasbro, Inc. 84,000 2,667,000
9,146,963
LODGING & GAMING - 0.7%
Doubletree Corp. (a) 300,000 6,468,750
Hospitality Franchise Systems, Inc. 453,600 15,705,900
22,174,650
PUBLISHING - 0.1%
Houghton Mifflin Co. 50,000 2,637,500
RESTAURANTS - 1.9%
Apple South, Inc. 500,000 9,750,000
Applebee's International, Inc. 275,000 7,081,250
Landry's Seafood Restaurants, Inc. (a) 334,200 6,684,000
Lone Star Steakhouse Saloon (a) 375,000 11,367,188
Outback Steakhouse, Inc. (a) 385,000 11,116,875
Papa John's International, Inc. (a) 161,800 5,663,000
Starbucks Corp. (a) 180,000 6,412,500
Uno Restaurant Corp. (a) 226,625 2,351,234
60,426,047
TOTAL MEDIA & LEISURE 140,974,544
SHARES VALUE (NOTE 1)
NONDURABLES - 1.3%
BEVERAGES - 0.3%
PepsiCo, Inc. 225,000 $ 10,265,625
HOUSEHOLD PRODUCTS - 0.3%
Colgate-Palmolive Co. 50,000 3,656,250
Gillette Co. 130,000 5,801,250
9,457,500
TOBACCO - 0.7%
Philip Morris Companies, Inc. 225,000 16,734,375
RJR Nabisco Holdings Corp. 200,000 5,575,000
22,309,375
TOTAL NONDURABLES 42,032,500
RETAIL & WHOLESALE - 8.7%
APPAREL STORES - 0.7%
Baby Superstore, Inc. (a) 65,000 3,063,125
Gymboree Corp. (a) 135,000 3,923,438
Just For Feet, Inc. (a)(c) 402,000 16,029,750
23,016,313
APPLIANCE STORES - 0.1%
Cellstar Corp. (a) 165,700 3,873,238
DRUG STORES - 0.4%
General Nutrition Companies, Inc. (a) 365,000 12,820,625
GENERAL MERCHANDISE STORES - 1.5%
Dollar General Corp. 150,050 4,745,331
Wal-Mart Stores, Inc. 1,600,000 42,800,000
47,545,331
RETAIL & WHOLESALE, MISCELLANEOUS - 6.0%
Barnes & Noble, Inc. (a) 153,100 5,205,400
Bed Bath & Beyond, Inc. (a) 700,000 16,975,000
Borders Group, Inc. (a) 80,000 1,150,000
Circuit City Stores, Inc. 150,000 4,743,750
Corporate Express (a) 275,000 5,878,125
Home Depot, Inc. (The) 345,066 14,018,306
Lowe's Companies, Inc. 1,175,000 35,103,125
Officemax, Inc. (a) 525,000 14,634,375
Office Depot, Inc. (a) 320,000 9,000,000
Petco Animal Supplies, Inc. (a) 378,700 8,804,775
Petsmart, Inc. (a) 600,000 17,250,000
Sport Supply Group, Inc. 309,550 3,869,375
Staples, Inc. (a) 550,000 15,881,250
Sunglass Hut International, Inc. (a) 886,500 31,027,500
Viking Office Products, Inc. (a) 150,000 5,493,750
189,034,731
TOTAL RETAIL & WHOLESALE 276,290,238
SERVICES - 2.3%
LEASING & RENTAL - 0.9%
Hollywood Entertainment Corp. (a) 605,000 27,225,000
SERVICES - 1.4%
Adia SA (Bearer) (a) 25,000 5,202,438
Block (H & R), Inc. 100,000 4,112,500
Children's Discovery Centers of
America, Inc. (a) 135,000 2,261,250
First Financial Management Corp. 75,000 6,412,500
Medaphis Corp. (a) 950,000 20,662,500
Zebra Technologies Corp. Class A (a) 100,000 5,325,000
43,976,188
TOTAL SERVICES 71,201,188
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 52.0%
COMMUNICATIONS EQUIPMENT - 10.9%
Apertus Technologies, Inc. (a) 57,000 $ 498,750
Cabletron Systems, Inc. (a) 85,000 4,526,250
Cisco Systems, Inc. (a) 1,215,000 61,433,438
DSC Communications Corp. (a) 1,850,000 86,025,000
Dialogic Corp. (a) 34,800 617,700
Ericsson (L.M.) Telephone Co.
Class B ADR 900,000 18,000,000
General Instrument Corp. (a) 350,000 13,431,250
Global Village Communication (a) 573,800 8,965,625
Inter-Tel, Inc. (a) 62,300 942,288
InterVoice, Inc. (a) 250,000 4,375,000
Lo Jack Corp. (a) 240,000 2,655,000
Microtest, Inc. (a) 125,000 2,781,250
Newbridge Networks Corp. (a) 525,000 18,506,250
Nokia Corp. AB :
Series A 160,000 9,377,565
sponsored ADR 915,000 54,556,875
Tellabs, Inc. (a) 147,800 7,112,875
3Com Corp. (a) 600,000 40,200,000
U.S. Robotics Corp. 74,600 8,131,400
342,136,516
COMPUTER SERVICES & SOFTWARE - 12.9%
Adobe Systems, Inc. 60,000 3,480,000
Alantec Corp. 65,000 2,226,250
America Online, Inc. (a) 240,500 10,582,000
American Business Information, Inc. (a) 140,800 3,801,600
Ascend Communications, Inc. (a) 60,000 3,030,000
Automatic Data Processing, Inc. 125,000 7,859,375
Broderbund Software, Inc. (a) 72,800 4,641,000
CUC International, Inc. (a) 502,500 14,070,000
Cambridge Technology Partners
Mass., Inc. (a) 90,000 2,970,000
Ceridian Corp. (a) 140,000 5,162,500
Cerner Corp. (a) 40,000 2,450,000
CompUSA, Inc. (a) 290,000 9,642,500
Computer Sciences Corp. (a) 160,000 9,100,000
Davidson & Associates, Inc. (a) 65,000 2,583,750
GMIS, Inc. (a) 212,600 4,849,938
Hyperion Software, Inc. (a) 60,000 2,715,000
Informix Corp. (a) 800,000 20,300,000
Inso Corp. (a) 30,000 1,792,500
Integrated Silicon Systems, Inc. (a) 108,400 4,092,100
Intersolv, Inc. (a) 315,000 7,323,750
Mercury Interactive Group Corp. (a) 252,500 5,081,563
Microsoft Corp. (a) 740,000 66,877,500
Network Peripherals, Inc. (a) 260,000 5,671,250
Novell, Inc. (a) 524,200 10,451,238
Oracle Systems Corp. (a) 2,900,000 112,012,500
Parametric Technology Corp. (a) 296,900 14,770,775
Paychex, Inc. 85,000 3,081,250
Peoplesoft, Inc. (a) 375,000 20,343,750
Platinum Technology, Inc. (a) 100,000 1,812,500
Reuters Holdings PLC ADR Class B 65,000 3,258,125
SAP AG sponsored ADR (a)(b) 35,000 1,461,250
Softkey International, Inc. (a) 150,000 4,781,250
Stratacom, Inc. (a) 490,400 23,907,000
SunGard Data Systems, Inc. (a) 110,000 5,747,500
Systems & Computer Technology Corp. (a) 125,000 2,500,000
Wonderware Corp. (a) 77,600 3,123,400
407,553,114
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTERS & OFFICE EQUIPMENT - 10.5%
ADAPTEC, Inc. (a) 375,000 $ 13,875,000
Apple Computer, Inc. 165,000 7,662,188
Bay Networks, Inc. (a) 800,000 33,100,000
Compaq Computer Corp. (a) 1,579,800 71,683,425
Comverse Technology, Inc. (a) 75,000 1,331,250
Dell Computer Corp. (a) 125,000 7,515,625
Digital Equipment Corp. (a) 200,000 8,150,000
Fore Systems, Inc. (a) 65,000 1,966,250
Gateway 2000, Inc. (a) 200,000 4,550,000
General Motors Corp. Class E (a) 505,600 21,993,600
Hewlett-Packard Co. 315,000 23,467,500
International Business Machines Corp. 635,000 60,960,000
Micom Communication Corp. (a) 146,100 949,650
Pitney Bowes, Inc. 110,000 4,221,250
Radius, Inc. (a) 290,000 3,190,000
Read Rite Corp. (a) 225,026 6,019,446
Seagate Technology (a) 214,900 8,434,825
Silicon Graphics, Inc. (a) 888,100 35,412,988
Sun Microsystems, Inc. (a) 224,000 10,864,000
Xerox Corp. (a) 45,000 5,276,250
330,623,247
ELECTRONIC INSTRUMENTS - 2.8%
Applied Materials, Inc. (a) 835,000 72,331,875
Electro Scientific Industries, Inc. (a) 117,500 3,906,875
Kulicke & Soffa Industries, Inc. 40,000 2,652,500
Novellus System, Inc. (a) 143,000 9,688,250
88,579,500
ELECTRONICS - 14.7%
AMP, Inc. 150,000 6,337,500
Advanced Micro Devices, Inc. 400,000 14,550,000
Alliance Semiconductor Corp. (a) 160,000 7,840,000
Altera Corp. (a) 387,400 16,755,050
Analog Devices, Inc. (a) 275,000 9,350,000
Atmel Corp. (a) 160,000 8,860,000
Avnet, Inc. 282,800 13,680,450
C-Cube Microsystems, Inc. (a) 75,000 2,043,750
Cascade Communications Corp. (a) 75,000 3,243,750
Chips & Technologies, Inc. (a) 201,300 2,642,063
Cirrus Logic, Inc. (a) 80,000 5,015,000
Cypress Semiconductor Corp. (a) 275,000 11,137,500
Hitachi Ltd. ADR 35,000 3,508,750
Integrated Device Technology, Inc. (a) 72,900 3,371,625
Integrated Silicon Solution (a) 147,800 7,722,550
Intel Corp. 1,530,000 96,868,125
Kemet Corp. (a) 135,000 7,087,500
LSI Logic Corp. (a) 758,930 29,693,136
Linear Technology Corp. 225,000 14,850,000
Marshall Industries (a) 102,700 3,440,450
Maxim Integrated Products, Inc. (a) 90,000 4,590,000
Microchip Technology, Inc. (a) 275,050 10,004,944
Micron Technology, Inc. 1,300,000 71,337,500
Motorola, Inc. 235,000 15,774,375
National Semiconductor Corp. (a) 225,000 6,243,750
SGS-Thomson Microelectronic NV (a) 275,000 11,171,875
S-3, Inc. (a) 81,700 2,941,200
Samsung Electronics Co. Ltd.:
GDR (b) 55,000 5,280,000
GDS (non-vtg.) (Reg.) (a) 102,800 5,345,600
Tencor Instruments (a) 80,000 3,280,000
Texas Instruments, Inc. 235,000 31,460,625
Thomas & Betts Corp. 34,600 2,365,775
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
VLSI Technology, Inc. (a) 135,000 $ 4,066,875
Wholesale Cellular USA, Inc. (a) 150,000 3,225,000
Wyle Laboratories 74,800 2,103,750
Xilinx, Inc. (a) 175,000 16,450,000
463,638,468
PHOTOGRAPHIC EQUIPMENT - 0.2%
3D Systems Corp. 375,000 6,937,500
TOTAL TECHNOLOGY 1,639,468,345
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.4%
AMR Corp. (a) 110,000 8,208,750
Atlantic Southeast Airlines, Inc. 59,700 1,798,463
Comair Holdings, Inc. 25,000 946,875
Southwest Airlines Co. 137,700 3,287,588
14,241,676
RAILROADS - 0.5%
ABC Rail Products Corp. (a) 150,000 3,450,000
CSX Corp. 151,200 11,358,900
14,808,900
TOTAL TRANSPORTATION 29,050,576
UTILITIES - 9.4%
CELLULAR - 5.9%
AirTouch Communications, Inc. (a) 2,300,000 65,550,000
Arch Communications Group, Inc. (a) 150,000 3,337,500
BCE Mobile Communications, Inc. (a) 275,000 9,166,666
Cellular Communications, Inc.,
Series A (redeemable) (a) 200,000 9,100,000
Metrocall, Inc. (a) 150,000 2,737,500
Mobile Telecommunications
Technologies, Inc. (a) 75,000 2,053,125
Mobilemedia Corp. (a) 13,000 240,500
Palmer Wireless, Inc. (a) 575,300 9,420,538
USA Mobile Communications (a) 116,600 2,040,500
United States Cellular Corp. (a) 315,000 9,528,750
Vanguard Cellular Systems, Inc.
Class A (a)(c) 2,176,000 52,224,000
Vodafone Group PLC sponsored ADR 548,700 20,782,013
186,181,092
TELEPHONE SERVICES - 3.5%
ALC Communications Corp. (a) 215,000 9,701,875
AT&T Corp. 425,000 22,578,125
Ameritech Corp. 493,700 21,722,800
Bell Atlantic Corp. 375,000 21,000,000
BellSouth Corp. 150,000 9,525,000
LCI International, Inc. (a) 125,000 3,828,125
SBC Communications, Inc. 475,000 22,621,875
110,977,800
TOTAL UTILITIES 297,158,892
TOTAL COMMON STOCKS
(Cost $2,234,010,970) 3,027,328,237
NONCONVERTIBLE PREFERRED STOCKS - 0.6%
SHARES VALUE (NOTE 1)
TECHNOLOGY - 0.6%
COMPUTER SERVICES & SOFTWARE - 0.2%
SAP AG (a) 5,250 $ 6,622,118
COMPUTERS & OFFICE EQUIPMENT - 0.4%
Silicon Graphics CDA Ltd.
exchangeable (non-vtg.) (a) 280,080 11,132,774
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $15,178,912) 17,754,892
REPURCHASE AGREEMENTS - 3.4%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 106,155,996 106,101,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $2,355,290,882) $ 3,151,184,129
LEGEND
(a) Non-income producing
(b) 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 $6,741,250 or 0.2% of net
assets.
(c) A company in which the fund has ownership of at least 5% of the voting
securities is an affiliated company. Transactions during the period with
companies that are or were affiliates are as follows:
PURCHASES SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Just For Feet, Inc. (a) $ 2,342,009 - - $ 16,029,750
Vanguard Cellular Systems, Inc.
Class A (a) 1,588,387 - - 52,224,000
TOTAL $ 3,930,396 $ - $ - $ 68,253,750
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $1,556,970,263 and $967,373,548, 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 $555,941 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $2,361,955,662. Net unrealized appreciation aggregated
$789,228,467, of which $809,605,722 related to appreciated investment
securities and $20,377,255 related to depreciated investment securities.
At December 31, 1994, the fund had a capital loss carryforward of
approximately $68,037,000 all of which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $106,101,000) (cost $2,355,290,882) $ 3,151,184,129
- See accompanying schedule
Receivable for investments sold 15,240,448
Receivable for fund shares sold 4,631,877
Dividends receivable 1,976,933
Other receivables 241,989
TOTAL ASSETS 3,173,275,376
LIABILITIES
Payable for investments purchased $ 31,104,827
Payable for fund shares redeemed 2,527,529
Accrued management fee 1,523,671
Other payables and accrued expenses 374,992
TOTAL LIABILITIES 35,531,019
NET ASSETS $ 3,137,744,357
Net Assets consist of:
Paid in capital $ 2,373,300,032
Undistributed net investment income 3,900,899
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (35,349,821)
Net unrealized appreciation (depreciation) on investments 795,893,247
NET ASSETS, for 117,514,234 shares outstanding $ 3,137,744,357
NET ASSET VALUE, offering price and redemption price per share ($3,137,744,357 (divided by) 117,514,234 shares) $26.70
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 8,244,859
Dividends
Interest 5,551,271
TOTAL INCOME 13,796,130
EXPENSES
Management fee $ 7,756,500
Transfer agent fees 627,931
Accounting fees and expenses 378,173
Non-interested trustees' compensation 4,869
Custodian fees and expenses 69,955
Registration fees 147,294
Audit 14,797
Legal 4,080
Miscellaneous 7,349
TOTAL EXPENSES 9,010,948
NET INVESTMENT INCOME 4,785,182
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 46,674,141
Foreign currency transactions 395 46,674,536
Change in net unrealized appreciation (depreciation) on investment securities 517,371,258
NET GAIN (LOSS) 564,045,794
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 568,830,976
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 4,785,182 $ 11,810,184
Net investment income
Net realized gain (loss) 46,674,536 (74,102,658)
Change in net unrealized appreciation (depreciation) 517,371,258 80,193,945
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 568,830,976 17,901,471
Distributions to shareholders (12,404,421) (7,589,523)
From net investment income
From net realized gain - (80,320,550)
TOTAL DISTRIBUTIONS (12,404,421) (87,910,073)
Share transactions 750,772,650 1,289,938,019
Net proceeds from sales of shares
Reinvestment of distributions 12,404,421 87,909,946
Cost of shares redeemed (323,728,603) (549,819,377)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 439,448,468 828,028,588
TOTAL INCREASE (DECREASE) IN NET ASSETS 995,875,023 758,019,986
NET ASSETS
Beginning of period 2,141,869,334 1,383,849,348
End of period (including undistributed net investment income of $3,900,899 and $11,472,202, $ 3,137,744,357 $ 2,141,869,334
respectively)
OTHER INFORMATION
Shares 32,171,873 60,676,019
Sold
Issued in reinvestment of distributions 568,749 4,039,985
Redeemed (13,969,564) (25,920,211)
Net increase (decrease) 18,771,058 38,795,793
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 F 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91 $ 15.18
Income from Investment Operations
Net investment income .04 .12 .12 .09 D .09 D .24
Net realized and unrealized gain (loss) 5.09 (.12) E 3.64 1.64 5.72 (1.98)
Total from investment operations 5.13 - 3.76 1.73 5.81 (1.74)
Less Distributions (.12) (.12) (.11) (.05) (.21) (.21)
From net investment income
From net realized gain - (1.27) (.21) (.43) - (.32)
In excess of net realized gain - - (.12) - - -
Total distributions (.12) (1.39) (.44) (.48) (.21) (.53)
Net asset value, end of period $ 26.70 $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91
TOTAL RETURN B, C 23.78% (.02) 19.37% 9.32% 45.51% (11.73)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 3,137,744 $ 2,141,869 $ 1,383,849 $ 749,837 $ 371,462 $ 135,487
Ratio of expenses to average net assets .72% A .69% .71% .75% .84% .88%
Ratio of expenses to average net assets
before expense .72% A .70% .71% .75% .84% .88%
reductions
Ratio of net investment income to average net
assets .38% A .69% .72% .83% .56% 2.69%
Portfolio turnover rate 82% A 122% 159% 262% 261% 88%
A ANNUALIZED
B TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO
THE FINANCIAL STATEMENTS).
C TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO
YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE TOTAL RETURNS SHOWN.
D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD
ENDED DUE TO THE TIMING OF SALES
AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
F 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.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. Each performance figure
includes changes in a fund's share price, plus reinvestment of any
dividends (income) and capital gains (the profits the fund earns when it
sells stocks that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
JUNE 30, 1995 YEAR YEARS FUND
OVERSEAS 2.96% 4.76% 7.12%
Morgan Stanley EAFE Index 1.65% 4.69% 6.97%
AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and
show you what would have happened if the fund had performed at a constant
rate each year.
UNDERSTANDING PERFORMANCE
Many markets around the globe offer the potential
for significant growth over time; however,
investing in foreign markets means assuming
greater risks than investing in the United States.
Factors like changes in a country's financial
markets, its local political and economic
climate, and the fluctuating value of its currency
create these risks. For these reasons an
international fund's performance may be more
volatile than a fund that invests exclusively in the
United States.
(checkmark)
You can compare the fund's figures to the performance of the Morgan Stanley
EAFE index - a broad measure of the performance of stocks in Europe,
Australia, and the Far East. This benchmark includes reinvested dividends
and capital gains, if any, and excludes the effects of sales charges.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of operations
January 28, 1987.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, IT WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. Foreign investments involve greater risks and
potential rewards than U.S. investments. These risks include political and
economic uncertainties of foreign countries, as well as the risk of
currency fluctuations.
$10,000 OVER LIFE OF FUND
VIP Overseas (22Europe, Australia,
01/28/87 10000.00 10000.00
01/31/87 10000.00 9997.46
02/28/87 10010.00 10296.66
03/31/87 10460.00 11140.41
04/30/87 11220.00 12319.18
05/31/87 11060.00 12319.14
06/30/87 10520.00 11926.66
07/31/87 10400.00 11905.82
08/31/87 11320.00 12798.54
09/30/87 11070.00 12597.05
10/31/87 8760.00 10777.00
11/30/87 8840.00 10938.65
12/31/87 9462.16 11263.46
01/31/88 9138.32 11464.55
02/29/88 9381.20 12228.75
03/31/88 9806.24 12980.64
04/30/88 9968.16 13169.27
05/31/88 9786.00 12747.12
06/30/88 9613.96 12411.13
07/31/88 9543.12 12800.51
08/31/88 9209.16 11968.24
09/30/88 9603.84 12491.19
10/31/88 10028.88 13559.96
11/30/88 10211.04 14367.68
12/31/88 10231.28 14447.79
01/31/89 10534.87 14701.99
02/28/89 10717.03 14777.56
03/31/89 10707.38 14487.53
04/30/89 11023.50 14621.89
05/31/89 10615.60 13826.42
06/30/89 10574.81 13593.67
07/31/89 11563.97 15300.67
08/31/89 11482.39 14612.54
09/30/89 12196.21 15278.16
10/31/89 11533.38 14664.33
11/30/89 12155.42 15401.50
12/31/89 12920.24 15969.77
01/31/90 12746.88 15375.56
02/28/90 12449.36 14302.43
03/31/90 12919.92 12812.46
04/30/90 12991.52 12710.78
05/31/90 13840.58 14161.09
06/30/90 14147.46 14036.37
07/31/90 14863.53 14234.08
08/31/90 13349.56 12851.83
09/30/90 12081.09 11060.74
10/31/90 13206.34 12784.21
11/30/90 12797.16 12030.10
12/31/90 12705.10 12224.98
01/31/91 12827.85 12620.40
02/28/91 13260.02 13973.29
03/31/91 12872.18 13134.44
04/30/91 13155.20 13263.42
05/31/91 13186.64 13401.82
06/30/91 12463.37 12417.04
07/31/91 13081.82 13027.11
08/31/91 13123.75 12762.56
09/30/91 13658.34 13481.84
10/31/91 13752.68 13672.96
11/30/91 13260.02 13034.64
12/31/91 13721.24 13707.79
01/31/92 13888.95 13415.00
02/29/92 13599.52 12934.85
03/31/92 13323.28 12080.93
04/30/92 14152.01 12138.36
05/31/92 14768.23 12950.85
06/30/92 14491.99 12336.56
07/31/92 13567.65 12020.83
08/31/92 13450.78 12774.79
09/30/92 12908.92 12522.52
10/31/92 12027.08 11865.66
11/30/92 11963.33 11977.32
12/31/92 12250.20 12039.27
01/31/93 12600.81 12037.79
02/28/93 12847.62 12401.41
03/31/93 13738.91 13482.39
04/30/93 14651.94 14761.90
05/31/93 14967.16 15073.67
06/30/93 14597.60 14838.49
07/31/93 15173.67 15357.91
08/31/93 15988.88 16186.97
09/30/93 15901.92 15822.62
10/31/93 16478.00 16310.23
11/30/93 15782.36 14884.55
12/31/93 16825.82 15959.32
01/31/94 17923.63 17308.60
02/28/94 17607.51 17260.66
03/31/94 17170.60 16517.22
04/30/94 17738.58 17218.03
05/31/94 17520.13 17119.18
06/30/94 17334.44 17361.11
07/31/94 17793.20 17528.07
08/31/94 18000.73 17943.05
09/30/94 17531.05 17377.92
10/31/94 17891.50 17956.61
11/30/94 17214.29 17093.61
12/31/94 17115.99 17200.65
01/31/95 16406.01 16539.88
02/28/95 16449.17 16492.41
03/31/95 16955.64 17521.06
04/30/95 17440.09 18180.00
05/31/95 17682.31 17963.28
06/30/95 17847.46 17648.27
Let's say you invested $10,000 in Overseas Portfolio on January 28, 1987,
when the fund started. By June 30, 1995, your investment would have grown
to $17,847 - a 78.47% increase. That compares to $10,000 invested in the
Morgan Stanley EAFE Index, which would have grown to $17,648 over the same
period - a 76.48% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF JUNE 30, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
C. S. Holdings (Reg.) 1.8
Nestle SA (Reg.) 1.5
Deutsche Bank AG 1.3
Unilever NV Ord. 1.2
Swiss Bank Corp. (Bearer) 1.2
TOP FIVE MARKET SECTORS AS OF JUNE 30, 1995
% OF FUND'S
INVESTMENTS
Finance 26.4
Utilities 8.8
Nondurables 8.4
Durables 8.1
Basic Industries 6.2
GEOGRAPHIC DIVERSIFICATION AS OF JUNE 30, 1995
(BY LOCATION OF ISSUER) % OF FUND'S
INVESTMENTS
Japan 18.5
United Kingdom 12.4
Switzerland 9.8
France 7.5
Netherlands 6.9
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with John Hickling, Portfolio Manager of Overseas Portfolio
Q. JOHN, HOW HAS THE FUND PERFORMED?
A. For the six months and one year ended June 30, 1995, the fund's
performance topped that of the Morgan Stanley EAFE index - a broad measure
of stocks in Europe, Australia and the Far East. The index had total
returns of 2.60% and 1.65% for the six- and 12-month periods, respectively.
Q. WHAT WERE THE KEYS TO THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A. First, I kept the fund fully invested through much of the period.
Second, some of the stocks I picked in Japan and Europe fared well. And
finally, the fund was able to benefit from new investments in emerging
markets.
Q. WHY DID THE EAFE INDEX OFFER RELATIVELY LOW RETURNS?
A. While European markets have performed relatively well - though not as
well as the U.S. market - emerging markets and Japan have not. Japan was
affected by a number of factors that dampened investor enthusiasm: the
Barings debacle, the Kobe earthquake and the subway gas attack. The
Japanese market also was hurt by the strength of the yen versus the dollar.
On the heels of Mexico's devaluation of the peso in late 1994, emerging
markets also struggled, although they appear to have pretty much bottomed
out.
Q. WHAT'S THE STORY BEHIND THE FUND'S INVESTMENTS IN JAPAN?
A. Even though Japan has the highest country representation in the fund,
I've kept the fund underweighted there, relative to the index. I've focused
much of the fund's Japanese investments in technology, including consumer
electronics companies Toshiba and Hitachi, and other manufacturers and
exporters that are poised to take advantage of economic activity both in
Japan and globally. While the technology sector has done well in the U.S.,
it has been weak in Japan, so I found valuations to be attractive. The
sector recently has shown some strong gains. In addition, I've targeted
some financial stocks. The Japanese market has started to pick up a bit
lately, and brokerage house Nomura Securities is poised to take advantage
because it has been cutting costs aggressively. In addition, it appears
trust banks such as Sumitomo Trust will be able to improve interest margins
- the difference between what they charge for loans and what they pay to
depositors - because of changing regulations.
Q. THE FUND IS OVERWEIGHTED IN EUROPE, RELATIVE TO THE INDEX. WHERE HAVE
YOU FOUND OPPORTUNITIES THERE?
A. Mainly in financial and consumer nondurable stocks, as well as interest
rate-sensitive issues - because European bond markets have been rallying -
and cyclicals - those that tend to rise and fall with the economy. European
stocks have rallied lately, mainly on the strength of the technology
sector. In the short run, I've missed some opportunity there, because I
found the tech stocks to be too expensive and risky. Some of the appealing
consumer nondurable names have been Guinness, Cadbury-Schweppes, Bass and
Nestle. Barclays, National Westminster, Swiss Bank and C.S. Holdings were
among the fund's financial stock investments. I've added investments in
cyclical stocks because they became cheap. Those include paper companies Mo
Och Domsjoe and Svenska Cellulosa; auto stocks Volvo and Peugeot; and tire
companies such as Michelin.
Q. WHAT ABOUT THE FUND'S EMERGING MARKET INVESTMENTS?
A. I've been more active there because, as I said, I felt they had hit
bottom, and there were a lot of very interesting stocks. Among the stocks
that have caught my eye have been Hong Kong/Shanghai Bank (HSBC) and Hong
Kong Land Holdings; Philippine Long Distance Telephone; the department
store Matahari and cigarette manufacturer Gudang Garam in Indonesia; Krung
Thai Bank; Telecom Argentina; and Mexican companies Bancomer, Telmex, Cemex
and Grupo Carso.
Q. WHAT'S YOUR OUTLOOK GOING FORWARD?
A. Several factors are important to consider. First of all, it seems most
stock markets reflect the sentiment that any worldwide recession will stay
pretty shallow and that growth will resume. Of course, this is the best
possible scenario. At the same time, if the U.S. market stumbles, one would
expect there to be a drop in foreign markets. In such a scenario, I believe
overseas markets wouldn't drop as far as the U.S, because they haven't
gained as much recently, but it's impossible to say for sure. How the
dollar does also will be important. Going forward, I'll stay with my usual
game plan, looking for opportunities in any markets that appear to have
excellent value.
FUND FACTS
GOAL: to increase the value of the fund's
shares by investing mainly in stocks in
Europe, the Far East, and the Pacific Basin
START DATE: January 28, 1987
SIZE: as of June 30, 1995, more than $1.2 billion
MANAGER: John Hickling, since 1993; manager
Fidelity Overseas Fund, since 1993; Fidelity
Advisor Overseas Fund, since 1993; Fidelity
Advisor Annuity Overseas Portfolio, since
January 1995; previously managed several
Fidelity international funds; joined Fidelity in
1982
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
INVESTMENTS JUNE 30, 1995 (UNAUDITED)
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 89.2%
SHARES VALUE (NOTE 1)
ARGENTINA - 0.8%
Buenos Aires Embotelladora SA
sponsored ADR 41,800 $ 1,050,301
Perez Companc Class B 308,452 1,295,822
Telecom Argentina sponsored
ADR Class B 83,400 3,794,700
Telecom Argentina Stet France
Telecom SA 263,600 1,199,681
YPF Sociedad Anonima sponsored
ADR representing Class D shares 150,500 2,840,688
10,181,192
AUSTRALIA - 1.4%
Brambles Industries Ltd. 276,500 2,616,260
FAI Insurance Ltd. Ord. 2,037,900 809,474
Lend Lease Corp. Ltd. 81,000 1,033,010
Pioneer International Ltd. 493,300 1,224,642
TNT Ltd. (a) 1,658,800 2,176,694
Westpac Banking Corp. 2,912,700 10,536,488
18,396,568
AUSTRIA - 0.9%
Mayr Melnhof Karton AG 24,200 1,398,830
OEMV AG 62,400 7,194,579
VA Technologie AG 6,800 851,047
VA Technologie AG (d) 15,000 1,877,310
11,321,766
BELGIUM - 1.6%
Bekaert SA 4,005 3,197,654
Delhaize Freres & Cie Le Lion SA 135,300 6,183,782
Petrofina SA 11,900 3,590,951
Petrofina SA (warrants) (a) 595 8,380
Solvay & Cie SA 14,062 7,724,197
20,704,964
BERMUDA - 0.2%
Consolidated Electric Power Asia Ltd.
sponsored ADR (d) 30,000 682,500
Jardine Strategic Holdings Ltd. Ord. 529,500 1,704,990
2,387,490
BRAZIL - 0.2%
Coteminas PN 2,500,000 788,675
Telebras PN (Pfd. Reg.) 60,298,770 1,987,447
2,776,122
CANADA - 0.5%
Midland Walwyn, Inc. 269,000 2,106,921
Noranda, Inc. 245,400 4,827,541
6,934,462
CHILE - 0.1%
Vina Concha Stet y Toro SA
sponsored ADR 51,100 990,063
FINLAND - 0.8%
Kymmene Corp. 53,900 1,680,624
Pohjola Class B 291,000 4,570,859
Valmet Corp. OY Ord. 167,700 3,793,939
10,045,422
FRANCE - 7.2%
Accor SA 65,158 8,694,014
Axa SA 91,718 4,963,362
BQE National Paris Ord. 222,840 10,770,332
Club Mediterranee SA Ord. 42,500 4,340,855
Compagnie Bancaire Ord. 65,670 7,867,107
Credit Lyonnais 24,500 1,413,880
SHARES VALUE (NOTE 1)
FRANCE - CONTINUED
Elf Aquitaine 112,128 $ 8,302,776
Generale des Eaux 90,600 10,105,133
Havas SA 53,300 4,227,450
IMETAL SA Ord. 9,200 1,083,135
L'Oreal Co. Ord. 10,200 2,563,957
Lafarge Coppee SA 63,900 4,978,432
Lyonnaise des Eaux Dumez SA 30,700 2,909,255
Michelin SA Cie Generale des
Etablissements, Class B (a) 76,900 3,413,366
Peugeot SA Ord. 19,500 2,710,627
Total SA Class B 190,600 11,495,446
Vallourec SA (a) 60,000 3,010,224
92,849,351
GERMANY - 6.0%
Allianz Versich Holdings Ord. (Reg.) 1,450 2,590,467
Asko 2,900 1,813,746
BMW AG 9,918 5,463,533
Bayerische Vereinsbank AG Ord. 11,000 3,340,331
Continental Gummi-Werke AG 25,600 3,721,076
Deutsche Bank AG 352,000 17,122,878
Duerr Beteiligungs AG (RFD) 8,777 3,119,553
Gildemeister AG (a) 28,620 2,372,138
Hoechst AG Ord. 38,900 8,413,855
Karstadt AG 17,800 7,821,202
Kaufhof Holding AG 20,000 7,151,906
Metallgesellschaft AG (a)(d) 86,700 1,587,832
SGL Carbon AG (a)(d) 28,000 1,250,570
Schmalbach-Lubeca AG 4,250 855,261
Veba AG Ord. 27,400 10,779,905
77,404,253
HONG KONG - 2.1%
Amoy Properties Ltd. 2,084,000 1,831,440
Consolidated Electric Power Asia Ltd. 604,000 1,401,165
Dickson Concepts International Ltd. 2,108,000 1,259,994
HSBC Holdings PLC 834,000 10,697,560
Hong Kong Land Holdings Ltd. 2,337,000 4,253,340
Hopewell Holdings Ltd. 3,944,000 3,338,596
Hysan Development Co. Ltd. 643,000 1,470,863
Peregrine Investments Holdings Ltd. 832,000 1,182,780
Semi-Tech (Global) Ltd. 100,000 160,901
Sun Hung Kai Properties Ltd. 153,000 1,132,023
26,728,662
INDIA - 0.1%
Reliance Industries Ltd. GDS (a) 106,400 1,902,432
INDONESIA - 1.0%
Astra International PT (For. Reg.) 160,000 283,790
Bank International Indonesia PT Ord. 921,000 2,843,238
Gudang Garam PT Perusahaan 42,500 326,336
Jakarta International Hotels &
Development Ord. 1,541,000 1,937,499
Matahari Putra Prima PT:
(For. Reg.) 552,000 879,927
(For. Reg.) (rights) (a) 276,000 266,459
Sampoerna Hanjaya Mandala (For. Reg.) 735,750 5,781,604
12,318,853
IRELAND - 1.0%
Bank of Ireland U.S. Holdings, Inc. 1,009,200 5,793,010
Fyffes PLC 1,358,000 2,479,301
Independent Newspapers PLC 521,050 2,866,312
Waterford Wedgwood PLC Unit 1,751,400 1,494,049
12,632,672
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ITALY - 1.3%
Alitalia Linee Aeree Italiane Class A (a) 136,400 $ 65,201
Assicurazioni Generali Spa 218,570 5,128,878
Fiat Spa 1,121,000 3,965,325
Istituto Mobiliare Italiano 301,400 1,848,206
Italgas Spa 512,200 1,334,373
Montedison Spa Ord. (a) 2,962,700 2,120,701
SAI Sta Assieuratrice Industriale Spa 189,000 2,017,120
16,479,804
JAPAN - 18.5%
ADO Electronic Industrial Co. Ltd. 19,000 410,750
Advantest Corp. 74,000 2,797,401
Aida Engineering Ltd. Ord. 176,000 1,199,669
Akita Bank Ltd. 76,650 656,483
Amada Metrecs Co. Ltd. 86,000 1,107,383
Amadasonoike Co. Ltd. 282,000 1,632,368
Autobacs Seven Co. Ltd. 20,600 2,007,679
Bridgestone Corp. 339,000 5,005,908
Canon, Inc. 526,000 8,575,073
Daicel Chemical Industries Ltd. 397,000 2,035,415
East Japan Railway Co. Ord. 700 3,597,165
Fanuc Ltd. 98,200 4,245,860
Fujitsu Ltd. 726,000 7,247,135
Futaba Industrial Co. Ltd. 126,000 2,054,105
Hachijuni Bank Ltd. 92,000 1,141,170
Hanshin Department Store Ltd. 29,000 205,210
Higo Bank Ltd. Ord. 96,000 941,288
Hitachi Ltd. 1,126,000 11,240,047
Honda Motor Co. Ltd. 432,000 6,634,375
Ishihara Sangyo Kaisha Ltd. (a) 343,000 1,021,097
Japan Airlines Co. Ltd. 302,000 2,008,578
Komatsu Ltd. Ord. 410,000 3,133,728
Marubeni Corp. 339,000 1,726,035
Matsushita Electric Industrial Co. Ltd. 303,000 4,724,867
Marukyo Corp. 16,000 255,168
Minebea Co. Ltd. 546,000 3,508,847
Mitsubishi Chemical Industries Ltd. 89,000 381,654
Mitsubishi Estate Co. Ltd. 264,000 2,978,382
Mitsubishi Heavy Industries Ltd. 492,000 3,347,809
Mitsubishi Trust & Banking Corp. 486,000 6,889,546
Mitsui OSK Lines Ltd. 457,000 1,268,696
Murata Mfg. Co. Ltd. 171,000 6,484,465
Nichido Fire & Marine
Insurance Co. Ltd. 502,000 4,062,254
Nikko Securities Co. Ltd. 373,000 3,031,587
Nippon Telegraph &
Telephone Corp. Ord. 400 3,354,991
Nippon Yusen Kabushiki Kaisha 354,000 1,986,414
Nissan Motor Co. Ltd. Ord. 388,000 2,484,302
Nisshinbo Industries 154,000 1,217,082
Nitto Denko Corp. 97,000 1,512,581
Nomura Securities Co. Ltd. 664,000 11,609,217
Omron Corp. 139,000 2,660,131
Orix Corp. 242,000 8,061,901
Pioneer Electronic Corp. 241,000 4,099,704
Rohm Co. Ltd. 120,000 6,209,096
Sankyo Co. Ltd. 258,300 6,011,235
Sanwa Bank Ltd. 95,000 1,795,629
Seino Transpotation Co. Ltd. 144,000 2,432,605
Sony Corp. 209,700 10,082,445
Sumitomo Marine and Fire
Insurance Co. Ltd. 420,000 3,339,160
Sumitomo Realty &
Development Co. Ltd. 648,000 3,873,452
Sumitomo Rubber Industries Ltd. 185,000 1,376,846
Sumitomo Trust & Banking Co. Ltd. 363,000 4,416,893
Suzuki Motor Corp. 228,000 2,545,303
SHARES VALUE (NOTE 1)
JAPAN - CONTINUED
TDK Corp. 88,000 $ 4,012,759
Takashimaya Co. Ltd. 198,000 2,666,510
Takeda Chemical Industries Ltd. 397,000 5,252,687
Tokio Marine & Fire
Insurance Co. Ltd. (The) 1,065,000 12,228,948
Toshiba Corp. 1,626,000 10,314,970
Toyota Motor Corp. 474,000 9,407,208
Tsugami Corp. 253,000 911,577
Yamanouchi Pharmaceutical Co. Ltd. 302,000 6,814,177
238,235,020
KOREA (SOUTH) - 0.8%
Cho Hung Bank Co. Ltd. 191,504 2,273,043
Korea Electric Power Corp. (a) 147,470 5,647,716
Korea First Securities Co. Ltd. 14,218 187,136
Kyungki Bank (a) 171,523 1,628,705
Seoul Securities Co. 74,592 924,714
10,661,314
MEXICO - 1.2%
Banacci SA de CV:
Class B 352,200 540,979
Class L 17,610 26,767
Cemex SA, Series B 1,071,800 3,875,630
Cifra SA Class C 1,559,100 2,055,517
Consorcio G Grupo Dina SA ADR 34,800 108,750
Empresas Ica Sociedad Controladora
SA de CV sponsored ADR
representing Ord. (part. cert.) 208,700 2,139,175
Grupo Carso SA de CV Class A-1 (a) 287,800 1,574,842
Grupo Dina sponsored ADR, Series L 12,543 25,086
Grupo Financiero Bancomer SA de CV:
Class B (a) 4,451,800 1,303,487
Series L (a) 216,878 57,256
sponsored ADR, Series C (a) (d) 70,200 412,425
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 93,200 2,761,050
14,880,964
MALAYSIA - 0.9%
Kuala Lumpur Industries Holdings BHD (a) 290,000 394,913
Magnum Corp. BHD 567,500 1,326,804
Malaysian Banking BHD 133,000 1,052,871
Resorts World BHD 443,000 2,598,399
Telekom Malaysia BHD 614,000 4,659,149
Tenega Nasional BHD 251,000 1,024,384
Time Engineering BHD 161,000 541,509
11,598,029
NETHERLANDS - 6.9%
ABN-AMRO Holdings NV 46,500 1,796,666
Aegon NV Ord. 68,250 2,363,636
AKZO NV Ord. 103,800 12,420,856
Heineken NV 24,200 3,666,667
IHC Caland NV 48,300 1,373,134
International Nederlanden Groep NV 249,108 13,793,730
KLM Royal Dutch Airlines Ord. (a) 198,200 6,441,468
Koninklijke PPT Nederland 221,500 7,971,539
Koninklijke PPT Nederland (a) (d) 80,600 2,900,705
Oce Van der Grinten NV 136,700 7,719,571
Pirelli Tyre Holdings NV Ord. (a) 633,700 4,258,242
Royal Dutch Petroleum Co. Ord. 50,900 6,222,317
Unilever NV Ord. 122,000 15,891,452
Vendex International Bearer (a) (d) 81,400 2,156,361
88,976,344
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NETHERLANDS ANTILLES - 0.3%
Schlumberger Ltd. 68,200 $ 4,236,925
NORWAY - 2.4%
Bergesen Group:
Class A 35,500 807,408
Class B 301,600 6,859,557
Christiania Bank Free shares Ord. 1,475,000 3,426,617
Den Norske Bank Class A Free shares 1,146,800 3,111,291
Norsk Hydro AS 100,850 4,218,809
Orkla AS:
Class A Free shares 93,250 4,173,564
Class B (non-vtg.) 47,800 2,026,773
Saga Petroleum AS Class B 261,600 3,463,634
Unitor AS 192,300 3,358,339
31,445,992
PAKISTAN - 0.1%
Pakistan Telecommunications Voucher
GDR (a) (d) 8,630 837,110
PHILLIPINES - 0.1%
Philippine Long Distance Telephone Co.
sponsored ADR 21,500 1,542,625
SINGAPORE - 1.0%
Jardine Matheson Holdings Ltd. Ord. 506,659 3,723,944
Kim Engineering Holdings Ltd. 2,455,000 2,565,721
Neptune Orient Lines Ltd. 3,377,000 3,916,071
Overseas Union Bank Ltd. (For.) 265,000 1,669,291
Van Der Horst Ltd. 156,000 748,174
12,623,201
SOUTH AFRICA - 0.0%
De Beers Consolidated Mines Ltd. ADR 24,000 621,000
SPAIN - 4.2%
Banco Bilbao Vizcaya SA Ord. (Reg.) 349,100 10,102,294
Banco Intercontinental Espanol 59,550 5,374,415
Corporacion Mapfrecia International
de Reaseguros SA (Reg.) 183,400 9,035,230
EL Aguila SA (a) 56,540 423,669
Repsol SA Ord. 172,500 5,441,730
Tabacalera SA, Series A 205,200 7,696,592
Telefonica de Espana SA Ord. 845,150 10,916,448
Union Electrica Fenosa SA 1,216,100 5,719,270
54,709,648
SWEDEN - 3.5%
Electrolux AB 117,600 5,358,737
Investor AB Class B Free shares 314,700 9,097,942
Mo Och Domsjoe (MoDo) Class B
Free shares 83,100 4,799,104
SKF AB Ord. 75,800 1,533,959
Skandia International Holding 35,400 687,147
Svenska Cellulosa Aktiebolaget SCA
Class B Ord. 362,700 6,740,754
Skandinaviska Enskilda Banken
Class A Free shares 948,300 4,934,745
Volvo AB Class B 637,400 12,153,153
45,305,541
SWITZERLAND - 9.8%
Adia SA (Bearer) (a) 54,800 11,403,744
Alusuisse-Lonza Holding AG (Reg.) 15,939 10,019,990
Baloise Holding (Reg.) 5,635 12,879,299
CIBA-GEIGY AG (Reg.) 14,380 10,567,453
C. S. Holdings (Reg.) 258,405 23,736,812
Fischer (Georg) AG (Reg.) 12,400 3,228,211
Holderbank Financiere Glarus
AG (Bearer) 2,825 2,324,445
SHARES VALUE (NOTE 1)
SWITZERLAND - CONTINUED
Holderbank Financial Glarus
(warrants) (a) 14,125 $ 19,678
Nestle SA (Reg.) 18,800 19,626,644
Roche Holdings Ltd. (part. certs.) 1,700 10,990,422
Surveillance, Societe Generale (Bearer) 1,010 1,758,816
Swiss Bank Corp. (Bearer) 43,450 15,435,437
Zurich Versicherung (Reg.) 3,405 4,289,973
126,280,924
THAILAND - 1.6%
Bank of Asia PCL (For. Reg.) 354,310 1,004,727
Krung Thai Bank (For. Reg.) 1,698,840 6,882,069
Ruam Pattana Fund II (For. Reg.) (a) 1,117,000 712,691
Ruang Khao Unit Trust (For. Reg.) (a) 836,800 601,709
Siam City Bank PCL (For. Reg.) 6,828,500 9,405,234
Telecomasia Corp. PCL (For. Reg.) (a) 394,000 1,460,440
20,066,870
TURKEY - 0.3%
Aksigorta (a) 280,000 54,463
Aksigoria (a) (d) 952,000 185,174
Cimentas AS (a) 500,000 322,290
Tofas Turk Otomobil Fabrikasi
AS ADR (a) (d) 165,600 712,080
Tofas Turk Otomobil Fabrikasi AS (a) 2,400,600 2,117,473
3,391,480
UNITED KINGDOM - 12.4%
Argyll Group PLC Ord. 626,900 3,353,633
Avon Rubber 81,900 666,007
BTR PLC Ord. 625,100 3,184,528
Barclays PLC Ord. 980,300 10,558,664
Bass PLC Ord. 763,700 7,324,586
Berkeley Group PLC 159,600 904,685
Booker PLC 364,200 2,415,782
Boots Co. PLC 287,600 2,334,164
British Land Ord. 289,500 1,844,124
Burmah Oil 190,700 2,768,567
Cadbury-Schweppes PLC Ord. 955,700 6,994,539
Commercial Union PLC (a) 225,100 2,099,695
De La Rue PLC 488,300 7,287,643
Dixons Group PLC 937,500 3,826,800
Forte PLC 1,806,100 6,551,610
Glaxo Holdings PLC Ord. 378,100 4,651,224
Great Universal Stores PLC Ord Class A 381,600 3,574,711
Guinness PLC Ord. 1,154,300 8,705,719
Hanson Trust PLC Ord. 674,000 2,358,953
Iceland Group PLC 637,600 1,829,976
Lasmo PLC 858,400 2,347,355
Ladbroke Group PLC Ord. 1,032,400 2,782,019
Lloyds Abbey Life PLC 549,600 3,426,481
London International Group PLC 2,561,200 4,492,217
National Westminster Bank PLC Ord. 1,097,920 9,567,209
Nurdin & Peacock PLC Ord. 375,000 1,046,393
North West Water Group PLC Ord. 337,700 2,988,469
Redland PLC Ord. 147,800 969,770
Rolls Royce PLC Ord. 874,433 2,433,022
Royal Insurance Holdings PLC 992,600 4,890,550
Sainsbury (J.) PLC Ord. 566,367 3,987,065
Scottish Hydro-Electric PLC Ord. 723,700 3,681,071
Scottish Power PLC ADR 960,500 4,954,461
Shell Transport & Trading PLC 581,900 6,972,716
TSB Group PLC 300 1,155
Tesco PLC Ord. 1,425,100 6,589,734
Unigate Ltd. Ord. 312,800 2,022,471
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UNITED KINGDOM - CONTINUED
Vodafone Group PLC 1,890,600 $ 7,039,006
Whitbread Co. PLC Class A 715,700 6,847,100
160,273,874
TOTAL COMMON STOCKS
(Cost $1,041,443,013) 1,149,740,937
NONCONVERTIBLE PREFERRED STOCKS - 2.5%
AUSTRIA - 0.5%
Creditanstalt Bankverein 105,900 6,099,579
GERMANY - 0.5%
Henkel KGAA 10,300 3,974,013
Porsche AG Ord. (a) 6,050 2,638,622
6,612,635
ITALY - 1.5%
Banco Ambro Veneto 1,197,000 1,627,788
Fiat Spa 1,350,600 2,937,514
SAI Sta Assicuratrice Industriale Spa 650,500 2,800,526
Stet (Societa Finanziaria Telefonica) Spa 5,075,300 11,278,078
18,643,906
KOREA (SOUTH) - 0.0%
Korea First Securities Co. Ltd. 68,124 575,898
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $29,697,172) 31,932,018
FOREIGN GOVERNMENT OBLIGATIONS (F) - 1.1%
MOODY'S PRINCIPAL VALUE
RATINGS (C) AMOUNT (NOTE 1)
ARGENTINA - 0.3%
Argentina Republic BOCON
6.0625%, 4/1/01 (e) B1 $ 5,993,570 3,738,969
BRAZIL - 0.2%
Brazil Federative Republic IDU
euro 6.6875%, 1/1/01 (e) B1 2,570,500 2,069,253
DENMARK - 0.3%
Danish Government Bullet
7%, 12/15/04 Aa1 DKK 25,000,000 4,181,735
FRANCE - 0.3%
French Government Strips
4/25/23 Aaa FRF 168,000,000 3,508,764
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(Cost $14,123,089) 13,498,721
REPURCHASE AGREEMENTS - 7.2%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations), in a joint
trading account at 6.22% dated
6/30/95 due 7/3/95 $ 92,390,864 92,343,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,177,606,274) $ 1,287,514,676
FORWARD FOREIGN CURRENCY CONTRACTS
SETTLEMENT UNREALIZED
DATE(S) VALUE GAIN/(LOSS)
CONTRACTS TO SELL
810,720,000 ESP 7/12/95 $ 6,704,431 $ (278,432)
228,920,092 FRF 8/16/95 47,220,286 (1,965,746)
2,043,255,600 JPY 7/11/95 24,176,080 411,833
TOTAL CONTRACTS TO SELL-
(Receivable amount $76,268,452) $ 78,100,797 $ (1,832,345)
THE VALUE OF CONTRACTS TO SELL AS A PERCENTAGE OF TOTAL INVESTMENT IN
SECURITIES - 6.1%
CURRENCY ABBREVIATIONS
DKK - Danish krone
ESP - Spanish peseta
FRF - French franc
JPY - Japanese yen
LEGEND
(a) Non-income producing
(b) Principal amount is stated in United States dollars unless otherwise
noted.
(c) Standard & Poor's Corporation credit ratings are used in the absence
of a rating by Moody's Investors Service, Inc.
(d) 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 $12,602,067 or 1.0% of net
assets.
(e) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(f) Some foreign government obligations have not been individually rated
by S&P or Moody's. The ratings listed are assigned to securities by FMR,
the fund's investment adviser, based principally on S&P and Moody's ratings
of the sovereign credit of the issuing government.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $307,494,270 and $257,850,752, 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 $152,215 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At June 30, 1995, the aggregate cost of investment securities for income
tax purposes was $1,177,807,984. Net unrealized appreciation aggregated
$109,706,692, of which $162,739,035 related to appreciated investment
securities and $53,032,343 related to depreciated investment securities.
INDUSTRY DIVERSIFICATION
As a Percentage of Total Value of Investments
Basic Industries 6.2
Construction & Real Estate 3.2
Durables 8.1
Energy 5.1
Finance 26.4
Government Obligations 1.1
Health 3.4
Holding Companies 1.0
Industrial Machinery & Equipment 2.8
Media & Leisure 2.4
Nondurables 8.4
Retail & Wholesale 4.8
Services 3.0
Repurchase Agreements 7.2
Technology 4.9
Transportation 2.8
Utilities 8.8
Others (individually less than 1%) 0.4
Total 100.0%
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 1995 (UNAUDITED)
ASSETS
Investment in securities, at value (including repurchase agreements of $92,343,000) (cost $1,177,606,274) - $ 1,287,514,676
See accompanying schedule
Cash 655
Receivable for investments sold 20,207,922
Unrealized appreciation on foreign currency contracts 411,833
Dividends receivable 7,490,524
Interest receivable 304,815
TOTAL ASSETS 1,315,930,425
LIABILITIES
Payable for investments purchased $ 10,265,923
Unrealized depreciation on foreign currency contracts 2,244,178
Payable for fund shares redeemed 5,303,385
Accrued management fee 832,243
Other payables and accrued expenses 336,394
TOTAL LIABILITIES 18,982,123
NET ASSETS $ 1,296,948,302
Net Assets consist of:
Paid in capital $ 1,177,330,987
Undistributed net investment income 11,730,370
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (279,038)
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 108,165,983
NET ASSETS, for 80,033,348 shares outstanding $ 1,296,948,302
NET ASSET VALUE, offering price and redemption price per share ($1,296,948,302 (divided by) 80,033,348 shares) $16.21
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
INVESTMENT INCOME $ 21,509,202
Dividends
Interest 4,660,220
26,169,422
Less foreign taxes withheld (2,979,305)
TOTAL INCOME 23,190,117
EXPENSES
Management fee $ 4,861,229
Transfer agent fees 316,317
Accounting fees and expenses 267,409
Non-interested trustees' compensation 3,447
Custodian fees and expenses 311,947
Registration fees 24
Audit 22,683
Legal 2,524
Miscellaneous 2,230
TOTAL EXPENSES 5,787,810
NET INVESTMENT INCOME 17,402,307
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 6,935,354
Foreign currency transactions (6,677,005) 258,349
Change in net unrealized appreciation (depreciation) on:
Investment securities 37,408,823
Assets and liabilities in foreign currencies (2,727,346) 34,681,477
NET GAIN (LOSS) 34,939,826
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 52,342,133
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
Operations $ 17,402,307 $ 14,354,948
Net investment income
Net realized gain (loss) 258,349 1,588,422
Change in net unrealized appreciation (depreciation) 34,681,477 (19,420,073)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 52,342,133 (3,476,703)
Distributions to shareholders (4,893,543) (4,465,195)
From net investment income
From net realized gain (1,797,170) -
In excess of net realized gain (3,096,373) -
TOTAL DISTRIBUTIONS (9,787,086) (4,465,195)
Share transactions 235,046,856 1,000,905,405
Net proceeds from sales of shares
Reinvestment of distributions 9,787,086 4,465,195
Cost of shares redeemed (288,141,738) (477,688,222)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (43,307,796) 527,682,378
TOTAL INCREASE (DECREASE) IN NET ASSETS (752,749) 519,740,480
NET ASSETS
Beginning of period 1,297,701,051 777,960,571
End of period (including undistributed net investment income of $11,730,370 and $10,987,509,$ 1,296,948,302 $ 1,297,701,051
respectively)
OTHER INFORMATION
Shares 15,188,474 62,240,900
Sold
Issued in reinvestment of distributions 652,472 274,107
Redeemed (18,619,209) (29,967,241)
Net increase (decrease) (2,778,263) 32,547,766
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE 30,
1995
SELECTED PER-SHARE DATA (UNAUDITED) 1994 1993 E 1992 1991 1990
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42 $ 12.67
Income from Investment Operations
Net investment income .07 .19 .06 .16 .24 .18
Net realized and unrealized gain (loss) .59 .08 C 4.16 (1.54) .74 (.39)
Total from investment operations .66 .27 4.22 (1.38) .98 (.21)
Less Distributions (.06) (.08) (.18) (.18) (.17) (.04)
From net investment income
In excess of net investment income - - (.04) - - -
From net realized gain (.02) - - - (.14) D -
In excess of net realized gain (.04) - (.05) - - -
Total distributions (.12) (.08) (.27) (.18) (.31) (.04)
Net asset value, end of period $ 16.21 $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42
TOTAL RETURN B 4.27% 1.72% 37.35% (10.72) 8.00% (1.67)
% %
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,296,948 $ 1,297,701 $ 777,961 $ 180,837 $ 126,490 $ 80,554
Ratio of expenses to average net assets .91% A .92% 1.03% 1.14% 1.26% 1.41%
Ratio of net investment income to average net assets 2.74% A 1.28% 1.21% 1.86% 2.33% 1.89%
Portfolio turnover rate 46% A 42% 42% 61% 168% 100%
A ANNUALIZED
B TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. 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 THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD
ENDED DUE TO THE TIMING OF SALES AND
REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
D INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
E 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.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended June 30, 1995 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES.
The Money Market Portfolio, High Income Portfolio, Equity-Income Portfolio,
Growth Portfolio and Overseas Portfolio (the funds) are funds of Variable
Insurance Products Fund (the trust). The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business trust.
Each fund is authorized to issue an unlimited number of shares. Shares of
each fund may only be purchased by insurance companies for the purpose of
funding variable annuity or variable life insurance contracts. The
following summarizes the significant accounting policies of the funds:
SECURITY VALUATION:
MONEY MARKET PORTFOLIO. As permitted under Rule 2a-7 of the 1940 Act, and
certain conditions therein, securities are valued initially at cost and
thereafter assume a constant amortization to maturity of any discount or
premium.
HIGH INCOME PORTFOLIO. 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
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus interest, both of which approximate current
value.
EQUITY-INCOME AND GROWTH PORTFOLIOS. Securities for which exchange
quotations are readily available are valued at the last sale price, or if
no sale price, at the closing bid price. Securities for which exchange
quotations are not readily available (and in certain cases debt securities
which trade on an exchange), are valued primarily using dealer-supplied
valuations or at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees. Short-term securities maturing within sixty days of their
purchase date are valued at amortized cost or original cost plus accrued
interest, both of which approximate current value.
OVERSEAS PORTFOLIO. Securities for which quotations are readily available
are valued at the last sales price, or if no sale price, at the closing bid
prices in the principal market in which such securities are normally
traded. Securities for which market quotations are not readily available
are valued
primarily using dealer-supplied valuations or at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases and
sales of securities, income receipts, and expense payments are translated
into U.S. dollars at the prevailing exchange rate on the respective dates
of the transactions.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of net investment income accrued and
the U.S. dollar amount actually received. The effects of changes in foreign
currency exchange rates on investments in securities are included with the
net realized and unrealized gain or loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under Subchapter
M of the Internal Revenue Code, each fund is not subject to income taxes to
the extent that it distributes substantially all of its taxable income for
the fiscal year. The schedules of investments include information regarding
income taxes under the caption "Income Tax Information."
INVESTMENT INCOME:
MONEY MARKET PORTFOLIO. Interest income, which includes amortization of
premium and accretion of original issue discount, is accrued as earned.
HIGH INCOME, EQUITY-INCOME, GROWTH AND OVERSEAS PORTFOLIOS. Dividend income
is recorded on the ex-dividend date, except certain dividends from foreign
securities where the ex-dividend date may have passed, are recorded as soon
as the funds are informed of the ex-dividend date. Interest income, which
includes accretion of original issue discount, is accrued as earned.
Investment income is recorded net of foreign taxes withheld where recovery
of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income for the Money Market Portfolio.
Distributions are recorded on the ex-dividend date for all other funds.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, passive foreign investment companies (PFIC), market
discount, partnerships, non-taxable dividends and losses deferred due to
wash sales and excise tax regulations.
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.
FORWARD FOREIGN CURRENCY CONTRACTS. The funds, except for the Money Market
Portfolio, may use foreign currency contracts to facilitate transactions in
foreign securities and to manage the funds' currency exposure. Contracts to
buy generally are used to acquire exposure to foreign currencies, while
contracts to sell are used to hedge the funds' investments against currency
fluctuations. Also, a contract to buy or sell can offset a previous
contract. These contracts involve market risk in excess of the unrealized
gain or loss reflected in the funds' Statement of Assets and Liabilities.
The U.S. dollar value of the currencies each applicable fund has committed
to buy or sell is shown in the schedule of investments under the caption
"Forward Foreign Currency Contracts." This amount represents the aggregate
exposure to each currency acquired or hedged through currency contracts at
period end. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
Contracts that have been offset with different counterparties are reflected
as both a contract to buy and a contract to sell in each applicable fund's
schedule of investments under the caption "Forward Foreign Currency
Contracts."
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into one or more joint trading accounts. These
balances are invested in one or more repurchase agreements that mature in
60 days or less from the date of purchase, and are collateralized by U.S.
Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying securities, whose market value is required to be at least
102% of the resale price at the time of purchase. FMR, the funds'
investment adviser, is responsible for determining that the value of these
underlying securities remains at least equal to the resale price.
INDEXED SECURITIES. The funds, (excluding the Money Market Portfolio) may
invest in indexed securities whose values are linked either directly or
inversely to changes in foreign currencies, interest rates, commodities,
indices, or other underlying instruments. The funds use these securities to
increase or decrease their exposure to different underlying instruments and
to gain exposure to markets that might be difficult to invest in through
conventional securities. Indexed securities may be more volatile than their
underlying instruments, but any loss is limited to the amount of the
original investment.
RESTRICTED SECURITIES. The funds are permitted to invest in privately
placed restricted securities. These securities 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 $20,998,411 or 2.7% of net assets for the Money Market
Portfolio and $15,265,476 or 1.9% of net assets for the High Income
Portfolio.
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly
fee.
For the Money Market Portfolio, FMR receives a monthly fee that is
calculated on the basis of a basic fund fee rate of .03% of the fund's
average net assets, plus a fixed income group fee rate and an income-based
fee. The group fee rate is the weighted average of a series of rates
ranging from .1200% to .3700% and is based on the monthly average net
assets of all the mutual funds advised by FMR. The income-based fee is
added only when the 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
3. FEES AND OTHER TRANSACTIONS
WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
income-based component is .24% of average net assets. For the period, the
management fee was equivalent to an annualized rate of .25% of average net
assets.
For all other funds, FMR receives a monthly fee that is calculated on the
basis of a group fee rate plus a fixed individual fund fee rate applied to
the average net assets of the fund. The group fee rate is the weighted
average of a series of rates and is based on the monthly average net assets
of all the mutual funds advised by FMR. The rates ranged from .1200% to
.3700% for the High Income Portfolio and .2700% to .5200% for the
Equity-Income, Growth and Overseas Portfolios for the period. In the event
that these rates were lower than the contractual rates in effect during the
period, FMR voluntarily implemented the above rates, as they resulted in
the same or a lower management fee. The annual individual fund fee rates
are .20%, .30%, .45% and .45% for the Equity-Income, Growth, Overseas, and
High Income Portfolios, respectively. For the period, the management fees
were equivalent to annualized rates of .60%, .52%, .62%, and .77% of
average net assets for the High Income, Equity-Income, Growth, and Overseas
Portfolios, respectively.
SUB-ADVISER FEE. As the Money Market Portfolio's investment sub-adviser,
FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR
of 50% of the management fee payable to FMR. The fees are paid prior to any
voluntary expense reimbursements which may be in effect, and after reducing
the fee for any payments by FMR pursuant to the fund's Distribution and
Service Plan.
FMR, on behalf of the High Income and Overseas Portfolios, entered into
sub-advisory agreements with affiliates of FMR. In addition, one of the
sub-advisers of the Overseas Portfolio, Fidelity International Investment
Advisors (FIIA), entered into a sub-advisory agreement with its subsidiary,
Fidelity International Investment Advisors (U.K.) Limited (FIIAL U.K.).
Under the sub-advisory arrangements, FMR may receive investment advice and
research services and may grant the sub-advisers investment management
authority to buy and sell securities. FMR pays its sub-advisers either a
portion of its management fee or a fee based on costs incurred for these
services. FIIA pays FIIAL U.K. a fee based on costs incurred for either
service.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. Effective January 1, 1995, the Board of
Trustees approved a revised transfer agent contract pursuant to which FIIOC
receives account fees and asset-based fees that vary according to account
size and type of account. Under the prior transfer agent contract, FIIOC
received fees based on the type, size, number of accounts, and number of
transactions made by shareholders. FIIOC pays for typesetting, printing and
mailing of all shareholder reports, except proxy statements.
ACCOUNTING FEES. Fidelity Service Co.(FSC) an affiliate of FMR, maintains
the funds' accounting records. The fee is based on the level of average net
assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms are shown under the caption
"Other Information" at the end of each applicable fund's schedule of
investments.
4. BANK BORROWINGS.
Each fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. Each fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, each fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. For
the High Income and Equity-Income portfolios, the maximum loans during the
periods for which loans were outstanding amounted to $4,885,000 and
$18,269,000 respectively, and the average daily loan balances were
$4,885,000 and $18,269,000, respectively. The weighted average interest
rate was 6.4% for both the High Income Portfolio and for the Equity-Income
Portfolio.
5. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the funds' operating expenses
(excluding interest, taxes, brokerage commissions and extraordinary
expenses) above an annual rate of 1.00% of average net assets for the High
Income Portfolio and 1.50% of average net assets for the Equity-Income,
Growth, and Overseas Portfolios. For the period, there was no reimbursement
under this arrangement.
FMR has directed certain portfolio trades of the High Income Portfolio to
brokers who paid a portion of the fund's expenses. For the period, the High
Income Portfolio's expenses were reduced by $5,422 under this agreement.
6. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI), an affiliate of FMR, was the record owner of more than 5% of the
outstanding shares and certain unaffiliated insurance companies were record
owners of approximately 10% of the total outstanding shares of the
following funds:
FILI UNAFFILIATED INSURANCE COMPANIES
FUND % OF OWNERSHIP # OF % OF OWNERSHIP
Money Market 48 1 16
High Income 17 1 41
Equity-Income 26 1 30
Growth 17 1 31
Overseas 15 1 40
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 each applicable fund's schedule of investments.
8. TRANSACTIONS WITH AFFILIATED COMPANIES.
Information regarding transactions with affiliated companies is included
under the caption "Other Information" at the end of each applicable fund's
schedule of investments.
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
Fred L. Henning, Jr., VICE PRESIDENT, MONEY MARKET PORTFOLIO
Robert A. Lawrence, VICE PRESIDENT
Lawrence Greenberg, VICE PRESIDENT
Barry J. Coffman, VICE PRESIDENT
Robert Litterst, VICE PRESIDENT
John R. Hickling, VICE PRESIDENT
Bettina Doulton, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Stephen P. Jonas, TREASURER
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
Michael D. Conway, ASSISTANT TREASURER, MONEY MARKET PORTFOLIO
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
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Co.
Boston, MA
CUSTODIAN
Morgan Guaranty Trust Company of New York,
New York, NY
MONEY MARKET PORTFOLIO
The Bank of New York, New York, NY
HIGH INCOME PORTFOLIO
The Chase Manhattan Bank, N.A., New York, NY
EQUITY-INCOME AND OVERSEAS PORTFOLIOS
Brown Brothers Harriman & Co., Boston, MA
GROWTH PORTFOLIO
