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[LETTERHEAD OF PROVIDIAN CORPORATION] [LOGO]
February 1996
Dear Valued Customer:
Enclosed are the annual reports for the portfolios available in your Providian
Life and Health variable annuity contract.
Please take some time to review these reports, and if you have any questions,
just call one of our customer service representatives at 1-800-866-6007, 8 a.m.
to 6 p.m. EST, Monday through Friday.
Providian Life and Health is proud to have you as our customer.
Sincerely,
Jeff Lammers
Senior Vice President
National Sales Director
Providian Life and Health Insurance Company provides the variable annuity.
Securities are offered through Providian Securities Corporation, 400 West Market
Street, Louisville, KY 40202. Both are subsidiaries of Providian Corporation.
(2_FIDELITY_LOGOS)
VARIABLE INSURANCE PRODUCTS
FUND
MONEY MARKET PORTFOLIO
HIGH INCOME PORTFOLIO
EQUITY-INCOME PORTFOLIO
GROWTH PORTFOLIO
OVERSEAS PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1995
CONTENTS
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MARKET ENVIRONMENT VIPF-3 A REVIEW OF WHAT HAPPENED DURING THE PAST YEAR
MONEY MARKET PORTFOLIO VIPF-4 PERFORMANCE
VIPF-5 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-6 INVESTMENTS
VIPF-9 FINANCIAL STATEMENTS
HIGH INCOME PORTFOLIO VIPF-11 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-12 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-13 INVESTMENTS
VIPF-19 FINANCIAL STATEMENTS
EQUITY-INCOME PORTFOLIO VIPF-21 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-22 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-23 INVESTMENTS
VIPF-27 FINANCIAL STATEMENTS
GROWTH PORTFOLIO VIPF-29 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-30 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-31 INVESTMENTS
VIPF-35 FINANCIAL STATEMENTS
OVERSEAS PORTFOLIO VIPF-37 PERFORMANCE AND INVESTMENT SUMMARY
VIPF-38 FUND TALK: THE MANAGER'S OVERVIEW
VIPF-39 INVESTMENTS
VIPF-44 FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS VIPF-46 NOTES TO THE FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS VIPF-50 THE AUDITORS' OPINION
DISTRIBUTIONS VIPF-51
</TABLE>
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS
NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
MARKET ENVIRONMENT
Most stock and bond markets rebounded in 1995, after experiencing
volatility and inconsistent returns in 1994. Returns were fueled by
declining interest rates, moderate economic growth, sustained corporate
earnings growth and a relative absence of inflation. The U.S. stock market
outpaced counterparts in the developed world and those in emerging markets.
Returns from bond markets overseas generally topped those provided by the
U.S., although the U.S. bond market still was quite strong.
U.S. STOCK MARKETS
The Standard & Poor's Composite Index of 500 Stocks - a broad measure of
U.S. stock performance - rose 37.58% for the 12 months ended December 31,
1995, well above the market's long-term average annual return. The NASDAQ
Composite Index - a measure of small stock performance - rose 39.92%
(excluding dividends). The Dow Jones Industrial Average - an index of 30
blue-chip stocks - posted a return of 36.72%, closing above 5000 for the
first time in November.
Strong corporate earnings and a favorable interest rate environment helped
the U.S. stock market post robust returns. With inflation posing little
threat, interest rates fell during much of 1995. The Federal Reserve Board
cut short-term interest rates twice, in July and December. Lower interest
rates helped bolster earnings, as they reduced companies' borrowing costs.
A relatively weak dollar also helped sustain earnings, with American
products and services remaining fairly cheap overseas. Investor sentiment
toward the stock market was extremely positive, evidenced by a flurry of
successful initial public offerings throughout the year.
Market activity was marked by rapid sector rotation, with investors
reacting swiftly to breaking news. Technology was one of the best
performing market sectors until the fourth quarter, fueled by improving
earnings associated with strong growth in personal computers and related
products. Internet-related stocks posted extremely strong share price
gains. Although increases in cellular subscriptions helped semiconductor
stocks earlier in the year, that industry saw share price drops later in
the year due to concerns about over-capacity. Expanding inventories and
evidence of an economic slowdown hurt technology stocks later in the year.
Biotechnology issues saw a resurgence, partly because the sector had
struggled to the point where valuations - stock prices relative to other
measures such as earnings - appeared attractive. Consumer nondurables -
such as food, beverage and tobacco companies - health care and traditional
big-name growth stocks showed strength as investors sought companies that
traditionally have steady earnings growth regardless of the economic
environment.
Cyclical stocks - those that usually rise and fall with the economy -
provided subpar returns during 1995 as a result of over-capacity and
evidence the economy was slowing. Industrial commodities, such as chemicals
and paper, faltered due to decreased demand, despite the prospect for
renewed economic growth - and concurrent future earnings growth - resulting
from interest rate declines. On the other hand, lower interest rates and
continued merger and acquisition activity helped financial stocks perform
well. Regional Bell operating companies - RBOCs or "Baby Bells"-performed
well in the second half of the year, because they offered strong yields,
and because of their potential for growth as they enter new businesses.
FOREIGN STOCK MARKETS
Foreign stock markets showed mixed results in 1995. The Morgan Stanley EAFE
(Europe, Australasia, Far East) index was up 11.21%. Although interest
rates declined in most European countries, economies were generally
stagnant. While equity indexes in some countries posted strong returns, in
some cases these results were due to the strong performance of large
companies that made up a significant portion of the index, such as Nokia in
Finland and Ericsson in Sweden. The Morgan Stanley Europe Index rose 21.62%
in 1995. Japanese companies were hindered by a strong yen - which made
their products expensive overseas - and a weak economy earlier in the year.
However, in the fourth quarter of the year, both the Japanese market and
economy started to rebound. According to Morgan Stanley Capital
International, Japanese stocks rose 0.69% in U.S. dollars for the year.
Emerging markets struggled in 1995, hurt by a lack of capital inflows
caused by Mexico's peso devaluation in December 1994. This negative
sentiment contributed to the -5.21% return of the Morgan Stanley Emerging
Markets Free Index in 1995.
U.S. BOND MARKETS
U.S. bond markets posted strong returns in 1995. The Lehman Brothers
Aggregate Bond Index - a broad measure of U.S. taxable bonds - posted a
total return of 18.47% in 1995. A strong, year-long rally helped bonds
recover from the effects of the sharply rising interest rates seen in 1994.
Indications of a slowing economy and a relative absence of inflation
pressures encouraged bond investors, helping to push interest rates lower.
Prospects for a balanced budget agreement also helped to fuel optimism in
the markets. Monetary policy also played a role in the bond market's
performance. In an effort to thwart the possibility of a recession, the
Federal Reserve Board lowered the fed funds rates twice, in July and
December. Mortgage-backed securities also benefited from this environment,
as illustrated by the performance of the Salomon Brothers Mortgage Index,
which returned 16.77% during the year. The high-yield bond market also
turned in a strong performance in 1995, driven by generally good earnings,
strong demand for high-yield bonds among investors searching for high
current income and declining interest rates. The Merrill Lynch High Yield
Master Index rose 19.91%.
FOREIGN BOND MARKETS
Both developed and emerging fixed-income markets recorded strong returns in
1995. For the 12 months ended December 31, 1995, the Salomon Brothers World
Government Bond Index - a proxy of bond market performance in developed
nations including the U.S. - rose 19.04%. Bond markets in developed
countries benefited from slow economic growth and relatively low inflation
pressures. This led to a more favorable interest rate environment, as the
central banks of the U.S., Germany and Great Britain all lowered their
respective short-term interest rates. Emerging markets shrugged off the
fallout from December 1994's Mexican peso devaluation to record strong
returns. The J.P. Morgan Emerging Markets Bond Index posted a 27.54% return
for the year. The bulk of emerging markets' total return came from a
springtime rally following the announcement of a $50 billion bailout
package for Mexico by the U.S. Treasury and the International Monetary
Fund.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
PERFORMANCE
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects both the change
in a fund's share price over a given period, and reinvestment of its
dividends (or income). Yield measures the income paid by a fund. Since a
money market fund tries to maintain a $1 share price, yield is an important
measure of performance.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
DECEMBER 31, 1995 YEAR YEARS YEARS
Money Market 5.87% 4.66% 6.09%
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.
Recent U.S. Consumer Price Index information is not available from the U.S.
Department of Labor. Therefore, the CPI comparison has not been included in
this report.AVERAGETURNS
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
If Fidelity had not reimbursed certain fund expenses, the past five and ten
year total returns would have been lower. Yield will vary.
YIELD
Row: 1, Col: 1, Value: 5.609999999999999
Row: 1, Col: 2, Value: 2.74
Row: 2, Col: 1, Value: 5.91
Row: 2, Col: 2, Value: 2.89
Row: 3, Col: 1, Value: 5.85
Row: 3, Col: 2, Value: 2.87
Row: 4, Col: 1, Value: 5.64
Row: 4, Col: 2, Value: 2.86
Row: 5, Col: 1, Value: 5.56
Row: 5, Col: 2, Value: 2.83
Money Market
MMDA
6% -
5% -
4% -
3% -
2% -
1% -
0%
12/28/94 3/29/95 6/28/95 9/27/95 12/27/95
Money Market 5.61% 5.91% 5.85% 5.64% 5.56%
MMDA 2.74% 2.89% 2.87% 2.86% 2.83%
YIELD refers to the income paid by the fund over a given period. Yields for
money market funds are usually for seven-day periods,
expressed as annual percentage rates. A yield that assumes income earned is
reinvested or compounded is called an effective yield. The chart above
shows the fund's current seven-day yield at quarterly intervals over the
past year. This is compared to similar yields for the average bank money
market deposit account (MMDA). The MMDA average is supplied by BANK RATE
MONITOR.(Trademark)
COMPARING PERFORMANCE
There are some important differences between
a bank money market deposit account (MMDA)
and a money market fund. First, the U.S.
government neither insures nor guarantees a
money market fund. In fact, there is no
assurance that a money fund will maintain a $1
share price. Second, a money market fund
returns to its shareholders income earned by the
fund's investments after expenses. This is in
contrast to banks, which set their MMDA rates
periodically based on current interest rates,
competitors' rates, and internal criteria.
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with
Bob Litterst, Portfolio
Manager of Money
Market Portfolio
Q. BOB, HOW HAVE MARKET CONDITIONS CHANGED DURING THE PAST YEAR?
A. Ironically, the interest rate banks charge each other for overnight
loans-known as the federal funds rate-ended the year exactly where it
started, at 5.50%. But if we compare market conditions a year ago to those
that prevailed at the close of the period, the difference is like night and
day. As 1995 began, the Fed was still in a restrictive mode, raising
interest rates as a means of slowing down the economic growth rate and
preventing an outbreak of inflation. After a torrid fourth quarter-during
which the economy expanded at an annual rate of more than 5%-most market
participants expected growth to continue at a fast pace and interest rates
to keep rising in 1995. That view was apparently confirmed when the Fed
increased the federal funds rate again in February to 6.00%. As it turned
out, however, that was the last rate increase in the cycle. Already, signs
of weakness were appearing among the key economic indicators, heralding a
dramatic slowdown in the first half of 1995.
Q. HOW DID THE FED REACT TO CHANGING CONDITIONS?
A. By gradually lowering interest rates. When growth slowed to an annual
growth rate of 1.3% during the second quarter of 1995, from 2.7% during the
first quarter, warnings arose from some quarters that the economy was in
danger of slipping back into recession. Such warnings were undoubtedly a
factor in the Fed's decision to lower the federal funds rate one-quarter
percentage point on July 6, 1995. Growth picked up again in the third
quarter, when the economy expanded at an annual rate of 4.2%. But
indications are that the fourth quarter numbers, when they're released in
January, will show a return to slower growth. The Fed apparently thinks so.
It lowered the federal funds rate another one-quarter percentage point on
December 19, 1995, bringing it back down to 5.50%. At present, conditions
appear stable, characterized by moderate growth, stable to declining
interest rates and mild inflation.
Q. HOW DID YOU POSITION THE FUND DURING THE PERIOD?
A. The fund's average maturity a year ago December, when the period began,
was 39 days. That's a rather defensive number and reflects my expectation
at the time that interest rates were likely to go higher. However, after
the Fed rate increase in February, I began extending the fund's average
maturity out towards 60 days. By then, market expectations for higher rates
struck me as too severe, and therefore unlikely to be realized. I shortened
up slightly during the third quarter in response to a shift in the money
market yield curve that favored shorter trades over longer trades. By
year-end, however, I was back out around 70 days. That's anywhere from 10
to 15 days longer than most other funds in my competitive universe, and
reflects my view that short-term rates are more likely to fall than rise
over the next six months.
Q. HOW HAS THE COMPOSITION OF ASSETS CHANGED DURING THE PERIOD?
A. The percentage of variable rate instruments has risen slightly since
last fall to around 23%. Variable rate securities have interest rates that
reset at daily, weekly, monthly and quarterly intervals. Most of those the
fund invests in are pegged to traditional money market interest rates, such
as the federal funds rate, the prime rate and the London Interbank Offered
Rate, or LIBOR. In the current environment, with interest rates likely to
keep falling, I've tended to favor variable rate securities that reset
quarterly over those that reset more frequently.
Q. WHAT'S THE OUTLOOK?
A. Not at all what it was a year ago, at least for the short-term. I'm
basing my investment decisions on the likelihood of continued moderate
growth, stable to declining interest rates and mild inflationary pressures.
I think there's a good chance the Fed will lower interest rates at least
one more time, possibly if and when the warring parties in Washington
finally agree on a balanced budget. The Fed has long been an advocate of a
balanced budget, and would likely respond to a credible agreement with a
rate cut. On the other hand, with the economy expanding near the Fed's
target growth rate and little chance of a recession, I don't expect further
dramatic reductions in interest rates. That's why I'll likely keep the
fund's average around 60 days, possibly longer. That puts the fund in a
good position to benefit from stable to declining rates while leaving me
with some flexibility to respond if market conditions suddenly change.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: income and share price stability by
investing in high quality, short-term instruments
START DATE: April 1, 1982
SIZE: As of December 31, 1995, more than
$808 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 DECEMBER 31, 1995
Showing Percentage of Total Value of Investment in Securities
BANKERS' ACCEPTANCES - 0.3%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
DOMESTIC BANKERS' ACCEPTANCES
CHEMICAL BANK
1/31/96 5.94% $ 524,312 $ 521,619
3/26/96 5.88 2,000,000 1,972,354
TOTAL BANKERS' ACCEPTANCES 2,493,973
CERTIFICATES OF DEPOSIT - 22.2%
NEW YORK BRANCH, EURODOLLAR, DOMESTIC BANKS - 0.6%
BANK OF NEW YORK
5/9/96 5.65 5,000,000 5,009,008
NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 11.6%
BANQUE NATIONALE DE PARIS
2/9/96 5.80 1,000,000 1,001,059
BAYERISCHE HYPOTHEKEN-UND WESCHEL
4/12/96 5.77 10,000,000 10,000,281
BAYERISCHE LANDESBANK GIROZENTRALE
10/30/96 5.87 10,000,000 10,000,000
BAYERISCHE VEREINSBANK A.G.
1/4/96 5.95 10,000,000 10,000,000
COMMERZBANK, GERMANY
3/8/96 5.80 5,000,000 5,007,235
DEUTSCHE BANK, A.G.
4/22/96 5.77 5,000,000 5,000,000
DRESDNER BANK, A.G.
3/15/96 5.87 3,000,000 3,003,713
3/15/96 6.44 1,000,000 1,000,257
ROYAL BANK OF CANADA
3/27/96 5.75 5,000,000 5,000,000
SOCIETE GENERALE
1/16/96 5.84 5,000,000 5,000,000
SWISS BANK CORP.
2/29/96 5.73 15,000,000 15,000,000
3/25/96 5.75 5,000,000 5,000,000
5/6/96 5.47 (c) 10,000,000 10,000,000
WESTDEUTSCHE LANDESBANK
4/3/96 5.78 5,000,000 5,009,308
WESTPAC BANKING CORP.
4/3/96 5.68 5,000,000 5,010,707
95,032,560
LONDON BRANCH, EURODOLLAR, DOMESTIC BANKS - 2.5%
CHEMICAL BANK
3/27/96 5.81 10,000,000 10,000,000
MORGAN GUARANTY TRUST CO.
2/7/96 5.78 5,000,000 5,000,104
4/4/96 5.74 5,000,000 5,000,564
20,000,668
LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 7.5%
ABN-AMRO BANK
3/13/96 5.72 3,000,000 3,000,975
4/22/96 5.70 1,000,000 1,000,104
ABBEY NATIONAL (UK), PLC
4/9/96 5.77 5,000,000 4,998,282
4/23/96 5.75 5,000,000 5,000,000
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
BAYERISCHE HYPOTHEKEN-UND WESCHEL
2/26/96 5.74% $ 10,000,000 $ 10,000,115
2/28/96 5.74 5,000,000 5,000,081
DEUTSCHE BANK, A.G.
2/26/96 5.76 10,000,000 10,000,198
3/1/96 5.72 5,000,000 4,999,993
LANDESBANK HESSEN - THURINGEN
3/14/96 5.71 5,000,000 5,000,050
NORDDEUTSCHE LANDESBANK
4/29/96 5.70 2,000,000 2,000,324
ROYAL BANK OF SCOTLAND, PLC
3/18/96 5.71 5,000,000 5,000,000
TORONTO-DOMINION BANK
2/26/96 5.71 5,000,000 5,001,789
61,001,911
TOTAL CERTIFICATES OF DEPOSIT 181,044,147
COMMERCIAL PAPER - 54.4%
A.H. ROBINS COMPANY, INCORPORATED
2/6/96 5.80 5,740,000 5,705,343
AT&T CAPITAL CORP.
2/5/96 5.78 4,000,000 3,976,566
2/5/96 5.78 6,000,000 5,964,788
3/8/96 5.63 4,000,000 3,957,297
3/27/96 5.58 10,000,000 9,865,556
AVCO FINANCIAL SERVICES, INC.
3/5/96 5.76 5,000,000 4,948,025
AMERICAN EXPRESS CREDIT CORP.
3/1/96 5.80 5,000,000 4,951,433
3/13/96 5.72 5,000,000 4,942,342
AMERICAN HOME PRODUCTS
2/2/96 5.79 9,500,000 9,448,679
2/6/96 5.85 2,000,000 1,987,851
2/7/96 5.85 1,000,000 993,765
3/7/96 5.77 8,300,000 8,211,264
4/3/96 5.71 4,000,000 3,940,888
AMERICAN TELEPHONE & TELEGRAPH
3/14/96 5.75 5,000,000 4,941,354
3/14/96 5.80 5,000,000 4,941,146
3/25/96 5.77 10,000,000 9,865,745
ASSOCIATES CORP. OF NORTH AMERICA
3/14/96 5.72 5,000,000 4,941,562
3/15/96 5.75 7,000,000 6,916,210
4/8/96 5.67 5,000,000 4,922,778
4/11/96 5.64 5,000,000 4,920,890
BENEFICIAL CORP.
2/13/96 5.86 5,000,000 4,963,750
BRADFORD & BINGLEY BUILDING SOCIETY
2/6/96 5.76 3,000,000 2,982,014
2/8/96 5.75 10,000,000 9,937,000
CIT GROUP HOLDINGS, INC.
1/2/96 5.90 (a) 5,000,000 4,996,787
2/15/96 5.87 5,000,000 4,962,792
2/16/96 5.77 5,000,000 4,962,000
COMMERCIAL PAPER - CONTINUED
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
CAISSE DES DEPOTS ET CONSIGNATIONS
1/26/96 5.80% $ 7,000,000 $ 6,969,813
CHEMICAL BANKING CORP.
3/15/96 5.69 5,000,000 4,940,890
CHRYSLER FINANCIAL CORPORATION
2/2/96 5.87 5,000,000 4,972,564
2/8/96 5.84 5,000,000 4,967,890
2/9/96 5.84 3,000,000 2,980,252
COMMERZBANK U.S. FINANCE, INC.
1/5/96 5.89 1,994,000 1,992,049
COMPAGNIE BANCAIRE
1/18/96 5.84 6,000,000 5,981,729
CORESTATES CAPITAL CORP.
1/2/96 5.84 (a) 5,000,000 5,000,000
1/8/96 5.83 (a) 5,000,000 5,000,000
1/8/96 5.86 (a) 5,000,000 4,999,827
DAKOTA
1/11/96 5.86 5,000,000 4,990,284
DU PONT (E.I.) DE NEMOURS & CO.
2/13/96 5.76 4,350,000 4,319,604
3/28/96 5.70 2,000,000 1,972,410
EIGER CAPITAL CORP.
1/30/96 5.85 5,000,000 4,975,006
ENTERPRISE FUNDING CORP.
1/19/96 6.02 2,144,000 2,136,853
FLEET FUNDING CORPORATION
1/18/96 5.84 1,045,000 1,041,801
FORD MOTOR CREDIT CORP.
2/15/96 5.77 5,000,000 4,962,792
4/4/96 5.77 4,000,000 3,939,947
GTE CORP.
1/17/96 5.91 5,000,000 4,985,326
GENERAL ELECTRIC CAPITAL CORP.
3/15/96 5.69 5,000,000 4,941,100
3/27/96 5.80 10,000,000 9,862,134
4/1/96 5.71 5,000,000 4,927,667
4/29/96 5.73 5,000,000 4,906,393
GENERAL MOTORS ACCEPTANCE CORP.
1/30/96 5.87 3,000,000 2,985,069
2/6/96 5.84 9,000,000 8,945,375
2/15/96 5.84 4,000,000 3,969,972
2/20/96 5.84 4,000,000 3,966,777
3/5/96 5.83 5,000,000 4,947,475
GLAXO WELLCOME, PLC
2/23/96 5.75 5,000,000 4,956,764
GOLDMAN SACHS GROUP, L.P. (THE)
3/18/96 5.75 9,000,000 8,888,412
HANSON FINANCE (UK), PLC
1/26/96 5.85 1,500,000 1,493,475
2/9/96 5.86 1,000,000 993,395
IBM CORP.
3/12/96 5.72 12,000,000 11,863,490
JOHN DEERE CAPITAL CORP.
4/26/96 5.73 5,000,000 4,908,714
LILLY (ELI) & CO.
4/8/96 5.54 5,000,000 4,924,305
5/6/96 5.53 8,000,000 7,845,831
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
MERRILL LYNCH & CO., INC.
3/8/96 5.76% $ 9,250,000 $ 9,150,716
MORGAN STANLEY GROUP, INC.
1/2/96 6.08 10,000,000 9,994,933
1/25/96 5.83 12,000,000 11,950,167
5/16/96 5.95 5,000,000 4,890,807
NEW CENTER ASSET TRUST
2/16/96 5.81 5,000,000 4,961,667
2/28/96 5.82 5,000,000 4,952,083
NORWEST CORP.
3/13/96 5.71 5,000,000 4,942,445
NORWEST FINANCIAL
1/17/96 5.87 5,000,000 4,985,388
2/28/96 5.80 5,000,000 4,952,584
PHH CORP.
1/22/96 5.94 3,000,000 2,999,251
PREFERRED RECEIVABLES FUNDING CORP.
2/5/96 5.79 10,000,000 9,941,416
REXAM PLC
1/8/96 5.92 5,000,000 4,992,625
1/16/96 5.95 10,000,000 9,972,044
SEARS ROEBUCK ACCEPTANCE CORP.
2/7/96 5.80 8,000,000 7,950,427
2/21/96 5.81 5,000,000 4,958,042
SHERWOOD MEDICAL COMPANY
1/18/96 5.98 1,351,000 1,346,757
SOCIETE GENERALE NORTH AMERICA
3/4/96 5.75 10,000,000 9,898,167
TRANSAMERICA FINANCE CORP.
2/9/96 5.85 5,000,000 4,966,972
TEXTRON, INC.
1/10/96 5.98 2,000,000 1,996,364
WOOL INTERNATIONAL
2/27/96 5.84 4,250,000 4,210,507
TOTAL COMMERCIAL PAPER 443,616,572
FEDERAL AGENCIES (A) - 2.4%
FEDERAL FARM CREDIT BANK - AGENCY COUPONS - 0.6%
1/2/96 5.76 5,000,000 4,999,430
FEDERAL HOME LOAN BANK - AGENCY COUPONS - 1.2%
1/4/96 5.60 (c) 5,000,000 4,996,700
3/20/96 5.69 5,000,000 4,996,948
9,993,648
STUDENT LOAN MARKETING ASSOC. - AGENCY COUPONS - 0.6%
10/16/96 5.95 5,000,000 5,000,000
TOTAL FEDERAL AGENCIES 19,993,078
BANK NOTES - 7.6%
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOC.
1/2/96 5.93 (a) 4,000,000 3,998,425
BANK OF NEW YORK - DELAWARE
10/30/96 5.88 (a) 8,000,000 8,000,000
BANK NOTES - CONTINUED
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
BOATMEN'S NATIONAL BANK OF ST. LOUIS
3/22/96 5.84%(a) $ 5,000,000 $ 4,998,063
COMERICA BANK-DETROIT
3/1/96 5.83 (a) 5,000,000 4,997,517
5/28/96 5.83 5,000,000 5,006,677
HUNTINGTON NATIONAL BANK
10/30/96 5.87 (a) 10,000,000 10,000,000
NATIONSBANK OF TEXAS
10/17/96 5.78 10,000,000 9,993,870
PNC BANK, N.A.
1/20/96 5.93 (a) 5,000,000 4,997,642
SEATTLE FIRST NATIONAL BANK
1/4/96 5.97 (a) 5,000,000 4,994,482
WACHOVIA BANK OF NORTH CAROLINA
1/26/96 5.71 (a) 5,000,000 4,996,865
TOTAL BANK NOTES 61,983,541
MASTER NOTES (A) - 1.7%
J.P. MORGAN SECURITIES
1/16/96 5.94 3,000,000 3,000,000
1/22/96 5.93 6,000,000 6,000,000
NORWEST CORP.
1/2/96 5.86 5,000,000 5,000,000
TOTAL MASTER NOTES 14,000,000
MEDIUM-TERM NOTES (A) - 6.6%
ABBEY NATIONAL TREASURY SERVICES (B)
3/9/96 5.69 10,000,000 10,000,000
BEAR STEARNS COS., INC.
1/11/96 5.82 5,000,000 5,001,190
BENEFICIAL CORP.
2/3/96 5.85 3,000,000 2,998,186
DEAN WITTER, DISCOVER & CO.
1/17/96 5.92 5,000,000 5,001,138
GENERAL ELECTRIC CAPITAL CORP.
1/2/96 5.78 5,000,000 4,999,670
GENERAL MOTORS ACCEPTANCE CORP.
2/7/96 6.00 3,000,000 3,000,000
2/22/96 5.87 6,000,000 6,001,174
GOLDMAN SACHS GROUP, L.P. (THE) (B)
3/1/96 5.91 3,000,000 3,000,000
MERRILL LYNCH & CO., INC.
2/27/96 6.95 5,000,000 5,007,264
NORWEST CORP.
3/10/96 5.83 6,000,000 6,000,000
TRANSAMERICA LIFE INSURANCE & ANNUITY CO.
3/15/96 5.84 3,000,000 3,000,000
TOTAL MEDIUM-TERM NOTES 54,008,622
SHORT-TERM NOTES (A) - 4.6%
ANNUALIZED
YIELD AT
DUE TIME OF PRINCIPAL VALUE
DATE PURCHASE AMOUNT (NOTE 1)
CAPITAL ONE FUNDING CORP.
1/8/96 5.83% $ 6,000,000 $ 6,000,000
1/8/96 5.83 3,648,000 3,648,000
SMM TRUST COMPANY (1995-B) (B)
1/2/96 6.03 2,500,000 2,500,000
SMM TRUST COMPANY (1995-D) (B)
1/27/96 5.99 4,000,000 4,000,000
SMM TRUST COMPANY (1995-I) (B)
1/29/96 5.80 6,000,000 5,999,284
SMM TRUST COMPANY (1995-J) (B)
1/15/96 5.96 11,000,000 11,000,000
SMM TRUST COMPANY (1995-N) (B)
2/8/96 5.93 3,000,000 3,000,000
SMM TRUST COMPANY (1995-P) (B)
3/15/96 5.86 1,000,000 1,000,000
TOTAL SHORT-TERM NOTES 37,147,284
REPURCHASE AGREEMENTS - 0.2%
MATURITY
AMOUNT
In a joint trading account
(U.S. Government Obligations)
dated 12/29/95 due 1/2/96:
At 6.14% $ 1,938,322 1,937,000
TOTAL INVESTMENTS - 100% $ 816,224,217
Total Cost for Income Tax Purposes - $816,224,217
LEGEND
1. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due date on these types of
securities reflects the next interest rate reset date or, when applicable,
the final maturity date.
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $40,499,284 or 5.0% of net
assets.
3. Security purchased on a delayed delivery basis (see Note 2 of Notes to
Financial Statements).
INCOME TAX INFORMATION
At December 31, 1995, the fund had a capital loss carryforward of
approximately $78,000 which will expire on December 31, 2002.
VARIABLE INSURANCE PRODUCTS FUND: MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1995
ASSETS
Investment in securities, at value (including repurchase agreements of $1,937,000) - See accompanying $ 816,224,217
schedule
Cash 3,514,660
Receivable for investments sold 70,000
Delayed delivery
Interest receivable 4,269,714
TOTAL ASSETS 824,078,591
LIABILITIES
Payable for investments purchased $ 14,998,205
Delayed delivery
Accrued management fee 147,208
Other payables and accrued expenses 59,193
TOTAL LIABILITIES 15,204,606
NET ASSETS $ 808,873,985
Net Assets consist of:
Paid in capital $ 808,936,711
Accumulated net realized gain (loss) on investments (62,726
)
NET ASSETS, for 808,936,711 shares outstanding $ 808,873,985
NET ASSET VALUE, offering price $1.00
and redemption price per share ($808,873,985 (divided by) 808,936,711 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995
INTEREST INCOME $ 46,489,428
EXPENSES
Management fee $ 1,881,213
Transfer agent fees 390,358
Accounting fees and expenses 107,886
Non-interested trustees' compensation 5,034
Custodian fees and expenses 64,835
Registration fees 20,803
Audit 28,200
Legal 4,046
Miscellaneous 2,687
TOTAL EXPENSES 2,505,062
NET INTEREST INCOME 43,984,366
NET REALIZED GAIN (LOSS) 16,876
ON INVESTMENTS
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 44,001,242
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 43,984,366 $ 25,859,424
Net interest income
Net realized gain (loss) 16,876 (80,853)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 44,001,242 25,778,571
Distributions to shareholders from net interest income (43,984,366) (25,859,424)
Share transactions at net asset value of $1.00 per share 1,212,453,074 1,187,546,448
Proceeds from sales of shares
Reinvestment of distributions from net interest income 43,984,366 25,859,424
Cost of shares redeemed (1,196,186,142) (817,822,836)
NET INCREASE (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS 60,251,298 395,583,036
TOTAL INCREASE (DECREASE) IN NET ASSETS 60,268,174 395,502,183
NET ASSETS
Beginning of period 748,605,811 353,103,628
End of period $ 808,873,985 $ 748,605,811
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31,
SELECTED PER-SHARE DATA 1995 1994 1993 1992 1991
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from Investment Operations .057 .042 .032 .038 .059
Net interest income
Less Distributions (.057) (.042) (.032) (.038) (.059)
From net interest income
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN A 5.87% 4.25% 3.23%B 3.90% 6.09%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $ 808,874 $ 748,606 $ 353,104 $ 301,002 $ 271,123
Ratio of expenses to average net
assets .33% .27% .22%C .24% .38%
Ratio of net interest income to
average net assets 5.72% 4.32% 3.16% 3.85% 5.93%
A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE THE
TOTAL RETURNS.
B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES HAD NOT
BEEN REDUCED DURING THE PERIOD.
C FMR VOLUNTARILY AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES
DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
</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. A fund's total return includes
changes in a fund's share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells
securities that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10
DECEMBER 31, 1995 YEAR YEARS YEARS
HIGH INCOME 20.72% 18.92% 11.47%
Merrill Lynch High Yield Master Index 19.91% 17.17% 11.77%
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. Consumer
Price Index information is not available from the U.S. Department of Labor.
Therefore, the CPI comparison has not been included in this report.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown.
If Fidelity had not reimbursed certain fund expenses, the fund's five and
ten year total returns would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. The fund includes high yielding, lower-rated
securities which are subject to greater price volatility and may involve
greater risk of default. The market for these securities may be less
liquid.
$10,000 OVER 10 YEARS
VIP High IncomHigh Yield Maste
12/31/85 10000.00 10000
01/31/86 10123.85 10067.864366073
02/28/86 10466.32 10495.670585261
03/31/86 10724.48 10725.334976615
04/30/86 10906.45 10892.823284035
05/31/86 11072.99 11019.861585135
06/30/86 11212.15 11131.494122108
07/31/86 11178.06 10984.941853116
08/31/86 11223.19 11187.665908229
09/30/86 11318.50 11280.258500822
10/31/86 11656.67 11478.716344331
11/30/86 11694.04 11572.177980028
12/31/86 11767.99 11634.670079636
01/31/87 12197.01 11963.642396663
02/28/87 12408.07 12161.152193149
03/31/87 12521.09 12295.616862596
04/30/87 12129.79 12027.477562887
05/31/87 12017.03 11973.280874731
06/30/87 12276.56 12138.794084187
07/31/87 12289.69 12204.841360131
08/31/87 12391.50 12327.139426116
09/30/87 11960.00 12043.515358362
10/31/87 11388.07 11721.732397927
11/30/87 11723.48 12018.155100493
12/31/87 11911.11 12177.743016054
01/31/88 12302.71 12510.981544685
02/29/88 12671.05 12850.461382885
03/31/88 12580.01 12829.209328783
04/30/88 12678.07 12866.262166603
05/31/88 12659.22 12933.415497409
06/30/88 12924.54 13180.697762609
07/31/88 13059.08 13319.981671091
08/31/88 12996.70 13363.749841992
09/30/88 13100.89 13498.451523196
10/31/88 13243.51 13708.759954494
11/30/88 13192.94 13760.11250158
12/31/88 13297.78 13818.338389584
01/31/89 13617.33 14025.565668057
02/28/89 13684.31 14119.81734294
03/31/89 13508.47 14107.255719884
04/30/89 13358.87 14148.890784983
05/31/89 13605.70 14409.366704589
06/30/89 13995.39 14613.512830236
07/31/89 13903.25 14682.720262925
08/31/89 13822.61 14755.245860195
09/30/89 13338.96 14614.776892934
10/31/89 12767.11 14383.611427127
11/30/89 12777.86 14415.845025913
12/31/89 12742.84 14402.809379345
01/31/90 12461.16 14121.318417394
02/28/90 12269.28 13915.671217292
03/31/90 12139.83 14103.779547466
04/30/90 12175.79 14175.436101631
05/31/90 12425.97 14431.487801795
06/30/90 12621.71 14711.0826697
07/31/90 12816.66 15021.963089369
08/31/90 12602.26 14446.893565921
09/30/90 12303.44 13818.57540134
10/31/90 12004.88 13466.928959676
11/30/90 12286.47 13581.010618127
12/31/90 12458.27 13776.703324485
01/31/91 12722.59 13971.44798382
02/28/91 13427.45 15008.45341929
03/31/91 13903.22 15653.757426368
04/30/91 14396.62 16211.20907597
05/31/91 14608.07 16290.371002402
06/30/91 14925.26 16618.079256731
07/31/91 15489.14 17016.259006447
08/31/91 15700.60 17373.909745923
09/30/91 16053.02 17595.199721906
10/31/91 16599.28 18118.047655164
11/30/91 16740.25 18327.32903552
12/31/91 16828.36 18540.244596132
01/31/92 17727.05 19188.471748199
02/29/92 18370.68 19665.02338516
03/31/92 18964.52 19939.403994438
04/30/92 19098.61 20084.534192896
05/31/92 19328.48 20404.895082796
06/30/92 19539.20 20658.418657565
07/31/92 19922.32 21076.981418278
08/31/92 20343.76 21356.023258754
09/30/92 20554.47 21599.355328024
10/31/92 20247.98 21326.554797118
11/30/92 20497.01 21628.586777904
12/31/92 20726.88 21907.075590949
01/31/93 21282.41 22446.514347112
02/28/93 21645.44 22871.397421312
03/31/93 22144.95 23267.918088737
04/30/93 22290.64 23434.932372646
05/31/93 22623.65 23750.395019593
06/30/93 23206.41 24196.609151814
07/31/93 23435.35 24456.690051827
08/31/93 23685.11 24689.830615599
09/30/93 23768.36 24811.654658071
10/31/93 24330.31 25279.041840475
11/30/93 24559.25 25417.298698015
12/31/93 24954.69 25671.454304133
01/31/94 25787.21 26234.041208444
02/28/94 25756.30 26045.379850841
03/31/94 24888.62 25196.640753381
04/30/94 24637.45 24902.19314878
05/31/94 24683.12 24813.471748199
06/30/94 24591.78 24904.800278094
07/31/94 24683.12 25079.872961699
08/31/94 24683.12 25254.076602199
09/30/94 24865.78 25244.51712805
10/31/94 24637.45 25308.668309948
11/30/94 24431.95 25093.382631779
12/31/94 24546.11 25372.503476172
01/31/95 24820.12 25731.023258754
02/28/95 25671.99 26533.86107951
03/31/95 25991.66 26903.12539502
04/30/95 26753.95 27533.023637972
05/31/95 27442.47 28393.218303628
06/30/95 27516.24 28610.084060169
07/31/95 28180.17 28937.16028315
08/31/95 28401.48 29112.785994185
09/30/95 28868.69 29445.866514979
10/31/95 29139.18 29654.594867905
11/30/95 29286.72 29944.065225635
12/29/95 29630.98 30424.725066363
Let's say you invested $10,000 in High Income Portfolio on December 31,
1985. By December 31, 1995, your investment would have grown to $29,631 - a
196.31% increase. That compares to $10,000 invested in the Merrill Lynch
High Yield Master Index, which would have grown to $30,425 over the same
period - a 204.25% increase.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF DECEMBER 31, 1995
(BY ISSUER, EXCLUDING REPURCHASE AGREEMENTS) % OF FUND'S
INVESTMENTS
PanAmSat Corp. (various issues) 4.3
American Financial Corp. (various issues) 3.9
Marvel Parent Holdings, Inc. (various issues) 3.4
Transtexas Gas Corp. (various issues) 2.7
Mother's Work, Inc. 12 5/8%, 8/1/05 2.2
TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
Media & Leisure 30.3
Retail & Wholesale 11.1
Basic Industries 10.6
Finance 7.5
Energy 6.4
QUALITY DIVERSIFICATION AS OF DECEMBER 31, 1995
(MOODY'S RATINGS) % OF FUND'S
INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.0
Ba 8.9
B 48.5
Caa, Ca, C 9.6
Nonrated 10.8
TABLE EXCLUDES SHORT-TERM INVESTMENTS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT DECEMBER 31, 1995, ACCOUNT FOR 6.6% OF THE
FUND'S INVESTMENTS.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Barry Coffman, Portfolio Manager of High Income Portfolio
Q. HOW HAS THE FUND PERFORMED, BARRY?
A. It did well relative to its peers and to its benchmark. For the 12
months ended December 31, 1995, the Merrill Lynch High Yield Master Index
returned 19.91%.
Q. WHAT KIND OF YEAR WAS 1995 FOR THE HIGH-YIELD MARKET?
A. 1995 was very strong in absolute terms, but it was unusual in that it
was the first time in several years that the high-yield bond market
underperformed both the Treasury and stock markets. Some of the same
factors that boosted the Treasury market - namely concerns about a slowing
economy and fears of a recession - kept high-yield bonds from performing as
well as Treasuries. That's because investors feared that a slowing economy
would translate into lower earnings and deteriorating credit quality for
some high-yield companies. In addition, a slight increase in the number of
companies that defaulted on their debt last year - and rising expectations
that the default rate will increase slightly in 1996 - caused the
high-yield market to underperform the stock market.
Q. WAS THERE ANY PARTICULAR REASON THE FUND OUTPERFORMED BOTH ITS PEERS AND
ITS BENCHMARK?
A. I think it's important to point out that the fund outperformed even
though it was underweighted, relative to the index, in securities rated Ba.
Those securities outperformed as a group due to their higher sensitivity to
interest rates and the widening of credit spreads during the year. The key
to the fund's better performance can be attributed to the strength of its
individual holdings and its lower exposure to some sectors - like retail -
which significantly underperformed. The fund's largest holding at the end
of the period - PanAmSat Corp., which operates an international satellite
communications system and provides satellite services to the broadcasting
and business communications market, performed quite well. The company
launched a third satellite and continued to have a large backlog of
contracted time from companies, including ESPN and Viacom, for its existing
and yet-to-be-launched satellites. Another of the fund's strong performers
was Big Flower Press, a large specialty printer of advertising inserts,
comics and television guides. I invested in the bonds and equity of this
company, both of which did well as its fortunes improved.
Q. HOW DID THE FUND'S GAMING HOLDINGS DO?
A. Performance was mixed. On one hand, there were few new jurisdictions
that approved gaming facilities in 1995. That lack of new competition and
good growth in the Atlantic City market, in particular, helped many of our
casino holdings. On the other hand, Harrah's Jazz was a disappointment. In
November, the company filed for bankruptcy protection. I sold the bonds
after the bankruptcy declaration. However, Harrah's problems don't appear
to have had any residual effects on other casino holdings.
Q. WHAT TYPES OF INVESTMENTS DID YOU ADD OVER THE PAST SIX MONTHS?
A. I focused on finding smaller companies that didn't have much visibility
in the market - meaning that few investors followed them. I bought
companies in which I developed a high degree of confidence regarding their
future business prospects. As an example, one recent addition to the fund
was Mother's Work, the largest retailer of maternity clothes. In 1995, the
company bought two of its primary competitors and now controls more than
half of the country's maternity stores.
Q. WHAT'S YOUR OUTLOOK?
A. The high-yield market's performance will obviously be dependent on the
health of the economy. And in my view, there's no way of knowing for sure
what the environment will be. So I'll continue to look at each company,
attempting to assess how it's likely to do in a variety of economic
environments. I'll focus on finding companies that are properly
capitalized, with sufficient financial flexibility and business
fundamentals that can withstand a downturn in the economy.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks high current income by investing in
high yielding, lower-rated fixed income
securities
START DATE: September 19, 1985
SIZE: as of December 31, 1995, more than
$1.0 billion
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
INVESTMENTS DECEMBER 31, 1995
Showing Percentage of Total Value of Investment in Securities
CORPORATE BONDS - 77.6%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
CONVERTIBLE BONDS - 0.2%
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp., Series C
0%, 6/3 0/97 - $ 469,000 $ 584,329
RETAIL & WHOLESALE - 0.1%
GROCERY STORES - 0.1%
Farm Fresh, Inc.
7 1/2%, 3/1/10 B3 1,686,000 988,434
TOTAL CONVERTIBLE BONDS 1,572,763
NONCONVERTIBLE BONDS - 77.4%
AEROSPACE & DEFENSE - 0.7%
RHI Holdings, Inc.
11 7/8%, 3/1/99 B2 2,160,000 2,170,800
Wyman-Gordon Co.
10 3/4%, 3/15/03 B1 4,490,000 4,714,500
6,885,300
BASIC INDUSTRIES - 10.0%
CHEMICALS & PLASTICS - 2.6%
Acetex Corp.
9 3/4%, 10/1/03 (e) B1 1,860,000 1,934,400
American Pacific Corp.
11%, 2/21/02 (e) - 850,000 765,000
Atlantis Group, Inc.
11%, 2/15/03 B2 9,610,000 8,456,800
NL Industries, Inc.
11 3/4%, 10/15/03 B1 8,070,000 8,634,900
Pioneer Americas Acquisition
Corp. 13 3/8%, 4/1/05 (e) B2 5,960,000 6,183,500
Trans Resources, Inc.
14 1/2%, 9/1/96 B2 580,000 591,600
26,566,200
IRON & STEEL - 1.3%
Republic Engineered Steels, Inc.
9 7/8%, 12/15/01 B2 14,560,000 13,067,600
METALS & MINING - 1.9%
International Wire Group, Inc.
11 3/4%, 6/1/05 B3 5,850,000 5,630,625
Kaiser Aluminum & Chemical
Corp. 12 3/4%, 2/1/03 B2 12,050,000 13,194,750
18,825,375
PACKAGING & CONTAINERS - 0.4%
Crown Packaging Holdings Ltd.
0%, 11/1/03 (c) Caa 6,840,000 3,026,700
Gaylord Container
0%, 5/15/05 (c) Caa 600,000 586,500
3,613,200
PAPER & FOREST PRODUCTS - 3.8%
Rapp International Finance Co. BV
yankee 13 1/4%, 12/15/05 Ba3 12,280,000 12,065,100
Stone Container Corp.:
9 7/8%, 2/1/01 B1 2,950,000 2,868,875
10 3/4%, 10/1/02 B1 900,000 931,500
11 1/2%, 10/1/04 B1 1,120,000 1,120,000
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
Tembec Finance Corp. yankee
9 7/8%, 9/30/05 B1 $ 13,120,000 $ 12,939,600
Williamhouse Regency
Delaware, Inc.
13%, 11/15/05 (e) B3 8,500,000 8,903,750
38,828,825
TOTAL BASIC INDUSTRIES 100,901,200
CONGLOMERATES - 0.8%
Jordan Industries, Inc.:
10 3/8%, 8/1/03 B3 9,155,000 7,781,750
0%, 8/1/05 (c) Caa 1,955,000 1,114,350
8,896,100
CONSTRUCTION & REAL ESTATE - 1.1%
CONSTRUCTION - 0.9%
Continental Homes Holding
Corp. sr. notes
12%, 8/1/99 Ba3 3,000,000 3,232,500
UDC Homes, Inc.:
Series A, 12 1/2%, 5/1/00 - 800,000 756,000
Series B, 12 1/2%, 5/1/00 - 40,000 37,800
WCI Communities LP
17%, 7/24/98 (d) - 5,000,000 5,000,000
9,026,300
REAL ESTATE - 0.2%
Littlefield Co. 10%, 9/30/97 (d) - 2,750,000 1,988,525
TOTAL CONSTRUCTION & REAL ESTATE 11,014,825
DURABLES - 2.7%
AUTOS, TIRES, & ACCESSORIES - 1.0%
Harvard Industries, Inc.
11 1/8%, 8/1/05 B3 9,870,000 9,870,000
TEXTILES & APPAREL - 1.7%
Hat Brands, Inc.,:
Series B, 12 5/8%, 9/15/02 - 1,520,000 1,596,000
Series D, 12 5/8%, 9/15/02 - 680,000 714,000
Interface, Inc.
9 1/2%, 11/15/05 (e) Ba3 10,070,000 10,384,688
Leslie Fay Cos., Inc. (d)(g):
9.53%, 1/15/00 - 676,319 405,791
10.54%, 1/15/02 - 611,353 213,974
United States Leather, Inc.
10 1/4%, 7/31/03 B2 6,010,000 4,357,250
17,671,703
TOTAL DURABLES 27,541,703
ENERGY - 5.1%
OIL & GAS - 5.1%
Harcor Energy, Inc., Series B,
14 7/8%, 7/15/02 B3 15,000,000 14,536,079
Plains Resources, Inc.,
12%, 8/15/99 B3 2,257,000 2,369,850
Transamerican Refining Corp.
16 1/2%, 2/15/02 (f) Caa 7,590,000 7,134,600
Transtexas Gas Corp.
11 1/2%, 6/15/02 B2 23,235,000 23,873,963
Vintage Petroleum, Inc.
9%, 12/15/05 B1 3,500,000 3,552,500
51,466,992
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
FINANCE - 4.6%
INSURANCE - 4.0%
American Financial Corp.:
9 3/4%, 4/20/04 Ba3 $ 21,340,000 $ 22,220,276
American Life Holdings
11 1/4%, 9/15/04 B1 13,350,000 14,017,500
Americo Life, Inc.
9 1/4%, 6/1/05 Ba2 3,900,000 3,705,000
39,942,776
SAVINGS & LOANS - 0.6%
First Nationwide Holdings, Inc.
12 1/4%, 5/15/01 Ba3 5,790,000 6,426,900
SECURITIES INDUSTRY - 0.0%
ECM Corp. 14%, 6/1/02 (e) - 489,990 538,989
TOTAL FINANCE 46,908,665
HEALTH - 0.8%
MEDICAL EQUIPMENT & SUPPLIES - 0.8%
Wright Medical Technology, Inc.,
Series B, 10 3/4%, 7/1/00 B3 7,450,000 7,636,250
INDUSTRIAL MACHINERY & EQUIPMENT - 3.4%
INDUSTRIAL MACHINERY & EQUIPMENT - 2.5%
Howmet Corp.
10%, 12/1/03 (e) B3 1,910,000 2,005,500
MVE, Inc.
12 1/2%, 2/15/02 B3 5,595,000 5,511,075
Specialty Equipment Cos., Inc.
11 3/8%, 12/1/03 B3 10,640,000 10,799,600
Thermadyne Holdings Corp.:
10 1/4%, 5/1/02 B3 1,484,000 1,495,130
10 3/4%, 11/1/03 Caa 5,756,000 5,770,390
25,581,695
POLLUTION CONTROL - 0.9%
Norcal Waste System, Inc.
12 1/2%, 11/15/05 (e)(f) B3 8,890,000 8,978,900
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 34,560,595
MEDIA & LEISURE - 23.5%
BROADCASTING - 7.2%
Bell Cablemedia PLC
0%, 9/15/05 (c)(e) B2 14,500,000 9,098,750
Chancellor Broadcasting
12 1/2%, 10/1/04 B3 10,570,000 11,309,900
Citicasters, Inc.
9 3/4%, 2/15/04 B- 7,812,000 7,968,240
Cooke Media Group, Inc.
11 5/8%, 4/1/99 - 350,000 332,500
Diamond Cable Communications
PLC yankee 0%,
12/15/05 (c) B3 5,920,000 3,478,000
NWCG Holdings Corp.
0%, 6/15/99 Caa 18,695,000 12,806,075
Peoples Choice TV Corp.
Unit 0%, 6/1/04 (c) Caa 20,380,000 11,871,350
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
Robin Media Group, Inc.
11 1/8%, 4/1/97 - $ 12,340,000 $ 12,340,000
Telewest PLC
0%, 10/1/07 (c) B1 5,330,000 3,151,363
72,356,178
LEISURE DURABLES & TOYS - 1.3%
ICON Health and Fitness, Inc.
13%, 7/15/02 B3 5,890,000 6,361,200
IHF Holdings, Inc.
0%, 11/15/04 (c) Caa 10,250,000 6,457,500
12,818,700
LODGING & GAMING - 8.4%
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 3,320,000 3,481,850
Casino America, Inc.
11 1/2%, 11/15/96 B1 590,000 554,600
GNF Corp., Series B,
10 5/8%, 4/1/03 B2 2,840,000 2,648,300
Grand Casinos, Inc.
10 1/8%, 12/1/03 Ba3 14,690,000 15,314,325
HMH Properties, Inc., Series B,
9 1/2%, 5/15/05 (e) B1 13,470,000 13,739,400
Hollywood Casino Corp.
12 3/4%, 11/1/03 B2 8,500,000 7,735,000
Horseshoe Gaming LLC
12 3/4%, 9/30/00 (e) - 5,000,000 4,993,750
Maritime Group Ltd. pay-in-kind
14%, 2/15/97 (g) - 1,648,399 296,712
Mohegan Tribal Gaming
Authority 13 1/2%,
11/15/02 (e) - 8,880,000 9,634,800
Players International, Inc.
10 7/8%, 4/15/05 Ba3 18,180,000 17,043,750
President Riverboat Casinos
13%, 9/15/01 B1 8,210,000 6,732,200
85,264,687
PUBLISHING - 3.4%
Marvel Holdings, Inc., Series B
0%, 4/15/98 B3 25,350,000 18,125,250
Marvel Parent Holdings, Inc.
0%, 4/15/98 B3 22,440,000 16,280,220
34,405,470
RESTAURANTS - 3.2%
Cafeteria Operators LP:
11%, 6/30/98 (d) - 5,548,126 943,181
12%, 12/31/01 - 1,451,874 115,177
Host Marriott Travel Plazas, Inc.,
Series B, 9 1/2%, 5/15/05 B1 20,690,000 20,457,238
SC International Services, Inc.
13%, 10/1/05 B3 10,640,000 11,278,400
32,793,996
TOTAL MEDIA & LEISURE 237,639,031
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
NONDURABLES - 3.3%
FOODS - 1.4%
Specialty Foods Corp.:
10 1/4%, 8/15/01 B3 3,430,000 3,258,500
Series B
11 1/8%, 10/1/02 B3 6,780,000 6,576,600
11 1/4%, 8/15/03 Caa 4,610,000 4,102,900
13,938,000
HOUSEHOLD PRODUCTS - 1.9%
McAndrews & Forbes Group, Inc.
12 1/4%, 7/1/96 - 1,360,000 1,366,800
Revlon Consumer Products Corp.
10 1/2%, 2/15/03 B3 7,230,000 7,410,750
Revlon Worldwide Corp. secured
0%, 3/15/98 B3 14,140,000 10,481,275
19,258,825
TOTAL NONDURABLES 33,196,825
RETAIL & WHOLESALE - 10.6%
APPAREL STORES - 4.8%
Apparel Retailers, Inc.
0%, 8/15/05 (c) Caa 11,230,000 6,513,400
Lamonts Apparel, Inc.
10 1/4%, 11/1/99 (e)(g) - 2,201,000 550,250
Mother's Work, Inc.
12 5/8%, 8/1/05 B3 22,500,000 22,106,250
Specialty Retailers, Inc.:
10%, 8/15/00 B1 2,890,000 2,687,700
11%, 8/15/03 B3 12,220,000 10,875,800
Series D, 11%, 8/15/03 B- 6,750,000 6,007,500
48,740,900
GROCERY STORES - 4.1%
Food 4 Less Holdings, Inc.
0%, 7/15/05 (c) Caa 22,750,000 10,578,750
Ralph's Grocery Co. :
10.45%, 6/15/04 B1 6,470,000 6,567,050
11%, 6/15/05 B3 9,970,000 9,870,300
Star Markets, Inc.
13%, 11/1/04 B3 13,905,000 14,148,338
41,164,438
RETAIL & WHOLESALE, MISCELLANEOUS - 1.7%
Alliance Entertainment Corp.,
Series B, 11 1/4%, 7/15/05 B3 12,780,000 12,859,875
Barry's Jewelers, Inc.
11%, 12/22/00 - 1,139,000 1,116,220
Finlay Fine Jewelry Corp.
10 5/8%, 5/1/03 B1 3,460,000 3,287,000
17,263,095
TOTAL RETAIL & WHOLESALE 107,168,433
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
SERVICES - 5.0%
LEASING & RENTAL - 1.1%
GPA Delaware, Inc.:
8 1/2%, 3/3/97 - $ 3,500,000 $ 3,412,500
8 3/4%, 12/15/98 Caa 4,960,000 4,625,200
8 5/8%, 1/15/99 - 2,600,000 2,353,000
Scotsman Holdings, Inc.
pay-in-kind 11%, 3/1/04 - 1,258,343 1,099,339
11,490,039
PRINTING - 2.4%
Big Flower Press :
10 3/4%, 8/1/03 B2 4,865,000 5,205,550
Class A, 10 3/4%, 8/1/03 B3 3,219,000 3,444,330
Class B, 10 3/4%, 8/1/03 B2 967,000 1,034,690
Sullivan Graphics, Inc.
12 3/4%, 8/1/05 Caa 14,830,000 14,422,175
24,106,745
SERVICES - 1.5%
Protection One Alarm
Monitoring, Inc. 13 5/8%,
6/30/05 Caa 18,300,000 14,823,000
TOTAL SERVICES 50,419,784
TECHNOLOGY - 0.6%
COMMUNICATIONS EQUIPMENT - 0.6%
Echostar Communications Corp.
0%, 6/1/04 (c) Caa 9,000,000 6,030,000
TRANSPORTATION - 3.4%
AIR TRANSPORTATION - 2.1%
Trans World Airlines, Inc.
12%, 11/3/98 - 1,260,000 1,102,500
US Air Inc.:
Series 1993-A1 Pass Thru
Trust 8 5/8%, 9/1/98 B1 5,000,000 4,900,000
10 3/8%, 3/1/13 B1 15,975,000 15,016,500
21,019,000
RAILROADS - 1.2%
Transtar Holdings L.P./Transtar
Cap Corp., Series B,
0%, 12/15/03 (c) B- 17,941,000 12,199,880
TRUCKING & FREIGHT - 0.1%
Burlington Motor Holdings, Inc.
11 1/2%, 11/1/03 (g) Ca 4,750,000 855,000
TOTAL TRANSPORTATION 34,073,880
UTILITIES - 1.8%
CELLULAR - 0.7%
Comunicaciones Celulares SA
Unit 0%, 11/15/03 (c)(e) B3 12,000,000 6,810,000
USA Mobile Communications, Inc.
9 1/2%, 2/1/04 B3 210,000 207,900
7,017,900
ELECTRIC UTILITY - 0.1%
El Paso Funding Corp.
lease oblig. (g):
9 3/8%, 10/1/96 Ca 790,000 537,200
9.20%, 7/2/97 Ca 380,000 256,500
793,700
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
NONCONVERTIBLE BONDS - CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - 1.0%
Winstar Communications, Inc.
Unit 0%, 10/15/05 (c)(e) - $ 6,550,000 $ 10,398,125
TOTAL UTILITIES 18,209,725
TOTAL NONCONVERTIBLE BONDS 782,549,308
TOTAL CORPORATE BONDS
(Cost $780,639,572) 784,122,071
COMMERCIAL MORTGAGE SECURITIES - 0.2%
Meritor Mortgage Security Corp.
commercial Series 1987-1
Class B, 9.40%, 2/1/00 (e)(g) - 1,350,000 243,000
SKW Real Estate LP commercial
Series II Class E, 11%,
4/15/05 (e) B 1,500,000 1,507,500
TOTAL COMMERCIAL MORTGAGE SECURITIES
(Cost $1,762,853) 1,750,500
COMMON STOCKS - 5.3%
SHARES
BASIC INDUSTRIES - 0.6%
METALS & MINING - 0.5%
Kaiser Aluminum Corp. (a) 383,500 4,985,500
PAPER & FOREST PRODUCTS - 0.1%
Mail-Well Holdings, Inc. (a)(e) 26,279 308,778
Repap Enterprises, Inc. (a) 300,000 1,319,310
1,628,088
TOTAL BASIC INDUSTRIES 6,613,588
DURABLES - 0.1%
HOME FURNISHINGS - 0.0%
Polyvision Corp. (a) 2,993 6,173
TEXTILES & APPAREL - 0.1%
Hat Brands, Inc. (warrants) (a)(d) 27,466 302,121
HM/Hat Brands Trust Class I Unit (a)(d) 340,000 340,000
642,121
TOTAL DURABLES 648,294
ENERGY - 0.9%
OIL & GAS - 0.9%
Flores & Rucks, Inc. (a) 341,400 4,950,300
Harcor Energy, Inc. (warrants) (a) 330,000 382,807
TransTexas Gas Corp. (a) 275,300 3,716,550
9,049,657
FINANCE - 1.7%
INSURANCE - 1.7%
American Financial Group, Inc. 565,800 17,327,625
SHARES VALUE (NOTE 1)
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (e) 3,000 $ 300,000
TOTAL FINANCE 17,627,625
HEALTH - 0.1%
MEDICAL EQUIPMENT & SUPPLIES - 0.1%
MVE, Inc. (warrants) (a) 10,555 158,325
Wright Medical
Technology, Inc. (warrants) (a) 1,976 335,970
494,295
HOLDING COMPANIES - 0.1%
SDW Holdings Corp.(a)
Unit (e) 4,450 1,335,000
(warrants) 3,720 18,600
1,353,600
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.0%
Ampex Corp. Class A (warrants) (a) 57,599 230,396
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
Terex Corp. (rights) (a)(d) 3,150 315
Thermadyne Holdings Corp. (a) 65,419 1,185,719
1,186,034
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,416,430
MEDIA & LEISURE - 1.1%
BROADCASTING - 0.3%
PanAmSat Corp. (a) 115,300 2,543,806
ENTERTAINMENT - 0.0%
Live Entertainment, Inc. (a)
$2.00 (warrant) (d) 232,000 11,600
$2.72 (warrant) (d) 221,765 11,088
22,688
LEISURE DURABLES & TOYS - 0.1%
IHF Capital, Inc.(a)(e):
Series H (warrants) 10,250 820,000
Series I (warrants) 5,890 147,250
967,250
LODGING & GAMING - 0.7%
Bally Gaming International, Inc.
(warrants)(a) 90,000 483,750
Horseshoe Gaming LLC (warrants) (a) 2,500,000 25,000
Host Marriott Corp. (a) 389,800 5,164,850
Maritime Group Ltd. (warrants) (a) 17,880 179
Motels of America, Inc. (a) 3,000 225,000
Sun International Hotels Ltd. (a) 30,570 1,008,810
Sun Internaitonal Hotels Ltd. Class B (a) 6,418 211,794
7,119,383
PUBLISHING - 0.0%
General Media, Inc. (warrants) (a) 1,310 6,550
TOTAL MEDIA & LEISURE 10,659,677
RETAIL & WHOLESALE - 0.4%
APPAREL STORES - 0.0%
Lamonts Apparel, Inc. (a) 35,870 2,242
Lamonts Apparel, Inc. (warrants) (a) 66,214 1
2,243
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
GROCERY STORES - 0.4%
FF Holdings Corp. (a)(d) 33,900 $ 67,800
MAFCO (warrants) (a) 59 -
Food 4 Less Holdings, Inc.
(warrants) (a)(d) 9,348 283,712
Stop & Shop Companies, Inc. (a) 150,300 3,475,688
3,827,200
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Barry's Jewelers, Inc. (a) 45,576 182,304
Barry's Jewelers, Inc. (warrants) (a) 5,697 1,424
183,728
TOTAL RETAIL & WHOLESALE 4,013,171
SERVICES - 0.1%
LEASING & RENTAL - 0.0%
Scotsman Holdings, Inc. (a) 8,689 119,908
SERVICES - 0.1%
Protection One, Inc. (warrants) (a) 74,560 410,080
Vestar/LPA Investment Corp. (a) 5,177 93,186
503,266
TOTAL SERVICES 623,174
TECHNOLOGY - 0.1%
COMMUNICATIONS EQUIPMENT - 0.1%
Echostar Communications Corp. Class A 40,500 982,125
ELECTRONICS - 0.0%
Berg Electronics Holdings Corp. (a)(e) 20,853 125,118
TOTAL TECHNOLOGY 1,107,243
UTILITIES - 0.0%
ELECTRIC UTILITY - 0.0%
Eastern Utilities Associates 3 71
Northeast Utilities Associates (warrants) (a) 21,789 29,960
30,031
GAS - 0.0%
UGI Corp. (warrants) (a) 14,033 2,104
TOTAL UTILITIES 32,135
TOTAL COMMON STOCKS
(Cost $45,860,829) 53,638,889
PREFERRED STOCKS - 8.2%
CONVERTIBLE PREFERRED STOCKS - 0.3%
RETAIL & WHOLESALE - 0.0%
RETAIL & WHOLESALE, MISCELLANEOUS - 0.0%
Town & Country Corp. (a) 4,065 3,252
SERVICES - 0.3%
La Petite Holdings Corp. exchangeable (a) 160,800 3,216,000
TECHNOLOGY - 0.0%
ELECTRONICS - 0.0%
Alpine Group, Inc. 8% cumulative 1,594 71,730
UTILITIES - 0.0%
GAS - 0.0%
Columbia Gas System, Inc. 1,511 61,762
TOTAL CONVERTIBLE PREFERRED STOCKS 3,352,744
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED STOCKS - 7.9%
BASIC INDUSTRIES - 0.0%
PAPER & FOREST PRODUCTS - 0.0%
S D Warren Co. exchangeable
pay-in-kind 3,720 $ 117,180
DURABLES - 0.0%
AUTOS, TIRES, & ACCESSORIES - 0.0%
Harvard Industries, Inc. pay-in-kind $14.25 25,979 681,949
ENERGY - 0.4%
OIL & GAS - 0.4%
Gulf Canada Resources Ltd.,
Series 1, adj. rate 1,321,942 3,827,222
Gulf Canada Resources Ltd. (d) 31,009 89,151
3,916,373
FINANCE - 1.2%
SAVINGS & LOANS - 1.2%
First Nationwide Bank 11 1/2%, 103,582 11,627,080
INDUSTRIAL MACHINERY & EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Ampex Corp. 8% (a)(d) 1,589 1,015,927
MEDIA & LEISURE - 5.7%
BROADCASTING - 5.7%
Cablevision System Corp., Series G
exchangeable pay-in-kind (e) 159,107 16,467,575
PanAmSat Corp. 12 3/4% pay-in-kind 36,616 41,009,920
57,477,495
TECHNOLOGY - 0.5%
ELECTRONICS - 0.5%
Berg Electronics Holding Corp., Series E,
$3.4687 pay-in-kind 168,137 4,707,832
UTILITIES - 0.0%
GAS - 0.0%
Columbia Gas System, Inc. 2,467 60,750
TOTAL NONCONVERTIBLE PREFERRED STOCKS 79,604,586
TOTAL PREFERRED STOCKS
(Cost $77,990,307) 82,957,330
PURCHASED BANK DEBT - 0.1%
PRINCIPAL
AMOUNT
Leslie Fay Cos., Inc.:
term loan - $ 777,600 466,560
revolving loan - 685,856 411,514
TOTAL PURCHASED BANK DEBT
(Cost $1,190,771) 878,074
REPURCHASE AGREEMENTS - 8.6%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.91% dated
12/29/95 due 1/2/96 $ 87,453,390 $ 87,396,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $994,840,332) $ 1,010,742,864
LEGEND
1. Non-income producing
2. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
3. Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date.
4. Restricted securities - Investment in securities not registered under
the Securities Act of 1933 (see Note 2 of Notes to Financial Statements).
Additional information on each holding is as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Ampex Corp. 8% 2/16/95 $ 834,225
Cafeteria Operators LP
11%, 6/30/98 6/24/93 $ 4,438,501
FF Holdings Corp. 10/2/92
to 1/14/94 $ 135,752
Food 4 Less Holdings, 12/30/92
Inc. (warrants) to 5/17/93 $ 229,281
Gulf Canada Resources Ltd. 10/15/93 $ 76,940
Hat Brands, Inc. (warrants) 9/2/92
to 2/23/94 $ -
HM/Hat Brands Trust
Class I Unit 2/22/94 $ 340,000
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%, 9/30/97 2/28/94 $ 2,750,000
Live Entertainment, Inc.
(warrants):
$2.00 3/23/93 $ 220,717
$2.72 3/23/93 $ 131,863
Terex Corp. (rights) 7/29/92 $ -
WCI Communities LP
17%, 7/24/98 7/24/95 $ 4,937,231
5. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $116,174,023 or 11.2% of net
assets.
6. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
7. Non-income producing - issuer filed for protection under the Federal
Bankruptcy Code or is in default of interest payment.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $1,312,680,785 and $949,022,493, respectively.
The fund placed a portion of its portfolio securities 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 Financial Statements).
The composition of long-term debt holdings as a percentage of total value
of investment in securities, is as follows (ratings are unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 0.0% AAA, AA, A 0.0%
Baa 0.0% BBB 0.0%
Ba 8.9% BB 16.6%
B 48.5% B 46.4%
Caa 9.4% CCC 2.4%
Ca, C 0.2% CC, C 0.0%
D 0.2%
The percentage not rated by either S&P or Moody's amounted to 6.6%
including long-term debt categorized as other securities. FMR has
determined that unrated debt securities that are lower quality account for
6.6% of the total value of investment in securities.
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $996,121,824. Net unrealized appreciation
aggregated $14,621,040, of which $38,646,371 related to appreciated
investment securities and $24,025,331 related to depreciated investment
securities.
VARIABLE INSURANCE PRODUCTS FUND: HIGH INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1995
ASSETS
Investment in securities, at value (including repurchase agreements of $87,396,000) (cost $994,840,332) - $ 1,010,742,864
See accompanying schedule
Cash 254
Receivable for investments sold 6,165,833
Receivable for fund shares sold 7,120,279
Dividends receivable 517,158
Interest receivable 16,852,344
Other receivables 3,728
TOTAL ASSETS 1,041,402,460
LIABILITIES
Payable for investments purchased $ 495,248
Payable for fund shares redeemed 170,468
Accrued management fee 507,064
Other payables and accrued expenses 230,122
TOTAL LIABILITIES 1,402,902
NET ASSETS $ 1,039,999,558
Net Assets consist of:
Paid in capital $ 927,473,751
Undistributed net investment income 76,334,012
Accumulated undistributed net realized gain (loss) on investments and foreign 20,293,833
currency transactions
Net unrealized appreciation (depreciation) on investments 15,897,962
and assets and liabilities in foreign currencies
NET ASSETS, for 86,302,481 shares outstanding $ 1,039,999,558
NET ASSET VALUE, offering price and redemption price per share ($1,039,999,558 (divided by) 86,302,481 shares) $12.05
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995
INVESTMENT INCOME $ 5,754,603
Dividends
Interest 76,991,507
TOTAL INCOME 82,746,110
EXPENSES
Management fee $ 4,956,133
Transfer agent fees 427,444
Accounting fees and expenses 266,623
Non-interested trustees' compensation 3,485
Custodian fees and expenses 12,918
Registration fees 126,417
Audit 43,210
Legal 35,431
Interest 2,621
Miscellaneous 2,484
Total expenses before reductions 5,876,766
Expense reductions (9,702 5,867,064
)
NET INVESTMENT INCOME 76,879,046
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 21,707,506
Foreign currency transactions (1,190 21,706,316
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 49,316,944
Assets and liabilities in (756 49,316,188
foreign currencies )
NET GAIN (LOSS) 71,022,504
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 147,901,550
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 76,879,046 $ 43,091,356
Net investment income
Net realized gain (loss) 21,706,316 (726,075)
Change in net unrealized appreciation (depreciation) 49,316,188 (49,793,238)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 147,901,550 (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 747,404,302 498,543,147
Net proceeds from sales of shares
Reinvestment of distributions 43,871,918 46,157,203
Cost of shares redeemed (424,723,050) (385,629,739)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 366,553,170 159,070,611
TOTAL INCREASE (DECREASE) IN NET ASSETS 470,582,802 105,485,451
NET ASSETS
Beginning of period 569,416,756 463,931,305
End of period (including undistributed net investment income of $76,334,012 and
$42,834,969, respectively) $ 1,039,999,558 $ 569,416,756
OTHER INFORMATION
Shares
Sold 66,375,373 45,102,882
Issued in reinvestment of distributions 4,326,619 4,073,892
Redeemed (37,385,468) (34,899,979)
Net increase (decrease) 33,316,524 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>
YEARS ENDED DECEMBER 31,
SELECTED PER-SHARE DATA 1995 1994 1993 C 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.750 $ 11.990 $ 10.820 $ 9.550 $ 7.070
Income from Investment Operations .856 .770 .728 .790 .890
Net investment income
Net realized and unrealized gain (loss) 1.224 (.910) 1.332 1.290 1.590
Total from investment operations 2.080 (.140) 2.060 2.080 2.480
Less Distributions (.780) (.730) (.794) (.810) -
From net investment income
In excess of net investment income - - (.036) - -
From net realized gain - (.370) (.060) - -
Total distributions (.780) (1.100) (.890) (.810) -
Net asset value, end of period $ 12.050 $ 10.750 $ 11.990 $ 10.820 $ 9.550
TOTAL RETURN A, B 20.72% (1.64)% 20.40% 23.17% 35.08%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,040,000 $ 569,417 $ 463,931 $ 200,591 $ 70,060
Ratio of expenses to average net assets .71% .71% .64% .67% .97%
D
Ratio of net investment income to average net assets 9.32% 8.75% 8.69% 10.98% 12.94%
Portfolio turnover rate 132% 122% 155% 160% 154%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN (SEE NOTE 5 OF NOTES TO FINANCIAL
STATEMENTS).
B TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT
PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS A
RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
D FMR VOLUNTARILY REIMBURSED A PORTION OF THE FUND'S EXPENSES DURING
THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. A fund's total return includes
changes in a fund's share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells
securities that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
DECEMBER 31, 1995 YEAR YEARS FUND
Equity-Income 35.09% 21.32% 13.33%
S&P 500 37.58% 16.60% 14.46%
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.
If Fidelity had not reimbursed certain fund expenses, the fund's past five
year and life of fund total returns would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Equity IncomStandard & Poor'
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
07/31/95 28604.87 31415.97
08/31/95 28963.65 31494.83
09/30/95 29925.22 32823.91
10/31/95 29580.88 32706.73
11/30/95 30859.87 34142.55
12/29/95 31763.97 34800.14
Let's say you invested $10,000 in Equity-Income Portfolio on October 9,
1986, when the fund started. By December 31, 1995, your investment would
have grown to $31,764 - a 217.64% increase. That compares to $10,000
invested in the S&P 500, which would have grown to $34,800 over the same
period - a 248% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
Philip Morris Companies, Inc. 4.7
Federal National Mortgage Association 3.5
General Electric Co. 2.4
NYNEX Corp. 1.9
Citicorp 1.7
TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
Finance 19.2
Nondurables 10.0
Utilities 7.8
Industrial Machinery & Equipment 6.8
Health 6.6
ASSET ALLOCATION AS OF DECEMBER 31, 1995*
Row: 1, Col: 1, Value: 9.4
Row: 1, Col: 2, Value: 8.699999999999999
Row: 1, Col: 3, Value: 81.90000000000001
Stocks 81.9%
Bonds 8.7%
Short-term investments 9.4%
FOREIGN INVESTMENTS 3.4%
*
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
An interview with Bettina Doulton, Portfolio Manager of Equity-Income
Portfolio
Q. HOW DID THE FUND PERFORM, BETTINA?
A. Compared to its peers, the fund did very well over the past 12 months.
However, it slightly trailed the performance of the Standard & Poor's
Composite Index for the 12-month period. The index had a total return of
37.58% for the 12 months ended December 31, 1995. The stock market rally in
1995 was narrow - led by the technology and finance sectors, as well as
large-cap and blue-chip stocks - and many funds did not beat the
performance of the index during the past 12 months.
Q. WHAT HELPED THE FUND'S PERFORMANCE?
A. The fund's performance came from a number of sectors, including finance
and telephone utilities, as well as from some of the larger holdings,
including the fund's largest investment, Philip Morris. This company's
business was propelled by gains in market share for its Marlboro brand
domestically, and by increased volumes and profits in its international
tobacco business.
Q. LET'S TAKE A LOOK AT YOUR INVESTMENTS IN THE FINANCE SECTOR. WHICH
STOCKS HAVE TURNED OUT WELL?
A. The fund's finance investments are fairly diverse. I pick the stocks for
the fund one-by-one, but many of the top performers over the past 12 months
came from this sector. Among them, Citicorp benefited from growth in its
emerging market credit card business. Fannie Mae - the Federal National
Mortgage Association - was helped by improved business conditions, a strong
supply of mortgages and widening spreads, such that profit growth was
solid. And American Express, having restructured in order to reduce costs,
posted strong and consistent earnings growth from improved marketing of its
existing and new credit card products. Beyond that, some of the fund's
insurance stocks - GenRe, American International Group, Aetna and CIGNA -
contributed well to the fund's return.
Q. HOW ABOUT TELEPHONE UTILITIES?
A. I've owned several of the regional Bell operating companies (RBOCs),
such as Ameritech, BellSouth, Bell Atlantic, NYNEX and SBC Communications.
The regulatory environment is improving on a state-by-state basis, allowing
these companies to focus more on profitability and competitiveness. They've
also been able to improve revenues by offering value-added services, such
as call waiting and caller identification, cellular services, and
additional access lines for computer modem use.
Q. WHICH STOCKS DIDN'T TURN OUT AS WELL AS YOU WOULD HAVE LIKED?
A. A couple of areas were disappointing. First, Wal-Mart struggled as it
went through a major transition. It was upgrading and expanding its older,
most profitable stores, converting them into so-called super centers -
general merchandise stores with grocery stores attached. The negative
impact on the company's profits associated with this process - as well as
the difficult retail environment - was worse and more prolonged than
anticipated. Second, despite better managing their account bases and
internal operations, WMX Technologies and Browning-Ferris Industries -
broadly based pollution control companies - were hurt by the weakening
economy, such that the pace of revenue and profit growth was not as strong
as expected.
Q. GENERAL ELECTRIC WAS ONE OF THE FUND'S TOP FIVE STOCKS AT THE END OF THE
PERIOD. WHY WAS IT ATTRACTIVE TO YOU?
A. GE offered a diverse business portfolio, shareholder-oriented management
and a consistent earnings history, qualities that appeared attractive given
the economic climate. I felt the same way about Emerson Electric and
Allied-Signal. These companies - through geographical expansion and
improvements in productivity - were able to sustain consistent earnings and
free cash flow. I believed the economy was weakening to an extent that the
relative performance expected from these companies would be rewarded.
Q. DOES THAT MEAN YOUR OUTLOOK IS COLORED BY CONCERNS FOR THE ECONOMY?
A. Yes it does. Economic indicators point out that the economy is slowing.
Wages have been stagnant and consumers' disposable income is down. Interest
rates will have to decline, in part so that capital will flow back into the
developing economies, believed to be a prime driver for future global
economic growth including U.S. exports. As it stands at the end of 1995,
economies outside of the U.S. also have slowed, leading me to believe that
demand for U.S. exports will wane. Given this backdrop, I have concerns
about corporate profitability in 1996 and think it will be a tough
investing environment. As a result, I'll be looking for companies with
aspects to their business that will enable them to sustain good earnings
growth despite a weakening economy.
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 December 31, 1995, more than
$1.0 billion
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
INVESTMENTS DECEMBER 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 81.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 6.0%
AEROSPACE & DEFENSE - 3.3%
Alliant Techsystems, Inc. (a) 447,100 $ 22,634,438
Boeing Co. 344,600 27,008,025
Lockheed Martin Corp. 329,303 26,014,937
McDonnell Douglas Corp. 289,800 26,661,600
Rockwell International Corp. 634,000 33,522,750
Sundstrand Corp. 183,000 12,878,625
Thiokol Corp. 232,700 7,882,713
156,603,088
DEFENSE ELECTRONICS - 2.0%
Litton Industries, Inc. (a) 546,300 24,310,350
Loral Corp. 538,800 19,060,050
Raytheon Co. 1,164,600 55,027,350
98,397,750
SHIP BUILDING & REPAIR - 0.7%
General Dynamics Corp. 592,600 35,037,475
TOTAL AEROSPACE & DEFENSE 290,038,313
BASIC INDUSTRIES - 5.5%
CHEMICALS & PLASTICS - 4.3%
du Pont (E.I.) de Nemours & Co. 585,500 40,911,813
Ethyl Corp. 723,100 9,038,750
Great Lakes Chemical Corp. 179,800 12,945,600
Hercules, Inc. 521,400 29,393,925
Minnesota Mining &
Manufacturing Co. 516,000 34,185,000
Monsanto Co. 190,000 23,275,000
Nalco Chemical Co. 221,200 6,663,650
Raychem Corp. 248,400 14,127,750
Schulman (A.), Inc. 70,600 1,588,500
Union Carbide Corp. 1,013,700 38,013,750
210,143,738
IRON & STEEL - 0.2%
Nucor Corp. 177,000 10,111,125
METALS & MINING - 0.7%
Alcan Aluminium Ltd. 409,114 12,706,568
Aluminum Co. of America 375,000 19,828,125
32,534,693
PACKAGING & CONTAINERS - 0.1%
Crown Cork & Seal Co., Inc. (a) 98,500 4,112,375
PAPER & FOREST PRODUCTS - 0.2%
James River Corp. of Virginia 451,700 10,897,263
TOTAL BASIC INDUSTRIES 267,799,194
CONGLOMERATES - 3.1%
Allied-Signal, Inc. 748,700 35,563,250
ITT Industries, Inc. 292,600 7,022,400
Tyco International Ltd. 1,752,742 62,441,434
United Technologies Corp. 422,300 40,065,713
Whitman Corp. 152,200 3,538,650
148,631,447
CONSTRUCTION & REAL ESTATE - 0.3%
BUILDING MATERIALS - 0.3%
Cooper Cameron Corp. (a) 200,628 7,122,294
Sherwin-Williams Co. 196,900 8,023,675
15,145,969
SHARES VALUE (NOTE 1)
CONSTRUCTION - 0.0%
Castle & Cooke, Inc. 74,767 $ 1,252,331
TOTAL CONSTRUCTION & REAL ESTATE 16,398,300
DURABLES - 2.3%
AUTOS, TIRES, & ACCESSORIES - 1.7%
Chrysler Corp. 237,100 13,129,413
Dana Corp. 406,100 11,878,425
General Motors Corp. 683,376 36,133,506
Johnson Controls, Inc. 61,100 4,200,625
PACCAR, Inc. 55,300 2,329,513
Snap-on Tools Corp. 374,000 16,923,500
84,594,982
CONSUMER ELECTRONICS - 0.4%
Whirlpool Corp. 342,500 18,238,125
TEXTILES & APPAREL - 0.2%
Westpoint Stevens, Inc. Class A 358,900 7,200,431
TOTAL DURABLES 110,033,538
ENERGY - 5.6%
ENERGY SERVICES - 1.5%
Baker Hughes, Inc. 521,800 12,718,875
Dresser Industries, Inc. 158,700 3,868,313
Helmerich & Payne, Inc. 95,000 2,826,250
McDermott International, Inc. 348,400 7,664,800
Schlumberger Ltd. 646,900 44,797,825
71,876,063
OIL & GAS - 4.1%
Amerada Hess Corp. 910,200 48,240,600
British Petroleum PLC ADR 825,877 84,342,689
Canada Occidental Petroleum Ltd. 161,100 5,284,000
Coastal Corp. (The) 380,000 14,155,000
Kerr-McGee Corp. 118,400 7,518,400
Occidental Petroleum Corp. 1,047,000 22,379,625
Petro-Canada 1st Installment Receipt (b) 185,600 1,071,279
Total SA:
Class B 210,425 14,174,149
sponsored ADR 10,978 373,252
197,538,994
TOTAL ENERGY 269,415,057
FINANCE - 19.2%
BANKS - 6.6%
Bank of Boston Corp. 257,877 11,926,811
Barnett Banks, Inc. 86,800 5,121,200
Boatmen's Bancshares, Inc. 55,100 2,252,213
Chase Manhattan Corp. 205,460 12,456,013
Chemical Banking Corp. 604,400 35,508,500
Citicorp 1,262,400 84,896,400
First Bank System, Inc. 181,600 9,011,900
First Interstate Bancorp 372,500 50,846,250
First Union Corp. 393,990 21,915,694
Fleet Financial Group, Inc. 628,054 25,593,201
KeyCorp. 369,200 13,383,500
NationsBank Corp. 428,400 29,827,350
Wells Fargo & Co. 92,600 20,001,600
322,740,632
CREDIT & OTHER FINANCE - 2.2%
American Express Co. 1,974,572 81,697,917
Greenpoint Financial Corp. 327,900 8,771,325
Household International, Inc. 234,011 13,835,900
104,305,142
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
FEDERAL SPONSORED CREDIT - 4.7%
Federal Home Loan
Mortgage Corporation 636,000 $ 53,106,000
Federal National
Mortgage Association 1,359,000 168,685,875
Student Loan Marketing Association 124,000 8,168,500
229,960,375
INSURANCE - 5.6%
Aetna Life & Casualty Co. 649,000 44,943,250
Allstate Corp. 893,900 36,761,638
American International Group, Inc. 423,000 39,127,500
CIGNA Corp. 308,800 31,883,600
General Re Corp. 320,000 49,600,000
ITT Hartford Group, Inc. 292,600 14,154,525
Loews Corp. 533,000 41,773,875
Prudential Reinsurance Holdings, Inc. 202,100 4,724,088
Travelers, Inc. (The) 147,933 9,301,287
272,269,763
SAVINGS & LOANS - 0.1%
Charter One Financial Corp. 149,000 4,563,125
TOTAL FINANCE 933,839,037
HEALTH - 6.3%
DRUGS & PHARMACEUTICALS - 4.3%
Allergan, Inc. 388,100 12,613,250
American Home Products Corp. 438,100 42,495,700
Bristol-Myers Squibb Co. 646,800 55,543,950
Lilly (Eli) & Co. 66,800 3,757,500
Merck & Co., Inc. 151,400 9,954,550
Pharmacia & Upjohn, Inc. 1,193,400 46,244,250
Schering-Plough Corp. 112,900 6,181,275
SmithKline Beecham PLC ADR 580,700 32,228,850
209,019,325
MEDICAL EQUIPMENT & SUPPLIES - 1.2%
Baxter International, Inc. 1,022,300 42,808,813
Hillenbrand Industries, Inc. 29,000 982,375
I-Stat Corporation (a) 149,400 4,855,500
Nellcor, Inc. (a) 188,324 10,922,792
59,569,480
MEDICAL FACILITIES MANAGEMENT - 0.8%
Columbia/HCA Healthcare Corp. 548,100 27,816,075
Tenet Healthcare Corp. (a) 137,600 2,855,200
U.S. Healthcare, Inc. 134,700 6,263,550
36,934,825
TOTAL HEALTH 305,523,630
INDUSTRIAL MACHINERY & EQUIPMENT - 6.8%
ELECTRICAL EQUIPMENT - 3.2%
Emerson Electric Co. 457,500 37,400,625
General Electric Co. 1,620,200 116,654,400
154,055,025
INDUSTRIAL MACHINERY & EQUIPMENT - 2.0%
Caterpillar, Inc. 335,800 19,728,250
Cooper Industries, Inc. 240,832 8,850,576
Deere & Co. 1,423,200 50,167,800
Ingersoll-Rand Co. 559,000 19,634,875
Varity Corp. (a) 62,700 2,327,738
100,709,239
SHARES VALUE (NOTE 1)
POLLUTION CONTROL - 1.6%
Browning-Ferris Industries, Inc. 1,364,800 $ 40,261,600
WMX Technologies, Inc. 1,222,200 36,513,225
76,774,825
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 331,539,089
MEDIA & LEISURE - 2.1%
BROADCASTING - 0.8%
Viacom, Inc. Class B (non-vtg.) (a) 833,014 39,464,038
LODGING & GAMING - 0.6%
ITT Corp. 594,700 31,519,100
PUBLISHING - 0.6%
Knight-Ridder, Inc. 201,700 12,606,250
Meredith Corp. 224,600 9,405,125
Times Mirror Co. Class A 212,100 7,184,888
29,196,263
RESTAURANTS - 0.1%
Darden Restaurants, Inc. 332,900 3,953,188
TOTAL MEDIA & LEISURE 104,132,589
NONDURABLES - 9.9%
BEVERAGES - 2.1%
Anheuser-Busch Companies, Inc. 649,300 43,421,938
PepsiCo, Inc. 1,077,200 60,188,550
103,610,488
FOODS - 0.7%
ConAgra, Inc. 298,300 12,304,875
Dole Food, Inc. 224,300 7,850,500
Kellogg Co. 75,800 5,855,550
Nabisco Holdings Class A 232,500 7,585,313
33,596,238
HOUSEHOLD PRODUCTS - 1.4%
Avon Products, Inc. 423,880 31,949,955
Colgate-Palmolive Co. 223,600 15,707,900
First Brands Corp. 329,200 15,678,150
Rubbermaid, Inc. 231,000 5,890,500
69,226,505
TOBACCO - 5.7%
Imasco Ltd. 113,700 2,208,414
Philip Morris Companies, Inc. 2,521,100 228,159,550
RJR Nabisco Holdings Corp. 986,839 30,468,654
UST, Inc. 448,500 14,968,688
275,805,306
TOTAL NONDURABLES 482,238,537
RETAIL & WHOLESALE - 2.0%
APPAREL STORES - 0.3%
Limited, Inc. (The) 906,500 15,750,438
GENERAL MERCHANDISE STORES - 1.2%
Dayton Hudson Corp. 71,100 5,332,500
May Department Stores Co. (The) 93,500 3,950,375
Sears, Roebuck & Co. 403,000 15,717,000
Wal-Mart Stores, Inc. 1,596,300 35,717,213
60,717,088
GROCERY STORES - 0.3%
Great Atlantic & Pacific Tea Co., Inc. 312,700 7,192,100
Vons Companies, Inc. (a) 231,900 6,551,175
13,743,275
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - 0.2%
Home Depot, Inc. (The) 151,400 $ 7,248,275
Tandy Corp. 36,300 1,506,450
8,754,725
TOTAL RETAIL & WHOLESALE 98,965,526
SERVICES - 0.3%
ADT Ltd. (a) 711,600 10,674,000
National Service Industries, Inc. 80,400 2,602,950
13,276,950
TECHNOLOGY - 2.3%
COMPUTERS & OFFICE EQUIPMENT - 1.7%
International Business Machines Corp. 320,700 29,424,225
Pitney Bowes, Inc. 1,111,300 52,231,100
81,655,325
ELECTRONICS - 0.6%
AMP, Inc. 659,600 25,312,150
Thomas & Betts Corp. 81,200 5,988,500
31,300,650
TOTAL TECHNOLOGY 112,955,975
TRANSPORTATION - 1.8%
RAILROADS - 1.7%
Burlington Northern Santa Fe Corp. 625,940 48,823,320
CSX Corp. 390,600 17,821,125
Union Pacific Corp. 237,900 15,701,400
82,345,845
TRUCKING & FREIGHT - 0.1%
Roadway Services, Inc. 105,200 5,141,650
TOTAL TRANSPORTATION 87,487,495
UTILITIES - 7.8%
TELEPHONE SERVICES - 7.8%
Ameritech Corp. 1,067,900 63,006,100
Bell Atlantic Corp. 790,400 52,858,000
BellSouth Corp. 1,632,200 71,000,700
NYNEX Corp. 1,754,600 94,748,400
Pacific Telesis Group 639,500 21,503,188
Koninklijke PPT Nederland 236,700 8,581,847
Koninklijke PPT Nederland (d) 104,400 3,785,149
SBC Communications, Inc. 950,300 54,642,250
Southern New England
Telecommunications Corp. 251,900 10,013,025
TOTAL UTILITIES 380,138,659
TOTAL COMMON STOCKS
(Cost $3,211,246,320) 3,952,413,336
PREFERRED STOCKS - 0.6%
CONVERTIBLE PREFERRED STOCKS - 0.6%
BASIC INDUSTRIES - 0.1%
PAPER & FOREST PRODUCTS - 0.1%
James River Corp. cum, Series P 278,200 6,502,925
SHARES VALUE (NOTE 1)
ENERGY - 0.5%
OIL & GAS - 0.5%
Atlantic Richfield Co.
exchangeable $.5575 431,300 $ 10,135,550
Occidental Petroleum Corp.
Indexed $3.00 218,900 13,599,163
23,734,713
UTILITIES - 0.0%
GAS - 0.0%
Columbia Gas System, Inc. 403 16,473
TOTAL CONVERTIBLE PREFERRED STOCKS 30,254,111
NONCONVERTIBLE PREFERRED STOCKS - 0.0%
UTILITIES - 0.0%
ELECTRIC UTILITY - 0.0%
Gulf States Utilities Co., Series B,
adj. rate 586 28,128
GAS - 0.0%
Columbia Gas System, Inc. 658 16,203
TOTAL NONCONVERTIBLE PREFERRED STOCKS 44,331
TOTAL PREFERRED STOCKS
(Cost $34,163,788) 30,298,442
CORPORATE BONDS - 1.3%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) (C) AMOUNT
CONVERTIBLE BONDS - 0.3%
CONSTRUCTION & REAL ESTATE - 0.0%
REAL ESTATE INVESTMENT TRUSTS - 0.0%
Liberty Property exchangeable
8%, 7/1/01 - $ 750,000 769,688
HEALTH - 0.2%
DRUGS & PHARMACEUTICALS - 0.2%
Roche Holdings, Inc. liquid yield
option notes 0%, 4/20/10 (d) - 19,580,000 8,664,150
PRECIOUS METALS - 0.1%
Pegasus Gold, Inc. euro
6 1/4%, 4/30/02 (d) Baa3 1,860,000 2,055,300
SERVICES - 0.0%
ADT Operations, Inc. liquid yield
option notes 0%, 7/6/10 Ba3 3,670,000 1,752,425
UTILITIES - 0.0%
GAS - 0.0%
SFP Pipeline Holdings, Inc.
exchangeable 0%,
8/15/10 (e) Baa3 470,000 611,000
TOTAL CONVERTIBLE BONDS 13,852,563
NONCONVERTIBLE BONDS - 1.0%
AEROSPACE & DEFENSE - 0.0%
DEFENSE ELECTRONICS - 0.0%
Tracor, Inc.
10 7/8%, 8/15/01 B2 1,220,000 1,268,800
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) 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 $ 360,500
PAPER & FOREST PRODUCTS - 0.2%
Stone Container Corp.
9 7/8%, 2/1/01 B1 7,760,000 7,546,600
TOTAL BASIC INDUSTRIES 7,907,100
DURABLES - 0.2%
TEXTILES & APPAREL - 0.2%
Westpoint Stevens, Inc.:
8 3/4%, 12/15/01 B1 2,660,000 2,660,000
9 3/8%, 12/15/05 B3 7,850,000 7,732,250
10,392,250
FINANCE - 0.0%
BANKS - 0.0%
Signet Banking Corp. (e):
6%, 5/15/97 Baa2 340,000 337,753
6 1/8%, 4/15/98 Baa2 190,000 187,866
525,619
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT - 0.1%
Tenet Healthcare Corp.:
9 5/8%, 9/1/02 Ba2 1,760,000 1,925,000
8 5/8%, 12/1/03 Ba2 3,480,000 3,636,600
5,561,600
MEDIA & LEISURE - 0.4%
BROADCASTING - 0.4%
Viacom, Inc. 8%, 7/7/06 B1 18,890,000 19,220,575
NONDURABLES - 0.1%
BEVERAGES - 0.1%
Canandaigua Wine, Inc.
8 3/4%, 12/15/03 B1 5,700,000 5,671,500
TOTAL NONCONVERTIBLE BONDS 50,547,444
TOTAL CORPORATE BONDS
(Cost $59,279,783) 64,400,007
U.S. TREASURY OBLIGATIONS - 7.4%
5 3/4%, 8/15/03 Aaa 68,000,000 68,818,040
7 1/4%, 2/15/23 Aaa 17,690,000 20,227,442
6 1/4%, 8/15/23 Aaa 8,790,000 9,044,119
7 1/2%, 11/15/24 Aaa 15,390,000 18,499,242
7 5/8%, 2/15/25 Aaa 29,540,000 36,121,807
6 7/8%, 8/15/25 Aaa 35,210,000 39,710,190
Principal STRIPS:
0%, 11/15/18 Aaa 345,000,000 83,797,050
0%, 2/15/19 Aaa 350,000,000 83,699,000
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $332,219,484) 359,916,890
REPURCHASE AGREEMENTS - 9.4%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.91% dated
12/29/95 due 1/2/96 $ 455,467,894 $ 455,169,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $4,092,078,375) $ 4,862,197,675
LEGEND
1. Non-income producing
2. Purchased on an installment basis. Market value reflects only those
payments made through December 31, 1995. The remaining installments for
Petro-Canada, aggregating CAD 1,577,600, are due September 23, 1996 and
March 24, 1997.
3. Standard & Poor's Corporation credit ratings are used in the absence of
a rating by Moody's Investors Service, Inc.
4. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $14,504,599 or 0.3% of net
assets.
5. 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 $4,313,419,496 and $2,742,014,794, respectively, of which U.S.
government and government agency obligations aggregated $409,364,645 and
$205,227,833, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $2,077,039 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 7.4% AAA, AA, A 7.4%
Baa 0.1% BBB 0.0%
Ba 0.1% BB 0.6%
B 0.9% B 0.5%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by either S&P or Moody's amounted to 0.2%. FMR has
determined that unrated debt securities that are lower quality account for
0.2% of the total value of investment in securities.
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $4,098,146,199. Net unrealized appreciation
aggregated $764,051,476, of which $793,759,941 related to appreciated
investment securities and $29,708,465 related to depreciated investment
securities.
The fund hereby designates approximately $64,818,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
VARIABLE INSURANCE PRODUCTS FUND: EQUITY-INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1995
ASSETS
Investment in securities, at value (including repurchase agreements of $455,169,000) (cost $4,092,078,375) $ 4,862,197,675
- - See accompanying schedule
Cash 719
Receivable for investments sold 1,835,507
Receivable for fund shares sold 10,941,112
Dividends receivable 10,792,285
Interest receivable 5,307,245
Other receivables 126,974
TOTAL ASSETS 4,891,201,517
LIABILITIES
Payable for investments purchased $ 7,521,288
Payable for fund shares redeemed 1,339,589
Accrued management fee 2,004,252
Other payables and accrued expenses 901,707
TOTAL LIABILITIES 11,766,836
NET ASSETS $ 4,879,434,681
Net Assets consist of:
Paid in capital $ 3,883,373,607
Undistributed net investment income 8,997,355
Accumulated undistributed net realized gain (loss) on investments and foreign 216,938,284
currency transactions
Net unrealized appreciation (depreciation) on investments 770,125,435
and assets and liabilities in foreign currencies
NET ASSETS, for 253,263,397 shares outstanding $ 4,879,434,681
NET ASSET VALUE, offering price and redemption price per share ($4,879,434,681 (divided by) 253,263,397 shares) $19.27
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995
INVESTMENT INCOME $ 74,462,683
Dividends
Interest 35,486,492
TOTAL INCOME 109,949,175
EXPENSES
Management fee $ 17,818,979
Transfer agent fees 1,660,720
Accounting fees and expenses 760,752
Non-interested trustees' compensation 13,087
Custodian fees and expenses 91,612
Registration fees 607,587
Audit 49,196
Legal 15,555
Interest 9,801
Miscellaneous 7,729
TOTAL EXPENSES 21,035,018
NET INVESTMENT INCOME 88,914,157
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 220,993,365
Foreign currency transactions 4,100 220,997,465
Change in net unrealized appreciation (depreciation) on:
Investment securities 715,594,560
Assets and liabilities in (6,641 715,587,919
foreign currencies )
NET GAIN (LOSS) 936,585,384
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,025,499,541
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 88,914,157 $ 49,846,224
Net investment income
Net realized gain (loss) 220,997,465 121,898,471
Change in net unrealized appreciation (depreciation) 715,587,919 (61,690,963)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,025,499,541 110,053,732
Distributions to shareholders (84,729,039) (44,739,784)
From net investment income
From net realized gain (121,254,353) (68,533,800)
TOTAL DISTRIBUTIONS (205,983,392) (113,273,584)
Share transactions 1,784,340,253 1,048,772,904
Net proceeds from sales of shares
Reinvestment of distributions 205,981,922 113,273,584
Cost of shares redeemed (214,815,736) (192,914,992)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 1,775,506,439 969,131,496
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,595,022,588 965,911,644
NET ASSETS
Beginning of period 2,284,412,093 1,318,500,449
End of period (including undistributed net investment income of $8,997,355 and $4,150,957,
respectively) $ 4,879,434,681 $ 2,284,412,093
OTHER INFORMATION
Shares
Sold 103,951,843 68,815,564
Issued in reinvestment of distributions 12,868,445 7,484,681
Redeemed (12,384,683) (12,882,315)
Net increase (decrease) 104,435,605 63,417,930
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
SELECTED PER-SHARE DATA 1995 1994 1993 C 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.35 $ 15.44 $ 13.40 $ 11.85 $ 9.51
Income from Investment Operations
Net investment income .41 .41 .37 .40 .50
Net realized and unrealized gain (loss) 4.69 .64 2.06 1.57 2.43
Total from investment operations 5.10 1.05 2.43 1.97 2.93
Less Distributions (.40) (.37) (.35) (.42) (.59)
From net investment income
In excess of net investment income - - (.04) - -
From net realized gain (.78) (.77) - - -
Total distributions (1.18) (1.14) (.39) (.42) (.59)
Net asset value, end of period $ 19.27 $ 15.35 $ 15.44 $ 13.40 $ 11.85
TOTAL RETURN A, B 35.09% 7.07% 18.29% 16.89% 31.44%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 4,879,435 $ 2,284,412 $ 1,318,500 $ 592,880 $ 282,171
Ratio of expenses to average net assets .61% .60% .62% .65% .74%
Ratio of expenses to average net assets after expense
reductions .61% .58% .62% .65% .74%
D
Ratio of net investment income to average net assets 2.56% 2.83% 2.87% 3.52% 4.83%
Portfolio turnover rate 87% 134% 120% 74% 107%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN
REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES
WOULD REDUCE THE TOTAL RETURNS SHOWN.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT
PRESENTATION OF INCOME, CAPITAL GAIN,
AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES." AS
A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED TO BOOK
TO TAX DIFFERENCES.
D FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A
PORTION OF THE FUND'S EXPENSES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. A fund's total return includes
changes in a fund's share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells
securities that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
DECEMBER 31, 1995 YEAR YEARS FUND
Growth 35.36% 20.78% 14.83%
S&P 500 37.58% 16.60% 14.46%
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.
If Fidelity had not reimbursed certain fund expenses, the fund's life of
fund total return would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER LIFE OF FUND
VIP Growth (2Standard &
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
07/31/95 36023.18 31415.97
08/31/95 36465.18 31494.83
09/30/95 37410.57 32823.91
10/31/95 37029.96 32706.73
11/30/95 37005.40 34142.55
12/29/95 35851.29 34800.14
Let's say you invested $10,000 in Growth Portfolio on October 9, 1986, when
the fund started. By December 31, 1995, your investment would have grown to
$35,851 - a 258.51% increase. That compares to $10,000 invested in the S&P
500, which would have grown to $34,800 over the same period - a 248%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
Oracle Systems Corp. 2.9
Cisco Systems, Inc. 2.5
Microsoft Corp. 2.4
AirTouch Communications, Inc. 2.2
General Electric Co. 1.7
TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
Technology 32.7
Utilities 9.4
Health 8.5
Retail & Wholesale 7.7
Finance 4.1
ASSET ALLOCATION AS OF DECEMBER 31, 1995*
Row: 1, Col: 1, Value: 15.4
Row: 1, Col: 2, Value: 1.7
Row: 1, Col: 3, Value: 82.90000000000001
Stocks 82.9%
Bonds 1.7%
Short-term investments 15.4%
FOREIGN INVESTMENTS 2.7%
*
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 DID THE FUND PERFORM?
A. Although the fund did well compared to its peers, it slightly lagged the
Standard & Poor's 500 Index, which returned 37.58% for the 12-month period
ended December 31, 1995.
Q. WHY WAS THE STOCK MARKET SO STRONG IN 1995?
A. In my opinion, two things really drive the equity market: strong
earnings and declining interest rates. During most of 1995, we had both.
This really played into the hands of the kinds of growth stocks the fund
owns. Many of these stocks represent fast-growing companies which are able
to grow faster than other companies in a slow but expanding economic
environment. They also can benefit more from a declining interest rate
environment.
Q. THE FUND'S TECHNOLOGY WEIGHTING HAS BEEN REDUCED, BUT, AT APPROXIMATELY
32.7%, IT REMAINED THE LARGEST SECTOR AS OF DECEMBER 31, 1995. DO YOU THINK
THIS AREA OF THE MARKET CAN KEEP UP THE TORRID PACE OF GROWTH WE SAW IN
1995?
A. Probably not. What we saw in 1995 was strength across the board. For the
most part, earnings grew as fast as the stock prices went up. Therefore,
despite good appreciation, price-to-earnings multiples didn't go up that
much. I don't think investors can expect the same level of growth in 1996
as they did in 1995. I think investors can expect to see more of an
environment of the haves and have-nots, with specific companies leaving
others behind.
Q. SO HOW WILL YOU MANAGE THE FUND'S TECHNOLOGY HOLDINGS GOING FORWARD?
A. I intend to approach the technology sector on a more selective basis,
looking at individual areas showing strength. For example, corporate
America's move from mainframe computing to client-server computing, along
with the rise of the Internet, may continue to benefit networking and
database companies. These companies provide the hardware and software for
the new corporate networks.
Q. WHAT WAS THE ATTRACTION TO UTILITY STOCKS, WHICH MADE UP 9.4% OF THE
FUND'S INVESTMENTS AT THE END OF DECEMBER?
A. All of the fund's utility holdings are in the telecommunications
industry. I believe the telecommunications industry offers excellent growth
opportunities both domestically and abroad as diversification,
privatization, globalization and proliferation of wireless communications
continue to create a strong demand outlook.
Q. IN THE FUND'S SEMIANNUAL REPORT, YOU DISCUSSED THAT YOU HAD CUT BACK ON
THE FUND'S HEALTH CARE EXPOSURE BECAUSE OF CONCERNS SURROUNDING FEDERAL
HEALTH CARE REFORM. WHAT'S HAPPENED SINCE THEN?
A. I slowly raised the fund's stake in health care stocks as values
presented themselves. Congress and the president continue to haggle over
the future of Medicare and Medicaid, but I anticipate that government
cutbacks in spending could force more Medicare users toward HMOs.
Therefore, I added more HMOs to the portfolio.
Q. WERE THERE ANY DISAPPOINTMENTS IN 1995?
A. Sure. Disappointments came on two fronts. First, in September, the
technology sector slowed somewhat as several corporate earnings
disappointments fueled investors' concerns that the sector had become
overvalued. As this occurred, investors moved to more defensive,
consumer-oriented stocks such as Coca-Cola, PepsiCo, Merck and Pfizer. In
hindsight, I wish I had been able to make this shift earlier. Second, the
underperformance of several of the fund's retail stocks hindered
performance. Building supply companies Home Depot and Lowe's, for example,
were hurt by falling lumber prices and a drop in demand with the slowdown
in the housing market.
Q. SO WHAT'S YOUR OUTLOOK?
A. As I mentioned earlier, the real fuel for a strong market - good
corporate earnings and declining interest rates - will probably not be as
strong in 1996 as it was in 1995. Given what we know now, though, I
believe, barring any unforeseen changes, the market environment may still
be constructive for stocks this year.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks high current income by investing in
high yielding, lower-rated fixed income
securities
START DATE: September 19, 1985
SIZE: as of December 31, 1995, more than
$1.0 billion
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
INVESTMENTS DECEMBER 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 82.7%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.9%
AEROSPACE & DEFENSE - 0.6%
C A E Industries Ltd. 535,900 $ 4,075,173
General Motors Corp. Class H 150,000 7,368,750
Rockwell International Corp. 225,000 11,896,875
Special Devices, Inc. (a) 246,700 3,207,100
26,547,898
DEFENSE ELECTRONICS - 0.3%
Loral Corp. 75,000 2,653,125
Raytheon Co. 165,000 7,796,250
10,449,375
TOTAL AEROSPACE & DEFENSE 36,997,273
BASIC INDUSTRIES - 1.5%
CHEMICALS & PLASTICS - 0.6%
Airgas, Inc. (a) 179,600 5,971,700
du Pont (E.I.) de Nemours & Co. 135,000 9,433,125
Minnesota Mining & Manufacturing Co. 100,000 6,490,900
Union Carbide Corp. 100,000 3,750,000
25,645,725
METALS & MINING - 0.9%
Alcan Aluminium Ltd. 100,000 3,105,875
Aluminum Co. of America 225,000 11,896,875
Freeport McMoRan Copper & Gold, Inc.
Class A 85,000 2,380,000
IMCO Recycling, Inc. 299,000 7,325,500
Inco Ltd. 175,000 5,788,013
Reynolds Metals Co. 125,000 7,078,125
37,574,388
TOTAL BASIC INDUSTRIES 63,220,113
CONGLOMERATES - 0.9%
Allied-Signal, Inc. 265,000 12,587,500
Harris Corp. 60,000 3,277,500
ITT Industries, Inc. 85,000 2,040,000
Tyco International Ltd. 350,000 12,468,750
United Technologies Corp. 65,000 6,166,875
36,540,625
CONSTRUCTION & REAL ESTATE - 0.6%
BUILDING MATERIALS - 0.1%
York International Corp. 60,000 2,820,000
CONSTRUCTION - 0.4%
Oakwood Homes Corp. 440,000 16,885,000
ENGINEERING - 0.1%
Fluor Corp. 85,000 5,610,000
TOTAL CONSTRUCTION & REAL ESTATE 25,315,000
DURABLES - 3.0%
AUTOS, TIRES, & ACCESSORIES - 2.1%
Chrysler Corp. 750,000 41,531,250
General Motors Corp. 825,146 43,629,595
Safety Components International, Inc. (a) 228,200 3,594,150
88,754,995
CONSUMER ELECTRONICS - 0.1%
Whirlpool Corp. 40,000 2,130,000
HOME FURNISHINGS - 0.1%
Leggett & Platt, Inc. 150,000 3,637,500
SHARES VALUE (NOTE 1)
TEXTILES & APPAREL - 0.7%
Adidas AG 71,400 $ 3,768,609
Adidas AG (a)(b) 45,600 2,406,843
NIKE, Inc. Class B 200,000 13,925,000
Tommy Hilfiger (a) 180,000 7,627,500
27,727,952
TOTAL DURABLES 122,250,447
ENERGY - 1.2%
ENERGY SERVICES - 0.3%
Schlumberger Ltd. 185,000 12,811,250
INDEPENDENT POWER - 0.2%
Thermo Electron Corp. (a) 175,000 9,100,000
OIL & GAS - 0.7%
Amerada Hess Corp. 225,000 11,925,000
Barrett Resources Corp. (a) 87,300 2,564,438
British Petroleum PLC ADR 75,000 7,659,375
Unocal Corp. 225,000 6,553,125
28,701,938
TOTAL ENERGY 50,613,188
FINANCE - 4.1%
BANKS - 0.8%
Banc One Corp. 350,000 13,212,500
BankAmerica Corp. 125,000 8,093,750
Chemical Banking Corp. 200,000 11,750,000
33,056,250
CREDIT & OTHER FINANCE - 0.5%
American Express Co. 435,000 17,998,125
Household International, Inc. 20,000 1,165,000
19,163,125
FEDERAL SPONSORED CREDIT - 1.6%
Federal National Mortgage Association 550,000 68,268,750
INSURANCE - 0.8%
Allstate Corp. 285,000 11,720,625
American International Group, Inc. 1,600 146,883
General Re Corp. 81,200 12,586,000
ITT Hartford Group, Inc. 85,000 4,111,875
Travelers, Inc. (The) 100,000 6,287,500
34,852,883
SECURITIES INDUSTRY - 0.4%
Alliance Entertainment Corp. (a) 684,800 6,505,600
Edwards (A.G.), Inc. 144,900 3,459,488
Merrill Lynch & Co., Inc. 100,000 5,100,000
15,065,088
TOTAL FINANCE 170,406,096
HEALTH - 8.5%
DRUGS & PHARMACEUTICALS - 2.4%
Amgen, Inc. (a) 225,000 13,359,375
Biogen, Inc. (a) 117,700 7,238,550
Bristol-Myers Squibb Co. 175,000 15,028,125
Dura Pharmaceuticals, Inc. (a) 125,000 4,343,750
Genentech, Inc. special (a) 125,000 6,625,000
Merck & Co., Inc. 300,000 19,725,000
Pharmacia & Upjohn, Inc. 400,000 15,500,000
Pfizer, Inc. 265,000 16,695,000
98,514,800
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - 2.6%
Abbott Laboratories 225,000 $ 9,393,750
Baxter International, Inc. 275,000 11,515,625
Biomet, Inc. (a) 185,000 3,306,875
Cardinal Health, Inc. 151,600 8,300,100
Conmed Corp. 7,700 192,500
Johnson & Johnson 120,000 10,275,000
Medtronic, Inc. 300,000 16,762,500
Millipore Corp. 175,000 7,196,875
Nellcor, Inc. 38,500 2,243,588
Oakley, Inc. (a) 100,000 3,400,000
Pall Corp. 235,000 6,315,625
Physician Sales & Service, Inc. (a) 300,000 8,550,000
St. Jude Medical, Inc. (a) 186,500 8,019,500
Thermedics, Inc. (a) 175,000 4,856,250
Thermo Cardiosystems, Inc. (a) 75,000 5,793,750
106,121,938
MEDICAL FACILITIES MANAGEMENT - 3.5%
American Medical Response 360,000 11,700,000
Columbia/HCA Healthcare Corp. 400,025 20,301,269
Foundation Health Corp. (a) 215,000 9,245,000
HEALTHSOUTH Rehabilitation Corp. (a) 1,000,000 29,125,000
Healthsource, Inc. (a) 95,000 3,420,000
Humana, Inc. 200,000 5,475,000
Multicare Companies, Inc. (a) 175,000 4,200,000
Oxford Health Plans, Inc. (a) 81,500 6,020,813
Physician Reliance Network, Inc. (a) 200,000 7,950,000
Sterling Healthcare Group, Inc. (a) 70,000 743,750
United HealthCare Corp. 260,000 17,030,000
U.S. Healthcare, Inc. 425,000 19,762,500
Vencor, Inc. (a) 360,025 11,700,813
146,674,145
TOTAL HEALTH 351,310,883
INDUSTRIAL MACHINERY & EQUIPMENT - 4.1%
ELECTRICAL EQUIPMENT - 2.8%
Avid Technology, Inc. (a) 225,050 4,275,950
Emerson Electric Co. 125,000 10,218,750
General Electric Co. 975,000 70,200,000
Glenayre Technologies, Inc. 350,175 21,798,373
Pinnacle Systems (a) 257,600 6,375,600
United Communication Industry
PCL (For. Reg.) 154,000 1,968,559
114,837,232
INDUSTRIAL MACHINERY & EQUIPMENT - 1.0%
Case Corp. 115,000 5,261,250
Caterpillar, Inc. 500,000 29,375,000
Global Industrial Technologies, Inc. (a) 65,800 1,241,975
Semitool, Inc. (a) 6,200 80,600
Singer Company 235,200 6,556,200
42,515,025
POLLUTION CONTROL - 0.3%
TETRA Technologies, Inc. (a) 200,000 3,475,000
WMX Technologies, Inc. 175,000 5,228,125
Zurn Industries, Inc. 125,000 2,671,875
11,375,000
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 168,727,257
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 2.6%
BROADCASTING - 0.1%
Emmis Broadcasting Corp. Class A (a) 25,900 802,900
Evergreen Media Corp. Class A (a) 88,800 2,841,600
3,644,500
ENTERTAINMENT - 0.2%
Disney (Walt) Co. 150,000 8,850,000
LEISURE DURABLES & TOYS - 0.1%
Mattel, Inc. 135,000 4,151,250
LODGING & GAMING - 1.4%
Doubletree Corp. (a) 285,900 7,504,875
HFS, Inc. (a) 525,000 42,918,750
ITT Corp. 85,000 4,505,000
Showboat, Inc. 150,000 3,956,250
58,884,875
RESTAURANTS - 0.8%
Applebee's International, Inc. 235,000 5,346,250
Apple South, Inc. 425,000 9,137,500
Lone Star Steakhouse Saloon (a) 235,000 9,018,125
Outback Steakhouse, Inc. (a) 245,000 8,789,375
Starbucks Corp. (a) 100,000 2,100,000
34,391,250
TOTAL MEDIA & LEISURE 109,921,875
NONDURABLES - 2.6%
AGRICULTURE - 0.1%
Pioneer Hi-Bred International, Inc. 70,000 3,893,750
BEVERAGES - 0.9%
Coca-Cola Company (The) 200,000 14,850,000
PepsiCo, Inc. 390,000 21,791,250
36,641,250
TOBACCO - 1.6%
Philip Morris Companies, Inc. 735,400 66,553,700
TOTAL NONDURABLES 107,088,700
PRECIOUS METALS - 0.5%
Barrick Gold Corp. 325,000 8,575,512
Firstmiss Gold, Inc. (a) 113,353 2,522,104
Newmont Mining Corp. 200,000 9,050,000
20,147,616
RETAIL & WHOLESALE - 7.7%
APPAREL STORES - 0.7%
Baby Superstore, Inc. (a) 75,000 4,275,000
Gap, Inc. 100,000 4,200,000
Just For Feet, Inc. (a) 575,000 20,556,250
29,031,250
APPLIANCE STORES - 0.4%
Cellstar Corp. (a) 710,000 18,460,000
DRUG STORES - 0.5%
General Nutrition Companies, Inc. (a) 735,000 16,905,000
Rite Aid Corp. 140,000 4,795,000
21,700,000
GENERAL MERCHANDISE STORES - 0.5%
Dollar General Corp. 260,050 5,396,038
Wal-Mart Stores, Inc. 681,700 15,253,038
20,649,076
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE, MISCELLANEOUS - 5.6%
Barnes & Noble, Inc. (a) 75,000 $ 2,175,000
Bed Bath & Beyond, Inc. (a) 250,000 9,703,125
Corporate Express (a) 400,000 12,050,000
Home Depot, Inc. (The) 425,000 20,346,875
Lowe's Companies, Inc. 1,275,000 42,712,500
Micro Warehouse, Inc. (a) 100,000 4,325,000
Officemax, Inc. (a) 950,000 21,256,250
Office Depot, Inc. (a) 300,000 5,925,000
Petco Animal Supplies, Inc. (a) 416,600 12,185,550
Petsmart, Inc. (a) 691,300 21,430,300
Staples, Inc. (a) 750,000 18,281,250
Sunglass Hut International, Inc. (a) 1,935,000 45,956,250
U.S. Office Products Co. (a) 235,000 5,346,250
Viking Office Products, Inc. (a) 175,000 8,137,500
229,830,850
TOTAL RETAIL & WHOLESALE 319,671,176
SERVICES - 1.3%
LEASING & RENTAL - 0.7%
Hollywood Entertainment Corp. (a) 1,345,400 11,267,725
Movie Gallery, Inc. (a) 500,000 15,250,000
26,517,725
SERVICES - 0.6%
Medaphis Corp. (a) 575,000 21,275,000
Zebra Technologies Corp. Class A (a) 120,000 4,080,000
25,355,000
TOTAL SERVICES 51,872,725
TECHNOLOGY - 32.5%
COMMUNICATIONS EQUIPMENT - 5.9%
Aspect Telecommunications Corp. (a) 110,000 3,685,000
Cisco Systems, Inc. (a) 1,400,000 104,475,000
DSC Communications Corp. (a) 1,800,000 66,375,000
Ericsson (L.M.) Telephone Co.
Class B ADR 178,500 3,480,750
Global Village Communication (a) 735,000 14,240,625
InterVoice, Inc. (a) 182,000 3,458,000
Jabil Circuit, Inc. (a) 235,700 2,651,625
Microtest, Inc. (a) 96,600 966,000
Microwave Power Devices, Inc. (a)(c) 253,000 2,814,625
U.S. Robotics Corp. 500,000 43,875,000
246,021,625
COMPUTER SERVICES & SOFTWARE - 14.2%
Access Health Marketing, Inc. (a) 50,000 2,212,500
Affiliated Computer Services Class A (a) 14,600 547,500
America Online, Inc. (a) 1,225,000 45,937,500
American Management Systems, Inc. (a) 240,800 7,224,000
Ascend Communications, Inc. (a) 400,000 32,450,000
Automatic Data Processing, Inc. 200,000 14,850,000
Broderbund Software, Inc. (a) 75,000 4,556,250
Business Objects SA sponsored ADR (a) 185,000 8,949,375
CUC International, Inc. (a) 665,000 22,693,125
Ceridian Corp. (a) 100,000 4,125,000
CompUSA, Inc. (a) 415,000 12,916,875
Computer Sciences Corp. (a) 250,000 17,562,500
DST Systems, Inc. (a) 100,000 2,850,000
Data Broadcasting Corp. (a) 203,800 2,522,025
Electronic Arts, Inc. (a) 195,800 5,115,275
FTP Software, Inc. (a) 250,000 7,250,000
SHARES VALUE (NOTE 1)
First Data Corp. 125,090 $ 8,365,394
General Motors Corp. Class E 435,000 22,620,000
HBO & Co. 250,000 19,156,250
Hummingbird Communications Ltd. (a) 140,000 5,746,326
Inso Corp. (a) 178,800 7,599,000
Macromedia, Inc. (a) 27,600 1,442,100
McAfee Associates, Inc. (a) 200,000 8,775,000
Medic Computer Systems, Inc. (a) 110,000 6,655,000
Metatools, Inc. (a) 4,000 104,000
Mercury Interactive Group Corp. (a) 329,800 6,018,850
Microsoft Corp. (a) 1,150,000 100,912,500
NETCOM On-Line Communication
Services, Inc. (a) 152,000 5,472,000
Netscape Communications Corp. (a) 15,000 2,085,000
Oracle Systems Corp. (a) 2,850,000 120,768,750
Parametric Technology Corp. (a) 125,000 8,312,500
Peoplesoft, Inc. (a) 779,300 33,509,900
Progress Software Corp. (a) 85,000 3,187,500
Project Software & Development, Inc. (a) 400 13,950
PsiNet, Inc. (a) 450,000 10,293,750
Stratacom, Inc. (a) 85,000 6,247,500
SunGard Data Systems, Inc. (a) 250,000 7,125,000
Systems & Computer Technology Corp. (a) 224,700 4,465,913
Technology Solutions, Inc. (a) 107,700 2,100,150
UUNET Technologies, Inc. (a) 40,000 2,520,000
585,258,258
COMPUTERS & OFFICE EQUIPMENT - 7.2%
Adaptec, Inc. (a) 625,000 25,625,000
Bay Networks, Inc. (a) 1,250,000 51,406,250
Compaq Computer Corp. (a) 1,425,000 68,400,000
Dell Computer Corp. (a) 350,000 12,118,750
Digital Equipment Corp. (a) 250,000 16,031,250
Discreet Logic, Inc. (a) 47,200 1,180,000
Gateway 2000, Inc. (a) 200,000 4,900,000
International Business Machines Corp. 153,500 14,083,625
Madge NV (a) 185,064 8,281,614
Pitney Bowes, Inc. 165,000 7,755,000
Read Rite Corp. (a) 250,026 5,813,105
SCI Systems, Inc. (a) 200,000 6,200,000
Seagate Technology (a) 225,000 10,687,500
Silicon Graphics, Inc. (a) 1,259,700 34,641,750
Sun Microsystems, Inc. (a) 320,000 14,600,000
Tech Data Corp. (a) 25,200 378,000
Western Digital Corp. (a) 440,000 7,865,000
Xerox Corp. 55,000 7,535,000
297,501,844
ELECTRONIC INSTRUMENTS - 0.0%
Cohu, Inc. 72,300 1,843,650
ELECTRONICS - 5.1%
Altera Corp. (a) 650,000 32,337,500
Analog Devices, Inc. (a) 572,300 20,245,113
Atmel Corp. (a) 725,000 16,221,875
Brightpoint, Inc. (a) 390,200 5,511,575
Cascade Communications Corp. (a) 35,000 2,983,750
Flextronics International (a) 50,000 1,500,000
International Rectifier Corp. (a) 175,000 4,375,000
Kemet Corp. (a) 250,000 5,968,750
LSI Logic Corp. (a) 835,030 27,347,233
Linear Technology Corp. 465,700 18,278,725
Marshall Industries (a) 4,100 131,713
Maxim Integrated Products, Inc. (a) 1,000,000 38,500,000
Microchip Technology, Inc. (a) 425,050 15,514,325
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Solectron Corp. (a) 150,000 $ 6,618,750
Xilinx, Inc. (a) 450,000 13,725,000
209,259,309
PHOTOGRAPHIC EQUIPMENT - 0.1%
3D Systems Corp. (Del) (a) 204,600 4,859,250
TOTAL TECHNOLOGY 1,344,743,936
TRANSPORTATION - 1.3%
AIR TRANSPORTATION - 0.5%
AMR Corp. (a) 90,000 6,682,500
America West Airlines, Inc. Class B (a) 200,000 3,400,000
Delta Air Lines, Inc. 55,000 4,063,125
Southwest Airlines Co. 200,000 4,650,000
Trans World Airlines, Inc. (a) 275,000 2,853,125
21,648,750
RAILROADS - 0.8%
Burlington Northern Santa Fe Corp. 140,025 10,921,950
CSX Corp. 302,400 13,797,000
Union Pacific Corp. 115,000 7,590,000
32,308,950
TOTAL TRANSPORTATION 53,957,700
UTILITIES - 9.4%
CELLULAR - 4.8%
AirTouch Communications, Inc. (a) 3,150,000 88,987,500
Arch Communications Group, Inc. (a) 250,043 6,001,032
BCE Mobile Communications, Inc. (a) 13,000 439,495
Metrocall, Inc. (a) 229,300 4,385,363
Mobile Telecommunications
Technologies, Inc. (a) 210,000 4,488,750
Mobilemedia Corp. (a) 128,600 2,861,350
Palmer Wireless, Inc. (a) 975,000 21,450,000
United States Cellular Corp. (a) 471,300 15,906,375
Vanguard Cellular Systems, Inc.
Class A (a)(c) 2,625,000 53,156,250
197,676,115
TELEPHONE SERVICES - 4.6%
AT&T Corp. 600,000 38,850,000
Ameritech Corp. 525,000 30,975,000
Bell Atlantic Corp. 450,000 30,093,750
BellSouth Corp. 600,000 26,100,000
Frontier Corp. 585,000 17,550,000
LCI International, Inc. (a) 324,300 6,648,150
Lincoln Telecommunications Co. 107,700 2,275,163
SBC Communications, Inc. 575,000 33,062,500
WorldCom, Inc. (a) 115,300 4,064,325
189,618,888
TOTAL UTILITIES 387,295,003
TOTAL COMMON STOCKS
(Cost $2,664,143,877) 3,420,079,613
NONCONVERTIBLE PREFERRED STOCKS - 0.2%
SHARES VALUE (NOTE 1)
TECHNOLOGY - 0.2%
COMPUTERS & OFFICE EQUIPMENT - 0.2%
Silicon Graphics CDA Ltd.
exchangeable (a)
(Cost $11,098,161) 280,080 $ 7,702,107
U.S. TREASURY OBLIGATION - 1.7%
MOODY'S RATINGS PRINCIPAL VALUE
(UNAUDITED) (B) AMOUNT (NOTE 1)
6.25%, 8/15/23
(Cost $68,683,766) Aaa 67,700,000 69,657,211
REPURCHASE AGREEMENTS - 15.4%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a
joint trading account at 5.91%
dated 12/29/95 due 1/2/96 $ 637,818,559 637,400,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $3,381,325,804) $ 4,134,838,931
LEGEND
1. Non-income producing
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $2,406,843 or 0.1% of net
assets.
3. An affiliated company is a company in which the fund has ownership of at
least 5% of the voting securities. Transactions with companies that are or
were affiliates are as follows:
PURCHASES SALES DIVIDEND MARKET
AFFILIATE COST COST INCOME VALUE
Just For Feet, Inc. $ 2,342,009 $ 659,304 - $ -
Microwave Power Devices, Inc. - 216,000 - 2,814,625
Vanguard Cellular Systems, Inc.
Class A 12,954,211 - - 53,156,250
TOTAL $ 15,296,220 $ 875,304 $ - $ 55,970,875
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $3,908,904,414 and $3,139,228,624, respectively, of which U.S.
government and government agency obligations aggregated $68,683,766 and $0,
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 $1,250,453 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $3,395,126,667. Net unrealized appreciation
aggregated $739,712,264, of which $816,952,982 related to appreciated
investment securities and $77,240,718 related to depreciated investment
securities.
The fund hereby designates approximately $188,205,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
VARIABLE INSURANCE PRODUCTS FUND: GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1995
ASSETS
Investment in securities, at value (including repurchase agreements of $637,400,000) (cost $3,381,325,804) $ 4,134,838,931
- - See accompanying schedule
Cash 470
Receivable for investments sold 111,607,416
Receivable for fund shares sold 9,321,438
Dividends receivable 2,825,313
Interest receivable 1,586,719
Other receivables 361,034
TOTAL ASSETS 4,260,541,321
LIABILITIES
Payable for investments purchased $ 94,809,749
Payable for fund shares redeemed 237,116
Accrued management fee 2,089,504
Other payables and accrued expenses 703,141
TOTAL LIABILITIES 97,839,510
NET ASSETS $ 4,162,701,811
Net Assets consist of:
Paid in capital $ 3,119,102,643
Undistributed net investment income 10,790,283
Accumulated undistributed net realized gain (loss) on investments and foreign 279,295,633
currency transactions
Net unrealized appreciation (depreciation) on investments 753,513,252
and assets and liabilities
in foreign currencies
NET ASSETS, for 142,576,497 shares outstanding $ 4,162,701,811
NET ASSET VALUE, offering price $29.20
and redemption price per
share ($4,162,701,811 (divided by) 142,576,497 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995
INVESTMENT INCOME $ 19,321,500
Dividends
Interest 14,884,599
TOTAL INCOME 34,206,099
EXPENSES
Management fee $ 19,591,048
Transfer agent fees 1,536,285
Accounting fees and expenses 760,478
Non-interested trustees' compensation 15,959
Custodian fees and expenses 155,218
Registration fees 404,037
Audit 47,036
Legal 14,321
Miscellaneous 7,492
TOTAL EXPENSES 22,531,874
NET INVESTMENT INCOME 11,674,225
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (including 361,330,988
realized gain of $736,446
on sales of investments in
affiliated issuers)
Foreign currency transactions (11,163 361,319,825
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 474,991,138
Assets and liabilities in 125 474,991,263
foreign currencies
NET GAIN (LOSS) 836,311,088
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 847,985,313
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 11,674,225 $ 11,810,184
Net investment income
Net realized gain (loss) 361,319,825 (74,102,658)
Change in net unrealized appreciation (depreciation) 474,991,263 80,193,945
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 847,985,313 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 2,059,928,760 1,289,938,019
Net proceeds from sales of shares
Reinvestment of distributions 12,404,421 87,909,946
Cost of shares redeemed (887,081,596) (549,819,377)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 1,185,251,585 828,028,588
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,020,832,477 758,019,986
NET ASSETS
Beginning of period 2,141,869,334 1,383,849,348
End of period (including undistributed net investment income of $10,790,283 and $11,472,202,
respectively) $ 4,162,701,811 $ 2,141,869,334
OTHER INFORMATION
Shares
Sold 76,302,442 60,676,019
Issued in reinvestment of distributions 568,749 4,039,985
Redeemed (33,037,870) (25,920,211)
Net increase (decrease) 43,833,321 38,795,793
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
SELECTED PER-SHARE DATA 1995 1994 1993 E 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.69 $ 23.08 $ 19.76 $ 18.51 $ 12.91
Income from Investment Operations
Net investment income .08 .12 .12 .09 .09 C
Net realized and unrealized gain (loss) 7.55 (.12) D 3.64 1.64 5.72
Total from investment operations 7.63 - 3.76 1.73 5.81
Less Distributions (.12) (.12) (.11) (.05) (.21)
From net investment income
From net realized gain - (1.27) (.21) (.43) -
In excess of net realized gain - - (.12) - -
Total distributions (.12) (1.39) (.44) (.48) (.21)
Net asset value, end of period $ 29.20 $ 21.69 $ 23.08 $ 19.76 $ 18.51
TOTAL RETURN A, B 35.36% (.02)% 19.37% 9.32% 45.51%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 4,162,702 $ 2,141,869 $ 1,383,849 $ 749,837 $ 371,462
Ratio of expenses to average net assets .70% .70% .71% .75% .84%
Ratio of expenses to average net assets after expense reductions .70% .69% .71% .75% .84%
F
Ratio of net investment income to average net assets .37% .69% .72% .83% .56%
Portfolio turnover rate 108% 122% 159% 262% 261%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
B TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR
INSURANCE COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES
WOULD REDUCE THE TOTAL RETURNS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON
AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
D THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH
THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD ENDED DUE TO
THE TIMING OF SALES AND
REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES
OF THE INVESTMENTS OF THE FUND.
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.
F FMR HAS DIRECTED CERTAIN PORTFOLIO TRADES TO BROKERS WHO PAID A
PORTION OF THE FUND'S EXPENSES.
</TABLE>
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the
growth of a hypothetical $10,000 investment. A fund's total return includes
changes in a fund's share price, plus reinvestment of any dividends
(income) and capital gains (the profits the fund earns when it sells
securities that have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 LIFE OF
DECEMBER 31, 1995 YEAR YEARS FUND
OVERSEAS 9.74% 8.13% 7.31%
Morgan Stanley EAFE Index 11.21% 9.37% 7.53%
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.
Figures for more than one year assume a steady compounded rate of return
and are not the fund's year-by-year results, which fluctuated over the
periods shown. The life of fund figures are from commencement of operations
January 28, 1987.
If Fidelity had not reimbursed certain fund expenses, the fund's life of
fund total return would have been lower.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S SEPARATE
ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF THESE ADDITIONAL
CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money. Foreign investments involve greater risks and
potential rewards than U.S. investments. These risks include political and
economic uncertainties of foreign countries, as well as the risk of
currency fluctuations.
$10,000 OVER LIFE OF FUND
VIP OverseasEurope, A
01/28/87 10000.00 10000
01/31/87 10000.00 9997.463
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
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 15401.5
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 12030.1
12/31/90 12705.10 12224.98
01/31/91 12827.85 12620.4
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
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 14761.9
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 17308.6
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
05/31/95 17682.31 17963.28
06/30/95 17847.46 17648.27
07/31/95 18640.19 18746.98
08/31/95 18122.72 18031.85
09/30/95 18386.96 18384.02
10/31/95 18023.62 17889.85
11/30/95 18232.82 18387.61
12/29/95 18783.33 19128.45
Let's say you invested $10,000 in Overseas Portfolio on January 28, 1987,
when the fund started. By December 31, 1995, your investment would have
grown to $18,783 - an 87.83% increase. That compares to $10,000 invested in
the Morgan Stanley EAFE Index, which would have grown to $19,128 over the
same period - a 91.28% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
C. S. Holdings (Reg.) 2.0
Unilever NV Ord. 1.3
Nomura Securities Co. Ltd. 1.2
ING Groep NV 1.1
Banco Bilbao Vizcaya SA Ord. (Reg.) 1.0
TOP FIVE MARKET SECTORS AS OF DECEMBER 31, 1995
% OF FUND'S
INVESTMENTS
Finance 26.4
Utilities 8.9
Nondurables 8.7
Durables 7.7
Basic Industries 5.4
GEOGRAPHIC DIVERSIFICATION AS OF DECEMBER 31, 1995
(BY LOCATION OF ISSUER) % OF FUND'S
INVESTMENTS
Japan 21.2
United Kingdom 12.9
Switzerland 8.0
Netherlands 6.4
France 5.1
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 12 months ended December 31, 1995, the fund's performance
slightly trailed that of the Morgan Stanley EAFE Index - a broad measure of
stocks in Europe, Australia and the Far East. The index had a total return
of 11.21% for the 12-month period.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
A. I think the main factor was that I thought the effects of slowing
economic growth on earnings estimates would have an impact on stock prices
somewhat before their effect was really felt. For example, I avoided
cyclical stocks - those that tend to rise and fall with the economy, such
as paper and forest product companies - but they didn't start to come down
until the fourth quarter. Instead, I focused the fund on what I would call
defensive stocks. These investments included Unilever, a consumer
nondurable stock that tends to post solid earnings regardless of the
economic climate, and financial investments such as ING Groep, which
generally benefit from the interest rate declines we've seen during the
year. These stocks helped the fund, but not until the fourth quarter.
Q. LET'S TAKE A CLOSER LOOK AT HOW YOU POSITIONED THE FUND DURING THE PAST
YEAR.
A. Most of 1995 was frustrating because, historically, markets around the
world have shown a higher correlation to the U.S. market than we've seen
this year. In addition, foreign stock market performance generally did not
coincide with the strong performance seen in many bond markets. The
slowdown experienced by many economies led to lower interest rates, an
environment that generally is supportive for stock markets as well. That's
because lower rates can reduce companies' borrowing costs and make
alternatives to stock investing less attractive. Furthermore, the good
performance in several foreign markets was narrow, driven by the strength
of only a few stocks. Looking specifically at the fund, more investments
were in Japan than elsewhere -21.2% at the end of the period - although the
fund held less there than is included in the EAFE index. This is a market
that struggled through most of the year, although it rebounded in the
fourth quarter. The Japanese banking sector performed well through the
first part of the year and in the fourth quarter. However, the fund didn't
participate, because its Japanese investments were focused on exporters;
companies with electronics or technology-oriented businesses, such as
Matsushita Electric, Hitachi and Omron; retailers such as Ito-Yodako; and
financial stocks such as Nomura Securities. In the second half of the year,
though, some of these stocks rebounded, because the yen started to weaken
versus the dollar, making these companies' products less expensive abroad.
Q. YOU ALSO INVESTED A FAIR AMOUNT IN THE UNITED KINGDOM...
A. That's right, 12.9%, about as much as is included in the EAFE index.
This has been one of the best performing markets outside of the U.S., led,
for the most part, by financial stocks including Barclays and National
Westminster Bank. In the early part of 1995, a number of consumer
nondurable stocks helped the fund, including brewers Bass and Whitbread.
Q. LET'S TURN TO EMERGING MARKETS...
A. At the end of last year, when emerging markets dropped sharply after
Mexico's devaluation of the peso, I had minimal investments in emerging
markets. I started adding some emerging market stocks in May, including
Mexican banks as well as investments in Brazil, Chile and Southeast Asia.
One stock that turned in a very good performance was Sampoerna, an
Indonesian cigarette company. One of the main reasons I owned this stock
and Matahari, an Indonesian retailer, was that the standard of living for
many Indonesians has been on the rise. With wages and disposable income
growing, demand for items such as cigarettes, beer, toothpaste and clothing
has been increasing. The fund's investments in Unilever and Nestle also
gave it some exposure to this growth in consumer nondurable spending in
emerging markets.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
A. At the end of the year, overseas markets started to catch up to the U.S.
market. Investors have started to become more actively interested in
opportunities abroad, attracted by, among other things, cheap stock
valuations. Prospects for foreign markets seem to be improving, in absolute
terms and relative to the U.S. After the mixed performance we've seen from
international markets over the past few years, a contrarian investor might
become more interested in foreign markets from a risk/reward perspective.
I'm hoping we'll see some signs of a rebound in overseas markets, with
investors finding better buys abroad than domestically.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND
OTHER CONDITIONS.
FUND FACTS
GOAL: seeks high current income by investing in
high yielding, lower-rated fixed income
securities
START DATE: September 19, 1985
SIZE: as of December 31, 1995, more than
$1.0 billion
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
INVESTMENTS DECEMBER 31, 1995
Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 86.7%
SHARES VALUE (NOTE 1)
ARGENTINA - 0.8%
Buenos Aires Embotelladora SA
sponsored ADR 41,800 $ 862,130
Perez Companc Class B 308,452 1,634,550
Telecom Argentina sponsored ADR
Class B 83,400 3,971,925
Telecom Argentina Stet France
Telecom SA 263,600 1,251,912
YPF Sociedad Anonima sponsored
ADR representing Class D shares 150,500 3,254,563
10,975,080
AUSTRALIA - 2.2%
Amcor Ltd. 190,700 1,345,603
Brambles Industries Ltd. 276,500 3,080,556
FAI Insurance Ltd. Ord. 2,037,900 1,104,965
Fosters Brewing Group Ltd. 903,100 1,482,418
Lend Lease Corp. Ltd. 81,000 1,173,174
Pioneer International Ltd. 493,300 1,271,403
Qantas Airways Ltd. sponsored ADR (b) 48,400 810,700
TNT Ltd. 1,106,800 1,463,295
Western Mining Holdings Ltd. 414,100 2,657,429
Westpac Banking Corp. 2,912,700 12,893,911
Woolworths Ltd. 991,200 2,385,333
29,668,787
AUSTRIA - 0.3%
EVN (Energie-Versor Nieder) 12,200 1,671,729
VA Technologie AG 6,800 861,143
VA Technologie AG (b) 15,000 1,899,580
4,432,452
BELGIUM - 1.2%
Bekaert SA 11,255 9,272,120
Delhaize Freres & Cie Le Lion SA 135,300 5,617,835
Petrofina SA 5,100 1,566,600
Petrofina SA (warrants) (a) 595 7,254
16,463,809
BERMUDA - 0.0%
Consolidated Electric Power Asia Ltd.
sponsored ADR (b) 39,800 701,475
BRAZIL - 0.7%
Brahma (Cia Cervejaria) PN Class B
(Pfd. Reg.) 3,204,300 1,318,743
Coteminas PN 2,500,000 835,948
Telebras PN:
(Pfd. Reg.) 103,879,970 5,001,883
sponsored ADR (a) 52,500 2,487,188
9,643,762
CANADA - 0.4%
Midland Walwyn, Inc. 269,900 1,730,952
Noranda, Inc. 191,100 3,939,385
5,670,337
CHILE - 0.3%
Santa Isabel SA sponsored ADR (a) 90,900 2,181,600
Vina Concha Stet y Toro SA
sponsored ADR 81,300 1,463,400
3,645,000
SHARES VALUE (NOTE 1)
FINLAND - 0.7%
Cultor OY, Series 1 71,100 $ 2,933,908
Pohjola Class B 334,000 4,287,843
Valmet OY Class A 91,700 2,291,396
9,513,147
FRANCE - 5.1%
Accor SA 65,158 8,419,479
Alcatel Alsthom CGE 77,300 6,651,597
Axa SA 158,018 10,627,930
Club Mediterranee SA Ord. 28,200 2,247,264
Compagnie Bancaire Ord. 65,670 7,334,589
Elf Aquitaine 38,528 2,833,161
Generale des Eaux 60,582 6,036,592
IMETAL SA Ord. 40,700 4,852,644
Lafarge Coppee SA 41,590 2,674,339
Michelin SA Cie Generale des
Etablissements Class B 128,100 5,098,936
Total SA Class B 144,400 9,726,730
Vallourec SA (a) 60,000 2,127,790
68,631,051
GERMANY - 4.2%
Asko 2,900 1,512,517
Bayer AG 12,000 3,158,554
Bayerische Vereinsbank AG Ord. 99,500 2,947,636
Continental Gummi-Werke AG 256,000 3,560,501
Daimler-Benz AG Ord. 8,700 4,368,150
Deutsche Bank AG 273,300 12,918,081
Gildemeister AG 18 1,627
Hoechst AG Ord. 14,500 3,922,462
Kaufhof Holding AG 14,500 4,406,467
Mannesmann AG Ord. 16,400 5,208,540
Metallgesellschaft AG Ord. 88,300 1,928,108
Metallgesellschaft AG (b) 86,700 1,893,171
Veba AG Ord. 170,900 7,237,698
Volkswagen AG 8,900 2,968,317
56,031,829
HONG KONG - 2.9%
Amoy Properties Ltd. 2,208,000 2,198,720
Consolidated Electric Power Asia Ltd. 1,464,000 2,660,097
Dickson Concepts International Ltd. 2,578,000 2,400,449
Great Eagle Holdings Ltd. 948,000 2,451,988
HSBC Holdings PLC 834,000 12,619,205
Hong Kong Land Holdings Ltd. 2,544,000 4,706,400
Hong Kong Telecommunications Ltd. 1,838,000 3,280,233
Hopewell Holdings Ltd. 3,944,000 2,269,745
Hysan Development Co. Ltd. 1,383,000 3,657,595
Peregrine Investments Holdings Ltd. 832,000 1,075,978
Semi-Tech (Global) Ltd. 102,006 164,239
Sun Hung Kai Properties Ltd. (a) 153,000 1,251,503
38,736,152
INDIA - 0.1%
Reliance Industries Ltd. GDS 106,400 1,423,632
INDONESIA - 1.6%
Astra International PT (For. Reg.) 1,596,500 3,316,589
Bank International Indonesia PT Ord. 921,000 3,051,205
Bank Niaga PT 330,000 656,681
Gudang Garam PT Perusahaan 271,500 2,837,899
Jakarta International Hotels &
Development Ord. 1,541,000 1,887,078
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDONESIA - CONTINUED
Matahari Putra Prima PT (For. Reg.) 1,011,500 $ 1,780,578
Sampoerna Hanjaya Mandala (For. Reg.) 735,750 7,658,370
Semen Gresik (For. Reg.) 268,500 751,542
21,939,942
IRELAND - 0.9%
Bank of Ireland U.S. Holdings, Inc. 1,009,200 7,355,579
Fyffes PLC 1,358,000 2,169,096
Independent Newspapers PLC 521,050 3,151,271
12,675,946
ITALY - 1.7%
Assicurazioni Generali Spa 198,470 4,800,400
Benetton Group Spa 126,200 1,494,691
Bulgari Spa (a) 163,400 1,393,736
Fiat Spa 396,500 1,286,128
Istituto Mobiliare Italiano 301,400 1,897,985
Istituto Nazionale Delle Assicurazioni Spa 976,500 1,294,416
Italgas Spa 734,700 2,236,486
Magneti Marelli Spa 1,169,000 1,406,775
Montedison Spa Ord. (a) 1,604,600 1,075,123
Olivetti Ing C & Co. Spa Ord. 4,324,750 3,496,838
SAI Sta Assieuratrice Industriale Spa 211,200 2,156,554
22,539,132
JAPAN - 21.2%
ADO Electronic Industrial Co. Ltd. 19,000 486,944
Acom Co. Ltd. 1,000 41,779
Aida Engineering Ltd. Ord. 176,000 1,348,085
Amada Metrecs Co. Ltd. 86,000 1,372,340
Amadasonoike Co. Ltd. 282,000 1,808,182
Amway Japan Ltd. 78,100 3,293,192
Aoyama Trading Co. Ord. (a) 114,600 3,657,447
Bridgestone Corp. 339,000 5,376,789
Canon, Inc. 548,000 9,910,638
Citizen Watch Co. Ltd. Ord. 422,000 3,224,178
Daiwa House Industry Co. Ltd. 218,000 3,584,139
East Japan Railway Co. Ord. 700 3,398,453
Fanuc Ltd. 98,200 4,245,203
Fuji Bank 126,000 2,778,337
Fuji Photo Film Co. Ltd. 261,000 7,522,050
Fujitsu Ltd. 370,000 4,115,087
Futaba Industrial Co. Ltd. 126,000 2,059,381
Hanshin Department Store Ltd. 29,000 222,969
Hirose Electric Co. Ltd. 25,200 1,447,660
Hitachi Ltd. 1,126,000 11,325,339
Honda Motor Co. Ltd. 597,000 12,297,969
Ishihara Sangyo Kaisha Ltd. (a) 343,000 1,111,267
Isetan Co. Ltd. 289,000 4,751,451
Ito-Yokado Co. Ltd. 27,000 1,660,735
Izumi Co. Ord. 112,000 2,469,633
Japan Airlines Co. Ltd. (a) 302,000 2,000,677
Kao Corp. 114,000 1,411,219
Kobe Steel (a) 1,187,000 3,662,021
Komatsu Ltd. Ord. 410,000 3,370,406
Komatsu Seiren 30,000 275,629
Marubeni Corp. 339,000 1,832,698
Matsushita Electric Industrial Co. Ltd. 303,000 4,923,017
Marukyo Corp. 16,000 286,267
Minebea Co. Ltd. 546,000 4,572,882
Mitsubishi Estate Co. Ltd. 264,000 3,293,617
Mitsubishi Heavy Industries Ltd. 492,000 3,916,016
Mitsubishi Trust & Banking Corp. 191,000 3,177,176
SHARES VALUE (NOTE 1)
Mitsui Trust and Banking 449,000 $ 4,906,867
Mitsukoshi Ltd. 315,000 2,955,029
Murata Manufacturing Co. Ltd. 132,000 4,851,064
Nichido Fire & Marine
Insurance Co. Ltd. 591,000 4,744,004
Nikko Securities Co. Ltd. 521,000 6,701,451
Nintendo Co. Ltd. Ord. 46,000 3,492,263
Nissan Motor Co. Ltd. Ord. 468,000 3,589,207
Nitto Denko Corp. 97,000 1,500,967
Nomura Securities Co. Ltd. 711,000 15,471,470
Omron Corp. 139,000 3,199,420
Onward Kashiyama & Co. Ltd. 291,000 4,728,046
Orix Corp. 242,000 9,946,809
Rohm Co. Ltd. 120,000 6,765,958
Sakura Bank Ltd. 265,000 3,357,350
Sankyo Co. Ltd. 142,000 3,186,074
Seino Transpotation Co. Ltd. 144,000 2,409,284
Sekisui Chemical Co. Ltd. (a) 325,000 4,777,563
Sony Corp. 141,500 8,470,841
Sumitomo Marine and Fire
Insurance Co. Ltd. 420,000 3,444,487
Sumitomo Realty & Development Co. Ltd. 648,000 4,574,855
Sumitomo Trust & Banking Co. Ltd. 315,000 4,447,776
TDK Corp. 44,000 2,242,553
Takashimaya Co. Ltd. 322,000 5,138,298
Takeda Chemical Industries Ltd. 487,000 8,006,770
Tokio Marine & Fire
Insurance Co. Ltd. (The) 1,065,000 13,904,739
Toshiba Corp. 629,000 4,921,286
Toyota Motor Corp. 397,000 8,408,414
Tsugami Corp. 253,000 1,409,362
Uny Co. Ltd. 103,000 1,932,495
Yamanouchi Pharmaceutical Co. Ltd. 209,000 4,487,234
284,202,808
KOREA (SOUTH) - 0.9%
Cho Hung Bank Co. Ltd. 191,504 2,409,736
Korea Electric Power Corp. 147,470 6,329,338
Korea First Securities Co. Ltd. 16,203 194,248
Kyungki Bank 171,523 1,680,406
Seoul Securities Co. 74,592 903,854
11,517,582
MEXICO - 1.2%
Banacci SA de CV:
Class B 352,200 591,348
Class L 17,610 26,226
Cemex SA, Series B 1,152,800 4,194,724
Cifra SA Class C 1,559,100 1,580,374
Consorcio G Grupo Dina SA ADR 34,800 65,250
Empresas Ica Sociedad Controladora SA
de CV sponsored ADR representing Ord.
(participation certificates) 208,700 2,139,175
Grupo Carso SA de CV Class A-1 (a) 287,800 1,555,878
Grupo Dina sponsored ADR, Series L 12,543 17,247
Grupo Financiero Bancomer SA de CV (a):
Class B 5,151,800 1,439,424
Series L 216,879 56,369
sponsored ADR, Series C (b) 70,200 386,100
Telefonos de Mexico SA sponsored ADR
representing shares Ord. Class L 121,400 3,869,625
15,921,740
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MALAYSIA - 0.9%
Kuala Lumpur Industries Holdings BHD (a) 290,000 $ 332,375
Magnum Corp. BHD 567,500 1,072,863
Malayan Banking BHD 133,000 1,120,993
Resorts World BHD 443,000 2,372,903
Telekom Malaysia BHD 792,000 6,176,290
Tenega Nasional BHD 251,000 988,578
Time Engineering BHD 161,000 374,124
12,438,126
NETHERLANDS - 6.4%
ABN-AMRO Holdings NV 46,500 2,113,899
AKZO NV 103,800 11,980,896
IHC Caland NV 93,200 3,129,851
ING Groep NV 228,108 15,207,200
KLM Royal Dutch Airlines Ord. 271,873 9,535,844
Koninklijke PPT Nederland 221,500 8,030,752
Oce Van der Grinten NV 136,700 8,297,214
Pirelli Tyre Holdings NV Ord.(a) 546,100 4,754,602
Royal Dutch Petroleum Co. Ord. 29,500 4,091,107
Unilever NV Ord. 122,000 17,108,831
Vendex International NV (b) 81,400 2,414,664
86,664,860
NORWAY - 2.2%
Bergesen Group:
Class A 35,500 705,031
Class B 301,600 5,894,710
Christiania Bank Free shares Ord. 1,475,000 3,417,581
Den Norske Bank Class A Free shares 1,146,800 2,964,428
Norsk Hydro AS 85,150 3,570,062
Orkla AS:
Class A Free shares 93,250 4,622,521
Class B (non-vtg.) 47,800 2,275,329
Saga Petroleum AS Class B 261,600 3,257,424
Unitor AS 192,300 2,636,987
29,344,073
PAKISTAN - 0.0%
Hub Power Co. Ltd. GDR (a) 36,200 629,880
PHILIPPINES - 0.2%
Philippine Long Distance Telephone Co.
sponsored ADR 51,400 2,782,025
POLAND - 0.1%
Bank Gdanski SA GDR (b) 92,600 900,998
SINGAPORE - 0.4%
Kim Engineering Holdings Ltd. 2,455,000 2,256,593
Overseas Union Bank Ltd. (For.) 265,000 1,826,875
Van Der Horst Ltd. 156,000 788,659
4,872,127
SOUTH AFRICA - 0.1%
De Beers Consolidated Mines Ltd. ADR 24,000 726,000
SPAIN - 4.9%
Banco Bilbao Vizcaya SA Ord. (Reg.) 389,200 13,974,807
Banco de Santander SA Ord. (Reg.) 51,000 2,551,990
Banco Intercontinental Espanol 59,550 5,773,715
Corporacion Mapfrecia International de
Reaseguros SA (Reg.) 183,400 10,232,003
Repsol SA Ord. 139,500 4,556,201
Tabacalera SA, Series A 205,200 7,755,803
Telefonica de Espana SA Ord. 971,750 13,413,910
Union Electrica Fenosa SA 1,152,700 6,914,021
65,172,450
SHARES VALUE (NOTE 1)
SWEDEN - 2.7%
Investor AB Class B Free shares 314,700 $ 10,356,174
Mo Och Domsjoe AB Class B 30,800 1,309,772
SKF AB Ord. 133,700 2,551,488
Skandia Foersaekrings AB 35,400 954,830
Skandinaviska Enskilda Banken
Class A Free shares 948,300 7,837,308
Volvo AB Class B 637,400 13,025,951
36,035,523
SWITZERLAND - 8.0%
Adia SA (Bearer) (a) 27,500 4,480,069
Alusuisse-Lonza Holding AG (Reg.) 12,739 10,089,641
Baloise Holding (Reg.) 3,802 7,907,106
CIBA-GEIGY AG (Reg.) 15,680 13,791,334
C.S. Holdings (Reg.) 258,405 26,478,675
Fischer (Georg) AG (Reg.) 11,600 2,915,078
Nestle SA (Reg.) 11,425 12,632,842
Roche Holdings Ltd. (participation
certificates) 1,700 13,442,374
Surveillance, Societe Generale (Bearer) 1,010 2,004,246
Swiss Bank Corp. (Bearer) 33,500 13,672,877
107,414,242
THAILAND - 1.4%
Bank of Asia PCL (For. Reg.) 354,310 815,799
Krung Thai Bank:
(Loc. Reg.) 179,300 740,262
(For. Reg.) 1,816,640 7,500,221
Ruang Khao Unit Trust (For. Reg.) 836,800 498,293
Siam City Bank PCL (For. Reg.) 6,882,800 7,923,827
Telecomasia Corp. PCL (For. Reg.) (a) 394,000 1,196,546
18,674,948
TURKEY - 0.1%
Aksigorta 350,000 27,918
Aksigorta (b) 1,190,000 94,922
Tofas Turk Otomobil Fabrikasi
AS ADR (b) 662,400 331,200
Tofas Turk Otomobil Fabrikasi AS 9,602,400 951,393
1,405,433
UNITED KINGDOM - 12.9%
Allied Lyons PLC 421,100 3,421,829
Argyll Group PLC Ord. 506,900 2,672,656
Avon Rubber 81,900 609,631
BTR PLC Ord. 625,100 3,179,546
Barclays PLC Ord. 980,300 11,219,078
Barratt Developments PLC 1,162,000 4,441,860
Bass PLC Ord. 576,600 6,424,554
Berkeley Group PLC 532,200 4,151,305
Booker PLC 364,200 2,050,163
Boots Co. PLC (The) 287,600 2,600,155
British Airways PLC Ord. 517,100 3,736,821
British Land Ord. 337,750 1,995,548
Burmah Oil 100,017 1,447,871
Cable & Wireless PLC Ord. 318,900 2,279,803
Cadbury-Schweppes PLC Ord. 955,700 7,877,105
Christies International PLC 50,200 162,702
De la Rue PLC 266,700 2,692,439
Dixons Group PLC 955,800 6,580,998
Glaxo Holdings PLC 363,400 5,156,414
Grand Metropolitan PLC 1,137,000 8,172,445
Great Universal Stores PLC Ord Class A 381,600 4,050,640
Guinness PLC Ord. 1,210,500 8,888,461
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UNITED KINGDOM - CONTINUED
Hanson Trust PLC Ord. 674,000 $ 2,006,795
Lloyds Abbey Life PLC 549,600 3,835,315
Lloyds TSB Group PLC 554,620 2,851,155
London International Group PLC 2,111,000 4,222,987
MFI Furniture Group PLC 1,223,700 3,036,244
Mirror Group Newspaper PLC 1,440,500 3,931,585
National Westminster Bank PLC Ord. 891,820 8,968,689
North West Water Group PLC Ord. 337,700 3,225,920
Prudential Corp. PLC 702,000 4,512,357
Reuters Holdings PLC Ord. 409,200 3,740,772
Rolls Royce PLC Ord. 874,433 2,549,331
Royal Insurance Holdings PLC 992,600 5,872,332
Scottish Hydro-Electric PLC Ord. 723,700 4,034,589
Scottish Power PLC ADR 960,500 5,511,133
South West Water PLC Ord. 383,200 3,084,144
Telegraph (The) PLC 452,100 2,909,540
Tesco PLC Ord. 401,397 1,848,725
Unigate Ltd. Ord. 312,800 1,991,231
Vodafone Group PLC 1,250,204 4,478,521
Whitbread Co. PLC Class A 525,900 5,549,746
Wickes PLC 718,200 1,381,048
173,354,183
TOTAL COMMON STOCKS
(Cost $1,007,219,327) 1,164,748,531
NONCONVERTIBLE PREFERRED STOCKS - 2.0%
AUSTRIA - 0.4%
Creditanstalt Bankverein 105,900 5,427,277
GERMANY - 0.3%
Porsche AG Ord (a). 6,050 3,147,010
ITALY - 1.3%
Banco Ambro Veneto 1,197,000 1,539,216
Fiat Spa 1,350,600 2,462,209
SAI Sta Assicuratrice Industriale Spa 650,500 2,700,722
Stet (Societa Finanziaria Telefonica) Spa 5,173,500 10,542,473
17,244,620
KOREA (SOUTH) - 0.0%
Korea First Securities Co. Ltd. (a) 66,140 549,923
TOTAL NONCONVERTIBLE PREFERRED STOCKS
(Cost $25,830,942) 26,368,830
FOREIGN GOVERNMENT OBLIGATIONS (D) - 0.5%
MOODY'S RATINGS PRINCIPAL
(UNAUDITED) AMOUNT
ARGENTINA - 0.4%
Argentina Republic BOCON
5.8359%, 4/1/01 (c) B1 $ 6,173,130 4,841,146
BRAZIL - 0.1%
Brazil Federative Republic IDU
euro 6 3/8%, 1/1/01 (c) B1 2,517,500 2,161,903
TOTAL GOVERNMENT OBLIGATIONS
(Cost $6,510,574) 7,003,049
CLOSED-END INVESTMENT COMPANIES - 0.0%
SHARES VALUE (NOTE 1)
THAILAND - 0.0%
Ruam Pattana Fund II (For. Reg.)
(Cost $620,880) 1,117,000 $ 676,231
REPURCHASE AGREEMENTS - 10.8%
MATURITY VALUE
AMOUNT (NOTE 1)
Investments in repurchase agreements
(U.S. Treasury obligations) in a joint
trading account at 5.91% dated
12/29/95 due 1/2/96 $ 144,975,138 144,880,000
TOTAL INVESTMENT IN SECURITIES - 100%
(Cost $1,185,061,723) $ 1,343,676,641
LEGEND
1. Non-income producing
2. Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $9,432,810 or 0.7% of net
assets.
3. The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
4. 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 $571,464,933 and $579,186,586, respectively.
The fund placed a portion of its portfolio securities with brokerage firms
which are affiliates of Fidelity Management & Research Company. The
commissions paid to these affiliated firms were $250,227 for the period
(see Note 3 of Notes to Financial Statements).
INCOME TAX INFORMATION
At December 31, 1995, the aggregate cost of investment securities for
income tax purposes was $1,185,652,116. Net unrealized appreciation
aggregated $158,024,525, of which $205,005,861 related to appreciated
investment securities and $46,981,336 related to depreciated investment
securities.
The fund hereby designates approximately $18,341,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
MARKET SECTOR DIVERSIFICATION (UNAUDITED)
As a Percentage of Total Value of Investment in Securities
Aerospace & Defense 0.2%
Basic Industries 5.4
Conglomerates 0.3
Construction & Real Estate 4.4
Durables 7.7
Energy 3.0
Finance 26.4
Government obligations 0.5
Health 3.6
Industrial Machinery & Equipment 2.8
Media & Leisure 2.2
Nondurables 8.7
Precious Metals 0.2
Retail & Wholesale 5.3
Services 1.8
Repurchase Agreements 10.8
Technology 5.3
Transportation 2.5
Utilities 8.9
100.0%
VARIABLE INSURANCE PRODUCTS FUND: OVERSEAS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31, 1995
ASSETS
Investment in securities, at value (including repurchase agreements of $144,880,000) (cost $1,185,061,723) $ 1,343,676,641
- - See accompanying schedule
Cash 209
Receivable for investments sold 7,686,625
Receivable for fund shares sold 1,628,036
Dividends receivable 3,238,530
Interest receivable 115,469
TOTAL ASSETS 1,356,345,510
LIABILITIES
Payable for investments purchased $ 10,926,264
Payable for fund shares redeemed 1,146,930
Accrued management fee 826,884
Other payables and accrued expenses 311,487
TOTAL LIABILITIES 13,211,565
NET ASSETS $ 1,343,133,945
Net Assets consist of:
Paid in capital $ 1,155,673,842
Undistributed net investment income 18,738,964
Accumulated undistributed net realized gain (loss) on investments and foreign 10,104,988
currency transactions
Net unrealized appreciation (depreciation) on investments 158,616,151
and assets and liabilities in foreign currencies
NET ASSETS, for 78,751,394 shares outstanding $ 1,343,133,945
NET ASSET VALUE, offering price $17.06
and redemption price per
share ($1,343,133,945 (divided by) 78,751,394 shares)
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1995
INVESTMENT INCOME $ 30,921,016
Dividends
Interest 8,867,312
39,788,328
Less foreign taxes withheld (3,740,466
)
TOTAL INCOME 36,047,862
EXPENSES
Management fee $ 9,837,952
Transfer agent fees 612,828
Accounting fees and expenses 551,039
Non-interested trustees' compensation 10,958
Custodian fees and expenses 656,865
Registration fees 46
Audit 51,981
Legal 58,187
Miscellaneous 2,343
TOTAL EXPENSES 11,782,199
NET INVESTMENT INCOME 24,265,663
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 18,618,705
Foreign currency transactions (7,976,330 10,642,375
)
Change in net unrealized appreciation (depreciation) on:
Investment securities 86,115,339
Assets and liabilities in (983,694 85,131,645
foreign currencies )
NET GAIN (LOSS) 95,774,020
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 120,039,683
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Operations $ 24,265,663 $ 14,354,948
Net investment income
Net realized gain (loss) 10,642,375 1,588,422
Change in net unrealized appreciation (depreciation) 85,131,645 (19,420,073)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 120,039,683 (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 466,436,535 1,000,905,405
Net proceeds from sales of shares
Reinvestment of distributions 9,787,086 4,465,195
Cost of shares redeemed (541,043,324) (477,688,222)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (64,819,703) 527,682,378
TOTAL INCREASE (DECREASE) IN NET ASSETS 45,432,894 519,740,480
NET ASSETS
Beginning of period 1,297,701,051 777,960,571
End of period (including undistributed net investment income of $18,738,964 and $10,987,509,
respectively) $ 1,343,133,945 $ 1,297,701,051
OTHER INFORMATION
Shares
Sold 29,090,043 62,240,900
Issued in reinvestment of distributions 652,472 274,107
Redeemed (33,802,732) (29,967,241)
Net increase (decrease) (4,060,217) 32,547,766
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31,
SELECTED PER-SHARE DATA 1995 1994 1993 C 1992 1991
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.67 $ 15.48 $ 11.53 $ 13.09 $ 12.42
Income from Investment Operations
Net investment income .17 .19 .06 .16 .24
Net realized and unrealized gain (loss) 1.34 .08 B 4.16 (1.54) .74
Total from investment operations 1.51 .27 4.22 (1.38) .98
Less Distributions (.06) (.08) (.18) (.18) (.17)
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)
Net asset value, end of period $ 17.06 $ 15.67 $ 15.48 $ 11.53 $ 13.09
TOTAL RETURN A 9.74% 1.72% 37.35% (10.72)% 8.00%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 1,343,134 $ 1,297,701 $ 777,961 $ 180,837 $ 126,490
Ratio of expenses to average net assets .91% .92% 1.03% 1.14% 1.26%
Ratio of net investment income to average net assets 1.88% 1.28% 1.21% 1.86% 2.33%
Portfolio turnover rate 50% 42% 42% 61% 168%
A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
B 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.
C EFFECTIVE JANUARY 1, 1993, THE FUND ADOPTED STATEMENT OF POSITION
93-2, "DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT
PRESENTATION OF INCOME, CAPITAL
GAIN, AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT COMPANIES."
AS A RESULT, NET INVESTMENT INCOME PER SHARE MAY REFLECT CERTAIN
RECLASSIFICATIONS RELATED
TO BOOK TO TAX DIFFERENCES.
D INCLUDES AMOUNTS DISTRIBUTED FROM NET REALIZED GAINS ON FOREIGN
CURRENCY RELATED TRANSACTIONS TAXABLE AS ORDINARY INCOME.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1995
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. Debt securities for which quotations are readily
available are valued by a pricing service at their market values as
determined by their most recent bid prices in the principal market (sales
prices if the principal market is an exchange) in which such securities are
normally traded. Equity securities for which quotations are readily
available are valued at the last sale price, or if no sale price, at the
closing bid price. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value
as determined in good faith under consistently applied procedures under the
general supervision of the Board of Trustees. Short-term securities
maturing within sixty days of their purchase date are valued at amortized
cost or original cost plus accrued interest, both of which approximate
current value.
EQUITY-INCOME AND GROWTH PORTFOLIOS. Securities for which exchange
quotations are readily available are valued at the last sale price, or if
no sale price, at the closing bid price. Securities for which exchange
quotations are not readily available (and in certain cases debt securities
which trade on an exchange) are valued primarily using dealer-supplied
valuations or at their fair value as determined in good faith under
consistently applied procedures under the general supervision of the Board
of Trustees. Short-term securities maturing within sixty days of their
purchase date are valued at amortized cost or original cost plus accrued
interest, both of which approximate current value.
OVERSEAS PORTFOLIO. Securities for which quotations are readily available
are valued at the last sale price, or if no sale price, at the closing bid
price in the principal market in which such securities are normally traded.
Securities for which quotations are not readily available are valued
primarily
using dealer-supplied valuations or at their fair value as determined in
good faith under consistently applied procedures under the general
supervision of the Board of Trustees. Short-term securities maturing within
sixty days of their purchase date are valued at amortized cost or original
cost plus accrued interest, both of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. 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, the Money Market, High Income,
Equity-Income, Growth and Overseas Portfolios are not subject to income
taxes to the extent that each distributes substantially all of its taxable
income for the fiscal year. The Overseas Portfolio may be subject to
foreign taxes on income, gains on investments or currency repatriation. The
schedules of investments include information regarding income taxes under
the caption "Income Tax Information."
INVESTMENT INCOME:
MONEY MARKET PORTFOLIO. Interest income, which includes amortization of
premium and accretion of discount, is accrued as earned.
HIGH INCOME, EQUITY-INCOME, GROWTH AND OVERSEAS PORTFOLIOS. Dividend income
is recorded on the ex-dividend date, except certain dividends from foreign
securities where the ex-dividend date may have passed, are recorded as soon
as the funds are informed of the ex-dividend date. Interest income, which
includes accretion of original issue discount, is accrued as earned.
Investment income is recorded net of foreign taxes withheld where recovery
of such taxes is uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a fund.
Expenses which cannot be directly attributed are apportioned between the
funds in the trust.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid
monthly from net interest income for the Money Market Portfolio.
Distributions are recorded on the ex-dividend date for all other funds.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for defaulted
bonds, foreign currency transactions, passive foreign investment companies
(PFIC), market discount, partnerships, non-taxable dividends, capital loss
carryforwards and losses deferred due to wash sales. Certain foreign
currency gains (losses) are taxable as ordinary income and, therefore,
increase (decrease) taxable ordinary income available for distributions
with respect to the Overseas Portfolio.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital and may
affect the per-share allocation between net 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 the Money Market
Portfolio may use foreign currency contracts to facilitate transactions in
foreign securities and to manage the fund's currency exposure. Contracts to
buy generally are used to acquire exposure to foreign currencies, while
contracts to sell are used to hedge the fund's investments against currency
fluctuations. Also, a contract to buy or sell can offset a previous
contract. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms.
The U.S. dollar value of forward foreign currency contracts is determined
using forward currency exchange rates supplied by a quotation service.
Purchases and sales of forward foreign currency contracts having the same
settlement date and broker are offset and any realized gain (loss) is
recognized on the date of offset; otherwise, gain (loss) is recognized on
settlement date.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the funds, along with other affiliated
entities of Fidelity Management & Research Company (FMR), may transfer
uninvested cash balances into
one or more joint trading accounts. These balances are invested in one or
more repurchase agreements that mature in 60 days or less from the date of
purchase, and are collateralized by U.S. Treasury or Federal Agency
obligations.
REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery
of the underlying U.S. Treasury or Federal Agency securities, the market
value of which is required to be at least equal to the repurchase price.
For term repurchase agreement transactions, the underlying securities are
marked-to-market daily and maintained at a value at least equal to the
repurchase price. FMR, the funds' investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The funds may purchase or sell securities on
a when-issued or forward commitment basis. Payment and delivery may take
place a month or more after the date of the transaction. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. The
market value of the securities purchased or sold on a when-issued or
forward commitment basis is identified as such in the fund's schedule of
investments. The funds may receive compensation for interest forgone in the
purchase of a delayed delivery security. Losses may arise due to changes in
the market value of the underlying securities or if the counterparty does
not perform under the contract.
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 its 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 securities that
are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from registration
or to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. At the end of the period,
restricted securities (excluding 144A issues) amounted to $10,584,034 or
1.0% of net assets of the 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
3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
MANAGEMENT FEE - CONTINUED
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
income-based component is 0.24% of average net assets. For the period, the
management fee was equivalent to an annual rate of .24% 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 .45%, .20%, .30% and .45% for High Income, Equity-Income, Growth, and
Overseas Portfolios, respectively. For the period, the management fee was
equivalent to an annual rate of .60%, .51%, .61%, and .76% of average net
assets for the High Income, Equity-Income, Growth, and Overseas Portfolios,
respectively.
The Board of Trustees has approved a new group fee rate schedule with rates
ranging from .1100% to .3700% for the Money Market and High Income
Portfolios and .2500% to .5200% for the Equity-Income, Growth, and Overseas
Portfolios. Effective January 1, 1996, FMR voluntarily agreed to implement
this new group fee rate schedule as it results in the same or a lower
management fee.
SUB-ADVISER FEE. As the Money Market Portfolio's investment sub-adviser,
FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR
of 50% of the management fee payable to FMR. The fee is paid prior to any
voluntary expense reimbursements which may be in effect.
FMR, on behalf of the High Income and Overseas Portfolios, entered into
sub-advisory agreements with Fidelity Management & Research (U.K.) Inc.,
Fidelity Management & Research (Far East) Inc., and with respect only to
Overseas Fidelity International Investment Advisors (FIIA). In addition,
FIIA entered into a sub-advisory agreement with its subsidiary, Fidelity
International Investment Advisors (U.K.) Limited (FIIAL U.K.). Under the
sub-advisory arrangements, FMR may receive investment advice and research
services and may grant the sub-advisers investment management authority to
buy and sell securities. FMR pays its sub-advisers either a portion of its
management fee or a fee based on costs incurred for these services. FIIA
pays FIIAL U.K. a fee based on costs incurred for either service.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations Company
(FIIOC), an affiliate of FMR, is the funds' transfer, dividend disbursing
and shareholder servicing agent. FIIOC receives account fees and
asset-based fees that vary according to account size and type of account.
FIIOC pays for typesetting, printing and mailing of all shareholder
reports, except proxy statements. For the period, transfer agent fees were
equivalent to an annual rate of .05% of average net assets for each of the
funds.
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.
The funds are permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. Each fund has established
borrowing arrangements with certain banks. Under the most restrictive
arrangement, each fund must pledge to the bank securities having a market
value in excess of 220% of the total bank borrowings. The interest rate on
the borrowings is the bank's base rate, as revised from time to time. For
the High Income and Equity-Income Portfolios, the maximum loans and the
average daily loan balances during the period for which loans were
outstanding amounted to $4,885,000 and $18,269,000, respectively. The
weighted average interest rate was 6.4% for both the High Income Portfolio
and 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 $9,702 under this arrangement.
6. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI) and its subsidiaries, affiliates of FMR, were the record owners of
more than 5% of the outstanding shares and certain unaffiliated insurance
companies were record owners of approximately 10% or more of the total
outstanding shares of the following funds:
FILI UNAFFILIATED INSURANCE COMPANIES
FUND % OF OWNERSHIP # OF % OF OWNERSHIP
Money Market 52 1 14
High Income 18 1 42
Equity-Income 27 1 30
Growth 18 1 30
Overseas 15 1 39
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.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Variable Insurance Products Fund and the Shareholders of
Money Market Portfolio, High Income Portfolio, Equity-Income Portfolio,
Growth Portfolio and Overseas Portfolio:
We have audited the accompanying statements of assets and liabilities of
Variable Insurance Products Fund: Money Market Portfolio, High Income
Portfolio, Equity-Income Portfolio, Growth Portfolio and Overseas
Portfolio, including the schedules of portfolio investments, as of December
31, 1995, and the related statements of operations for the year then ended,
the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the five years
in the period then ended. These financial statements and financial
highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1995 by correspondence with the
custodians and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Variable Insurance Products Fund: Money Market Portfolio, High Income
Portfolio, Equity-Income Portfolio, Growth Portfolio and Overseas Portfolio
as of December 31, 1995, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 6, 1996
DISTRIBUTIONS
The Board of Trustees of Variable Insurance Products Fund voted to pay on
February 2, 1996, to shareholders of record at the opening of business on
February 2, 1996, the following distributions derived from capital gains
realized from sales of portfolio securities, and dividends derived from net
investment income:
DIVIDENDS CAPITAL GAINS
High Income $.92 $.18
Equity-Income $.03 $.86
Growth $.08 $2.02
Overseas $.20 $.22
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
FMR Texas Inc., Irving, TX
MONEY MARKET PORTFOLIO
Fidelity Management & Research (U.K.) Inc.,
London, England
HIGH INCOME AND OVERSEAS PORTFOLIOS
Fidelity Management & Research (Far East) Inc.,
Tokyo, Japan
HIGH INCOME AND OVERSEAS PORTFOLIOS
Fidelity International Investment Advisors
Pembroke, Bermuda
OVERSEAS PORTFOLIO
Fidelity International Investment Advisors (U.K.) Limited
Kent, England
OVERSEAS PORTFOLIO
OFFICERS
Edward C. Johnson 3d, PRESIDENT
J. Gary Burkhead, SENIOR VICE PRESIDENT
William J. Hayes, VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT
Robert A. Lawrence, VICE PRESIDENT
Lawrence Greenberg, VICE PRESIDENT
Barry J. Coffman, VICE PRESIDENT
Robert Litterst, VICE PRESIDENT
John R. Hickling, VICE PRESIDENT
Bettina Doulton, VICE PRESIDENT
Arthur S. Loring, SECRETARY
Kenneth A. Rathgeber, TREASURER
Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS
John H. Costello, ASSISTANT TREASURER
Leonard M. Rush, ASSISTANT TREASURER
BOARD OF TRUSTEES
J. Gary Burkhead
Ralph F. Cox
Phyllis Burke Davis
Richard J. Flynn
Edward C. Johnson 3d
E. Bradley Jones
Donald J. Kirk
Peter S. Lynch
Edward H. Malone
Marvin L. Mann
Gerald C. McDonough
Thomas R. Williams
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER
SERVICING AGENT
Fidelity Investments Institutional Operations Co.
Boston, MA
CUSTODIAN
The Bank of New York, New York, NY
MONEY MARKET AND HIGH INCOME PORTFOLIOS
The Chase Manhattan Bank, N.A., New York, NY
EQUITY-INCOME AND OVERSEAS PORTFOLIOS
Brown Brothers Harriman & Co., Boston, MA
GROWTH PORTFOLIO
