(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK) VARIABLE INSURANCE PRODUCTS:
OVERSEAS PORTFOLIO
MID CAP PORTFOLIO
GROWTH PORTFOLIO
CONTRAFUND(registered trademark) PORTFOLIO
GROWTH OPPORTUNITIES PORTFOLIO
INDEX 500 PORTFOLIO
GROWTH & INCOME PORTFOLIO
EQUITY-INCOME PORTFOLIO
BALANCED PORTFOLIO
ASSET MANAGER: GROWTH SM PORTFOLIO
ASSET MANAGER SM PORTFOLIO
HIGH INCOME PORTFOLIO
INVESTMENT GRADE BOND PORTFOLIO
MONEY MARKET PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1999
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
MARKET ENVIRONMENT 4 A REVIEW OF WHAT HAPPENED IN
WORLD MARKETS DURING THE
PAST 12 MONTHS.
OVERSEAS PORTFOLIO 5 PERFORMANCE AND INVESTMENT SUMMARY
7 FUND TALK: THE MANAGER'S OVERVIEW
8 INVESTMENTS
13 FINANCIAL STATEMENTS
MID CAP PORTFOLIO 16 PERFORMANCE AND INVESTMENT SUMMARY
18 FUND TALK: THE MANAGER'S OVERVIEW
19 INVESTMENTS
24 FINANCIAL STATEMENTS
GROWTH PORTFOLIO 27 PERFORMANCE AND INVESTMENT SUMMARY
29 FUND TALK: THE MANAGER'S OVERVIEW
30 INVESTMENTS
35 FINANCIAL STATEMENTS
CONTRAFUND PORTFOLIO 38 PERFORMANCE AND INVESTMENT SUMMARY
40 FUND TALK: THE MANAGER'S OVERVIEW
41 INVESTMENTS
49 FINANCIAL STATEMENTS
GROWTH OPPORTUNITIES PORTFOLIO 52 PERFORMANCE AND INVESTMENT SUMMARY
54 FUND TALK: THE MANAGER'S OVERVIEW
55 INVESTMENTS
59 FINANCIAL STATEMENTS
INDEX 500 PORTFOLIO 62 PERFORMANCE AND INVESTMENT SUMMARY
63 FUND TALK: THE MANAGER'S OVERVIEW
64 INVESTMENTS
72 FINANCIAL STATEMENTS
74 PROXY VOTING RESULTS
GROWTH & INCOME PORTFOLIO 75 PERFORMANCE AND INVESTMENT SUMMARY
77 FUND TALK: THE MANAGER'S OVERVIEW
78 INVESTMENTS
81 FINANCIAL STATEMENTS
EQUITY-INCOME PORTFOLIO 84 PERFORMANCE AND INVESTMENT SUMMARY
86 FUND TALK: THE MANAGER'S OVERVIEW
87 INVESTMENTS
95 FINANCIAL STATEMENTS
BALANCED PORTFOLIO 98 PERFORMANCE AND INVESTMENT SUMMARY
100 FUND TALK: THE MANAGER'S OVERVIEW
101 INVESTMENTS
112 FINANCIAL STATEMENTS
ASSET MANAGER: GROWTH PORTFOLIO 115 PERFORMANCE AND INVESTMENT SUMMARY
117 FUND TALK: THE MANAGER'S OVERVIEW
118 INVESTMENTS
133 FINANCIAL STATEMENTS
ASSET MANAGER PORTFOLIO 136 PERFORMANCE AND INVESTMENT SUMMARY
138 FUND TALK: THE MANAGER'S OVERVIEW
139 INVESTMENTS
155 FINANCIAL STATEMENTS
HIGH INCOME PORTFOLIO 158 PERFORMANCE AND INVESTMENT SUMMARY
160 FUND TALK: THE MANAGER'S OVERVIEW
161 INVESTMENTS
171 FINANCIAL STATEMENTS
INVESTMENT GRADE BOND PORTFOLIO 174 PERFORMANCE AND INVESTMENT SUMMARY
175 FUND TALK: THE MANAGER'S OVERVIEW
176 INVESTMENTS
182 FINANCIAL STATEMENTS
MONEY MARKET PORTFOLIO 184 PERFORMANCE
185 FUND TALK: THE MANAGER'S OVERVIEW
186 INVESTMENTS
190 FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS 192 NOTES TO THE FINANCIAL
STATEMENTS
REPORT OF INDEPENDENT 198 THE AUDITORS' OPINION
ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT 200 THE AUDITORS' OPINION
DISTRIBUTIONS 202
</TABLE>
Each Portfolio, except Money Market, Investment Grade Bond, and Index
500, has two classes of shares. Throughout this report and the
financial statements, one class is referred to as the "Initial Class"
and the other class is referred to as the "Service Class." The Service
Class shares include an asset based distribution fee (12b-1 fee), and
the initial offering of "Service Class" shares took place November 3,
1997, at which time the 12b-1 fee was imposed. Please note, there are
two Performance and Investment Summary pages for each Portfolio that
offers "Initial Class" shares and the "Service Class" shares, and the
performance may be different.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF EACH FUND'S
PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS
STATED ON THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF
FIDELITY OR ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER
CONDITIONS AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH
VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND,
BECAUSE INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
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.
Entering the final year of the 20th century, popular U.S. equity
market indexes had just posted an unprecedented four consecutive years
of double-digit annual returns, while domestic bonds also enjoyed
relatively strong increases. The international story entering 1999,
however, was less positive. In general - with the exception of
European issues - international equities and bonds were greatly
disappointing. Asian and Russian economies had fallen into disarray,
Japan was struggling to implement banking reforms, and emerging
markets were plagued by a host of currency devaluations, loan defaults
and dismal credit outlooks. So who would have thought, just one year
later, that Japan, Russia and emerging markets would be three of
1999's best-performing investments? U.S. equities also continued to
chug along in 1999, extending their indexes' streak of consecutive
double-digit annual increases to five. The stock market was not
without its problems, however. Extremely narrow market breadth,
soaring valuations and rising interest rates - not to mention Y2K -
left many investors unsettled about the prospects for equities
entering the new millennium. Domestic fixed-income alternatives,
meanwhile, fared poorly in 1999 relative to the year prior.
U.S. STOCK MARKETS
In a word, technology was the primary driver of equity market
performance in 1999. While telecommunications, particularly the
wireless segment of the industry, also performed well, nothing
dominated like technology. This incredibly narrow market breadth was
illustrated by the technology-laden NASDAQ Index. Its return of 86.12%
for the one-year period ending December 31, 1999, was the all-time
highest annual return for any major U.S. stock index. Broader indexes,
such as the Standard & Poor's 500 SM, generated much lower returns,
but were still significantly affected by tech's presence. For example,
technology was responsible for approximately 70% of the S&P 500's
12-month return of 21.04%, the index's fifth consecutive annual gain
above 20%. The top 50 stocks in the S&P 500 - the so-called "Nifty
50," many of which were technology shares - accounted for 115% of its
total return. Meanwhile, the remaining 450 stocks fell 3.13%. The Dow
Jones Industrial Average - an index of 30 blue-chip stocks - posted a
27.13% return during the period, its fifth consecutive double-digit
annual return. Despite the strong numbers of these indexes, more
stocks fell than rose in 1999. Growth stocks continued to hammer their
value-oriented peers. But in a turnaround from previous years, mid-
and small-cap growth stocks performed better than their large-cap
brethren did. Conversely, mid-and small-cap value issues posted
negative overall returns in 1999.
FOREIGN STOCK MARKETS
Similar to the domestic equity markets, technology and - perhaps to an
even greater degree than in the U.S. - telecommunications led the
charge in the vastly improved international equity markets. The
recovery of the Japanese stock market in 1999 was nothing short of
remarkable. A renewed emphasis on corporate restructuring and
shareholder value - combined with the Japanese government's
willingness to create more of a free-enterprise market system - proved
wildly successful. For the period, the Morgan Stanley Capital
International Japan Index returned 61.53% and Japan's TOPIX Index was
up 75.89%. While Canadian equity markets didn't get nearly the
attention of their U.S. neighbors, their performance was a great deal
better than the broader American indexes, as the Toronto Stock
Exchange (TSE) 300 returned 39.34% for the 12-month period ending
December 31, 1999. Despite a strong surge in December, European
markets offered mixed results over the past 12 months. In that time,
the Morgan Stanley Capital International Europe Index posted a
relatively tame - at least, in comparison to other developed nations'
stock markets - one-year return of 16.16%.
U.S. BOND MARKETS
Fueled by robust economic growth and a tighter monetary policy,
interest rates moved sharply higher, causing most domestic bonds to
struggle throughout the 12-month period ending December 31, 1999. The
Lehman Brothers Aggregate Bond Index, a popular measure of
taxable-bond performance, fell 0.82% during the period. Treasury
prices had the toughest time of it, falling in response to three
quarter-point interest-rate hikes levied by the Federal Reserve Board,
which erased all of 1998's rate cuts. The Lehman Brothers Long-Term
Treasury Index plunged 8.74% in 1999. Nor were corporate bonds, as
measured by the Lehman Brothers Corporate Bond Index, immune from the
fixed-income fade during the year, falling 1.96%. Government agency
securities also fell into negative territory for the year, as the
Lehman Brothers U.S. Agency Index fell 0.94%. There were a few bright
spots, however. The high-yield market, as measured by the Merrill
Lynch High Yield Master II Index, returned 2.51% during the 12-month
period, while the Lehman Brothers Mortgage-Backed Securities Index was
up 1.86%.
FOREIGN BOND MARKETS
Emerging markets stood as one of the best-performing asset classes in
1999. For the 12-month period ending December 31, 1999, the JP Morgan
Emerging Markets Bond Index Plus was up 25.97%. A year ago, that same
index closed 1998 with a negative 14.35% annual return. A variety of
factors sparked their recovery, including rising commodity prices,
particularly oil; the continuation of a strong U.S. economy;
stable-to-lower interest rates; tame inflation; and greater political
stability. Russia was perhaps the year's biggest comeback story.
Devastated by its devaluation of the ruble and loan defaults in 1998,
Russia steadily demonstrated strong technical improvements that made
it the best-performing country in the index in 1999. Both Brazil and
Mexico enjoyed relatively low inflation and improved economies. Turkey
was the best-performing emerging-market country in December, as the
government's reform plans, IMF financial support, and the announcement
that it would be accepted in the European Union all boosted the
country's prospects. Elsewhere, outside of positive performing
Canadian and Japanese issues - beneficiaries of strong local
currencies - higher rates proved insurmountable for most non-U.S.
developed markets, which produced negative returns in local currency
terms. A markedly weak euro, coupled with firming supply pressures,
felled bond prices in Germany, France and Italy. The Salomon Brothers
Non-U.S. World Government Bond Index fell 5.07% in 1999.
FIDELITY VARIABLE INSURANCE PRODUCTS: OVERSEAS PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY VIP: OVERSEAS - 42.55% 17.37% 11.43%
"INITIAL CLASS"
MSCI EAFE 27.22% 12.98% 7.08%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Morgan
Stanley Capital International Europe, Australasia, Far East (EAFE)
Index - a market capitalization-weighted index that is designed to
represent the performance of developed stock markets outside the
United States and Canada. As of December 31, 1999, the index included
over 1,000 equity securities of companies domiciled in 21 countries.
UNDERSTANDING PERFORMANCE
Many markets around the globe offer the
potential for significant growth over time;
however, investing in foreign markets means
assuming greater risks than investing in the
United States. Factors like changes in a country's
financial markets, its local political and
economic climate, and the fluctuating value of
its currency create these risks. For these reasons
an international fund's performance may be
more volatile than a fund that invests exclusively
in the United States.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown.
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 10 YEARS
VIP Overseas MS EAFE (Net MA tax)
00154 MS001
1989/12/31 10000.00 10000.00
1990/01/31 9865.82 9627.92
1990/02/28 9635.55 8955.94
1990/03/31 9999.75 8022.94
1990/04/30 10055.17 7959.28
1990/05/31 10712.32 8867.44
1990/06/30 10949.85 8789.34
1990/07/31 11504.07 8913.14
1990/08/31 10332.29 8047.60
1990/09/30 9350.52 6926.05
1990/10/31 10221.44 8005.26
1990/11/30 9904.74 7533.04
1990/12/31 9833.49 7655.08
1991/01/31 9928.49 7902.68
1991/02/28 10262.98 8749.84
1991/03/31 9962.80 8224.56
1991/04/30 10181.85 8305.33
1991/05/31 10206.19 8391.99
1991/06/30 9646.39 7775.34
1991/07/31 10125.06 8157.36
1991/08/31 10157.51 7991.70
1991/09/30 10571.28 8442.10
1991/10/31 10644.30 8561.78
1991/11/30 10262.98 8162.07
1991/12/31 10619.96 8583.59
1992/01/31 10749.77 8400.25
1992/02/29 10525.75 8099.58
1992/03/31 10311.95 7564.88
1992/04/30 10953.36 7600.84
1992/05/31 11430.31 8109.61
1992/06/30 11216.51 7724.95
1992/07/31 10501.08 7527.24
1992/08/31 10410.63 7999.36
1992/09/30 9991.24 7841.39
1992/10/31 9308.71 7430.08
1992/11/30 9259.37 7499.99
1992/12/31 9481.40 7538.79
1993/01/31 9752.77 7537.86
1993/02/28 9943.80 7765.55
1993/03/31 10633.64 8442.44
1993/04/30 11340.30 9243.65
1993/05/31 11584.27 9438.88
1993/06/30 11298.24 9291.61
1993/07/31 11744.11 9616.86
1993/08/31 12375.07 10136.01
1993/09/30 12307.76 9907.86
1993/10/31 12753.64 10213.19
1993/11/30 12215.22 9320.45
1993/12/31 13022.84 9993.46
1994/01/31 13872.52 10838.36
1994/02/28 13627.85 10808.34
1994/03/31 13289.69 10342.81
1994/04/30 13729.30 10781.64
1994/05/31 13560.22 10719.74
1994/06/30 13416.50 10871.23
1994/07/31 13771.57 10975.78
1994/08/31 13932.20 11235.64
1994/09/30 13568.68 10881.76
1994/10/31 13847.66 11244.13
1994/11/30 13323.51 10703.73
1994/12/31 13247.42 10770.75
1995/01/31 12697.91 10356.99
1995/02/28 12731.32 10327.27
1995/03/31 13123.32 10971.39
1995/04/30 13498.27 11384.01
1995/05/31 13685.75 11248.31
1995/06/30 13813.57 11051.05
1995/07/31 14427.13 11739.04
1995/08/31 14026.61 11291.24
1995/09/30 14231.13 11511.76
1995/10/31 13949.92 11202.32
1995/11/30 14111.83 11514.01
1995/12/31 14537.91 11977.92
1996/01/31 14810.60 12027.09
1996/02/29 14843.22 12067.75
1996/03/31 15070.24 12324.02
1996/04/30 15489.34 12682.32
1996/05/31 15498.07 12448.94
1996/06/30 15611.58 12519.01
1996/07/31 15148.82 12153.11
1996/08/31 15262.32 12179.74
1996/09/30 15707.62 12503.30
1996/10/31 15550.46 12375.36
1996/11/30 16362.47 12867.75
1996/12/31 16449.78 12702.22
1997/01/31 16449.78 12260.18
1997/02/28 16830.90 12463.70
1997/03/31 16983.82 12511.07
1997/04/30 17127.19 12579.88
1997/05/31 18197.64 13400.96
1997/06/30 19153.39 14142.04
1997/07/31 19803.31 14372.84
1997/08/31 18312.33 13301.35
1997/09/30 19659.95 14048.48
1997/10/31 18283.65 12972.23
1997/11/30 18197.64 12842.51
1997/12/31 18350.56 12956.93
1998/01/31 18952.68 13551.91
1998/02/28 20019.53 14423.98
1998/03/31 20927.63 14870.83
1998/04/30 21515.83 14990.99
1998/05/31 21484.87 14920.98
1998/06/30 21278.49 15036.62
1998/07/31 21443.60 15191.80
1998/08/31 17542.89 13312.42
1998/09/30 17522.25 12907.19
1998/10/31 19121.74 14255.60
1998/11/30 20246.55 14988.77
1998/12/31 20700.60 15582.92
1999/01/31 20989.55 15539.76
1999/02/28 20433.05 15172.24
1999/03/31 21261.13 15808.57
1999/04/30 22207.50 16451.66
1999/05/31 21185.85 15607.21
1999/06/30 22368.82 16218.39
1999/07/31 23003.32 16703.32
1999/08/31 23336.70 16767.12
1999/09/30 23648.57 16938.82
1999/10/31 24616.45 17576.06
1999/11/30 26423.16 18189.46
1999/12/31 29509.63 19824.69
IMATRL PRASUN SHR__CHT 19991231 20000114 110247 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Overseas Portfolio
on December 31, 1989. As the chart shows, by December 31, 1999, the
value of the investment would have grown to $29,510 - a 195.10%
increase on the initial investment. For comparison, look at how the
Morgan Stanley Capital International EAFE Index did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 investment would have grown to $19,825 - a 98.25% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Kyocera Corp. (Japan) 3.1
Furukawa Electric Co. Ltd. 2.9
(Japan)
Total Fina SA Class B (France) 2.4
Nokia AB (Finland) 2.1
Deutsche Telekom AG (Germany) 1.8
12.3
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
UTILITIES 18.5
FINANCE 18.1
TECHNOLOGY 16.3
BASIC INDUSTRIES 6.5
ENERGY 5.6
TOP FIVE COUNTRIES AS OF
DECEMBER 31, 1999
(EXCLUDING CASH EQUIVALENTS) % OF FUND'S NET ASSETS
Japan 30.1
United Kingdom 14.8
France 10.4
Germany 7.5
Netherlands 5.7
PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS, IF
APPLICABLE.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: OVERSEAS PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). The initial offering of Service Class shares
took place on November 3, 1997. Performance for Service Class shares
reflects an asset based distribution fee (12b-1 fee), and returns
prior to November 3, 1997 are those of Initial Class and do not
include the effects of Service Class' 12b-1 fee. Had Service Class
shares' 12b-1 fee been reflected, returns prior to November 3, 1997
would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY VIP: OVERSEAS - 42.44% 17.33% 11.41%
SERVICE CLASS
MSCI EAFE 27.22% 12.98% 7.08%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Morgan
Stanley Capital International Europe, Australasia, Far East (EAFE)
Index - a market capitalization-weighted index that is designed to
represent the performance of developed stock markets outside the
United States and Canada. As of December 31, 1999, the index included
over 1,000 equity securities of companies domiciled in 21 countries.
UNDERSTANDING PERFORMANCE
Many markets around the globe offer the
potential for significant growth over time;
however, investing in foreign markets means
assuming greater risks than investing in the
United States. Factors like changes in a country's
financial markets, its local political and
economic climate, and the fluctuating value of
its currency create these risks. For these reasons
an international fund's performance may be
more volatile than a fund that invests exclusively
in the United States.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown.
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 10 YEARS
VIP Overseas - SC MS EAFE (Net MA tax)
00495 MS001
1989/12/31 10000.00 10000.00
1990/01/31 9865.82 9627.92
1990/02/28 9635.55 8955.94
1990/03/31 9999.75 8022.94
1990/04/30 10055.17 7959.28
1990/05/31 10712.32 8867.44
1990/06/30 10949.85 8789.34
1990/07/31 11504.07 8913.14
1990/08/31 10332.29 8047.60
1990/09/30 9350.52 6926.05
1990/10/31 10221.44 8005.26
1990/11/30 9904.74 7533.04
1990/12/31 9833.49 7655.08
1991/01/31 9928.49 7902.68
1991/02/28 10262.98 8749.84
1991/03/31 9962.80 8224.56
1991/04/30 10181.85 8305.33
1991/05/31 10206.19 8391.99
1991/06/30 9646.39 7775.34
1991/07/31 10125.06 8157.36
1991/08/31 10157.51 7991.70
1991/09/30 10571.28 8442.10
1991/10/31 10644.30 8561.78
1991/11/30 10262.98 8162.07
1991/12/31 10619.96 8583.59
1992/01/31 10749.77 8400.25
1992/02/29 10525.75 8099.58
1992/03/31 10311.95 7564.88
1992/04/30 10953.36 7600.84
1992/05/31 11430.31 8109.61
1992/06/30 11216.51 7724.95
1992/07/31 10501.08 7527.24
1992/08/31 10410.63 7999.36
1992/09/30 9991.24 7841.39
1992/10/31 9308.71 7430.08
1992/11/30 9259.37 7499.99
1992/12/31 9481.40 7538.79
1993/01/31 9752.77 7537.86
1993/02/28 9943.80 7765.55
1993/03/31 10633.64 8442.44
1993/04/30 11340.30 9243.65
1993/05/31 11584.27 9438.88
1993/06/30 11298.24 9291.61
1993/07/31 11744.11 9616.86
1993/08/31 12375.07 10136.01
1993/09/30 12307.76 9907.86
1993/10/31 12753.64 10213.19
1993/11/30 12215.22 9320.45
1993/12/31 13022.84 9993.46
1994/01/31 13872.52 10838.36
1994/02/28 13627.85 10808.34
1994/03/31 13289.69 10342.81
1994/04/30 13729.30 10781.64
1994/05/31 13560.22 10719.74
1994/06/30 13416.50 10871.23
1994/07/31 13771.57 10975.78
1994/08/31 13932.20 11235.64
1994/09/30 13568.68 10881.76
1994/10/31 13847.66 11244.13
1994/11/30 13323.51 10703.73
1994/12/31 13247.42 10770.75
1995/01/31 12697.91 10356.99
1995/02/28 12731.32 10327.27
1995/03/31 13123.32 10971.39
1995/04/30 13498.27 11384.01
1995/05/31 13685.75 11248.31
1995/06/30 13813.57 11051.05
1995/07/31 14427.13 11739.04
1995/08/31 14026.61 11291.24
1995/09/30 14231.13 11511.76
1995/10/31 13949.92 11202.32
1995/11/30 14111.83 11514.01
1995/12/31 14537.91 11977.92
1996/01/31 14810.60 12027.09
1996/02/29 14843.22 12067.75
1996/03/31 15070.24 12324.02
1996/04/30 15489.34 12682.32
1996/05/31 15498.07 12448.94
1996/06/30 15611.58 12519.01
1996/07/31 15148.82 12153.11
1996/08/31 15262.32 12179.74
1996/09/30 15707.62 12503.30
1996/10/31 15550.46 12375.36
1996/11/30 16362.47 12867.75
1996/12/31 16449.78 12702.22
1997/01/31 16449.78 12260.18
1997/02/28 16830.90 12463.70
1997/03/31 16983.82 12511.07
1997/04/30 17127.19 12579.88
1997/05/31 18197.64 13400.96
1997/06/30 19153.39 14142.04
1997/07/31 19803.31 14372.84
1997/08/31 18312.33 13301.35
1997/09/30 19659.95 14048.48
1997/10/31 18283.65 12972.23
1997/11/30 18197.64 12842.51
1997/12/31 18350.56 12956.93
1998/01/31 18952.68 13551.91
1998/02/28 20019.53 14423.98
1998/03/31 20927.63 14870.83
1998/04/30 21505.51 14990.99
1998/05/31 21474.56 14920.98
1998/06/30 21268.17 15036.62
1998/07/31 21433.28 15191.80
1998/08/31 17532.57 13312.42
1998/09/30 17511.93 12907.19
1998/10/31 19111.43 14255.60
1998/11/30 20225.91 14988.77
1998/12/31 20679.97 15582.92
1999/01/31 20968.91 15539.76
1999/02/28 20401.65 15172.24
1999/03/31 21240.52 15808.57
1999/04/30 22176.17 16451.66
1999/05/31 21165.23 15607.21
1999/06/30 22337.49 16218.39
1999/07/31 22972.02 16703.32
1999/08/31 23305.42 16767.12
1999/09/30 23606.55 16938.82
1999/10/31 24574.47 17576.06
1999/11/30 26381.26 18189.46
1999/12/31 29457.10 19824.69
IMATRL PRASUN SHR__CHT 19991231 20000202 092634 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Overseas Portfolio -
Service Class on December 31, 1989. As the chart shows, by December
31, 1999, the value of the investment would have grown to $29,457 - a
194.57% increase on the initial investment. For comparison, look at
how the Morgan Stanley Capital International EAFE Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $19,825 - a 98.25%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Kyocera Corp. (Japan) 3.1
Furukawa Electric Co. Ltd. 2.9
(Japan)
Total Fina SA Class B (France) 2.4
Nokia AB (Finland) 2.1
Deutsche Telekom AG (Germany) 1.8
12.3
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
UTILITIES 18.5
FINANCE 18.1
TECHNOLOGY 16.3
BASIC INDUSTRIES 6.5
ENERGY 5.6
TOP FIVE COUNTRIES AS OF
DECEMBER 31, 1999
(EXCLUDING CASH EQUIVALENTS) % OF FUND'S NET ASSETS
Japan 30.1
United Kingdom 14.8
France 10.4
Germany 7.5
Netherlands 5.7
PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS, IF
APPLICABLE.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: OVERSEAS PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(Photograph of Richard Mace)
An interview with
Richard Mace,
Portfolio Manager of Overseas Portfolio
Q. HOW DID THE FUND PERFORM, RICK?
A. For the 12 months that ended December 31, 1999, the fund easily
outpaced the 27.22% return of the Morgan Stanley Capital International
Europe, Australasia, Far East (EAFE) Index.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG SHOWING?
A. Most of the fund's outperformance can be traced to a relatively
strong commitment to the high-performing Japanese market, as well as
from good individual stock picking within that market. The fund also
benefited from the solid performance of several of its energy-related
positions.
Q. WHAT TRIGGERED THE JAPANESE MARKET'S REBOUND AND HOW DID THE FUND
TAKE ADVANTAGE?
A. The Japanese market became somewhat more "Americanized" over the
past year. The government has allowed some barriers to come down to
create more of a free-enterprise market system, and Japanese
corporations - following in the footsteps of their U.S. counterparts -
have begun to implement share buyback programs, cut unprofitable
businesses and consider effective restructuring programs. Japanese
investors, in fact, can now buy mutual funds. All of this has
translated into a more confident market and economy, and the fund took
advantage. Several of the fund's Japanese telephone utilities
positions fared well, particularly DDI Corp., which was among the
fund's top holdings through the second half of the period. Japanese
non-bank financial positions also performed well, including
brokerage-related holdings such as Daiwa Securities and Nikko
Securities.
Q. CAN YOU ELABORATE ON THE ENERGY POSITIONS YOU MENTIONED?
A. Sure. The fund's best performers in this group were the two large
French exploration firms, Elf Aquitaine and Total. Both stocks suited
my philosophy that it's better to look for energy stocks with good
long-term characteristics than focus on trying to guess the direction
of oil prices. In particular, I was attracted to Elf's growing oil
reserve base, which should kick into production growth in 2001. Total
intrigued me because of its rapid 10% production growth rate. I looked
at both stocks as a package: One had current production growth, while
the other looked promising long-term. In addition, both companies
engaged in a spirited takeover battle during the period, with each
making takeover bids for the other. Eventually, the issue was resolved
and a merger was approved. Overall, I think the merger - which makes
Total the fourth-largest oil company in the world - should be
beneficial to both companies. Elf Aquitaine is no longer a publicly
traded stock.
Q. THE FUND ALSO RECEIVED GOOD RESULTS FROM SEVERAL OF ITS
TELECOMMUNICATIONS-RELATED STOCKS, MOST NOTABLY FINLAND'S NOKIA,
SWEDEN'S ERICSSON AND THE U.K.'S VODAFONE AIRTOUCH . . .
A. These companies were beneficiaries of the worldwide wireless
communications boom. Nokia and Ericsson - both longstanding positions
in the fund - showed strong management execution during the period
and generated good financial returns in the process. Vodafone
AirTouch, meanwhile, benefited from its strong presence in the
burgeoning U.K. market as well as from its announcement that it would
merge its mobile communications business with U.S.-based Bell
Atlantic. The Vodafone-Bell Atlantic partnership is but another
example of the cross-border alliances that have fueled telecom
business around the globe.
Q. WHICH STOCKS WOULD YOU CLASSIFY AS DISAPPOINTING?
A. Rentokil - which provides a variety of industrial-related services
for corporations - detracted significantly from performance due to a
strong British pound. A slump in sales growth, particularly in Asia,
also hurt. European consumer-related stocks - such as Swiss foods
company Nestle and Anglo-Dutch household products company Unilever -
suffered from sluggish global demand. The fund's Italian positions
also proved to be a weak link. Telecom Italia Mobile struggled, as did
bank stocks Banca di Roma and San Paolo-IMI, and insurer Generali SPA.
Q. WHAT'S YOUR OUTLOOK?
A. I expect to see more of the same in terms of increased
consolidation and cross-border mergers. The euro - the uniform
currency in Europe - has made it much easier to complete such
transactions. As big companies have become bigger, many smaller firms
have jumped into the fray just to keep pace. We may also see continued
restructuring efforts in Europe and Japan. As a result, there should
be greater differentiation of stocks away from the influences of their
local markets and more towards the earnings and underlying
fundamentals of the company itself.
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FUND FACTS
GOAL: seeks long-term growth of capital
primarily by investments in foreign securities
START DATE: January 28, 1987
SIZE: as of December 31, 1999, more than
$2.8 billion
MANAGER: Richard Mace, since 1996; joined
Fidelity in 1987
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: OVERSEAS PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 91.4%
SHARES VALUE (NOTE 1)
AUSTRALIA - 1.6%
AMP Ltd. 222,400 $ 2,459,146
Australia & New Zealand 1,189,642 8,660,852
Banking Group Ltd.
Cable & Wireless Optus Ltd. 1,974,000 6,601,313
(a)
National Australia Bank Ltd. 586,000 8,970,547
News Corp. Ltd. 794,681 7,721,939
News Corp. Ltd. sponsored:
ADR 36,400 1,392,300
ADR (preferred ltd. vtg.) 124,400 4,159,625
Rio Tinto Ltd. 40,000 859,908
The Broken Hill Proprietary 291,393 3,829,095
Co. Ltd.
Westpac Banking Corp. 105,800 730,348
45,385,073
BELGIUM - 0.3%
Electrabel SA 12,900 4,219,122
Fortis B 128,700 4,639,308
8,858,430
BRAZIL - 0.0%
Brahma Cervejaria (Compagnie) 80,400 1,125,600
sponsored ADR
BRITISH VIRGIN ISLANDS - 0.0%
El Sitio, Inc. 19,900 731,325
CANADA - 0.9%
Barrick Gold Corp. 43,500 774,262
BCE, Inc. 118,000 10,697,242
Celestica, Inc. (sub. vtg.) 147,300 8,226,889
(a)
Cinar Films, Inc. Class B 136,500 3,344,250
(sub. vtg.) (a)
Inco Ltd. 123,500 2,868,321
25,910,964
DENMARK - 0.2%
Carlsberg AS Class B 58,800 2,226,008
Novo-Nordisk AS Class B 13,200 1,749,006
Unidanmark AS Class A 37,000 2,601,336
6,576,350
FINLAND - 3.1%
Asko OY Class A 32,100 568,548
Helsinki Telephone Corp. 66,950 5,571,923
Class E
Metsa-Serla Oyj Class B Free 164,200 1,908,553
Shares
Metso Oyj (a) 137,600 1,786,311
Nokia AB 324,100 61,578,999
Sampo Insurance Co. Ltd. 97,800 3,415,210
Sonera Group PLC (c) 74,500 5,101,918
UPM-Kymmene Corp. 248,400 9,999,094
89,930,556
FRANCE - 10.4%
Alcatel Alsthom Compagnie 38,750 8,718,750
Generale d'Electricite SA
(RFD)
SHARES VALUE (NOTE 1)
Aventis SA 148,172 $ 8,427,282
Aventis SA (Germany) 53,778 3,138,389
AXA SA de CV 136,726 19,043,039
Banque Nationale de Paris 198,440 18,292,529
Canal Plus SA 36,000 5,235,033
Cap Gemini SA 34,800 8,825,287
Carrefour SA 65,200 12,013,927
Castorama Dubois 4,906 1,491,020
Investissements SA
Club Mediterranee SA (a) 16,700 1,929,334
Coflexip SA sponsored ADR 83,400 3,169,200
Compagnie de St. Gobain 23,000 4,321,368
France Telecom SA 246,600 32,584,184
Groupe Danone 18,300 4,309,392
L'Oreal SA 5,000 4,007,789
Lafarge SA 29,595 3,442,907
Michelin SA (Compagnie 66,519 2,610,714
Generale des Etablissements)
Class B (a)
Rhodia SA 361,700 8,168,088
Sanofi-Synthelabo SA (a) 193,168 8,036,273
Schneider SA 33,800 2,651,440
Societe Generale, France 53,000 12,320,743
Class A
Suez Lyonnaise des Eaux 72,000 11,527,941
Television Francaise 1 SA 34,900 18,263,240
Total Fina SA Class B 503,244 69,699,292
Union Assurances Federales SA 22,763 2,671,020
Vivendi SA (a) 282,800 25,514,012
300,412,193
GERMANY - 7.1%
Allianz AG (Reg.) 65,800 22,116,755
BASF AG 191,000 9,841,298
Bayer AG 206,600 9,792,651
Deutsche Bank AG 105,900 8,924,378
Deutsche Telekom AG 725,400 51,830,447
Kali Und Salz Beteiligungs AG 494,400 6,965,552
Mannesmann AG (Reg.) 195,300 47,562,718
Munich Reinsurance AG (Reg.) 58,192 14,903,907
Primacom AG 37,300 2,402,359
RWE AG 101,200 3,951,494
Siemens AG 123,600 15,796,877
Veba AG 159,700 7,786,598
Viag AG 192,500 3,525,747
205,400,781
HONG KONG - 0.6%
Cheung Kong Holdings Ltd. 276,000 3,508,625
China Telecom (Hong Kong) 1,230,000 7,906,595
Ltd. (a)
Dah Sing Financial Holdings 534,000 2,131,050
Ltd.
Wing Hang Bank Ltd. 808,000 2,766,838
16,313,108
IRELAND - 0.3%
Bank of Ireland, Inc. 1,151,438 9,154,122
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ITALY - 2.8%
Assicurazioni Generali Spa 283,800 $ 9,407,734
Banca di Roma 1,486,150 1,909,865
Banca Intesa Spa 1,415,846 5,739,242
Eni Spa sponsored ADR 3,030,700 16,600,850
Olivetti & Co. Spa 1,883,500 5,472,194
San Paolo-IMI Spa 479,100 6,486,742
Telecom Italia Mobile Spa 1,313,900 14,625,333
Telecom Italia Spa 1,130,524 15,827,335
Unicredito Italiano Spa 1,065,800 5,238,421
81,307,716
JAPAN - 29.5%
Aiful Corp. (c) 32,200 3,938,356
Aiwa Co. Ltd. 42,300 877,456
Asahi Bank Ltd. 671,000 4,136,301
Asahi Chemical Industry Co. 328,000 1,684,932
Ltd.
Canon, Inc. 155,000 6,287,188
CSK Corp. 175,300 28,473,386
Dai Nippon Printing Co. Ltd. 143,000 2,280,724
Dai-Ichi Kangyo Bank Ltd. 890,000 8,316,536
Daiwa Securities Co. Ltd. 1,959,000 30,650,108
DDI Corp. 1,965 26,917,809
FamilyMart Co. Ltd. 16,800 1,117,808
Fuji Bank Ltd. 902,000 8,764,051
Fuji Photo Film Co. Ltd. 188,000 6,861,448
Fujisawa Pharmaceutical Co. 182,000 4,416,438
Ltd.
Fujitsu Ltd. 463,000 21,111,351
Furukawa Electric Co. Ltd. 5,513,000 83,612,037
Hirose Electric Co. Ltd. 11,500 2,577,935
Hitachi Chemical Co. Ltd. 104,000 1,934,481
Hitachi Information Systems 19,000 1,106,164
Hitachi Ltd. 2,082,000 33,702,376
Honda Motor Co. Ltd. 149,000 5,699,250
Hoya Corp. 65,000 5,119,863
Ito-Yokado Co. Ltd. 301,000 32,691,781
Kaneka Corp. 125,000 1,598,581
Kansai Electric Power Co., 387,000 6,744,100
Inc.
Kao Corp. 124,000 3,536,791
Koa Denko Co. Ltd. 109,000 3,146,282
Kyocera Corp. 349,900 90,727,492
Matsushita Electric 534,000 14,898,600
Industrial Co. Ltd.
Minolta Co. Ltd. 394,000 1,534,364
Mitsubishi Electric Corp. 1,607,000 10,377,887
Mitsubishi Estate Co. Ltd. 646,000 6,301,977
Mitsubishi Trust & Banking 427,000 3,760,274
Corp.
Mitsui Fudosan Co. Ltd. 288,000 1,950,059
Mitsumi Electric Co. Ltd. 35,000 1,095,890
NEC Corp. 465,000 11,079,012
Nichicon Corp. 625,000 19,324,854
Nikko Securities Co. Ltd. 1,792,000 22,671,781
Nintendo Co. Ltd. 23,600 3,921,018
Nippon Computer Systems Corp. 77,000 1,597,260
SHARES VALUE (NOTE 1)
Nippon Steel Corp. 692,000 $ 1,618,278
Nippon Telegraph & Telephone 2,289 39,195,206
Corp.
Nippon Zeon Co. Ltd. 446,000 2,823,503
Nomura Securities Co. Ltd. 916,000 16,536,400
NTT Data Corp. 106 2,437,378
NTT Mobile Communication 412 15,843,053
Network, Inc.
Omron Corp. 1,415,000 32,605,920
ORIX Corp. 52,900 11,915,441
Ricoh Co. Ltd. 304,000 5,729,002
Rohm Co. Ltd. 13,000 5,342,466
Sakura Bank Ltd. 1,052,000 6,093,777
Secom Co. Ltd. 42,000 4,623,288
Sega Enterprises 148,700 4,728,718
Sharp Corp. 370,000 9,467,221
Shin-Etsu Chemical Co. Ltd. 141,000 6,070,450
Softbank Corp. 43,900 42,009,981
Sony Corp. 107,900 30,724,526
Takeda Chemical Industries 455,000 22,482,877
Ltd.
Tokai Bank Ltd. 286,000 1,802,192
Tokyo Electric Power Co. 807,000 21,635,813
Tokyo Tomin Bank Ltd. (a) 25,200 966,575
Toyota Motor Corp. 263,000 12,738,259
Trans Cosmos, Inc. 26,900 11,475,930
Yamaha Motor Co. Ltd. 210,000 1,454,795
Yamanouchi Pharmaceutical Co. 141,000 4,925,343
Ltd.
Yokogawa Electric Corp. 648,000 4,571,507
Yoshitomi Pharmaceutical 240,000 3,052,838
Industries Ltd.
849,414,738
KOREA (SOUTH) - 0.5%
Daelim Industrial Co. 107,400 1,234,319
Samsung Electronics Co. Ltd. 58,000 13,586,961
14,821,280
LUXEMBOURG - 0.0%
Stolt Comex Seaway SA (a) 45,600 504,450
MEXICO - 1.4%
Banacci SA de CV Series O (a) 1,236,000 4,957,045
Cifra SA de CV Series V (a) 2,458,000 4,934,159
Grupo Financiero Bancomer SA 10,589,000 4,403,236
de CV Series A
Grupo Televisa SA de CV 109,100 7,446,075
sponsored ADR (a)
Telefonos de Mexico SA de CV 96,500 10,856,250
Series L sponsored ADR
TV Azteca SA de CV sponsored 900,700 8,106,300
ADR
40,703,065
NETHERLANDS - 5.7%
ABN AMRO Holding NV 323,000 8,061,266
Aegon NV 89,300 8,618,251
Akzo Nobel NV 238,900 11,972,767
Equant NV (Reg.) (a) 195,700 21,918,400
Fortis Amev NV 388,400 13,973,472
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NETHERLANDS - CONTINUED
Heineken NV 94,600 $ 4,609,618
ING Groep NV 376,362 22,702,389
Koninklijke Ahold NV 227,731 6,735,515
Koninklijke KPN NV 196,500 19,161,759
Koninklijke Philips 159,396 21,655,102
Electronics NV
Nutreco Holding NV 123,833 3,819,583
Samas Groep NV 73,600 918,435
TNT Post Group NV 81,500 2,333,399
Vendex KBB NV 302,200 8,028,741
Vnu NV 106,700 5,602,960
Volker Wessels Stevin NV 58,600 958,297
Wolters Kluwer NV 75,800 2,563,053
163,633,007
NEW ZEALAND - 0.1%
Fletcher Challenge Ltd. - 870,200 1,285,141
Building Division
Lion Nathan Ltd. 495,600 1,154,978
2,440,119
NORWAY - 0.5%
Bergesen d.y. ASA:
(A Shares) 447,800 8,140,602
(B Shares) 213,200 3,636,866
DNB Holding ASA 854,800 3,501,708
Frontline Ltd. (a) 37,800 202,386
15,481,562
PORTUGAL - 0.1%
Electricidade de Portugal SA 149,600 2,609,031
SINGAPORE - 0.2%
Overseas Union Bank Ltd. 455,296 2,665,347
United Overseas Bank Ltd. 329,472 2,907,979
5,573,326
SOUTH AFRICA - 0.1%
Anglogold Ltd. 17,000 875,510
Gold Fields Ltd. 258,800 1,252,428
2,127,938
SPAIN - 2.5%
Altadis SA (France) 148,827 2,114,781
Altadis SA 96,900 1,384,717
Argentaria Caja Postal y 118,600 2,784,508
Banco Hipotecario de Espana
SA
Banco Bilbao Vizcaya SA (Reg.) 255,100 3,630,019
Banco Santander Central 1,297,668 14,678,408
Hispano SA
Endesa SA 271,900 5,393,180
Iberdrola SA 389,200 5,389,399
Telefonica SA (a) 1,452,400 36,248,244
71,623,256
SHARES VALUE (NOTE 1)
SWEDEN - 2.3%
ABB Ltd. (a) 37,263 $ 4,577,699
Atlas Copco AB Series B 39,200 1,123,808
Electrolux AB 236,400 5,993,105
Nordbanken Holding AB 532,200 3,152,358
Sandvik AB Series B 26,200 841,126
Skandinaviska Enskilda Banken 178,400 1,817,540
Class A
Svenska Handelsbanken AB (A 236,800 3,001,623
Shares)
Swedish Match Co. 1,130,700 3,978,272
Telefonaktiebolaget LM 594,000 39,018,375
Ericsson (B Shares)
Volvo AB Class B 98,000 2,554,109
66,058,015
SWITZERLAND - 4.3%
ABB Ltd. (Reg.) (a) 60,751 7,429,361
Ares Serono SA Class B 2,026 4,325,526
(Bearer)
Credit Suisse Group (Reg.) 78,054 15,512,773
Julius Baer Holding AG 1,392 4,204,408
Nestle SA (Reg.) 12,400 22,713,218
Novartis AG (Reg.) 15,400 22,609,231
Roche Holding AG 1,590 18,870,330
participation certificates
Swiss Reinsurance Co. (Reg.) 2,600 5,340,408
Swisscom AG 11,500 4,650,549
The Swatch Group AG (Reg.) 18,000 4,193,407
UBS AG 48,634 13,131,943
122,981,154
TAIWAN - 1.4%
Hon Hai Precision Industries 1,420,000 10,587,223
Co. Ltd. (a)
Ritek Corp. 919,000 5,563,486
Taiwan Semiconductor 3,185,450 16,949,822
Manufacturing Co. Ltd. (a)
United Microelectronics Corp. 1,740,000 6,209,336
39,309,867
UNITED KINGDOM - 14.8%
Allied Domecq PLC 323,200 1,598,706
Allied Zurich PLC 1,207,300 14,236,925
Amvescap PLC 626,100 7,287,053
AstraZeneca Group PLC 167,500 6,993,124
Bass PLC 23,916 297,877
BG Group PLC 371,111 2,399,604
Blue Circle Industries PLC 380,700 2,213,907
Booker PLC 1,241,700 2,348,433
Boots Co. PLC 230,700 2,245,018
BP Amoco PLC 3,206,386 31,696,456
British Aerospace PLC 1,253,912 8,310,490
British American Tobacco PLC 537,100 3,053,971
British Telecommunications PLC 1,431,500 34,069,706
BTP PLC 144,800 770,673
Cable & Wireless PLC 305,000 5,171,911
Cadbury Schweppes PLC 669,600 4,048,207
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UNITED KINGDOM - CONTINUED
Caradon PLC 4,721,645 $ 11,830,436
Centrica PLC 753,300 2,137,080
CGU PLC 392,400 6,327,288
Courtaulds Textiles PLC 69,600 73,130
Diageo PLC 770,300 6,201,046
Glaxo Wellcome PLC 716,600 20,020,013
Granada Group PLC 139,600 1,416,038
Hanson PLC 592,500 4,970,859
Hays PLC 156,400 2,492,811
HSBC Holdings PLC:
(Reg.) 693,700 9,902,571
(Hong Kong) 139,836 1,996,159
Johnson Matthey PLC 280,200 3,125,309
Kingfisher PLC 494,310 5,489,488
Lloyds TSB Group PLC 1,473,800 18,451,670
Marconi PLC 550,100 9,741,588
Morgan Crucible Co. PLC 293,100 1,369,271
National Grid Group PLC 563,390 4,289,491
National Westminster Bank PLC 146,400 3,147,519
Pearson PLC 269,800 8,740,079
Peninsular & Oriental Steam 192,000 3,206,101
Navigation Co.
Prudential Corp. PLC 454,200 8,957,414
Rentokil Initial PLC 3,144,500 11,475,063
Reuters Group PLC 675,700 9,278,826
Rio Tinto PLC (Reg.) 197,500 4,772,918
Royal & Sun Alliance 421,280 3,210,911
Insurance Group PLC
Royal Bank of Scotland Group 292,800 5,196,957
PLC
Safeway PLC 646,000 2,213,829
Scottish & Newcastle PLC 318,300 2,216,346
Scottish & Southern Energy PLC 356,300 2,846,677
Shell Transport & Trading Co. 3,954,500 32,459,834
PLC (Reg.)
SmithKline Beecham PLC 1,959,142 25,248,438
Standard Chartered PLC 531,773 8,260,862
Tomkins PLC 279,800 904,593
Unilever PLC 1,494,910 11,328,607
Vodafone AirTouch PLC 8,429,960 41,728,284
WPP Group PLC 237,100 3,759,900
425,529,467
UNITED STATES OF AMERICA - 0.7%
Baker Hughes, Inc. 69,800 1,470,163
Halliburton Co. 65,600 2,640,400
Newmont Mining Corp. 174,100 4,265,450
Noble Drilling Corp. (a) 43,600 1,427,900
OMI Corp. (a) 443,100 913,894
Overseas Shipholding Group, 101,000 1,496,063
Inc.
SHARES VALUE (NOTE 1)
Smith International, Inc. (a) 13,300 $ 660,844
Synthes-Stratec, Inc. (a)(c) 10,800 4,943,304
Weatherford International, 39,100 1,561,556
Inc. (a)
19,379,574
TOTAL COMMON STOCKS 2,633,296,067
(Cost $1,634,214,296)
PREFERRED STOCKS - 0.6%
CONVERTIBLE PREFERRED STOCKS
- - 0.2%
AUSTRALIA - 0.2%
WBK STRYPES Trust (Westpac 174,300 5,588,581
Banking Corp.) $3.135
NONCONVERTIBLE PREFERRED
STOCKS - 0.4%
GERMANY - 0.4%
SAP AG 15,300 9,222,896
Wella AG 82,696 1,814,220
11,037,116
TOTAL PREFERRED STOCKS 16,625,697
(Cost $11,389,870)
INVESTMENT COMPANIES - 0.5%
EMERGING MARKETS - 0.2%
Asia Tigers Fund, Inc. 142,400 1,450,700
Templeton Dragon Fund, Inc. 439,500 4,312,594
5,763,294
HONG KONG - 0.0%
Asia Pacific Fund, Inc. 51,500 579,375
INDIA - 0.0%
India Fund (a) 28,800 482,400
KOREA (SOUTH) - 0.1%
Korea Fund, Inc. (The) (a) 73,300 1,246,100
MULTI-NATIONAL - 0.2%
European Warrant Fund, Inc. 189,100 3,510,169
Morgan Stanley Dean Witter 210,000 2,480,625
Asia-Pacific Fund, Inc.
5,990,794
TOTAL INVESTMENT COMPANIES 14,061,963
(Cost $13,342,629)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GOVERNMENT OBLIGATIONS - 0.4%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
UNITED STATES OF AMERICA - 0.4%
U.S. Treasury Bills, yield at - $ 7,000,000 $ 6,912,710
date of purchase 5.21%
3/30/00 (d)
U.S. Treasury Bond stripped Aaa 25,350,000 4,252,970
principal 0% 11/15/27
TOTAL GOVERNMENT OBLIGATIONS 11,165,680
(Cost $11,230,254)
</TABLE>
CASH EQUIVALENTS - 6.1%
SHARES
Central Cash Collateral Fund, 5,203,934 5,203,934
4.97% (b)
Taxable Central Cash Fund, 171,429,199 171,429,199
5.12% (b)
TOTAL CASH EQUIVALENTS 176,633,133
(Cost $176,633,133)
TOTAL INVESTMENT PORTFOLIO - 2,851,782,540
99.0%
(Cost $1,846,810,182)
NET OTHER ASSETS - 1.0% 29,440,328
NET ASSETS - 100% $ 2,881,222,868
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT UNREALIZED GAIN/(LOSS)
PURCHASED
93 Nikkei 225 Index Contracts March 2000 $ 8,788,500 $ 109,387
(Japan)
47 Topix Index Contracts March 2000 7,873,191 341,003
(Japan)
$ 16,661,691 $ 450,390
</TABLE>
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS -
0.6%
SECURITY TYPE ABBREVIATIONS
STRYPES - Structured Yield Product
Exchangeable for Common Stock
LEGEND
(a) Non-income producing
(b) The rate quoted is the annualized seven-day yield of the fund at
period end.
(c) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $13,983,578 or 0.5% of net assets.
(d) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $5,925,180.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $1,627,002,883 and $1,718,283,178, respectively.
The market value of futures contracts opened and closed during the
period amounted to $184,594,576 and $243,472,240, 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 $1,009 for the
period.
The fund participated in the security lending program. At period end,
the value of securities loaned amounted to $8,863,298. The fund
received cash collateral of $5,203,934 which was invested in cash
equivalents and U.S. Treasury Obligations valued at $4,100,800.
MARKET SECTOR DIVERSIFICATION (UNAUDITED)
As a Percentage of Net Assets
AEROSPACE & DEFENSE 0.3%
BASIC INDUSTRIES 6.5
CASH EQUIVALENTS 6.1
CONSTRUCTION & REAL ESTATE 1.5
DURABLES 3.0
ENERGY 5.6
FINANCE 18.1
GOVERNMENT OBLIGATIONS 0.4
HEALTH 5.4
INDUSTRIAL MACHINERY & 5.3
EQUIPMENT
INVESTMENT COMPANIES 0.5
MEDIA & LEISURE 3.4
NONDURABLES 2.9
PRECIOUS METALS 0.2
RETAIL & WHOLESALE 2.7
SERVICES 1.6
TECHNOLOGY 16.3
TRANSPORTATION 0.7
UTILITIES 18.5
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $1,856,520,147. Net unrealized appreciation
aggregated $995,262,393, of which $1,054,796,671 related to
appreciated investment securities and $59,534,278 related to
depreciated investment securities.
The fund hereby designates approximately $51,355,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: OVERSEAS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 2,851,782,540
value (cost $1,846,810,182)
- - See accompanying schedule
Cash 764,740
Foreign currency held at 15,162,014
value (cost $15,100,848)
Receivable for investments 26,049,758
sold
Receivable for fund shares 11,770,243
sold
Dividends receivable 3,307,672
Interest receivable 604,609
Receivable for daily 40,260
variation on futures
contracts
Other receivables 92,272
TOTAL ASSETS 2,909,574,108
LIABILITIES
Payable for investments $ 16,237,310
purchased
Payable for fund shares 4,800,920
redeemed
Accrued management fee 1,619,365
Distribution fees payable 10,490
Other payables and accrued 479,221
expenses
Collateral on securities 5,203,934
loaned, at value
TOTAL LIABILITIES 28,351,240
NET ASSETS $ 2,881,222,868
Net Assets consist of:
Paid in capital $ 1,595,314,539
Undistributed net investment 10,707,600
income
Accumulated undistributed net 269,697,728
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 1,005,503,001
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 2,881,222,868
INITIAL CLASS: NET ASSET $27.44
VALUE, offering price and
redemption price per share
($2,736,851,374 (divided by)
99,741,041 shares)
SERVICE CLASS: NET ASSET $27.39
VALUE, offering price and
redemption price per share
($144,371,494 (divided by)
5,271,746 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 41,120,788
Dividends
Interest 7,340,013
Security lending 128,632
48,589,433
Less foreign taxes withheld (4,697,362)
TOTAL INCOME 43,892,071
EXPENSES
Management fee $ 16,245,906
Transfer agent fees 1,480,857
Distribution fees - Service 66,278
Class
Accounting and security 1,017,769
lending fees
Non-interested trustees' 9,891
compensation
Custodian fees and expenses 1,236,441
Registration fees 5,816
Audit 45,812
Legal 17,159
Miscellaneous 186,421
Total expenses before 20,312,350
reductions
Expense reductions (805,931) 19,506,419
NET INVESTMENT INCOME 24,385,652
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 271,585,334
Foreign currency transactions (948,070)
Futures contracts 8,443,771 279,081,035
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 564,585,615
Assets and liabilities in 250,997
foreign currencies
Futures contracts 3,004,028 567,840,640
NET GAIN (LOSS) 846,921,675
NET INCREASE (DECREASE) IN $ 871,307,327
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 803,042
Expense reductions Directed
brokerage arrangements
Custodian credits 2,889
$ 805,931
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 24,385,652 $ 24,821,303
income
Net realized gain (loss) 279,081,035 46,470,387
Change in net unrealized 567,840,640 174,010,260
appreciation (depreciation)
NET INCREASE (DECREASE) IN 871,307,327 245,301,950
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (31,839,750) (37,913,851)
From net investment income
From net realized gain (51,354,434) (111,746,087)
TOTAL DISTRIBUTIONS (83,194,184) (149,659,938)
Share transactions - net (16,452,995) 86,667,359
increase (decrease)
TOTAL INCREASE (DECREASE) 771,660,148 182,309,371
IN NET ASSETS
NET ASSETS
Beginning of period 2,109,562,720 1,927,253,349
End of period (including $ 2,881,222,868 $ 2,109,562,720
undistributed net investment
income of $10,707,600 and
$15,374,087, respectively)
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 137,488,784 $ 2,927,082,596 83,667,719 $ 1,630,270,593
Class Sold
Reinvested 4,250,326 81,691,268 7,943,861 149,503,507
Redeemed (145,444,173) (3,101,747,139) (88,486,169) (1,726,300,500)
Net increase (decrease) (3,705,063) $ (92,973,275) 3,125,411 $ 53,473,600
Service Class Sold 18,969,271 $ 422,534,083 1,950,594 $ 38,211,430
Reinvested 78,277 1,502,916 8,320 156,588
Redeemed (15,508,477) (347,516,719) (274,725) (5,174,259)
Net increase (decrease) 3,539,071 $ 76,520,280 1,684,189 $ 33,193,759
Distributions From net $ 31,264,560 $ 37,874,182
investment income Initial
Class
Service Class 575,190 39,669
Total $ 31,839,750 $ 37,913,851
From net realized gain $ 50,426,708 $ 111,629,169
Initial Class
Service Class 927,726 116,918
Total $ 51,354,434 $ 111,746,087
$ 83,194,184 $ 149,659,938
</TABLE>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 20.06 $ 19.20 $ 18.84 $ 17.06 $ 15.67
period
Income from Investment
Operations
Net investment income .24 D .23 D .30 D .32 D, E .17
Net realized and unrealized 7.95 2.13 1.70 1.88 1.34
gain (loss)
Total from investment 8.19 2.36 2.00 2.20 1.51
operations
Less Distributions
From net investment income (.31) (.38) (.33) (.20) (.06)
From net realized gain (.50) (1.12) (1.31) (.22) (.02)
In excess of net realized gain - - - - (.04)
Total distributions (.81) (1.50) (1.64) (.42) (.12)
Net asset value, end of period $ 27.44 $ 20.06 $ 19.20 $ 18.84 $ 17.06
TOTAL RETURN B, C 42.55% 12.81% 11.56% 13.15% 9.74%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,736,851 $ 2,074,843 $ 1,926,322 $ 1,667,601 $ 1,343,134
(000 omitted)
Ratio of expenses to average .91% .91% .92% .93% .91%
net assets
Ratio of expenses to average .87% G .89% G .90% G .92% G .91%
net assets after expense
reductions
Ratio of net investment 1.10% 1.19% 1.55% 1.84% 1.88%
income to average net assets
Portfolio turnover 78% 84% 67% 92% 50%
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 F
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 20.04 $ 19.20 $ 19.36
period
Income from Investment
Operations
Net investment income D .22 .15 .01
Net realized and unrealized 7.94 2.19 (.17)
gain (loss)
Total from investment 8.16 2.34 (.16)
operations
Less Distributions
From net investment income (.31) (.38) -
From net realized gain (.50) (1.12) -
Total distributions (.81) (1.50) -
Net asset value, end of period $ 27.39 $ 20.04 $ 19.20
TOTAL RETURN B, C 42.44% 12.69% (0.83)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 144,371 $ 34,720 $ 931
(000 omitted)
Ratio of expenses to average 1.01% 1.01% 1.02% A
net assets
Ratio of expenses to average .98% G .97% G 1.01% A, G
net assets after expense
reductions
Ratio of net investment 1.00% .80% .31% A
income to average net assets
Portfolio turnover 78% 84% 67%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
D NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
E INVESTMENT INCOME PER SHARE
REFLECTS A SPECIAL DIVIDEND
WHICH AMOUNTED TO $.05 PER
SHARE.
F FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
G FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
FIDELITY VARIABLE INSURANCE PRODUCTS: MID CAP PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the total returns would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
FIDELITY VIP: MID CAP - 49.04% 53.14%
"INITIAL CLASS"
S&P MidCap 400 14.72% 20.81%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Standard
& Poor's MidCap 400 Index - a market capitalization-weighted index of
400 medium-capitalization stocks. This benchmark includes reinvested
dividends and capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown. The life of fund figures are from commencement
of operations, December 28, 1998.
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 BE 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 III Mid Cap S&P MidCap 400
00772 SP004
1998/12/28 10000.00 10000.00
1998/12/31 10310.00 10546.36
1999/01/31 10520.00 10135.79
1999/02/28 9950.00 9605.08
1999/03/31 10440.00 9873.45
1999/04/30 11160.00 10652.27
1999/05/31 11050.00 10698.39
1999/06/30 11780.00 11271.29
1999/07/31 11760.00 11031.77
1999/08/31 11850.00 10653.60
1999/09/30 11630.00 10324.73
1999/10/31 12390.00 10850.88
1999/11/30 13230.00 11420.44
1999/12/31 15366.09 12099.15
IMATRL PRASUN SHR__CHT 19991231 20000225 115745 R00000000000016
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Mid Cap Portfolio on
December 28, 1998, when the fund started. As the chart shows, by
December 31, 1999, the value of the investment would have grown to
$15,366 - a 53.66% increase on the initial investment. For comparison,
look at how the Standard & Poor's MidCap 400 Index did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 investment would have grown to $12,099 - a 20.99% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
VERITAS Software Corp. 3.4
Nextel Communications, Inc. 2.3
Class A
Kopin Corp. 1.6
PE Corp. - Biosystems Group 1.4
Exodus Communications, Inc. 1.3
10.0
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 35.5
HEALTH 13.3
UTILITIES 9.2
MEDIA & LEISURE 8.7
ENERGY 7.9
ASSET ALLOCATION AS OF
DECEMBER 31, 1999*
% OF FUND'S NET ASSETS
Stocks and Equity Futures
93.2%
Short-Term Investments and
Net Other Assets 6.8%
Row: 1, Col: 1, Value: 93.2
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 6.8
* FOREIGN INVESTMENTS 6.5%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: MID CAP PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). Performance for Service Class shares reflects an
asset based distribution fee (12b-1 fee). If Fidelity had not
reimbursed certain fund expenses, the total returns would have been
lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
FIDELITY VIP: MID CAP - 48.94% 53.04%
SERVICE CLASS
S&P MidCap 400 14.72% 20.81%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Standard
& Poor's MidCap 400 Index - a market capitalization-weighted index of
400 medium-capitalization stocks. This benchmark includes reinvested
dividends and capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown. The life of fund figures are from commencement
of operations, December 28, 1998.
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 BE 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 III Mid Cap - SC S&P MidCap 400
00773 SP004
1998/12/28 10000.00 10000.00
1998/12/31 10310.00 10546.36
1999/01/31 10520.00 10135.79
1999/02/28 9950.00 9605.08
1999/03/31 10440.00 9873.45
1999/04/30 11150.00 10652.27
1999/05/31 11040.00 10698.39
1999/06/30 11770.00 11271.29
1999/07/31 11750.00 11031.77
1999/08/31 11840.00 10653.60
1999/09/30 11620.00 10324.73
1999/10/31 12380.00 10850.88
1999/11/30 13220.00 11420.44
1999/12/31 15356.09 12099.15
IMATRL PRASUN SHR__CHT 19991231 20000209 104849 R00000000000016
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Mid Cap Portfolio -
Service Class - on December 28, 1998, when the fund started. As the
chart shows, by December 31, 1999, the value of the investment would
have grown to $15,356 - a 53.56% increase on the initial investment.
For comparison, look at how the Standard & Poor's MidCap 400 Index did
over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $12,099 -
a 20.99% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
VERITAS Software Corp. 3.4
Nextel Communications, Inc. 2.3
Class A
Kopin Corp. 1.6
PE Corp. - Biosystems Group 1.4
Exodus Communications, Inc. 1.3
10.0
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 35.5
HEALTH 13.3
UTILITIES 9.2
MEDIA & LEISURE 8.7
ENERGY 7.9
ASSET ALLOCATION AS OF
DECEMBER 31, 1999*
% OF FUND'S NET ASSETS
Stocks and Equity Futures
93.2%
Short-Term Investments and
Net Other Assets 6.8%
Row: 1, Col: 1, Value: 93.2
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 6.8
* FOREIGN INVESTMENTS 6.5%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: MID CAP PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(Photograph of David Felman)
An interview with
David Felman,
Portfolio Manager
of Mid Cap Portfolio
Q. HOW DID THE FUND PERFORM, DAVID?
A. The fund had excellent performance, substantially exceeding that of
the Standard & Poor's MidCap 400 Index, which had a total return of
14.72% for the 12 months ending December 31, 1999.
Q. WHAT FACTORS AFFECTED PERFORMANCE?
A. Sector and stock selection worked well, with consumer stocks
performing well early in the year and technology stocks surging late
in the period. Early in 1999, the fund took advantage of the strong
consumer economy by emphasizing the media and leisure industry,
including radio stations, advertisers and other consumer-related
stocks. As consumer spending surged and advertising budgets swelled,
these stocks rallied. Later in the period, however, I reduced this
sector's weightings as stocks began to hit their target prices. I also
was concerned about the effects that rising interest rates might have
on consumer-related stocks. I de-emphasized retailing stocks for the
same reason. While I moved away from consumer-related stocks, I added
to the fund's position in technology and in health care.
Q. WHAT WAS YOUR STRATEGY IN TECHNOLOGY, WHERE THE FUND'S RELATIVE
WEIGHTING WENT FROM 16.8% TO 35.5% OF NET ASSETS IN THE FINAL SIX
MONTHS OF THE PERIOD?
A. I wanted to take advantage of the tremendous change taking place in
the worldwide economy that was driven by two trends - the growth in
wireless communications and in the Internet. Together, these two
trends created a tremendous driver for stock performance and I looked
for stocks of companies that could take advantage. However, stock
valuations were extremely high even for companies without significant
revenues or earnings, so I tried to be cautious about the stock prices
I paid. I invested in companies such as Nextel, Qualcomm, Comverse
Technology and Kopin Corp. that benefited from the strong demand for
wireless. I also invested in companies such as VERITAS Software and
Legato Systems that produce software for data-storage systems for
networks. Finally, I increased the weighting in semiconductor
companies providing equipment for networks.
Q. YOU ALSO INCREASED THE WEIGHTING IN HEALTH CARE, WHICH ROSE FROM
7.5% TO 13.3% OF NET ASSETS IN THE FINAL SIX MONTHS. WHAT WAS YOUR
STRATEGY IN THAT SECTOR?
A. I invested primarily in biotechnology companies that introduced a
number of very successful products. Health care also was relatively
attractive because it was not likely to be affected by rising interest
rates. Among the biotechnology companies in which I invested were IDEC
Pharmaceuticals and Cephalon Inc.
Q. WHAT INVESTMENTS HELPED PERFORMANCE, AND WHERE WERE YOU
DISAPPOINTED?
A. The radio station chains performed exceptionally well. Westwood
One, for example, successfully integrated its acquisition of the Metro
One chain. Many of the biggest winners were the Internet and wireless
communications companies. Exodus Communications, which designs and
operates Web sites for other companies, had very strong performance as
its business grew even faster than the Internet itself. Another strong
Internet-related stock was DoubleClick, an advertising company whose
business grew as Web commerce increased. Nextel Communications
benefited as wireless penetration in the United States grew. Some
individual holdings, such as Premier Parks, a chain of amusement
parks, didn't meet expectations. However, most of my disappointments
have less to do with what the fund owned than what the fund didn't
own. For instance, the fund didn't own enough of Xilinx, a
semiconductor company that we sold.
Q. WHAT IS YOUR OUTLOOK?
A. Technology is still a terrific story. It is changing the way we
live, work and play. At the same time, many of the stocks are trading
at extremely high valuations. I want to be in technology to take
advantage of the power of the long-term, fundamental trend, but I want
to be cautious about the weightings of individual investments. I also
want to be invested in the more liquid stocks, which can be traded
more easily and offer me the ability to trim positions when necessary.
I am careful to keep the fund diversified in other sectors and
prepared for the possibility that market trends could shift.
FUND FACTS
GOAL: long-term growth of capital by investing
primarily in common stocks of companies with
medium-sized market capitalizations
START DATE: December 28, 1998
SIZE: as of December 31, 1999, more than
$27 million
MANAGER: David Felman, since 1999; joined
Fidelity in 1993.
(checkmark)
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FIDELITY VARIABLE INSURANCE PRODUCTS: MID CAP PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 92.4%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.2%
SHIP BUILDING & REPAIR - 0.2%
General Dynamics Corp. 990 $ 52,223
BASIC INDUSTRIES - 0.8%
CHEMICALS & PLASTICS - 0.1%
Solutia, Inc. 1,560 24,083
METALS & MINING - 0.4%
CommScope, Inc. (a) 2,890 116,503
PACKAGING & CONTAINERS - 0.1%
Corning, Inc. 300 38,681
Owens-Illinois, Inc. (a) 70 1,754
40,435
PAPER & FOREST PRODUCTS - 0.2%
Bowater, Inc. 910 49,424
TOTAL BASIC INDUSTRIES 230,445
CONSTRUCTION & REAL ESTATE -
1.3%
BUILDING MATERIALS - 0.1%
Carlisle Companies, Inc. 50 1,800
Justin Industries, Inc. 400 5,950
7,750
ENGINEERING - 1.2%
DSP Group, Inc. (a) 1,490 138,570
Dycom Industries, Inc. (a) 1,330 58,603
PerkinElmer, Inc. 3,390 141,321
338,494
TOTAL CONSTRUCTION & REAL 346,244
ESTATE
DURABLES - 1.9%
AUTOS, TIRES, & ACCESSORIES -
0.7%
Barrett Resources Corp. (a) 2,990 88,018
Danaher Corp. 630 30,398
Federal-Mogul Corp. 1,360 27,370
SPX Corp. (a) 810 65,458
211,244
HOME FURNISHINGS - 0.2%
Haverty Furniture Companies, 200 2,525
Inc.
Leggett & Platt, Inc. 2,040 43,732
Miller (Herman), Inc. 40 920
47,177
TEXTILES & APPAREL - 1.0%
Jones Apparel Group, Inc. (a) 4,170 113,111
Liz Claiborne, Inc. 1,310 49,289
Nautica Enterprises, Inc. (a) 4,710 53,282
Polymer Group, Inc. 2,200 40,150
WestPoint Stevens, Inc. Class 980 17,150
A
272,982
TOTAL DURABLES 531,403
SHARES VALUE (NOTE 1)
ENERGY - 7.9%
ENERGY SERVICES - 2.7%
BJ Services Co. (a) 3,860 $ 161,396
ENSCO International, Inc. 5,410 123,754
Global Marine, Inc. (a) 2,190 36,409
Nabors Industries, Inc. (a) 4,220 130,556
Noble Drilling Corp. (a) 2,200 72,050
Plains Energy Services Ltd. 600 3,214
(a)
Tidewater, Inc. 2,460 88,560
Transocean Sedco Forex, Inc. 1,780 59,964
Weatherford International, 1,760 70,290
Inc. (a)
746,193
OIL & GAS - 5.2%
Anadarko Petroleum Corp. 2,770 94,526
Apache Corp. 6,000 221,625
Cooper Cameron Corp. (a) 480 23,490
EOG Resources, Inc. 4,330 76,046
Frontier Oil Corp. (a) 2,500 16,875
Kerr-McGee Corp. 1,530 94,860
Noble Affiliates, Inc. 1,500 32,156
Nuevo Energy Co. (a) 2,520 47,250
Ocean Energy, Inc. (a) 6,610 51,228
Santa Fe Snyder Corp. (a) 20,240 161,920
Sunoco, Inc. 2,070 48,645
Tesoro Petroleum Corp. (a) 2,910 33,647
The Coastal Corp. 1,160 41,108
Tosco Corp. 6,690 181,884
Ultramar Diamond Shamrock 2,900 65,794
Corp.
USX - Marathon Group 1,500 37,031
Vastar Resources, Inc. 3,520 207,680
1,435,765
TOTAL ENERGY 2,181,958
FINANCE - 7.0%
BANKS - 1.6%
First Security Corp. 1,860 47,488
Marshall & Ilsley Corp. 2,180 136,931
Northern Trust Corp. 1,640 86,920
Zions Bancorp 3,060 181,114
452,453
CREDIT & OTHER FINANCE - 0.3%
Associates First Capital 2,980 81,764
Corp. Class A
Household International, Inc. 70 2,608
84,372
FEDERAL SPONSORED CREDIT - 0.1%
Freddie Mac 660 31,061
INSURANCE - 4.5%
AFLAC, Inc. 1,590 75,028
Allmerica Financial Corp. 2,380 132,388
Ambac Financial Group, Inc. 3,050 159,172
American General Corp. 830 62,976
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
INSURANCE - CONTINUED
CIGNA Corp. 1,240 $ 99,898
Hartford Financial Services 1,080 51,165
Group, Inc.
Hartford Life, Inc. Class A 1,050 46,200
Jefferson-Pilot Corp. 780 53,235
Lincoln National Corp. 1,180 47,200
MBIA, Inc. 2,040 107,738
Protective Life Corp. 4,190 133,294
Reliastar Financial Corp. 4,760 186,533
The Chubb Corp. 890 50,118
Torchmark Corp. 1,890 54,928
1,259,873
SAVINGS & LOANS - 0.3%
Golden West Financial Corp. 2,200 73,700
SECURITIES INDUSTRY - 0.2%
Daiwa Securities Co. Ltd. 3,000 46,937
TOTAL FINANCE 1,948,396
HEALTH - 13.3%
DRUGS & PHARMACEUTICALS - 11.8%
Alkermes, Inc. (a) 50 2,456
Allergan, Inc. 1,310 65,173
Alpharma, Inc. Class A 2,470 75,953
Aviron (a) 940 14,864
Biogen, Inc. (a) 3,390 286,455
Biovail Corp. International 1,680 156,771
(a)
Celgene Corp. (a) 1,150 80,500
Cephalon, Inc. (a) 8,140 281,339
Chiron Corp. (a) 2,370 100,429
COR Therapeutics, Inc. (a) 2,200 59,125
CV Therapeutics, Inc. (a) 1,915 49,910
Cytyc Corp. (a) 1,740 106,249
Forest Laboratories, Inc. (a) 3,170 194,757
Genentech, Inc. 1,900 255,550
Gilead Sciences, Inc. (a) 2,440 132,065
Human Genome Sciences, Inc. 420 64,103
(a)
IDEC Pharmaceuticals Corp. (a) 3,450 338,963
Medimmune, Inc. (a) 1,643 272,533
Millennium Pharmaceuticals, 1,491 181,902
Inc. (a)
QLT PhotoTherapeutics, Inc. 3,350 196,827
(a)
Sangstat Medical Corp. (a) 990 29,453
Sepracor, Inc. (a) 2,280 226,147
ViroPharma, Inc. (a) 2,090 77,330
3,248,854
MEDICAL EQUIPMENT & SUPPLIES
- - 1.0%
Becton, Dickinson & Co. 120 3,210
Millipore Corp. 1,280 49,440
MiniMed, Inc. (a) 420 30,765
Pall Corp. 2,210 47,653
SHARES VALUE (NOTE 1)
Stryker Corp. 750 $ 52,219
Sybron International, Inc. (a) 4,290 105,909
289,196
MEDICAL FACILITIES MANAGEMENT
- - 0.5%
Advance Paradigm, Inc. (a) 1,000 21,563
Medquist, Inc. (a) 510 13,164
Syncor International Corp. (a) 1,300 37,863
Trigon Healthcare, Inc. (a) 650 19,175
Wellpoint Health Networks, 530 34,947
Inc. (a)
126,712
TOTAL HEALTH 3,664,762
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.0%
ELECTRICAL EQUIPMENT - 1.0%
Adaptive Broadband Corp. (a) 600 44,288
California Amplifier, Inc. (a) 100 2,631
Gilat Satellite Networks Ltd. 370 43,938
(a)
Research in Motion Ltd. (a) 3,155 145,461
W. W. Grainger, Inc. 970 46,378
282,696
MEDIA & LEISURE - 8.7%
BROADCASTING - 7.3%
Adelphia Communications Corp. 2,570 168,656
Class A (a)
AT&T Corp. - Liberty Media 2,950 167,413
Group Class A (a)
Cablevision Systems Corp. 580 43,790
Class A (a)
Cox Communications, Inc. 1,450 74,675
Class A (a)
EchoStar Communications Corp. 2,480 241,800
Class A (a)
Emmis Communications Corp. 110 13,710
Class A (a)
Infinity Broadcasting Corp. 2,497 90,360
Class A
Insight Communications, Inc. 6,570 194,636
Pegasus Communications Corp. 620 60,605
(a)
Radio One, Inc. 2,270 208,840
UnitedGlobalCom, Inc. (a) 800 56,500
Univision Communications, 2,450 250,359
Inc. Class A (a)
USA Networks, Inc. (a) 4,017 221,939
Westwood One, Inc. (a) 2,522 191,672
Young Broadcasting, Inc. 810 41,310
Class A (a)
2,026,265
ENTERTAINMENT - 0.8%
Cinar Films, Inc. Class B 90 2,205
(sub. vtg.) (a)
Premier Parks, Inc. (a) 7,520 217,140
219,345
LEISURE DURABLES & TOYS - 0.5%
Harley-Davidson, Inc. 2,200 140,937
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
RESTAURANTS - 0.1%
Jack in the Box, Inc. (a) 680 $ 14,068
TOTAL MEDIA & LEISURE 2,400,615
NONDURABLES - 1.2%
BEVERAGES - 0.4%
Adolph Coors Co. Class B 1,780 93,450
Canandaigua Brands, Inc. 290 14,790
Class A (a)
Celestial Seasonings, Inc. (a) 400 7,444
115,684
FOODS - 0.8%
Keebler Foods Co. (a) 3,690 103,781
Nabisco Group Holdings Corp. 11,040 117,300
221,081
TOTAL NONDURABLES 336,765
PRECIOUS METALS - 0.7%
Agnico-Eagle Mines Ltd. 2,500 18,318
Barrick Gold Corp. 980 17,443
Newmont Mining Corp. 1,520 37,240
Placer Dome, Inc. 1,530 16,445
Stillwater Mining Co. (a) 3,570 113,794
203,240
RETAIL & WHOLESALE - 1.9%
APPAREL STORES - 0.3%
Abercrombie & Fitch Co. Class 420 11,209
A (a)
AnnTaylor Stores Corp. (a) 1,740 59,921
71,130
GENERAL MERCHANDISE STORES -
1.1%
Costco Wholesale Corp. (a) 1,540 140,525
Dollar Tree Stores, Inc. (a) 3,380 163,719
304,244
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.5%
Bed Bath & Beyond, Inc. (a) 640 22,240
Tandy Corp. 440 21,643
Tiffany & Co., Inc. 1,140 101,745
145,628
TOTAL RETAIL & WHOLESALE 521,002
SERVICES - 1.7%
ADVERTISING - 1.1%
DoubleClick, Inc. (a) 1,100 278,369
Omnicom Group, Inc. 60 6,000
284,369
SERVICES - 0.6%
Cintas Corp. 580 30,813
SHARES VALUE (NOTE 1)
FreeMarkets, Inc. 200 $ 68,263
True North Communications 1,480 66,138
Viad Corp. 300 8,363
173,577
TOTAL SERVICES 457,946
TECHNOLOGY - 35.5%
COMMUNICATIONS EQUIPMENT - 4.6%
Advanced Fibre 1,310 58,541
Communications, Inc. (a)
Ciena Corp. (a) 1,040 59,800
Digital Island, Inc. 260 24,733
Ditech Communications Corp. 300 28,050
Globalstar Telecommunications 7,680 337,920
Ltd. (a)
Jabil Circuit, Inc. (a) 3,100 226,300
Marconi PLC 8,940 158,316
Metricom, Inc. (a) 700 55,038
Natural MicroSystems Corp. (a) 2,920 136,693
Telefonaktiebolaget LM 2,990 196,406
Ericsson sponsored ADR
1,281,797
COMPUTER SERVICES & SOFTWARE
- - 15.9%
Adobe Systems, Inc. 800 53,800
Affiliated Computer Services, 1,170 53,820
Inc. Class A (a)
Affymetrix, Inc. (a) 190 32,241
Amdocs Ltd. (a) 2,207 76,142
At Home Corp. Series A (a) 1,490 63,884
Autodesk, Inc. 120 4,050
BEA Systems, Inc. (a) 1,280 89,520
Cadence Design Systems, Inc. 5,080 121,920
(a)
Cambridge Technology 1,000 26,250
Partners, Inc. (a)
Careerbuilder, Inc. 150 966
Citrix Systems, Inc. (a) 2,350 289,050
Cognos, Inc. (a) 1,430 65,238
DST Systems, Inc. (a) 1,010 77,076
Electronic Arts, Inc. (a) 520 43,680
Electronics for Imaging, Inc. 810 47,081
(a)
Exchange Applications, Inc. 960 53,640
Exodus Communications, Inc. 3,910 347,257
(a)
F5 Networks, Inc. 510 58,140
Foundry Networks, Inc. 75 22,627
Healtheon/Web Maryland Corp. 420 15,750
Inet Technologies, Inc. 990 69,176
InfoSpace.com, Inc. 400 85,600
Inktomi Corp. (a) 560 49,700
Integral Systems, Inc. (a) 2,270 100,164
Interleaf, Inc. (a) 520 17,485
InterVU, Inc. (a) 650 68,250
Intuit, Inc. (a) 3,140 188,204
ISS Group, Inc. (a) 600 42,675
J. D. Edwards & Co. (a) 1,100 32,863
Legato Systems, Inc. (a) 2,030 139,689
Metasolv Software, Inc. 300 24,525
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- - CONTINUED
NBC Internet, Inc. Class A (a) 20 $ 1,545
NCR Corp. (a) 1,070 40,526
Networks Associates, Inc. (a) 6 160
NetZero, Inc. 1,710 46,063
New Era of Networks, Inc. (a) 430 20,479
Parametric Technology Corp. 2,450 66,303
(a)
Peregrine Systems, Inc. (a) 950 79,978
Puma Technology, Inc. (a) 550 71,844
Redback Networks, Inc. 110 19,525
SalesLogix Corp. 1,480 60,773
Siebel Systems, Inc. (a) 3,430 288,120
Sykes Enterprises, Inc. (a) 1,550 68,006
Synopsys, Inc. (a) 510 34,043
Technology Solutions, Inc. (a) 200 6,550
VERITAS Software Corp. (a) 6,630 948,904
Vignette Corp. 1,160 189,080
Visual Networks, Inc. (a) 760 60,230
Vitria Technology, Inc. 100 23,400
Zi Corp. (a) 940 19,623
4,405,615
COMPUTERS & OFFICE EQUIPMENT
- - 3.2%
Adaptec, Inc. (a) 1,574 78,503
Apple Computer, Inc. (a) 470 48,322
Comverse Technology, Inc. (a) 1,405 203,374
Concurrent Computer Corp. (a) 1,410 26,349
FileNET Corp. (a) 640 16,320
Fujitsu Support & Service, 200 98,043
Inc.
Kronos, Inc. (a) 1,110 66,600
Network Appliance, Inc. (a) 980 81,401
Quantum Corp. - DLT & Storage 2,780 42,048
Systems (a)
Safeguard Scientifics, Inc. 470 76,169
(a)
ScanSource, Inc. (a) 570 23,121
Seagate Technology, Inc. (a) 1,000 46,563
Symbol Technologies, Inc. 1,250 79,453
886,266
ELECTRONIC INSTRUMENTS - 3.9%
Agilent Technologies, Inc. 3,400 262,863
Catapult Communications Corp. 2,160 21,465
Credence Systems Corp. (a) 1,320 114,180
KLA-Tencor Corp. (a) 800 89,100
LAM Research Corp. (a) 100 11,156
Novellus Systems, Inc. (a) 640 78,420
PE Corp. - Biosystems Group 3,180 382,594
Sawtek, Inc. (a) 1,070 71,222
Teradyne, Inc. (a) 510 33,660
1,064,660
ELECTRONICS - 7.8%
Altera Corp. (a) 2,950 146,209
Amphenol Corp. Class A (a) 810 53,916
SHARES VALUE (NOTE 1)
Analog Devices, Inc. (a) 1,670 $ 155,310
Atmel Corp. (a) 1,010 29,858
Celestica, Inc. (sub. vtg.) 1,080 60,319
(a)
Chartered Semiconduct 900 65,700
Manufacturing Ltd. ADR
Conexant Systems, Inc. (a) 530 35,179
Cree Research, Inc. (a) 1,860 158,798
Cypress Semiconductor Corp. 3,710 120,111
(a)
E Tek Dynamics, Inc. 770 103,661
Flextronics International 600 27,600
Ltd. (a)
JDS Uniphase Corp. (a) 240 38,715
KEMET Corp. (a) 1,300 58,581
Kopin Corp. (a) 10,360 435,120
Linear Technology Corp. 880 62,975
LSI Logic Corp. (a) 710 47,925
Maxim Integrated Products, 1,740 82,106
Inc. (a)
Micron Technology, Inc. (a) 90 6,998
National Semiconductor Corp. 5,190 222,197
(a)
QLogic Corp. (a) 231 36,931
Three-Five Systems, Inc. (a) 2,083 85,417
Toko, Inc. 8,000 37,886
Vitesse Semiconductor Corp. 1,530 80,229
(a)
2,151,741
PHOTOGRAPHIC EQUIPMENT - 0.1%
In Focus Systems, Inc. (a) 1,010 23,419
TOTAL TECHNOLOGY 9,813,498
TRANSPORTATION - 0.1%
RAILROADS - 0.0%
Westinghouse Air Brake Co. 296 5,254
TRUCKING & FREIGHT - 0.1%
Forward Air Corp. (a) 400 17,350
TOTAL TRANSPORTATION 22,604
UTILITIES - 9.2%
CELLULAR - 6.1%
ALLTEL Corp. 630 52,093
Clearnet Communications, Inc. 1,660 56,970
Class A (non-vtg.) (a)
Mannesmann AG (Reg.) 645 157,081
Microcell Telecommunications, 2,450 80,442
Inc. Class B (a)
Nextel Communications, Inc. 6,280 647,625
Class A (a)
QUALCOMM, Inc. (a) 1,700 299,413
Sprint Corp. - PCS Group 600 61,500
Series 1 (a)
Telephone & Data Systems, 950 119,700
Inc.
VoiceStream Wireless Corp. (a) 440 62,618
Western Wireless Corp. Class A 1,930 128,828
Wireless Facilities, Inc. 400 17,450
1,683,720
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
ELECTRIC UTILITY - 1.6%
AES Corp. (a) 2,050 $ 153,238
Calpine Corp. (a) 3,530 225,920
Illinova Corp. 520 18,069
IPALCO Enterprises, Inc. 2,740 46,751
443,978
GAS - 0.7%
Columbia Energy Group 60 3,795
Dynegy, Inc. 2,560 62,240
Enron Corp. 1,160 51,475
Kinder Morgan, Inc. 3,690 74,492
192,002
TELEPHONE SERVICES - 0.8%
Commonwealth Telephone 1,050 55,519
Enterprises, Inc. (a)
Illuminet Holdings, Inc. 190 10,450
Metromedia Fiber Network, 100 4,794
Inc. Class A (a)
Qwest Communications 520 22,360
International, Inc. (a)
RSL Communications Ltd./RSL 140 2,398
Communications PLC Class A
(a)
WinStar Communications, Inc. 1,760 131,780
(a)
227,301
TOTAL UTILITIES 2,547,001
TOTAL COMMON STOCKS 25,540,798
(Cost $21,177,224)
U.S. TREASURY OBLIGATIONS -
0.0%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT
U.S. Treasury Bills, yield at - $ 15,000 14,940
date of purchase 5.10%
2/3/00 (c) (Cost $14,929)
CASH EQUIVALENTS - 10.9%
SHARES VALUE (NOTE 1)
Taxable Central Cash Fund, 2,726,490 $ 2,726,490
5.12% (b)
Central Cash Collateral Fund, 65,400 65,400
4.97% (b)
MATURITY AMOUNT
Investments in repurchase $ 213,060 213,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 3.38%,
dated 12/31/99 due 1/3/00
TOTAL CASH EQUIVALENTS 3,004,890
(Cost $3,004,890)
TOTAL INVESTMENT PORTFOLIO - 28,560,628
103.3%
(Cost $24,197,043)
NET OTHER ASSETS - (3.3)% (908,838)
NET ASSETS - 100% $ 27,651,790
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT UNREALIZED GAIN/LOSS
PURCHASED
1 S&P 400 Midcap Index March 2000 $ 224,575 $ 12,194
Contracts
</TABLE>
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS -
0.8%
LEGEND
(a) Non-income producing
(b) The rate quoted is the annualized seven-day yield of the fund at
period end.
(c) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $14,940.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $28,341,746 and $8,267,299, respectively, of which
long-term U.S. government and government agency obligations aggregated
$14,826 and $0, respectively.
The market value of futures contracts opened and closed during the
period amounted to $420,575 and $209,494, 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 $591 for the
period.
The fund participated in the security lending program. At period end,
the value of securities loaned amounted to $61,844. The fund received
cash collateral of $65,400 which was invested in cash equivalents.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $24,347,403. Net unrealized appreciation
aggregated $4,213,225, of which $4,769,342 related to appreciated
investment securities and $556,117 related to depreciated investment
securities.
FIDELITY VARIABLE INSURANCE PRODUCTS: MID CAP PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 28,560,628
value (including repurchase
agreements of $213,000)
(cost $24,197,043) - See
accompanying schedule
Cash 9,658
Foreign currency held at 9,581
value (cost $9,595)
Receivable for investments 246,354
sold
Receivable for fund shares 225,706
sold
Dividends receivable 5,378
Interest receivable 8,643
Receivable for daily 1,400
variation on futures
contracts
Other receivables 651
Receivable from investment 3,046
adviser for expense
reductions
TOTAL ASSETS 29,071,045
LIABILITIES
Payable for investments $ 1,315,952
purchased
Payable for fund shares 794
redeemed
Distribution fees payable 1,591
Other payables and accrued 35,518
expenses
Collateral on securities 65,400
loaned, at value
TOTAL LIABILITIES 1,419,255
NET ASSETS $ 27,651,790
Net Assets consist of:
Paid in capital $ 23,312,596
Accumulated undistributed net (36,505)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 4,375,699
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 27,651,790
INITIAL CLASS: NET ASSET $15.25
VALUE, offering price and
redemption price per share
($1,744,154 (divided by)
114,358 shares)
SERVICE CLASS: NET ASSET $15.24
VALUE, offering price and
redemption price per share
($25,907,636 (divided by)
1,699,918 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 18,436
Dividends
Interest 27,072
Security lending 161
TOTAL INCOME 45,669
EXPENSES
Management fee $ 26,332
Transfer agent fees 4,287
Distribution fees - Service 3,806
Class
Accounting and security 60,000
lending fees
Non-interested trustees' 7
compensation
Custodian fees and expenses 41,176
Registration fees 278
Audit 18,103
Legal 3,262
Miscellaneous 235
Total expenses before 157,486
reductions
Expense reductions (108,538) 48,948
NET INVESTMENT INCOME (LOSS) (3,279)
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 139,111
Foreign currency transactions (494)
Futures contracts 1,300 139,917
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 4,331,376
Assets and liabilities in (80)
foreign currencies
Futures contracts 12,194 4,343,490
NET GAIN (LOSS) 4,483,407
NET INCREASE (DECREASE) IN $ 4,480,128
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION
Expense reductions FMR
Reimbursement:
Initial Class $ 17,489
Service Class 89,792
Directed brokerage 769
arrangements
Custodian credits 488
$ 108,538
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 DECEMBER 28, 1998
ASSETS (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1998
Operations Net investment $ (3,279) $ (37)
income (loss)
Net realized gain (loss) 139,917 (704)
Change in net unrealized 4,343,490 32,209
appreciation (depreciation)
NET INCREASE (DECREASE) IN 4,480,128 31,468
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (139,917) -
From net realized gains
In excess of net realized (32,523) -
gain
Total distributions (172,440) -
Share transactions - net 22,312,614 1,000,020
increase (decrease)
TOTAL INCREASE (DECREASE) 26,620,302 1,031,488
IN NET ASSETS
NET ASSETS
Beginning of period 1,031,488 -
End of period $ 27,651,790 $ 1,031,488
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 67,742 $ 873,931 50,001 $ 500,010
Class A Sold
Reinvested 755 10,914 - -
Redeemed (4,140) (54,766) - -
Net increase (decrease) 64,357 $ 830,079 50,001 $ 500,010
Service ClassB Sold 1,749,215 $ 22,631,585 50,001 $ 500,010
Reinvested 11,186 161,526 - -
Redeemed (110,484) (1,310,576) - -
Net increase (decrease) 1,649,917 $ 21,482,535 50,001 $ 500,010
Distributions
From net realized gain $ 8,856 $ -
Initial Class
Service Class 131,061 -
Total $ 139,917 $ -
In excess of net realized $ 2,058 $ -
gain Initial Class
Service Class 30,465 -
Total $ 32,523 $ -
$ 172,440 $ -
</TABLE>
A INITIAL CLASS COMMENCEMENT OF OPERATIONS DECEMBER 28, 1998.
B SERVICE CLASS COMMENCEMENT OF OPERATIONS DECEMBER 28, 1998.
FINANCIAL HIGHLIGHTS - INITIAL CLASS
YEARS ENDED DECEMBER 31, 1999 1998 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.31 $ 10.00
period
Income from Investment
Operations
Net investment income (loss) D .00 .00
Net realized and unrealized 5.05 .31
gain (loss)
Total from investment 5.05 .31
operations
Less Distributions
From net realized gain (.09) -
In excess of net realized gain (.02) -
Total distributions (.11) -
Net asset value, end of period $ 15.25 $ 10.31
TOTAL RETURN B, C 49.04% 3.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,744 $ 516
(000 omitted)
Ratio of expenses to average 1.00% G 1.00% A, G
net assets
Ratio of expenses to average .97% H 1.00% A
net assets after expense
reductions
Ratio of net investment .01% (.27)% A
income (loss) to average net
assets
Portfolio turnover 163% 125% A
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 F
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 10.31 $ 10.00
period
Income from Investment
Operations
Net investment income (loss) D (.01) .00
Net realized and unrealized 5.05 .31
gain (loss)
Total from investment 5.04 .31
operations
Less Distributions
From net realized gain (.09) -
In excess of net realized gain (.02) -
Total distributions (.11) -
Net asset value, end of period $ 15.24 $ 10.31
TOTAL RETURN B, C 48.94% 3.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 25,908 $ 516
(000 omitted)
Ratio of expenses to average 1.10% G 1.10% A, G
net assets
Ratio of expenses to average 1.07% H 1.10% A
net assets after expense
reductions
Ratio of net investment (.09)% (.35)% A
income (loss) to average net
assets
Portfolio turnover 163% 125% A
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
D NET INVESTMENT INCOME
(LOSS) PER SHARE HAS BEEN
CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING
THE PERIOD.
E FOR THE PERIOD DECEMBER 28,
1998 (COMMENCEMENT OF SALE
OF INITIAL CLASS SHARES) TO
DECEMBER 31, 1998.
F FOR THE PERIOD DECEMBER 28,
1998 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1998.
G FMR AGREED TO REIMBURSE A
PORTION OF THE CLASS'
EXPENSES DURING THE PERIOD.
WITHOUT THIS REIMBURSEMENT,
THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
H FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY VIP: GROWTH - 37.44% 29.74% 19.94%
"INITIAL CLASS"
Russell 3000 Growth 33.83% 31.09% 19.70%
S&P 500 21.04% 28.56% 18.21%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Russell
3000 Growth Index - a market capitalization-weighted index of
growth-oriented stocks of U.S. domiciled corporations and the
performance of the Standard & Poor's 500 Index - a market
capitalization-weighted index of common stocks. These benchmarks
reflect the reinvestment of dividends and capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of long-term growth and
short-term volatility. In turn, the share price and
return of a fund that invests in stocks will vary.
That means if you sell your shares during a
market downturn, you might lose money. But if
you can ride out the market's ups and downs,
you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF
THESE ADDITIONAL CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER 10 YEARS
VIP Growth Russell 3000 Growth
00151 RS007
1989/12/31 10000.00 10000.00
1990/01/31 9420.29 9180.27
1990/02/28 9510.27 9264.60
1990/03/31 9626.50 9637.41
1990/04/30 9346.18 9500.34
1990/05/31 10173.46 10477.95
1990/06/30 10385.41 10587.57
1990/07/31 10221.32 10468.62
1990/08/31 9168.42 9436.29
1990/09/30 8224.92 8907.03
1990/10/31 7930.92 8914.92
1990/11/30 8573.60 9526.18
1990/12/31 8826.57 9868.85
1991/01/31 9414.55 10395.42
1991/02/28 10116.92 11240.27
1991/03/31 10422.23 11702.25
1991/04/30 10325.09 11642.69
1991/05/31 10935.71 12164.23
1991/06/30 10123.86 11572.89
1991/07/31 11088.37 12188.45
1991/08/31 11581.03 12602.35
1991/09/30 11671.24 12405.72
1991/10/31 12032.06 12617.96
1991/11/30 11345.11 12276.54
1991/12/31 12843.91 13979.69
1992/01/31 13628.01 13721.52
1992/02/29 13913.10 13750.22
1992/03/31 13060.41 13348.88
1992/04/30 12548.79 13392.48
1992/05/31 12442.20 13483.62
1992/06/30 11959.01 13114.93
1992/07/31 12420.89 13691.38
1992/08/31 12079.81 13501.20
1992/09/30 12292.98 13671.46
1992/10/31 12769.07 13898.96
1992/11/30 13621.76 14547.88
1992/12/31 14041.00 14709.71
1993/01/31 14318.13 14565.11
1993/02/28 14022.96 14295.27
1993/03/31 14582.14 14576.95
1993/04/30 14429.63 14002.12
1993/05/31 15504.41 14516.85
1993/06/30 15664.18 14395.74
1993/07/31 15620.60 14170.94
1993/08/31 16404.90 14759.95
1993/09/30 16709.91 14700.20
1993/10/31 16869.67 15110.52
1993/11/30 16187.04 14965.19
1993/12/31 16760.74 15252.97
1994/01/31 17181.94 15610.18
1994/02/28 17004.72 15345.19
1994/03/31 16232.13 14585.20
1994/04/30 16332.57 14650.33
1994/05/31 15954.00 14822.38
1994/06/30 15142.78 14367.58
1994/07/31 15668.14 14830.82
1994/08/31 16556.62 15682.84
1994/09/30 16355.75 15496.07
1994/10/31 17020.18 15841.62
1994/11/30 16340.30 15321.86
1994/12/31 16757.49 15589.01
1995/01/31 16440.73 15856.15
1995/02/28 17121.59 16527.32
1995/03/31 17743.06 17010.84
1995/04/30 18341.23 17371.45
1995/05/31 19055.93 17941.08
1995/06/30 20741.67 18685.46
1995/07/31 22792.53 19530.66
1995/08/31 23072.20 19574.98
1995/09/30 23670.36 20424.49
1995/10/31 23429.54 20332.99
1995/11/30 23414.01 21133.88
1995/12/31 22683.78 21289.60
1996/01/31 23041.12 21911.98
1996/02/29 23813.64 22371.09
1996/03/31 23905.55 22440.70
1996/04/30 24841.38 23145.97
1996/05/31 25618.46 23994.94
1996/06/30 25117.12 23855.54
1996/07/31 23195.32 22300.94
1996/08/31 23888.84 22981.81
1996/09/30 25493.12 24605.12
1996/10/31 25434.63 24631.67
1996/11/30 26846.74 26368.01
1996/12/31 26019.53 25948.37
1997/01/31 27515.19 27654.20
1997/02/28 26889.70 27328.21
1997/03/31 25382.84 25809.30
1997/04/30 26603.92 27347.47
1997/05/31 28448.53 29494.32
1997/06/30 29617.64 30659.01
1997/07/31 31843.30 33261.46
1997/08/31 30613.56 31588.41
1997/09/30 32388.89 33241.91
1997/10/31 31167.81 31932.29
1997/11/30 32059.80 33070.09
1997/12/31 32129.08 33406.01
1998/01/31 32562.09 34265.50
1998/02/28 35008.30 36883.97
1998/03/31 36236.83 38361.44
1998/04/30 36945.99 38864.53
1998/05/31 35997.12 37601.51
1998/06/30 38274.41 39732.36
1998/07/31 39053.48 39198.44
1998/08/31 32681.07 33055.97
1998/09/30 36057.05 35656.78
1998/10/31 38604.01 38443.66
1998/11/30 41290.81 41372.18
1998/12/31 44816.61 45103.53
1999/01/31 48442.30 47705.96
1999/02/28 46063.99 45365.90
1999/03/31 48631.82 47700.58
1999/04/30 48800.02 48048.34
1999/05/31 48138.44 46686.79
1999/06/30 51278.14 49895.43
1999/07/31 50582.92 48311.94
1999/08/31 50863.25 48912.71
1999/09/30 49865.27 48018.23
1999/10/31 52791.93 51476.99
1999/11/30 55942.85 54431.27
1999/12/31 61594.32 60360.15
IMATRL PRASUN SHR__CHT 19991231 20000124 143725 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Growth Portfolio on
December 31, 1989. As the chart shows, by December 31, 1999, the value
of the investment would have grown to $61,594 - a 515.94% increase on
the initial investment. For comparison, look at how the Russell 3000
Growth Index did over the same period. With dividends and capital
gains, if any, reinvested, the same $10,000 investment would have
grown to $60,360 - a 503.60% increase. Going forward, the fund will
compare its performance to that of the Russell 3000 Growth Index,
rather than the Standard & Poor's 500 Index. The Russell 3000 Growth
Index more closely reflects the fund's investment strategy.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 4.6
Cisco Systems, Inc. 3.9
General Electric Co. 2.2
Wal-Mart Stores, Inc. 2.1
Home Depot, Inc. 2.0
14.8
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 37.8
HEALTH 12.6
MEDIA & LEISURE 9.7
FINANCE 8.6
UTILITIES 8.0
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stocks 98.6%
Short-Term Investments and
Net Other Assets 1.4%
Row: 1, Col: 1, Value: 98.59999999999999
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 1.4
* FOREIGN INVESTMENTS 12.7%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). The initial offering of Service Class shares
took place on November 3, 1997. Performance for Service Class shares
reflects an asset based distribution fee (12b-1 fee), and returns
prior to November 3, 1997 are those of Initial Class and do not
include the effects of Service Class' 12b-1 fee. Had Service Class
shares' 12b-1 fee been reflected, returns prior to November 3, 1997
would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY VIP: GROWTH - 37.29% 29.68% 19.91%
SERVICE CLASS
Russell 3000(registered 33.83% 31.09% 19.70%
trademark) Growth
S&P 500 21.04% 28.56% 18.21%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Russell
3000 Growth Index - a market capitalization-weighted index of U.S.
domiciled growth-oriented stocks. You can also compare the fund's
returns to the Standard & Poor's 500 Index - a market
capitalization-weighted index of common stocks. These benchmarks
reflect the reinvestment of dividends and capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of long-term growth and
short-term volatility. In turn, the share price and
return of a fund that invests in stocks will vary.
That means if you sell your shares during a
market downturn, you might lose money. But if
you can ride out the market's ups and downs,
you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF
THESE ADDITIONAL CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER 10 YEARS
VIP Growth - SC S&P 500
00472 SP001
1989/12/31 10000.00 10000.00
1990/01/31 9420.29 9329.00
1990/02/28 9510.27 9449.34
1990/03/31 9626.50 9699.75
1990/04/30 9346.18 9457.26
1990/05/31 10173.46 10379.34
1990/06/30 10385.41 10308.76
1990/07/31 10221.32 10275.77
1990/08/31 9168.42 9346.84
1990/09/30 8224.92 8891.65
1990/10/31 7930.92 8853.42
1990/11/30 8573.60 9425.35
1990/12/31 8826.57 9688.32
1991/01/31 9414.55 10110.73
1991/02/28 10116.92 10833.64
1991/03/31 10422.23 11095.82
1991/04/30 10325.09 11122.45
1991/05/31 10935.71 11602.94
1991/06/30 10123.86 11071.52
1991/07/31 11088.37 11587.46
1991/08/31 11581.03 11862.08
1991/09/30 11671.24 11663.98
1991/10/31 12032.06 11820.28
1991/11/30 11345.11 11343.92
1991/12/31 12843.91 12641.67
1992/01/31 13628.01 12406.53
1992/02/29 13913.10 12567.82
1992/03/31 13060.41 12322.74
1992/04/30 12548.79 12685.03
1992/05/31 12442.20 12747.19
1992/06/30 11959.01 12557.26
1992/07/31 12420.89 13070.85
1992/08/31 12079.81 12802.90
1992/09/30 12292.98 12953.97
1992/10/31 12769.07 12999.31
1992/11/30 13621.76 13442.58
1992/12/31 14041.00 13607.93
1993/01/31 14318.13 13722.24
1993/02/28 14022.96 13908.86
1993/03/31 14582.14 14202.33
1993/04/30 14429.63 13858.64
1993/05/31 15504.41 14230.05
1993/06/30 15664.18 14271.32
1993/07/31 15620.60 14214.23
1993/08/31 16404.90 14752.95
1993/09/30 16709.91 14639.35
1993/10/31 16869.67 14942.39
1993/11/30 16187.04 14800.44
1993/12/31 16760.74 14979.52
1994/01/31 17181.94 15488.82
1994/02/28 17004.72 15069.08
1994/03/31 16232.13 14412.07
1994/04/30 16332.57 14596.54
1994/05/31 15954.00 14835.92
1994/06/30 15142.78 14472.44
1994/07/31 15668.14 14947.14
1994/08/31 16556.62 15559.97
1994/09/30 16355.75 15178.75
1994/10/31 17020.18 15520.27
1994/11/30 16340.30 14955.03
1994/12/31 16757.49 15176.81
1995/01/31 16440.73 15570.34
1995/02/28 17121.59 16177.12
1995/03/31 17743.06 16654.51
1995/04/30 18341.23 17144.98
1995/05/31 19055.93 17830.27
1995/06/30 20741.67 18244.46
1995/07/31 22792.53 18849.45
1995/08/31 23072.20 18896.76
1995/09/30 23670.36 19694.21
1995/10/31 23429.54 19623.90
1995/11/30 23414.01 20485.39
1995/12/31 22683.78 20879.93
1996/01/31 23041.12 21590.69
1996/02/29 23813.64 21790.83
1996/03/31 23905.55 22000.68
1996/04/30 24841.38 22324.97
1996/05/31 25618.46 22900.73
1996/06/30 25117.12 22987.98
1996/07/31 23195.32 21972.37
1996/08/31 23888.84 22435.77
1996/09/30 25493.12 23698.46
1996/10/31 25434.63 24352.06
1996/11/30 26846.74 26192.83
1996/12/31 26019.53 25673.95
1997/01/31 27515.19 27278.06
1997/02/28 26889.70 27491.92
1997/03/31 25382.84 26362.28
1997/04/30 26603.92 27936.10
1997/05/31 28448.53 29636.85
1997/06/30 29617.64 30964.59
1997/07/31 31843.30 33428.44
1997/08/31 30613.56 31555.78
1997/09/30 32388.89 33284.09
1997/10/31 31167.81 32172.40
1997/11/30 32051.14 33661.66
1997/12/31 32120.42 34239.63
1998/01/31 32553.43 34618.32
1998/02/28 34999.69 37114.99
1998/03/31 36228.28 39015.65
1998/04/30 36937.46 39408.15
1998/05/31 35978.57 38730.72
1998/06/30 38255.94 40303.96
1998/07/31 39025.06 39874.73
1998/08/31 32652.40 34109.64
1998/09/30 36028.51 36294.70
1998/10/31 38565.59 39246.91
1998/11/30 41252.49 41625.67
1998/12/31 44768.44 44024.14
1999/01/31 48394.27 45865.23
1999/02/28 46005.77 44439.74
1999/03/31 48562.90 46217.77
1999/04/30 48731.13 48007.79
1999/05/31 48069.42 46874.32
1999/06/30 51198.53 49475.85
1999/07/31 50491.95 47931.21
1999/08/31 50783.55 47693.95
1999/09/30 49774.16 46386.66
1999/10/31 52690.18 49322.01
1999/11/30 55830.51 50324.73
1999/12/31 61460.66 53288.85
IMATRL PRASUN SHR__CHT 19991231 20000209 105011 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Growth Portfolio -
Service Class on December 31, 1989. As the chart shows, by December
31, 1999, the value of the investment would have grown to $61,461 - a
514.61% increase on the initial investment. For comparison, look at
how the Russell 3000 Growth Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $60,360 - a 503.60% increase. Going
forward, the fund will compare its performance to that of the Russell
3000 Growth Index, rather than the Standard & Poor's 500 Index. The
Russell 3000 Growth Index more closely reflects the fund's investment
strategy.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 4.6
Cisco Systems, Inc. 3.9
General Electric Co. 2.2
Wal-Mart Stores, Inc. 2.1
Home Depot, Inc. 2.0
14.8
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 37.8
HEALTH 12.6
MEDIA & LEISURE 9.7
FINANCE 8.6
UTILITIES 8.0
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stocks 98.6%
Short-Term Investments and
Net Other Assets 1.4%
Row: 1, Col: 1, Value: 98.59999999999999
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 1.4
* FOREIGN INVESTMENTS 12.7%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Jennifer Uhrig)
An interview with Jennifer Uhrig,
Portfolio Manager of Growth Portfolio
Q. HOW DID THE FUND PERFORM, JENNIFER?
A. The fund performed well for the 12 months that ended December 31,
1999, posting a higher return than the Russell 3000 Growth Index,
which returned 33.83% during the period.
Q. WHAT FACTORS INFLUENCED THE FUND'S STRONG PERFORMANCE?
A. The fund benefited both from what it owned and what it didn't own.
If you weren't in technology stocks during the period, chances are
good that you didn't beat your benchmarks. Fortunately, the fund was
well-represented in this area, particularly among mid-
sized technology stocks in the semiconductor and storage subsectors.
Conversely, my decision to underweight consumer nondurables provided a
performance boost.
Q. IN TERMS OF TECHNOLOGY, CAN YOU PROVIDE A PLAY-BY-PLAY OF YOUR
INVESTING STRATEGY?
A. As we entered the period, my focus was on semiconductor-related
stocks. The economic recovery in Asia and continued strong demand in
the U.S. and Europe - especially in the communications area - led to a
very strong semiconductor market. Investments in KLA-Tencor, Teradyne
and ASM Lithography - companies that supply equipment for
semiconductor manufacturing - performed well. The fund no longer owned
KLA-Tencor nor Teradyne at the end of the period. In the second half
of the period, I began to emphasize other areas of technology,
including storage companies such as EMC, Veritas Software, Legato
Systems and Network Appliance. The amazing growth of the Internet
created huge demand for data storage, and these companies generated
terrific returns. When people think of technology, the big fish in the
pond - Microsoft, Intel, Cisco Systems - tend to come to mind. While
the fund had substantial positions in both Microsoft and Cisco at the
end of the period, I was underweighted in these larger names relative
to the index. In retrospect, it was the superior performance of the
fund's mid-cap technology stocks that made the tech sector a positive
overall contributor.
Q. WHAT OTHER STOCKS OR GROUPS PERFORMED WELL FOR THE FUND?
A. In keeping with the information age theme, the fund's exposure to
wireless communications stocks helped significantly. Investments in
Nokia and Texas Instruments - the latter of which makes a digital chip
that goes into most cellular phones - performed well. Competitive
local exchange carriers such as McLeod, Metromedia Fiber and Nextlink
also fared nicely, as did cable TV-related position MediaOne which
announced that it was being acquired by AT&T during the period.
Q. WHICH STOCKS WOULD YOU CATEGORIZE AS DISAPPOINTMENTS?
A. Philip Morris continued to be a drag on performance, as the ongoing
tobacco litigation gradually took its toll. Other disappointments
included drug stock Lilly - which suffered due to slower Prozac sales
- - and Avon, which had difficulty executing its business plan at the
same time as its business weakened in Latin America. I sold off the
fund's stake in Avon prior to the end of the period.
Q. DID THE FUND HAVE ANY EXPOSURE TO THE REVITALIZED JAPANESE MARKET?
A. It did. The fund's positions in Japanese brokerage houses such as
Daiwa Securities, Nikko Securities and Nomura Securities panned out
well, as did its stake in Softbank, a dominant Internet venture
capital firm. The rebound in Japan has been driven by a modest
recovery in the economy combined with increased restructuring efforts
on the part of old-line Japanese companies. Companies are becoming
more shareholder-oriented, cutting back on non-profitable businesses
and working hard to become more efficient. It's a glacial effort, but
at least it's underway. Additionally, demographics in Japan are
positive as more people enter their prime savings years. This could be
a big plus for the stock market.
Q. WHAT'S YOUR OUTLOOK?
A. The big question is how long the technology bubble can last. The
tech stocks that performed best during the period were overpriced by
historical measures, and it's very difficult to determine how long
this will continue. Against this backdrop, my goal is to participate
in technology where I can find relatively underappreciated ideas and
emphasize relative values. One final note on Japan: It's important to
remember that the market was very strong during the period as the
economy showed signs of life. Going forward, I think we'll see
volatility in that market as the economy moves forward in fits and
starts.
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FUND FACTS
GOAL: to increase the value of the fund's shares over the long term by
investing in stocks with above-average growth potential
START DATE: October 9, 1986
SIZE: as of December 31, 1999, more than
$18.0 billion
MANAGER: Jennifer Uhrig, since 1997; joined Fidelity in 1987
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 98.6%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.5%
Boeing Co. 933,300 $ 38,790,281
United Technologies Corp. 822,200 53,443,000
92,233,281
BASIC INDUSTRIES - 2.1%
CHEMICALS & PLASTICS - 0.5%
Cytec Industries, Inc. (a) 1,091,000 25,229,375
Great Lakes Chemical Corp. 610,200 23,302,013
Monsanto Co. 200 7,125
NOVA Chemicals Corp. 1,958,500 37,770,201
Solutia, Inc. 970,300 14,979,006
101,287,720
IRON & STEEL - 0.1%
Nucor Corp. 304,700 16,701,369
METALS & MINING - 1.1%
Alcoa, Inc. 956,200 79,364,600
CommScope, Inc. (a) 1,266,100 51,039,656
Falconbridge Ltd. 578,200 10,311,440
Inco Ltd. 2,201,400 51,128,112
191,843,808
PACKAGING & CONTAINERS - 0.2%
Owens-Illinois, Inc. (a) 1,452,400 36,400,775
PAPER & FOREST PRODUCTS - 0.2%
Kimberly-Clark Corp. 525,300 34,275,825
TOTAL BASIC INDUSTRIES 380,509,497
CONSTRUCTION & REAL ESTATE -
0.1%
ENGINEERING - 0.1%
Stolt Comex Seaway SA (a) 974,000 10,774,875
Stolt Comex Seaway SA Class A 199,250 2,191,750
sponsored ADR (a)
12,966,625
DURABLES - 1.0%
CONSUMER ELECTRONICS - 1.0%
Sony Corp. 619,900 176,516,528
ENERGY - 3.1%
ENERGY SERVICES - 1.3%
Baker Hughes, Inc. 1,670,470 35,184,274
BJ Services Co. (a) 575,800 24,075,638
Coflexip SA sponsored ADR (c) 928,500 35,283,000
Halliburton Co. 1,504,900 60,572,225
Smith International, Inc. (a) 806,750 40,085,391
Weatherford International, 1,223,740 48,873,116
Inc. (a)
244,073,644
OIL & GAS - 1.8%
Apache Corp. 679,200 25,087,950
Exxon Mobil Corp. 1,790,000 144,206,875
Newfield Exploration Co. (a) 1,553,000 41,542,750
SHARES VALUE (NOTE 1)
Noble Affiliates, Inc. 1,463,800 $ 31,380,213
Sunoco, Inc. 1,147,500 26,966,250
Tosco Corp. 956,800 26,013,000
USX - Marathon Group 638,300 15,758,031
Vastar Resources, Inc. 268,900 15,865,100
326,820,169
TOTAL ENERGY 570,893,813
FINANCE - 8.6%
BANKS - 0.5%
Chase Manhattan Corp. 839,800 65,241,963
Mitsui Trust & Banking Co. 11,610,000 26,241,781
Ltd.
91,483,744
CREDIT & OTHER FINANCE - 1.9%
American Express Co. 1,169,300 194,396,125
Associates First Capital 1,482,600 40,678,838
Corp. Class A
Citigroup, Inc. 1,185,550 65,872,122
Household International, Inc. 1,243,638 46,325,516
347,272,601
FEDERAL SPONSORED CREDIT - 1.9%
Fannie Mae 3,980,100 248,507,494
Freddie Mac 1,969,500 92,689,594
341,197,088
INSURANCE - 2.6%
AFLAC, Inc. 709,700 33,488,969
Allmerica Financial Corp. 657,910 36,596,244
Ambac Financial Group, Inc. 577,500 30,138,281
American International Group, 2,055,831 222,286,727
Inc.
CIGNA Corp. 962,500 77,541,406
Xl Capital Ltd. 1,339,200 69,471,000
469,522,627
SECURITIES INDUSTRY - 1.7%
Charles Schwab Corp. 1,951,900 74,904,163
Daiwa Securities Co. Ltd. 5,334,000 83,454,659
Nikko Securities Co. Ltd. 5,626,000 71,178,260
Nomura Securities Co. Ltd. 4,423,000 79,847,702
309,384,784
TOTAL FINANCE 1,558,860,844
HEALTH - 12.6%
DRUGS & PHARMACEUTICALS - 11.6%
Abgenix, Inc. (a) 20,400 2,703,000
American Home Products Corp. 2,023,300 79,793,894
Amgen, Inc. (a) 2,113,600 126,948,100
Biogen, Inc. (a) 948,500 80,148,250
Bristol-Myers Squibb Co. 4,000,500 256,782,094
Chiron Corp. (a) 1,510,770 64,018,879
Elan Corp. PLC sponsored ADR 2,800,400 82,611,800
(a)
Eli Lilly & Co. 4,451,300 296,011,450
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS -
CONTINUED
Genentech, Inc. 803,200 $ 108,030,400
Genzyme Corp. - General 1,374,260 61,841,700
Division
Immunex Corp. (a) 39,300 4,303,350
Medimmune, Inc. (a) 322,900 53,561,038
Merck & Co., Inc. 3,936,900 264,018,356
Millennium Pharmaceuticals, 283,500 34,587,000
Inc. (a)
PE Corp. - Celera Genomics 205,200 30,574,800
Group (a)
Pfizer, Inc. 4,395,000 142,562,813
Quintiles Transnational Corp. 963,800 18,011,013
(a)
Schering-Plough Corp. 1,472,370 62,115,609
Takeda Chemical Industries 233,000 11,513,210
Ltd.
Warner-Lambert Co. 3,780,000 309,723,750
2,089,860,506
MEDICAL EQUIPMENT & SUPPLIES
- - 0.8%
Johnson & Johnson 1,141,500 106,302,188
McKesson HBOC, Inc. 1,391,090 31,386,468
137,688,656
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Columbia/HCA Healthcare Corp. 753,200 22,078,175
Health Management Associates, 804,150 10,755,506
Inc. Class A (a)
HEALTHSOUTH Corp. (a) 1,527,500 8,210,313
41,043,994
TOTAL HEALTH 2,268,593,156
INDUSTRIAL MACHINERY &
EQUIPMENT - 3.2%
ELECTRICAL EQUIPMENT - 2.8%
General Electric Co. 2,587,700 400,446,575
Mitsubishi Electric Corp. 10,104,000 65,250,882
Omnipoint Corp. (a) 434,000 52,351,250
518,048,707
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.4%
ASM Lithography Holding NV (a) 596,200 67,817,750
TOTAL INDUSTRIAL MACHINERY & 585,866,457
EQUIPMENT
MEDIA & LEISURE - 9.7%
BROADCASTING - 6.8%
AT&T Corp. - Liberty Media 1,192,840 67,693,670
Group Class A (a)
Cablevision Systems Corp. 910,800 68,765,400
Class A (a)
CBS Corp. (a) 2,401,827 153,566,814
Clear Channel Communications, 632,800 56,477,400
Inc. (a)
Comcast Corp. Class A 3,516,000 177,777,750
(special)
SHARES VALUE (NOTE 1)
Cox Communications, Inc. 2,289,600 $ 117,914,400
Class A (a)
MediaOne Group, Inc. (a) 2,421,600 186,009,150
NTL, Inc. (a) 550,875 68,721,656
Time Warner, Inc. 2,685,968 194,564,807
UnitedGlobalCom, Inc. (a) 1,298,300 91,692,438
USA Networks, Inc. (a) 703,400 38,862,850
1,222,046,335
ENTERTAINMENT - 0.3%
Royal Caribbean Cruises Ltd. 601,000 29,636,813
Walt Disney Co. 1,072,320 31,365,360
61,002,173
LEISURE DURABLES & TOYS - 0.3%
Harley-Davidson, Inc. 702,000 44,971,875
RESTAURANTS - 2.3%
Brinker International, Inc. 1,793,400 43,041,600
(a)
Darden Restaurants, Inc. 2,242,800 40,650,750
McDonald's Corp. 4,997,700 201,469,781
Outback Steakhouse, Inc. (a) 1,570,250 40,728,359
Tricon Global Restaurants, 1,755,760 67,816,230
Inc. (a)
Wendy's International, Inc. 1,154,000 23,801,250
417,507,970
TOTAL MEDIA & LEISURE 1,745,528,353
NONDURABLES - 3.9%
FOODS - 0.6%
American Italian Pasta Co. 642,000 19,741,500
Class A (a)
Bestfoods 878,100 46,155,131
Keebler Foods Co. (a) 768,000 21,600,000
Nabisco Holdings Corp. Class A 1,018,600 32,213,225
119,709,856
HOUSEHOLD PRODUCTS - 2.5%
Clorox Co. 1,911,600 96,296,850
Gillette Co. 2,291,200 94,368,800
Procter & Gamble Co. 2,329,100 255,182,019
445,847,669
TOBACCO - 0.8%
Philip Morris Companies, Inc. 6,184,500 143,403,094
TOTAL NONDURABLES 708,960,619
PRECIOUS METALS - 0.5%
Barrick Gold Corp. 1,434,000 25,523,951
Homestake Mining Co. 2,249,300 17,572,656
Newmont Mining Corp. 1,472,000 36,064,000
Placer Dome, Inc. 1,426,100 15,328,579
94,489,186
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - 6.3%
DRUG STORES - 0.4%
Walgreen Co. 2,329,560 $ 68,139,630
GENERAL MERCHANDISE STORES -
2.8%
Dayton Hudson Corp. 903,450 66,347,109
Nordstrom, Inc. 2,284,300 59,820,106
Wal-Mart Stores, Inc. 5,393,100 372,798,038
498,965,253
GROCERY STORES - 0.3%
Safeway, Inc. (a) 1,787,400 63,564,413
RETAIL & WHOLESALE,
MISCELLANEOUS - 2.8%
Best Buy Co., Inc. (a) 987,200 49,545,100
Home Depot, Inc. 5,376,750 368,643,422
Lowe's Companies, Inc. 324,400 19,382,900
Tiffany & Co., Inc. 716,000 63,903,000
501,474,422
TOTAL RETAIL & WHOLESALE 1,132,143,718
SERVICES - 0.4%
FreeMarkets, Inc. 175,600 59,934,475
GetThere.com, Inc. 295,500 11,893,875
Profit Recovery Group 157,600 4,186,250
International, Inc. (a)
76,014,600
TECHNOLOGY - 37.8%
COMMUNICATIONS EQUIPMENT - 7.6%
ADC Telecommunications, Inc. 1,057,700 76,749,356
(a)
Advanced Fibre 1,094,300 48,901,531
Communications, Inc. (a)
Aspect Communications Corp. 566,600 22,168,225
(a)
Cisco Systems, Inc. (a) 6,583,550 705,262,794
Ditech Communications Corp. 142,900 13,361,150
Lucent Technologies, Inc. 1,150,835 86,096,843
Nokia AB sponsored ADR 524,900 99,731,000
Nortel Networks Corp. 849,130 85,605,592
Telefonaktiebolaget LM 2,380,400 156,362,525
Ericsson sponsored ADR
Tellabs, Inc. (a) 1,047,000 67,204,313
1,361,443,329
COMPUTER SERVICES & SOFTWARE
- - 14.7%
Adobe Systems, Inc. 567,700 38,177,825
America Online, Inc. (a) 2,910,900 219,591,019
Aspect Development, Inc. (a) 183,800 12,590,300
Automatic Data Processing, 1,661,700 89,524,088
Inc.
BEA Systems, Inc. (a) 304,800 21,316,950
BMC Software, Inc. (a) 215,500 17,226,531
Citrix Systems, Inc. (a) 514,100 63,234,300
Compuware Corp. (a) 1,291,800 48,119,550
Concentric Network Corp. (a) 859,600 26,486,425
DST Systems, Inc. (a) 355,400 27,121,463
Electronic Arts, Inc. (a) 1,222,100 102,656,400
SHARES VALUE (NOTE 1)
Electronic Data Systems Corp. 1,491,700 $ 99,850,669
Electronics for Imaging, Inc. 1,067,100 62,025,188
(a)
Exodus Communications, Inc. 938,500 83,350,531
(a)
First Data Corp. 1,313,400 64,767,038
IMS Health, Inc. 604,400 16,432,125
Infonet Services Corp. Class B 1,388,100 36,437,625
Inktomi Corp. (a) 717,800 63,704,750
InsWeb Corp. 37,200 950,925
Intertrust Technologies Corp. 332,200 39,075,025
Intuit, Inc. (a) 1,396,900 83,726,694
Legato Systems, Inc. (a) 813,600 55,985,850
Microsoft Corp. (a) 7,193,523 839,843,798
New Era of Networks, Inc. (a) 397,000 18,907,125
Oracle Corp. (a) 1,533,450 171,842,241
Redback Networks, Inc. 112,860 20,032,650
Siebel Systems, Inc. (a) 230,400 19,353,600
Trans Cosmos, Inc. 177,200 75,596,088
Verio, Inc. (a) 1,484,100 68,546,869
VERITAS Software Corp. (a) 581,850 83,277,281
Yahoo!, Inc. (a) 207,300 89,696,119
2,659,447,042
COMPUTERS & OFFICE EQUIPMENT
- - 7.7%
Adaptec, Inc. (a) 936,800 46,722,900
CDW Computer Centers, Inc. (a) 1,198,600 94,239,925
Comverse Technology, Inc. (a) 473,100 68,481,225
Crossroads Systems, Inc. 208,800 17,643,600
Dell Computer Corp. (a) 2,490,400 127,010,400
EMC Corp. (a) 2,504,768 273,645,904
Gateway, Inc. (a) 1,129,700 81,409,006
Hewlett-Packard Co. 1,621,900 184,795,231
International Business 1,451,100 156,718,800
Machines Corp.
Network Appliance, Inc. (a) 775,600 64,423,275
Pitney Bowes, Inc. 946,300 45,718,119
Ricoh Co. Ltd. 762,000 14,360,196
SCI Systems, Inc. (a) 288,500 23,711,094
Softbank Corp. 108,900 104,211,548
Sun Microsystems, Inc. (a) 1,100,800 85,243,200
1,388,334,423
ELECTRONIC INSTRUMENTS - 0.6%
PE Corp. - Biosystems Group 820,800 98,752,500
Waters Corp. (a) 214,500 11,368,500
110,121,000
ELECTRONICS - 7.2%
C-Cube Microsystems, Inc. (a) 262,300 16,328,175
Celestica, Inc. (sub. vtg.) 1,970,200 110,038,128
(a)
Chartered Semiconduct 795,500 58,071,500
Manufacturing Ltd. ADR
Flextronics International 658,600 30,295,600
Ltd. (a)
Harmonic, Inc. (a) 275,800 26,183,763
Intel Corp. 3,674,100 302,424,356
Kyocera Corp. 412,700 107,011,255
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Linear Technology Corp. 695,200 $ 49,750,250
Motorola, Inc. 1,283,700 189,024,825
Sanmina Corp. (a) 633,000 63,220,875
Solectron Corp. (a) 488,400 46,459,050
Taiwan Semiconductor 1,086,608 48,897,360
Manufacturing Co. Ltd.
sponsored ADR (a)
Texas Instruments, Inc. 2,122,200 205,588,125
Vitesse Semiconductor Corp. 1,006,000 52,752,125
(a)
1,306,045,387
TOTAL TECHNOLOGY 6,825,391,181
TRANSPORTATION - 0.8%
AIR TRANSPORTATION - 0.1%
Preview Travel, Inc. (a) 417,100 21,741,338
RAILROADS - 0.7%
Burlington Northern Santa Fe 1,209,300 29,325,525
Corp.
Canadian National Railway Co. 1,630,880 43,063,258
Union Pacific Corp. 1,007,400 43,947,825
Wisconsin Central 947,000 12,725,313
Transportation Corp. (a)
129,061,921
TOTAL TRANSPORTATION 150,803,259
UTILITIES - 8.0%
CELLULAR - 2.5%
Aerial Communications, Inc. 306,600 18,664,275
(a)
China Telecom (Hong Kong) 481,000 61,838,563
Ltd. sponsored ADR (a)
Mannesmann AG (Reg.) 596,700 145,318,349
Nextel Communications, Inc. 588,500 60,689,063
Class A (a)
Sprint Corp. - PCS Group 718,890 73,686,225
Series 1 (a)
Vodafone AirTouch PLC 1,652,650 81,806,175
sponsored ADR
442,002,650
ELECTRIC UTILITY - 0.8%
AES Corp. (a) 949,800 70,997,550
Calpine Corp. (a) 538,700 34,476,800
Tokyo Electric Power Co. 1,615,400 43,309,159
148,783,509
TELEPHONE SERVICES - 4.7%
AT&T Corp. 3,075,150 156,063,863
DDI Corp. 5,570 76,301,371
iBasis, Inc. 416,900 11,985,875
MCI WorldCom, Inc. (a) 3,920,205 208,015,878
McLeodUSA, Inc. Class A (a) 1,640,800 96,602,100
Metromedia Fiber Network, 1,646,300 78,919,506
Inc. Class A (a)
SHARES VALUE (NOTE 1)
NEXTLINK Communications, Inc. 982,000 $ 81,567,375
Class A (a)
Sprint Corp. - FON Group 756,000 50,888,250
Time Warner Telecom, Inc. 519,400 25,937,538
WinStar Communications, Inc. 811,300 60,746,088
(a)
847,027,844
TOTAL UTILITIES 1,437,814,003
TOTAL COMMON STOCKS 17,817,585,120
(Cost $11,780,552,884)
CASH EQUIVALENTS - 2.0%
Central Cash Collateral Fund, 143,842,184 143,842,184
4.97% (b)
Taxable Central Cash Fund, 214,462,104 214,462,104
5.12% (b)
TOTAL CASH EQUIVALENTS 358,304,288
(Cost $358,304,288)
TOTAL INVESTMENT PORTFOLIO - 18,175,889,408
100.6%
(Cost $12,138,857,172)
NET OTHER ASSETS - (0.6%) (117,148,114)
NET ASSETS - 100% $ 18,058,741,294
</TABLE>
LEGEND
(a) Non-income producing
(b) The rate quoted is the annualized seven-day yield of the fund at
period end.
(c) Transactions during the period with companies which are or were
affiliates are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE
Coflexip SA sponsored ADR $ 4,002,766 $ - $ 691,321 $ 35,283,000
</TABLE>
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $14,106,368,134 and $11,450,619,296, 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 $1,094,413 for the
period.
The fund participated in the security lending program. At period end,
the value of securities loaned amounted to $141,285,898. The fund
received cash collateral of $143,842,184 which was invested in cash
equivalents.
Distribution of investments by country of issue, as a percentage of
net assets, is as follows:
United States of America 87.3%
Japan 5.1
Canada 2.1
Others (individually less 5.5
than 1%)
100.0%
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $12,189,282,652. Net unrealized appreciation
aggregated $5,986,606,756, of which $6,527,057,005 related to
appreciated investment securities and $540,450,249 related to
depreciated investment securities.
The fund hereby designates approximately $865,307,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 18,175,889,408
value (cost
$12,138,857,172) - See
accompanying schedule
Receivable for investments 78,976,807
sold
Receivable for fund shares 20,126,614
sold
Dividends receivable 9,356,259
Interest receivable 1,297,709
Other receivables 919,847
TOTAL ASSETS 18,286,566,644
LIABILITIES
Payable for investments $ 64,490,490
purchased
Payable for fund shares 10,224,589
redeemed
Accrued management fee 8,218,623
Distribution fees payable 68,362
Other payables and accrued 981,102
expenses
Collateral on securities 143,842,184
loaned, at value
TOTAL LIABILITIES 227,825,350
NET ASSETS $ 18,058,741,294
Net Assets consist of:
Paid in capital $ 10,043,852,946
Undistributed net investment 18,773,383
income
Accumulated undistributed 1,959,076,077
net realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 6,037,038,888
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 18,058,741,294
INITIAL CLASS: NET ASSET $54.93
VALUE, offering price and
redemption price per share
($17,142,410,791 (divided
by) 312,074,263 shares)
SERVICE CLASS: NET ASSET $54.80
VALUE, offering price and
redemption price per share
($916,330,503 (divided by)
16,719,947 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 89,360,587
Dividends (including $691,321
received from affiliated
issuers)
Interest 21,172,156
Security lending 405,124
TOTAL INCOME 110,937,867
EXPENSES
Management fee $ 81,026,539
Transfer agent fees 9,312,973
Distribution fees - Service 403,810
Class
Accounting and security 1,027,507
lending fees
Non-interested trustees' 54,092
compensation
Custodian fees and expenses 561,050
Registration fees 67,365
Audit 77,212
Legal 93,177
Miscellaneous 674,956
Total expenses before 93,298,681
reductions
Expense reductions (2,000,564) 91,298,117
NET INVESTMENT INCOME 19,639,750
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 2,028,189,080
Foreign currency transactions 733,132 2,028,922,212
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 2,640,512,870
Assets and liabilities in (25,287) 2,640,487,583
foreign currencies
NET GAIN (LOSS) 4,669,409,795
NET INCREASE (DECREASE) IN $ 4,689,049,545
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 1,991,065
Expense reductions Directed
brokerage arrangements
Custodian credits 9,499
$ 2,000,564
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 19,639,750 $ 18,972,063
income
Net realized gain (loss) 2,028,922,212 1,259,813,273
Change in net unrealized 2,640,487,583 1,830,051,769
appreciation (depreciation)
NET INCREASE (DECREASE) IN 4,689,049,545 3,108,837,105
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (20,716,861) (39,552,560)
From net investment income
From net realized gain (1,302,572,634) (1,034,611,705)
TOTAL DISTRIBUTIONS (1,323,289,495) (1,074,164,265)
Share transactions - net 3,313,015,561 1,616,145,892
increase (decrease)
TOTAL INCREASE (DECREASE) 6,678,775,611 3,650,818,732
IN NET ASSETS
NET ASSETS
Beginning of period 11,379,965,683 7,729,146,951
End of period (including $ 18,058,741,294 $ 11,379,965,683
undistributed net investment
income of $18,773,383 and
$18,972,632, respectively)
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 82,051,942 $ 3,738,420,624 59,666,196 $ 2,260,308,481
Class Sold
Reinvested 31,299,165 1,303,923,236 31,899,319 1,073,412,088
Redeemed (51,848,071) (2,361,030,389) (49,261,439) (1,831,294,638)
Net increase (decrease) 61,503,036 $ 2,681,313,471 42,304,076 $ 1,502,425,931
Service Class Sold 14,009,513 $ 648,480,975 3,032,492 $ 115,566,215
Reinvested 465,535 19,366,259 22,360 752,178
Redeemed (792,556) (36,145,144) (71,737) (2,598,432)
Net increase (decrease) 13,682,492 $ 631,702,090 2,983,115 $ 113,719,961
Distributions From net $ 20,413,671 $ 39,524,864
investment income Initial
Class
Service Class 303,190 27,696
Total $ 20,716,861 $ 39,552,560
From net realized gain $ 1,283,509,565 $ 1,033,887,224
Initial Class
Service Class 19,063,069 724,481
Total $ 1,302,572,634 $ 1,034,611,705
$ 1,323,289,495 $ 1,074,164,265
</TABLE>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 44.87 $ 37.10 $ 31.14 $ 29.20 $ 21.69
period
Income from Investment
Operations
Net investment income .07 C .08 C .20 C .22 .08
Net realized and unrealized 15.10 12.85 6.91 3.82 7.55
gain (loss)
Total from investment 15.17 12.93 7.11 4.04 7.63
operations
Less Distributions
From net investment income (.08) (.19) (.21) (.08) (.12)
From net realized gain (5.03) (4.97) (.94) (2.02) -
Total distributions (5.11) (5.16) (1.15) (2.10) (.12)
Net asset value, end of period $ 54.93 $ 44.87 $ 37.10 $ 31.14 $ 29.20
TOTAL RETURN B, F 37.44% 39.49% 23.48% 14.71% 35.36%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 17,142,411 $ 11,243,824 $ 7,727,132 $ 6,086,424 $ 4,162,702
(000 omitted)
Ratio of expenses to average .66% .68% .69% .69% .70%
net assets
Ratio of expenses to average .65% E .66% E .67% E .67% E .70%
net assets after expense
reductions
Ratio of net investment .14% .21% .58% .81% .37%
income to average net assets
Portfolio turnover 84% 123% 113% 81% 108%
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 44.82 $ 37.09 $ 36.92
period
Income from Investment
Operations
Net investment income C .02 .06 .03
Net realized and unrealized 15.07 12.83 .14
gain (loss)
Total from investment 15.09 12.89 .17
operations
Less Distributions
From net investment income (.08) (.19) -
From net realized gain (5.03) (4.97) -
Total distributions (5.11) (5.16) -
Net asset value, end of period $ 54.80 $ 44.82 $ 37.09
TOTAL RETURN B, F 37.29% 39.38% .46%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 916,330 $ 136,142 $ 2,015
(000 omitted)
Ratio of expenses to average .77% .80% .79% A
net assets
Ratio of expenses to average .75% E .75% E .77% A, E
net assets after expense
reductions
Ratio of net investment .04% .15% .70% A
income to average net assets
Portfolio turnover 84% 123% 113%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
D FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
E FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
F TOTAL RETURNS FOR PERIODS
LESS THAN ONE YEAR ARE NOT
ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
FIDELITY VARIABLE INSURANCE PRODUCTS: CONTRAFUND PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
Fidelity VIP: Contrafund - 24.25% 27.73%
"initial class"
S&P 500 (registered trademark) 21.04% 28.59%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's return to the performance of the Standard &
Poor's 500 Index - a market capitalization-weighted index of common
stocks. This benchmark reflects the reinvestment of dividends and
capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown. The life of the fund figures are from
commencement of operations, January 3, 1995.
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 RETURN WOULD BE 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 II Contrafund S&P 500
00158 SP001
1995/01/03 10000.00 10000.00
1995/01/31 9870.00 10261.28
1995/02/28 10370.00 10661.16
1995/03/31 10890.00 10975.77
1995/04/30 11480.00 11299.00
1995/05/31 11730.00 11750.63
1995/06/30 12490.00 12023.59
1995/07/31 13470.00 12422.30
1995/08/31 13640.00 12453.48
1995/09/30 13940.00 12979.01
1995/10/31 13650.00 12932.68
1995/11/30 13900.00 13500.42
1995/12/31 13971.98 13760.44
1996/01/31 14073.30 14228.85
1996/02/29 14124.25 14360.75
1996/03/31 14584.49 14499.04
1996/04/30 15065.18 14712.76
1996/05/31 15239.05 15092.20
1996/06/30 15116.32 15149.70
1996/07/31 14410.62 14480.39
1996/08/31 14962.90 14785.78
1996/09/30 15597.01 15617.92
1996/10/31 16077.71 16048.66
1996/11/30 17039.10 17261.78
1996/12/31 16936.82 16919.83
1997/01/31 17591.38 17976.98
1997/02/28 17103.08 18117.92
1997/03/31 16660.22 17373.45
1997/04/30 17060.91 18410.65
1997/05/31 18115.35 19531.49
1997/06/30 18906.18 20406.50
1997/07/31 20530.03 22030.24
1997/08/31 19950.08 20796.11
1997/09/30 21299.77 21935.11
1997/10/31 20656.56 21202.48
1997/11/30 20646.02 22183.94
1997/12/31 21025.62 22564.84
1998/01/31 21004.53 22814.41
1998/02/28 22531.76 24459.78
1998/03/31 23627.59 25712.37
1998/04/30 23851.23 25971.03
1998/05/31 23292.13 25524.59
1998/06/30 24544.52 26561.40
1998/07/31 24578.06 26278.52
1998/08/31 20899.18 22479.17
1998/09/30 22118.02 23919.19
1998/10/31 22844.85 25864.77
1998/11/30 24365.61 27432.44
1998/12/31 27328.84 29013.09
1999/01/31 28894.32 30226.42
1999/02/28 27829.69 29286.98
1999/03/31 28819.87 30458.76
1999/04/30 29437.27 31638.42
1999/05/31 28843.17 30891.44
1999/06/30 30404.14 32605.92
1999/07/31 29903.23 31587.96
1999/08/31 29029.55 31431.60
1999/09/30 28936.36 30570.06
1999/10/31 29996.43 32504.53
1999/11/30 31184.63 33165.35
1999/12/31 33957.12 35118.79
IMATRL PRASUN SHR__CHT 19991231 20000114 110425 R00000000000063
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Contrafund Portfolio
on January 3, 1995, when the fund started. As the chart shows, by
December 31, 1999, the value of the investment would have grown to
$33,957 - a 239.57% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $35,119 - a 251.19%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
McDonald's Corp. 3.6
Time Warner, Inc. 2.9
Microsoft Corp. 2.5
Cisco Systems, Inc. 2.5
Vodafone AirTouch PLC 2.0
sponsored ADR
13.5
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 24.5
MEDIA & LEISURE 15.5
UTILITIES 13.9
FINANCE 9.6
HEALTH 5.7
ASSET ALLOCATION AS OF
DECEMBER 31, 1999*
% OF FUND'S NET ASSETS
Stocks and equity futures
94.9%
Bonds 2.3%
Short-Term Investments and
Net Other Assets 2.8%
Row: 1, Col: 1, Value: 94.90000000000001
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 2.3
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.8
* FOREIGN INVESTMENTS 16.7%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: CONTRAFUND PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). The initial offering of Service Class shares
took place on November 3, 1997. Performance for Service Class shares
reflects an asset based distribution fee (12b-1 fee), and returns
prior to November 3, 1997 are those of Initial Class and do not
include the effects of Service Class' 12b-1 fee. Had Service Class
shares' 12b-1 fee been reflected, returns prior to November 3, 1997
would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
FIDELITY VIP: CONTRAFUND - 24.15% 27.69%
SERVICE CLASS
S&P 500 21.04% 28.59%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's return to the performance of the Standard &
Poor's 500 Index - a market capitalization-weighted index of common
stocks. This benchmark reflects the reinvestment of dividends and
capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown. The life of the fund figures are from
commencement of operations, January 3, 1995.
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 RETURN WOULD BE 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 II Contrafund - SC S&P 500
00470 SP001
1995/01/03 10000.00 10000.00
1995/01/31 9870.00 10261.28
1995/02/28 10370.00 10661.16
1995/03/31 10890.00 10975.77
1995/04/30 11480.00 11299.00
1995/05/31 11730.00 11750.63
1995/06/30 12490.00 12023.59
1995/07/31 13470.00 12422.30
1995/08/31 13640.00 12453.48
1995/09/30 13940.00 12979.01
1995/10/31 13650.00 12932.68
1995/11/30 13900.00 13500.42
1995/12/31 13971.98 13760.44
1996/01/31 14073.30 14228.85
1996/02/29 14124.25 14360.75
1996/03/31 14584.49 14499.04
1996/04/30 15065.18 14712.76
1996/05/31 15239.05 15092.20
1996/06/30 15116.32 15149.70
1996/07/31 14410.62 14480.39
1996/08/31 14962.90 14785.78
1996/09/30 15597.01 15617.92
1996/10/31 16077.71 16048.66
1996/11/30 17039.10 17261.78
1996/12/31 16936.82 16919.83
1997/01/31 17591.38 17976.98
1997/02/28 17103.08 18117.92
1997/03/31 16660.22 17373.45
1997/04/30 17060.91 18410.65
1997/05/31 18115.35 19531.49
1997/06/30 18906.18 20406.50
1997/07/31 20530.03 22030.24
1997/08/31 19950.08 20796.11
1997/09/30 21299.77 21935.11
1997/10/31 20656.56 21202.48
1997/11/30 20646.02 22183.94
1997/12/31 21015.07 22564.84
1998/01/31 21004.53 22814.41
1998/02/28 22531.76 24459.78
1998/03/31 23627.59 25712.37
1998/04/30 23851.23 25971.03
1998/05/31 23292.13 25524.59
1998/06/30 24544.52 26561.40
1998/07/31 24566.88 26278.52
1998/08/31 20899.18 22479.17
1998/09/30 22106.84 23919.19
1998/10/31 22833.67 25864.77
1998/11/30 24354.42 27432.44
1998/12/31 27306.48 29013.09
1999/01/31 28871.96 30226.42
1999/02/28 27807.33 29286.98
1999/03/31 28797.53 30458.76
1999/04/30 29403.31 31638.42
1999/05/31 28809.18 30891.44
1999/06/30 30370.22 32605.92
1999/07/31 29857.64 31587.96
1999/08/31 28995.58 31431.60
1999/09/30 28890.73 30570.06
1999/10/31 29950.83 32504.53
1999/11/30 31127.43 33165.35
1999/12/31 33900.01 35118.79
IMATRL PRASUN SHR__CHT 19991231 20000114 110513 R00000000000063
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Contrafund Portfolio
- - Service Class on January 3, 1995, when the fund started. As the
chart shows, by December 31, 1999, the value of the investment would
have grown to $33,900 - a 239.00% increase on the initial investment.
For comparison, look at how the Standard & Poor's 500 Index did over
the same period. With dividends and capital gains, if any, reinvested,
the same $10,000 investment would have grown to $35,119 - a 251.19%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
McDonald's Corp. 3.6
Time Warner, Inc. 2.9
Microsoft Corp. 2.5
Cisco Systems, Inc. 2.5
Vodafone AirTouch PLC 2.0
sponsored ADR
13.5
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 24.5
MEDIA & LEISURE 15.5
UTILITIES 13.9
FINANCE 9.6
HEALTH 5.7
ASSET ALLOCATION AS OF
DECEMBER 31, 1999*
% OF FUND'S NET ASSETS
Stocks and equity futures
94.9%
Bonds 2.3%
Short-Term Investments and
Net Other Assets 2.8%
Row: 1, Col: 1, Value: 94.90000000000001
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 2.3
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.8
* FOREIGN INVESTMENTS 16.7%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: CONTRAFUND PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(Photograph of Will Danoff)
An interview with
Will Danoff,
Portfolio Manager
of Contrafund Portfolio
Q. HOW DID THE FUND PERFORM, WILL?
A. The fund performed well for the 12 months that ended December 31,
1999, posting a higher return than the Standard & Poor's 500 Index,
which returned 21.04%.
Q. WHAT FACTORS HELPED THE FUND BEAT ITS BENCHMARK?
A. The fund was able to participate in the technology rally during
1999, and also received strong returns from its holdings in the media
and leisure and the telecommunications groups. A de-emphasis on health
and finance stocks also helped performance, as those groups endured a
very challenging year.
Q. WHAT WAS YOUR STRATEGY WITHIN THE TECHNOLOGY SECTOR DURING THE
PERIOD?
A. The sector exploded during the second half of the year, as global
Internet traffic and wireless phone usage surged, and the global
economy strengthened. Technology earnings growth accelerated to 28% in
1999, up from less than 10% in 1998 and 1997, and vastly better than
the rest of the market's 7% growth rate. I chose to emphasize global
networking and software leaders such as Cisco Systems and Microsoft,
both of which were very profitable and continued to grow by more than
30% annually. Both companies were top-5 positions at the end of the
period and helped performance significantly in 1999.
Q. HOW ABOUT MEDIA AND LEISURE AND TELECOMMUNICATIONS STOCKS?
A. The immense popularity of the Internet filtered into these sectors
as well. As the Web grows and enables faster and more convenient
distribution of content, traditional media companies should become
more valuable. As such, the fund held considerable stakes in leading
media companies such as Time Warner, CBS and Viacom, and each
performed well. The telecommunications group, meanwhile, benefited
from the continued growth in wireless usage, as well as from the huge
increase in data traffic - primarily Internet-related - throughout the
global telephony network. Worldwide wireless subscribers grew 50% in
1999, and are expected to sustain that growth rate going forward. Data
traffic accounts for more than 50% of global traffic already, and is
doubling every year. The fund benefited from its investments in Nokia,
Motorola and Ericsson, the leading cell phone and wireless
infrastructure manufacturers in the world.
Q. DID YOU FOLLOW ANY "OUT OF FAVOR" THEMES DURING THE PERIOD?
A. I increased the fund's Japanese holdings. Entering 1999, Japan had
endured a very challenging economic environment. The Nikkei 225 Index
peaked at 38,900 in December 1989, and was below 15,000 at the
beginning of the period as an ongoing recession crushed corporate
profits throughout the 1990s. But by last summer, Japanese companies
were trading at half the cash-flow valuations of their U.S.
counterparts, Japan's central bank had shifted toward easier monetary
policies and Japanese firms were cutting costs aggressively and taking
other shareholder-friendly actions. As a result, earnings rebounded
throughout 1999 and share prices followed. The fund's positions in
Japanese brokers and selected technology companies performed well as a
result.
Q. WHERE DID THE FUND'S DISAPPOINTMENTS LIE?
A. The global economy, and particularly the U.S. economy, were much
stronger than expected in 1999. I had anticipated faster economic
growth, and should have positioned the fund more aggressively with a
higher weighting in technology and even lower weightings in defensive
areas such as drug, grocery-store and financial stocks. The fund's
positions in such steady "defensive" growers as CVS, Safeway and
Associates First Capital detracted from performance as the market paid
virtually any price in 1999 for accelerating earnings growth, and
discarded these steady growers regardless of their low share prices.
Q. WHAT'S YOUR OUTLOOK?
A. I'm concerned about the recent interest-rate tightenings by the
U.S. Federal Reserve. With unemployment levels at 30-year lows, the
risk of accelerating wage inflation is rising. Higher interest rates
should slow the economy and could squeeze corporate profit growth,
particularly in the second half of 2000. I expect earnings growth to
slow in 2000, and am worried that profits could disappoint even with
those expectations. Thus, the fund is positioned more cautiously on
economically sensitive sectors than it was a year ago. The fund
remains underweighted in technology relative to the S&P 500, and I
believe I will find better buying opportunities in the future.
FUND FACTS
GOAL: to increase the value of the fund's shares
over the long term by investing in companies
whose value is not fully recognized by the public
START DATE: January 3, 1995
SIZE: as of December 31, 1999, more than
$9.7 billion
MANAGER: Will Danoff, since inception;
joined Fidelity in 1986
(checkmark)
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FIDELITY VARIABLE INSURANCE PRODUCTS: CONTRAFUND PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 94.7%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.6%
Alliant Techsystems, Inc. (a) 83,100 $ 5,178,169
Boeing Co. 660,330 27,444,966
Bombardier, Inc. Class B 366,900 7,519,586
United Technologies Corp. 241,001 15,665,065
55,807,786
BASIC INDUSTRIES - 2.6%
CHEMICALS & PLASTICS - 0.7%
Aventis SA (Germany) 260,982 15,230,449
Avery Dennison Corp. 122,600 8,934,475
Geon Co. 232,700 7,562,750
H. B. Fuller Co. 86,463 4,836,524
Spartech Corp. 115,600 3,728,100
Union Carbide Corp. 187,200 12,495,600
Valspar Corp. 281,800 11,800,375
64,588,273
IRON & STEEL - 0.0%
Cordant Technologies, Inc. 53,800 1,775,400
METALS & MINING - 0.8%
Alcoa, Inc. 390,600 32,419,800
Inco Ltd. 85,400 1,983,438
Inco Ltd. Class VBN Shares 45,500 404,144
Rio Tinto PLC (Reg.) 1,049,608 25,365,535
The Broken Hill Proprietary 1,664,538 21,873,123
Co. Ltd.
82,046,040
PACKAGING & CONTAINERS - 0.2%
Corning, Inc. 115,100 14,840,706
PAPER & FOREST PRODUCTS - 0.9%
Bowater, Inc. 186,300 10,118,419
Champion International Corp. 523,200 32,405,700
Georgia-Pacific Corp. 187,200 9,500,400
Kimberly-Clark Corp. 101,300 6,609,825
Temple-Inland, Inc. 35,000 2,307,813
Weyerhaeuser Co. 365,000 26,211,563
Willamette Industries, Inc. 12,200 566,538
87,720,258
TOTAL BASIC INDUSTRIES 250,970,677
CONSTRUCTION & REAL ESTATE -
0.5%
BUILDING MATERIALS - 0.2%
Fortune Brands, Inc. 417,100 13,790,369
Masco Corp. 170,900 4,336,588
18,126,957
CONSTRUCTION - 0.1%
Ashtead Group PLC 24,700 67,078
Jacobs Engineering Group, 214,030 6,955,975
Inc. (a)
7,023,053
ENGINEERING - 0.1%
PerkinElmer, Inc. 315,200 13,139,900
SHARES VALUE (NOTE 1)
REAL ESTATE - 0.0%
ResortQuest International, 192,100 $ 804,419
Inc. (a)
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
Equity Office Properties Trust 373,500 9,197,438
Equity Residential Properties 35,400 1,511,138
Trust (SBI)
Glenborough Realty Trust, 213,600 2,856,900
Inc.
13,565,476
TOTAL CONSTRUCTION & REAL 52,659,805
ESTATE
DURABLES - 3.1%
AUTOS, TIRES, & ACCESSORIES -
1.6%
Danaher Corp. 734,022 35,416,562
Gentex Corp. (a) 176,600 4,900,650
Midas, Inc. 333,300 7,290,938
PACCAR, Inc. 39,900 1,768,069
SPX Corp. (a) 1,051,341 84,961,495
Toyota Motor Corp. 184,000 8,911,938
TRW, Inc. 289,900 15,056,681
158,306,333
CONSUMER DURABLES - 0.1%
Blyth Industries, Inc. (a) 69,000 1,694,813
Boyds Collection, Ltd. 451,600 3,132,975
Minnesota Mining & 25,100 2,456,663
Manufacturing Co.
7,284,451
CONSUMER ELECTRONICS - 0.8%
Harman International 256,200 14,379,225
Industries, Inc.
Matsushita Electric 99,000 2,762,100
Industrial Co. Ltd.
Sony Corp. 221,700 63,129,076
80,270,401
HOME FURNISHINGS - 0.2%
Linens'n Things, Inc. (a) 582,100 17,244,713
Restoration Hardware, Inc. (a) 102,200 696,238
The Bombay Company, Inc. (a) 602,500 2,711,250
20,652,201
TEXTILES & APPAREL - 0.4%
Delta Woodside Industries 88,700 166,313
Jones Apparel Group, Inc. (a) 375,126 10,175,293
Pacific Sunwear of 214,900 6,849,938
California, Inc. (a)
Quiksilver, Inc. (a) 187,100 2,900,050
Tommy Hilfiger (a) 725,000 16,901,563
Warnaco Group, Inc. Class A 355,300 4,374,631
41,367,788
TOTAL DURABLES 307,881,174
ENERGY - 5.0%
ENERGY SERVICES - 0.2%
BJ Services Co. (a) 42,200 1,764,488
ENSCO International, Inc. 14,600 333,975
Global Marine, Inc. (a) 196,900 3,273,463
Halliburton Co. 12,800 515,200
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
ENERGY SERVICES - CONTINUED
Hanover Compressor Co. (a) 53,500 $ 2,019,625
Schlumberger Ltd. 64,000 3,600,000
Smith International, Inc. (a) 7,900 392,531
Tidewater, Inc. 30,700 1,105,200
Transocean Sedco Forex, Inc. 12,390 417,388
13,421,870
OIL & GAS - 4.8%
Amerada Hess Corp. 141,200 8,013,100
Anadarko Petroleum Corp. 135,300 4,617,113
Atlantic Richfield Co. 252,600 21,849,900
BP Amoco PLC sponsored ADR 2,593,932 153,852,592
Canadian Natural Resources 69,170 1,685,382
Ltd. (a)
Exxon Mobil Corp. 2,244,571 180,828,251
Rio Alto Exploration Ltd. (a) 113,900 1,606,110
Royal Dutch Petroleum Co. (NY 840,700 50,809,806
Registry Gilder 1.25)
Suncor Energy, Inc. 162,200 6,771,881
Total Fina SA sponsored ADR 437,223 30,277,693
Vastar Resources, Inc. 181,200 10,690,800
471,002,628
TOTAL ENERGY 484,424,498
FINANCE - 9.6%
BANKS - 2.2%
Bank of New York Co., Inc. 1,345,000 53,800,000
Chase Manhattan Corp. 411,300 31,952,869
Fifth Third Bancorp 50,200 3,683,425
First Security Corp. 63,600 1,623,788
FleetBoston Financial Corp. 262,228 9,128,812
HSBC Holdings PLC (United K 1,576,509 22,504,673
(Reg.)
Lloyds TSB Group PLC 963,600 12,064,072
M&T Bank Corp. 7,690 3,185,583
Marshall & Ilsley Corp. 94,200 5,916,938
Mellon Financial Corp. 319,900 10,896,594
Northern Trust Corp. 147,700 7,828,100
Toronto Dominion Bank 350,500 9,388,177
Wells Fargo & Co. 1,083,900 43,830,206
Zions Bancorp 64,800 3,835,350
219,638,587
CREDIT & OTHER FINANCE - 2.6%
American Express Co. 487,500 81,046,875
Associates First Capital 3,566,304 97,850,466
Corp. Class A
Citigroup, Inc. 1,262,100 70,125,431
Household International, Inc. 283,500 10,560,375
259,583,147
FEDERAL SPONSORED CREDIT - 1.2%
Fannie Mae 1,379,900 86,157,506
SHARES VALUE (NOTE 1)
Freddie Mac 396,200 $ 18,646,163
SLM Holding Corp. 210,700 8,902,075
113,705,744
INSURANCE - 1.9%
AFLAC, Inc. 309,600 14,609,250
Allstate Corp. 185,200 4,444,800
Ambac Financial Group, Inc. 55,500 2,896,406
American General Corp. 220,100 16,700,088
American International Group, 732,056 79,153,555
Inc.
Berkshire Hathaway, Inc. 584 32,762,400
Class A (a)
Canada Life Financial Corp. 169,200 2,613,963
(a)
CIGNA Corp. 43,900 3,536,694
Marsh & McLennan Companies, 138,400 13,243,150
Inc.
Mutual Risk Management Ltd. 462,000 7,767,375
RenaissanceRe Holdings Ltd. 112,000 4,578,000
Zenith National Insurance 127,700 2,633,813
Corp.
184,939,494
SAVINGS & LOANS - 0.4%
Golden West Financial Corp. 1,049,100 35,144,850
SECURITIES INDUSTRY - 1.3%
Daiwa Securities Co. Ltd. 4,107,000 64,257,271
Nikko Securities Co. Ltd. 2,916,000 36,892,251
Nomura Securities Co. Ltd. 1,268,000 22,890,998
124,040,520
TOTAL FINANCE 937,052,342
HEALTH - 5.7%
DRUGS & PHARMACEUTICALS - 4.5%
Allergan, Inc. 923,100 45,924,225
Amgen, Inc. (a) 611,400 36,722,213
AstraZeneca Group PLC 85,300 3,561,274
(United Kingdom)
Biogen, Inc. (a) 268,500 22,688,250
Biovail Corp. International 23,700 2,211,585
(a)
Bristol-Myers Squibb Co. 393,500 25,257,781
Cephalon, Inc. (a) 49,200 1,700,475
Chiron Corp. (a) 16,900 716,138
Eli Lilly & Co. 480,900 31,979,850
Genentech, Inc. 286,460 38,528,870
Human Genome Sciences, Inc. 36,600 5,586,075
(a)
IDEC Pharmaceuticals Corp. (a) 92,300 9,068,475
Immunex Corp. (a) 838,790 91,847,505
Jones Pharma, Inc. 19,300 838,344
Medimmune, Inc. (a) 169,680 28,145,670
Merck & Co., Inc. 309,300 20,742,431
Pfizer, Inc. 74,500 2,416,594
QLT PhotoTherapeutics, Inc. 142,800 8,390,129
(a)
Schering-Plough Corp. 612,100 25,822,969
Warner-Lambert Co. 497,545 40,767,593
442,916,446
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - 0.9%
Baxter International, Inc. 52,900 $ 3,322,781
Becton, Dickinson & Co. 251,200 6,719,600
Biomet, Inc. 166,900 6,676,000
Boston Scientific Corp. (a) 26,600 581,875
C. R. Bard, Inc. 161,700 8,570,100
Cardinal Health, Inc. 64,455 3,085,783
Guidant Corp. 235,900 11,087,300
Haemonetics Corp. (a) 47,500 1,131,094
Medtronic, Inc. 335,800 12,235,713
Patterson Dental Co. (a) 255,400 10,886,425
Perrigo Co. (a) 249,100 1,992,800
Smith & Nephew PLC 1,482,522 4,984,713
Stryker Corp. 89,900 6,259,288
Sybron International, Inc. (a) 256,100 6,322,469
Varian Medical Systems, Inc. 254,600 7,590,263
91,446,204
MEDICAL FACILITIES MANAGEMENT
- - 0.3%
Columbia/HCA Healthcare Corp. 573,600 16,813,650
Health Management Associates, 187,900 2,513,163
Inc. Class A (a)
United HealthCare Corp. 98,000 5,206,250
24,533,063
TOTAL HEALTH 558,895,713
HOLDING COMPANIES - 0.0%
PartnerRe Ltd. 42,600 1,381,838
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.8%
ELECTRICAL EQUIPMENT - 1.5%
Adtran, Inc. (a) 114,700 5,899,881
Allen Telecom, Inc. (a) 519,500 6,006,719
Anixter International, Inc. 159,100 3,281,438
(a)
C&D Technologies, Inc. 3,900 165,750
Cymer, Inc. (a) 17,100 786,600
General Instrument Corp. (a) 154,400 13,124,000
Hutchison Whampoa Ltd. 1,615,000 23,493,177
L-3 Communications Holdings, 77,800 3,238,425
Inc. (a)
Loral Space & Communications 1,207,833 29,365,440
Ltd. (a)
Mitsubishi Electric Corp. 335,000 2,163,405
Rayovac Corp. (a) 555,250 10,480,344
Roper Industries, Inc. 176,000 6,655,000
Siemens AG 339,800 43,428,632
148,088,811
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
Exide Corp. 100 831
ITT Industries, Inc. 314,000 10,499,375
Kennametal, Inc. 36,100 1,213,863
Mettler-Toledo International, 164,000 6,262,750
Inc. (a)
MSC Industrial Direct, Inc. 228,000 3,021,000
(a)
SHARES VALUE (NOTE 1)
Sandvik AB Series B 156,900 $ 5,037,127
Terex Corp. (a) 127,400 3,535,350
29,570,296
TOTAL INDUSTRIAL MACHINERY & 177,659,107
EQUIPMENT
MEDIA & LEISURE - 15.5%
BROADCASTING - 8.4%
American Tower Corp. Class A 1,436,950 43,916,784
(a)
Asia Satellite 300 10,500
Telecommunications Holdings
Ltd. sponsored ADR
AT&T Corp.:
( Liberty Media Group Class A 1,089,908 61,852,279
(a))
( Liberty Media Group Class B 1,700 116,875
(a))
Capital Radio PLC 213,884 5,186,152
CBS Corp. (a) 2,612,412 167,031,092
Charter Communications, Inc. 355,000 7,765,625
Citadel Communications Corp. 100,500 6,519,938
(a)
Comcast Corp.:
Class A 48,500 2,321,938
Class A (special) 1,432,700 72,440,894
Cox Communications, Inc. 408,800 21,053,200
Class A (a)
EchoStar Communications Corp. 57,100 5,567,250
Class A (a)
Entercom Communications Corp. 28,600 1,887,600
Grupo Televisa SA de CV 35,300 2,409,225
sponsored ADR (a)
Infinity Broadcasting Corp. 2,192,160 79,328,790
Class A
NTL, Inc. (a) 44,000 5,489,000
Primacom AG 54,476 3,508,603
SBS Broadcasting SA (a) 247,000 12,025,813
TCI Satellite Entertainment, 34,400 550,400
Inc. Class A (a)
Television Francaise 1 SA 16,105 8,427,779
Time Warner, Inc. 3,885,303 281,441,636
TV Azteca SA de CV sponsored 43,100 387,900
ADR
United Pan-Europe 221,800 28,347,471
Communications NV
UnitedGlobalCom, Inc. (a) 35,400 2,500,125
Univision Communications, 10,500 1,072,969
Inc. Class A (a)
821,159,838
ENTERTAINMENT - 2.2%
Park Place Entertainment 246,800 3,085,000
Corp.
Premier Parks, Inc. (a) 1,029,300 29,721,038
SFX Entertainment, Inc. Class 56,800 2,055,450
A (a)
Viacom, Inc.:
Class A (a) 671,400 40,577,738
Class B (non-vtg.) (a) 2,268,900 137,126,644
212,565,870
LEISURE DURABLES & TOYS - 0.2%
Callaway Golf Co. 200,600 3,548,113
Harley-Davidson, Inc. 321,700 20,608,906
24,157,019
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 0.0%
Dover Downs Entertainment, 133,200 $ 2,497,500
Inc.
PUBLISHING - 0.6%
Harte Hanks Communications, 411,600 8,952,300
Inc.
McGraw-Hill Companies, Inc. 89,200 5,496,950
Meredith Corp. 50,600 2,109,388
Reader's Digest Association, 820,940 24,012,495
Inc. Class A (non-vtg.)
Scholastic Corp. (a) 72,700 4,521,031
The New York Times Co. Class A 31,500 1,547,438
Tribune Co. 302,243 16,642,255
63,281,857
RESTAURANTS - 4.1%
Brinker International, Inc. 313,500 7,524,000
(a)
CEC Entertainment, Inc. (a) 232,400 6,594,350
McDonald's Corp. 8,849,500 356,745,433
Outback Steakhouse, Inc. (a) 254,550 6,602,391
Papa John's International, 189,600 4,941,450
Inc. (a)
Pizzaexpress PLC 316,100 3,742,897
PJ America, Inc. (a)(c) 581,700 9,016,350
Ryan's Family Steak Houses, 188,500 1,602,250
Inc. (a)
396,769,121
TOTAL MEDIA & LEISURE 1,520,431,205
NONDURABLES - 2.0%
BEVERAGES - 0.1%
Allied Domecq PLC 1,190,876 5,890,656
FOODS - 1.2%
American Italian Pasta Co. 31,500 968,625
Class A (a)
Ben & Jerry's Homemade, Inc. 239,400 5,955,075
Class A (a)
Booker PLC 1,866,889 3,530,856
Earthgrains Co. 742,600 11,974,425
General Mills, Inc. 294,800 10,539,100
H. J. Heinz Co. 7,500 298,594
Keebler Foods Co. (a) 768,900 21,625,313
Kellogg Co. 334,900 10,319,106
Quaker Oats Co. 494,300 32,438,438
Sysco Corp. 382,500 15,132,656
112,782,188
HOUSEHOLD PRODUCTS - 0.7%
Avon Products, Inc. 563,200 18,585,600
Colgate-Palmolive Co. 603,000 39,195,000
Dial Corp. 382,700 9,304,394
SHARES VALUE (NOTE 1)
Playtex Products, Inc. (a) 323,000 $ 4,966,125
Yankee Candle Co., Inc. 84,800 1,383,300
73,434,419
TOTAL NONDURABLES 192,107,263
PRECIOUS METALS - 0.8%
Anglogold Ltd. 36,400 1,874,622
Barrick Gold Corp. 1,874,260 33,360,196
Franco Nevada Mining Corp. 921,964 14,115,921
Ltd.
Newmont Mining Corp. 25,900 634,550
Placer Dome, Inc. 1,490,045 16,015,898
Stillwater Mining Co. (a) 348,900 11,121,188
77,122,375
RETAIL & WHOLESALE - 5.4%
APPAREL STORES - 0.6%
Abercrombie & Fitch Co. Class 12,500 333,594
A (a)
AnnTaylor Stores Corp. (a) 73,200 2,520,825
Charlotte Russe Holding, Inc. 6,800 142,800
Charming Shoppes, Inc. (a) 1,479,600 9,802,350
Claire's Stores, Inc. 356,500 7,976,688
Gap, Inc. 132,287 6,085,202
Talbots, Inc. 158,800 7,086,450
The Limited, Inc. 164,500 7,124,906
TJX Companies, Inc. 763,900 15,612,206
Urban Outfitters, Inc. (a) 48,200 1,403,825
58,088,846
DRUG STORES - 1.5%
CVS Corp. 3,663,002 146,291,142
Walgreen Co. 195,200 5,709,600
152,000,742
GENERAL MERCHANDISE STORES -
0.5%
99 Cents Only Stores (a) 23,100 883,575
Costco Wholesale Corp. (a) 313,800 28,634,250
Dollar Tree Stores, Inc. (a) 42,800 2,073,125
Hot Topic, Inc. (a) 46,000 1,069,500
Ito-Yokado Co. Ltd. 128,000 13,902,153
Tuesday Morning Corp. (a) 188,600 3,477,313
Wal-Mart Stores, Inc. 5,900 407,838
50,447,754
GROCERY STORES - 0.5%
Fleming Companies, Inc. 477,959 4,899,080
Loblaw Companies Ltd. 61,900 1,501,825
Safeway, Inc. (a) 786,450 27,968,128
U.S. Foodservice (a) 788,600 13,209,050
47,578,083
RETAIL & WHOLESALE,
MISCELLANEOUS - 2.3%
Bed Bath & Beyond, Inc. (a) 814,700 28,310,825
Best Buy Co., Inc. (a) 17,200 863,225
Boots Co. PLC 344,155 3,349,086
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE,
MISCELLANEOUS - CONTINUED
Circuit City Stores, Inc. - 155,000 $ 6,984,688
Circuit City Group
Good Guys, Inc. (a) 266,700 2,483,644
Guitar Center, Inc. (a) 147,400 1,483,213
Home Depot, Inc. 2,185,990 149,876,939
Intimate Brands, Inc. Class A 3,600 155,250
Office Depot, Inc. (a) 1,437,000 15,717,188
Staples, Inc. (a) 220,550 4,576,413
Sunglass Hut International, 802,800 9,031,500
Inc. (a)
222,831,971
TOTAL RETAIL & WHOLESALE 530,947,396
SERVICES - 2.8%
ADVERTISING - 1.9%
DoubleClick, Inc. (a) 99,400 25,154,413
Interpublic Group of 947,700 54,670,444
Companies, Inc.
Lamar Advertising Co. Class A 465,800 28,210,013
(a)
Omnicom Group, Inc. 5,100 510,000
TMP Worldwide, Inc. (a) 107,000 15,194,000
WPP Group PLC 815,840 12,937,481
Young & Rubicam, Inc. 670,400 47,430,800
184,107,151
LEASING & RENTAL - 0.0%
Blockbuster, Inc. Class A 251,900 3,369,163
PRINTING - 0.0%
Reynolds & Reynolds Co. Class 92,600 2,083,500
A
SERVICES - 0.9%
ACNielsen Corp. (a) 375,400 9,244,225
Carlisle Holdings Ltd. (a) 205,500 2,466,000
Catalina Marketing Corp. (a) 75,900 8,785,425
Cendant Corp. (a) 119,500 3,174,219
CheckFree Holdings Corp. (a) 49,000 5,120,500
Convergys Corp. (a) 8,500 261,375
FYI, Inc. (a) 63,800 2,169,200
Gartner Group, Inc. Class B 441,543 6,098,813
(a)
H&R Block, Inc. 234,800 10,272,500
NOVA Corp. (a) 153,700 4,851,156
Professional Detailing, Inc. 9,500 284,406
(a)
Robert Half International, 126,300 3,607,444
Inc. (a)
Teletech Holdings, Inc. (a) 43,000 1,449,234
Viad Corp. 885,612 24,686,435
82,470,932
TOTAL SERVICES 272,030,746
TECHNOLOGY - 24.5%
COMMUNICATIONS EQUIPMENT - 5.1%
ADC Telecommunications, Inc. 530,200 38,472,638
(a)
Advanced Fibre 110,000 4,915,625
Communications, Inc. (a)
AudioCodes Ltd. 51,100 4,701,200
SHARES VALUE (NOTE 1)
Cisco Systems, Inc. (a) 2,263,100 $ 242,434,588
Ditech Communications Corp. 7,400 691,900
Efficient Networks, Inc. 3,287 223,516
Globalstar Telecommunications 149,600 6,582,400
Ltd. (a)
InterVoice, Inc. (a) 18,500 430,125
Lucent Technologies, Inc. 695,700 52,047,056
Marconi PLC 620,300 10,984,742
Metricom, Inc. (a) 56,400 4,434,450
NEC Corp. 180,000 4,288,650
Nokia AB sponsored ADR 250,500 47,595,000
Nortel Networks Corp. 229,080 23,094,849
Telefonaktiebolaget LM 278,900 18,320,244
Ericsson sponsored ADR
Tellabs, Inc. (a) 520,700 33,422,431
Terayon Communication 10,300 646,969
Systems, Inc. (a)
Xircom, Inc. (a) 78,400 5,880,000
499,166,383
COMPUTER SERVICES & SOFTWARE
- - 10.4%
24/7 Media, Inc. (a) 64,200 3,611,250
Adobe Systems, Inc. 329,700 22,172,325
Affymetrix, Inc. (a) 28,700 4,870,031
Akamai Technologies, Inc. 9,400 3,079,675
Amdocs Ltd. (a) 449,700 15,514,650
America Online, Inc. (a) 789,600 59,565,450
Ariba, Inc. 2,600 461,175
Automatic Data Processing, 1,564,700 84,298,213
Inc.
AVT Corp. (a) 8,000 376,000
BEA Systems, Inc. (a) 87,900 6,147,506
Bell & Howell Co. (a) 85,800 2,729,513
Black Box Corp. (a) 14,500 971,500
BMC Software, Inc. (a) 46,000 3,677,125
BroadVision, Inc. (a) 43,500 7,397,719
Cambridge Technology 260,800 6,846,000
Partners, Inc. (a)
Ceridian Corp. (a) 1,431,920 30,875,775
Computer Sciences Corp. (a) 531,800 50,321,575
Covad Communications Group, 135,650 7,587,922
Inc.
Dendrite International, Inc. 47,950 1,624,306
(a)
DSET Corp. (a) 53,700 2,007,038
DST Systems, Inc. (a) 71,000 5,418,188
Electronic Data Systems Corp. 534,700 35,791,481
Equant NV (Reg.) (a) 175,600 19,667,200
Fair, Isaac & Co., Inc. 4,500 238,500
Forsoft Ltd. (a)(c) 831,800 10,605,450
Foundry Networks, Inc. 4,800 1,448,100
Go2Net, Inc. (a) 41,200 3,584,400
HotJobs.com Ltd. 46,800 2,044,575
IMS Health, Inc. 385,247 10,473,903
Infonet Services Corp. Class B 207,300 5,441,625
Informix Corp. (a) 523,200 5,951,400
InfoSpace.com, Inc. 1,700 363,800
Intuit, Inc. (a) 1,125,400 67,453,663
ISS Group, Inc. (a) 71,100 5,056,988
J. D. Edwards & Co. (a) 67,700 2,022,538
Lycos, Inc. (a) 113,900 9,062,169
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- - CONTINUED
Micromuse, Inc. (a) 80,100 $ 13,617,000
Microsoft Corp. (a) 2,080,420 242,889,035
National Computer Systems, 228,600 8,601,075
Inc.
National Instrument Corp. (a) 121,700 4,655,025
NCR Corp. (a) 238,450 9,031,294
NetIQ Corp. 87,500 4,555,469
Novell, Inc. (a) 1,700 67,894
Polycom, Inc. (a) 235,600 15,004,775
Proxicom, Inc. 20,800 2,585,700
Rational Software Corp. (a) 391,000 19,207,875
Redback Networks, Inc. 30,600 5,431,500
SalesLogix Corp. 36,000 1,478,250
Software.com, Inc. 18,100 1,737,600
Sykes Enterprises, Inc. (a) 225,600 9,898,200
Symantec Corp. (a) 10,300 603,838
Synopsys, Inc. (a) 36,900 2,463,075
The Bisys Group (a) 92,400 6,029,100
TIBCO Software, Inc. 1,700 260,100
Unisys Corp. (a) 3,444,258 110,000,990
Verio, Inc. (a) 105,300 4,863,544
VeriSign, Inc. (a) 22,000 4,200,625
Viant Corp. 59,800 5,920,200
Vignette Corp. 62,590 10,202,170
Visual Networks, Inc. (a) 76,800 6,086,400
Yahoo!, Inc. (a) 52,400 22,672,825
1,010,822,287
COMPUTERS & OFFICE EQUIPMENT
- - 2.5%
Adaptec, Inc. (a) 49,400 2,463,825
Alteon Websystems, Inc. 15,500 1,360,125
Apple Computer, Inc. (a) 187,600 19,287,625
Canon, Inc. 95,000 3,853,438
Comverse Technology, Inc. (a) 22,200 3,213,450
Dell Computer Corp. (a) 297,800 15,187,800
EMC Corp. (a) 413,100 45,131,175
Hewlett-Packard Co. 577,050 65,747,634
Hitachi Ltd. 173,000 2,800,438
Juniper Networks, Inc. 46,600 15,844,000
RSA Security, Inc. (a) 18,700 1,449,250
SanDisk Corp. (a) 60,800 5,852,000
Seagate Technology, Inc. (a) 342,100 15,929,031
Sun Microsystems, Inc. (a) 158,500 12,273,844
Symbol Technologies, Inc. 581,700 36,974,306
247,367,941
ELECTRONIC INSTRUMENTS - 2.1%
Agilent Technologies, Inc. 271,500 20,990,344
Anadigics, Inc. (a) 21,900 1,033,406
KLA-Tencor Corp. (a) 30,000 3,341,250
Novellus Systems, Inc. (a) 6,800 833,213
PE Corp. - Biosystems Group 793,550 95,473,984
SHARES VALUE (NOTE 1)
Sawtek, Inc. (a) 17,100 $ 1,138,219
Teradyne, Inc. (a) 193,100 12,744,600
Thermo Electron Corp. (a) 1,031,000 15,465,000
Thermo Instrument Systems, 194,500 2,163,813
Inc. (a)
Varian, Inc. (a) 45,800 1,030,500
Waters Corp. (a) 985,900 52,252,700
206,467,029
ELECTRONICS - 4.4%
Analog Devices, Inc. (a) 238,000 22,134,000
Atmel Corp. (a) 327,100 9,669,894
Broadcom Corp. Class A (a) 61,600 16,778,300
Brocade Communications 8,600 1,522,200
Systems, Inc.
Celestica, Inc. (sub. vtg.) 410,400 22,921,352
(a)
Conexant Systems, Inc. (a) 52,200 3,464,775
Dallas Semiconductor Corp. 12,800 824,800
Intel Corp. 399,180 32,857,504
JDS Uniphase Corp. (a) 8,600 1,387,288
KEMET Corp. (a) 98,200 4,425,138
Kyocera Corp. 192,700 49,966,244
Linear Technology Corp. 269,600 19,293,250
Micron Technology, Inc. (a) 8,600 668,650
Motorola, Inc. 745,200 109,730,700
National Semiconductor Corp. 214,900 9,200,406
(a)
PMC-Sierra, Inc. (a) 17,100 2,741,344
QLogic Corp. (a) 39,300 6,283,088
RF Micro Devices, Inc. (a) 12,800 876,000
Sanmina Corp. (a) 46,600 4,654,175
TDK Corp. 59,000 8,145,695
Texas Instruments, Inc. 652,400 63,201,250
Vitesse Semiconductor Corp. 693,300 36,354,919
(a)
Zoran Corp. (a) 109,600 6,110,200
433,211,172
TOTAL TECHNOLOGY 2,397,034,812
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.3%
AHL Services, Inc. (a) 79,300 1,655,388
Continental Airlines, Inc. 89,200 3,958,250
Class B (a)
Ryanair Holdings PLC 55,200 3,042,900
sponsored ADR (a)
Southwest Airlines Co. 1,335,687 21,621,433
30,277,971
RAILROADS - 0.1%
Canadian National Railway Co. 202,500 5,346,997
TRUCKING & FREIGHT - 0.5%
American Freightways Corp. (a) 174,300 2,821,481
C. H. Robinson Worldwide, 470,400 18,698,400
Inc.
Expeditors International of 75,300 3,299,081
Washington, Inc.
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - CONTINUED
Swift Transportation Co., 1,058,500 $ 18,656,062
Inc. (a)
United Parcel Service, Inc. 94,400 6,513,600
Class B
49,988,624
TOTAL TRANSPORTATION 85,613,592
UTILITIES - 13.9%
CELLULAR - 6.4%
Aerial Communications, Inc. 133,200 8,108,550
(a)
AirGate PCS, Inc. 9,200 485,300
ALLTEL Corp. 354,100 29,279,644
Centennial Cellular Corp. (a) 800 66,300
China Telecom (Hong Kong) 1,790,000 11,506,345
Ltd. (a)
Mannesmann AG (Reg.) 220,084 53,598,531
Nextel Communications, Inc. 937,500 96,679,688
Class A (a)
NTT Mobile Communication 433 16,650,587
Network, Inc.
Orange PLC ADR (a) 161,200 26,678,600
Partner Communication Co. 349,000 9,030,375
Ltd. ADR
Sprint Corp. - PCS Group 996,800 102,172,000
Series 1 (a)
Tele Sudeste Celular 144,900 5,623,931
Participacoes SA ADR
TeleCorp PCS, Inc. 3,100 117,800
Telesp Celular Participacoes 249,600 10,576,800
SA ADR
Telesystem International 102,500 3,762,183
Wireless, Inc. (sub. vtg.)
(a)
Triton PCS Holdings, Inc. 390,700 17,776,850
Class A
Vodafone AirTouch PLC 3,952,500 195,648,750
sponsored ADR
VoiceStream Wireless Corp. (a) 246,050 35,015,991
Western Wireless Corp. Class A 21,300 1,421,775
Wireless Facilities, Inc. 101,200 4,414,850
628,614,850
ELECTRIC UTILITY - 0.3%
AES Corp. (a) 150,400 11,242,400
Edison International 29,500 772,531
Illinova Corp. 207,000 7,193,250
Independent Energy Holdings 170,500 5,679,781
PLC sponsored ADR (a)
24,887,962
GAS - 0.1%
Dynegy, Inc. 563,300 13,695,231
TELEPHONE SERVICES - 7.0%
Allegiance Telecom, Inc. (a) 132,000 12,177,000
AT&T Corp. 2,444,022 124,034,117
SHARES VALUE (NOTE 1)
Bell Atlantic Corp. 343,900 $ 21,171,344
BellSouth Corp. 876,000 41,007,750
British Telecommunications PLC 566,446 13,481,417
Cable & Wireless PLC 400,700 21,212,056
sponsored ADR
DDI Corp. 2,217 30,369,864
Deutsche Telekom AG 54,433 3,889,284
Energis PLC (a) 485,135 23,322,724
Esat Telecom Group PLC 75,700 6,926,550
sponsored ADR (a)
Global Crossing Ltd. (a) 235,400 11,770,000
GTE Corp. 295,300 20,837,106
Koninklijke KPN NV 5,600 546,086
MCI WorldCom, Inc. (a) 1,335,091 70,843,266
McLeodUSA, Inc. Class A (a) 674,200 39,693,525
NEXTLINK Communications, Inc. 426,100 35,392,931
Class A (a)
Nippon Telegraph & Telephone 3,359 57,517,124
Corp.
Qwest Communications 152,744 6,567,992
International, Inc. (a)
RCN Corp. (a) 118,600 5,752,100
SBC Communications, Inc. 1,639,606 79,930,793
Telefonica SA sponsored ADR 224,532 17,695,928
Telefonos de Mexico SA de CV 42,700 4,803,750
Series L sponsored ADR
Teligent, Inc. Class A (a) 143,800 8,879,650
Time Warner Telecom, Inc. 47,000 2,347,063
WinStar Communications, Inc. 271,300 20,313,588
(a)
680,483,008
WATER - 0.1%
Vivendi SA (a) 76,484 6,900,331
TOTAL UTILITIES 1,354,581,382
TOTAL COMMON STOCKS 9,256,601,711
(Cost $6,774,814,883)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -
2.3%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT
U.S. Treasury Bills, yield at - $ 4,100,000 4,048,873
date of purchase 5.21% to
5.21% 3/30/00 (d)
U.S. Treasury Bonds:
5.5% 8/15/28 Aaa 29,500,000 25,157,895
6.125% 11/15/27 Aaa 63,000,000 58,629,060
6.375% 8/15/27 Aaa 66,000,000 63,391,020
6.5% 11/15/26 Aaa 20,000,000 19,500,000
6.75% 8/15/26 Aaa 9,900,000 9,946,431
6.875% 8/15/25 Aaa 36,500,000 37,178,535
7.625% 2/15/25 Aaa 9,500,000 10,528,660
TOTAL U.S. TREASURY OBLIGATIONS 228,380,474
(Cost $244,277,498)
</TABLE>
CASH EQUIVALENTS - 5.1%
SHARES VALUE (NOTE 1)
Central Cash Collateral Fund, 153,522,448 $ 153,522,448
4.97% (b)
Taxable Central Cash Fund, 347,412,077 347,412,077
5.12% (b)
TOTAL CASH EQUIVALENTS 500,934,525
(Cost $500,934,525)
TOTAL INVESTMENT PORTFOLIO - 9,985,916,710
102.1%
(Cost $7,520,026,906)
NET OTHER ASSETS - (2.1)% (205,572,030)
NET ASSETS - 100% $ 9,780,344,680
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT AT VALUE UNREALIZED GAIN/LOSS
PURCHASED
54 S&P 500 Stock Index March 2000 $ 20,036,700 $ 9,477
Contracts
</TABLE>
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS -
0.2%
LEGEND
(a) Non-income producing
(b) The rate quoted is the annualized seven-day yield of the fund at
period end.
(c) Transactions during the period with companies which are or were
affiliates are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE
Forsoft Ltd. $ - $ - $ - $ 10,605,450
PJ America, Inc. 6,620,658 - - 9,016,350
THINK New Ideas, Inc. 4,396,872 4,906,153 - -
TOTALS $ 11,017,530 $ 4,906,153 $ - $ 19,621,800
</TABLE>
(d) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $570,000.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $14,083,874,421 and $12,461,859,475, respectively, of which
long-term U.S. government and government agency obligations aggregated
$215,338,047 and $119,671,688, respectively.
The market value of futures contracts opened and closed during the
period amounted to $1,172,189,323 and $1,169,080,232, 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 $1,037,142 for the
period.
The fund participated in the security lending program. At period end
the value of the securities loaned amounted to $149,787,496. The fund
received cash collateral of $153,522,448 which was invested in cash
equivalents.
Distribution of investments by country of issue, as a percentage of
net assets, is as follows:
United States of America 83.3%
United Kingdom 5.8
Japan 3.9
Canada 1.6
Germany 1.1
Netherlands 1.0
Others (individually less 3.3
than 1%)
100.0%
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $7,608,757,149. Net unrealized appreciation
aggregated $2,377,159,561, of which $2,702,180,417 related to
appreciated investment securities and $325,020,856 related to
depreciated investment securities.
The fund hereby designates approximately $240,382,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: CONTRAFUND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 9,985,916,710
value (cost $7,520,026,906)
- - See accompanying schedule
Cash 878,201
Foreign currency held at 251,753
value (cost $251,721)
Receivable for investments 38,088,363
sold
Receivable for fund shares 7,542,705
sold
Dividends receivable 3,292,399
Interest receivable 6,853,935
Receivable for daily 40,263
variation on futures
contracts
Other receivables 990,508
TOTAL ASSETS 10,043,854,837
LIABILITIES
Payable for investments $ 103,332,050
purchased
Payable for fund shares 1,809,563
redeemed
Accrued management fee 4,457,922
Distribution fees payable 59,172
Other payables and accrued 329,002
expenses
Collateral on securities 153,522,448
loaned, at value
TOTAL LIABILITIES 263,510,157
NET ASSETS $ 9,780,344,680
Net Assets consist of:
Paid in capital $ 6,122,322,479
Undistributed net investment 34,775,260
income
Accumulated undistributed 1,157,349,006
net realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 2,465,897,935
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 9,780,344,680
INITIAL CLASS: NET ASSET $29.15
VALUE, offering price and
redemption price per share
($9,005,128,880 (divided by)
308,882,521 shares)
SERVICE CLASS : NET ASSET $29.10
VALUE, offering price and
redemption price per share
($775,215,800 (divided by)
26,637,837 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 43,410,388
Dividends
Interest 44,468,956
Security lending 368,030
TOTAL INCOME 88,247,374
EXPENSES
Management fee $ 45,655,867
Transfer agent fees 5,273,108
Distribution fees - Service 353,057
Class
Accounting and security 957,962
lending fees
Non-interested trustees' 22,556
compensation
Custodian fees and expenses 497,401
Registration fees 121,874
Audit 49,769
Legal 53,322
Miscellaneous 419,654
Total expenses before 53,404,570
reductions
Expense reductions (2,221,270) 51,183,300
NET INVESTMENT INCOME 37,064,074
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 1,233,779,064
(including realized loss of
$1,671,175 on sales of
investments in affiliated
issuers)
Foreign currency transactions (55,463)
Futures contracts 4,830,650 1,238,554,251
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 533,962,994
Assets and liabilities in (22,455)
foreign currencies
Futures contracts (46,666) 533,893,873
NET GAIN (LOSS) 1,772,448,124
NET INCREASE (DECREASE) IN $ 1,809,512,198
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION Directed $ 2,205,203
brokerage arrangements
Custodian credits 16,067
$ 2,221,270
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 37,064,074 $ 31,078,671
income
Net realized gain (loss) 1,238,554,251 176,892,378
Change in net unrealized 533,893,873 1,158,422,991
appreciation (depreciation)
NET INCREASE (DECREASE) IN 1,809,512,198 1,366,394,040
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (32,779,255) (29,014,734)
From net investment income
From net realized gain (240,381,202) (213,465,544)
TOTAL DISTRIBUTIONS (273,160,457) (242,480,278)
Share transactions - net 1,702,847,259 1,305,641,290
increase (decrease)
TOTAL INCREASE (DECREASE) 3,239,199,000 2,429,555,052
IN NET ASSETS
NET ASSETS
Beginning of period 6,541,145,680 4,111,590,628
End of period (including $ 9,780,344,680 $ 6,541,145,680
undistributed net investment
income of $34,775,260 and
$30,790,900, respectively)
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 75,689,715 $ 1,921,467,155 78,130,341 $ 1,666,803,775
Class Sold
Reinvested 11,119,147 266,192,366 12,506,721 242,005,046
Redeemed (39,357,256) (1,004,869,657) (35,242,800) (730,882,335)
Net increase (decrease) 47,451,606 $ 1,182,789,864 55,394,262 $ 1,177,926,486
Service Class Sold 20,768,738 $ 530,250,534 6,109,863 $ 128,808,187
Reinvested 291,308 6,968,091 24,559 475,234
Redeemed (669,866) (17,161,230) (73,492) (1,568,617)
Net increase (decrease) 20,390,180 $ 520,057,395 6,060,930 $ 127,714,804
Distributions From net $ 31,943,084 $ 28,957,869
investment income Initial
Class
Service Class 836,171 56,865
Total $ 32,779,255 $ 29,014,734
From net realized gain $ 234,249,282 $ 213,047,177
Initial Class
Service Class 6,131,920 418,367
Total $ 240,381,202 $ 213,465,544
$ 273,160,457 $ 242,480,278
</TABLE>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 24.44 $ 19.94 $ 16.56 $ 13.79 $ 10.00
period
Income from Investment
Operations
Net investment income .12 C .13 C .16 C .14 .06
Net realized and unrealized 5.59 5.54 3.73 2.76 3.91
gain (loss)
Total from investment 5.71 5.67 3.89 2.90 3.97
operations
Less Distributions
From net investment income (.12) (.14) (.14) - (.06)
From net realized gain (.88) (1.03) (.37) (.13) (.12)
Total distributions (1.00) (1.17) (.51) (.13) (.18)
Net asset value, end of period $ 29.15 $ 24.44 $ 19.94 $ 16.56 $ 13.79
TOTAL RETURN B, G 24.25% 29.98% 24.14% 21.22% 39.72%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 9,005,129 $ 6,388,592 $ 4,107,868 $ 2,394,103 $ 877,000
(000 omitted)
Ratio of expenses to average .67% .70% .71% .74% .72%
net assets
Ratio of expenses to average .65% F .66% F .68% F .71% F .72%
net assets after expense
reductions
Ratio of net investment .48% .62% .90% 1.33% 1.07%
income to average net assets
Portfolio turnover 172% 201% 142% 178% 132%
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 24.42 $ 19.93 $ 19.99
period
Income from Investment
Operations
Net investment income C .10 .11 .03
Net realized and unrealized 5.58 5.55 (.09)
gain (loss)
Total from investment 5.68 5.66 (.06)
operations
Less Distributions
From net investment income (.12) (.14) -
From net realized gain (.88) (1.03) -
Total distributions (1.00) (1.17) -
Net asset value, end of period $ 29.10 $ 24.42 $ 19.93
TOTAL RETURN B, G 24.15% 29.94% (0.30)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 775,216 $ 152,553 $ 3,722
(000 omitted)
Ratio of expenses to average .78% .80% .81% A
net assets
Ratio of expenses to average .75% F .75% F .78% A, F
net assets after expense
reductions
Ratio of net investment .37% .53% 1.14% A
income to average net assets
Portfolio turnover 172% 201% 142%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
D FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
E FOR THE PERIOD JANUARY 3,
1995 (COMMENCEMENT OF
OPERATIONS OF INITIAL CLASS
SHARES) TO DECEMBER 31, 1995.
F FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
G TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH OPPORTUNITIES PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the life of fund total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
FIDELITY VIP: GROWTH 4.27% 21.51%
OPPORTUNITIES - "INITIAL
CLASS"
S&P 500 21.04% 28.59%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's return to the performance of the Standard &
Poor's 500 Index - a market capitalization-weighted index of common
stocks. This benchmark reflects the reinvestment of dividends and
capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown. The life of fund figures are from commencement
of operations, January 3, 1995.
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 RETURN WOULD BE 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 III Growth Opp S&P 500
00617 SP001
1995/01/03 10000.00 10000.00
1995/01/31 10060.00 10261.28
1995/02/28 10370.00 10661.16
1995/03/31 10560.00 10975.77
1995/04/30 10930.00 11299.00
1995/05/31 11440.00 11750.63
1995/06/30 11790.00 12023.59
1995/07/31 12180.00 12422.30
1995/08/31 12260.00 12453.48
1995/09/30 12470.00 12979.01
1995/10/31 12560.00 12932.68
1995/11/30 12920.00 13500.42
1995/12/31 13251.81 13760.44
1996/01/31 13444.45 14228.85
1996/02/29 13434.43 14360.75
1996/03/31 13393.72 14499.04
1996/04/30 13607.45 14712.76
1996/05/31 13912.77 15092.20
1996/06/30 14024.73 15149.70
1996/07/31 13617.62 14480.39
1996/08/31 13699.05 14785.78
1996/09/30 14360.59 15617.92
1996/10/31 14950.89 16048.66
1996/11/30 16080.60 17261.78
1996/12/31 15673.50 16919.83
1997/01/31 16416.46 17976.98
1997/02/28 16573.05 18117.92
1997/03/31 15727.48 17373.45
1997/04/30 16446.21 18410.65
1997/05/31 17513.74 19531.49
1997/06/30 18095.06 20406.50
1997/07/31 19490.24 22030.24
1997/08/31 18750.37 20796.11
1997/09/30 19532.52 21935.11
1997/10/31 19141.45 21202.48
1997/11/30 19817.90 22183.94
1997/12/31 20367.51 22564.84
1998/01/31 20452.07 22814.41
1998/02/28 21731.21 24459.78
1998/03/31 22407.88 25712.37
1998/04/30 22296.95 25971.03
1998/05/31 22141.65 25524.59
1998/06/30 22674.11 26561.40
1998/07/31 22751.76 26278.52
1998/08/31 19801.02 22479.17
1998/09/30 21021.26 23919.19
1998/10/31 22629.74 25864.77
1998/11/30 24082.93 27432.44
1998/12/31 25380.81 29013.09
1999/01/31 25613.76 30226.42
1999/02/28 24407.24 29286.98
1999/03/31 25024.57 30458.76
1999/04/30 26064.88 31638.42
1999/05/31 25893.40 30891.44
1999/06/30 27025.16 32605.92
1999/07/31 26396.40 31587.96
1999/08/31 25744.78 31431.60
1999/09/30 24864.52 30570.06
1999/10/31 25824.81 32504.53
1999/11/30 25859.10 33165.35
1999/12/31 26465.00 35118.79
IMATRL PRASUN SHR__CHT 19991231 20000112 141607 R00000000000063
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Growth Opportunities
Portfolio on January 3, 1995, when the fund started. As the chart
shows, by December 31, 1999, the value of the investment would have
grown to $26,465 - a 164.65% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $35,119 - a 251.19%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Fannie Mae 5.7
FleetBoston Financial Corp. 3.4
Solectron Corp. 3.3
Freddie Mac 3.0
Philip Morris Companies, Inc. 2.9
18.3
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
FINANCE 20.6
TECHNOLOGY 16.1
HEALTH 10.5
RETAIL & WHOLESALE 10.1
ENERGY 7.8
ASSET ALLOCATION AS OF
DECEMBER 31, 1999*
% OF FUND'S NET ASSETS
Stocks 91.9%
Bonds 5.9%
Short-Term Investments and
Net Other Assets 2.2%
Row: 1, Col: 1, Value: 91.90000000000001
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 5.9
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.2
* FOREIGN INVESTMENTS 6.9%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH OPPORTUNITIES PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). The initial offering of Service Class shares
took place on November 3, 1997. Performance for Service Class shares
reflects an asset based distribution fee (12b-1 fee), and returns
prior to November 3, 1997 are those of Initial Class and do not
include the effects of Service Class' 12b-1 fee. Had Service Class
shares' 12b-1 fee been reflected, returns prior to November 3, 1997
would have been lower. If Fidelity had not reimbursed certain fund
expenses, the life of fund total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
FIDELITY VIP: GROWTH 4.18% 21.47%
OPPORTUNITIES - SERVICE
CLASS
S&P 500 21.04% 28.59%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's return to the performance of the Standard &
Poor's 500 Index - a market capitalization-weighted index of common
stocks. This benchmark reflects the reinvestment of dividends and
capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown. The life of the fund figures are from
commencement of operations, January 3, 1995.
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 RETURN WOULD BE 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 III Growth Opp - SC S&P 500
00491 SP001
1995/01/03 10000.00 10000.00
1995/01/31 10060.00 10261.28
1995/02/28 10370.00 10661.16
1995/03/31 10560.00 10975.77
1995/04/30 10930.00 11299.00
1995/05/31 11440.00 11750.63
1995/06/30 11790.00 12023.59
1995/07/31 12180.00 12422.30
1995/08/31 12260.00 12453.48
1995/09/30 12470.00 12979.01
1995/10/31 12560.00 12932.68
1995/11/30 12920.00 13500.42
1995/12/31 13251.81 13760.44
1996/01/31 13444.45 14228.85
1996/02/29 13434.43 14360.75
1996/03/31 13393.72 14499.04
1996/04/30 13607.45 14712.76
1996/05/31 13912.77 15092.20
1996/06/30 14024.73 15149.70
1996/07/31 13617.62 14480.39
1996/08/31 13699.05 14785.78
1996/09/30 14360.59 15617.92
1996/10/31 14950.89 16048.66
1996/11/30 16080.60 17261.78
1996/12/31 15673.50 16919.83
1997/01/31 16416.46 17976.98
1997/02/28 16573.05 18117.92
1997/03/31 15727.48 17373.45
1997/04/30 16446.21 18410.65
1997/05/31 17513.74 19531.49
1997/06/30 18095.06 20406.50
1997/07/31 19490.24 22030.24
1997/08/31 18750.37 20796.11
1997/09/30 19532.52 21935.11
1997/10/31 19141.45 21202.48
1997/11/30 19828.47 22183.94
1997/12/31 20367.51 22564.84
1998/01/31 20452.07 22814.41
1998/02/28 21731.21 24459.78
1998/03/31 22407.88 25712.37
1998/04/30 22296.95 25971.03
1998/05/31 22130.56 25524.59
1998/06/30 22674.11 26561.40
1998/07/31 22740.67 26278.52
1998/08/31 19789.93 22479.17
1998/09/30 21010.16 23919.19
1998/10/31 22618.65 25864.77
1998/11/30 24071.83 27432.44
1998/12/31 25358.62 29013.09
1999/01/31 25591.58 30226.42
1999/02/28 24385.18 29286.98
1999/03/31 25002.24 30458.76
1999/04/30 26042.09 31638.42
1999/05/31 25859.26 30891.44
1999/06/30 26990.53 32605.92
1999/07/31 26362.05 31587.96
1999/08/31 25710.71 31431.60
1999/09/30 24830.83 30570.06
1999/10/31 25779.27 32504.53
1999/11/30 25813.55 33165.35
1999/12/31 26419.18 35118.79
IMATRL PRASUN SHR__CHT 19991231 20000112 141707 R00000000000063
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Growth Opportunities
Portfolio - Service Class on January 3, 1995, when the fund started.
As the chart shows, by December 31, 1999, the value of the investment
would have grown to $26,419 - a 164.19% increase on the initial
investment. For comparison, look at how the Standard & Poor's 500
Index did over the same period. With dividends and capital gains, if
any, reinvested, the same $10,000 investment would have grown to
$35,119 - a 251.19% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Fannie Mae 5.7
FleetBoston Financial Corp. 3.4
Solectron Corp. 3.3
Freddie Mac 3.0
Philip Morris Companies, Inc. 2.9
18.3
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
FINANCE 20.6
TECHNOLOGY 16.1
HEALTH 10.5
RETAIL & WHOLESALE 10.1
ENERGY 7.8
ASSET ALLOCATION AS OF
DECEMBER 31, 1999*
% OF FUND'S NET ASSETS
Stocks 91.9%
Bonds 5.9%
Short-Term Investments and
Net Other Assets 2.2%
Row: 1, Col: 1, Value: 91.90000000000001
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 5.9
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.2
* FOREIGN INVESTMENTS 6.9%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH OPPORTUNITIES PORTFOLIO
FUND TALK: THE MANAGERS' OVERVIEW
(photographs of George Vanderheiden and Bettina Doulton)
NOTE TO SHAREHOLDERS: The following is an interview with George
Vanderheiden, Portfolio Manager of Growth Opportunities Portfolio,
with additional comments from Bettina Doulton, who became manager of
the fund on February 1, 2000.
Q. HOW DID THE FUND PERFORM, GEORGE?
G.V. For the 12-month period ending December 31, 1999, the fund
underperformed the Standard & Poor's 500 Index's return of 21.04%.
Q. WHAT WERE THE PRIMARY REASONS FOR THE FUND'S UNDERPERFORMANCE?
G.V. Two explanations spring to mind. First, the fund was considerably
underweighted in technology stocks. The S&P 500's tech weighting at
the end of the period was nearly twice as much as the fund's. While
their valuations were vastly overinflated in my opinion, a small group
of technology stocks - such as Microsoft, Intel, Dell and a few others
- - continued to drive the performance of the market. I did own
positions in most of these, but did not weight them as heavily as the
index did.
Q. WHAT ELSE HELD BACK PERFORMANCE?
G.V. The second factor was the fund's value and defensive growth
positioning. At the period's outset, I felt value stocks looked
attractive relative to growth stocks. This strategy paid off in the
second quarter of 1999, as central bank interest-rate easings around
the world, recoveries in Asia and Russia, and a rebound in commodity
prices - particularly oil - all contributed to a broadening of
corporate earnings. Unfortunately for the fund, it remained a very
narrow, growth-oriented market for the remainder of the year.
Q. WHAT CAUSED VALUE STOCKS TO LOSE THEIR LUSTER IN THE EYES OF
INVESTORS?
G.V. The U.S. Federal Reserve Board, wary of an overheated domestic
economy and impending signs of inflation, hiked short-term interest
rates by 0.25 percentage points on June 30, which effectively ended
the value and cyclical rally. Two more rate hikes by the same amount,
one in August and the other in November, further sealed their demise.
Q. WHAT WAS YOUR STRATEGIC REACTION TO THE FED'S ACTIONS?
G.V. I stopped buying cyclical and value stocks and focused on
defensive growth stocks - companies that grow their earnings at a 10%
to 15% annual rate, have a reasonable price-to-earnings (P/E) ratio
and typically are not really affected by interest rates or recessions.
It's a broad category that included financial holdings such as Fannie
Mae and Freddie Mac; drug stocks such as Schering-Plough and Eli
Lilly; and grocery store chains such as Safeway and Kroger.
Unfortunately, not much worked well in 1999 other than technology.
Q. WHAT STOCKS DID WORK WELL FOR THE FUND?
G.V. Not surprisingly, the fund's best performer in 1999 was a
technology holding, Solectron, a contract electronic manufacturer to
which other technology companies outsource their manufacturing. Strong
stock selection in the retail and telecom sectors also helped the
fund's overall return. In retail, Home Depot and Wal-Mart were the
fund's second- and third-best contributors, respectively, to
performance. Each benefited from the strong U.S. economy and
consumers' ability to finance home improvements. U.K.-based
telecommunications company Vodafone, which enjoyed solid earnings
growth, also had a consistent run of outstanding performance.
Q. WHICH HOLDINGS HURT PERFORMANCE?
G.V. Philip Morris, one of the fund's largest positions, was one of
its largest relative detractors due to the company's ongoing
litigation battles. Despite beating their earnings estimates, Fannie
Mae and Freddie Mac, two government-sponsored mortgage companies, also
were disappointments. The nervous investor sentiment over rising
interest rates that drove down the finance sector in general, also -
unjustly, to a degree - drove down the share prices of these two
stocks.
Q. TURNING TO YOU, BETTINA, WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS?
B.D. First, let me say that it's an honor to succeed an icon like
George Vanderheiden. He is one of the most respected money managers of
all time. Turning back to the market, I think the fundamental outlook
for the technology stocks - the enablers of the new economy - remains
positive. I expect the effort to upgrade Corporate America's processes
via the Internet, be it customer service, sales and marketing,
logistics or inventory management, to continue for the next couple of
years. Internationally, this trend is just getting started. Meanwhile,
I will be searching to find the companies that can emerge as the
winners, selecting those that I think can successfully adapt their
business models and, thus, demonstrate consistent double-digit
earnings growth rates over time.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FUND FACTS
GOAL: to provide capital growth by investing primarily in common
stocks
START DATE: January 3, 1995
SIZE: as of December 31, 1999, more than
$1.8 billion
MANAGER: Bettina Doulton, since February 2000; joined Fidelity in 1986
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH OPPORTUNITIES PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 91.9%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.8%
Boeing Co. 358,000 $ 14,879,375
BASIC INDUSTRIES - 1.4%
CHEMICALS & PLASTICS - 0.5%
Cabot Corp. 112,700 2,296,263
E. I. du Pont de Nemours and 52,497 3,458,240
Co.
Engelhard Corp. 100,100 1,889,388
Praxair, Inc. 26,200 1,318,188
8,962,079
PACKAGING & CONTAINERS - 0.7%
Owens-Illinois, Inc. (a) 551,500 13,821,969
PAPER & FOREST PRODUCTS - 0.2%
Bowater, Inc. 21,200 1,151,425
Westvaco Corp. 53,400 1,742,175
2,893,600
TOTAL BASIC INDUSTRIES 25,677,648
CONSTRUCTION & REAL ESTATE -
1.4%
BUILDING MATERIALS - 0.1%
Owens Corning 158,600 3,062,963
CONSTRUCTION - 1.1%
Centex Corp. 232,600 5,742,313
D. R. Horton, Inc. 230,436 3,182,897
Fleetwood Enterprises, Inc. 109,062 2,249,404
Kaufman & Broad Home Corp. 196,500 4,752,844
Lennar Corp. 205,500 3,339,375
Pulte Corp. 17,600 396,000
Toll Brothers, Inc. (a) 21,800 406,025
20,068,858
ENGINEERING - 0.2%
Fluor Corp. 81,100 3,720,463
TOTAL CONSTRUCTION & REAL 26,852,284
ESTATE
DURABLES - 5.1%
AUTOS, TIRES, & ACCESSORIES -
4.6%
AutoNation, Inc. (a) 630,500 5,832,125
Cummins Engine Co., Inc. 127,300 6,150,181
Dana Corp. 188,200 5,634,238
Delphi Automotive Systems 295,178 4,649,054
Corp.
Discount Auto Parts, Inc. (a) 64,000 1,156,000
Eaton Corp. 212,450 15,429,181
General Motors Corp. 496,000 36,053,000
Lear Corp. (a) 196,300 6,281,600
Magna International, Inc. 127,700 5,415,356
Class A
86,600,735
TEXTILES & APPAREL - 0.5%
Burlington Industries, Inc. 137,600 550,400
(a)
Jones Apparel Group, Inc. (a) 38,000 1,030,750
SHARES VALUE (NOTE 1)
Liz Claiborne, Inc. 178,000 $ 6,697,250
Warnaco Group, Inc. Class A 180,500 2,222,406
10,500,806
TOTAL DURABLES 97,101,541
ENERGY - 7.8%
ENERGY SERVICES - 0.9%
Baker Hughes, Inc. 36,700 772,994
Halliburton Co. 242,000 9,740,500
McDermott International, Inc. 46,600 422,313
Schlumberger Ltd. 92,300 5,191,875
Transocean Sedco Forex, Inc. 17,869 601,962
16,729,644
OIL & GAS - 6.9%
Amerada Hess Corp. 226,900 12,876,575
Apache Corp. 24,100 890,194
BP Amoco PLC sponsored ADR 431,090 25,569,026
Chevron Corp. 40,100 3,473,663
Conoco, Inc. Class B 143,968 3,581,204
Cooper Cameron Corp. (a) 72,300 3,538,181
Exxon Mobil Corp. 342,600 27,600,713
Occidental Petroleum Corp. 466,400 10,085,900
Royal Dutch Petroleum Co. (NY 282,300 17,061,506
Registry Gilder 1.25)
Sunoco, Inc. 22,500 528,750
Tosco Corp. 596,900 16,228,219
Total Fina SA:
Class B 6,153 852,190
sponsored ADR 94,405 6,537,546
Union Pacific Resources 63,300 807,075
Group, Inc.
USX - Marathon Group 35,900 886,281
130,517,023
TOTAL ENERGY 147,246,667
FINANCE - 20.6%
BANKS - 5.9%
Bank of America Corp. 454,000 22,785,125
Bank of Tokyo-Mitsubishi Ltd. 449,000 6,256,125
Bank of Tokyo-Mitsubishi Ltd. 44,500 620,219
ADR
Bank One Corp. 248,410 7,964,646
Chase Manhattan Corp. 18,600 1,444,988
Dai-Ichi Kangyo Bank Ltd. 39,000 364,432
FleetBoston Financial Corp. 1,839,146 64,025,270
Fuji Bank Ltd. 39,000 378,933
Industrial Bank of Japan Ltd. 39,000 375,881
(IBJ)
Sakura Bank Ltd. 62,000 359,139
Sumitomo Bank Ltd. 33,000 451,732
Wells Fargo & Co. 164,200 6,639,838
111,666,328
CREDIT & OTHER FINANCE - 0.6%
Associates First Capital 191,300 5,248,794
Corp. Class A
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
Citigroup, Inc. 64,900 $ 3,606,006
Concord EFS, Inc. (a) 76,050 1,958,288
Household International, Inc. 27,200 1,013,200
11,826,288
FEDERAL SPONSORED CREDIT - 8.7%
Fannie Mae 1,731,100 108,085,540
Freddie Mac 1,196,500 56,310,281
164,395,821
INSURANCE - 4.1%
Allmerica Financial Corp. 74,500 4,144,063
American International Group, 207,975 22,487,297
Inc.
CIGNA Corp. 229,600 18,497,150
Hartford Life, Inc. Class A 18,800 827,200
Marsh & McLennan Companies, 900 86,119
Inc.
MGIC Investment Corp. 477,100 28,715,456
Travelers Property Casualty 53,200 1,822,100
Corp. Class A
76,579,385
SAVINGS & LOANS - 0.6%
Golden State Bancorp, Inc. (a) 52,800 910,800
Washington Mutual, Inc. 360,300 9,367,800
10,278,600
SECURITIES INDUSTRY - 0.7%
Daiwa Securities Co. Ltd. 72,000 1,126,497
Kokusai Securities Co. Ltd. 37,000 579,618
Nomura Securities Co. Ltd. 662,000 11,950,979
13,657,094
TOTAL FINANCE 388,403,516
HEALTH - 10.5%
DRUGS & PHARMACEUTICALS - 3.5%
American Home Products Corp. 82,900 3,269,369
Amgen, Inc. (a) 136,600 8,204,538
Bristol-Myers Squibb Co. 10,500 673,969
Eli Lilly & Co. 277,300 18,440,450
Forest Laboratories, Inc. (a) 63,900 3,925,856
Merck & Co., Inc. 113,100 7,584,769
Schering-Plough Corp. 367,100 15,487,031
Warner-Lambert Co. 93,600 7,669,350
65,255,332
MEDICAL EQUIPMENT & SUPPLIES
- - 3.7%
Abbott Laboratories 256,900 9,328,681
AmeriSource Health Corp. 315,800 4,796,213
Class A (a)
Baxter International, Inc. 48,700 3,058,969
Biomet, Inc. 47,200 1,888,000
SHARES VALUE (NOTE 1)
Cardinal Health, Inc. 669,100 $ 32,033,163
Johnson & Johnson 211,900 19,733,188
70,838,214
MEDICAL FACILITIES MANAGEMENT
- - 3.3%
Columbia/HCA Healthcare Corp. 1,371,450 40,200,628
Lifepoint Hospitals, Inc. (a) 21,018 248,275
Tenet Healthcare Corp. (a) 520,400 12,229,400
United HealthCare Corp. 146,200 7,766,875
Wellpoint Health Networks, 15,000 989,063
Inc. (a)
61,434,241
TOTAL HEALTH 197,527,787
INDUSTRIAL MACHINERY &
EQUIPMENT - 3.6%
ELECTRICAL EQUIPMENT - 2.4%
ANTEC Corp. (a) 5,700 208,050
Emerson Electric Co. 188,000 10,786,500
General Electric Co. 116,200 17,981,950
Koninklijke Philips 68,112 9,253,509
Electronics NV
Thomas & Betts Corp. 114,100 3,636,938
W. W. Grainger, Inc. 53,900 2,577,094
44,444,041
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.9%
Caterpillar, Inc. 171,300 8,061,806
Deere & Co. 43,200 1,873,800
Illinois Tool Works, Inc. 40,800 2,756,550
Ingersoll-Rand Co. 60,400 3,325,775
Parker-Hannifin Corp. 19,500 1,000,594
17,018,525
POLLUTION CONTROL - 0.3%
Republic Services, Inc. Class 360,800 5,186,500
A (a)
Waste Management, Inc. 69,300 1,191,094
6,377,594
TOTAL INDUSTRIAL MACHINERY & 67,840,160
EQUIPMENT
MEDIA & LEISURE - 2.9%
BROADCASTING - 0.9%
AT&T Corp. - Liberty Media 185,622 10,534,049
Group Class A (a)
Cox Communications, Inc. 19,300 993,950
Class A (a)
MediaOne Group, Inc. (a) 76,400 5,868,475
17,396,474
ENTERTAINMENT - 0.8%
Cedar Fair LP (depository 3,000 58,125
unit)
Fox Entertainment Group, Inc. 190,800 4,758,075
Class A
Royal Carribbean Cruises Ltd. 155,500 7,668,094
Walt Disney Co. 48,600 1,421,550
13,905,844
LODGING & GAMING - 0.3%
Mirage Resorts, Inc. (a) 393,800 6,030,063
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.1%
Reader's Digest Association, 87,400 $ 2,556,450
Inc. Class A (non-vtg.)
RESTAURANTS - 0.8%
McDonald's Corp. 85,300 3,438,656
Outback Steakhouse, Inc. (a) 32,400 840,375
Papa John's International, 88,380 2,303,404
Inc. (a)
Wendy's International, Inc. 382,200 7,882,875
14,465,310
TOTAL MEDIA & LEISURE 54,354,141
NONDURABLES - 3.8%
FOODS - 0.5%
Keebler Foods Co. (a) 220,600 6,204,375
Nabisco Group Holdings Corp. 377,710 4,013,169
10,217,544
HOUSEHOLD PRODUCTS - 0.3%
Clorox Co. 41,700 2,100,638
Procter & Gamble Co. 25,100 2,750,019
4,850,657
TOBACCO - 3.0%
Philip Morris Companies, Inc. 2,393,600 55,501,600
RJ Reynolds Tobacco Holdings, 48,400 853,050
Inc.
56,354,650
TOTAL NONDURABLES 71,422,851
RETAIL & WHOLESALE - 10.1%
APPAREL STORES - 0.5%
Gap, Inc. 56,337 2,591,502
TJX Companies, Inc. 362,900 7,416,769
10,008,271
DRUG STORES - 0.5%
CVS Corp. 215,900 8,622,506
GENERAL MERCHANDISE STORES -
1.9%
Saks, Inc. (a) 124,606 1,939,181
Wal-Mart Stores, Inc. 489,200 33,815,950
35,755,131
GROCERY STORES - 1.0%
Kroger Co. (a) 238,000 4,492,250
Safeway, Inc. (a) 430,400 15,306,100
19,798,350
RETAIL & WHOLESALE,
MISCELLANEOUS - 6.2%
Best Buy Co., Inc. (a) 136,600 6,855,613
Circuit City Stores, Inc. - 327,000 14,735,438
Circuit City Group
Home Depot, Inc. 724,200 49,652,962
Lowe's Companies, Inc. 637,500 38,090,625
SHARES VALUE (NOTE 1)
Office Depot, Inc. (a) 234,400 $ 2,563,750
Staples, Inc. (a) 253,925 5,268,944
117,167,332
TOTAL RETAIL & WHOLESALE 191,351,590
SERVICES - 0.4%
ADVERTISING - 0.2%
Interpublic Group of 13,800 796,088
Companies, Inc.
Young & Rubicam, Inc. 41,100 2,907,825
3,703,913
SERVICES - 0.2%
Cendant Corp. (a) 28,100 746,406
Gartner Group, Inc. Class B 24,606 339,870
(a)
H&R Block, Inc. 48,900 2,139,375
3,225,651
TOTAL SERVICES 6,929,564
TECHNOLOGY - 16.1%
COMMUNICATIONS EQUIPMENT - 0.2%
Nokia AB sponsored ADR 24,800 4,712,000
COMPUTER SERVICES & SOFTWARE
- - 3.1%
Automatic Data Processing, 151,100 8,140,513
Inc.
Black Box Corp. (a) 42,200 2,827,400
Compuware Corp. (a) 59,700 2,223,825
Electronics for Imaging, Inc. 46,500 2,702,813
(a)
First Data Corp. 87,400 4,309,913
IMS Health, Inc. 140,600 3,822,563
Microsoft Corp. (a) 257,200 30,028,100
Policy Management Systems 185,500 4,741,844
Corp. (a)
58,796,971
COMPUTERS & OFFICE EQUIPMENT
- - 4.2%
Compaq Computer Corp. 496,700 13,441,944
Hewlett-Packard Co. 21,600 2,461,050
Ingram Micro, Inc. Class A (a) 186,700 2,450,438
International Business 186,800 20,174,400
Machines Corp.
SCI Systems, Inc. (a) 378,900 31,140,844
Tech Data Corp. (a) 293,700 7,966,613
Xerox Corp. 31,700 719,194
78,354,483
ELECTRONIC INSTRUMENTS - 1.1%
LAM Research Corp. (a) 150,500 16,790,156
Thermo Electron Corp. (a) 204,200 3,063,000
19,853,156
ELECTRONICS - 7.5%
Avnet, Inc. 153,900 9,310,950
DII Group, Inc. (a) 51,100 3,626,503
Flextronics International 122,200 5,621,200
Ltd. (a)
Intel Corp. 93,100 7,663,294
Methode Electronics, Inc. 274,100 8,805,463
Class A
Microchip Technology, Inc. (a) 62,400 4,270,500
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
ELECTRONICS - CONTINUED
Micron Technology, Inc. (a) 164,700 $ 12,805,425
Molex, Inc. Class A 124,328 5,625,842
Motorola, Inc. 80,000 11,780,000
National Semiconductor Corp. 148,100 6,340,531
(a)
Samsung Electronics Co. Ltd. 2,800 655,922
Sanmina Corp. (a) 39,600 3,955,050
Solectron Corp. (a) 647,100 61,555,388
142,016,068
TOTAL TECHNOLOGY 303,732,678
TRANSPORTATION - 2.1%
AIR TRANSPORTATION - 1.7%
AMR Corp. (a) 355,800 23,838,600
Delta Air Lines, Inc. 145,300 7,237,756
Southwest Airlines Co. 31,500 509,906
31,586,262
RAILROADS - 0.3%
Burlington Northern Santa Fe 214,900 5,211,325
Corp.
TRUCKING & FREIGHT - 0.1%
Airborne Freight Corp. 88,900 1,955,800
TOTAL TRANSPORTATION 38,753,387
UTILITIES - 5.3%
CELLULAR - 1.6%
Nextel Communications, Inc. 5,400 556,875
Class A (a)
Vodafone AirTouch PLC 122,710 607,414
Vodafone AirTouch PLC 592,700 29,338,650
sponsored ADR
30,502,939
ELECTRIC UTILITY - 0.0%
PG&E Corp. 6,230 127,715
TELEPHONE SERVICES - 3.7%
AT&T Corp. 123,735 6,279,551
Bell Atlantic Corp. 89,462 5,507,504
BellSouth Corp. 228,900 10,715,381
CenturyTel, Inc. 109,100 5,168,613
MCI WorldCom, Inc. (a) 435,942 23,132,172
SBC Communications, Inc. 185,700 9,052,875
Sprint Corp. - FON Group 148,900 10,022,831
69,878,927
TOTAL UTILITIES 100,509,581
TOTAL COMMON STOCKS 1,732,582,770
(Cost $1,350,160,544)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -
5.9%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. Treasury Bond stripped Aaa $ 43,450,000 $ 11,945,274
principal 0% 2/15/19
U.S. Treasury Bonds:
6.25% 8/15/23 Aaa 5,453,000 5,141,143
7.875% 2/15/21 Aaa 25,700,000 28,727,717
8.125% 8/15/19 Aaa 57,340,000 65,340,650
TOTAL U.S. TREASURY OBLIGATIONS 111,154,784
(Cost $116,659,863)
</TABLE>
CASH EQUIVALENTS - 2.1%
SHARES
Central Cash Collateral Fund, 606,267 606,267
4.97% (b)
Taxable Central Cash Fund, 39,485,825 39,485,825
5.12% (b)
TOTAL CASH EQUIVALENTS 40,092,092
(Cost $40,092,092)
TOTAL INVESTMENT PORTFOLIO - 1,883,829,646
99.9%
(Cost $1,506,912,499)
NET OTHER ASSETS - 0.1% 2,534,881
NET ASSETS - 100% $ 1,886,364,527
LEGEND
(a) Non-income producing
(b) The rate quoted is the annualized seven-day yield of the fund at
period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $894,724,769 and $745,409,290, respectively, of which
long-term U.S. government and government agency obligations aggregated
$41,066,453 and $48,055,363, respectively.
The market value of futures contracts opened and closed during the
period amounted to $175,738,624 and $182,122,319, 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 $107,749 for the
period.
The fund participated in the security lending program. At period end,
the value of securities loaned amounted to $577,176. The fund received
cash collateral of $606,267 which was invested in cash equivalents.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $1,511,727,227. Net unrealized appreciation
aggregated $372,102,419, of which $522,301,635 related to appreciated
investment securities and $150,199,216 related to depreciated
investment securities.
The fund hereby designates approximately $32,888,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH OPPORTUNITIES PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 1,883,829,646
value (cost $1,506,912,499)
- - See accompanying schedule
Receivable for investments 2,148,585
sold
Receivable for fund shares 535,464
sold
Dividends receivable 2,740,222
Interest receivable 2,920,101
Other receivables 83,824
TOTAL ASSETS 1,892,257,842
LIABILITIES
Payable for investments $ 1,068,695
purchased
Payable for fund shares 3,122,957
redeemed
Accrued management fee 903,886
Distribution fees payable 27,436
Other payables and accrued 164,074
expenses
Collateral on securities 606,267
loaned, at value
TOTAL LIABILITIES 5,893,315
NET ASSETS $ 1,886,364,527
Net Assets consist of:
Paid in capital $ 1,381,964,975
Undistributed net investment 21,419,780
income
Accumulated undistributed net 106,065,559
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 376,914,213
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 1,886,364,527
INITIAL CLASS: NET ASSET $23.15
VALUE, offering price and
redemption price per share
($1,541,587,000 (divided
by) 66,585,864 shares)
SERVICE CLASS: NET ASSET $23.12
VALUE, offering price and
redemption price per share
($344,777,527 (divided by)
14,910,472 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 21,477,145
Dividends
Interest 13,198,841
Security lending 1,906
TOTAL INCOME 34,677,892
EXPENSES
Management fee $ 10,735,937
Transfer agent fees 1,224,961
Distribution fees - Service 244,429
Class
Accounting and security 586,991
lending fees
Non-interested trustees' 5,362
compensation
Custodian fees and expenses 90,050
Registration fees 482
Audit 34,194
Legal 15,026
Miscellaneous 96,513
Total expenses before 13,033,945
reductions
Expense reductions (209,805) 12,824,140
NET INVESTMENT INCOME 21,853,752
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 108,726,308
Foreign currency transactions (3,630)
Futures contracts 1,116,516 109,839,194
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (54,881,867)
Assets and liabilities in (15,036)
foreign currencies
Futures contracts (26,196) (54,923,099)
NET GAIN (LOSS) 54,916,095
NET INCREASE (DECREASE) IN $ 76,769,847
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 207,869
Expense reductions Directed
brokerage arrangements
Custodian credits 1,936
$ 209,805
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 21,853,752 $ 17,248,593
income
Net realized gain (loss) 109,839,194 29,400,065
Change in net unrealized (54,923,099) 261,670,341
appreciation (depreciation)
NET INCREASE (DECREASE) IN 76,769,847 308,318,999
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (17,518,652) (12,018,174)
From net investment income
From net realized gain (32,887,198) (41,777,463)
TOTAL DISTRIBUTIONS (50,405,850) (53,795,637)
Share transactions - net 140,493,459 436,628,059
increase (decrease)
TOTAL INCREASE (DECREASE) 166,857,456 691,151,421
IN NET ASSETS
NET ASSETS
Beginning of period 1,719,507,071 1,028,355,650
End of period (including $ 1,886,364,527 $ 1,719,507,071
undistributed net investment
income of $21,419,780 and
$17,079,948, respectively)
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 14,140,894 $ 318,792,928 21,572,358 $ 432,066,063
Class Sold
Reinvested 2,116,413 45,714,518 2,818,502 53,495,168
Redeemed (18,293,067) (412,962,598) (8,989,787) (178,498,316)
Net increase (decrease) (2,035,760) $ (48,455,152) 15,401,073 $ 307,062,915
Service Class Sold 9,385,140 $ 211,858,592 6,428,938 $ 130,061,772
Reinvested 217,292 4,691,331 15,831 300,469
Redeemed (1,230,823) (27,601,312) (40,244) (797,097)
Net increase (decrease) 8,371,609 $ 188,948,611 6,404,525 $ 129,565,144
Distributions From net $ 15,930,817 $ 11,951,048
investment income Initial
Class
Service Class 1,587,835 67,126
Total $ 17,518,652 $ 12,018,174
From net realized gain $ 29,783,702 $ 41,544,120
Initial Class
Service Class 3,103,496 233,343
Total $ 32,887,198 $ 41,777,463
$ 50,405,850 $ 53,795,637
</TABLE>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 22.88 $ 19.27 $ 15.40 $ 13.07 $ 10.00
period
Income from Investment
Operations
Net investment income .27 D .26 D .29 D .26 .11
Net realized and unrealized .66 4.29 4.18 2.12 3.14
gain (loss)
Total from investment .93 4.55 4.47 2.38 3.25
operations
Less Distributions
From net investment income (.23) (.21) (.25) - (.11)
From net realized gain (.43) (.73) (.35) (.05) (.07)
Total distributions (.66) (.94) (.60) (.05) (.18)
Net asset value, end of period $ 23.15 $ 22.88 $ 19.27 $ 15.40 $ 13.07
TOTAL RETURN B, C 4.27% 24.61% 29.95% 18.27% 32.52%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,541,587 $ 1,570,011 $ 1,025,766 $ 383,085 $ 164,303
(000 omitted)
Ratio of expenses to average .69% .71% .74% .77% .85% G
net assets
Ratio of expenses to average .68% H .70% H .73% H .76% H .83% H
net assets after expense
reductions
Ratio of net investment 1.20% 1.27% 1.68% 2.29% 2.49%
income to average net assets
Portfolio turnover 42% 29% 26% 28% 38%
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 F
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 22.86 $ 19.27 $ 18.50
period
Income from Investment
Operations
Net investment income D .25 .23 .04
Net realized and unrealized .66 4.30 .73
gain (loss)
Total from investment .91 4.53 .77
operations
Less Distributions
From net investment income (.22) (.21) -
From net realized gain (.43) (.73) -
Total distributions (.65) (.94) -
Net asset value, end of period $ 23.12 $ 22.86 $ 19.27
TOTAL RETURN B, C 4.18% 24.51% 4.16%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 344,778 $ 149,496 $ 2,589
(000 omitted)
Ratio of expenses to average .79% .80% .84% A
net assets
Ratio of expenses to average .78% H .79% H .83% A, H
net assets after expense
reductions
Ratio of net investment 1.09% 1.16% 1.72% A
income to average net assets
Portfolio turnover 42% 29% 26%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
D NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD JANUARY 3,
1995 (COMMENCEMENT OF SALE
OF INITIAL CLASS SHARES) TO
DECEMBER 31, 1995.
F FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
G FMR AGREED TO REIMBURSE A
PORTION OF THE CLASS'
EXPENSES DURING THE PERIOD.
WITHOUT THIS REIMBURSEMENT,
THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
H FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
FIDELITY VARIABLE INSURANCE PRODUCTS: INDEX 500 PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the total return figures would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
1999
FIDELITY VIP INDEX 500 20.52% 28.16% 21.07%
S&P 500 (registered trademark) 21.04% 28.56% 21.45%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Standard
& Poor's 500 Index - a market capitalization-weighted index of common
stocks. This benchmark includes reinvested dividends and capital
gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown. The life of fund figures are from commencement
of operations, August 27, 1992.
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 BE 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 II Index 500 S&P 500
00157 SP001
1992/08/27 10000.00 10000.00
1992/08/31 10014.00 10016.72
1992/09/30 10130.00 10134.92
1992/10/31 10152.00 10170.39
1992/11/30 10498.00 10517.20
1992/12/31 10630.67 10646.56
1993/01/31 10707.47 10735.99
1993/02/28 10856.70 10882.00
1993/03/31 11095.84 11111.61
1993/04/30 10822.25 10842.71
1993/05/31 11103.95 11133.30
1993/06/30 11132.32 11165.58
1993/07/31 11081.66 11120.92
1993/08/31 11501.17 11542.40
1993/09/30 11407.95 11453.53
1993/10/31 11641.01 11690.62
1993/11/30 11527.52 11579.55
1993/12/31 11666.06 11719.67
1994/01/31 12059.53 12118.14
1994/02/28 11732.95 11789.73
1994/03/31 11223.46 11275.70
1994/04/30 11357.65 11420.03
1994/05/31 11533.77 11607.32
1994/06/30 11252.82 11322.94
1994/07/31 11623.93 11694.33
1994/08/31 12087.29 12173.80
1994/09/30 11793.76 11875.54
1994/10/31 12055.84 12142.74
1994/11/30 11617.64 11700.50
1994/12/31 11787.47 11874.02
1995/01/31 12099.87 12181.91
1995/02/28 12563.64 12656.64
1995/03/31 12931.02 13030.14
1995/04/30 13311.22 13413.88
1995/05/31 13834.52 13950.03
1995/06/30 14148.51 14274.09
1995/07/31 14620.55 14747.42
1995/08/31 14656.86 14784.44
1995/09/30 15269.88 15408.34
1995/10/31 15218.62 15353.33
1995/11/30 15880.76 16027.34
1995/12/31 16171.25 16336.03
1996/01/31 16724.46 16892.11
1996/02/29 16880.36 17048.70
1996/03/31 17054.17 17212.88
1996/04/30 17292.62 17466.59
1996/05/31 17733.85 17917.06
1996/06/30 17809.61 17985.32
1996/07/31 17020.75 17190.73
1996/08/31 17370.61 17553.28
1996/09/30 18342.21 18541.18
1996/10/31 18848.06 19052.55
1996/11/30 20260.89 20492.73
1996/12/31 19844.17 20086.77
1997/01/31 21074.26 21341.79
1997/02/28 21231.99 21509.11
1997/03/31 20349.53 20625.30
1997/04/30 21559.17 21856.63
1997/05/31 22870.18 23187.26
1997/06/30 23874.76 24226.05
1997/07/31 25773.31 26153.72
1997/08/31 24330.96 24688.59
1997/09/30 25646.59 26040.78
1997/10/31 24798.69 25171.02
1997/11/30 25920.77 26336.19
1997/12/31 26358.54 26788.38
1998/01/31 26644.25 27084.66
1998/02/28 28537.17 29038.00
1998/03/31 29981.03 30525.04
1998/04/30 30277.94 30832.12
1998/05/31 29736.79 30302.12
1998/06/30 30950.78 31532.99
1998/07/31 30613.17 31197.16
1998/08/31 26183.42 26686.68
1998/09/30 27866.72 28396.22
1998/10/31 30129.49 30705.97
1998/11/30 31944.49 32567.06
1998/12/31 33819.35 34443.58
1999/01/31 35179.40 35884.01
1999/02/28 34072.96 34768.73
1999/03/31 35443.67 36159.83
1999/04/30 36794.90 37560.30
1999/05/31 35911.12 36673.50
1999/06/30 37892.93 38708.88
1999/07/31 36712.12 37500.39
1999/08/31 36517.35 37314.76
1999/09/30 35506.97 36291.96
1999/10/31 37739.55 38588.52
1999/11/30 38494.29 39373.02
1999/12/31 40758.51 41692.10
IMATRL PRASUN SHR__CHT 19991231 20000118 145117 R00000000000092
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Index 500 Portfolio
on August 27, 1992, when the fund started. As the chart shows, by
December 31, 1999, the value of the investment would have grown to
$40,759 - a 307.59% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $41,692 - a 316.92%
increase.
INVESTMENT SUMMARY
TOP TEN STOCKS AS OF DECEMBER
31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 4.8
General Electric Co. 4.1
Cisco Systems, Inc. 2.8
Wal-Mart Stores, Inc. 2.5
Exxon Mobil Corp. 2.2
Intel Corp. 2.2
Lucent Technologies, Inc. 1.9
International Business 1.6
Machines Corp.
Citigroup, Inc. 1.5
America Online, Inc. 1.3
24.9
TOP TEN MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 28.5
FINANCE 13.1
UTILITIES 11.0
HEALTH 9.1
RETAIL & WHOLESALE 6.6
NONDURABLES 6.1
INDUSTRIAL MACHINERY & 5.8
EQUIPMENT
ENERGY 5.4
MEDIA & LEISURE 4.5
BASIC INDUSTRIES 3.4
FIDELITY VARIABLE INSURANCE PRODUCTS: INDEX 500 PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(Photograph with Dean Barr)
An interview with Dean Barr, who oversees the Index 500 Portfolio's
investment management personnel as Managing Director for Bankers
Trust, sub-adviser of the fund
Q. HOW DID THE FUND PERFORM, DEAN?
A. The fund's performance was in line with the S&P's return of 21.04%
for the 12-month period ending December 31, 1999. This marks the fifth
consecutive year in which the S&P, and hence, the fund, has recorded
an annual return of over 20%.
Q. WITH FIVE STRAIGHT YEARS OF RETURNS EXCEEDING 20%, ONE WOULD THINK
THAT THE STOCK MARKET IS IN GREAT SHAPE. TRUE?
A. Yes and no. Interestingly, the top 50 stocks in the S&P 500, the
so-called "Nifty 50," accounted for 115% of its total return.
Meanwhile, the remaining 450 stocks had a cumulative return of -3.13%.
Also, one single sector - technology - was responsible for
approximately 70% of the S&P's return. This reflects incredibly narrow
market breadth. Overall, more stocks fell than rose in 1999. So are
the double-digit returns masking a hidden bear market? Some believe
so, and that this scenario will lead to more interest rate hikes.
Others believe that this is a natural fallout of the "new economy,"
Internet-centric business and consumer environments. It's too soon to
tell how this will play out in 2000, but it will certainly be
interesting to watch how the dynamics unfold.
Q. LET'S TALK MORE ABOUT TECHNOLOGY, THE FUND'S AND THE
BENCHMARK'S LARGEST SECTOR WEIGHTING . . .
A. In a year in which "dot.com" became part of our everyday lexicon,
technology was paced by the Internet frenzy - from servers to search
engines to semiconductors, and pretty much everything else in between.
In some cases, tech stocks succeeded almost without reason. Excessive
valuations, little to no revenues, questionable fundamentals . . . and
yet, they still managed to produce outstanding returns. Overall,
however, strong current earnings growth in most issues and potential
growth year-over-year is what captured investors' attention and, in
their minds, warranted the lofty valuations. The big winners for the
fund and the index included Microsoft, the largest holding and
single-best performer for each, and other familiar names such as
Cisco, Intel, Oracle and Sun Microsystems.
Q. FINANCE REMAINED THE SECOND-LARGEST SECTOR WEIGHTING.
HOW DID THIS GROUP PERFORM IN 1999?
A. Three interest-rate hikes by the Federal Reserve Board were
especially detrimental to the finance sector, which typically
underperforms in a rising rate environment. Banks were particularly
hard hit, and even companies that beat their earnings estimates and
demonstrated strong fundamentals - such as government-sponsored
mortgage companies Fannie Mae and Freddie Mac - were dragged under.
Some areas of the industry did fare well, however, namely consumer
finance and credit card companies. Among these, American Express was a
true standout. Its credit card business benefited from the vigorous
U.S. economic growth, and it implemented one of the best Internet
strategies of any traditional bricks-and-mortar enterprise.
Q. HEALTH CARE, ONE OF THE HOTTEST SECTORS IN 1998, COOLED
CONSIDERABLY IN 1999. WHAT HAPPENED?
A. Large-cap pharmaceutical stocks, which drove the sector in '98,
were largely responsible for its decline in 1999. Investors became
concerned about weaker sales resulting from the potential loss of
patent protection for many drugs, possible government regulation of
pricing and a poor product pipeline outlook. Names like Pfizer and Eli
Lilly fell greatly from their highs. But again, like the finance
sector, there were some industries within health care that performed
very well - specifically, biotechnology and genomics. These groups
experienced waves of investor interest based on their considerable
growth prospects.
Q. WHAT OTHER SECTORS OF THE MARKET WERE NOTEWORTHY IN 1999?
A. While utilities underperformed as a category, the wireless and
telecommunications subsectors within utilities performed exceptionally
well. Driven by the growth of the Internet and the demand for digital
voice and data communications, wireless and telecom contributed
exceptional returns. One of the most talked-about stocks in 1999,
Qualcomm, resides in this sector. Its stock price increased over
1,800% during the year.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT FEW MONTHS?
A. I don't see the technology juggernaut slowing to a great degree,
nor do I see the U.S. economy putting on the brakes anytime soon. Of
course, that's fairly dependent upon how hard the Federal Reserve
Board steps on them. But if productivity remains strong, pricing
remains steady and wage pressures don't come to bear, then I foresee a
favorable 2000 for the stock market.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF BANKERS TRUST ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
ANY SUCH VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR
OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FUND FACTS
GOAL: to provide returns that correspond to those of the S&P 500 index
START DATE: August 27, 1992
SIZE: as of December 31, 1999, more than
$5.5 billion
MANAGER: Bankers Trust, since 1997
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: INDEX 500 PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 98.6%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 1.4%
AEROSPACE & DEFENSE - 1.2%
BFGoodrich Co. 50,600 $ 1,391,500
Boeing Co. 416,868 17,326,076
Honeywell International, Inc. 352,462 20,332,652
Lockheed Martin Corp. 182,986 4,002,819
Northrop Grumman Corp. 30,200 1,632,688
Rockwell International Corp. 83,700 4,007,138
Textron, Inc. 65,500 5,023,031
United Technologies Corp. 212,000 13,780,000
67,495,904
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. Class B 149,900 3,981,719
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 92,900 4,900,475
TOTAL AEROSPACE & DEFENSE 76,378,098
BASIC INDUSTRIES - 3.4%
CHEMICALS & PLASTICS - 1.6%
Air Products & Chemicals, 97,400 3,268,988
Inc.
Ashland, Inc. 31,500 1,037,531
Avery Dennison Corp. 49,400 3,600,025
Dow Chemical Co. 97,100 12,974,988
E. I. du Pont de Nemours and 465,779 30,683,192
Co.
Eastman Chemical Co. 36,375 1,734,633
Engelhard Corp. 55,300 1,043,788
FMC Corp. (a) 13,900 796,644
Great Lakes Chemical Corp. 25,200 962,325
Hercules, Inc. 45,500 1,268,313
Monsanto Co. 286,200 10,195,875
Pactiv Corp. (a) 110,700 1,176,188
PPG Industries, Inc. 74,900 4,685,931
Praxair, Inc. 68,000 3,421,250
Rohm & Haas Co. 92,936 3,781,334
Sealed Air Corp. (a) 44,560 2,308,765
Union Carbide Corp. 61,500 4,105,125
W. R. Grace & Co. (a) 31,300 434,288
87,479,183
IRON & STEEL - 0.1%
Allegheny Technologies, Inc. 40,192 901,808
Bethlehem Steel Corp. (a) 52,600 440,525
Nucor Corp. 48,200 2,641,963
USX - U.S. Steel Group 41,500 1,369,500
Worthington Industries, Inc. 38,050 630,203
5,983,999
METALS & MINING - 0.5%
Alcan Aluminium Ltd. 103,557 4,251,943
Alcoa, Inc. 158,300 13,138,900
Freeport-McMoRan Copper & 65,700 1,387,913
Gold, Inc. Class B (a)
SHARES VALUE (NOTE 1)
Inco Ltd. 81,036 $ 1,882,083
Phelps Dodge Corp. 36,357 2,440,464
Reynolds Metals Co. 28,300 2,168,488
25,269,791
PACKAGING & CONTAINERS - 0.3%
Ball Corp. 12,530 493,369
Bemis Co., Inc. 19,200 669,600
Corning, Inc. 112,300 14,479,681
Crown Cork & Seal Co., Inc. 53,500 1,197,063
Owens-Illinois, Inc. (a) 63,900 1,601,494
Tupperware Corp. 24,400 413,275
18,854,482
PAPER & FOREST PRODUCTS - 0.9%
Boise Cascade Corp. 24,200 980,100
Champion International Corp. 44,900 2,780,994
Fort James Corp. 97,900 2,680,013
Georgia-Pacific Corp. 75,200 3,816,400
International Paper Co. 186,666 10,534,962
Kimberly-Clark Corp. 237,832 15,518,538
Louisiana-Pacific Corp. 52,700 750,975
Mead Corp. 44,200 1,919,938
Potlatch Corp. 17,300 772,013
Temple-Inland, Inc. 24,400 1,608,875
Westvaco Corp. 38,950 1,270,744
Weyerhaeuser Co. 95,000 6,822,188
Willamette Industries, Inc. 45,300 2,103,619
51,559,359
TOTAL BASIC INDUSTRIES 189,146,814
CONSTRUCTION & REAL ESTATE -
0.3%
BUILDING MATERIALS - 0.2%
Armstrong World Industries, 17,800 594,075
Inc.
Crane Co. 27,800 552,525
Fortune Brands, Inc. 80,500 2,661,531
Huttig Building Products, 6,177 30,499
Inc. (a)
Masco Corp. 192,300 4,879,613
Owens Corning 24,400 471,225
Sherwin-Williams Co. 78,700 1,652,700
Vulcan Materials Co. 43,500 1,737,281
Water Pik Technologies, Inc. 4,019 38,432
(a)
12,617,881
CONSTRUCTION - 0.0%
Centex Corp. 26,300 649,281
Fleetwood Enterprises, Inc. 14,800 305,250
Kaufman & Broad Home Corp. 21,700 524,869
Pulte Corp. 16,700 375,750
1,855,150
ENGINEERING - 0.1%
Fluor Corp. 33,300 1,527,638
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONSTRUCTION & REAL ESTATE -
CONTINUED
ENGINEERING - CONTINUED
Foster Wheeler Corp. 19,400 $ 172,175
PerkinElmer, Inc. 19,400 808,738
2,508,551
TOTAL CONSTRUCTION & REAL 16,981,582
ESTATE
DURABLES - 2.1%
AUTOS, TIRES, & ACCESSORIES -
1.4%
AutoZone, Inc. (a) 60,850 1,966,216
Cooper Tire & Rubber Co. 35,300 549,356
Cummins Engine Co., Inc. 15,800 763,338
Dana Corp. 72,666 2,175,438
Danaher Corp. 62,100 2,996,325
Delphi Automotive Systems 255,535 4,024,676
Corp.
Eaton Corp. 31,400 2,280,425
Ford Motor Co. 535,000 28,589,063
General Motors Corp. 285,078 20,721,607
Genuine Parts Co. 76,450 1,896,916
Goodyear Tire & Rubber Co. 68,300 1,925,206
Johnson Controls, Inc. 34,200 1,945,125
NACCO Industries, Inc. Class A 2,600 144,463
Navistar International Corp. 28,870 1,367,716
(a)
PACCAR, Inc. 36,090 1,599,238
Pep Boys-Manny, Moe & Jack 22,200 202,575
TRW, Inc. 53,300 2,768,269
75,915,952
CONSUMER DURABLES - 0.3%
Minnesota Mining & 179,800 17,597,925
Manufacturing Co.
Snap-On, Inc. 27,300 725,156
18,323,081
CONSUMER ELECTRONICS - 0.1%
Black & Decker Corp. 48,400 2,528,900
Maytag Corp. 38,600 1,852,800
Whirlpool Corp. 29,800 1,938,863
6,320,563
HOME FURNISHINGS - 0.1%
Leggett & Platt, Inc. 86,300 1,850,056
Newell Rubbermaid, Inc. 120,993 3,508,797
5,358,853
TEXTILES & APPAREL - 0.2%
Liz Claiborne, Inc. 27,500 1,034,688
NIKE, Inc. Class B 128,300 6,358,869
Reebok International Ltd. (a) 24,800 203,050
Russell Corp. 15,200 254,600
Springs Industries, Inc. 7,900 315,506
Class A
VF Corp. 51,900 1,557,000
9,723,713
TOTAL DURABLES 115,642,162
SHARES VALUE (NOTE 1)
ENERGY - 5.4%
ENERGY SERVICES - 0.5%
Baker Hughes, Inc. 141,330 $ 2,976,763
Halliburton Co. 200,800 8,082,200
McDermott International, Inc. 24,200 219,313
Rowan Companies, Inc. (a) 36,200 785,088
Schlumberger Ltd. 242,800 13,657,500
Transocean Sedco Forex, Inc. 92,306 3,109,558
28,830,422
OIL & GAS - 4.9%
Amerada Hess Corp. 41,000 2,326,750
Anadarko Petroleum Corp. 53,900 1,839,338
Apache Corp. 47,000 1,736,063
Atlantic Richfield Co. 143,900 12,447,350
Burlington Resources, Inc. 85,257 2,818,810
Chevron Corp. 290,700 25,181,888
Conoco, Inc. Class B 277,331 6,898,609
Exxon Mobil Corp. 1,529,733 123,239,115
Kerr-McGee Corp. 39,894 2,473,428
Occidental Petroleum Corp. 150,000 3,243,750
Phillips Petroleum Co. 108,000 5,076,000
Royal Dutch Petroleum Co. 949,775 57,402,027
(NY Registry Gilder 1.25)
Sunoco, Inc. 42,000 987,000
Texaco, Inc. 246,200 13,371,738
The Coastal Corp. 93,100 3,299,231
Tosco Corp. 67,200 1,827,000
Union Pacific Resources 107,212 1,366,953
Group, Inc.
Unocal Corp. 104,150 3,495,534
USX - Marathon Group 130,200 3,214,313
272,244,897
TOTAL ENERGY 301,075,319
FINANCE - 13.1%
BANKS - 4.9%
AmSouth Bancorp. 155,500 3,003,094
Bank of America Corp. 756,140 37,948,776
Bank of New York Co., Inc. 323,800 12,952,000
Bank One Corp. 507,999 16,287,718
BB&T Corp. 129,300 3,539,588
Capital One Financial Corp. 90,800 4,375,425
Chase Manhattan Corp. 365,646 28,406,124
Comerica, Inc. 81,900 3,823,706
Fifth Third Bancorp 136,725 10,032,197
First Union Corp. 427,145 14,015,695
Firstar Corp. 439,642 9,287,437
FleetBoston Financial Corp. 411,483 14,324,752
Huntington Bancshares, Inc. 98,104 2,342,233
J. P. Morgan & Co., Inc. 78,400 9,927,400
KeyCorp 198,114 4,383,272
Mellon Financial Corp. 228,300 7,776,469
National City Corp. 279,242 6,614,545
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Northern Trust Corp. 98,600 $ 5,225,800
PNC Financial Corp. 133,200 5,927,400
Regions Financial Corp. 91,600 2,301,450
Republic of New York Corp. 46,800 3,369,600
SouthTrust Corp. 79,600 3,009,875
State Street Corp. 67,900 4,960,944
Summit Bancorp 79,700 2,440,813
SunTrust Banks, Inc. 142,800 9,826,425
Synovus Finanical Corp. 105,000 2,086,875
U.S. Bancorp 333,351 7,937,921
Union Planters Corp. 56,700 2,236,106
Wachovia Corp. 88,800 6,038,400
Wells Fargo & Co. 727,400 29,414,238
273,816,278
CREDIT & OTHER FINANCE - 2.7%
American Express Co. 198,279 32,963,884
Associates First Capital 325,148 8,921,248
Corp. Class A
Citigroup, Inc. 1,493,429 82,978,649
Countrywide Credit 49,400 1,247,350
Industries, Inc.
Household International, Inc. 208,182 7,754,780
MBNA Corp. 359,325 9,791,606
Old Kent Financial Corp. 54,600 1,931,475
Providian Financial Corp. 63,300 5,764,256
151,353,248
FEDERAL SPONSORED CREDIT - 0.8%
Fannie Mae 457,700 28,577,644
Freddie Mac 310,400 14,608,200
SLM Holding Corp. 70,100 2,961,725
46,147,569
INSURANCE - 3.0%
Aetna, Inc. 67,200 3,750,600
AFLAC, Inc. 120,200 5,671,938
Allstate Corp. 356,742 8,561,808
American General Corp. 109,452 8,304,670
American International Group, 685,812 74,153,423
Inc.
Aon Corp. 108,025 4,321,000
CIGNA Corp. 83,000 6,686,688
Cincinnati Financial Corp. 68,500 2,136,344
Conseco, Inc. 141,716 2,533,174
Hartford Financial Services 98,500 4,666,438
Group, Inc.
Jefferson-Pilot Corp. 46,400 3,166,800
Lincoln National Corp. 87,300 3,492,000
Loews Corp. 45,700 2,773,419
Marsh & McLennan Companies, 121,050 11,582,972
Inc.
MBIA, Inc. 42,400 2,239,250
MGIC Investment Corp. 46,300 2,786,681
Progressive Corp. 30,800 2,252,250
SAFECO Corp. 57,600 1,432,800
SHARES VALUE (NOTE 1)
St. Paul Companies, Inc. (The) 113,192 $ 3,813,156
The Chubb Corp. 79,900 4,499,369
Torchmark Corp. 56,800 1,650,750
UnumProvident Corp. 100,838 3,233,118
163,708,648
SAVINGS & LOANS - 0.2%
Golden West Financial Corp. 77,400 2,592,900
Washington Mutual, Inc. 258,562 6,722,612
9,315,512
SECURITIES INDUSTRY - 1.5%
Charles Schwab Corp. 367,300 14,095,138
Franklin Resources, Inc. 107,000 3,430,688
Kansas City Southern 46,500 3,470,063
Industries, Inc.
Lehman Brothers Holdings, 52,000 4,403,750
Inc.
Merrill Lynch & Co., Inc. 158,400 13,226,400
Morgan Stanley Dean Witter & 246,656 35,210,144
Co.
PaineWebber Group, Inc. 69,300 2,689,706
T. Rowe Price Associates, 65,300 2,412,019
Inc.
The Bear Stearns Companies, 49,497 2,115,997
Inc.
81,053,905
TOTAL FINANCE 725,395,160
HEALTH - 9.1%
DRUGS & PHARMACEUTICALS - 6.2%
Allergan, Inc. 62,400 3,104,400
ALZA Corp. Class A. (a) 42,300 1,464,638
American Home Products Corp. 583,400 23,007,838
Amgen, Inc. (a) 452,500 27,178,281
Bausch & Lomb, Inc. 23,500 1,608,281
Bristol-Myers Squibb Co. 878,600 56,395,138
Eli Lilly & Co. 482,992 32,118,968
Merck & Co., Inc. 1,035,300 69,429,806
Pfizer, Inc. 1,721,500 55,841,156
Pharmacia & Upjohn, Inc. 226,260 10,181,700
Quintiles Transnational Corp. 51,700 966,144
(a)
Schering-Plough Corp. 655,600 27,658,125
Sigma-Aldrich Corp. 43,400 1,304,713
Warner-Lambert Co. 382,000 31,300,125
Watson Pharmaceuticals, Inc. 39,400 1,411,013
(a)
342,970,326
MEDICAL EQUIPMENT & SUPPLIES
- - 2.5%
Abbott Laboratories 685,600 24,895,850
Baxter International, Inc. 124,500 7,820,156
Becton, Dickinson & Co. 110,900 2,966,575
Biomet, Inc. 60,600 2,424,000
Boston Scientific Corp. (a) 195,000 4,265,625
C. R. Bard, Inc. 29,200 1,547,600
Cardinal Health, Inc. 123,650 5,919,744
Guidant Corp. 137,700 6,471,900
Johnson & Johnson 615,900 57,355,688
Mallinckrodt, Inc. 30,200 960,738
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - CONTINUED
McKesson HBOC, Inc. 119,048 $ 2,686,021
Medtronic, Inc. 515,300 18,776,244
Millipore Corp. 18,800 726,150
Pall Corp. 53,300 1,149,281
St. Jude Medical, Inc. (a) 34,229 1,050,402
139,015,974
MEDICAL FACILITIES MANAGEMENT
- - 0.4%
Columbia/HCA Healthcare Corp. 248,912 7,296,233
HEALTHSOUTH Corp. (a) 223,800 1,202,925
Humana, Inc. (a) 70,700 578,856
Manor Care, Inc. (a) 46,200 739,200
Tenet Healthcare Corp. (a) 131,100 3,080,850
United HealthCare Corp. 78,800 4,186,250
Wellpoint Health Networks, 28,500 1,879,219
Inc. (a)
18,963,533
TOTAL HEALTH 500,949,833
INDUSTRIAL MACHINERY &
EQUIPMENT - 5.8%
ELECTRICAL EQUIPMENT - 4.5%
Emerson Electric Co. 192,400 11,038,950
General Electric Co. 1,453,300 224,898,175
General Instrument Corp. (a) 77,400 6,579,000
Scientific-Atlanta, Inc. 34,900 1,941,313
Teledyne Technologies, Inc. 11,483 108,371
(a)
Thomas & Betts Corp. 23,800 758,625
W. W. Grainger, Inc. 40,400 1,931,625
247,256,059
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.2%
Briggs & Stratton Corp. 10,000 536,250
Caterpillar, Inc. 161,900 7,619,419
Cooper Industries, Inc. 40,146 1,623,404
Deere & Co. 101,500 4,402,563
Dover Corp. 91,200 4,138,200
Illinois Tool Works, Inc. 125,800 8,499,363
Ingersoll-Rand Co. 72,400 3,986,525
ITT Industries, Inc. 41,400 1,384,313
Milacron, Inc. 12,800 196,800
Parker-Hannifin Corp. 46,125 2,366,789
The Stanley Works 37,800 1,138,725
Timken Co. 23,784 486,085
Tyco International Ltd. 747,142 29,045,145
65,423,581
POLLUTION CONTROL - 0.1%
Allied Waste Industries, Inc. 75,300 663,581
(a)
Waste Management, Inc. 282,709 4,859,061
5,522,642
TOTAL INDUSTRIAL MACHINERY & 318,202,282
EQUIPMENT
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 4.5%
BROADCASTING - 2.1%
CBS Corp. (a) 337,608 $ 21,585,812
Clear Channel Communications, 152,600 13,619,550
Inc. (a)
Comcast Corp. Class A 334,600 16,918,213
(special)
MediaOne Group, Inc. (a) 273,700 21,023,581
Time Warner, Inc. 569,840 41,277,785
114,424,941
ENTERTAINMENT - 1.1%
Carnival Corp. 273,900 13,095,844
Viacom, Inc. Class B 307,000 18,554,313
(non-vtg.) (a)
Walt Disney Co. 916,600 26,810,550
58,460,707
LEISURE DURABLES & TOYS - 0.1%
Brunswick Corp. 39,800 885,550
Hasbro, Inc. 85,675 1,633,180
Mattel, Inc. 199,176 2,614,185
5,132,915
LODGING & GAMING - 0.1%
Harrah's Entertainment, Inc. 46,100 1,218,769
(a)
Hilton Hotels Corp. 187,700 1,806,613
Marriott International, Inc. 102,700 3,241,469
Class A
Mirage Resorts, Inc. (a) 88,800 1,359,750
7,626,601
PUBLISHING - 0.6%
American Greetings Corp. 37,600 888,300
Class A
Dow Jones & Co., Inc. 32,300 2,196,400
Gannet Co., Inc. 124,900 10,187,156
Harcourt General, Inc. 26,100 1,050,525
Knight-Ridder, Inc. 40,000 2,380,000
McGraw-Hill Companies, Inc. 86,600 5,336,725
Meredith Corp. 22,400 933,800
The New York Times Co. Class A 77,800 3,821,925
Times Mirror Co. Class A 30,900 2,070,300
Tribune Co. 105,200 5,792,575
34,657,706
RESTAURANTS - 0.5%
Darden Restaurants, Inc. 58,300 1,056,688
McDonald's Corp. 604,900 24,385,031
Tricon Global Restaurants, 68,510 2,646,199
Inc. (a)
Wendy's International, Inc. 52,600 1,084,875
29,172,793
TOTAL MEDIA & LEISURE 249,475,663
NONDURABLES - 6.1%
BEVERAGES - 2.1%
Adolph Coors Co. Class B 15,400 808,500
Anheuser-Busch Companies, 208,500 14,777,438
Inc.
Brown-Forman Corp. Class B 25,300 1,448,425
Coca-Cola Enterprises, Inc. 181,600 3,654,700
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - CONTINUED
BEVERAGES - CONTINUED
PepsiCo, Inc. 644,800 $ 22,729,200
Seagram Co. Ltd. 194,100 8,660,507
The Coca-Cola Co. 1,094,000 63,725,500
115,804,270
FOODS - 1.2%
Archer-Daniels-Midland Co. 262,528 3,199,560
Bestfoods 124,600 6,549,288
Campbell Soup Co. 186,700 7,222,956
ConAgra, Inc. 207,700 4,686,231
General Mills, Inc. 135,100 4,829,825
H. J. Heinz Co. 160,050 6,371,991
Hershey Foods Corp. 59,200 2,812,000
Kellogg Co. 172,200 5,305,913
Nabisco Group Holdings Corp. 157,200 1,670,250
Quaker Oats Co. 64,200 4,213,125
Ralston Purina Co. 142,500 3,972,188
Sara Lee Corp. 386,200 8,520,538
Sysco Corp. 147,800 5,847,338
Wm. Wrigley Jr. Co. 58,400 4,843,550
70,044,753
HOUSEHOLD PRODUCTS - 2.3%
Alberto-Culver Co. Class B 16,000 413,000
Avon Products, Inc. 118,300 3,903,900
Clorox Co. 104,700 5,274,263
Colgate-Palmolive Co. 257,500 16,737,500
Gillette Co. 475,100 19,568,181
International Flavors & 43,500 1,642,125
Fragrances, Inc.
Procter & Gamble Co. 582,100 63,776,331
Unilever NV (NY Shares) 268,752 14,630,187
125,945,487
TOBACCO - 0.5%
Philip Morris Companies, Inc. 1,048,000 24,300,500
RJ Reynolds Tobacco Holdings, 1 18
Inc.
UST, Inc. 80,300 2,022,556
26,323,074
TOTAL NONDURABLES 338,117,584
PRECIOUS METALS - 0.1%
Barrick Gold Corp. 170,900 3,041,871
Homestake Mining Co. 100,800 787,500
Newmont Mining Corp. 77,265 1,892,993
Placer Dome, Inc. 152,000 1,633,787
7,356,151
RETAIL & WHOLESALE - 6.6%
APPAREL STORES - 0.5%
Gap, Inc. 382,875 17,612,250
SHARES VALUE (NOTE 1)
The Limited, Inc. 105,740 $ 4,579,864
TJX Companies, Inc. 136,100 2,781,544
24,973,658
DRUG STORES - 0.4%
CVS Corp. 174,900 6,985,069
Longs Drug Stores Corp. 16,500 425,906
Rite Aid Corp. 129,700 1,451,019
Walgreen Co. 449,200 13,139,100
22,001,094
GENERAL MERCHANDISE STORES -
3.4%
Consolidated Stores Corp. (a) 46,300 752,375
Costco Wholesale Corp. (a) 98,539 8,991,684
Dayton Hudson Corp. 193,900 14,239,531
Dillards, Inc. Class A 43,900 886,231
Dollar General Corp. 104,193 2,370,391
Federated Department Stores, 88,800 4,489,950
Inc. (a)
JCPenney Co., Inc. 111,500 2,223,031
Kmart Corp. (a) 208,700 2,100,044
Kohls Corp. (a) 79,500 5,738,906
Nordstrom, Inc. 64,700 1,694,331
Sears, Roebuck & Co. 169,800 5,168,288
The May Department Stores Co. 154,900 4,995,525
Wal-Mart Stores, Inc. 1,971,100 136,252,288
189,902,575
GROCERY STORES - 0.4%
Albertson's, Inc. 193,681 6,246,212
Great Atlantic & Pacific Tea, 16,200 451,575
Inc.
Kroger Co. (a) 364,200 6,874,275
Safeway, Inc. (a) 227,800 8,101,138
SUPERVALU, Inc. 49,600 992,000
Winn-Dixie Stores, Inc. 60,500 1,448,219
24,113,419
RETAIL & WHOLESALE,
MISCELLANEOUS - 1.9%
Bed Bath & Beyond, Inc. (a) 60,300 2,095,425
Best Buy Co., Inc. (a) 92,500 4,642,344
Circuit City Stores, Inc. - 89,700 4,042,106
Circuit City Group
Home Depot, Inc. 1,019,850 69,923,466
IKON Office Solutions, Inc. 57,400 391,038
Lowe's Companies, Inc. 177,400 10,599,650
Office Depot, Inc. (a) 180,400 1,973,125
Staples, Inc. (a) 215,150 4,464,363
Tandy Corp. 83,700 4,116,994
Toys 'R' Us, Inc. (a) 114,700 1,641,644
103,890,155
TOTAL RETAIL & WHOLESALE 364,880,901
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 0.6%
ADVERTISING - 0.3%
Interpublic Group of 115,800 $ 6,680,213
Companies, Inc.
Omnicom Group, Inc. 79,500 7,950,000
14,630,213
LEASING & RENTAL - 0.0%
Ryder System, Inc. 33,600 821,100
PRINTING - 0.0%
Deluxe Corp. 34,800 954,825
R. R. Donnelley & Sons Co. 57,300 1,421,756
2,376,581
SERVICES - 0.3%
Cendant Corp. (a) 303,941 8,073,433
Dun & Bradstreet Corp. 71,200 2,100,400
Ecolab, Inc. 49,700 1,944,513
H&R Block, Inc. 46,300 2,025,625
Jostens, Inc. 10,300 250,419
National Service Industries, 19,600 578,200
Inc.
Service Corp. International 115,700 802,669
15,775,259
TOTAL SERVICES 33,603,153
TECHNOLOGY - 28.5%
COMMUNICATIONS EQUIPMENT - 6.2%
3Com Corp. (a) 154,000 7,238,000
ADC Telecommunications, Inc. 58,200 4,223,138
(a)
Andrew Corp. (a) 52,212 988,765
Cabletron Systems, Inc. (a) 88,800 2,308,800
Cisco Systems, Inc. (a) 1,448,850 155,208,056
Lucent Technologies, Inc. 1,392,506 104,176,855
Nortel Networks Corp. 592,640 59,747,387
Tellabs, Inc. (a) 174,800 11,219,975
345,110,976
COMPUTER SERVICES & SOFTWARE
- - 10.4%
Adobe Systems, Inc. 54,800 3,685,300
America Online, Inc. (a) 990,200 74,698,213
Autodesk, Inc. 24,500 826,875
Automatic Data Processing, 276,300 14,885,663
Inc.
BMC Software, Inc. (a) 107,000 8,553,313
Ceridian Corp. (a) 57,800 1,246,313
Citrix Systems, Inc. (a) 40,100 4,932,300
Computer Associates 240,012 16,785,839
International, Inc.
Computer Sciences Corp. (a) 71,400 6,756,225
Compuware Corp. (a) 159,300 5,933,925
Electronic Data Systems Corp. 208,500 13,956,469
Equifax, Inc. 61,000 1,437,313
First Data Corp. 187,300 9,236,231
IMS Health, Inc. 144,800 3,936,750
Microsoft Corp. (a) 2,285,600 266,843,749
Novell, Inc. (a) 149,900 5,986,631
SHARES VALUE (NOTE 1)
Oracle Corp. (a) 630,625 $ 70,669,414
Parametric Technology Corp. 120,300 3,255,619
(a)
Paychex, Inc. 109,250 4,370,000
PeopleSoft, Inc. 112,000 2,387,000
Shared Medical Systems Corp. 11,200 570,500
Unisys Corp. (a) 136,600 4,362,663
Yahoo!, Inc. (a) 116,600 50,451,363
575,767,668
COMPUTERS & OFFICE EQUIPMENT
- - 6.7%
Adaptec, Inc. (a) 46,100 2,299,238
Apple Computer, Inc. (a) 66,900 6,878,156
Compaq Computer Corp. 749,062 20,271,490
Comverse Technology, Inc. (a) 32,000 4,632,000
Dell Computer Corp. (a) 1,125,400 57,395,400
EMC Corp. (a) 452,475 49,432,894
Gateway, Inc. (a) 137,600 9,915,800
Hewlett-Packard Co. 452,300 51,533,931
International Business 798,400 86,227,200
Machines Corp.
Lexmark International Group, 57,500 5,203,750
Inc. Class A (a)
Network Appliance, Inc. (a) 67,200 5,581,800
Pitney Bowes, Inc. 117,500 5,676,719
Seagate Technology, Inc. (a) 93,000 4,330,313
Silicon Graphics, Inc. (a) 79,300 778,131
Sun Microsystems, Inc. (a) 691,000 53,509,313
Xerox Corp. 304,600 6,910,613
370,576,748
ELECTRONIC INSTRUMENTS - 0.7%
Applied Materials, Inc. (a) 165,200 20,928,775
KLA-Tencor Corp. (a) 38,600 4,299,075
PE Corp. - Biosystems Group 47,000 5,654,688
Tektronix, Inc. 19,850 771,669
Teradyne, Inc. (a) 76,100 5,022,600
Thermo Electron Corp. (a) 63,800 957,000
37,633,807
ELECTRONICS - 4.3%
Advanced Micro Devices, Inc. 61,400 1,776,763
(a)
Analog Devices, Inc. (a) 76,000 7,068,000
Intel Corp. 1,479,800 121,806,038
LSI Logic Corp. (a) 59,300 4,002,750
Micron Technology, Inc. (a) 105,600 8,210,400
Molex, Inc. 67,200 3,809,400
Motorola, Inc. 268,700 39,566,075
National Semiconductor Corp. 75,000 3,210,938
(a)
Solectron Corp. (a) 122,800 11,681,350
Texas Instruments, Inc. 350,800 33,983,750
Xilinx, Inc. (a) 143,200 6,511,125
241,626,589
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 0.2%
Eastman Kodak Co. 139,800 $ 9,261,750
Polaroid Corp. 21,900 411,994
9,673,744
TOTAL TECHNOLOGY 1,580,389,532
TRANSPORTATION - 0.6%
AIR TRANSPORTATION - 0.2%
AMR Corp. (a) 68,400 4,582,800
Delta Air Lines, Inc. 58,800 2,928,975
Southwest Airlines Co. 213,675 3,458,864
US Airways Group, Inc. (a) 33,900 1,086,919
12,057,558
RAILROADS - 0.3%
Burlington Northern Santa Fe 220,054 5,336,310
Corp.
CSX Corp. 95,238 2,988,092
Norfolk Southern Corp. 161,600 3,312,800
Union Pacific Corp. 109,800 4,790,025
16,427,227
TRUCKING & FREIGHT - 0.1%
FDX Corp. (a) 139,540 5,712,419
TOTAL TRANSPORTATION 34,197,204
UTILITIES - 11.0%
CELLULAR - 1.8%
ALLTEL Corp. 136,300 11,270,306
Nextel Communications, Inc. 163,200 16,830,000
Class A (a)
QUALCOMM, Inc. (a) 294,000 51,780,750
Sprint Corp. - PCS Group 190,850 19,562,125
Series 1 (a)
99,443,181
ELECTRIC UTILITY - 1.6%
AES Corp. (a) 93,900 7,019,025
Ameren Corp. 54,400 1,781,600
American Electric Power Co., 88,200 2,833,425
Inc.
Carolina Power & Light Co. 58,800 1,789,725
Central & South West Corp. 89,962 1,799,240
Cinergy Corp. 62,613 1,510,539
CMS Energy Corp. 50,000 1,559,375
Consolidated Edison, Inc. 99,100 3,418,950
Constellation Energy Corp. 59,800 1,734,200
Dominion Resources, Inc. 90,700 3,559,975
DTE Energy Co. 66,600 2,089,575
Duke Energy Corp. 168,407 8,441,401
Edison International 162,600 4,258,088
Entergy Corp. 122,400 3,151,800
SHARES VALUE (NOTE 1)
FirstEnergy Corp. 92,100 $ 2,089,519
Florida Progress Corp. 43,300 1,832,131
FPL Group, Inc. 78,900 3,377,906
GPU, Inc. 47,700 1,428,019
New Century Energies, Inc. 44,100 1,339,538
Niagara Mohawk Holdings, Inc. 99,300 1,383,994
(a)
Northern States Power Co. 54,700 1,066,650
PECO Energy Co. 98,000 3,405,500
PG&E Corp. 168,100 3,446,050
Pinnacle West Capital Corp. 37,800 1,155,263
PP&L Resources, Inc. 59,040 1,350,540
Public Service Enterprise 94,800 3,300,225
Group, Inc.
Reliant Energy, Inc. 119,422 2,731,778
Southern Co. 298,100 7,005,350
Texas Utilities Co. 125,800 4,473,763
Unicom Corp. 99,400 3,329,900
87,663,044
GAS - 0.6%
Columbia Energy Group 36,000 2,277,000
Consolidated Natural Gas Co. 41,100 2,668,931
Eastern Enterprises Co. 12,300 706,481
El Paso Energy Corp. 102,300 3,970,519
Enron Corp. 318,700 14,142,313
NICOR, Inc. 23,900 776,750
ONEOK, Inc. 12,506 314,213
Peoples Energy Corp. 15,300 512,550
Sempra Energy 101,256 1,759,323
Williams Companies, Inc. 181,500 5,547,094
32,675,174
TELEPHONE SERVICES - 7.0%
AT&T Corp. 1,415,305 71,826,729
Bell Atlantic Corp. 687,778 42,341,333
BellSouth Corp. 830,100 38,859,056
CenturyTel, Inc. 61,100 2,894,613
Global Crossing Ltd. (a) 340,925 17,046,250
GTE Corp. 430,400 30,370,100
MCI WorldCom, Inc. (a) 1,254,555 66,569,825
SBC Communications, Inc. 1,510,970 73,659,788
Sprint Corp. - FON Group 387,300 26,070,131
U.S. WEST, Inc. 227,592 16,386,624
386,024,449
TOTAL UTILITIES 605,805,848
TOTAL COMMON STOCKS 5,457,597,286
(Cost $3,569,389,138)
U.S. TREASURY OBLIGATIONS -
1.2%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. Treasury Bills, yield at - $ 67,338,000 $ 66,739,941
date of purchase 4.41% to
5.33% 1/6/00 to 3/23/00 (b)
(Cost $66,707,957)
CASH EQUIVALENTS - 3.5%
SHARES
Bankers Trust Institutional 195,553,860 195,553,860
Daily Asset Fund, 5.64% (c)
(Cost $195,553,860)
TOTAL INVESTMENT PORTFOLIO - 5,719,891,087
103.3%
(Cost $3,831,650,955)
NET OTHER ASSETS - (3.3)% (181,156,397)
NET ASSETS - 100% $ 5,538,734,690
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT AT VALUE UNREALIZED GAIN/LOSS
PURCHASED
188 S&P 500 Stock Index March 2000 $ 69,757,400 $ 1,171,540
Contracts
</TABLE>
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS -
1.3%
LEGEND
(a) Non-income producing
(b) Security or portion of the security was pledged to cover margin
requirements for futures contracts. At period end, the value of
securities pledged amounted to $9,500,000.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
OTHER INFORMATION
Purchases of securities, other than short-term securities aggregated
$1,335,477,273. Sales of securities, other than short-term securities,
aggregated $352,686,746, of which $189,593,992 represents the value of
securities delivered in redemption of fund shares. The realized gain
(loss) of $(19,766,037) on securities delivered in redemption of fund
shares is not taxable to the fund.
The market value of futures contracts opened and closed during the
period amounted to $1,689,438,572 and $1,744,339,056, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company
or Bankers Trust Company. The commissions paid to these affiliated
firms were $0 and $67,430, respectively, for the period.
The fund participated in the security lending program. At period end,
the value of securities loaned amounted to $191,479,679. The fund
received cash collateral of $195,553,860 which was invested in cash
equivalents.
The fund participated in the bank borrowing program. The average daily
loan balance during the period for which loans were outstanding
amounted to $65,685,000. The weighted average interest rate was 5.63%.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $3,840,199,163. Net unrealized appreciation
aggregated $1,879,691,924, of which $2,147,196,458 related to
appreciated investment securities and $267,504,534 related to
depreciated investment securities.
The fund hereby designates approximately $20,392,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: INDEX 500 PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 5,719,891,087
value (cost $3,831,650,955)
- - See accompanying schedule
Receivable for investments 939,400
sold
Receivable for fund shares 13,535,853
sold
Dividends receivable 5,192,827
Interest receivable 116,823
Receivable for daily 163,101
variation on futures
contracts
TOTAL ASSETS 5,739,839,091
LIABILITIES
Payable to custodian bank $ 1,066,785
Payable for investments 1,493,996
purchased
Payable for fund shares 1,660,899
redeemed
Accrued management fee and 871,653
sub-advisory fee
Other payables and accrued 457,208
expenses
Collateral on securities 195,553,860
loaned, at value
TOTAL LIABILITIES 201,104,401
NET ASSETS $ 5,538,734,690
Net Assets consist of:
Paid in capital $ 3,581,128,016
Undistributed net investment 51,598,237
income
Accumulated undistributed net 16,596,765
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 1,889,411,672
(depreciation) on investments
NET ASSETS, for 33,084,429 $ 5,538,734,690
shares outstanding
NET ASSET VALUE, offering $167.41
price and redemption price
per share ($5,538,734,690
(divided by) 33,084,429
shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 59,738,255
Dividends
Interest 4,816,154
Security lending 579,682
TOTAL INCOME 65,134,091
EXPENSES
Management fee and $ 11,596,410
sub-advisory fee
Transfer agent fees 3,177,411
Accounting and security 914,740
lending fees
Non-interested trustees' 13,398
compensation
Registration fees 57,258
Audit 55,052
Legal 54,160
Interest 10,263
Miscellaneous 319,628
Total expenses before 16,198,320
reductions
Expense reductions (2,738,317) 13,460,003
NET INVESTMENT INCOME 51,674,088
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (8,978,244)
Foreign currency transactions 9,474
Futures contracts 18,123,881 9,155,111
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 837,600,367
Assets and liabilities in (65)
foreign currencies
Futures contracts (4,938,247) 832,662,055
NET GAIN (LOSS) 841,817,166
NET INCREASE (DECREASE) IN $ 893,491,254
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 2,693,102
Expense reductions FMR
reimbursement
Custodian credits 45,215
$ 2,738,317
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 51,674,088 $ 38,335,034
income
Net realized gain (loss) 9,155,111 16,170,769
Change in net unrealized 832,662,055 661,278,302
appreciation (depreciation)
NET INCREASE (DECREASE) IN 893,491,254 715,784,105
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (39,106,912) (26,060,180)
From net investment income
From net realized gain (26,536,833) (60,359,977)
TOTAL DISTRIBUTIONS (65,643,745) (86,420,157)
Share transactions Net 1,868,929,324 1,653,376,843
proceeds from sales of shares
Reinvestment of distributions 65,643,745 86,420,157
Cost of shares redeemed (995,753,409) (695,135,202)
NET INCREASE (DECREASE) IN 938,819,660 1,044,661,798
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 1,766,667,169 1,674,025,746
IN NET ASSETS
NET ASSETS
Beginning of period 3,772,067,521 2,098,041,775
End of period (including $ 5,538,734,690 $ 3,772,067,521
undistributed net investment
income of $51,598,237 and
$38,272,966, respectively)
OTHER INFORMATION
Shares
Sold 12,455,112 13,244,133
Issued in reinvestment of 468,884 751,741
distributions
Redeemed (6,545,615) (5,630,148)
Net increase (decrease) 6,378,381 8,365,726
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 141.24 $ 114.40 $ 89.05 $ 75.71 $ 56.22
period
Income from Investment
Operations
Net investment income 1.64 C 1.65 C 1.80 C 1.04 .85
Net realized and unrealized 26.88 29.70 26.67 15.55 19.72
gain (loss)
Total from investment 28.52 31.35 28.47 16.59 20.57
operations
Less Distributions
From net investment income (1.40) (1.36) (1.03) (.91) (.95)
From net realized gain (.95) (3.15) (2.09) (2.34) (.11)
In excess of net realized gain - - - - (.02)
Total distributions (2.35) (4.51) (3.12) (3.25) (1.08)
Net asset value, end of period $ 167.41 $ 141.24 $ 114.40 $ 89.05 $ 75.71
TOTAL RETURN A, B 20.52% 28.31% 32.83% 22.71% 37.19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 5,538,735 $ 3,772,068 $ 2,098,042 $ 823,243 $ 245,700
(000 omitted)
Ratio of expenses to average .28% D .28% D .28% D .28% D .28% D
net assets
Ratio of net investment 1.09% 1.33% 1.74% 2.26% 2.70%
income to average net assets
Portfolio turnover rate 8% 4% 9% 14% 16%
</TABLE>
A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
PROXY VOTING RESULTS (UNAUDITED)
A special meeting of Index 500 Portfolio's shareholders was held on
September 15, 1999. The results of votes taken among shareholders on
proposals before them are reported below. Each vote reported
represents one dollar of net asset value held on the record date for
the meeting.
PROPOSAL 1(A)
To approve an interim sub-advisory agreement with Bankers Trust
Company for Index 500 Portfolio.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 28,714,620.820 90.257%
Against 888,790.795 2.794%
Abstain 2,210,738.590 6.949%
TOTAL 31,814,150.205 100.000%
PROPOSAL 1(B)
To approve a new sub-advisory agreement with Bankers Trust Company for
Index 500 Portfolio.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 28,644,098.127 90.036%
Against 917,138.304 2.883%
Abstain 2,252,913.774 7.081%
TOTAL 31,814,150.205 100.000%
PROPOSAL 2
To approve a new "manager-of-managers" arrangement for Index 500
Portfolio.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 27,934,514.445 87.805%
Against 1,454,672.124 4.573%
Abstain 2,424,963.636 7.622%
TOTAL 31,814,150.205 100.000%
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH & INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the life of fund total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
FIDELITY VIP: GROWTH & INCOME 9.17% 22.11%
- - "INITIAL CLASS"
S&P 500 (registered trademark) 21.04% 26.79%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Standard
& Poor's 500 Index - a market capitalization-weighted index of common
stocks. This benchmark includes reinvested dividends and capital
gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown. The life of fund figures are from commencement
of operations, December 31, 1996.
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 BE 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 III Growth & Income S&P 500
00147 SP001
1996/12/31 10000.00 10000.00
1997/01/31 10250.00 10440.61
1997/02/28 10270.00 10522.46
1997/03/31 9820.00 10090.10
1997/04/30 10350.00 10692.48
1997/05/31 10930.00 11343.43
1997/06/30 11490.00 11851.62
1997/07/31 12420.00 12794.65
1997/08/31 11790.00 12077.90
1997/09/30 12410.00 12739.40
1997/10/31 12060.00 12313.91
1997/11/30 12600.00 12883.92
1997/12/31 12879.20 13105.13
1998/01/31 12951.15 13250.08
1998/02/28 13837.79 14205.67
1998/03/31 14540.53 14933.14
1998/04/30 14540.53 15083.37
1998/05/31 14323.51 14824.09
1998/06/30 15057.25 15426.24
1998/07/31 14953.91 15261.95
1998/08/31 12835.35 13055.38
1998/09/30 13796.45 13891.71
1998/10/31 14871.23 15021.66
1998/11/30 15822.00 15932.12
1998/12/31 16690.09 16850.13
1999/01/31 17062.13 17554.80
1999/02/28 16735.18 17009.20
1999/03/31 17261.77 17689.74
1999/04/30 17746.24 18374.86
1999/05/31 17240.71 17941.03
1999/06/30 17999.01 18936.76
1999/07/31 17367.09 18345.55
1999/08/31 17135.39 18254.74
1999/09/30 16829.97 17754.38
1999/10/31 17714.65 18877.88
1999/11/30 17819.96 19261.67
1999/12/31 18220.18 20396.18
IMATRL PRASUN SHR__CHT 19991231 20000207 091024 R00000000000039
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Growth & Income
Portfolio on December 31, 1996, when the fund started. As the chart
shows, by December 31, 1999, the value of the investment would have
grown to $18,220 - an 82.20% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $20,396 - a 103.96%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 6.5
Exxon Mobil Corp. 4.5
Fannie Mae 4.0
Freddie Mac 3.4
Associates First Capital 3.2
Corp. Class A
21.6
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 20.7
FINANCE 17.8
HEALTH 12.2
RETAIL & WHOLESALE 8.5
UTILITIES 8.4
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stocks 92.1%
Short-Term Investments and
Net Other Assets 7.9%
Row: 1, Col: 1, Value: 92.09999999999999
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 7.9
* FOREIGN INVESTMENTS 4.3%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH & INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). The initial offering of Service Class shares
took place on November 3, 1997. Performance for Service Class shares
reflects an asset based distribution fee (12b-1 fee), and returns
prior to November 3, 1997 are those of Initial Class and do not
include the effects of Service Class' 12b-1 fee. Had Service Class
shares' 12b-1 fee been reflected, returns prior to November 3, 1997
would have been lower. If Fidelity had not reimbursed certain fund
expenses, the life of fund total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
FIDELITY VIP: GROWTH & INCOME 9.06% 21.98%
- - SERVICE CLASS
S&P 500 21.04% 26.79%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Standard
& Poor's 500 Index - a market capitalization-weighted index of common
stocks. This benchmark includes reinvested dividends and capital
gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown. The life of fund figures are from commencement
of operations, December 31, 1996.
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 BE 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 III Growth & Inc - SC S&P 500
00473 SP001
1996/12/31 10000.00 10000.00
1997/01/31 10250.00 10440.61
1997/02/28 10270.00 10522.46
1997/03/31 9820.00 10090.10
1997/04/30 10350.00 10692.48
1997/05/31 10930.00 11343.43
1997/06/30 11490.00 11851.62
1997/07/31 12420.00 12794.65
1997/08/31 11790.00 12077.90
1997/09/30 12410.00 12739.40
1997/10/31 12060.00 12313.91
1997/11/30 12590.00 12883.92
1997/12/31 12879.48 13105.13
1998/01/31 12941.16 13250.08
1998/02/28 13817.49 14205.67
1998/03/31 14520.25 14933.14
1998/04/30 14509.91 15083.37
1998/05/31 14292.88 14824.09
1998/06/30 15026.65 15426.24
1998/07/31 14923.30 15261.95
1998/08/31 12804.69 13055.38
1998/09/30 13765.81 13891.71
1998/10/31 14830.29 15021.66
1998/11/30 15781.08 15932.12
1998/12/31 16649.19 16850.13
1999/01/31 17021.24 17554.80
1999/02/28 16683.76 17009.20
1999/03/31 17210.39 17689.74
1999/04/30 17694.90 18374.86
1999/05/31 17189.33 17941.03
1999/06/30 17947.68 18936.76
1999/07/31 17315.72 18345.55
1999/08/31 17084.00 18254.74
1999/09/30 16778.55 17754.38
1999/10/31 17663.30 18877.88
1999/11/30 17758.09 19261.67
1999/12/31 18158.33 20396.18
IMATRL PRASUN SHR__CHT 19991231 20000113 154204 R00000000000039
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Growth & Income
Portfolio - Service Class on December 31, 1996, when the fund started.
As the chart shows, by December 31, 1999, the value of the investment
would have grown to $18,158 - an 81.58% increase on the initial
investment. For comparison, look at how the Standard & Poor's 500
Index did over the same period. With dividends and capital gains, if
any, reinvested, the same $10,000 investment would have grown to
$20,396 - a 103.96% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 6.5
Exxon Mobil Corp. 4.5
Fannie Mae 4.0
Freddie Mac 3.4
Associates First Capital 3.2
Corp. Class A
21.6
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 20.7
FINANCE 17.8
HEALTH 12.2
RETAIL & WHOLESALE 8.5
UTILITIES 8.4
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stocks 92.1%
Short-Term Investments and
Net Other Assets 7.9%
Row: 1, Col: 1, Value: 92.09999999999999
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 0.0
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 7.9
* FOREIGN INVESTMENTS 4.3%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH & INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Louis Salemy)
An interview with Louis Salemy, Portfolio Manager of Growth & Income
Portfolio
Q. HOW DID THE FUND PERFORM, LOUIS?
A. For the 12 months that ended December 31, 1999, the fund's return
was less than half of the 21.04% return of the Standard & Poor's 500
Index.
Q. WHY DID THE FUND UNDERPERFORM THE INDEX?
A. Underweighting the technology sector was the most important reason.
In the second half of 1999, there were essentially two stock
markets-technology stocks and everything else. The discrepancy was so
pronounced that the non-technology part of the S&P 500, as a group,
was actually down for the year. I brought the fund's technology
weighting up from 13.0% of net assets six months ago to 20.7% at the
end of the period. However, it was not enough to make up the
performance shortfall. Another factor that hurt performance relative
to the index was investors' emphasis within the technology sector on a
small number of stocks with very high price-to-earnings ratios. The
fund's policy of pursuing growth at a reasonable price prevented it
from buying these stocks. Finally, missing out on the brief but
powerful rally in cyclical stocks earlier in the year contributed to
the fund's underperformance relative to the index.
Q. WHY DID YOU MAINTAIN AN OVERWEIGHTING IN FINANCE STOCKS - WHICH
WERE 17.8% OF NET ASSETS AT THE END OF THE PERIOD - IN THE FACE OF
RISING INTEREST RATES?
A. Rising interest rates do not affect all types of finance stocks
equally. Banks, which I underweighted, tend to have more difficulty
responding quickly to rate increases. Furthermore, during the period
many banks had earnings problems related to recent mergers and
acquisitions. However, consumer finance companies and credit card
companies, which I overweighted relative to the index, can do well
when interest rates are rising, as long as the economy is growing
vigorously and the rate hikes are not too steep. This phenomenon was
reflected in the strong earnings reported by many of the fund's
finance holdings. Unfortunately, investors chose to focus, for the
time being, on interest rates instead of earnings.
Q. WHAT STOCKS DID WELL FOR THE FUND?
A. Microsoft topped the list of stocks that helped performance.
Investors put aside earlier concerns over the government's antitrust
lawsuit against the company, and the stock rallied sharply as the
period drew to a close. In addition, Microsoft was helped by positive
momentum in the technology sector generally and by the upcoming launch
of the company's Windows 2000 operating system. American Express was
another strong holding, benefiting from the introduction of a credit
card aimed specifically at Internet users. Also doing well was Home
Depot, which enjoyed strong sales at existing stores as well as good
results from new stores.
Q. WHAT STOCKS DETRACTED FROM PERFORMANCE?
A. Philip Morris was a disappointing holding. Although the stock was
already cheap when I bought it, it got cheaper during the period due
to ongoing litigation concerns. Associates First, a consumer credit
company, consistently reported earnings that matched analysts'
estimates, but the stock took a hit because of concerns about the
impact of higher interest rates and a slight deterioration in the
credit quality of the company's loan portfolio. Freddie Mac and Fannie
Mae, two government-sponsored mortgage companies, also made the list
of disappointments. Apparently frightened by higher interest rates,
investors chose to ignore the excellent earnings outlook for these two
stocks.
Q. WHAT'S YOUR OUTLOOK, LOUIS?
A. My decisions about sector allocations will be influenced to some
extent by what happens in the bond market and the economy. Right now
the economy looks strong, and if that trend continues, there may be
further opportunities in cyclical stocks. The technology sector also
bears careful watching, especially for signs of a reacceleration of
spending following the Y2K phenomenon. On the other hand, if prospects
for the bond market improve, perhaps because of a softening economy, I
would consider moving more assets into the finance sector, where
investor sentiment has been overly negative. My main focus, though, is
to add value through stock selection by finding stocks with the
potential to contribute meaningfully to the fund's goal of achieving a
high total return through a combination of current income and capital
appreciation.
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FUND FACTS
GOAL: seeks a high total return through a combination of current
income and capital appreciation
START DATE: December 31, 1996
SIZE: as of December 31, 1999, more than
$1.3 billion
MANAGER: Louis Salemy, since 1998; joined Fidelity in 1992
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH & INCOME PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS - 92.1%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.9%
AEROSPACE & DEFENSE - 0.5%
Boeing Co. 172,200 $ 7,157,063
SHIP BUILDING & REPAIR - 0.4%
General Dynamics Corp. 107,100 5,649,525
TOTAL AEROSPACE & DEFENSE 12,806,588
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.1%
Avery Dennison Corp. 17,800 1,297,175
PACKAGING & CONTAINERS - 0.5%
Ball Corp. 163,725 6,446,672
TOTAL BASIC INDUSTRIES 7,743,847
CONSTRUCTION & REAL ESTATE -
1.3%
REAL ESTATE INVESTMENT TRUSTS
- - 1.3%
Equity Office Properties Trust 250,600 6,171,025
Equity Residential Properties 150,900 6,441,544
Trust (SBI)
Public Storage, Inc. 243,100 5,515,331
18,127,900
DURABLES - 1.6%
AUTOS, TIRES, & ACCESSORIES -
0.8%
Ford Motor Co. 196,600 10,505,813
CONSUMER DURABLES - 0.8%
Minnesota Mining & 112,700 11,030,513
Manufacturing Co.
TOTAL DURABLES 21,536,326
ENERGY - 6.9%
ENERGY SERVICES - 0.5%
Schlumberger Ltd. 117,600 6,615,000
Transocean Sedco Forex, Inc. 22,767 766,963
7,381,963
OIL & GAS - 6.4%
BP Amoco PLC sponsored ADR 305,962 18,147,371
Exxon Mobil Corp. 757,328 61,012,237
Royal Dutch Petroleum Co. (NY 117,000 7,071,188
Registry Gilder 1.25)
86,230,796
TOTAL ENERGY 93,612,759
FINANCE - 17.8%
BANKS - 3.5%
Bank of New York Co., Inc. 424,400 16,976,000
Mellon Financial Corp. 258,500 8,805,156
Wachovia Corp. 326,800 22,222,400
48,003,556
SHARES VALUE (NOTE 1)
CREDIT & OTHER FINANCE - 5.8%
American Express Co. 211,300 $ 35,128,625
Associates First Capital 1,601,100 43,930,181
Corp. Class A
79,058,806
FEDERAL SPONSORED CREDIT - 7.4%
Fannie Mae 873,400 54,532,913
Freddie Mac 971,232 45,708,606
100,241,519
INSURANCE - 1.1%
American International Group, 72,837 7,875,501
Inc.
Hartford Financial Services 139,000 6,585,125
Group, Inc.
14,460,626
TOTAL FINANCE 241,764,507
HEALTH - 12.2%
DRUGS & PHARMACEUTICALS - 11.3%
American Home Products Corp. 259,300 10,226,144
Amgen, Inc. (a) 280,500 16,847,531
Bristol-Myers Squibb Co. 425,300 27,298,944
Eli Lilly & Co. 390,800 25,988,200
Merck & Co., Inc. 498,400 33,423,950
Schering-Plough Corp. 119,400 5,037,188
Warner-Lambert Co. 424,700 34,798,856
153,620,813
MEDICAL EQUIPMENT & SUPPLIES
- - 0.9%
Baxter International, Inc. 104,000 6,532,500
Becton, Dickinson & Co. 204,000 5,457,000
11,989,500
TOTAL HEALTH 165,610,313
INDUSTRIAL MACHINERY &
EQUIPMENT - 4.1%
ELECTRICAL EQUIPMENT - 2.4%
General Electric Co. 210,300 32,543,925
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.7%
Caterpillar, Inc. 137,800 6,485,213
Ingersoll-Rand Co. 125,800 6,926,863
Tyco International Ltd. 253,320 9,847,815
23,259,891
TOTAL INDUSTRIAL MACHINERY & 55,803,816
EQUIPMENT
MEDIA & LEISURE - 2.5%
BROADCASTING - 1.7%
Comcast Corp. Class A 219,300 11,088,356
(special)
Infinity Broadcasting Corp. 324,825 11,754,605
Class A
22,842,961
ENTERTAINMENT - 0.5%
Walt Disney Co. 207,000 6,054,750
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.3%
Times Mirror Co. Class A 63,500 $ 4,254,500
TOTAL MEDIA & LEISURE 33,152,211
NONDURABLES - 5.3%
FOODS - 1.1%
Bestfoods 149,600 7,863,350
Ralston Purina Co. 223,300 6,224,488
14,087,838
HOUSEHOLD PRODUCTS - 2.7%
Procter & Gamble Co. 332,800 36,462,400
TOBACCO - 1.5%
Philip Morris Companies, Inc. 895,660 20,768,116
TOTAL NONDURABLES 71,318,354
RETAIL & WHOLESALE - 8.5%
APPAREL STORES - 0.7%
Gap, Inc. 196,462 9,037,252
DRUG STORES - 1.2%
CVS Corp. 197,800 7,899,637
Walgreen Co. 306,900 8,976,825
16,876,462
GENERAL MERCHANDISE STORES -
3.9%
Costco Wholesale Corp. (a) 179,400 16,370,250
Dayton Hudson Corp. 129,900 9,539,531
Wal-Mart Stores, Inc. 397,000 27,442,625
53,352,406
GROCERY STORES - 0.3%
Safeway, Inc. (a) 117,000 4,160,813
RETAIL & WHOLESALE,
MISCELLANEOUS - 2.4%
Bed Bath & Beyond, Inc. (a) 222,500 7,731,875
Home Depot, Inc. 355,500 24,373,969
32,105,844
TOTAL RETAIL & WHOLESALE 115,532,777
SERVICES - 0.8%
ADVERTISING - 0.7%
Omnicom Group, Inc. 95,600 9,560,000
SERVICES - 0.1%
Gartner Group, Inc. Class B 70,814 978,118
(a)
TOTAL SERVICES 10,538,118
SHARES VALUE (NOTE 1)
TECHNOLOGY - 20.7%
COMMUNICATIONS EQUIPMENT - 3.9%
Cisco Systems, Inc. (a) 322,800 $ 34,579,950
Lucent Technologies, Inc. 114,500 8,566,031
Nokia AB sponsored ADR 53,300 10,127,000
53,272,981
COMPUTER SERVICES & SOFTWARE
- - 10.6%
Automatic Data Processing, 407,200 21,937,900
Inc.
DST Systems, Inc. (a) 156,800 11,965,800
IMS Health, Inc. 565,900 15,385,406
Intuit, Inc. (a) 14,600 875,088
Litton Industries, Inc. (a) 117,600 5,865,300
Microsoft Corp. (a) 751,400 87,725,945
143,755,439
COMPUTERS & OFFICE EQUIPMENT
- - 2.7%
EMC Corp. (a) 118,500 12,946,125
Hewlett-Packard Co. 85,100 9,696,081
Pitney Bowes, Inc. 286,700 13,851,194
36,493,400
ELECTRONICS - 3.5%
Intel Corp. 271,700 22,364,306
Motorola, Inc. 52,700 7,760,075
Solectron Corp. (a) 172,500 16,409,063
46,533,444
TOTAL TECHNOLOGY 280,055,264
TRANSPORTATION - 0.5%
RAILROADS - 0.5%
Burlington Northern Santa Fe 276,900 6,714,825
Corp.
UTILITIES - 8.4%
CELLULAR - 2.8%
ALLTEL Corp. 128,100 10,592,269
Nextel Communications, Inc. 99,000 10,209,375
Class A (a)
Vodafone AirTouch PLC 340,600 16,859,700
sponsored ADR
37,661,344
ELECTRIC UTILITY - 0.4%
IPALCO Enterprises, Inc. 287,900 4,912,294
TELEPHONE SERVICES - 5.2%
AT&T Corp. 223,750 11,355,313
BellSouth Corp. 236,000 11,047,750
MCI WorldCom, Inc. (a) 283,133 15,023,718
SBC Communications, Inc. 692,730 33,770,588
71,197,369
TOTAL UTILITIES 113,771,007
TOTAL COMMON STOCKS 1,248,088,612
(Cost $1,049,863,902)
CASH EQUIVALENTS - 7.9%
SHARES VALUE (NOTE 1)
Taxable Central Cash Fund, 107,201,675 $ 107,201,675
5.12% (b)
(Cost $107,201,675)
TOTAL INVESTMENT PORTFOLIO - 1,355,290,287
100.0%
(Cost $1,157,065,577)
NET OTHER ASSETS - (0.0)% (293,554)
NET ASSETS - 100% $ 1,354,996,733
</TABLE>
LEGEND
(a) Non-income producing
(b) The rate quoted is the annualized seven-day yield of the fund at
period end.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $789,435,681 and $696,126,181, 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 $93,221 for the
period.
The fund participated in the security lending program. At period end
there were no loans outstanding.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $1,157,997,994. Net unrealized appreciation
aggregated $197,292,293, of which $280,086,415 related to appreciated
investment securities and $82,794,122 related to depreciated
investment securities.
The fund hereby designates approximately $12,689,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH & INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 1,355,290,287
value (cost $1,157,065,577)
- - See accompanying schedule
Receivable for investments 4,064,455
sold
Receivable for fund shares 878,318
sold
Dividends receivable 1,247,852
Interest receivable 560,334
Other receivables 11,924
TOTAL ASSETS 1,362,053,170
LIABILITIES
Payable to custodian bank $ 5,230
Payable for investments 4,218,658
purchased
Payable for fund shares 2,159,841
redeemed
Accrued management fee 538,088
Distribution fees payable 7,010
Other payables and accrued 127,610
expenses
TOTAL LIABILITIES 7,056,437
NET ASSETS $ 1,354,996,733
Net Assets consist of:
Paid in capital $ 1,051,113,889
Undistributed net investment 14,353,340
income
Accumulated undistributed net 91,304,794
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 198,224,710
(depreciation) on investments
NET ASSETS $ 1,354,996,733
INITIAL CLASS: NET ASSET $17.30
VALUE, offering price and
redemption price per share
($1,259,396,292 (divided by)
72,796,460 shares)
SERVICE CLASS: NET ASSET $17.24
VALUE, offering price and
redemption per share
($95,600,441 (divided by)
5,545,693 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 15,564,192
Dividends
Interest 6,629,664
Security lending 211
TOTAL INCOME 22,194,067
EXPENSES
Management fee $ 6,383,024
Transfer agent fees 884,058
Distribution fees - Service 41,594
Class
Accounting and security 446,583
lending fees
Non-interested trustees' 3,822
compensation
Custodian fees and expenses 22,186
Registration fees 70,550
Audit 29,919
Legal 11,478
Miscellaneous 59,089
Total expenses before 7,952,303
reductions
Expense reductions (107,373) 7,844,930
NET INVESTMENT INCOME 14,349,137
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 94,532,442
Foreign currency transactions (4,603) 94,527,839
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 5,577,132
Assets and liabilities in (1,085) 5,576,047
foreign currencies
NET GAIN (LOSS) 100,103,886
NET INCREASE (DECREASE) IN $ 114,453,023
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 107,137
Expense reductions Directed
brokerage arrangements
Custodian credits 236
$ 107,373
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 14,349,137 $ 7,652,898
income
Net realized gain (loss) 94,527,839 11,913,664
Change in net unrealized 5,576,047 159,411,129
appreciation (depreciation)
NET INCREASE (DECREASE) IN 114,453,023 178,977,691
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (7,463,706) -
From net investment income
From net realized gain (14,927,412) (2,137,232)
TOTAL DISTRIBUTIONS (22,391,118) (2,137,232)
Share transactions - net 102,753,346 638,043,127
increase (decrease)
TOTAL INCREASE (DECREASE) 194,815,251 814,883,586
IN NET ASSETS
NET ASSETS
Beginning of period 1,160,181,482 345,297,896
End of period (including $ 1,354,996,733 $ 1,160,181,482
undistributed net investment
income of $14,353,340 and
$7,652,325, respectively)
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 16,149,212 $ 265,569,682 49,641,298 $ 710,748,814
Class Sold
Reinvested 1,401,034 21,996,237 165,544 2,137,174
Redeemed (15,445,916) (257,900,936) (6,663,877) (91,124,370)
Net increase (decrease) 2,104,330 $ 29,664,983 43,142,965 $ 621,761,618
Service Class Sold 4,435,269 $ 73,604,463 1,196,585 $ 17,082,667
Reinvested 25,216 394,881 4 58
Redeemed (55,277) (910,981) (56,936) (801,216)
Net increase (decrease) 4,405,208 $ 73,088,363 1,139,653 $ 16,281,509
Distributions From net $ 7,332,079 $ -
investment income
Initial Class
Service Class 131,627 -
Total $ 7,463,706 $ -
From net realized gain $ 14,664,158 $ 2,137,174
Initial Class
Service Class 263,254 58
Total $ 14,927,412 $ 2,137,232
$ 22,391,118 $ 2,137,232
</TABLE>
FIDELITY VARIABLE INSURANCE PRODUCTS: GROWTH & INCOME PORTFOLIO
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 16.15 $ 12.53 $ 9.90 $ 10.00
period
Income from Investment
Operations
Net investment income .18 D .15 D .13 D .00
Net realized and unrealized 1.27 3.54 2.84 (.10)
gain (loss)
Total from investment 1.45 3.69 2.97 (.10)
operations
Less Distributions
From net investment income (.10) - (.08) -
From net realized gain (.20) (.07) (.26) -
Total distributions (.30) (.07) (.34) -
Net asset value, end of period $ 17.30 $ 16.15 $ 12.53 $ 9.90
TOTAL RETURN B, C 9.17% 29.59% 30.09% (1.00)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,259,396 $ 1,141,806 $ 345,287 $ 990
(000 omitted)
Ratio of expenses to average .60% .61% .70% 1.00% A, F
net assets
Ratio of expenses to average .59% G .60% G .70% 1.00% A
net assets after expense
reductions
Ratio of net investment 1.08% 1.08% 1.14% 3.89% A
income to average net assets
Portfolio turnover 58% 66% 81% 0% A
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 16.11 $ 12.53 $ 12.35
period
Income from Investment
Operations
Net investment income D .16 .15 .03
Net realized and unrealized 1.27 3.50 .49
gain (loss)
Total from investment 1.43 3.65 .52
operations
Less Distributions
From net investment income (.10) - (.08)
From net realized gain (.20) (.07) (.26)
Total distributions (.30) (.07) (.34)
Net asset value, end of period $ 17.24 $ 16.11 $ 12.53
TOTAL RETURN B, C 9.06% 29.27% 4.29%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 95,600 $ 18,375 $ 10
(000 omitted)
Ratio of expenses to average .70% .71% .80% A
net assets
Ratio of expenses to average .69% G .70% G .80% A
net assets after expense
reductions
Ratio of net investment .98% 1.05% 1.24% A
income to average net assets
Portfolio turnover 58% 66% 81%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
D NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
F FMR AGREED TO REIMBURSE A
PORTION OF THE CLASS'
EXPENSES DURING THE PERIOD.
WITHOUT THIS REIMBURSEMENT,
THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
H FOR THE PERIOD DECEMBER 31,
1996 (COMMENCEMENT OF
OPERATIONS OF INITIAL CLASS
SHARES).
FIDELITY VARIABLE INSURANCE PRODUCTS: EQUITY-INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY VIP: EQUITY-INCOME - 6.33% 18.61% 14.49%
"INITIAL CLASS"
Russell 3000 Value 6.65% 22.15% 15.31%
S&P 500 (registered trademark) 21.04% 28.56% 18.21%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Russell
3000 Value Index - a market capitalization-weighted index of
value-oriented stocks of U.S. domiciled corporations and the
performance of the Standard & Poor's 500Index - a market
capitalization-weighted index of common stocks. These benchmarks
reflect the reinvestment of dividends and capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of long-term growth and
short-term volatility. In turn, the share price and
return of a fund that invests in stocks will vary.
That means if you sell your shares during a
market downturn, you might lose money. But if
you can ride out the market's ups and downs,
you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF
THESE ADDITIONAL CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER 10 YEARS
VIP Equity-Income Russell 3000 Value
00150 RS008
1989/12/31 10000.00 10000.00
1990/01/31 9324.65 9371.11
1990/02/28 9379.91 9606.92
1990/03/31 9395.38 9719.38
1990/04/30 9069.63 9342.72
1990/05/31 9669.70 10097.82
1990/06/30 9573.42 9882.72
1990/07/31 9339.29 9777.75
1990/08/31 8593.53 8899.48
1990/09/30 7926.91 8452.49
1990/10/31 7724.79 8314.32
1990/11/30 8278.44 8887.34
1990/12/31 8471.06 9115.48
1991/01/31 8925.35 9543.73
1991/02/28 9539.97 10198.50
1991/03/31 9737.86 10378.09
1991/04/30 9783.37 10455.02
1991/05/31 10320.32 10850.43
1991/06/30 9898.33 10390.76
1991/07/31 10459.48 10814.90
1991/08/31 10680.26 11020.19
1991/09/30 10606.96 10945.39
1991/10/31 10783.59 11122.83
1991/11/30 10318.78 10559.81
1991/12/31 11134.23 11431.66
1992/01/31 11284.57 11510.56
1992/02/29 11651.01 11811.17
1992/03/31 11508.24 11643.01
1992/04/30 11868.77 12096.97
1992/05/31 11963.64 12175.51
1992/06/30 11858.90 12077.51
1992/07/31 12222.32 12543.07
1992/08/31 11954.53 12170.16
1992/09/30 12078.63 12343.49
1992/10/31 12223.23 12376.52
1992/11/30 12666.66 12811.37
1992/12/31 13014.49 13135.01
1993/01/31 13402.98 13542.55
1993/02/28 13704.06 13983.83
1993/03/31 14112.45 14405.47
1993/04/30 14053.77 14207.68
1993/05/31 14308.05 14506.33
1993/06/30 14476.35 14811.05
1993/07/31 14673.31 14984.56
1993/08/31 15234.63 15529.55
1993/09/30 15176.39 15585.78
1993/10/31 15315.17 15608.81
1993/11/30 15047.52 15279.64
1993/12/31 15395.34 15584.89
1994/01/31 16073.38 16171.30
1994/02/28 15659.46 15666.29
1994/03/31 15004.35 15072.03
1994/04/30 15521.38 15347.11
1994/05/31 15669.10 15504.56
1994/06/30 15572.30 15130.22
1994/07/31 16092.43 15580.79
1994/08/31 16920.41 16045.63
1994/09/30 16643.21 15550.80
1994/10/31 16984.82 15713.95
1994/11/30 16429.70 15079.17
1994/12/31 16483.14 15281.78
1995/01/31 16740.85 15694.68
1995/02/28 17379.19 16311.25
1995/03/31 17979.28 16640.96
1995/04/30 18479.34 17163.64
1995/05/31 19036.22 17851.09
1995/06/30 19309.72 18128.85
1995/07/31 20052.85 18762.92
1995/08/31 20304.36 19057.28
1995/09/30 20978.45 19705.46
1995/10/31 20737.06 19450.90
1995/11/30 21633.67 20415.39
1995/12/31 22267.47 20940.04
1996/01/31 22914.58 21543.05
1996/02/29 22991.55 21722.27
1996/03/31 23233.56 22099.47
1996/04/30 23536.08 22232.81
1996/05/31 23790.20 22538.07
1996/06/30 23572.38 22529.14
1996/07/31 22422.81 21640.87
1996/08/31 22882.64 22293.33
1996/09/30 23862.80 23149.82
1996/10/31 24250.03 23979.01
1996/11/30 25871.54 25671.65
1996/12/31 25448.01 25461.90
1997/01/31 26440.28 26608.12
1997/02/28 26733.18 26984.95
1997/03/31 25739.58 26039.51
1997/04/30 26652.62 27061.44
1997/05/31 28304.14 28636.85
1997/06/30 29619.99 29887.64
1997/07/31 31781.74 32037.71
1997/08/31 30291.34 31054.48
1997/09/30 31956.29 32950.14
1997/10/31 30788.14 32031.70
1997/11/30 31916.01 33341.19
1997/12/31 32600.79 34329.91
1998/01/31 32520.23 33830.79
1998/02/28 34616.16 36085.61
1998/03/31 36219.56 38220.53
1998/04/30 36219.56 38469.83
1998/05/31 35632.60 37823.75
1998/06/30 36033.45 38242.68
1998/07/31 35145.85 37360.71
1998/08/31 29777.34 31776.27
1998/09/30 31523.90 33597.52
1998/10/31 33857.41 36066.02
1998/11/30 35289.01 37689.68
1998/12/31 36391.35 38964.64
1999/01/31 36276.82 39181.65
1999/02/28 35835.23 38466.55
1999/03/31 37144.62 39181.62
1999/04/30 40440.68 42835.36
1999/05/31 39341.99 42489.46
1999/06/30 41027.65 43745.15
1999/07/31 39793.51 42481.19
1999/08/31 38709.87 40908.17
1999/09/30 37445.63 39523.04
1999/10/31 38815.22 41575.47
1999/11/30 38303.51 41286.38
1999/12/31 38694.82 41556.13
IMATRL PRASUN SHR__CHT 19991231 20000126 140928 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Equity-Income
Portfolio on December 31, 1989. As the chart shows, by December 31,
1999, the value of the investment would have grown to $38,695 - a
286.95% increase on the initial investment. For comparison, look at
how the Russell 3000 Value Index did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment would have grown to $41,556 - a 315.56% increase. Going
forward, the fund will compare its performance to that of the Russell
3000 Value Index, rather than the Standard & Poor's 500 Index. The
Russell 3000 Value Index more closely reflects the fund's investment
strategy.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
General Electric Co. 4.8
Citigroup, Inc. 3.5
Exxon Mobil Corp. 3.0
BP Amoco PLC sponsored ADR 2.6
American Express Co. 2.4
16.3
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
FINANCE 23.6
ENERGY 14.0
UTILITIES 10.9
INDUSTRIAL MACHINERY & 8.8
EQUIPMENT
BASIC INDUSTRIES 8.0
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stocks 97.3%
Bonds 1.4%
Short-Term Investments and
Net Other Assets 1.3%
Row: 1, Col: 1, Value: 97.3
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 1.4
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 1.3
* FOREIGN INVESTMENTS 9.5%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: EQUITY-INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). The initial offering of Service Class shares
took place on November 3, 1997. Performance for Service Class shares
reflects an asset based distribution fee (12b-1 fee), and returns
prior to November 3, 1997 are those of Initial Class and do not
include the effects of Service Class' 12b-1 fee. Had Service Class
shares' 12b-1 fee been reflected, returns prior to November 3, 1997
would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY VIP: EQUITY-INCOME - 6.25% 18.57% 14.47%
SERVICE CLASS
Russell 3000(registered 6.65% 22.15% 15.31%
trademark) Value
S&P 500 21.04% 28.56% 18.21%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Russell
3000 Value Index - a market capitalization-weighted index of
value-oriented stocks of U.S. domiciled corporations. You can also
compare the fund's returns to the performance of the Standard & Poor's
500 Index - a market capitalization-weighted index of common stocks.
These benchmarks reflect the reinvestment of dividends and capital
gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for
example, has a history of long-term growth and
short-term volatility. In turn, the share price and
return of a fund that invests in stocks will vary.
That means if you sell your shares during a
market downturn, you might lose money. But if
you can ride out the market's ups and downs,
you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF
THESE ADDITIONAL CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER 10 YEARS
VIP Equity-Income - SC Russell 3000 Value
00471 RS008
1989/12/31 10000.00 10000.00
1990/01/31 9324.65 9371.11
1990/02/28 9379.91 9606.92
1990/03/31 9395.38 9719.38
1990/04/30 9069.63 9342.72
1990/05/31 9669.70 10097.82
1990/06/30 9573.42 9882.72
1990/07/31 9339.29 9777.75
1990/08/31 8593.53 8899.48
1990/09/30 7926.91 8452.49
1990/10/31 7724.79 8314.32
1990/11/30 8278.44 8887.34
1990/12/31 8471.06 9115.48
1991/01/31 8925.35 9543.73
1991/02/28 9539.97 10198.50
1991/03/31 9737.86 10378.09
1991/04/30 9783.37 10455.02
1991/05/31 10320.32 10850.43
1991/06/30 9898.33 10390.76
1991/07/31 10459.48 10814.90
1991/08/31 10680.26 11020.19
1991/09/30 10606.96 10945.39
1991/10/31 10783.59 11122.83
1991/11/30 10318.78 10559.81
1991/12/31 11134.23 11431.66
1992/01/31 11284.57 11510.56
1992/02/29 11651.01 11811.17
1992/03/31 11508.24 11643.01
1992/04/30 11868.77 12096.97
1992/05/31 11963.64 12175.51
1992/06/30 11858.90 12077.51
1992/07/31 12222.32 12543.07
1992/08/31 11954.53 12170.16
1992/09/30 12078.63 12343.49
1992/10/31 12223.23 12376.52
1992/11/30 12666.66 12811.37
1992/12/31 13014.49 13135.01
1993/01/31 13402.98 13542.55
1993/02/28 13704.06 13983.83
1993/03/31 14112.45 14405.47
1993/04/30 14053.77 14207.68
1993/05/31 14308.05 14506.33
1993/06/30 14476.35 14811.05
1993/07/31 14673.31 14984.56
1993/08/31 15234.63 15529.55
1993/09/30 15176.39 15585.78
1993/10/31 15315.17 15608.81
1993/11/30 15047.52 15279.64
1993/12/31 15395.34 15584.89
1994/01/31 16073.38 16171.30
1994/02/28 15659.46 15666.29
1994/03/31 15004.35 15072.03
1994/04/30 15521.38 15347.11
1994/05/31 15669.10 15504.56
1994/06/30 15572.30 15130.22
1994/07/31 16092.43 15580.79
1994/08/31 16920.41 16045.63
1994/09/30 16643.21 15550.80
1994/10/31 16984.82 15713.95
1994/11/30 16429.70 15079.17
1994/12/31 16483.14 15281.78
1995/01/31 16740.85 15694.68
1995/02/28 17379.19 16311.25
1995/03/31 17979.28 16640.96
1995/04/30 18479.34 17163.64
1995/05/31 19036.22 17851.09
1995/06/30 19309.72 18128.85
1995/07/31 20052.85 18762.92
1995/08/31 20304.36 19057.28
1995/09/30 20978.45 19705.46
1995/10/31 20737.06 19450.90
1995/11/30 21633.67 20415.39
1995/12/31 22267.47 20940.04
1996/01/31 22914.58 21543.05
1996/02/29 22991.55 21722.27
1996/03/31 23233.56 22099.47
1996/04/30 23536.08 22232.81
1996/05/31 23790.20 22538.07
1996/06/30 23572.38 22529.14
1996/07/31 22422.81 21640.87
1996/08/31 22882.64 22293.33
1996/09/30 23862.80 23149.82
1996/10/31 24250.03 23979.01
1996/11/30 25871.54 25671.65
1996/12/31 25448.01 25461.90
1997/01/31 26440.28 26608.12
1997/02/28 26733.18 26984.95
1997/03/31 25739.58 26039.51
1997/04/30 26652.62 27061.44
1997/05/31 28304.14 28636.85
1997/06/30 29619.99 29887.64
1997/07/31 31781.74 32037.71
1997/08/31 30291.34 31054.48
1997/09/30 31956.29 32950.14
1997/10/31 30788.14 32031.70
1997/11/30 31916.01 33341.19
1997/12/31 32587.36 34329.91
1998/01/31 32520.23 33830.79
1998/02/28 34616.16 36085.61
1998/03/31 36205.24 38220.53
1998/04/30 36219.56 38469.83
1998/05/31 35618.28 37823.75
1998/06/30 36019.13 38242.68
1998/07/31 35131.54 37360.71
1998/08/31 29763.03 31776.27
1998/09/30 31509.58 33597.52
1998/10/31 33828.78 36066.02
1998/11/30 35246.07 37689.68
1998/12/31 36348.40 38964.64
1999/01/31 36233.87 39181.65
1999/02/28 35807.33 38466.55
1999/03/31 37101.75 39181.62
1999/04/30 40382.96 42835.36
1999/05/31 39284.21 42489.46
1999/06/30 40954.92 43745.15
1999/07/31 39720.70 42481.19
1999/08/31 38637.00 40908.17
1999/09/30 37372.68 39523.04
1999/10/31 38742.36 41575.47
1999/11/30 38230.61 41286.38
1999/12/31 38621.95 41556.13
IMATRL PRASUN SHR__CHT 19991231 20000201 171557 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Equity-Income
Portfolio - Service Class on December 31, 1989. As the chart shows, by
December 31, 1999, the value of the investment would have grown to
$38,622 - a 286.22% increase on the initial investment. For
comparison, look at how the Russell 3000 Value Index did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 investment would have grown to $41,556 - a 315.56% increase.
Going forward, the fund will compare its performance to that of the
Russell 3000 Value Index, rather than the Standard & Poor's 500 Index.
The Russell 3000 Value Index more closely reflects the fund's
investment strategy.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
General Electric Co. 4.8
Citigroup, Inc. 3.5
Exxon Mobil Corp. 3.0
BP Amoco PLC sponsored ADR 2.6
American Express Co. 2.4
16.3
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
FINANCE 23.6
ENERGY 14.0
UTILITIES 10.9
INDUSTRIAL MACHINERY & 8.8
EQUIPMENT
BASIC INDUSTRIES 8.0
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stocks 97.3%
Bonds 1.4%
Short-Term Investments and
Net Other Assets 1.3%
Row: 1, Col: 1, Value: 97.3
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 1.4
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 1.3
* FOREIGN INVESTMENTS 9.5%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: EQUITY-INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Steve Petersen)
An interview with
Steve Petersen,
Portfolio Manager
of Equity-Income Portfolio
Q. HOW DID THE FUND PERFORM, STEVE?
A. The fund slightly underperformed the Russell 3000 Value Index,
which returned 6.65% for the 12-month period ending December 31, 1999.
Q. WHY DID THE FUND'S PERFORMANCE LAG THAT OF THE RUSSELL INDEX?
A. The Russell 3000 Value Index, which focuses on companies with value
characteristics, closely reflects the fund's investment strategy.
However, 7% of the index was in technology stocks - typically growth
stocks rather than dividend-paying stocks - and the fund was unable to
identify good dividend-paying candidates within this sector. A huge
push in technology performance, particularly during the fourth
quarter, helped boost the Russell index. Consequently, the fund's
underweighting in technology stocks hurt its performance relative to
the index.
Q. WHAT WAS YOUR STRATEGY WITHIN THIS CHALLENGING ENVIRONMENT?
A. I followed my long-term strategy, which emphasizes companies that
pay dividends, show signs of improvement in business fundamentals and
have good valuations. Rather than buying the high-priced growth
stocks, I looked for earnings growth, restructuring progress,
acquisition activity or share buyback programs that allowed for faster
earnings growth. Although this approach has worked well for us before,
over the past two years the market focused only on companies that had
robust internal growth, and punished companies that could not sustain
strong earnings growth.
Q. FINANCIAL STOCKS ACCOUNTED FOR A SIGNIFICANT PROPORTION OF THE
FUND'S PORTFOLIO AND THE RUSSELL INDEX. HOW DID THEY DO?
A. The biggest impact on financial stocks during 1999 was the Federal
Reserve Board's interest-rate increases. In general, rising interest
rates are not good for this sector because they tend to cause
borrowing activity to slow. We also saw a gradual narrowing between
longer-term fixed-income yields and shorter-term yields during the
year, which negatively affected many financial stocks. Lending
institutions play the spreads, borrowing short-term money - deposits -
and lending long-term money - mortgages and installment loans. When
spreads narrow, it hurts banks' profitability. Such traditional
commercial banks as Bank One, BankAmerica and savings and loan
institution Washington Mutual performed poorly. Fannie Mae also
suffered from negative investor perception of the overall sector,
even though its earnings were on track during the year. On the other
hand, financial companies that earned a higher percentage of their
revenues from transactions or asset management did well during the
year. For example, Citigroup benefited from strong equity markets
through its Salomon Smith Barney subsidiary. Fund holding Bank of New
York's custodial business helped its performance.
Q. WHICH OTHER STOCKS PERFORMED WELL?
A. GE, the fund's largest holding, contributed significantly to
overall performance. This company demonstrated consistent earnings
growth and did a good job strengthening its various business units.
Energy holdings BP Amoco and Total Fina benefited from rising oil
prices and their stocks performed very well. Alcoa demonstrated its
ability to cut costs, make successful acquisitions of second-tier
producers, integrate those acquisitions successfully, purchase
properties and streamline its operations. As a result, with aluminum
prices trending upward during 1999, Alcoa's stock performed strongly.
Wal-Mart continued to improve profitability and benefited from a
consumer trend toward value for such products as apparel.
Q. WHAT ABOUT DISAPPOINTMENTS?
A. In addition to the financial stocks I mentioned earlier, Philip
Morris performed poorly, suffering from continued litigation woes that
do not appear likely to let up in the near future. I sold much of the
fund's position in this stock. Waste Management experienced internal
accounting problems earlier in 1999, and its stock fell significantly.
I sold this stock from the fund's portfolio.
Q. WHAT'S YOUR OUTLOOK, STEVE?
A. I'm still cautious. The outlook for corporate earnings growth in
the near term looks good and, as the world economy continues its
recovery, we're seeing more good news from companies that were hurt by
the global economic downturn last year. The potentially bad news is
that the U.S. government and the Fed are still concerned about the
potential for inflation to pick up once again. They also appear to be
monitoring the valuation anomaly on the technology side of the market.
Any action to increase interest rates could be detrimental to value
stocks.
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FUND FACTS
GOAL: seeks reasonable income while maintaining a yield that exceeds
the composite dividend yield of S&P 500; also considers the potential
for achieving capital appreciation
START DATE: October 9, 1986
SIZE: as of December 31, 1999, more than
$11.4 billion
MANAGER: Stephen Petersen, since 1997; joined
Fidelity in 1980
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: EQUITY-INCOME PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 94.3%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 3.6%
AEROSPACE & DEFENSE - 3.3%
Boeing Co. 1,116,200 $ 46,392,063
Harsco Corp. 583,300 18,519,775
Honeywell International, Inc. 2,029,925 117,101,298
Rockwell International Corp. 313,800 15,023,175
Textron, Inc. 1,122,400 86,074,050
United Technologies Corp. 1,466,300 95,309,500
378,419,861
DEFENSE ELECTRONICS - 0.0%
Raytheon Co. Class B 33,600 892,500
SHIP BUILDING & REPAIR - 0.3%
General Dynamics Corp. 505,700 26,675,675
TOTAL AEROSPACE & DEFENSE 405,988,036
BASIC INDUSTRIES - 7.7%
CHEMICALS & PLASTICS - 3.2%
Arch Chemicals, Inc. 292,600 6,126,312
Aventis SA 368,416 21,500,108
Celanese AG (a) 49,110 892,064
CK Witco Corp. 630,951 8,438,970
Dexter Corp. 281,000 11,169,750
Dow Chemical Co. 273,400 36,533,075
E. I. du Pont de Nemours and 560,649 36,932,753
Co.
Eastman Chemical Co. 434,800 20,734,525
Engelhard Corp. 557,500 10,522,813
Great Lakes Chemical Corp. 1,060,100 40,482,569
Hercules, Inc. 856,100 23,863,788
Hercules Trust II unit 15,700 12,128,250
IMC Global, Inc. 1,626,800 26,638,850
Lyondell Chemical Co. 611,700 7,799,175
M. A. Hanna Co. 979,200 10,710,000
Millennium Chemicals, Inc. 749,200 14,796,700
Monsanto Co. 288,800 10,288,500
Praxair, Inc. 446,900 22,484,656
Solutia, Inc. 1,249,300 19,286,069
Union Carbide Corp. 376,200 25,111,350
366,440,277
IRON & STEEL - 0.8%
AK Steel Holding Corp. 980,800 18,512,600
Allegheny Technologies, Inc. 687,550 15,426,903
Dofasco, Inc. 749,800 14,771,065
Nucor Corp. 628,100 34,427,731
83,138,299
METALS & MINING - 2.1%
Alcan Aluminium Ltd. 679,500 27,899,565
Alcoa, Inc. 1,849,858 153,538,214
Olin Corp. 712,700 14,120,369
Phelps Dodge Corp. 429,800 28,850,325
Ryerson Tull, Inc. 753,323 14,642,716
239,051,189
SHARES VALUE (NOTE 1)
PACKAGING & CONTAINERS - 0.4%
American National Can Group, 501,400 $ 6,518,200
Inc.
Ball Corp. 383,152 15,086,610
Owens-Illinois, Inc. (a) 681,300 17,075,081
Tupperware Corp. 576,500 9,764,469
48,444,360
PAPER & FOREST PRODUCTS - 1.2%
Bowater, Inc. 798,600 43,373,963
Champion International Corp. 800,800 49,599,550
Georgia-Pacific Corp. 352,800 17,904,600
Pentair, Inc. 236,600 9,109,100
Smurfit-Stone Container Corp. 755,400 18,507,300
(a)
138,494,513
TOTAL BASIC INDUSTRIES 875,568,638
CONSTRUCTION & REAL ESTATE -
1.7%
BUILDING MATERIALS - 0.7%
Fortune Brands, Inc. 805,700 26,638,456
Masco Corp. 2,090,800 53,054,050
Water Pik Technologies, Inc. 54,895 524,933
(a)
80,217,439
ENGINEERING - 0.2%
PerkinElmer, Inc. 587,500 24,491,406
REAL ESTATE INVESTMENT TRUSTS
- - 0.8%
Alexandria Real Estate 109,600 3,486,650
Equities, Inc.
Crescent Real Estate Equities 853,600 15,684,900
Co.
Duke-Weeks Realty Corp. 495,722 9,666,579
Equity Office Properties Trust 524,500 12,915,813
Equity Residential Properties 548,700 23,422,631
Trust (SBI)
Public Storage, Inc. 609,700 13,832,569
Reckson Associates Realty 125,800 2,578,900
Corp.
Spieker Properties, Inc. 277,000 10,093,188
91,681,230
TOTAL CONSTRUCTION & REAL 196,390,075
ESTATE
DURABLES - 2.4%
AUTOS, TIRES, & ACCESSORIES -
1.5%
Eaton Corp. 465,900 33,835,988
Federal-Mogul Corp. 503,700 10,136,963
Ford Motor Co. 906,100 48,419,719
Meritor Automotive, Inc. 629,900 12,204,313
Navistar International Corp. 324,800 15,387,400
(a)
Pep Boys-Manny, Moe & Jack 662,100 6,041,663
TRW, Inc. 852,300 44,266,331
170,292,377
CONSUMER DURABLES - 0.5%
Minnesota Mining & 350,200 34,275,825
Manufacturing Co.
Snap-On, Inc. 1,102,000 29,271,875
63,547,700
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
DURABLES - CONTINUED
HOME FURNISHINGS - 0.4%
Newell Rubbermaid, Inc. 1,442,367 $ 41,828,643
TOTAL DURABLES 275,668,720
ENERGY - 13.9%
ENERGY SERVICES - 1.6%
Baker Hughes, Inc. 1,771,100 37,303,794
Halliburton Co. 2,407,900 96,917,975
Schlumberger Ltd. 724,300 40,741,875
Transocean Sedco Forex, Inc. 140,224 4,723,796
179,687,440
OIL & GAS - 12.3%
Amerada Hess Corp. 709,400 40,258,450
Anadarko Petroleum Corp. 587,900 20,062,088
Atlantic Richfield Co. 183,600 15,881,400
BP Amoco PLC sponsored ADR 4,967,238 294,619,304
Burlington Resources, Inc. 1,131,400 37,406,913
Chevron Corp. 1,280,171 110,894,813
Conoco, Inc.:
Class A 721,200 17,849,700
Class B 1,112,415 27,671,323
Exxon Mobil Corp. 4,255,118 342,802,944
Kerr-McGee Corp. 156,000 9,672,000
Occidental Petroleum Corp. 1,854,000 40,092,750
Royal Dutch Petroleum Co. 2,218,600 134,086,638
(NY Registry Gilder 1.25)
Santa Fe Snyder Corp. (a) 1,336,203 10,689,624
Tosco Corp. 449,800 12,228,938
Total Fina SA:
Class B 448,000 62,047,998
sponsored ADR 2,183,396 151,200,173
Ultramar Diamond Shamrock 713,600 16,189,800
Corp.
Union Pacific Resources 645,500 8,230,125
Group, Inc.
Unocal Corp. 463,983 15,572,429
USX - Marathon Group 1,621,100 40,020,906
1,407,478,316
TOTAL ENERGY 1,587,165,756
FINANCE - 23.1%
BANKS - 9.3%
Bank of America Corp. 3,004,190 150,772,786
Bank of New York Co., Inc. 4,618,300 184,732,000
Bank One Corp. 1,439,038 46,139,156
Chase Manhattan Corp. 2,012,500 156,346,094
Comerica, Inc. 1,443,200 67,379,400
FleetBoston Financial Corp. 2,365,200 82,338,525
Mellon Financial Corp. 1,917,200 65,304,625
National Bank of Canada 2,476,636 31,670,537
SHARES VALUE (NOTE 1)
Toronto Dominion Bank 584,700 $ 15,661,246
U.S. Bancorp 2,928,094 69,725,238
Wachovia Corp. 442,500 30,090,000
Wells Fargo & Co. 3,967,200 160,423,650
1,060,583,257
CREDIT & OTHER FINANCE - 7.6%
American Express Co. 1,610,972 267,824,095
Associates First Capital 3,787,456 103,918,324
Corp. Class A
Citigroup, Inc. 7,215,398 400,905,551
Household International, Inc. 2,527,647 94,154,851
866,802,821
FEDERAL SPONSORED CREDIT - 2.5%
Fannie Mae 3,901,500 243,599,906
Freddie Mac 548,400 25,809,075
SLM Holding Corp. 412,700 17,436,575
286,845,556
INSURANCE - 1.9%
ACE Ltd. 1,474,100 24,599,044
Conseco, Inc. 244,600 4,372,225
Financial Security Assurance 417,871 21,781,526
Holdings Ltd.
Hartford Financial Services 1,691,600 80,139,550
Group, Inc.
Highlands Insurance Group, 371,100 3,525,450
Inc. (a)
Marsh & McLennan Companies, 94,800 9,071,175
Inc.
PMI Group, Inc. 189,700 9,259,731
Reliastar Financial Corp. 267,601 10,486,614
Torchmark Corp. 550,340 15,994,256
Travelers Property Casualty 620,000 21,235,000
Corp. Class A
UnumProvident Corp. 463,700 14,867,381
215,331,952
SAVINGS & LOANS - 0.7%
TCF Financial Corp. 442,100 10,997,238
Washington Mutual, Inc. 2,898,482 75,360,532
86,357,770
SECURITIES INDUSTRY - 1.1%
Franklin Resources, Inc. 590,900 18,945,731
Lehman Brothers Holdings, 449,800 38,092,438
Inc.
Morgan Stanley Dean Witter & 205,300 29,306,575
Co.
Nomura Securities Co. Ltd. 1,561,000 28,180,480
Waddell & Reed Financial, Inc.:
Class A 394,416 10,698,534
Class B 182,132 4,576,066
129,799,824
TOTAL FINANCE 2,645,721,180
HEALTH - 5.8%
DRUGS & PHARMACEUTICALS - 3.8%
Bristol-Myers Squibb Co. 1,792,400 115,049,675
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS -
CONTINUED
Eli Lilly & Co. 1,773,400 $ 117,931,100
Merck & Co., Inc. 1,710,700 114,723,819
Schering-Plough Corp. 2,129,530 89,839,547
437,544,141
MEDICAL EQUIPMENT & SUPPLIES
- - 1.3%
Abbott Laboratories 1,514,100 54,980,756
Becton, Dickinson & Co. 925,800 24,765,150
Cardinal Health, Inc. 289,700 13,869,388
Johnson & Johnson 607,800 56,601,375
150,216,669
MEDICAL FACILITIES MANAGEMENT
- - 0.7%
Beverly Enterprises, Inc. (a) 1,722,000 7,533,750
Columbia/HCA Healthcare Corp. 2,259,150 66,221,334
73,755,084
TOTAL HEALTH 661,515,894
INDUSTRIAL MACHINERY &
EQUIPMENT - 8.5%
ELECTRICAL EQUIPMENT - 5.9%
Emerson Electric Co. 340,100 19,513,238
General Electric Co. 3,588,100 555,258,458
Loral Space & Communications 298,700 7,262,144
Ltd. (a)
Siemens AG 671,400 85,809,251
Teledyne Technologies, Inc. 156,842 1,480,196
(a)
669,323,287
INDUSTRIAL MACHINERY &
EQUIPMENT - 2.5%
Caterpillar, Inc. 490,100 23,065,331
Deere & Co. 1,297,000 56,257,375
Ingersoll-Rand Co. 643,800 35,449,238
Kennametal, Inc. 493,737 16,601,907
Parker-Hannifin Corp. 525,000 26,939,062
Tyco International Ltd. 3,389,046 131,749,163
290,062,076
POLLUTION CONTROL - 0.1%
Allied Waste Industries, Inc. 592,200 5,218,763
(a)
Republic Services, Inc. Class 588,200 8,455,375
A (a)
13,674,138
TOTAL INDUSTRIAL MACHINERY & 973,059,501
EQUIPMENT
MEDIA & LEISURE - 5.5%
BROADCASTING - 2.5%
CBS Corp. (a) 1,586,100 101,411,269
MediaOne Group, Inc. (a) 741,110 56,926,512
Time Warner, Inc. 1,711,380 123,968,089
282,305,870
ENTERTAINMENT - 1.5%
Fox Entertainment Group, Inc. 164,000 4,089,750
Class A
SHARES VALUE (NOTE 1)
Mandalay Resort Group (a) 464,400 $ 9,346,050
Viacom, Inc. Class B 1,904,300 115,091,131
(non-vtg.) (a)
Walt Disney Co. 1,559,000 45,600,750
174,127,681
LEISURE DURABLES & TOYS - 0.1%
Brunswick Corp. 569,800 12,678,050
LODGING & GAMING - 0.4%
Mirage Resorts, Inc. (a) 1,046,900 16,030,656
Starwood Hotels & Resorts 1,465,981 34,450,554
Worldwide, Inc. unit
50,481,210
PUBLISHING - 0.4%
Harcourt General, Inc. 564,000 22,701,000
Reader's Digest Association, 873,100 25,538,175
Inc. Class A (non-vtg.)
48,239,175
RESTAURANTS - 0.6%
McDonald's Corp. 1,562,400 62,984,250
TOTAL MEDIA & LEISURE 630,816,236
NONDURABLES - 3.6%
BEVERAGES - 0.1%
Brown-Forman Corp. Class B 147,800 8,461,550
FOODS - 0.7%
Corn Products International, 401,625 13,153,219
Inc.
H. J. Heinz Co. 336,200 13,384,963
Hershey Foods Corp. 394,900 18,757,750
Nabisco Group Holdings Corp. 967,700 10,281,813
Nabisco Holdings Corp. Class A 779,200 24,642,200
80,219,945
HOUSEHOLD PRODUCTS - 1.9%
Avon Products, Inc. 837,400 27,634,200
Clorox Co. 742,300 37,393,363
Gillette Co. 921,500 37,954,281
Procter & Gamble Co. 307,200 33,657,600
Unilever NV 11,071 610,989
Unilever NV (NY Shares) 714,285 38,883,890
Unilever PLC 6,090,714 46,156,160
222,290,483
TOBACCO - 0.9%
Philip Morris Companies, Inc. 4,374,000 101,422,125
TOTAL NONDURABLES 412,394,103
PRECIOUS METALS - 0.1%
Newmont Mining Corp. 605,600 14,837,200
RETAIL & WHOLESALE - 2.9%
APPAREL STORES - 0.9%
Charming Shoppes, Inc. (a) 612,800 4,059,800
Footstar, Inc. (a) 551,800 16,829,900
Payless ShoeSource, Inc. (a) 385,000 18,095,000
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
APPAREL STORES - CONTINUED
The Limited, Inc. 1,317,700 $ 57,072,881
TJX Companies, Inc. 350,200 7,157,213
103,214,794
GENERAL MERCHANDISE STORES -
2.0%
Consolidated Stores Corp. (a) 2,020,156 32,827,539
Dayton Hudson Corp. 920,700 67,613,906
Federated Department Stores, 1,104,400 55,841,225
Inc. (a)
Hudson's Bay Co. (d) 302,500 3,575,551
Wal-Mart Stores, Inc. 1,062,300 73,431,488
233,289,709
TOTAL RETAIL & WHOLESALE 336,504,503
SERVICES - 1.5%
LEASING & RENTAL - 0.2%
Ryder System, Inc. 877,400 21,441,463
PRINTING - 0.1%
New England Business Service, 200,000 4,887,500
Inc.
R. R. Donnelley & Sons Co. 568,400 14,103,425
18,990,925
SERVICES - 1.2%
ACNielsen Corp. (a) 859,800 21,172,575
Cendant Corp. (a) 928,791 24,671,011
Edperbrascan Corp. Class A 2,699,800 35,644,004
(ltd. vtg.)
H&R Block, Inc. 673,000 29,443,750
Modis Professional Services, 165,600 2,359,800
Inc. (a)
Viad Corp. 775,800 21,625,425
134,916,565
TOTAL SERVICES 175,348,953
TECHNOLOGY - 2.8%
COMPUTER SERVICES & SOFTWARE
- - 0.9%
Litton Industries, Inc. (a) 642,500 32,044,688
NCR Corp. (a) 247,900 9,389,213
Unisys Corp. (a) 2,059,717 65,782,212
107,216,113
COMPUTERS & OFFICE EQUIPMENT
- - 1.7%
Compaq Computer Corp. 1,951,500 52,812,469
International Business 635,000 68,580,000
Machines Corp.
Pitney Bowes, Inc. 1,582,000 76,430,375
Xerox Corp. 20 454
197,823,298
ELECTRONIC INSTRUMENTS - 0.2%
Beckman Coulter, Inc. 209,000 10,632,875
Thermo Electron Corp. (a) 614,900 9,223,500
19,856,375
TOTAL TECHNOLOGY 324,895,786
SHARES VALUE (NOTE 1)
TRANSPORTATION - 1.2%
AIR TRANSPORTATION - 0.2%
AMR Corp. (a) 336,700 $ 22,558,900
RAILROADS - 1.0%
Burlington Northern Santa Fe 2,998,700 72,718,475
Corp.
CSX Corp. 880,000 27,610,000
Union Pacific Corp. 409,400 17,860,075
118,188,550
TOTAL TRANSPORTATION 140,747,450
UTILITIES - 10.0%
CELLULAR - 0.4%
ALLTEL Corp. 506,600 41,889,488
ELECTRIC UTILITY - 2.4%
Allegheny Energy, Inc. 1,148,700 30,943,106
American Electric Power Co., 997,100 32,031,838
Inc.
Central & South West Corp. 444,000 8,880,000
Cinergy Corp. 415,000 10,011,875
CMS Energy Corp. 379,200 11,826,300
Consolidated Edison, Inc. 473,450 16,334,025
DPL, Inc. 1,358,750 23,523,359
Entergy Corp. 3,187,300 82,072,975
Niagara Mohawk Holdings, Inc. 1,434,200 19,989,163
(a)
PG&E Corp. 1,551,878 31,813,499
Pinnacle West Capital Corp. 72,100 2,203,556
269,629,696
GAS - 0.1%
Sempra Energy 688,284 11,958,934
TELEPHONE SERVICES - 7.1%
AT&T Corp. 4,262,300 216,311,725
Bell Atlantic Corp. 1,352,440 83,259,587
BellSouth Corp. 2,124,399 99,448,428
CenturyTel, Inc. 467,300 22,138,338
GTE Corp. 1,087,100 76,708,494
MCI WorldCom, Inc. (a) 1,616,816 85,792,272
Pathnet, Inc. warrants 520 5,200
4/15/08 (a)(d)
SBC Communications, Inc. 4,829,993 235,462,159
819,126,203
TOTAL UTILITIES 1,142,604,321
TOTAL COMMON STOCKS 10,799,226,352
(Cost $8,107,467,117)
PREFERRED STOCKS - 3.0%
CONVERTIBLE PREFERRED STOCKS
- - 3.0%
BASIC INDUSTRIES - 0.3%
CHEMICALS & PLASTICS - 0.1%
Monsanto Co. $1.625 ACES 460,000 14,720,000
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONVERTIBLE PREFERRED STOCKS
- - CONTINUED
BASIC INDUSTRIES - CONTINUED
PAPER & FOREST PRODUCTS - 0.2%
Georgia-Pacific Corp. $3.75 314,100 $ 15,940,575
PEPS
TOTAL BASIC INDUSTRIES 30,660,575
DURABLES - 0.0%
AUTOS, TIRES, & ACCESSORIES -
0.0%
Automatic Common Exchangeable 219,200 2,096,100
Securities Trust II
(Republic Industries, Inc.)
$1.55 ACES
ENERGY - 0.1%
OIL & GAS - 0.1%
Apache Corp. $2.015 ACES 183,100 6,316,950
The Coastal Corp. $1.20 PRIDES 368,900 7,239,663
13,556,613
FINANCE - 0.5%
CREDIT & OTHER FINANCE - 0.4%
Federal-Mogul Financing Trust 490,300 16,425,050
$3.50
Union Pacific Capital Trust:
$3.125 403,200 16,430,400
$3.125 TIDES (d) 384,500 15,668,375
48,523,825
INSURANCE - 0.1%
Conseco, Inc. $3.50 PRIDES 240,400 5,619,350
SECURITIES INDUSTRY - 0.0%
Merrill Lynch & Co., Inc. 77,600 1,387,100
(IMC Global, Inc.) $2.39
STRYPES
TOTAL FINANCE 55,530,275
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
ELECTRICAL EQUIPMENT - 0.2%
Loral Space & Communications
Ltd. Series C:
$3.00 (d) 183,200 11,289,700
$3.00 208,700 12,861,138
24,150,838
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.1%
Ingersoll Rand Co./Ingersoll 530,100 13,517,550
Rand Finance $1.68 Growth
PRIDES
TOTAL INDUSTRIAL MACHINERY & 37,668,388
EQUIPMENT
MEDIA & LEISURE - 0.9%
BROADCASTING - 0.7%
Cox Communications, Inc.:
$2.27 PRIDES 224,900 14,000,025
$6.858 PRIZES 146,400 14,200,800
SHARES VALUE (NOTE 1)
MediaOne Group, Inc.:
$3.04 448,600 $ 21,420,650
(Vodafone AirTouch PLC) $3.63 249,900 26,989,200
PIES
76,610,675
ENTERTAINMENT - 0.1%
Premier Parks, Inc. $4.05 PIES 273,300 14,758,200
PUBLISHING - 0.1%
Readers Digest Automatic 464,700 12,546,900
Common Exchange Trust $1.93
TRACES
Tribune Co. (The Learning 102,300 1,739,100
Co., Inc.) $1.75 DECS
14,286,000
TOTAL MEDIA & LEISURE 105,654,875
NONDURABLES - 0.2%
BEVERAGES - 0.2%
Seagram Co. Ltd. $3.76 ACES 473,400 21,095,888
RETAIL & WHOLESALE - 0.1%
GENERAL MERCHANDISE STORES -
0.1%
K mart Financing I $3.875 100,000 4,375,000
UTILITIES - 0.6%
ELECTRIC UTILITY - 0.5%
Houston Industries, Inc. 285,500 34,402,750
(Time Warner, Inc.) $3.216
ACES
NiSource, Inc. $3.875 PIES 299,300 10,774,800
Texas Utilities Co. $3.90 398,400 15,202,944
growth PRIDES
60,380,494
GAS - 0.1%
Enron Corp. (EOG Resources, 484,900 8,819,119
Inc.) $1.5575 ACES
TOTAL UTILITIES 69,199,613
TOTAL CONVERTIBLE PREFERRED 339,837,327
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 0.0%
CONSTRUCTION & REAL ESTATE -
0.0%
REAL ESTATE INVESTMENT TRUSTS
- - 0.0%
California Federal Preferred 31,590 718,673
Capital Corp. $2.2812
MEDIA & LEISURE - 0.0%
BROADCASTING - 0.0%
CSC Holdings, Inc. 11.125% 22,360 2,442,830
pay-in-kind
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
MEDIA & LEISURE - CONTINUED
PUBLISHING - 0.0%
PRIMEDIA, Inc. 8.625% 6,123 $ 541,886
TOTAL MEDIA & LEISURE 2,984,716
TOTAL NONCONVERTIBLE 3,703,389
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 343,540,716
(Cost $341,105,704)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 1.4%
MOODY'S RATINGS (UNAUDITED) (E) PRINCIPAL AMOUNT
CONVERTIBLE BONDS - 1.0%
CONSTRUCTION & REAL ESTATE -
0.3%
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
Liberty Property LP 8.3% Ba2 $ 27,985,000 34,578,966
7/1/01
DURABLES - 0.1%
CONSUMER ELECTRONICS - 0.1%
Sunbeam Corp. 0% 3/25/18 (d) Caa2 60,290,000 8,968,138
FINANCE - 0.0%
INSURANCE - 0.0%
Loews Corp. 3.125% 9/15/07 A2 4,320,000 3,520,800
MEDIA & LEISURE - 0.3%
BROADCASTING - 0.0%
Jacor Communications, Inc. Ba3 3,370,000 2,266,965
liquid yield option notes 0%
2/9/18
PUBLISHING - 0.3%
News America Holdings, Inc. Baa3 48,470,000 37,806,600
liquid yield option notes 0%
3/11/13
TOTAL MEDIA & LEISURE 40,073,565
NONDURABLES - 0.0%
FOODS - 0.0%
Chiquita Brands B3 820,000 582,200
International, Inc. 7%
3/28/01
TECHNOLOGY - 0.2%
COMPUTER SERVICES & SOFTWARE
- - 0.0%
Softkey International, Inc. - 1,340,000 1,306,500
5.5% 11/1/00 (d)
MOODY'S RATINGS (UNAUDITED) (E) PRINCIPAL AMOUNT VALUE (NOTE 1)
COMPUTERS & OFFICE EQUIPMENT
- - 0.1%
Quantum Corp. 7% 8/1/04 B2 $ 7,730,000 $ 5,555,938
ELECTRONICS - 0.1%
Micron Technology, Inc. 7% B2 9,683,000 12,442,655
7/1/04
TOTAL TECHNOLOGY 19,305,093
UTILITIES - 0.1%
TELEPHONE SERVICES - 0.1%
Telefonos de Mexico SA de CV BB 9,430,000 12,282,575
4.25% 6/15/04
TOTAL CONVERTIBLE BONDS 119,311,337
NONCONVERTIBLE BONDS - 0.4%
BASIC INDUSTRIES - 0.0%
CHEMICALS & PLASTICS - 0.0%
Lyondell Chemical Co. 9.875% Ba3 1,340,000 1,366,800
5/1/07
ENERGY - 0.0%
ENERGY SERVICES - 0.0%
RBF Finance Co. 11.375% Ba3 1,520,000 1,634,000
3/15/09
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
Macsaver Financial Services, Ba2 1,000,000 570,000
Inc. 7.875% 8/1/03
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Tenet Healthcare Corp. 8.125% Ba3 2,220,000 2,070,150
12/1/08
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.0%
POLLUTION CONTROL - 0.0%
Allied Waste North America, B2 1,030,000 916,700
Inc. 10% 8/1/09 (d)
MEDIA & LEISURE - 0.2%
BROADCASTING - 0.2%
Adelphia Communications Corp.:
7.75% 1/15/09 B1 1,065,000 950,513
9.875% 3/1/07 B1 2,425,000 2,449,250
Century Communications Corp. B1 440,000 192,500
Series B, 0% 1/15/08
Charter Communications B2 1,340,000 1,239,500
Holdings LLC/Charter
Communications Holdings
Capital Corp. 8.625% 4/1/09
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (E) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Falcon Holding Group B2 $ 1,840,000 $ 1,343,200
LP/Falcon Funding Corp. 0%
4/15/10 (c)
NTL Communications Corp. B3 6,470,000 7,003,775
11.5% 10/1/08
Telewest PLC 0% 10/1/07 (c) B1 1,780,000 1,646,500
14,825,238
ENTERTAINMENT - 0.0%
Regal Cinemas, Inc. 8.875% Caa1 2,340,000 1,749,150
12/15/10
LODGING & GAMING - 0.0%
HMH Properties, Inc. 7.875% Ba2 860,000 769,700
8/1/08
RESTAURANTS - 0.0%
Domino's, Inc. 10.375% 1/15/09 B3 1,020,000 981,750
TOTAL MEDIA & LEISURE 18,325,838
NONDURABLES - 0.0%
HOUSEHOLD PRODUCTS - 0.0%
Revlon Consumer Products B3 1,390,000 1,056,400
Corp. 9% 11/1/06
UTILITIES - 0.2%
CELLULAR - 0.1%
Nextel Communications, Inc.:
0% 10/31/07 (c) B1 4,635,000 3,360,375
12% 11/1/08 B1 2,090,000 2,335,575
5,695,950
TELEPHONE SERVICES - 0.1%
GST Network Funding, Inc. 0% - 1,620,000 793,800
5/1/08 (c)
ICG Services, Inc. 0% 5/1/08 B3 1,395,000 714,938
(c)
Intermedia Communications, B2 770,000 710,325
Inc. 8.6% 6/1/08
McLeodUSA, Inc. 9.5% 11/1/08 B1 990,000 999,900
NEXTLINK Communications, Inc. B2 2,780,000 2,717,450
9.625% 10/1/07
Pathnet, Inc. 12.25% 4/15/08 - 520,000 332,800
Rhythms NetConnections, Inc. B3 1,670,000 1,619,900
12.75% 4/15/09
Teligent, Inc. 0% 3/1/08 (c) Caa1 3,160,000 1,856,500
MOODY'S RATINGS (UNAUDITED) (E) PRINCIPAL AMOUNT VALUE (NOTE 1)
WinStar Communications, Inc.:
0% 10/15/05 (c) Caa1 $ 660,000 $ 620,400
15% 3/1/07 CCC 840,000 1,192,800
11,558,813
TOTAL UTILITIES 17,254,763
TOTAL NONCONVERTIBLE BONDS 43,194,651
TOTAL CORPORATE BONDS 162,505,988
(Cost $156,035,259)
</TABLE>
CASH EQUIVALENTS - 0.7%
SHARES
Central Cash Collateral Fund, 2,271,170 2,271,170
4.97% (b)
Taxable Central Cash Fund, 70,952,473 70,952,473
5.12% (b)
TOTAL CASH EQUIVALENTS 73,223,643
(Cost $73,223,643)
TOTAL INVESTMENT PORTFOLIO - 11,378,496,699
99.4%
(Cost $8,677,831,723)
NET OTHER ASSETS - 0.6% 73,126,371
NET ASSETS - 100% $ 11,451,623,070
SECURITY TYPE ABBREVIATIONS
ACES - Automatic Common Exchange
Securities
DECS - Dividend Enhanced Convertible
Stock/Debt Exchangeable for
Common Stock
PIES - Premium Income Equity
Securities
PEPS - Participating Equity
Preferred Shares/Premium
Exchangeable Participating
Shares
PRIDES - Preferred Redeemable
Increased Dividend Equity
Securities
PRIZES - Participating Redeemable
Indexed Zero-Premium
Exchangeable Securities
STRYPES - Structured Yield Product
Exchangeable for Common Stock
TIDES - Term Income Deferred Equity
Securities
TRACES - Trust Automatic Common
Exchange Securities
LEGEND
(a) Non-income producing
(b) The rate quoted is the annualized seven-day yield of the fund at
period end.
(c) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(d) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
At the period end, the value of these securities amounted to
$41,730,164 or 0.4% of net assets.
(e) Standard & Poor's credit ratings are used in absence of a rating
by Moody's Investors Service, Inc.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $3,130,810,154 and $3,702,654,756, 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 $357,904 for the
period.
The fund participated in the security lending program. At period end,
the value of securities loaned amounted to $2,161,728. The fund
received cash collateral of $2,271,170 which was invested in cash
equivalents.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $8,683,660,234. Net unrealized appreciation
aggregated $2,694,836,465, of which $3,429,361,965 related to
appreciated investment securities and $734,525,500 related to
depreciated investment securities.
The fund hereby designates approximately $377,295,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: EQUITY-INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 11,378,496,699
value (cost $8,677,831,723)
- - See accompanying schedule
Receivable for investments 90,046,143
sold
Receivable for fund shares 5,505,560
sold
Dividends receivable 16,959,938
Interest receivable 2,863,561
Other receivables 1,050,496
TOTAL ASSETS 11,494,922,397
LIABILITIES
Payable for investments $ 27,476,104
purchased
Payable for fund shares 8,190,160
redeemed
Accrued management fee 4,525,611
Distribution fees payable 35,366
Other payables and accrued 800,916
expenses
Collateral on securities 2,271,170
loaned, at value
TOTAL LIABILITIES 43,299,327
NET ASSETS $ 11,451,623,070
Net Assets consist of:
Paid in capital $ 7,876,429,434
Undistributed net investment 185,982,649
income
Accumulated undistributed 688,542,254
net realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 2,700,668,733
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 11,451,623,070
INITIAL CLASS: NET ASSET $25.71
VALUE, offering price and
redemption price per share
($11,014,291,174 (divided
by) 428,356,122 shares)
SERVICE CLASS: NET ASSET $25.66
VALUE, offering price and
redemption price per share
($437,331,896 (divided by)
17,043,776 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 237,494,123
Dividends
Interest 19,670,450
Security lending 164,973
257,329,546
Less foreign taxes withheld (5,121,217)
TOTAL INCOME 252,208,329
EXPENSES
Management fee $ 56,916,465
Transfer agent fees 7,747,895
Distribution fees - Service 335,256
Class
Accounting and security 1,001,302
lending fees
Non-interested trustees' 47,939
compensation
Custodian fees and expenses 321,914
Registration fees 28,786
Audit 85,493
Legal 72,821
Miscellaneous 786,528
Total expenses before 67,344,399
reductions
Expense reductions (1,041,650) 66,302,749
NET INVESTMENT INCOME 185,905,580
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 697,929,742
Foreign currency transactions (331,079) 697,598,663
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (178,760,100)
Assets and liabilities in (100,181) (178,860,281)
foreign currencies
NET GAIN (LOSS) 518,738,382
NET INCREASE (DECREASE) IN $ 704,643,962
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 1,041,650
Expense reductions Directed
brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 185,905,580 $ 175,118,232
income
Net realized gain (loss) 697,598,663 377,421,064
Change in net unrealized (178,860,281) 617,114,451
appreciation (depreciation)
NET INCREASE (DECREASE) IN 704,643,962 1,169,653,747
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (170,985,891) (143,408,236)
From net investment income
From net realized gain (377,968,784) (510,364,604)
TOTAL DISTRIBUTIONS (548,954,675) (653,772,840)
Share transactions - net (339,122,770) 1,007,105,749
increase (decrease)
TOTAL INCREASE (DECREASE) (183,433,483) 1,522,986,656
IN NET ASSETS
NET ASSETS
Beginning of period 11,635,056,553 10,112,069,897
End of period (including $ 11,451,623,070 $ 11,635,056,553
undistributed net investment
income of $185,982,649 and
$172,284,861, respectively)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
OTHER INFORMATION:
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 41,506,315 $ 1,076,558,536 64,328,671 $ 1,568,020,907
Class Sold
Reinvested 22,601,688 537,468,103 27,884,679 652,780,343
Redeemed (84,630,671) (2,163,179,248) (59,592,607) (1,424,580,460)
Net increase (decrease) (20,522,668) $ (549,152,609) 32,620,743 $ 796,220,790
Service Class Sold 8,201,124 211,555,674 8,703,524 212,310,778
Reinvested 483,645 11,486,572 42,396 992,496
Redeemed (507,589) (13,012,407) (98,817) (2,418,315)
Net increase (decrease) 8,177,180 $ 210,029,839 8,647,103 $ 210,884,959
Distributions From net $ 167,408,106 $ 143,190,527
investment income Initial
Class
Service Class 3,577,785 217,709
Total $ 170,985,891 $ 143,408,236
From net realized gain $ 370,059,997 $ 509,589,817
Initial Class
Service Class 7,908,787 774,787
Total $ 377,968,784 $ 510,364,604
$ 548,954,675 $ 653,772,840
</TABLE>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 25.42 $ 24.28 $ 21.03 $ 19.27 $ 15.35
period
Income from Investment
Operations
Net investment income .41 C .38 C .36 C .35 .41
Net realized and unrealized 1.10 2.31 5.06 2.30 4.69
gain (loss)
Total from investment 1.51 2.69 5.42 2.65 5.10
operations
Less Distributions
From net investment income (.38) (.34) (.36) (.03) (.40)
From net realized gain (.84) (1.21) (1.81) (.86) (.78)
Total distributions (1.22) (1.55) (2.17) (.89) (1.18)
Net asset value, end of period $ 25.71 $ 25.42 $ 24.28 $ 21.03 $ 19.27
TOTAL RETURN B, F 6.33% 11.63% 28.11% 14.28% 35.09%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 11,014,291 $ 11,409,912 $ 10,106,742 $ 6,961,090 $ 4,879,435
(000 omitted)
Ratio of expenses to average .57% .58% .58% .58% .61%
net assets
Ratio of expenses to average .56% E .57% E .57% E .56% E .61%
net assets after expense
reductions
Ratio of net investment 1.57% 1.58% 1.65% 1.97% 2.56%
income to average net assets
Portfolio turnover 27% 28% 44% 186% 87%
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 25.39 $ 24.27 $ 23.44
period
Income from Investment
Operations
Net investment income C .38 .36 .05
Net realized and unrealized 1.11 2.31 .78
gain (loss)
Total from investment 1.49 2.67 .83
operations
Less Distributions
From net investment income (.38) (.34) -
From net realized gain (.84) (1.21) -
Total distributions (1.22) (1.55) -
Net asset value, end of period $ 25.66 $ 25.39 $ 24.27
TOTAL RETURN B, F 6.25% 11.54% 3.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 437,332 $ 225,145 $ 5,328
(000 omitted)
Ratio of expenses to average .67% .68% .68% A
net assets
Ratio of expenses to average .66% E .67% E .65% A, E
net assets after expense
reductions
Ratio of net investment 1.47% 1.51% 1.63% A
income to average net assets
Portfolio turnover 27% 28% 44%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
D FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
E FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
F TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
FIDELITY VARIABLE INSURANCE PRODUCTS: BALANCED PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the life of fund total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
FIDELITY VIP: BALANCED - 4.55% 13.50%
"INITIAL CLASS"
Fidelity Balanced Composite 12.00% 20.12%
S&P 500 (registered trademark) 21.04% 28.59%
LB Aggregate Bond -0.82% 7.77%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show what would have happened if the fund had performed at a constant
rate each year.
You can compare the fund's returns to the performance of the Fidelity
Balanced Composite Index - a hypothetical combination of unmanaged
indices. The composite index combines the total returns of the
Standard & Poor's 500 Index and the Lehman Brothers Aggregate Bond
Index.
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 3, 1995.
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.
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 long-term growth and short-term
volatility. 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)
$10,000 OVER LIFE OF FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP III Balanced 60 S&P/40 LB Agg S&P 500 LB Aggregate Bond
00616 F0021 SP001 LB001
1995/01/03 10000.00 10000.00 10000.00 10000.00
1995/01/31 9990.00 10242.08 10261.28 10213.32
1995/02/28 10190.00 10579.07 10661.16 10456.40
1995/03/31 10260.00 10792.19 10975.77 10520.18
1995/04/30 10390.00 11043.33 11299.00 10667.46
1995/05/31 10610.00 11479.12 11750.63 11080.29
1995/06/30 10740.00 11672.64 12023.59 11161.18
1995/07/31 10880.00 11894.60 12422.30 11136.63
1995/08/31 10920.00 11970.09 12453.48 11271.38
1995/09/30 11020.00 12319.61 12979.01 11380.71
1995/10/31 10890.00 12357.29 12932.68 11528.66
1995/11/30 11210.00 12756.92 13500.42 11701.59
1995/12/31 11391.59 12975.78 13760.44 11865.41
1996/01/31 11473.17 13275.05 14228.85 11943.72
1996/02/29 11319.47 13256.49 14360.75 11735.90
1996/03/31 11227.28 13295.97 14499.04 11653.75
1996/04/30 11258.01 13383.78 14712.76 11588.49
1996/05/31 11380.93 13580.17 15092.20 11565.31
1996/06/30 11452.64 13684.00 15149.70 11720.29
1996/07/31 11227.28 13336.05 14480.39 11751.93
1996/08/31 11298.98 13495.73 14785.78 11731.96
1996/09/30 11780.44 14045.39 15617.92 11936.09
1996/10/31 12098.00 14402.53 16048.66 12201.07
1996/11/30 12733.12 15154.26 17261.78 12409.71
1996/12/31 12528.25 14917.76 16919.83 12294.30
1997/01/31 12927.76 15495.50 17976.98 12332.41
1997/02/28 13144.66 15583.88 18117.92 12363.24
1997/03/31 12777.20 15130.49 17373.45 12226.01
1997/04/30 13260.15 15763.24 18410.65 12409.40
1997/05/31 13785.10 16398.94 19531.49 12527.29
1997/06/30 14289.05 16917.81 20406.50 12676.37
1997/07/31 15086.97 17908.21 22030.24 13018.63
1997/08/31 14383.54 17245.39 20796.11 12907.97
1997/09/30 14960.98 17914.20 21935.11 13099.01
1997/10/31 14646.01 17659.10 21202.48 13288.94
1997/11/30 15002.98 18182.06 22183.94 13350.07
1997/12/31 15307.44 18442.83 22564.84 13484.91
1998/01/31 15475.43 18659.64 22814.41 13657.52
1998/02/28 16051.56 19461.11 24459.78 13646.59
1998/03/31 16655.17 20085.54 25712.37 13692.99
1998/04/30 16789.31 20248.55 25971.03 13764.19
1998/05/31 16789.31 20116.65 25524.59 13894.95
1998/06/30 17169.36 20675.20 26561.40 14012.83
1998/07/31 17158.18 20560.63 26278.52 14042.56
1998/08/31 15302.64 18910.90 22479.17 14271.13
1998/09/30 16174.52 19814.85 23919.19 14605.24
1998/10/31 16766.95 20740.08 25864.77 14528.18
1998/11/30 17392.92 21541.30 27432.44 14610.46
1998/12/31 18007.71 22311.94 29013.09 14654.40
1999/01/31 18208.91 22935.54 30226.42 14759.07
1999/02/28 17885.34 22347.65 29286.98 14501.38
1999/03/31 18332.47 22933.73 30458.76 14581.84
1999/04/30 18920.81 23495.74 31638.42 14628.06
1999/05/31 18497.20 23080.20 30891.44 14499.33
1999/06/30 18897.27 23819.28 32605.92 14453.03
1999/07/31 18438.37 23333.08 31587.96 14392.32
1999/08/31 18238.34 23259.04 31431.60 14385.01
1999/09/30 17897.10 22984.49 30570.06 14551.94
1999/10/31 18403.07 23891.08 32504.53 14605.63
1999/11/30 18403.07 24181.84 33165.35 14604.61
1999/12/31 18826.67 24989.79 35118.79 14534.19
IMATRL PRASUN SHR__CHT 19991231 20000118 151147 R00000000000063
</TABLE>
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Balanced Portfolio
on January 3, 1995, when the fund started. As the chart shows, by
December 31, 1999, the value of the investment would have grown to
$18,827 - an 88.27% increase on the initial investment. For
comparison, look at how both the Standard & Poor's 500 Index, a market
capitalization-weighted index of common stocks, and the Lehman
Brothers Aggregate Bond Index, a market value-weighted index of
investment-grade fixed-rate debt issues, including government,
corporate, asset-backed, and mortgage-backed securities, with
maturities of one year or more, did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment in the Standard & Poor's 500 Index would have grown to
$35,119 - a 251.19% increase. If $10,000 was put in the Lehman
Brothers Aggregate Bond Index, it would have grown to $14,534 - a
45.34% increase. You can also look at how the Fidelity Balanced
Composite Index did over the same period. The composite index combines
the total returns of the Standard & Poor's 500 Index and the Lehman
Brothers Aggregate Bond Index. With dividends and interest, if any,
reinvested, the same $10,000 would have grown to $24,990 - a 149.90%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 3.5
General Electric Co. 3.0
Exxon Mobil Corp. 2.6
Motorola, Inc. 2.4
American Express Co. 2.1
13.6
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 15.8
FINANCE 13.3
UTILITIES 9.4
MEDIA & LEISURE 6.6
HEALTH 5.6
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stocks 62.4%
Bonds 33.1%
Short-Term Investments and
Net Other Assets 4.5%
Row: 1, Col: 1, Value: 62.4
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 33.1
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 4.5
* FOREIGN INVESTMENTS 3.5%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: BALANCED PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). The initial offering of Service Class shares
took place on November 3, 1997. Performance for Service Class shares
reflects an asset based distribution fee (12b-1 fee), and returns
prior to November 3, 1997 are those of Initial Class and do not
include the effects of Service Class' 12b-1 fee. Had Service Class
shares' 12b-1 fee been reflected, returns prior to November 3, 1997
would have been lower. If Fidelity had not reimbursed certain fund
expenses, the life of fund total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
FIDELITY VIP: BALANCED - 4.43% 13.42%
SERVICE CLASS
Fidelity Balanced Composite 12.00% 20.12%
S&P 500 21.04% 28.59%
LB Aggregate Bond -0.82% 7.77%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show what would have happened if the fund had performed at a constant
rate each year.
You can compare the fund's returns to the performance of the Fidelity
Balanced Composite Index - a hypothetical combination of unmanaged
indices. The composite index combines the total returns of the
Standard & Poor's 500 Index and the Lehman Brothers Aggregate Bond
Index.
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 3, 1995.
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.
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 long-term growth and short-term
volatility. 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)
$10,000 OVER LIFE OF FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP III Balanced - SC 60 S&P/40 LB Agg S&P 500 LB Aggregate Bond
00469 F0021 SP001 LB001
1995/01/03 10000.00 10000.00 10000.00 10000.00
1995/01/31 9990.00 10242.08 10261.28 10213.32
1995/02/28 10190.00 10579.07 10661.16 10456.40
1995/03/31 10260.00 10792.19 10975.77 10520.18
1995/04/30 10390.00 11043.33 11299.00 10667.46
1995/05/31 10610.00 11479.12 11750.63 11080.29
1995/06/30 10740.00 11672.64 12023.59 11161.18
1995/07/31 10880.00 11894.60 12422.30 11136.63
1995/08/31 10920.00 11970.09 12453.48 11271.38
1995/09/30 11020.00 12319.61 12979.01 11380.71
1995/10/31 10890.00 12357.29 12932.68 11528.66
1995/11/30 11210.00 12756.92 13500.42 11701.59
1995/12/31 11391.59 12975.78 13760.44 11865.41
1996/01/31 11473.17 13275.05 14228.85 11943.72
1996/02/29 11319.47 13256.49 14360.75 11735.90
1996/03/31 11227.28 13295.97 14499.04 11653.75
1996/04/30 11258.01 13383.78 14712.76 11588.49
1996/05/31 11380.93 13580.17 15092.20 11565.31
1996/06/30 11452.64 13684.00 15149.70 11720.29
1996/07/31 11227.28 13336.05 14480.39 11751.93
1996/08/31 11298.98 13495.73 14785.78 11731.96
1996/09/30 11780.44 14045.39 15617.92 11936.09
1996/10/31 12098.00 14402.53 16048.66 12201.07
1996/11/30 12733.12 15154.26 17261.78 12409.71
1996/12/31 12528.25 14917.76 16919.83 12294.30
1997/01/31 12927.76 15495.50 17976.98 12332.41
1997/02/28 13144.66 15583.88 18117.92 12363.24
1997/03/31 12777.20 15130.49 17373.45 12226.01
1997/04/30 13260.15 15763.24 18410.65 12409.40
1997/05/31 13785.10 16398.94 19531.49 12527.29
1997/06/30 14289.05 16917.81 20406.50 12676.37
1997/07/31 15086.97 17908.21 22030.24 13018.63
1997/08/31 14383.54 17245.39 20796.11 12907.97
1997/09/30 14960.98 17914.20 21935.11 13099.01
1997/10/31 14646.01 17659.10 21202.48 13288.94
1997/11/30 15002.98 18182.06 22183.94 13350.07
1997/12/31 15317.94 18442.83 22564.84 13484.91
1998/01/31 15464.93 18659.64 22814.41 13657.52
1998/02/28 16029.90 19461.11 24459.78 13646.59
1998/03/31 16633.54 20085.54 25712.37 13692.99
1998/04/30 16756.50 20248.55 25971.03 13764.19
1998/05/31 16756.50 20116.65 25524.59 13894.95
1998/06/30 17136.57 20675.20 26561.40 14012.83
1998/07/31 17125.39 20560.63 26278.52 14042.56
1998/08/31 15280.94 18910.90 22479.17 14271.13
1998/09/30 16130.51 19814.85 23919.19 14605.24
1998/10/31 16734.14 20740.08 25864.77 14528.18
1998/11/30 17348.96 21541.30 27432.44 14610.46
1998/12/31 17963.77 22311.94 29013.09 14654.40
1999/01/31 18164.98 22935.54 30226.42 14759.07
1999/02/28 17841.40 22347.65 29286.98 14501.38
1999/03/31 18288.61 22933.73 30458.76 14581.84
1999/04/30 18877.05 23495.74 31638.42 14628.06
1999/05/31 18453.37 23080.20 30891.44 14499.33
1999/06/30 18841.74 23819.28 32605.92 14453.03
1999/07/31 18382.76 23333.08 31587.96 14392.32
1999/08/31 18182.69 23259.04 31431.60 14385.01
1999/09/30 17841.40 22984.49 30570.06 14551.94
1999/10/31 18335.69 23891.08 32504.53 14605.63
1999/11/30 18335.69 24181.84 33165.35 14604.61
1999/12/31 18759.36 24989.79 35118.79 14534.19
IMATRL PRASUN SHR__CHT 19991231 20000118 151146 R00000000000063
</TABLE>
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Balanced Portfolio -
Service Class on January 3, 1995, when the fund started. As the chart
shows, by December 31, 1999, the value of the investment would have
grown to $18,759 - an 87.59% increase on the initial investment. For
comparison, look at how both the Standard & Poor's 500 Index, a market
capitalization-weighted index of common stocks, and the Lehman
Brothers Aggregate Bond Index, a market value-weighted index of
investment-grade fixed-rate debt issues, including government,
corporate, asset-backed, and mortgage-backed securities, with
maturities of one year or more, did over the same period. With
dividends and capital gains, if any, reinvested, the same $10,000
investment in the S&P 500 would have grown to $35,119 - a 251.19%
increase. If $10,000 was put in the Lehman Brothers Aggregate Bond
Index, it would have grown to $14,534 - a 45.34% increase. You can
also look at how the Fidelity Balanced Composite Index did over the
same period. The composite index combines the total returns of the
Standard & Poor's 500 Index and the Lehman Brothers Aggregate Bond
Index. With dividends and interest, if any, reinvested, the same
$10,000 would have grown to $24,990 - a 149.90% increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 3.5
General Electric Co. 3.0
Exxon Mobil Corp. 2.6
Motorola, Inc. 2.4
American Express Co. 2.1
13.6
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 15.8
FINANCE 13.3
UTILITIES 9.4
MEDIA & LEISURE 6.6
HEALTH 5.6
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stocks 62.4%
Bonds 33.1%
Short-Term Investments and
Net Other Assets 4.5%
Row: 1, Col: 1, Value: 62.4
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 33.1
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 4.5
* FOREIGN INVESTMENTS 3.5%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: BALANCED PORTFOLIO
FUND TALK: THE MANAGERS' OVERVIEW
(photograph of John Avery and Kevin Grant)
An interview with John Avery (right), Lead Portfolio Manager of
Balanced Portfolio, and Kevin Grant, manager for fixed-income
investments
Q. HOW DID THE FUND PERFORM, JOHN?
J.A. Considering the fund's mix of equity and fixed-income
investments, its returns typically fall somewhere between that of its
benchmark - the Standard & Poor's 500 Index - and that of the Lehman
Brothers Aggregate Bond Index. That was indeed the case for the 12
months that ended December 31, 1999, as the fund's return trailed the
21.04% return of the S&P 500 but outpaced the -0.82% return of the
Lehman Brothers index.
Q. WHAT AFFECTED THE FUND'S PERFORMANCE RELATIVE TO THE S&P 500?
J.A. Simply put, our underexposure to technology hurt. The fund was,
in essence, left by the wayside during the narrowly led advances of
technology stocks over the past 12 months. I found it difficult
gaining adequate exposure to the high-tech segment of the market, an
area I deemed far too richly valued. With technology representing over
one-quarter of the S&P 500 index, relative performance struggled to
keep pace during the sector's powerful rally.
Q. WHAT OTHER FACTORS INFLUENCED FUND PERFORMANCE?
J.A. With the notable exception of some of the strong, larger names,
such as American Express and American International Group, the fund's
overweighting in financial stocks relative to the index during a
period of rising interest rates detracted from returns. Our
overexposure to Freddie Mac, Fannie Mae and Bank of New York hurt the
most. Similarly, many of our investments in health care, most notably
our stake in pharmaceutical firms, also hurt performance. Having
overweighted positions in pharmaceutical companies Schering-Plough and
Eli Lilly took its toll on the fund during the period. We did manage,
however, to erase some of our losses by holding comparatively less
Pfizer and Abbot Laboratories than the index. On the whole, investors
punished drug stocks for delivering earnings growth that continued to
lag the broader market. Switching to contributors, select energy
holdings including BP Amoco helped, as a bullish market for oil and
related products fueled the industry's strong advances. Our
overweighting in broadcasting stocks - specifically CBS - lifted
returns, as many traditional media companies benefited from an
onslaught of Internet advertising.
Q. WHAT OTHER STOCKS HELPED? WHICH HURT?
J.A. The fund's top holding, Microsoft, broke out at the end of the
period, fueled by strong earnings and a solid product pipeline.
Telecommunications giant MCI WorldCom also helped, giving the fund
exposure to the development of the Internet and the soaring demand for
voice and data delivery. Along those same lines, Texas Instruments and
Motorola were each big winners in the cellular bonanza. GE rose
sharply on consistently impressive earnings growth related to the
robustness of its underlying businesses. On the downside, Philip
Morris continued its period-long swoon caused by tobacco-related
litigation. Eli Lilly faltered on deteriorating sales of its key
product, Prozac. Postal metering stronghold Pitney-Bowes slipped
further as Internet-only rivals began to widen their lead in the Net
postage market.
Q. TURNING TO YOU, KEVIN, HOW DID THE BOND PORTION OF THE FUND
PERFORM?
K.G. It was an uphill battle for bonds, as interest rates rose
steadily over the course of the period - not exactly a recipe for
success for most bond funds. In managing this fund's fixed-income
investments, however, I relied on sector allocation to gain exposure
to a strong recovery in the spread sectors - namely, corporate bonds
and mortgage securities - and, thus, an advantage over the
Treasury-rich Lehman Brothers index, as these securities outperformed
their government counterparts during the 12-month period.
Specifically, our stake in mortgages helped. This sector benefited
from favorable prepayment levels, as well as declining interest-rate
volatility later in the period. Within corporates, we found ourselves
in the right areas of the market. Our positioning in various media,
telecommunications and energy names proved particularly beneficial for
the fund's bond subportfolio.
Q. JOHN, WHAT'S YOUR OUTLOOK?
J.A. I'm cautiously optimistic. Even with higher interest rates, many
companies continue to do very well, and more money continues to pour
into stocks. I will remain focused on individual company fundamentals,
trying to add value from the bottom up. Due to their high valuations,
the fund will assuredly miss out on the growth potential pervading the
dot.com universe. However, to fill the void, I intend to pursue those
companies with strong businesses and attractive valuations that are
ideally positioned to benefit either directly or indirectly from the
technology boom.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON
THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED
ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FUND FACTS
GOAL: seeks both income and growth of captial by investing in a
diversified portfolio of stocks and bonds
START DATE: January 3, 1995
SIZE: as of December 31, 1999, more than
$352 million
MANAGER: John Avery, since 1998, and Kevin Grant, since 1996; John
Avery joined Fidelity in 1995; Kevin Grant joined
Fidelity in 1993
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: BALANCED PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 60.6%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 1.3%
AEROSPACE & DEFENSE - 0.8%
Boeing Co. 22,000 $ 914,375
Textron, Inc. 22,300 1,710,131
2,624,506
SHIP BUILDING & REPAIR - 0.5%
General Dynamics Corp. 35,200 1,856,800
TOTAL AEROSPACE & DEFENSE 4,481,306
BASIC INDUSTRIES - 4.1%
CHEMICALS & PLASTICS - 2.3%
Aventis SA 20,030 1,168,915
E. I. du Pont de Nemours and 29,004 1,910,639
Co.
Praxair, Inc. 80,300 4,040,094
Sealed Air Corp. (a) 19,300 999,981
8,119,629
IRON & STEEL - 0.5%
AK Steel Holding Corp. 46,400 875,800
USX - U.S. Steel Group 22,500 742,500
1,618,300
METALS & MINING - 1.3%
Alcoa, Inc. 56,300 4,672,900
TOTAL BASIC INDUSTRIES 14,410,829
CONSTRUCTION & REAL ESTATE -
0.0%
BUILDING MATERIALS - 0.0%
Masco Corp. 600 15,225
DURABLES - 0.8%
AUTOS, TIRES, & ACCESSORIES -
0.3%
Ford Motor Co. 20,200 1,079,438
CONSUMER DURABLES - 0.3%
Minnesota Mining & 12,600 1,233,225
Manufacturing Co.
HOME FURNISHINGS - 0.2%
Leggett & Platt, Inc. 32,200 690,288
TOTAL DURABLES 3,002,951
ENERGY - 4.9%
ENERGY SERVICES - 0.9%
Baker Hughes, Inc. 41,300 869,881
Halliburton Co. 26,600 1,070,650
Schlumberger Ltd. 21,300 1,198,125
Transocean Sedco Forex, Inc. 4,123 138,894
3,277,550
OIL & GAS - 4.0%
BP Amoco PLC 220,762 2,182,324
Chevron Corp. 14,300 1,238,738
Exxon Mobil Corp. 112,966 9,100,823
SHARES VALUE (NOTE 1)
Sunoco, Inc. 26,000 $ 611,000
USX - Marathon Group 30,200 745,563
13,878,448
TOTAL ENERGY 17,155,998
FINANCE - 10.2%
BANKS - 2.6%
Bank of America Corp. 36,700 1,841,881
Bank of New York Co., Inc. 110,500 4,420,000
Chase Manhattan Corp. 27,300 2,120,869
Wells Fargo & Co. 16,600 671,263
9,054,013
CREDIT & OTHER FINANCE - 3.1%
American Express Co. 44,700 7,431,375
Citigroup, Inc. 61,325 3,407,370
10,838,745
FEDERAL SPONSORED CREDIT - 1.5%
Fannie Mae 35,600 2,222,775
Freddie Mac 64,100 3,016,706
5,239,481
INSURANCE - 2.0%
AFLAC, Inc. 25,300 1,193,844
American International Group, 44,000 4,757,500
Inc.
Hartford Financial Services 25,800 1,222,275
Group, Inc.
7,173,619
SECURITIES INDUSTRY - 1.0%
Morgan Stanley Dean Witter & 25,600 3,654,400
Co.
TOTAL FINANCE 35,960,258
HEALTH - 5.5%
DRUGS & PHARMACEUTICALS - 5.1%
American Home Products Corp. 36,100 1,423,694
Bristol-Myers Squibb Co. 43,700 2,804,994
Eli Lilly & Co. 54,200 3,604,300
Merck & Co., Inc. 34,800 2,333,775
Pfizer, Inc. 18,900 613,069
Schering-Plough Corp. 75,900 3,202,031
Warner-Lambert Co. 46,300 3,793,706
17,775,569
MEDICAL EQUIPMENT & SUPPLIES
- - 0.4%
Abbott Laboratories 5,300 192,456
Johnson & Johnson 14,000 1,303,750
1,496,206
TOTAL HEALTH 19,271,775
INDUSTRIAL MACHINERY &
EQUIPMENT - 4.5%
ELECTRICAL EQUIPMENT - 3.0%
General Electric Co. 67,800 10,492,050
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.5%
Caterpillar, Inc. 11,200 $ 527,100
Ingersoll-Rand Co. 22,600 1,244,413
The Stanley Works 32,800 988,100
Tyco International Ltd. 67,870 2,638,446
5,398,059
TOTAL INDUSTRIAL MACHINERY & 15,890,109
EQUIPMENT
MEDIA & LEISURE - 2.9%
BROADCASTING - 1.7%
CBS Corp. (a) 61,200 3,912,975
MediaOne Group, Inc. (a) 2,200 168,988
NTL, Inc. warrants 10/14/08 199 9,950
(a)
Teletrac Holdings, Inc. 20 0
warrants 8/1/07 (a)
Time Warner, Inc. 26,408 1,912,930
UIH Australia/Pacific, Inc. 150 4,500
warrants 5/15/06 (a)
6,009,343
PUBLISHING - 0.9%
McGraw-Hill Companies, Inc. 48,500 2,988,813
RESTAURANTS - 0.3%
McDonald's Corp. 28,400 1,144,875
TOTAL MEDIA & LEISURE 10,143,031
NONDURABLES - 1.3%
FOODS - 0.3%
Nabisco Group Holdings Corp. 30,500 324,063
Nabisco Holdings Corp. Class A 26,500 838,063
1,162,126
HOUSEHOLD PRODUCTS - 0.7%
Clorox Co. 24,000 1,209,000
Procter & Gamble Co. 11,000 1,205,188
2,414,188
TOBACCO - 0.3%
Philip Morris Companies, Inc. 40,000 927,500
TOTAL NONDURABLES 4,503,814
RETAIL & WHOLESALE - 2.6%
APPAREL STORES - 0.0%
Mothers Work, Inc. (a)(j) 3 35
GENERAL MERCHANDISE STORES -
1.2%
Dayton Hudson Corp. 10,200 749,063
Wal-Mart Stores, Inc. 54,300 3,753,488
4,502,551
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE,
MISCELLANEOUS - 1.4%
Home Depot, Inc. 51,450 $ 3,527,541
Lowe's Companies, Inc. 22,300 1,332,425
4,859,966
TOTAL RETAIL & WHOLESALE 9,362,552
SERVICES - 0.3%
H&R Block, Inc. 24,400 1,067,500
TECHNOLOGY - 15.3%
COMMUNICATIONS EQUIPMENT - 2.9%
Cisco Systems, Inc. (a) 47,800 5,120,575
Lucent Technologies, Inc. 50,900 3,807,956
Tellabs, Inc. (a) 22,500 1,444,219
10,372,750
COMPUTER SERVICES & SOFTWARE
- - 4.9%
America Online, Inc. (a) 17,600 1,327,700
Automatic Data Processing, 38,900 2,095,738
Inc.
Computer Associates 21,800 1,524,638
International, Inc.
Microsoft Corp. (a) 105,200 12,282,078
17,230,154
COMPUTERS & OFFICE EQUIPMENT
- - 3.4%
Compaq Computer Corp. 38,800 1,050,025
Dell Computer Corp. (a) 55,400 2,825,400
EMC Corp. (a) 18,100 1,977,425
Hewlett-Packard Co. 9,300 1,059,619
International Business 13,300 1,436,400
Machines Corp.
Pitney Bowes, Inc. 76,100 3,676,581
12,025,450
ELECTRONICS - 4.1%
Insilco Corp. warrants 60 1
8/15/07 (a)
Intel Corp. 25,700 2,115,431
Intersil Holding Corp. 60 8,430
warrants 8/15/09 (a)(g)
Motorola, Inc. 56,300 8,290,175
Texas Instruments, Inc. 41,400 4,010,625
14,424,662
TOTAL TECHNOLOGY 54,053,016
TRANSPORTATION - 0.3%
RAILROADS - 0.3%
Burlington Northern Santa Fe 11,100 269,175
Corp.
Union Pacific Corp. 16,200 706,725
975,900
UTILITIES - 6.6%
CELLULAR - 2.0%
ALLTEL Corp. 44,300 3,663,056
Loral Orion Network Systems,
Inc.:
warrants 1/15/07 (CV ratio 290 2,030
.47) (a)
warrants 1/15/07 (CV ratio 50 450
.6) (a)
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Mannesmann AG (Reg.) 3,300 $ 803,671
McCaw International Ltd. 290 653
warrants 4/15/07 (a)(g)
Nextel Communications, Inc. 11,000 1,134,375
Class A (a)
Sprint Corp. - PCS Group 6,400 656,000
Series 1 (a)
Vodafone AirTouch PLC 15,000 742,500
sponsored ADR
7,002,735
ELECTRIC UTILITY - 0.5%
CMS Energy Corp. 27,800 867,013
Entergy Corp. 24,300 625,725
PG&E Corp. 8,200 168,100
1,660,838
TELEPHONE SERVICES - 4.1%
AT&T Corp. 40,604 2,060,653
BellSouth Corp. 33,000 1,544,813
KMC Telecom Holdings, Inc. 70 175
warrants 4/15/08 (a)(g)
MCI WorldCom, Inc. (a) 106,689 5,661,185
Ono Finance PLC rights 210 21,000
5/31/09 (a)(g)
SBC Communications, Inc. 79,570 3,879,038
Sprint Corp. - FON Group 19,500 1,312,594
14,479,458
TOTAL UTILITIES 23,143,031
TOTAL COMMON STOCKS 213,437,295
(Cost $161,094,328)
PREFERRED STOCKS - 1.8%
CONVERTIBLE PREFERRED STOCKS
- - 1.5%
BASIC INDUSTRIES - 0.1%
CHEMICALS & PLASTICS - 0.1%
Monsanto Co. $1.625 ACES 10,500 336,000
DURABLES - 0.0%
AUTOS, TIRES, & ACCESSORIES -
0.0%
Automatic Common Exchangeable 3,700 35,381
Securities Trust II
(Republic Industries, Inc.)
$1.55 ACES
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.1%
ELECTRICAL EQUIPMENT - 0.1%
Loral Space & Communications 3,700 228,013
Ltd. Series C, $3.00 (g)
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 1.3%
BROADCASTING - 1.3%
Comcast Corp.:
$1.44 ZONES 4,700 $ 465,888
$1.63 ZONES 12,600 1,245,825
Cox Communications, Inc. 9,100 882,700
$6.858 PRIZES
MediaOne Group, Inc.:
$3.04 15,400 735,350
(Vodafone AirTouch PLC) $3.63 12,300 1,328,400
PIES
4,658,163
LODGING & GAMING - 0.0%
Host Marriott Financial Trust 2,800 89,600
$3.375 QUIPS (g)
TOTAL MEDIA & LEISURE 4,747,763
TOTAL CONVERTIBLE PREFERRED 5,347,157
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 0.3%
CONSTRUCTION & REAL ESTATE -
0.1%
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
California Federal Preferred 5,800 131,950
Capital Corp. $2.2812
ENERGY - 0.0%
ENERGY SERVICES - 0.0%
R&B Falcon Corp. 13.875% 106 111,830
FINANCE - 0.0%
INSURANCE - 0.0%
American Annuity Group 50 44,773
Capital Trust II 8.875%
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Fresenius Medical Care 190 179,900
Capital Trust II 7.875%
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
Adelphia Communications Corp. 300 33,900
$13.00
Citadel Broadcasting Co. 279 31,109
Series B, 13.25% pay-in-kind
CSC Holdings, Inc. 11.125% 2,022 220,904
pay-in-kind
285,913
PUBLISHING - 0.0%
PRIMEDIA, Inc. Series D, 600 59,400
$10.00
TOTAL MEDIA & LEISURE 345,313
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
UTILITIES - 0.0%
TELEPHONE SERVICES - 0.0%
NEXTLINK Communications, Inc. 1,601 $ 86,454
14% pay-in-kind
TOTAL NONCONVERTIBLE 900,220
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 6,247,377
(Cost $5,549,320)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 13.1%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT
CONVERTIBLE BONDS - 0.2%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.0%
POLLUTION CONTROL - 0.0%
WMX Technologies, Inc. 2% Ba3 $ 75,000 62,063
1/24/05
MEDIA & LEISURE - 0.1%
BROADCASTING - 0.1%
EchoStar Communications Corp. - 100,000 122,750
4.875% 1/1/07 (g)
Liberty Media Corp. 4% Baa3 220,000 276,100
11/15/29 (g)
NTL, Inc. 5.75% 12/15/09 (g) - 150,000 161,625
560,475
TECHNOLOGY - 0.1%
COMPUTER SERVICES & SOFTWARE
- - 0.1%
Amazon.com, Inc. 4.75% Caa3 243,000 277,324
2/1/09 (g)
TOTAL CONVERTIBLE BONDS 899,862
NONCONVERTIBLE BONDS - 12.9%
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. 6.45% 8/15/02 Baa2 280,000 272,387
BASIC INDUSTRIES - 0.6%
CHEMICALS & PLASTICS - 0.3%
Borden Chemicals & Plastics B1 200,000 182,000
Operating L.P./BCP Financial
Corp. 9.5% 5/1/05
Huntsman Corp. 9.5% 7/1/07 B2 370,000 349,650
(g)
Lyondell Chemical Co.:
9.625% 5/1/07 Ba3 120,000 122,400
9.875% 5/1/07 Ba3 110,000 112,200
10.875% 5/1/09 B2 150,000 155,250
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Zeneca Specialty Chemicals B2 $ 50,000 $ 51,750
PLC 11% 7/1/09 (g)
973,250
METALS & MINING - 0.1%
Kaiser Aluminum & Chemical B3 160,000 160,000
Corp. 12.75% 2/1/03
Metals USA, Inc. 8.625% B2 150,000 140,625
2/15/08
300,625
PACKAGING & CONTAINERS - 0.1%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 190,000 176,700
9.75% 6/15/07 Caa1 250,000 237,500
414,200
PAPER & FOREST PRODUCTS - 0.1%
Fort James Corp. 6.625% Baa2 45,000 43,385
9/15/04
Millar Western Forest B3 120,000 120,000
Products Ltd. 9.875% 5/15/08
Repap New Brunswick, Inc. Caa1 230,000 212,175
yankee 10.625% 4/15/05
375,560
TOTAL BASIC INDUSTRIES 2,063,635
CONSTRUCTION & REAL ESTATE -
0.8%
CONSTRUCTION - 0.0%
Del Webb Corp. 10.25% 2/15/10 B2 30,000 28,650
Great Lakes Dredge & Dock B3 70,000 73,150
Corp. 11.25% 8/15/08
101,800
REAL ESTATE - 0.3%
Duke Realty LP 7.3% 6/30/03 Baa1 500,000 492,575
LNR Property Corp. 9.375% B1 360,000 337,500
3/15/08
830,075
REAL ESTATE INVESTMENT TRUSTS
- - 0.5%
CenterPoint Properties Trust Baa2 100,000 92,156
6.75% 4/1/05
Equity Office Properties
Trust:
6.5% 1/15/04 Baa1 1,000,000 953,680
6.625% 2/15/05 Baa1 200,000 188,640
6.75% 2/15/08 Baa1 300,000 275,907
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE INVESTMENT TRUSTS
- - CONTINUED
Ocwen Asset Investment Corp. - $ 120,000 $ 102,000
11.5% 7/1/05
ProLogis Trust 6.7% 4/15/04 Baa1 70,000 66,150
1,678,533
TOTAL CONSTRUCTION & REAL 2,610,408
ESTATE
DURABLES - 0.0%
CONSUMER DURABLES - 0.0%
Corning Consumer Products Co. B3 60,000 47,100
9.625% 5/1/08
TEXTILES & APPAREL - 0.0%
Worldtex, Inc. 9.625% B1 20,000 16,200
12/15/07
TOTAL DURABLES 63,300
ENERGY - 0.5%
COAL - 0.1%
P&L Coal Holdings Corp. B2 135,000 131,625
9.625% 5/15/08
ENERGY SERVICES - 0.0%
R&B Falcon Corp. 12.25% Ba3 100,000 110,500
3/15/06
OIL & GAS - 0.4%
Anadarko Petroleum Corp. 7.2% Baa1 385,000 347,786
3/15/29
Apache Corp.:
7.625% 7/1/19 Baa1 155,000 149,420
7.7% 3/15/26 Baa1 65,000 61,545
Apache Finance Property Ltd. Baa1 100,000 92,020
6.5% 12/15/07
Chesapeake Energy Corp. B3 250,000 236,250
9.625% 5/1/05
Conoco, Inc. 5.9% 4/15/04 A3 125,000 119,050
Ocean Energy, Inc. 7.625% Ba1 250,000 240,625
7/1/05
Plains Resources, Inc. Series B2 200,000 195,000
B 10.25% 3/15/06
Seven Seas Petroleum, Inc. Caa1 20,000 8,000
12.5% 5/15/05
YPF Sociedad Anonima:
7.75% 8/27/07 B1 25,000 24,030
8% 2/15/04 B1 50,000 49,506
1,523,232
TOTAL ENERGY 1,765,357
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - 3.1%
BANKS - 0.9%
ABN-Amro Bank NV, Chicago A1 $ 500,000 $ 494,850
6.625% 10/31/01
BankBoston Corp. 6.625% A3 200,000 194,314
2/1/04
Barclays Bank PLC yankee A1 450,000 441,981
5.95% 7/15/01
Capital One Bank 6.375% Baa2 250,000 239,825
2/15/03
Capital One Financial Corp. Baa3 210,000 191,585
7.125% 8/1/08
Korea Development Bank:
6.625% 11/21/03 Baa2 170,000 163,107
7.375% 9/17/04 Baa2 160,000 156,800
MBNA Corp.:
6.34% 6/2/03 Baa2 100,000 95,720
6.875% 11/15/02 Baa2 300,000 295,242
NB Capital Trust IV 8.25% Aa2 330,000 316,384
4/15/27
Sanwa Finance Aruba AEC 8.35% Baa1 600,000 602,238
7/15/09
Summit Bancorp 8.625% BBB+ 100,000 102,957
12/10/02
3,295,003
CREDIT & OTHER FINANCE - 2.0%
Ahmanson Capital Trust I A3 250,000 237,640
8.36% 12/1/26 (g)
AMRESCO, Inc. 9.875% 3/15/05 Caa3 170,000 113,050
Associates Corp. of North Aa3 500,000 471,220
America 6% 7/15/05
Chase Capital I 7.67% 12/1/26 Aa3 500,000 451,770
ERP Operating LP:
6.55% 11/15/01 A3 50,000 49,199
7.1% 6/23/04 A3 200,000 195,426
Fleet Capital Trust II 7.92% A2 100,000 91,989
12/11/26
Ford Motor Credit Co. 6.5% A1 1,000,000 989,500
2/28/02
GS Escrow Corp. 7.125% 8/1/05 Ba1 400,000 358,196
Imperial Credit Capital Trust B2 20,000 15,600
I 10.25% 6/14/02
Imperial Credit Industries B3 330,000 244,200
9.875% 1/15/07
KeyCorp Institutional Capital A1 1,000,000 905,380
A 7.826% 12/1/26
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 10,000 6,000
7.6% 8/1/07 Ba2 14,000 7,700
7.875% 8/1/03 Ba2 30,000 17,100
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
Newcourt Credit Group, Inc. A1 $ 340,000 $ 331,782
6.875% 2/16/05
PNC Institutional Capital A2 600,000 573,972
Trust 8.315% 5/15/27 (g)
Spieker Properties LP:
6.8% 5/1/04 Baa2 90,000 86,564
6.875% 2/1/05 Baa2 1,000,000 951,950
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 160,000 152,197
5.875% 5/1/04 Baa1 375,000 355,253
6.875% 11/15/28 Baa1 190,000 168,815
Trizec Finance Ltd. yankee Baa3 100,000 99,500
10.875% 10/15/05
TXU Eastern Funding 6.75% Baa1 60,000 55,151
5/15/09
6,929,154
SAVINGS & LOANS - 0.2%
Long Island Savings Bank FSB Baa3 500,000 493,525
6.2% 4/2/01
TOTAL FINANCE 10,717,682
HEALTH - 0.0%
MEDICAL EQUIPMENT & SUPPLIES
- - 0.0%
Wright Medical Technology, Caa3 40,000 44,600
Inc. 11.75% 7/1/00 (d)(h)
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Mariner Post-Acute Network, B3 80,000 4,800
Inc. 9.5% 11/1/07 (d)
Oxford Health Plans, Inc. 11% Caa1 50,000 48,500
5/15/05
Unilab Corp. 12.75% 10/1/09 B3 30,000 31,050
(g)
84,350
TOTAL HEALTH 128,950
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.6%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.4%
Thermadyne Holdings Corp. 0% Caa1 90,000 40,950
6/1/08 (e)
Thermadyne Manufacturing LLC B3 80,000 66,400
9.875% 6/1/08
Tyco International Group SA:
yankee 6.875% 1/15/29 Baa1 500,000 424,935
yankee 6.125% 6/15/01 Baa1 1,000,000 983,080
1,515,365
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
POLLUTION CONTROL - 0.2%
Allied Waste North America, B2 $ 400,000 $ 356,000
Inc. 10% 8/1/09 (g)
WMX Technologies, Inc. 7.1% Ba1 400,000 370,660
8/1/26
726,660
TOTAL INDUSTRIAL MACHINERY & 2,242,025
EQUIPMENT
MEDIA & LEISURE - 2.2%
BROADCASTING - 1.8%
ACME Television LLC/ACME B3 200,000 180,000
Financial Corp. 0% 9/30/04
(e)
Adelphia Communications Corp. B1 150,000 152,625
9.875% 3/1/05
Ascent Entertainment Group, B3 300,000 223,500
Inc. 0% 12/15/04 (e)
Avalon Cable Holding 0% Caa1 140,000 91,700
12/1/08 (e)
Bresnan Communications Group B2 125,000 86,250
LLC/Bresnan Capital Corp.
0% 2/1/09 (e)
CapStar Broadcasting B2 190,000 171,000
Partners, Inc. 0% 2/1/09 (e)
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (e) B2 140,000 81,900
8.625% 4/1/09 B2 180,000 166,500
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa2 215,000 222,218
9% 9/1/08 Baa2 540,000 587,504
Cox Communications, Inc. Baa2 125,000 126,215
7.75% 8/15/06
Diamond Cable Communications B3 250,000 204,375
PLC 0% 2/15/07 (e)
Earthwatch, Inc. 0% 7/15/07 - 130,000 91,000
unit (e)(g)
EchoStar DBS Corp. 9.375% B2 490,000 491,225
2/1/09
International Cabletel, Inc. B3 250,000 225,625
0% 2/1/06 (e)
LIN Holdings Corp. 0% 3/1/08 B3 10,000 6,750
(e)
Nielsen Media Research, Inc. Baa2 150,000 146,203
7.6% 6/15/09
NTL, Inc. 0% 4/1/08 (e) B3 560,000 386,400
Olympus Communications B1 170,000 177,650
LP/Olympus Capital Corp.
10.625% 11/15/06
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Satelites Mexicanos SA de CV:
0% 6/30/04 (g)(h) B1 $ 74,000 $ 68,080
10.125% 11/1/04 B3 100,000 70,000
Sinclair Broadcast Group, B2 180,000 171,000
Inc. 9% 7/15/07
TCI Communications, Inc. A2 105,000 114,552
8.75% 8/1/15
TCI Communications Financing A3 180,000 197,888
III 9.65% 3/31/27
Telewest PLC 0% 10/1/07 (e) B1 190,000 175,750
Time Warner, Inc. 8.18% Baa3 910,000 935,262
8/15/07
UIH Australia/Pacific, Inc.:
Series B 0% 5/15/06 (e) B2 250,000 210,000
Series D 0% 5/15/06 (e) B2 30,000 25,200
United Pan-Europe
Communications NV:
0% 8/1/09 (e) B2 230,000 132,250
10.875% 11/1/07 (g) B2 200,000 206,500
10.875% 8/1/09 B2 215,000 218,225
6,343,347
ENTERTAINMENT - 0.2%
AMC Entertainment, Inc. 9.5% B3 110,000 97,075
3/15/09
Harrahs Operating Co., Inc. Ba2 130,000 126,750
7.875% 12/15/05
Hollywood Entertainment Corp. B3 50,000 46,250
10.625% 8/15/04
Premier Parks, Inc. 0% B3 350,000 238,000
4/1/08 (e)
Regal Cinemas, Inc. 9.5% Caa1 110,000 86,900
6/1/08
594,975
LEISURE DURABLES & TOYS - 0.0%
Marvel Enterprises, Inc. 12% - 80,000 74,400
6/15/09
LODGING & GAMING - 0.0%
Horseshoe Gaming LLC 8.625% B2 70,000 67,375
5/15/09
KSL Recreation Group, Inc. B3 90,000 88,200
10.25% 5/1/07
155,575
PUBLISHING - 0.1%
News America Holdings, Inc. Baa3 80,000 82,489
8.5% 2/15/05
News America, Inc. 6.625% Baa3 145,000 134,743
1/9/08
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Time Warner Entertainment
Co. LP:
7.25% 9/1/08 Baa2 $ 90,000 $ 87,633
8.375% 3/15/23 Baa2 180,000 187,151
492,016
RESTAURANTS - 0.1%
AFC Enterprises, Inc. 10.25% B3 190,000 190,950
5/15/07
NE Restaurant, Inc. 10.75% B3 20,000 17,750
7/15/08
208,700
TOTAL MEDIA & LEISURE 7,869,013
NONDURABLES - 0.3%
BEVERAGES - 0.2%
Seagram JE & Sons, Inc. Baa3 585,000 557,505
6.625% 12/15/05
TOBACCO - 0.1%
Philip Morris Companies, Inc. A2 250,000 246,275
6.95% 6/1/06
RJ Reynolds Tobacco Holdings, Baa2 200,000 186,894
Inc. 7.375% 5/15/03
433,169
TOTAL NONDURABLES 990,674
RETAIL & WHOLESALE - 0.7%
DRUG STORES - 0.1%
Rite Aid Corp.:
6% 12/15/00 (g) B1 65,000 56,550
6.5% 12/15/05 (g) B1 530,000 381,600
7.125% 1/15/07 B1 110,000 82,500
520,650
GENERAL MERCHANDISE STORES -
0.2%
Dayton Hudson Corp. 6.4% A3 400,000 391,408
2/15/03
Federated Department Stores, Baa1 500,000 485,285
Inc. 6.79% 7/15/27
876,693
GROCERY STORES - 0.1%
Ameriserve Food Distribution,
Inc.:
8.875% 10/15/06 B3 30,000 16,800
10.125% 7/15/07 Caa1 60,000 19,800
Jitney-Jungle Stores of
America, Inc.:
10.375% 9/15/07 (d) C 450,000 2,250
12% 3/1/06 (d) Caa3 10,000 2,400
Kroger Co. 6% 7/1/00 Baa3 200,000 198,692
239,942
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.3%
USA Networks, Inc./USANi LLC Baa3 $ 1,000,000 $ 954,820
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 2,592,105
SERVICES - 0.1%
LEASING & RENTAL - 0.0%
Rent-A-Center, Inc. 11% B2 60,000 61,650
8/15/08
PRINTING - 0.0%
Sullivan Graphics, Inc. Caa1 40,000 41,700
12.75% 8/1/05
World Color Press, Inc. 7.75% Baa3 60,000 57,150
2/15/09
98,850
SERVICES - 0.1%
Apcoa, Inc. 9.25% 3/15/08 Caa1 40,000 28,000
SITEL Corp. 9.25% 3/15/06 B3 250,000 235,000
263,000
TOTAL SERVICES 423,500
TECHNOLOGY - 0.4%
COMPUTER SERVICES & SOFTWARE
- - 0.1%
Concentric Network Corp. B- 50,000 52,500
12.75% 12/15/07
Covad Communications Group, B3 90,000 56,475
Inc. 0% 3/15/08 (e)
DecisionOne Corp. 9.75% B3 250,000 938
8/1/07 (d)
Exodus Communications, Inc. B- 40,000 40,700
10.75% 12/15/09 (g)
PSINet, Inc. 10.5% 12/1/06 B3 300,000 303,750
(g)
454,363
COMPUTERS & OFFICE EQUIPMENT
- - 0.2%
Comdisco, Inc.:
5.95% 4/30/02 Baa1 300,000 288,927
7.25% 9/1/02 Baa1 250,000 247,135
536,062
ELECTRONIC INSTRUMENTS - 0.0%
Telecommunications Techniques B3 80,000 72,800
Co. LLC 9.75% 5/15/08
ELECTRONICS - 0.1%
ChipPAC International Ltd. B3 40,000 42,000
12.75% 8/1/09 (g)
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE NOTE 1)
Fairchild Semiconductor Corp. B3 $ 120,000 $ 122,400
10.375% 10/1/07
Hadco Corp. 9.5% 6/15/08 B2 140,000 135,800
Intersil Corp. 13.25% B3 60,000 65,400
8/15/09 (g)
SCG Holding B2 80,000 85,000
Corp./Semiconductor
Components Industries LLC
12% 8/1/09 (g)
450,600
TOTAL TECHNOLOGY 1,513,825
TRANSPORTATION - 0.7%
AIR TRANSPORTATION - 0.3%
Atlas Air, Inc.:
8.77% 1/2/11 Ba2 90,000 87,525
9.375% 11/15/06 B3 220,000 212,850
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 70,000 68,348
7.73% 9/15/12 Baa1 45,000 43,875
Delta Air Lines, Inc. 7.7% Baa3 350,000 344,400
12/15/05 (g)
Kitty Hawk, Inc. 9.95% B1 180,000 177,750
11/15/04
934,748
RAILROADS - 0.4%
Burlington Northern Santa Fe
Corp.:
6.875% 12/1/27 Baa2 1,000,000 880,640
7.29% 6/1/36 Baa2 150,000 145,878
Norfolk Southern Corp. 7.05% Baa1 340,000 337,039
5/1/37
1,363,557
SHIPPING - 0.0%
Holt Group, Inc. 9.75% Caa1 20,000 13,000
1/15/06
TOTAL TRANSPORTATION 2,311,305
UTILITIES - 2.8%
CELLULAR - 0.8%
Cable & Wireless Baa1 1,120,000 1,106,437
Communications PLC 6.375%
3/6/03
Cellnet Data Systems, Inc.:
0% 10/1/07 (e) - 300,000 33,000
15% 1/7/00 (j) - 12,400 12,400
Clearnet Communications, Inc. B3 200,000 196,500
yankee 0% 12/15/05 (e)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
McCaw International Ltd. 0% Caa1 $ 270,000 $ 189,000
4/15/07 (e)
Millicom International Caa1 241,000 199,428
Cellular SA 0% 6/1/06 (e)
Nextel Communications, Inc.:
0% 10/31/07 (e) B1 420,000 304,500
9.375% 11/15/09 (g) B1 300,000 295,125
Voicestream Wireless
Corp./Voicestream Wireless
Holding Co.:
0% 11/15/09 (e)(g) B2 295,000 177,738
10.375% 11/15/09 (g) B2 170,000 175,100
2,689,228
ELECTRIC UTILITY - 0.2%
Avon Energy Partners Holdings Baa2 300,000 267,531
6.46% 3/4/08 (g)
Israel Electric Corp. Ltd. A3 545,000 469,419
7.75% 12/15/27 (g)
Texas Utilities Co. 6.375% Baa3 140,000 126,839
1/1/08
863,789
GAS - 0.2%
CMS Panhandle Holding Co.:
6.125% 3/15/04 Baa3 150,000 142,155
7% 7/15/29 Baa3 150,000 130,236
Columbia Energy Group 6.61% A3 379,000 369,533
11/28/02
641,924
TELEPHONE SERVICES - 1.6%
Allegiance Telecom, Inc.:
0% 2/15/08 (e) B3 40,000 28,800
12.875% 5/15/08 B3 200,000 224,000
Esat Telecom Group PLC 0% B3 230,000 190,900
2/1/07 (e)
Global TeleSystems Group, Caa1 150,000 136,500
Inc. 9.875% 2/15/05
Globenet Communication Group Caa1 150,000 152,250
Ltd. 13% 7/15/07 (g)
GST Network Funding, Inc. 0% - 60,000 29,400
5/1/08 (e)
GST Telecommunications, Inc. - 90,000 84,600
12.75% 11/15/07
ICG Holdings, Inc. 0% 9/15/05 B3 260,000 226,850
(e)
Intermedia Communications, B3 460,000 274,850
Inc. 0% 3/1/09 (e)
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
IXC Communications, Inc. 9% B1 $ 30,000 $ 30,300
4/15/08
KMC Telecom Holdings, Inc. Caa2 170,000 168,300
13.5% 5/15/09
Logix Communications - 70,000 49,000
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc.:
6.4% 8/15/05 A3 260,000 249,036
8.875% 1/15/06 A3 184,000 193,121
Metromedia Fiber Network, B2 180,000 183,600
Inc. 10% 11/15/08
NEXTLINK Communications, Inc.:
0% 12/1/09 (e)(g) B2 500,000 292,500
10.75% 11/15/08 B3 340,000 350,200
Ono Finance PLC 13% 5/1/09 Caa1 210,000 217,350
Telecomunicaciones de Puerto Baa2 220,000 207,460
Rico, Inc. 6.65% 5/15/06
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 449,000 421,755
7.7% 7/20/29 Baa1 906,000 829,171
Teligent, Inc. 11.5% 12/1/07 Caa1 220,000 214,500
WinStar Communications, Inc. Caa1 470,000 714,400
0% 10/15/05 (e)
5,468,843
TOTAL UTILITIES 9,663,784
TOTAL NONCONVERTIBLE BONDS 45,227,950
TOTAL CORPORATE BONDS 46,127,812
(Cost $48,536,133)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 7.8%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 0.6%
Fannie Mae 6.5% 4/29/09 Aaa 1,600,000 1,497,248
Federal Home Loan Bank 7.59% Aaa 190,000 195,195
3/10/05
Freddie Mac 6.25% 7/15/04 Aaa 310,000 303,075
Government Trust Certificates Aaa 53,813 55,245
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency) Class 2-E, 9.4%
5/15/02
TOTAL U.S. GOVERNMENT AGENCY 2,050,763
OBLIGATIONS
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. TREASURY OBLIGATIONS -
7.2%
U.S. Treasury Bonds:
5.25% 2/15/29 Aaa $ 250,000 $ 206,718
6.125% 8/15/29 Aaa 2,010,000 1,916,093
6.375% 8/15/27 Aaa 2,600,000 2,497,222
8.875% 8/15/17 Aaa 505,000 610,338
9.875% 11/15/15 Aaa 625,000 808,400
14% 11/15/11 Aaa 490,000 683,550
U.S. Treasury Notes:
4% 10/31/00 Aaa 3,650,000 3,588,972
5.5% 5/31/03 Aaa 6,000,000 5,841,540
5.875% 11/15/04 Aaa 3,930,000 3,853,247
6% 8/15/09 Aaa 3,850,000 3,729,688
6.5% 5/31/02 Aaa 1,210,000 1,215,856
U.S. Treasury Notes - coupon Aaa 1,430,000 640,125
STRIPS 0% 11/15/11
TOTAL U.S. TREASURY 25,591,749
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 27,642,512
GOVERNMENT AGENCY OBLIGATIONS
(Cost $28,423,249)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 10.7%
FANNIE MAE - 7.2%
5.5% 2/1/11 Aaa 162,076 151,845
6% 4/1/09 to 1/1/29 Aaa 2,506,208 2,344,712
6.5% 11/1/25 to 7/1/29 Aaa 11,494,010 10,840,903
7% 12/1/24 to 9/1/28 Aaa 3,542,123 3,430,827
7.5% 10/1/26 to 10/1/29 Aaa 4,827,438 4,773,539
7.5% 1/1/30 Aaa 4,000,000 3,957,500
25,499,326
FREDDIE MAC - 0.1%
7.5% 1/1/27 Aaa 394,000 390,553
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 3.4%
6.5% 4/15/28 to 4/15/29 Aaa 10,729,856 10,069,219
7% 1/15/28 to 12/15/28 Aaa 666,985 644,055
7.5% 6/15/27 to 3/15/28 Aaa 1,204,237 1,191,573
11,904,847
TOTAL U.S. GOVERNMENT AGENCY 37,794,726
- - MORTGAGE SECURITIES
(Cost $39,455,590)
ASSET-BACKED SECURITIES - 0.8%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Airplanes pass through trust Ba2 $ 10,000 $ 8,200
10.875% 3/15/19
American Express Credit A1 200,000 190,766
Account Master Trust 6.1%
12/15/06
Chevy Chase Auto Receivables Aaa 66,352 65,679
Trust 5.91% 12/15/04
Contimortgage Home Equity Aaa 312,962 311,592
Loan Trust 6.26% 7/15/12
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 510,000 498,653
6.4% 12/15/02 Baa2 80,000 78,960
6.87% 11/15/04 A2 200,000 198,344
Key Auto Finance Trust:
6.3% 10/15/03 A2 303,535 301,449
6.65% 10/15/03 Baa3 90,666 90,511
Premier Auto Trust 5.59% Aaa 1,000,000 968,120
2/9/04
TOTAL ASSET-BACKED SECURITIES 2,712,274
(Cost $2,771,608)
COMMERCIAL MORTGAGE
SECURITIES - 0.5%
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 220,000 199,650
1/17/35
Series 1998-FL1:
Class D, 5.91% 12/10/00 (g)(h) A2 300,000 298,313
Class E, 6.26% 1/10/13 (g)(h) Baa2 420,000 413,700
GS Mortgage Securities Corp. Baa3 500,000 422,344
II Series 1998-GLII Class E,
7.1905% 4/13/31 (g)(h)
Thirteen Affiliates of Aaa 500,000 475,210
General Growth Properties,
Inc. sequential pay Series 1
Class A2, 6.602% 12/15/10 (g)
Wells Fargo Capital Markets Aaa 143,915 141,598
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (g)
TOTAL COMMERCIAL MORTGAGE 1,950,815
SECURITIES
(Cost $2,063,353)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (I) - 0.1%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Korean Republic yankee:
8.75% 4/15/03 Baa2 $ 80,000 $ 82,362
8.875% 4/15/08 Baa2 116,000 121,560
Quebec Province yankee:
6.86% 4/15/26 (f) A2 250,000 240,903
7.125% 2/9/24 A2 30,000 27,860
7.5% 7/15/23 A2 30,000 29,252
TOTAL FOREIGN GOVERNMENT AND 501,937
GOVERNMENT AGENCY OBLIGATIONS
(Cost $512,551)
SUPRANATIONAL OBLIGATIONS -
0.1%
Inter-American Development Aaa 500,000 475,585
Bank yankee 6.29% 7/16/27
(Cost $496,855)
</TABLE>
CASH EQUIVALENTS - 5.2%
SHARES
Taxable Central Cash Fund, 18,162,126 18,162,126
5.12% (c)
(Cost $18,162,126)
TOTAL INVESTMENT PORTFOLIO - 355,052,459
100.7%
(Cost $307,065,113)
NET OTHER ASSETS - (0.7)% (2,627,633)
NET ASSETS - 100% $ 352,424,826
SECURITY TYPE ABBREVIATIONS
ACES - Automatic Common Exchange
Securities
PIES - Premium Income Equity
Securities
PRIZES - Participating Redeemable
Indexed Zero-Premium
Exchangeable Securities
QUIPS - Quarterly Income Preferred
Securities
ZONES - Zero-Premium Option Note
Exchangeable Securities
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by
Moody's Investors Service, Inc.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(e) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(f) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(g) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $8,051,540 or 2.3% of net assets.
(h) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(i) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(j) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Cellnet Data Systems, Inc. 11/10/99 - 12/2/99 $ 12,400
15% 1/7/00
Mothers Work, Inc. 6/18/98 $ 18
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 21.8% AAA, AA, A 21.3%
Baa 6.0% BBB 5.5%
Ba 0.5% BB 0.5%
B 3.6% B 3.6%
Caa 1.0% CCC 0.7%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P 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.
Purchases and sales of securities, other than short-term securities,
aggregated $391,857,831 and $362,146,970, respectively, of which
long-term U.S. government and government agency obligations aggregated
$112,546,242 and $78,852,864, 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 $23,744 for the
period.
The fund invested in securities that are not registered under the
Securities Act of 1933. These securities are subject to legal or
contractual restrictions on resale. At the end of the period,
restricted securities (excluding Rule 144A issues) amounted to $12,435
and 0% of net assets.
The fund participated in the security lending program. At period end
there were no loans outstanding.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $307,948,129. Net unrealized appreciation
aggregated $47,104,330, of which $58,864,040 related to appreciated
investment securities and $11,759,710 related to depreciated
investment securities.
The fund hereby designates approximately $8,633,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: BALANCED PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 355,052,459
value (cost $307,065,113) -
See accompanying schedule
Receivable for investments 1,374,443
sold
Receivable for fund shares 33,709
sold
Dividends receivable 103,721
Interest receivable 1,513,703
Other receivables 32,494
TOTAL ASSETS 358,110,529
LIABILITIES
Payable to custodian bank $ 2,635
Payable for investments 5,256,490
purchased
Payable for fund shares 242,457
redeemed
Accrued management fee 125,977
Distribution fees payable 2,201
Other payables and accrued 55,943
expenses
TOTAL LIABILITIES 5,685,703
NET ASSETS $ 352,424,826
Net Assets consist of:
Paid in capital $ 286,988,554
Undistributed net investment 10,132,202
income
Accumulated undistributed net 7,315,617
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 47,988,453
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 352,424,826
INITIAL CLASS: NET ASSET $16.00
VALUE, offering price and
redemption price per share
($325,370,938 (divided by)
20,334,691 shares)
SERVICE CLASS: NET ASSET $15.94
VALUE, offering price and
redemption price per share
($27,053,888 (divided by)
1,696,857 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 3,381,273
Dividends
Interest 8,718,062
Security lending 2,296
TOTAL INCOME 12,101,631
EXPENSES
Management fee $ 1,522,322
Transfer agent fees 236,669
Distribution fees - Service 18,312
Class
Accounting and security 162,243
lending fees
Non-interested trustees' 1,024
compensation
Custodian fees and expenses 29,409
Registration fees 32
Audit 24,925
Legal 5,918
Miscellaneous 16,725
Total expenses before 2,017,579
reductions
Expense reductions (48,150) 1,969,429
NET INVESTMENT INCOME 10,132,202
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 7,573,058
Foreign currency transactions 7,896 7,580,954
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (2,518,250)
Assets and liabilities in (7,018) (2,525,268)
foreign currencies
NET GAIN (LOSS) 5,055,686
NET INCREASE (DECREASE) IN $ 15,187,888
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 46,034
Expense reductions Directed
brokerage arrangements
Custodian credits 2,116
$ 48,150
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 10,132,202 $ 7,601,874
income
Net realized gain (loss) 7,580,954 8,523,372
Change in net unrealized (2,525,268) 26,055,460
appreciation (depreciation)
NET INCREASE (DECREASE) IN 15,187,888 42,180,706
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (7,479,403) (5,425,338)
From net investment income
From net realized gain (8,692,279) (8,288,727)
TOTAL DISTRIBUTIONS (16,171,682) (13,714,065)
Share transactions - net 36,165,081 74,228,783
increase (decrease)
TOTAL INCREASE (DECREASE) 35,181,287 102,695,424
IN NET ASSETS
NET ASSETS
Beginning of period 317,243,539 214,548,115
End of period (including $ 352,424,826 $ 317,243,539
undistributed net investment
income of $10,132,202 and
$7,505,060, respectively)
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 4,444,110 $ 70,037,773 6,631,328 $ 99,433,344
Class Sold
Reinvested 1,027,536 15,608,277 974,658 13,713,433
Redeemed (4,234,242) (66,752,172) (3,218,228) (47,915,708)
Net increase (decrease) 1,237,404 $ 18,893,878 4,387,758 $ 65,231,069
Service Class Sold 1,108,300 $ 17,387,242 610,188 $ 9,232,622
Reinvested 37,189 563,405 46 643
Redeemed (43,583) (679,444) (15,989) (235,551)
Net increase (decrease) 1,101,906 $ 17,271,203 594,245 $ 8,997,714
Distributions From net $ 7,218,828 $ 5,425,084
investment income Initial
Class
Service Class 260,575 254
Total $ 7,479,403 $ 5,425,338
From net realized gain $ 8,389,449 $ 8,288,339
Initial Class
Service Class 302,830 388
Total $ 8,692,279 $ 8,288,727
$ 16,171,682 $ 13,714,065
</TABLE>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995 H
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 16.11 $ 14.58 $ 12.23 $ 11.17 $ 10.00
period
Income from Investment
Operations
Net investment income .45 D .44 D .44 D .33 .14
Net realized and unrealized .24 2.00 2.22 .78 1.25
gain (loss)
Total from investment .69 2.44 2.66 1.11 1.39
operations
Less Distributions
From net investment income (.37) (.36) (.31) (.01) (.14)
From net realized gain (.43) (.55) - (.04) (.08)
Total distributions (.80) (.91) (.31) (.05) (.22)
Net asset value, end of period $ 16.00 $ 16.11 $ 14.58 $ 12.23 $ 11.17
TOTAL RETURN B, C 4.55% 17.64% 22.18% 9.98% 13.92%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 325,371 $ 307,681 $ 214,538 $ 103,110 $ 43,155
(000 omitted)
Ratio of expenses to average .57% .59% .61% .72% 1.42% F
net assets
Ratio of expenses to average .55% G .58% G .60% G .71% G 1.42%
net assets after expense
reductions
Ratio of net investment 2.87% 2.94% 3.28% 3.63% 3.56%
income to average net assets
Portfolio turnover 108% 94% 98% 163% 248%
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 16.07 $ 14.59 $ 14.16
period
Income from Investment
Operations
Net investment income D .43 .41 .08
Net realized and unrealized .24 1.98 .35
gain (loss)
Total from investment .67 2.39 .43
operations
Less Distributions
From net investment income (.37) (.36) -
From net realized gain (.43) (.55) -
Total distributions (.80) (.91) -
Net asset value, end of period $ 15.94 $ 16.07 $ 14.59
TOTAL RETURN B, C 4.43% 17.27% 3.04%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 27,054 $ 9,562 $ 10
(000 omitted)
Ratio of expenses to average .67% .70% .71% A
net assets
Ratio of expenses to average .66% G .69% G .71% A
net assets after expense
reductions
Ratio of net investment 2.77% 2.79% 3.43% A
income to average net assets
Portfolio turnover 108% 94% 98%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
D NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
F FMR AGREED TO REIMBURSE A
PORTION OF THE CLASS'
EXPENSES DURING THE PERIOD.
WITHOUT THIS REIMBURSEMENT,
THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
H FOR THE PERIOD JANUARY 3,
1995 (COMMENCEMENT OF
OPERATIONS OF INITIAL CLASS
SHARES) TO DECEMBER 31, 1995.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the life of fund total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
FIDELITY VIP: ASSET MGR: 15.26% 20.16%
GROWTH - "INITIAL CLASS"
Asset Manager: Growth Composite 14.55% n/a
S&P 500 (registered trademark) 21.04% 28.59%
LB Aggregate Bond -0.82% 7.77%
LB 3 Month T-Bill 4.90% n/a
Variable Annuity Flexible 12.07% n/a
Portfolio Funds Average
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to those of the Asset Manager:
Growth Composite Index - a hypothetical combination of unmanaged
indices. The composite index combines the total returns of the
Standard & Poor's 500Index, the Lehman Brothers Aggregate Bond Index
and the Lehman Brothers 3 Month Treasury Bill Index weighted according
to the fund's neutral mix.
You can also compare the fund's returns to the variable annuity
flexible portfolio funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
one year average represents a peer group of 84 mutual funds. The
benchmarks listed in the table above include 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 3, 1995.
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 RETURN 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.
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 long-term growth and short-term
volatility. 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)
$10,000 OVER LIFE OF FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP II Asset Mgr Growth 70 S&P/25 LBAgg/5 LB 3Mo S&P 500 LB Aggregate Bond
00159 F0022 SP001 LB001
1995/01/31 10000.00 10000.00 10000.00 10000.00
1995/02/28 10149.70 10319.62 10389.70 10238.00
1995/03/31 10289.42 10539.71 10696.30 10300.45
1995/04/30 10558.88 10785.50 11011.31 10444.66
1995/05/31 10708.58 11199.23 11451.43 10848.87
1995/06/30 11137.72 11397.77 11717.44 10928.06
1995/07/31 11546.91 11633.53 12106.00 10904.02
1995/08/31 12065.87 11695.86 12136.38 11035.96
1995/09/30 12245.51 12052.97 12648.54 11143.01
1995/10/31 11776.45 12083.85 12603.38 11287.87
1995/11/30 11986.03 12487.56 13156.67 11457.19
1995/12/31 12277.71 12701.01 13410.07 11617.59
1996/01/31 12569.78 13008.92 13866.55 11694.26
1996/02/29 12613.39 13009.89 13995.09 11490.78
1996/03/31 12840.37 13059.96 14129.86 11410.35
1996/04/30 13143.01 13162.84 14338.14 11346.45
1996/05/31 13348.36 13380.07 14707.92 11323.76
1996/06/30 13402.41 13467.11 14763.95 11475.49
1996/07/31 13067.35 13093.05 14111.68 11506.48
1996/08/31 13164.62 13267.32 14409.30 11486.92
1996/09/30 13705.04 13821.05 15220.25 11686.79
1996/10/31 14104.95 14163.15 15640.03 11946.24
1996/11/30 15023.67 14935.59 16822.26 12150.52
1996/12/31 14737.79 14700.41 16489.01 12037.52
1997/01/31 15367.80 15358.12 17519.24 12074.83
1997/02/28 15514.22 15455.00 17656.59 12105.02
1997/03/31 14781.88 14970.83 16931.08 11970.65
1997/04/30 15401.55 15656.26 17941.87 12150.21
1997/05/31 16336.68 16364.80 19034.17 12265.64
1997/06/30 16821.15 16929.64 19886.90 12411.60
1997/07/31 17959.09 17991.36 21469.30 12746.72
1997/08/31 17395.75 17251.75 20266.59 12638.37
1997/09/30 18037.95 17980.97 21376.59 12825.42
1997/10/31 17609.82 17629.62 20662.61 13011.39
1997/11/30 18116.82 18224.94 21619.09 13071.24
1997/12/31 18432.29 18493.92 21990.29 13203.26
1998/01/31 18432.29 18700.72 22233.50 13372.26
1998/02/28 19558.44 19644.52 23836.98 13361.56
1998/03/31 20283.77 20370.04 25057.67 13406.99
1998/04/30 20220.15 20544.55 25309.75 13476.71
1998/05/31 20016.54 20350.75 24874.67 13604.74
1998/06/30 20487.37 20976.94 25885.08 13720.15
1998/07/31 20309.22 20836.30 25609.41 13749.26
1998/08/31 17751.48 18817.12 21906.80 13973.05
1998/09/30 18413.18 19776.04 23310.15 14300.19
1998/10/31 19583.89 20879.82 25206.20 14224.74
1998/11/30 20563.72 21798.80 26733.94 14305.30
1998/12/31 21670.80 22698.67 28274.35 14348.32
1999/01/31 22307.06 23408.00 29456.79 14450.81
1999/02/28 21729.24 22800.07 28541.27 14198.50
1999/03/31 21946.67 23475.12 29683.21 14277.27
1999/04/30 22598.96 24134.36 30832.84 14322.53
1999/05/31 22204.87 23687.10 30104.87 14196.49
1999/06/30 23305.60 24593.03 31775.69 14151.15
1999/07/31 22829.97 24034.91 30783.66 14091.72
1999/08/31 22775.62 23953.42 30631.28 14084.56
1999/09/30 22313.58 23568.71 29791.68 14248.00
1999/10/31 23224.06 24639.36 31676.89 14300.57
1999/11/30 23631.74 24994.57 32320.88 14299.58
1999/12/31 24977.08 26000.64 34224.58 14230.63
IMATRL PRASUN SHR__CHT 19991231 20000118 144608 R00000000000062
</TABLE>
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Asset Manager:
Growth Portfolio on January 31, 1995, shortly after the fund started.
As the chart shows, by December 31, 1999, the value of the investment
would have grown to $24,977 - a 149.77% increase. With reinvested
dividends and capital gains, if any, a $10,000 investment in the
Standard & Poor's 500 Index would have grown to $34,225 - a 242.25%
increase. If $10,000 was invested in the Lehman Brothers Aggregate
Bond Index, it would have grown to $14,231 - a 42.31% increase.
You can also look at how the Asset Manager: Growth Composite Index did
over the same period. The Asset Manager: Growth Composite Index
combines the cumulative total returns of three unmanaged indexes - the
S&P 500, Lehman Brothers Aggregate Bond Index, and the Lehman Brothers
3 Month Treasury Bill Index - according to the fund's neutral mix*.
With reinvested dividends and capital gains, if any, a $10,000
investment in the index would have grown to $26,001 - a 160.01%
increase.
* 70% STOCKS, 25% BONDS AND 5% SHORT-TERM INSTRUMENTS EFFECTIVE
JANUARY 1, 1997.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 3.2
Wal-Mart Stores, Inc. 2.9
General Electric Co. 2.8
Motorola, Inc. 2.4
Cisco Systems, Inc. 2.2
13.5
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
(STOCKS ONLY) % OF FUND'S NET ASSETS
TECHNOLOGY 21.3
FINANCE 10.4
UTILITIES 7.8
HEALTH 6.7
RETAIL & WHOLESALE 5.7
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stock Class 76.5%
Bond Class 20.4%
Short-Term Class 3.1%
* FOREIGN INVESTMENTS 1.2%
ASSET ALLOCATION IN THE PIE CHART REFLECTS THE CATEGORIZATION OF
ASSETS AS DEFINED IN THE FUND'S PROSPECTUS. FINANCIAL STATEMENT
CATEGORIZATIONS CONFORM TO ACCOUNTING STANDARDS AND WILL DIFFER FROM
THE PIE CHART.
PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS, IF
APPLICABLE.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). The initial offering of Service Class shares
took place on November 3, 1997. Performance for Service Class shares
reflects an asset based distribution fee (12b-1 fee), and returns
prior to November 3, 1997 are those of Initial Class and do not
include the effects of Service Class' 12b-1 fee. Had Service Class
shares' 12b-1 fee been reflected, returns prior to November 3, 1997
would have been lower. If Fidelity had not reimbursed certain fund
expenses, the life of fund total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
FIDELITY VIP: ASSET MGR: 15.13% 20.04%
GROWTH - SERVICE CLASS
Asset Manager: Growth Composite 14.55% n/a
S&P 500 21.04% 28.59%
LB Aggregate Bond -0.82% 7.77%
LB 3 Month T-Bill 4.90% n/a
Variable Annuity Flexible 12.07% n/a
Portfolio Funds Average
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to those of the Asset Manager:
Growth Composite Index - a hypothetical combination of unmanaged
indices. The composite index combines the total returns of the
Standard & Poor's 500 Index, the Lehman Brothers Aggregate Bond Index
and the Lehman Brothers 3 Month Treasury Bill Index weighted according
to the fund's neutral mix.
You can also compare the fund's returns to the variable annuity
flexible portfolio funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
one year average represents a peer group of 84 mutual funds. The
benchmarks listed in the table above include 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 3, 1995.
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 RETURN 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.
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 long-term growth and short-term
volatility. 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)
$10,000 OVER LIFE OF FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP II Asset Mgr Gro - SC 70 S&P/25 LBAgg/5 LB 3Mo S&P 500 LB Aggregate Bond
00468 F0022 SP001 LB001
1995/01/31 10000.00 10000.00 10000.00 10000.00
1995/02/28 10149.70 10319.62 10389.70 10238.00
1995/03/31 10289.42 10539.71 10696.30 10300.45
1995/04/30 10558.88 10785.50 11011.31 10444.66
1995/05/31 10708.58 11199.23 11451.43 10848.87
1995/06/30 11137.72 11397.77 11717.44 10928.06
1995/07/31 11546.91 11633.53 12106.00 10904.02
1995/08/31 12065.87 11695.86 12136.38 11035.96
1995/09/30 12245.51 12052.97 12648.54 11143.01
1995/10/31 11776.45 12083.85 12603.38 11287.87
1995/11/30 11986.03 12487.56 13156.67 11457.19
1995/12/31 12277.71 12701.01 13410.07 11617.59
1996/01/31 12569.78 13008.92 13866.55 11694.26
1996/02/29 12613.39 13009.89 13995.09 11490.78
1996/03/31 12840.37 13059.96 14129.86 11410.35
1996/04/30 13143.01 13162.84 14338.14 11346.45
1996/05/31 13348.36 13380.07 14707.92 11323.76
1996/06/30 13402.41 13467.11 14763.95 11475.49
1996/07/31 13067.35 13093.05 14111.68 11506.48
1996/08/31 13164.62 13267.32 14409.30 11486.92
1996/09/30 13705.04 13821.05 15220.25 11686.79
1996/10/31 14104.95 14163.15 15640.03 11946.24
1996/11/30 15023.67 14935.59 16822.26 12150.52
1996/12/31 14737.79 14700.41 16489.01 12037.52
1997/01/31 15367.80 15358.12 17519.24 12074.83
1997/02/28 15514.22 15455.00 17656.59 12105.02
1997/03/31 14781.88 14970.83 16931.08 11970.65
1997/04/30 15401.55 15656.26 17941.87 12150.21
1997/05/31 16336.68 16364.80 19034.17 12265.64
1997/06/30 16821.15 16929.64 19886.90 12411.60
1997/07/31 17959.09 17991.36 21469.30 12746.72
1997/08/31 17395.75 17251.75 20266.59 12638.37
1997/09/30 18037.95 17980.97 21376.59 12825.42
1997/10/31 17609.82 17629.62 20662.61 13011.39
1997/11/30 18105.55 18224.94 21619.09 13071.24
1997/12/31 18421.02 18493.92 21990.29 13203.26
1998/01/31 18409.75 18700.72 22233.50 13372.26
1998/02/28 19510.54 19644.52 23836.98 13361.56
1998/03/31 20235.98 20370.04 25057.67 13406.99
1998/04/30 20159.62 20544.55 25309.75 13476.71
1998/05/31 19955.99 20350.75 24874.67 13604.74
1998/06/30 20414.16 20976.94 25885.08 13720.15
1998/07/31 20248.71 20836.30 25609.41 13749.26
1998/08/31 17690.58 18817.12 21906.80 13973.05
1998/09/30 18352.38 19776.04 23310.15 14300.19
1998/10/31 19510.54 20879.82 25206.20 14224.74
1998/11/30 20490.53 21798.80 26733.94 14305.30
1998/12/31 21585.05 22698.67 28274.35 14348.32
1999/01/31 22221.40 23408.00 29456.79 14450.81
1999/02/28 21643.48 22800.07 28541.27 14198.50
1999/03/31 21847.40 23475.12 29683.21 14277.27
1999/04/30 22499.97 24134.36 30832.84 14322.53
1999/05/31 22105.71 23687.10 30104.87 14196.49
1999/06/30 23206.92 24593.03 31775.69 14151.15
1999/07/31 22717.49 24034.91 30783.66 14091.72
1999/08/31 22676.71 23953.42 30631.28 14084.56
1999/09/30 22214.47 23568.71 29791.68 14248.00
1999/10/31 23111.75 24639.36 31676.89 14300.57
1999/11/30 23519.61 24994.57 32320.88 14299.58
1999/12/31 24851.93 26000.64 34224.58 14230.63
IMATRL PRASUN SHR__CHT 19991231 20000118 144558 R00000000000062
</TABLE>
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Asset Manager:
Growth Portfolio - Service Class on January 31, 1995, shortly after
the fund started. As the chart shows, by December 31, 1999, the value
of the investment would have grown to $24,852 - a 148.52% increase.
With reinvested dividends and capital gains, if any, a $10,000
investment in the Standard & Poor's 500 Index would have grown to
$34,225 over the same period - a 242.25% increase. If $10,000 was
invested in the Lehman Brothers Aggregate Bond Index, it would have
grown to $14,231 - a 42.31% increase. You can also look at how the
Asset Manager: Growth Composite Index did over the same period. The
Asset Manager: Growth Composite Index combines the cumulative total
returns of three unmanaged indexes - the S&P 500, Lehman Brothers
Aggregate Bond Index, and the Lehman Brothers 3 Month Treasury Bill
Index - according to the fund's neutral mix*. With reinvested
dividends and capital gains, if any, a $10,000 investment in the index
would have grown to $26,001 - a 160.01% increase.
* 70% STOCKS, 25% BONDS AND 5% SHORT-TERM INSTRUMENTS EFFECTIVE
JANUARY 1, 1997.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 3.2
Wal-Mart Stores, Inc. 2.9
General Electric Co. 2.8
Motorola, Inc. 2.4
Cisco Systems, Inc. 2.2
13.5
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
(STOCKS ONLY) % OF FUND'S NET ASSETS
TECHNOLOGY 21.3
FINANCE 10.4
UTILITIES 7.8
HEALTH 6.7
RETAIL & WHOLESALE 5.7
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stock Class 76.5%
Bond Class 20.4%
Short-Term Class 3.1%
Row: 1, Col: 1, Value: 76.5
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 20.7
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.8
* FOREIGN INVESTMENTS 1.2%
ASSET ALLOCATION IN THE PIE CHART REFLECTS THE CATEGORIZATION OF
ASSETS AS DEFINED IN THE FUND'S PROSPECTUS. FINANCIAL STATEMENT
CATEGORIZATIONS CONFORM TO ACCOUNTING STANDARDS AND WILL DIFFER FROM
THE PIE CHART.
PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS, IF
APPLICABLE. PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO
PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S
INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with
Richard Habermann,
Portfolio Manager of
Asset Manager: Growth
Q. HOW DID THE FUND PERFORM, DICK?
A. For the 12 months that ended December 31, 1999, the fund topped the
14.55% return of the Asset Manager: Growth Composite Index.
Q. WHAT ASSET ALLOCATION STRATEGIES DID YOU FOLLOW DURING THE PERIOD?
A. The fund's neutral allocation mix calls for 70% of its assets to be
invested in stocks, 25% in bonds and the rest in short-term and money
market instruments. With stocks performing well through much of the
period, I kept the fund's average equity exposure at around 74%.
Timing, though, is also important, and the fund would have benefited
further from a higher stock exposure during certain periods in the
spring. On the bond side, the fund was somewhat underweighted on
average to accommodate the equity position. My decision to lower the
fund's exposure to investment-grade bonds worked out well, as rising
interest rates detracted from returns. My focus within the bond
subportfolio was instead on high-yield securities, which performed
very well relative to the Treasury market.
Q. HOW DID THE FUND'S EQUITY SUBPORTFOLIO PERFORM DURING THE PERIOD?
A. The fund's equities performed slightly better than the S&P 500
index, quite an accomplishment considering the narrowness of the
overall market in 1999. By that, I mean that 10 of the major stocks
within the index produced around 60% of its advance. Conversely, the
bottom 450 stocks within the S&P produced a negative aggregate return.
The technology sector led the market, and Steve Snider - who manages
the fund's stocks - was able to find enough good names to keep pace
with the tech stocks within the index. Industry leaders Cisco Systems
and Microsoft continued to perform well, as did Lexmark International.
The fund also benefited from the huge demand for wireless
communications by owning positions in Qualcomm and Motorola. Retail
stocks also performed well, with Wal-Mart being the fund's top overall
contributor during the period. Disappointments included pharmaceutical
firm Schering-Plough, as well as Fannie Mae and Freddie Mac, both of
which struggled due to less-than-favorable interest-rate conditions.
The fund no longer held equity stakes in Fannie Mae or Freddie Mac at
the end of the period.
Q. HOW DID YOU ALLOCATE INVESTMENTS WITHIN THE FUND'S BOND
SUBPORTFOLIO?
A. I continued to emphasize high-yield bonds, which clearly turned out
to be a wise move. These positions - managed by Fred Hoff - posted
attractive yields against the backdrop of a strong U.S. economy and a
favorable corporate earnings outlook. The best individual high-yield
performers included telecommunications names Nextel Communications,
WinStar and Teligent. As far as the fund's investment-grade bond
positions, rising interest rates pressured returns through much of the
period. Despite this general move in rates, the fund was heavily
weighted in corporate and mortgage-backed securities, which performed
relatively well during the period. This subportfolio - managed by
Charlie Morrison - benefited from its investments in Seagram, Cable &
Wireless and Capital One, as well as from its exposure to commercial
mortgage-backed securities, particularly in the lower credit tiers.
Q. HOW DID YOU POSITION THE FUND'S SHORT-TERM/MONEY MARKET
INVESTMENTS?
A. With interest rates spiking upward, John Todd - who manages this
portion of the fund - focused mainly on repurchase agreements. These
securities - commonly called repos - are short-term investments that
the seller agrees to buy back at a specified price and time. Repos
offered the fund an effective sanctuary in which to invest assets on a
temporary basis during the period. They also provided an adequate
level of liquidity, which was desirable given the rate scenario.
Q. WHAT'S YOUR OUTLOOK?
A. Despite the global economic growth we've seen recently, inflation
remains subdued. Corporate earnings appear to be on solid ground for
2000, which means there may be more market segments that are
reasonably valued. From an allocation standpoint the direction of
interest rates will have some influence on whether I take more of a
defensive or equity-oriented approach.
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FUND FACTS
GOAL: maximum total return over the long term by allocating assets
among stocks, bonds and short-term instruments anywhere in the world
START DATE: January 3, 1995
SIZE: as of December 31, 1999, more than
$591 million
MANAGER: Richard Habermann, since 1999; joined
Fidelity in 1968
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER: GROWTH PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 72.8%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 3.1%
AEROSPACE & DEFENSE - 3.0%
Boeing Co. 47,800 $ 1,986,688
Honeywell International, Inc. 92,225 5,320,230
Northrop Grumman Corp. 6,700 362,219
Rockwell International Corp. 24,100 1,153,788
Textron, Inc. 10,100 774,544
United Technologies Corp. 123,456 8,024,640
17,622,109
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 16,700 880,925
TOTAL AEROSPACE & DEFENSE 18,503,034
BASIC INDUSTRIES - 2.6%
CHEMICALS & PLASTICS - 0.7%
Dow Chemical Co. 21,900 2,926,388
Engelhard Corp. 18,900 356,738
Praxair, Inc. 19,300 971,031
4,254,157
IRON & STEEL - 0.2%
Mueller Industries, Inc. (a) 7,800 282,750
Nucor Corp. 19,700 1,079,806
1,362,556
METALS & MINING - 1.3%
Alcoa, Inc. 93,100 7,727,300
PAPER & FOREST PRODUCTS - 0.4%
Georgia-Pacific Corp. 12,200 619,150
Weyerhaeuser Co. 19,900 1,429,069
2,048,219
TOTAL BASIC INDUSTRIES 15,392,232
CONSTRUCTION & REAL ESTATE -
0.2%
BUILDING MATERIALS - 0.2%
Fortune Brands, Inc. 38,400 1,269,600
DURABLES - 1.8%
AUTOS, TIRES, & ACCESSORIES -
0.9%
Ford Motor Co. 102,000 5,450,625
CONSUMER DURABLES - 0.7%
Minnesota Mining & 43,800 4,286,925
Manufacturing Co.
CONSUMER ELECTRONICS - 0.1%
Whirlpool Corp. 3,200 208,200
TEXTILES & APPAREL - 0.1%
NIKE, Inc. Class B 13,500 669,094
TOTAL DURABLES 10,614,844
ENERGY - 4.2%
ENERGY SERVICES - 0.2%
BJ Services Co. (a) 27,000 1,128,938
SHARES VALUE (NOTE 1)
OIL & GAS - 4.0%
Amerada Hess Corp. 8,600 $ 488,050
Apache Corp. 23,100 853,256
Atlantic Richfield Co. 98,400 8,511,600
Chevron Corp. 71,200 6,167,700
Exxon Mobil Corp. 87,260 7,029,884
Tosco Corp. 20,200 549,188
23,599,678
TOTAL ENERGY 24,728,616
FINANCE - 10.3%
BANKS - 4.4%
Chase Manhattan Corp. 125,100 9,718,706
Comerica, Inc. 10,700 499,556
FleetBoston Financial Corp. 98,220 3,419,284
J. P. Morgan & Co., Inc. 55,700 7,053,013
PNC Financial Corp. 85,500 3,804,750
SouthTrust Corp. 41,300 1,561,656
26,056,965
CREDIT & OTHER FINANCE - 1.7%
American Express Co. 15,100 2,510,375
Citigroup, Inc. 113,200 6,289,675
Providian Financial Corp. 15,500 1,411,469
10,211,519
INSURANCE - 1.0%
Allmerica Financial Corp. 12,400 689,750
American General Corp. 9,200 698,050
CIGNA Corp. 9,400 757,288
Financial Security Assurance 4,700 244,988
Holdings Ltd.
Marsh & McLennan Companies, 26,400 2,526,150
Inc.
MGIC Investment Corp. 14,500 872,719
5,788,945
SAVINGS & LOANS - 0.4%
Golden West Financial Corp. 65,100 2,180,850
SECURITIES INDUSTRY - 2.8%
AXA Financial, Inc. 51,800 1,754,725
Kansas City Southern 44,500 3,320,813
Industries, Inc.
Lehman Brothers Holdings, 70,900 6,004,344
Inc.
Merrill Lynch & Co., Inc. 20,200 1,686,700
Morgan Stanley Dean Witter & 26,600 3,797,150
Co.
16,563,732
TOTAL FINANCE 60,802,011
HEALTH - 6.6%
DRUGS & PHARMACEUTICALS - 4.6%
Amgen, Inc. (a) 126,800 7,615,925
Biogen, Inc. (a) 12,100 1,022,450
Bristol-Myers Squibb Co. 124,500 7,991,344
Merck & Co., Inc. 54,000 3,621,375
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS -
CONTINUED
Pfizer, Inc. 53,900 $ 1,748,381
Schering-Plough Corp. 126,900 5,353,594
27,353,069
MEDICAL EQUIPMENT & SUPPLIES
- - 1.6%
Johnson & Johnson 101,400 9,442,875
Millipore Corp. 5,400 208,575
9,651,450
MEDICAL FACILITIES MANAGEMENT
- - 0.4%
United HealthCare Corp. 13,200 701,250
Wellpoint Health Networks, 20,100 1,325,344
Inc. (a)
2,026,594
TOTAL HEALTH 39,031,113
INDUSTRIAL MACHINERY &
EQUIPMENT - 4.1%
ELECTRICAL EQUIPMENT - 3.2%
Emerson Electric Co. 3,700 212,288
General Electric Co. 107,000 16,558,250
General Instrument Corp. (a) 28,300 2,405,500
19,176,038
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.9%
Ingersoll-Rand Co. 61,400 3,380,838
Parker-Hannifin Corp. 10,800 554,175
Tyco International Ltd. 34,000 1,321,750
5,256,763
TOTAL INDUSTRIAL MACHINERY & 24,432,801
EQUIPMENT
MEDIA & LEISURE - 2.2%
BROADCASTING - 0.0%
NTL, Inc. warrants 10/14/08 427 21,350
(a)
PUBLISHING - 2.1%
Central Newspapers, Inc. 8,700 342,563
Class A
Dow Jones & Co., Inc. 11,700 795,600
Gannet Co., Inc. 50,900 4,151,531
Knight-Ridder, Inc. 18,900 1,124,550
McGraw-Hill Companies, Inc. 8,500 523,813
The New York Times Co. Class A 32,800 1,611,300
Tribune Co. 66,800 3,678,175
12,227,532
RESTAURANTS - 0.1%
Brinker International, Inc. 12,000 288,000
(a)
Darden Restaurants, Inc. 23,400 424,125
712,125
TOTAL MEDIA & LEISURE 12,961,007
SHARES VALUE (NOTE 1)
NONDURABLES - 3.5%
BEVERAGES - 1.5%
Adolph Coors Co. Class B 14,700 $ 771,750
Anheuser-Busch Companies, 89,600 6,350,400
Inc.
Pepsi Bottling Group, Inc. 60,200 997,063
PepsiCo, Inc. 21,600 761,400
8,880,613
FOODS - 1.4%
Campbell Soup Co. 20,200 781,488
H. J. Heinz Co. 20,200 804,213
Kellogg Co. 46,100 1,420,456
Quaker Oats Co. 43,400 2,848,125
Ralston Purina Co. 27,000 752,625
Sara Lee Corp. 75,200 1,659,100
8,266,007
HOUSEHOLD PRODUCTS - 0.4%
Procter & Gamble Co. 22,700 2,487,069
TOBACCO - 0.2%
Philip Morris Companies, Inc. 45,000 1,043,438
TOTAL NONDURABLES 20,677,127
PRECIOUS METALS - 0.0%
Homestake Mining Co. 26,800 209,375
RETAIL & WHOLESALE - 5.7%
APPAREL STORES - 0.3%
Gap, Inc. 43,575 2,004,450
GENERAL MERCHANDISE STORES -
3.2%
Dayton Hudson Corp. 21,100 1,549,531
Sears, Roebuck & Co. 5,400 164,363
Wal-Mart Stores, Inc. 250,000 17,281,250
18,995,144
RETAIL & WHOLESALE,
MISCELLANEOUS - 2.2%
Best Buy Co., Inc. (a) 38,900 1,952,294
Circuit City Stores, Inc. - 20,100 905,756
Circuit City Group
Home Depot, Inc. 98,250 6,736,266
Lowe's Companies, Inc. 54,300 3,244,425
12,838,741
TOTAL RETAIL & WHOLESALE 33,838,335
SERVICES - 0.4%
LEASING & RENTAL - 0.2%
Hertz Corp. Class A 17,500 877,188
PRINTING - 0.2%
Valassis Communications, Inc. 31,650 1,337,213
(a)
TOTAL SERVICES 2,214,401
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 21.3%
COMMUNICATIONS EQUIPMENT - 4.6%
ADC Telecommunications, Inc. 33,500 $ 2,430,844
(a)
Cisco Systems, Inc. (a) 119,100 12,758,588
Globalstar Telecommunications 180 38,700
Ltd. warrants 2/15/04 (a)(f)
Lucent Technologies, Inc. 157,900 11,812,894
27,041,026
COMPUTER SERVICES & SOFTWARE
- - 6.1%
Adobe Systems, Inc. 59,600 4,008,100
Computer Associates 31,700 2,217,019
International, Inc.
Electronics for Imaging, Inc. 33,600 1,953,000
(a)
First Data Corp. 95,200 4,694,550
Microsoft Corp. (a) 163,300 19,065,244
NetScout Systems, Inc. 19,800 613,800
Oracle Corp. (a) 32,300 3,619,619
36,171,332
COMPUTERS & OFFICE EQUIPMENT
- - 4.5%
Adaptec, Inc. (a) 66,100 3,296,738
Comverse Technology, Inc. (a) 23,800 3,445,050
International Business 80,300 8,672,400
Machines Corp.
Lexmark International Group, 72,200 6,534,100
Inc. Class A (a)
Sun Microsystems, Inc. (a) 63,300 4,901,794
26,850,082
ELECTRONIC INSTRUMENTS - 0.7%
Agilent Technologies, Inc. 2,400 185,550
Applied Materials, Inc. (a) 13,200 1,672,275
Teradyne, Inc. (a) 36,200 2,389,200
4,247,025
ELECTRONICS - 5.4%
Analog Devices, Inc. (a) 700 65,100
Intel Corp. 26,800 2,205,975
LSI Logic Corp. (a) 23,600 1,593,000
Motorola, Inc. 95,800 14,106,550
National Semiconductor Corp. 27,000 1,155,938
(a)
Texas Instruments, Inc. 123,200 11,935,000
Vishay Intertechnology, Inc. 20,200 638,825
(a)
31,700,388
TOTAL TECHNOLOGY 126,009,853
TRANSPORTATION - 0.1%
TRUCKING & FREIGHT - 0.1%
United Parcel Service, Inc. 5,400 372,600
Class B
SHARES VALUE (NOTE 1)
UTILITIES - 6.7%
CELLULAR - 1.6%
McCaw International Ltd. 910 $ 2,048
warrants 4/16/07 (a)(f)
QUALCOMM, Inc. (a) 53,600 9,440,300
9,442,348
ELECTRIC UTILITY - 1.3%
DTE Energy Co. 32,000 1,004,000
Edison International 39,400 1,031,788
Energy East Corp. 99,100 2,062,519
GPU, Inc. 30,700 919,081
PECO Energy Co. 18,000 625,500
PP&L Resources, Inc. 19,500 446,063
Public Service Enterprise 24,200 842,463
Group, Inc.
Unicom Corp. 19,900 666,650
7,598,064
GAS - 0.3%
Enron Corp. 48,600 2,156,625
TELEPHONE SERVICES - 3.5%
AT&T Corp. 104,160 5,286,120
BellSouth Corp. 120,800 5,654,950
MCI WorldCom, Inc. (a) 50,550 2,682,309
Ono Finance PLC rights 310 31,000
5/31/09 (a)(f)
Pathnet, Inc. warrants 890 8,900
4/15/08 (a)(f)
SBC Communications, Inc. 92,514 4,510,058
Sprint Corp. - FON Group 35,100 2,362,669
20,536,006
TOTAL UTILITIES 39,733,043
TOTAL COMMON STOCKS 430,789,992
(Cost $313,591,361)
NONCONVERTIBLE PREFERRED
STOCKS - 2.0%
CONSTRUCTION & REAL ESTATE -
0.1%
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
California Federal Preferred 30,171 686,390
Capital Corp. $2.2812
FINANCE - 0.1%
INSURANCE - 0.1%
American Annuity Group 160 143,273
Capital Trust II 8.875%
SIG Capital Trust I 9.5% (a) 692 177,258
320,531
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Fresenius Medical Care 586 554,851
Capital Trust II 7.875%
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.4%
Adelphia Communications Corp. 2,183 $ 246,679
$13.00
CSC Holdings, Inc. 11.125% 14,372 1,570,141
pay-in-kind
Granite Broadcasting Corp. 3 3,060
12.75% pay-in-kind
Sinclair Capital 11.625% 4,003 401,301
2,221,181
PUBLISHING - 0.1%
PRIMEDIA, Inc.:
$9.20 4,338 407,772
8.625% 125 11,063
Series D, $10.00 6,244 618,156
1,036,991
TOTAL MEDIA & LEISURE 3,258,172
SERVICES - 0.1%
LEASING & RENTAL - 0.1%
Crown Castle International 336 347,760
Corp. 12.75% pay-in-kind
UTILITIES - 1.1%
CELLULAR - 0.4%
Nextel Communications, Inc.:
11.125% pay-in-kind 2,699 2,712,495
Series D, 13% pay-in-kind 52 55,900
2,768,395
TELEPHONE SERVICES - 0.7%
Adelphia Business Solution, 819 798,525
Inc. 12.875% pay-in-kind
Intermedia Communications, 769 749,775
Inc. 13.5% pay-in-kind
IXC Communications, Inc. 263 287,985
12.5% pay-in-kind
NEXTLINK Communications, Inc. 30,889 1,668,006
14% pay-in-kind
WinStar Communications, Inc. 519 513,810
14.25% (a)
4,018,101
TOTAL UTILITIES 6,786,496
TOTAL NONCONVERTIBLE 11,954,200
PREFERRED STOCKS
(Cost $12,332,899)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 14.0%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
CONVERTIBLE BONDS - 0.3%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Tenet Healthcare Corp. 6% B1 $ 1,290,000 $ 1,051,350
12/1/05
Total Renal Care Holdings, B1 500,000 313,750
Inc. 7% 5/15/09 (f)
1,365,100
MEDIA & LEISURE - 0.0%
LODGING & GAMING - 0.0%
Hilton Hotels Corp. 5% 5/15/06 Ba2 30,000 22,875
NONDURABLES - 0.1%
FOODS - 0.1%
Chiquita Brands B3 390,000 276,900
International, Inc. 7%
3/28/01
TOTAL CONVERTIBLE BONDS 1,664,875
NONCONVERTIBLE BONDS - 13.7%
AEROSPACE & DEFENSE - 0.1%
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, B1 530,000 528,675
Inc. 9.25% 12/1/06
BASIC INDUSTRIES - 0.5%
CHEMICALS & PLASTICS - 0.3%
Huntsman Corp. 9.5% 7/1/07 (f) B2 330,000 311,850
Huntsman ICI Chemicals LLC B2 220,000 226,050
10.125% 7/1/09 (f)
Lyondell Chemical Co.:
9.875% 5/1/07 Ba3 890,000 907,800
10.875% 5/1/09 B2 130,000 134,550
Sterling Chemicals, Inc. Caa3 440,000 327,800
11.75% 8/15/06
1,908,050
IRON & STEEL - 0.0%
The LTV Corp. 11.75% 11/15/09 Ba3 150,000 156,750
(f)
METALS & MINING - 0.1%
Kaiser Aluminum & Chemical B3 240,000 240,000
Corp. 12.75% 2/1/03
Metals USA, Inc. 8.625% B2 60,000 56,250
2/15/08
296,250
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS - 0.1%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 $ 560,000 $ 520,800
9.75% 6/15/07 Caa1 330,000 313,500
834,300
PAPER & FOREST PRODUCTS - 0.0%
Potlatch Corp. 6.25% 3/15/02 Baa1 80,000 78,066
TOTAL BASIC INDUSTRIES 3,273,416
CONSTRUCTION & REAL ESTATE -
0.3%
BUILDING MATERIALS - 0.0%
American Standard Companies, Ba3 320,000 300,800
Inc. 7.375% 4/15/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% 2/15/09 B1 390,000 353,925
ENGINEERING - 0.0%
Anteon Corp. 12% 5/15/09 B3 260,000 243,100
REAL ESTATE - 0.1%
Duke-Weeks Realty LP 6.875% Baa2 100,000 95,034
3/15/05
LNR Property Corp.:
9.375% 3/15/08 B1 460,000 431,250
10.5% 1/15/09 B1 240,000 237,000
763,284
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 100,000 92,156
7.125% 3/15/04 Baa2 110,000 103,663
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 100,000 96,414
6.75% 2/15/08 Baa1 100,000 91,969
384,202
TOTAL CONSTRUCTION & REAL 2,045,311
ESTATE
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES -
0.1%
Oshkosh Truck Co. 8.75% 3/1/08 B2 300,000 291,000
Tenneco, Inc. 11.625% B2 260,000 263,900
10/15/09 (f)
TRW, Inc. 6.5% 6/1/02 Baa1 120,000 117,700
672,600
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
TEXTILES & APPAREL - 0.1%
Jones Apparel Group, Inc. Baa2 $ 135,000 $ 132,503
7.875% 6/15/06
Worldtex, Inc. 9.625% 12/15/07 B1 410,000 332,100
464,603
TOTAL DURABLES 1,137,203
ENERGY - 0.6%
COAL - 0.1%
P&L Coal Holdings Corp. B2 320,000 312,000
9.625% 5/15/08
ENERGY SERVICES - 0.2%
Baker Hughes, Inc. 5.8% A2 90,000 86,508
2/15/03
R&B Falcon Corp. 6.5% 4/15/03 Ba3 320,000 292,000
RBF Finance Co.:
11% 3/15/06 Ba3 570,000 609,900
11.375% 3/15/09 Ba3 210,000 225,750
1,214,158
OIL & GAS - 0.3%
Apache Corp. 7.625% 7/1/19 Baa1 75,000 72,300
Chesapeake Energy Corp. B3 680,000 642,600
9.625% 5/1/05
Gulf Canada Resources Ltd. Ba1 140,000 137,550
8.375% 11/15/05
Occidental Petroleum Corp. Baa3 100,000 103,355
9.75% 6/15/01
Ocean Energy, Inc. 8.875% Ba3 360,000 359,100
7/15/07
Oryx Energy Co.:
8% 10/15/03 Baa1 95,000 95,086
8.125% 10/15/05 Baa1 140,000 142,254
8.375% 7/15/04 Baa1 195,000 199,996
Petro-Canada 7% 11/15/28 A3 80,000 70,511
1,822,752
TOTAL ENERGY 3,348,910
FINANCE - 1.3%
BANKS - 0.2%
BankBoston Corp.:
6.125% 3/15/02 A2 320,000 317,500
6.625% 2/1/04 A3 60,000 58,294
Capital One Bank:
6.375% 2/15/03 Baa2 130,000 124,709
6.65% 3/15/04 Baa3 260,000 248,820
Capital One Financial Corp. Baa3 100,000 91,231
7.125% 8/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
Den Danske Bank AS 6.375% A1 $ 170,000 $ 157,888
6/15/08 (f)(i)
Korea Development Bank 6.625% Baa2 95,000 91,148
11/21/03
National Westminster Bank PLC Aa3 50,000 48,825
7.375% 10/1/09
NB Capital Trust IV 8.25% Aa2 100,000 95,874
4/15/27
Providian National Bank 6.7% Baa3 100,000 95,791
3/15/03
1,330,080
CREDIT & OTHER FINANCE - 0.9%
Ahmanson Capital Trust I A3 125,000 118,820
8.36% 12/1/26 (f)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 550,000 365,750
10% 3/15/04 Caa3 370,000 240,500
AT&T Capital Corp. 6.25% A1 250,000 247,608
5/15/01
BanPonce Trust I 8.327% 2/1/27 A3 75,000 68,540
Countrywide Funding Corp. A3 150,000 146,132
6.45% 2/27/03
ERP Operating LP:
6.55% 11/15/01 A3 55,000 54,119
7.1% 6/23/04 A3 100,000 97,713
Farmers Insurance Exchange A2 110,000 93,564
Capital 7.05% 7/15/28 (f)
First Security Capital I A3 110,000 102,469
8.41% 12/15/26
Ford Motor Credit Co.:
6.3563% 7/16/01 (i) A1 400,000 400,367
6.5% 2/28/02 A1 540,000 534,330
GS Escrow Corp.:
7% 8/1/03 Ba1 90,000 83,168
7.125% 8/1/05 Ba1 165,000 147,756
Heller Financial, Inc. 6% A3 180,000 170,915
3/19/04
KeyCorp Institutional Capital A1 130,000 117,699
A 7.826% 12/1/26
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 430,000 258,000
7.6% 8/1/07 Ba2 790,000 434,500
7.875% 8/1/03 Ba2 130,000 74,100
Mellon Capital I 7.72% 12/1/26 A2 70,000 63,951
Newcourt Credit Group, Inc. A1 130,000 126,858
6.875% 2/16/05
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 $ 40,000 $ 38,049
5.875% 5/1/04 Baa1 100,000 94,734
The Money Store, Inc. 7.3% A2 100,000 99,625
12/1/02
TXU Eastern Funding:
6.15% 5/15/02 Baa1 60,000 58,434
6.75% 5/15/09 Baa1 80,000 73,534
U.S. Bancorp 8.09% 11/15/26 A1 100,000 93,254
U.S. West Capital Funding, Baa1 130,000 129,454
Inc. 6.875% 8/15/01 (f)
UNICCO Service Co./UNICCO B3 450,000 414,000
Finance Corp. 9.875% 10/15/07
4,947,943
SAVINGS & LOANS - 0.1%
Chevy Chase Savings Bank FSB B1 160,000 150,400
9.25% 12/1/08
Great Western Finance Trust A3 120,000 112,162
II 8.206% 2/1/27
Home Savings of America FSB A3 90,000 85,361
6.5% 8/15/04
Long Island Savings Bank FSB Baa3 140,000 138,141
7% 6/13/02
Sovereign Bancorp, Inc. Ba3 100,000 96,491
6.625% 3/15/01
582,555
SECURITIES INDUSTRY - 0.1%
Amvescap PLC yankee 6.375% A3 200,000 191,866
5/15/03
Goldman Sachs Group L.P. A1 400,000 400,648
6.5025% 7/27/00 (i)(j)
Morgan Stanley Dean Witter & Aa3 180,000 179,809
Co. 7.125% 1/15/03
772,323
TOTAL FINANCE 7,632,901
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Concentra Operating Corp. 13% B3 60,000 53,700
8/15/09 (f)
Fountain View, Inc. 11.25% Caa1 460,000 349,600
4/15/08
Tenet Healthcare Corp. 8.625% Ba3 330,000 320,100
1/15/07
723,400
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.5%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
Bucyrus International, Inc. B1 160,000 118,400
9.75% 9/15/07
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
Dunlop Standard Aero Holdings B3 $ 430,000 $ 442,900
PLC 11.875% 5/15/09
Roller Bearing Holding, Inc. - 500,000 265,000
0% 6/15/09 (d)(f)
Thermadyne Manufacturing LLC B3 60,000 49,800
9.875% 6/1/08
Tokheim Corp. 11.375% 8/1/08 B3 240,000 140,400
Tyco International Group SA:
7% 6/15/28 Baa1 100,000 86,536
yankee:
6.125% 6/15/01 Baa1 90,000 88,477
6.375% 6/15/05 Baa1 30,000 28,103
1,219,616
POLLUTION CONTROL - 0.3%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba3 230,000 209,300
10% 8/1/09 (f) B2 930,000 827,700
Browning-Ferris Industries, Ba3 220,000 176,000
Inc. 6.375% 1/15/08
Envirosource, Inc. Series B, Caa3 80,000 50,400
9.75% 6/15/03
WMX Technologies, Inc.:
6.25% 10/15/00 Ba1 100,000 97,961
7.1% 8/1/26 Ba1 140,000 129,731
1,491,092
TOTAL INDUSTRIAL MACHINERY & 2,710,708
EQUIPMENT
MEDIA & LEISURE - 4.4%
BROADCASTING - 3.0%
ACME Television LLC/ACME B3 140,000 126,000
Financial Corp. 0% 9/30/04
(d)
Adelphia Communications Corp.:
7.75% 1/15/09 B1 330,000 294,525
8.375% 2/1/08 B1 130,000 121,550
9.875% 3/1/07 B1 1,230,000 1,242,300
AMFM Operating, Inc. 12.625% - 257,300 292,679
10/31/06 pay-in-kind
Ascent Entertainment Group, B3 320,000 238,400
Inc. 0% 12/15/04 (d)
Avalon Cable Michigan, B2 330,000 333,300
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Benedek Communications Corp. B3 $ 120,000 $ 108,000
0% 5/15/06 (d)
Century Communications Corp.:
Series B, 0% 1/15/08 B1 460,000 201,250
8.75% 10/1/07 B1 120,000 115,200
Chancellor Media Corp. 9% B1 560,000 582,400
10/1/08
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (d) B2 335,000 195,975
8.625% 4/1/09 B2 390,000 360,750
Citadel Broadcasting Co. B3 190,000 200,450
10.25% 7/1/07
Clear Channel Communications,
Inc.:
6.875% 6/15/18 Baa3 150,000 133,281
7.25% 10/15/27 Baa3 105,000 94,710
Comcast UK Cable Partners B2 580,000 548,100
Ltd. 0% 11/15/07 (d)
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa2 10,000 10,336
9% 9/1/08 Baa2 350,000 380,790
Cox Communications, Inc.:
6.875% 6/15/05 Baa2 60,000 58,570
7.75% 8/15/06 Baa2 50,000 50,486
CSC Holdings, Inc.:
9.25% 11/1/05 B1 260,000 266,500
9.875% 5/15/06 B1 240,000 250,800
10.5% 5/15/16 B1 280,000 309,400
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 1,015,000 829,763
yankee 0% 12/15/05 (d) B3 300,000 282,000
Earthwatch, Inc. 0% 7/15/07 - 430,000 301,000
unit (d)(f)
EchoStar DBS Corp.:
9.25% 2/1/06 B2 170,000 170,000
9.375% 2/1/09 B2 160,000 160,400
Falcon Holding Group B2 1,835,000 1,339,550
LP/Falcon Funding Corp. 0%
4/15/10 (d)
FrontierVision Holdings B1 700,000 616,000
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
FrontierVision Operating B1 340,000 363,800
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Golden Sky DBS, Inc. 0% Caa1 590,000 356,950
3/1/07 (d)
Golden Sky Systems, Inc. B3 180,000 191,700
12.375% 8/1/06
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Hearst-Argyle Television, Baa3 $ 200,000 $ 184,838
Inc. 7.5% 11/15/27
International Cabletel, Inc. B3 220,000 198,550
0% 2/1/06 (d)
Knology Holding, Inc. 0% - 760,000 505,400
10/15/07 (d)
Lenfest Communications, Inc. B1 190,000 188,100
8.25% 2/15/08
LIN Holdings Corp. 0% 3/1/08 B3 60,000 40,500
(d)
Nielsen Media Research, Inc. Baa2 60,000 58,481
7.6% 6/15/09
NTL Communications Corp. B3 780,000 844,350
11.5% 10/1/08
NTL, Inc. 10% 2/15/07 B3 270,000 278,100
Olympus Communications B1 160,000 167,200
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp. B3 210,000 212,100
9.625% 10/15/05
TCI Communications, Inc.:
9.25% 4/15/02 A2 100,000 104,963
9.8% 2/1/12 A2 190,000 221,985
Telewest PLC:
yankee 9.625% 10/1/06 B1 110,000 112,200
0% 10/1/07 (d) B1 1,630,000 1,507,750
Time Warner, Inc. 9.125% Baa3 155,000 169,750
1/15/13
United International B3 1,345,000 840,625
Holdings, Inc. 0% 2/15/08 (d)
United Pan-Europe B2 740,000 751,100
Communications NV 10.875%
8/1/09
17,512,907
ENTERTAINMENT - 0.4%
AMC Entertainment, Inc. 9.5% B3 100,000 87,250
2/1/11
Bally Total Fitness Holding B3 608,000 588,240
Corp. 9.875% 10/15/07
Capitol Records, Inc. 8.375% Baa1 130,000 129,012
8/15/09 (f)
Cinemark USA, Inc. 8.5% 8/1/08 B2 510,000 446,250
Paramount Communications, Baa3 110,000 110,239
Inc. 7.5% 1/15/02
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa1 580,000 433,550
9.5% 6/1/08 Caa1 660,000 521,400
United Artists Theatre Co. Caa3 120,000 19,200
9.75% 4/15/08
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Viacom, Inc.:
6.75% 1/15/03 Baa3 $ 110,000 $ 108,225
7.75% 6/1/05 Baa3 115,000 115,751
2,559,117
LODGING & GAMING - 0.5%
Circus Circus Enterprises, Ba2 130,000 111,313
Inc. 7.625% 7/15/13
Coast Hotels & Casinos, Inc. B3 200,000 193,500
9.5% 4/1/09
Courtyard by Marriott II B- 780,000 766,350
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc.:
7.875% 8/1/05 Ba2 350,000 323,750
7.875% 8/1/08 Ba2 545,000 487,775
Hollywood Casino Corp. 11.25% B3 110,000 114,675
5/1/07
Host Marriott LP 8.375% Ba2 630,000 595,350
2/15/06
Signature Resorts, Inc. 9.75% B3 280,000 240,800
10/1/07
2,833,513
PUBLISHING - 0.2%
Garden State Newspapers, Inc. B1 750,000 706,875
Series B, 8.75% 10/1/09
News America Holdings, Inc.:
7.7% 10/30/25 Baa3 110,000 103,069
8.5% 2/15/05 Baa3 35,000 36,089
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 35,000 34,080
8.375% 3/15/23 Baa2 60,000 62,384
942,497
RESTAURANTS - 0.3%
CKE Restaurants, Inc. 9.125% B2 510,000 382,500
5/1/09
Domino's, Inc. 10.375% 1/15/09 B3 680,000 654,500
Host Marriott Travel Plazas, Ba3 450,000 454,500
Inc. 9.5% 5/15/05
NE Restaurant, Inc. 10.75% B3 550,000 488,125
7/15/08
1,979,625
TOTAL MEDIA & LEISURE 25,827,659
NONDURABLES - 0.2%
BEVERAGES - 0.1%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 115,000 112,998
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
BEVERAGES - CONTINUED
Seagram JE & Sons, Inc.: -
continued
6.4% 12/15/03 Baa3 $ 120,000 $ 114,900
6.625% 12/15/05 Baa3 60,000 57,180
285,078
FOODS - 0.0%
ConAgra, Inc. 7.125% 10/1/26 Baa1 115,000 108,994
HOUSEHOLD PRODUCTS - 0.1%
Revlon Consumer Products B3 390,000 296,400
Corp. 9% 11/1/06
TOBACCO - 0.0%
Philip Morris Companies, Inc.:
6.95% 6/1/06 A2 140,000 137,914
7.25% 9/15/01 A2 50,000 49,651
RJ Reynolds Tobacco Holdings, Baa2 100,000 93,447
Inc. 7.375% 5/15/03
281,012
TOTAL NONDURABLES 971,484
RETAIL & WHOLESALE - 0.4%
DRUG STORES - 0.0%
Rite Aid Corp.:
6% 12/15/00 (f) B1 25,000 21,750
6.5% 12/15/05 (f) B1 105,000 75,600
7.125% 1/15/07 B1 40,000 30,000
127,350
GENERAL MERCHANDISE STORES -
0.2%
Dayton Hudson Corp. 7.5% A3 125,000 125,371
7/15/06
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa1 100,000 97,057
8.5% 6/15/03 Baa1 50,000 51,385
Kmart Corp. 12.5% 3/1/05 Ba1 510,000 576,300
850,113
GROCERY STORES - 0.2%
Kroger Co. 6% 7/1/00 Baa3 110,000 109,281
Pathmark Stores, Inc. 9.625% Caa3 1,230,000 922,500
5/1/03
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Pueblo Xtra International,
Inc.:
Series C, 9.5% 8/1/03 B3 $ 220,000 $ 132,000
9.5% 8/1/03 B3 405,000 243,000
1,406,781
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
USA Networks, Inc./USANi LLC Baa3 60,000 57,289
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 2,441,533
SERVICES - 0.1%
PRINTING - 0.0%
Sullivan Graphics, Inc. Caa1 210,000 218,925
12.75% 8/1/05
SERVICES - 0.1%
La Petite Academy, Inc./La B3 530,000 389,550
Petite Academy Holding Co.
10% 5/15/08
Medaphis Corp. 9.5% 2/15/05 Caa1 260,000 200,200
589,750
TOTAL SERVICES 808,675
TECHNOLOGY - 0.9%
COMPUTER SERVICES & SOFTWARE
- - 0.5%
Concentric Network Corp. B- 120,000 126,000
12.75% 12/15/07
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 280,000 175,700
12.5% 2/15/09 B3 201,000 208,035
Exodus Communications, Inc.:
10.75% 12/15/09 (f) B- 320,000 325,600
11.25% 7/1/08 B- 70,000 72,450
Federal Data Corp. 10.125% B3 690,000 500,250
8/1/05
PSINet, Inc.:
10.5% 12/1/06 (f) B3 880,000 891,000
11% 8/1/09 B3 285,000 292,838
Verio, Inc. 10.625% 11/15/09 B3 200,000 204,000
(f)
2,795,873
COMPUTERS & OFFICE EQUIPMENT
- - 0.0%
Comdisco, Inc.:
6.375% 11/30/01 Baa1 150,000 147,095
7.25% 9/1/02 Baa1 125,000 123,568
Sun Microsystems, Inc. 7% Baa1 35,000 34,878
8/15/02
305,541
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONICS - 0.4%
ChipPAC International Ltd. B3 $ 575,000 $ 603,750
12.75% 8/1/09 (f)
Details, Inc. 10% 11/15/05 B3 40,000 36,800
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 255,000 257,550
10.375% 10/1/07 B3 360,000 367,200
Micron Technology, Inc. 6.5% B3 1,000,000 797,500
9/30/05 (j)
SCG Holding B2 355,000 377,188
Corp./Semiconductor
Components Industries LLC
12% 8/1/09 (f)
2,439,988
TOTAL TECHNOLOGY 5,541,402
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.4%
Atlas Air, Inc. 9.25% 4/15/08 B2 780,000 742,950
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 30,000 29,292
7.73% 9/15/12 Baa1 20,000 19,500
Delta Air Lines, Inc. 8.3% Baa3 160,000 155,200
12/15/29 (f)
Kitty Hawk, Inc. 9.95% B1 615,000 607,313
11/15/04
Qantas Airways Ltd. 7.75% Baa1 110,000 105,798
6/15/09 (f)
US Airways Group, Inc. Ba3 360,000 341,100
10.375% 3/1/13
2,001,153
RAILROADS - 0.1%
Burlington Northern Santa Fe Baa2 150,000 134,990
Corp. 6.125% 3/15/09
Canadian National Railway Co. Baa2 150,000 132,417
6.9% 7/15/28
CSX Corp.:
6.25% 10/15/08 Baa2 60,000 54,293
6.46% 6/22/05 Baa2 100,000 95,187
Norfolk Southern Corp. 7.05% Baa1 220,000 218,084
5/1/37
Wisconsin Central Baa2 100,000 91,555
Transportation Corp. 6.625%
4/15/08
726,526
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
SHIPPING - 0.0%
Holt Group, Inc. 9.75% 1/15/06 Caa1 $ 80,000 $ 52,000
TOTAL TRANSPORTATION 2,779,679
UTILITIES - 3.6%
CELLULAR - 1.1%
Cable & Wireless Baa1 170,000 167,941
Communications PLC 6.375%
3/6/03
McCaw International Ltd. 0% Caa1 890,000 623,000
4/15/07 (d)
Millicom International Caa1 930,000 769,575
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 10/31/07 (d) B1 3,020,000 2,189,500
12% 11/1/08 B1 220,000 245,850
Nextel International, Inc. 0% Caa1 740,000 440,300
4/15/08 (d)
Nuevo Grupo Iusacell SA de CV B1 127,000 132,080
14.25% 12/1/06 (f)
Rogers Cantel, Inc. 8.8% B2 200,000 200,000
10/1/07
Rogers Communications, Inc. B2 550,000 554,125
8.875% 7/15/07
Telesystem International Caa1 150,000 82,500
Wireless, Inc. 0% 11/1/07 (d)
Voicestream Wireless B2 780,000 803,400
Corp./Voicestream Wireless
Holding Co. 10.375% 11/15/09
(f)
6,208,271
ELECTRIC UTILITY - 0.1%
Avon Energy Partners Holdings Baa2 130,000 115,930
6.46% 3/4/08 (f)
Hydro-Quebec yankee 7.4% A2 90,000 94,257
3/28/25 (e)
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (f) A3 170,000 146,424
yankee 7.875% 12/15/26 (f) A3 80,000 70,222
Texas Utilities Co. 6.375% Baa3 50,000 45,300
1/1/08
472,133
GAS - 0.0%
CMS Panhandle Holding Co. Baa3 50,000 47,385
6.125% 3/15/04
TELEPHONE SERVICES - 2.4%
Allegiance Telecom, Inc. 0% B3 170,000 122,400
2/15/08 (d)
e.spire Communications, Inc. - 290,000 203,000
13.75% 7/15/07
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
GST Network Funding, Inc. 0% - $ 1,620,000 $ 793,800
5/1/08 (d)
GST Equipment Funding, Inc. - 290,000 279,850
13.25% 5/1/07
GST Telecommunications, Inc. - 170,000 159,800
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (d) - 60,000 44,700
GTE Corp. 6.155% 6/12/00 (i) - 350,000 349,896
Hyperion Telecommunications, Caa1 160,000 169,600
Inc. 12% 11/1/07
ICG Services, Inc. 0% 5/1/08 B3 840,000 430,500
(d)
Intermedia Communications,
Inc.:
0% 3/1/09 (d) B3 250,000 149,375
8.6% 6/1/08 B2 780,000 719,550
IXC Communications, Inc. 9% B1 480,000 484,800
4/15/08
KMC Telecom Holdings, Inc. Caa2 550,000 544,500
13.5% 5/15/09
Logix Communications - 785,000 549,500
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% A3 103,000 108,106
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (d) B1 580,000 469,800
9.5% 11/1/08 B1 570,000 575,700
Metromedia Fiber Network, Inc.:
10% 11/15/08 B2 175,000 178,500
10% 12/15/09 B2 290,000 295,800
NEXTLINK Communications, Inc.:
9.625% 10/1/07 B2 540,000 527,850
10.5% 12/1/09 (f) B2 410,000 417,175
Ono Finance PLC 13% 5/1/09 Caa1 310,000 320,850
Pathnet, Inc. 12.25% 4/15/08 - 890,000 569,600
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 1,300,000 702,000
12.75% 4/15/09 B3 770,000 746,900
Telecomunicaciones de Puerto Baa2 140,000 132,020
Rico, Inc. 6.65% 5/15/06
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 183,000 171,896
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
7.7% 7/20/29 Baa1 $ 220,000 $ 201,344
Teligent, Inc.:
0% 3/1/08 (d) Caa1 1,435,000 843,063
11.5% 12/1/07 Caa1 835,000 814,125
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 220,000 206,800
0% 10/15/05 (d) Caa1 220,000 334,400
0% 3/15/08 (d) CCC 1,370,000 1,397,400
15% 3/1/07 CCC 240,000 340,800
14,355,400
TOTAL UTILITIES 21,083,189
TOTAL NONCONVERTIBLE BONDS 80,854,145
TOTAL CORPORATE BONDS 82,519,020
(Cost $86,203,054)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 2.4%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 0.7%
Fannie Mae:
6% 5/15/08 Aaa 1,500,000 1,404,375
6.25% 5/15/29 Aaa 375,000 333,750
6.5% 4/29/09 Aaa 175,000 163,762
Freddie Mac:
5.5% 5/15/02 Aaa 1,500,000 1,463,910
6.25% 7/15/04 Aaa 50,000 48,883
7.625% 9/9/09 Aaa 400,000 395,064
TOTAL U.S. GOVERNMENT AGENCY 3,809,744
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
1.7%
U.S. Treasury Bills, yield at - 550,000 543,142
date of purchase 5.06% to
5.26% 3/30/00 (g)
U.S. Treasury Bonds:
6.875% 8/15/25 Aaa 3,275,000 3,335,882
8.875% 8/15/17 Aaa 219,000 264,681
8.875% 2/15/19 Aaa 259,000 315,252
U.S. Treasury Notes:
5.875% 11/15/04 Aaa 360,000 352,969
6% 8/15/09 Aaa 700,000 678,125
6.625% 6/30/01 Aaa 3,655,000 3,675,541
7.25% 8/15/04 Aaa 20,000 20,625
7.875% 11/15/04 Aaa 830,000 877,592
TOTAL U.S. TREASURY 10,063,809
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 13,873,553
GOVERNMENT AGENCY OBLIGATIONS
(Cost $14,153,239)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 3.3%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 2.6%
6% 3/1/11 to 1/1/29 Aaa $ 1,249,771 $ 1,189,271
6.5% 2/1/26 to 11/1/29 Aaa 5,071,932 4,781,558
7% 8/1/25 to 12/1/29 Aaa 6,845,573 6,624,084
7.5% 5/1/24 to 11/1/29 Aaa 2,627,362 2,598,278
8% 12/1/29 Aaa 300,029 302,466
15,495,657
FREDDIE MAC - 0.2%
7.5% 8/1/28 Aaa 140,275 139,049
8% 11/1/29 to 12/1/29 Aaa 1,000,000 1,009,680
1,148,729
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 0.5%
6.5% 3/15/28 to 5/15/29 Aaa 991,144 930,120
7% 7/15/28 Aaa 870,213 840,296
7.5% 1/15/26 to 8/15/28 Aaa 825,122 815,993
2,586,409
TOTAL U.S. GOVERNMENT AGENCY 19,230,795
- - MORTGAGE SECURITIES
(Cost $19,685,498)
ASSET-BACKED SECURITIES - 0.4%
Airplanes pass through trust Ba2 430,000 352,600
10.875% 3/15/19
BankAmerica Manufacturing Aaa 150,000 146,484
Housing Contract 6.2% 4/10/09
Capita Equipment Receivables Baa2 100,000 96,013
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 51,040 50,522
Trust 5.91% 12/15/04
CIT Marine Trust 5.8% 4/15/10 Aaa 120,000 115,350
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 62,094 62,279
6.55% 8/15/02 Aaa 29,094 29,022
CPS Auto Receivables Trust 6% Aaa 101,305 99,818
8/15/03
CSXT Trade Receivables Master Aaa 180,000 172,406
Trust 6% 7/25/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 90,000 87,998
6.4% 12/15/02 Baa2 50,000 49,350
6.87% 11/15/04 A2 50,000 49,586
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Green Tree Financial Corp.:
6.68% 1/15/29 AAA $ 210,000 $ 208,358
6.8% 6/15/27 Aaa 43,333 43,347
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 150,000 146,555
6.3% 10/15/03 A2 51,246 50,894
Olympic Automobile Aaa 23,393 23,393
Receivables Trust 6.7%
3/15/02
Petroleum Enhanced Trust Baa2 71,545 71,277
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (f)(i)
UAF Auto Grantor Trust 6.1% Aaa 104,900 104,114
1/15/03 (f)
WFS Financial Owner Trust Aaa 140,000 139,147
6.55% 10/20/04
TOTAL ASSET-BACKED SECURITIES 2,098,513
(Cost $2,246,616)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.0%
PRIVATE SPONSOR - 0.0%
Credit-Based Asset Servicing Ba3 176,455 83,982
and Securitization LLC
Series 1997- 2 Class 2B,
7.1864% 12/29/25 (f)(h)(i)
U.S. GOVERNMENT AGENCY - 0.0%
Fannie Mae planned
amortization class:
Series 1999-54 Class PH, 6.5% Aaa 100,000 88,938
11/18/29
Series 1999-57 Class PH, 6.5% Aaa 100,000 88,781
12/25/29
177,719
TOTAL COLLATERALIZED 261,701
MORTGAGE OBLIGATIONS
(Cost $273,430)
COMMERCIAL MORTGAGE
SECURITIES - 0.7%
BKB Commercial Mortgage Trust BBB 59,509 58,940
Series 1997-C1 Class D,
7.83% 2/25/43 (f)(i)
CBM Funding Corp.:
sequential pay Series 1996-1 AA 100,000 98,016
Class A-3PI, 7.08% 11/1/07
sequential pay Series 1996-1 A 80,000 77,631
Class B, 7.48% 2/1/08
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 $ 200,000 $ 181,500
1/17/35
Series 1998 C1 Class D, 7.17% BBB 210,000 185,850
1/17/12
Series 1998-FL1 Class E, Baa2 220,000 216,700
6.26% 1/10/13 (f)(i)
Deutsche Mortgage & Asset Baa2 140,000 122,413
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
First Chicago/Lennar Trust I
Series 1997-CHL1:
Class D, 8.1256% 4/13/39 (i) - 350,000 278,688
Class E, 8.1256% 4/1/39 (i) - 320,000 225,000
FMAC Loan Receivables Trust:
Series 1997-A Class E, - 250,000 167,969
8.1096% 4/15/19 (f)(i)
Series 1997-B Class E, - 100,000 58,344
7.8912% 9/15/19 (f)(i)
General Motors Acceptance Ba3 250,000 195,630
Corp. Commercial Mortgage
Securities, Inc. Series
1996-C1 Class F, 7.86%
10/15/28 (f)
GS Mortgage Securities Corp.
II Series 1998-GLII:
Class D, 7.1905% 4/13/31 Baa2 50,000 44,672
(f)(i)
Class E, 7.1905% 4/13/31 Baa3 180,000 152,044
(f)(i)
Host Marriot Pool Trust 6.98% Aaa 97,727 95,605
8/1/15
LTC Commercial Mortgage pass
through certificates:
Series 1996-1 Class E, 9.16% BB- 500,000 443,750
4/15/28
Series 1998-1 Class A, 6.029% AAA 104,234 96,225
5/30/30 (f)
Morgan Stanley Capital I, - 88,423 88,424
Inc. Series 1996-MBL1 Class
E, 8.5243% 5/25/21 (f)(i)
Nomura Asset Securities Corp. Baa2 140,000 121,494
Series 1998-D6 Class A-4,
7.597% 3/17/28 (i)
Nomura Depositor Trust - 125,000 113,779
floater Series 1998-ST1A
Class B2, 9.6938% 1/15/03
(f)(i)
Resolution Trust Corp. Series Baa3 53,032 42,956
1991-M2 Class A3, 6.9066%
9/25/20 (i)
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Structured Asset Securities
Corp.:
Series 1995-C1 Class E, BB $ 1,000,000 $ 883,438
7.375% 9/25/24 (f)
Series 1996 CFL Class E, BBB 80,000 78,516
7.75% 2/25/28
Thirteen Affiliates of
General Growth Properties,
Inc.:
Series D-2, 6.992% 12/15/10 Baa2 140,000 128,744
(f)
Series E-2, 7.224% 12/15/10 Baa3 100,000 89,281
(f)
TOTAL COMMERCIAL MORTGAGE 4,245,609
SECURITIES
(Cost $4,656,446)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (K) - 0.0%
Korean Republic yankee 8.875% Baa2 46,000 48,205
4/15/08 (Cost $48,520)
SUPRANATIONAL OBLIGATIONS -
0.0%
Inter-American Development Aaa 150,000 142,676
Bank yankee 6.29% 7/16/27
(Cost $149,057)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 0.3%
Canadian Imperial Bank of 400,000 399,855
Commerce yankee 5.63%
4/13/00 (i)
Commerzbank AG yankee 5.58% 400,000 398,952
6/12/00
Deutsche Bank AG yankee 5.1% 400,000 399,596
2/11/00
Fleet National Bank 6.305% 400,000 400,123
5/5/00 (i)
Societe Generale, France 400,000 399,518
yankee 5.16% 2/22/00
TOTAL CERTIFICATES OF DEPOSIT 1,998,044
(Cost $1,999,359)
COMMERCIAL PAPER - 0.5%
Asset Securitization Coop. 350,000 346,794
Corp. 5.96% 3/2/00
Citibank Credit Card Master 350,000 346,394
Trust I (Dakota Certificate
Program) 5.96% 3/9/00
Corporate Receivables Corp. 350,000 347,742
6.15% 2/14/00
CXC, Inc. 6.03% 2/18/00 350,000 347,500
Enterprise Funding Corp. 350,000 348,740
yankee 6.15% 1/27/00
COMMERCIAL PAPER - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
Finova Capital Corp. 6.4225% $ 400,000 $ 399,662
4/10/00 (i)
New Center Asset Trust 6.05% 350,000 345,738
3/21/00
Windmill Funding Corp. yankee 350,000 348,799
6.15% 1/26/00
TOTAL COMMERCIAL PAPER 2,831,369
(Cost $2,828,912)
</TABLE>
CASH EQUIVALENTS - 3.6%
MATURITY AMOUNT
Investments in repurchase $ 1,130,344 1,130,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 3.65%,
dated 12/31/99 due 1/3/00
SHARES
Taxable Central Cash Fund, 19,972,492 19,972,492
5.12% (c)
TOTAL CASH EQUIVALENTS 21,102,492
(Cost $21,102,492)
TOTAL INVESTMENT PORTFOLIO - 591,096,169
100.0%
(Cost $479,270,883)
NET OTHER ASSETS - 0.0% 284,070
NET ASSETS - 100% $ 591,380,239
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT AT VALUE UNREALIZED GAIN/LOSS
PURCHASED
27 S&P 500 Stock Index March 2000 $ 10,018,350 $ 35,263
Contracts
</TABLE>
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS -
1.7%
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(f) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $10,427,766 or 1.8% of net assets.
(g) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $543,142.
(h) Partial interest payment received on the last interest payment
date.
(i) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(j) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Goldman Sachs Group L.P. 1/25/99 $ 400,000
6.5025% 7/27/00
Micron Technology, Inc. 6.5% 11/1/99 $ 787,500
9/30/05
(k) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment advisor, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 6.7% AAA, AA, A 6.2%
Baa 1.5% BBB 1.6%
Ba 1.4% BB 2.2%
B 7.5% B 7.3%
Caa 1.7% CCC 1.6%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings
for the sovereign credit of the issuing government. The percentage not
rated by Moody's or S&P amounted to 0.9%. FMR has determined that
unrated debt securities that are lower quality account for 0.9% of the
total value of investment in securities.
Purchases and sales of securities, other than short-term securities,
aggregated $479,196,521 and $481,422,675, respectively, of which
long-term U.S. government and government agency obligations aggregated
$68,496,267 and $45,153,939, respectively.
The market value of futures contracts opened and closed during the
period amounted to $70,062,255 and $71,432,415, 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 $12,555 for the
period.
The fund participated in the security lending program. At period end
there were no loans outstanding.
The fund invested in securities that are not registered under the
Securities Act of 1933. These securities are subject to legal or
contractual restrictions on resale. At the end of the period,
restricted securities (excluding Rule 144A issues) amounted to
$1,198,148 and 0.2% of net assets.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $479,464,141. Net unrealized appreciation
aggregated $111,632,028, of which $127,990,290 related to appreciated
investment securities and $16,358,262 related to depreciated
investment securities.
The fund hereby designates approximately $21,174,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER: GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 591,096,169
value (including repurchase
agreements of $1,130,000)
(cost $479,270,883) - See
accompanying schedule
Cash 3,452
Receivable for investments 11,055
sold
Receivable for fund shares 99,538
sold
Dividends receivable 344,527
Interest receivable 2,052,716
Receivable for daily 22,950
variation on futures
contracts
Other receivables 1,214
TOTAL ASSETS 593,631,621
LIABILITIES
Payable for investments $ 1,446,849
purchased
Payable for fund shares 440,168
redeemed
Accrued management fee 277,040
Distribution fees payable 859
Other payables and accrued 86,466
expenses
TOTAL LIABILITIES 2,251,382
NET ASSETS $ 591,380,239
Net Assets consist of:
Paid in capital $ 419,428,366
Undistributed net investment 13,084,201
income
Accumulated undistributed net 47,007,122
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 111,860,550
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 591,380,239
INITIAL CLASS: NET ASSET $18.38
VALUE, offering price and
redemption price per share
($580,554,889 (divided by)
31,593,631 shares)
SERVICE CLASS: NET ASSET $18.28
VALUE, offering price and
redemption price per share
($10,825,350 (divided by)
592,283 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 5,819,170
Dividends
Interest 11,148,256
Security lending 396
TOTAL INCOME 16,967,822
EXPENSES
Management fee $ 3,196,423
Transfer agent fees 368,065
Distribution fees - Service 6,803
Class
Accounting and security 242,998
lending fees
Non-interested trustees' 1,601
compensation
Custodian fees and expenses 28,125
Registration fees 56
Audit 25,166
Legal 6,421
Miscellaneous 47,001
Total expenses before 3,922,659
reductions
Expense reductions (55,145) 3,867,514
NET INVESTMENT INCOME 13,100,308
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 48,031,486
Foreign currency transactions (152)
Futures contracts 633,577 48,664,911
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 18,274,646
Futures contracts (454,567) 17,820,079
NET GAIN (LOSS) 66,484,990
NET INCREASE (DECREASE) IN $ 79,585,298
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 52,298
Expense reductions Directed
brokerage arrangements
Custodian credits 2,847
$ 55,145
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 13,100,308 $ 12,886,652
income
Net realized gain (loss) 48,664,911 19,750,450
Change in net unrealized 17,820,079 46,973,028
appreciation (depreciation)
NET INCREASE (DECREASE) IN 79,585,298 79,610,130
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (12,766,102) (9,747,110)
From net investment income
From net realized gain (21,173,047) (45,582,074)
TOTAL DISTRIBUTIONS (33,939,149) (55,329,184)
Share transactions - net 13,695,216 24,516,891
increase (decrease)
TOTAL INCREASE (DECREASE) 59,341,365 48,797,837
IN NET ASSETS
NET ASSETS
Beginning of period 532,038,874 483,241,037
End of period (including $ 591,380,239 $ 532,038,874
undistributed net investment
income of $13,084,201 and
$12,651,500, respectively)
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 3,532,899 $ 59,442,839 5,166,840 $ 81,527,781
Class Sold
Reinvested 2,100,108 33,706,735 3,710,796 55,327,974
Redeemed (5,095,721) (86,190,044) (7,361,720) (115,250,981)
Net increase (decrease) 537,286 $ 6,959,530 1,515,916 $ 21,604,774
Service Class Sold 451,433 $ 7,507,627 202,513 $ 3,161,007
Reinvested 14,544 232,414 81 1,210
Redeemed (60,280) (1,004,355) (16,635) (250,100)
Net increase (decrease) 405,697 $ 6,735,686 185,959 $ 2,912,117
Distributions From net $ 12,678,680 $ 9,746,897
investment income Initial
Class
Service Class 87,422 213
Total $ 12,766,102 $ 9,747,110
From net realized gain $ 21,028,055 $ 45,581,077
Initial Class
Service Class 144,992 997
Total $ 21,173,047 $ 45,582,074
$ 33,939,149 $ 55,329,184
A
</TABLE>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 17.03 $ 16.36 $ 13.10 $ 11.77 $ 10.00
period
Income from Investment
Operations
Net investment income .40 C .41 C .36 C .21 .10
Net realized and unrealized 2.04 2.19 2.92 2.08 2.20
gain (loss)
Total from investment 2.44 2.60 3.28 2.29 2.30
operations
Less Distributions
From net investment income (.41) (.34) - (.21) (.11)
From net realized gain (.68) (1.59) (.02) (.75) (.42)
Total distributions (1.09) (1.93) (.02) (.96) (.53)
Net asset value, end of period $ 18.38 $ 17.03 $ 16.36 $ 13.10 $ 11.77
TOTAL RETURN B, H 15.26% 17.57% 25.07% 20.04% 23.02%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 580,555 $ 528,874 $ 483,231 $ 253,024 $ 68,247
(000 omitted)
Ratio of expenses to average .71% .73% .77% .87% 1.00% F
net assets
Ratio of expenses to average .70% G .72% G .76% G .85% G 1.00%
net assets after expense
reductions
Ratio of net investment 2.38% 2.60% 2.44% 2.63% 1.69%
income to average net assets
Portfolio turnover 92% 98% 90% 120% 343%
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 16.96 $ 16.35 $ 15.94
period
Income from Investment
Operations
Net investment income C .38 .40 .07
Net realized and unrealized 2.03 2.14 .34
gain (loss)
Total from investment 2.41 2.54 .41
operations
Less Distributions
From net investment income (.41) (.34) -
From net realized gain (.68) (1.59) -
Total distributions (1.09) (1.93) -
Net asset value, end of period $ 18.28 $ 16.96 $ 16.35
TOTAL RETURN B, H 15.13% 17.18% 2.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,825 $ 3,165 $ 10
(000 omitted)
Ratio of expenses to average .82% .89% .87% A
net assets
Ratio of expenses to average .81% G .88% G .87% A
net assets after expense
reductions
Ratio of net investment 2.27% 2.65% 2.70% A
income to average net assets
Portfolio turnover 92% 98% 90%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
D FOR THE PERIOD JANUARY 5,
1995 (COMMENCEMENT OF
OPERATIONS OF INITIAL CLASS
SHARES) TO DECEMBER 31, 1995.
E FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
F FMR AGREED TO REIMBURSE A
PORTION OF THE CLASS'
EXPENSES DURING THE PERIOD.
WITHOUT THIS REIMBURSEMENT,
THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
H TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the past 10 years total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY VIP: ASSET MANAGER - 11.09% 15.63% 13.14%
"INITIAL CLASS"
Asset Manager Composite 10.42% 16.69% 11.96%
S&P 500 (registered trademark) 21.04% 28.56% 18.21%
LB Aggregate Bond -0.82% 7.73% 7.70%
LB 3 Month T-Bill 4.90% 5.44% 5.19%
Variable Annuity Flexible 12.07% 17.11% 12.94%
Portfolio Funds Average
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to those of the Asset Manager
Composite Index, a hypothetical combination of unmanaged indices. The
composite index combines the total returns of the Standard & Poor's
500 Index, the Lehman Brothers Aggregate Bond Index and the Lehman
Brothers 3 Month Treasury Bill Index weighted according to the fund's
neutral mix.
You can also compare the fund's returns to the variable annuity
flexible portfolio funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
one year average represents a peer group of 84 mutual funds. The
benchmarks listed in the table above include reinvested dividends and
capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF
THESE ADDITIONAL CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER 10 YEARS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP II Asset Manager 50 S&P/40 LBAgg/10 LB 3Mo S&P 500 LB Aggregate Bond
00156 F0001 SP001 LB001
1989/12/31 10000.00 10000.00 10000.00 10000.00
1990/01/31 9779.34 9758.90 9329.00 9881.00
1990/02/28 9879.64 9821.55 9449.34 9912.62
1990/03/31 9959.88 9918.20 9699.75 9919.56
1990/04/30 9829.49 9826.06 9457.26 9828.30
1990/05/31 10330.99 10245.73 10379.34 10119.22
1990/06/30 10411.23 10309.87 10308.76 10282.14
1990/07/31 10391.17 10374.30 10275.77 10424.03
1990/08/31 10050.15 10053.74 9346.84 10284.35
1990/09/30 9839.52 9965.36 8891.65 10369.71
1990/10/31 9889.67 10036.52 8853.42 10501.40
1990/11/30 10371.11 10337.81 9425.35 10727.18
1990/12/31 10672.02 10510.87 9688.32 10894.53
1991/01/31 11182.69 10712.26 10110.73 11029.62
1991/02/28 11620.41 10980.81 10833.64 11123.37
1991/03/31 11808.00 11102.70 11095.82 11200.12
1991/04/30 11985.17 11176.87 11122.45 11321.08
1991/05/31 12256.14 11354.35 11602.94 11386.74
1991/06/30 12037.28 11207.20 11071.52 11381.05
1991/07/31 12339.52 11432.47 11587.46 11539.25
1991/08/31 12589.64 11636.99 11862.08 11788.50
1991/09/30 12662.60 11693.66 11663.98 12027.80
1991/10/31 12745.97 11799.49 11820.28 12161.31
1991/11/30 12537.53 11721.38 11343.92 12273.19
1991/12/31 13079.47 12301.71 12641.67 12637.71
1992/01/31 13246.22 12166.77 12406.53 12465.84
1992/02/29 13503.47 12244.15 12567.82 12546.86
1992/03/31 13470.56 12154.89 12322.74 12476.60
1992/04/30 13668.01 12307.31 12685.03 12566.43
1992/05/31 13810.61 12427.84 12747.19 12803.94
1992/06/30 13799.64 12433.93 12557.26 12980.63
1992/07/31 14030.00 12773.45 13070.85 13245.44
1992/08/31 13986.13 12724.17 12802.90 13379.22
1992/09/30 14073.88 12867.47 12953.97 13538.43
1992/10/31 14095.82 12807.50 12999.31 13358.37
1992/11/30 14402.97 12970.16 13442.58 13361.04
1992/12/31 14611.39 13123.44 13607.93 13573.48
1993/01/31 14874.66 13288.22 13722.24 13834.09
1993/02/28 15014.15 13473.22 13908.86 14076.19
1993/03/31 15439.19 13612.05 14202.33 14135.31
1993/04/30 15531.09 13529.31 13858.64 14234.26
1993/05/31 15795.30 13674.43 14230.05 14252.76
1993/06/30 15921.66 13819.92 14271.32 14510.73
1993/07/31 16116.95 13837.83 14214.23 14593.45
1993/08/31 16587.94 14178.41 14752.95 14848.83
1993/09/30 16599.43 14164.52 14639.35 14888.92
1993/10/31 17047.44 14310.13 14942.39 14944.01
1993/11/30 17024.46 14200.08 14800.44 14816.99
1993/12/31 17713.71 14299.60 14979.52 14897.00
1994/01/31 18276.60 14581.18 15488.82 15098.11
1994/02/28 17696.13 14302.92 15069.08 14835.40
1994/03/31 16864.37 13933.56 14412.07 14468.97
1994/04/30 16876.42 13968.59 14596.54 14353.22
1994/05/31 17021.08 14062.68 14835.92 14351.78
1994/06/30 16695.60 13923.74 14472.44 14320.21
1994/07/31 16984.91 14218.59 14947.14 14605.18
1994/08/31 17382.71 14463.06 15559.97 14622.70
1994/09/30 17177.68 14251.27 15178.75 14407.75
1994/10/31 17262.12 14388.19 15520.27 14394.78
1994/11/30 17008.79 14177.75 14955.03 14363.12
1994/12/31 16634.84 14311.22 15176.81 14462.22
1995/01/31 16526.28 14579.96 15570.34 14748.57
1995/02/28 16793.99 14945.53 16177.12 15099.59
1995/03/31 17015.77 15174.92 16654.51 15191.70
1995/04/30 17286.84 15448.25 17144.98 15404.38
1995/05/31 17508.62 15960.91 17830.27 16000.53
1995/06/30 17656.48 16176.16 18244.46 16117.33
1995/07/31 18284.87 16382.31 18849.45 16081.88
1995/08/31 18506.65 16490.96 18896.76 16276.47
1995/09/30 18740.76 16847.36 19694.21 16434.35
1995/10/31 18494.33 16943.39 19623.90 16647.99
1995/11/30 18974.86 17361.18 20485.39 16897.71
1995/12/31 19455.40 17613.93 20879.93 17134.28
1996/01/31 19874.32 17914.17 21590.69 17247.37
1996/02/29 19820.79 17847.93 21790.83 16947.26
1996/03/31 20031.51 17868.81 22000.68 16828.63
1996/04/30 20242.23 17943.89 22324.97 16734.39
1996/05/31 20400.27 18133.31 22900.73 16700.92
1996/06/30 20584.65 18268.91 22987.98 16924.72
1996/07/31 20242.23 17979.75 21972.37 16970.41
1996/08/31 20281.74 18133.01 22435.77 16941.56
1996/09/30 21019.26 18677.14 23698.46 17236.35
1996/10/31 21559.23 19064.36 24352.06 17618.99
1996/11/30 22626.00 19789.11 26192.83 17920.28
1996/12/31 22296.75 19568.22 25673.95 17753.62
1997/01/31 22968.41 20212.80 27278.06 17808.66
1997/02/28 23166.93 20320.13 27491.92 17853.18
1997/03/31 22285.66 19820.97 26362.28 17655.01
1997/04/30 23047.43 20541.26 27936.10 17919.83
1997/05/31 24152.75 21255.48 29636.85 18090.07
1997/06/30 24795.04 21840.43 30964.59 18305.34
1997/07/31 26228.97 22956.81 33428.44 18799.59
1997/08/31 25512.00 22246.29 31555.78 18639.79
1997/09/30 26333.52 22997.44 33284.09 18915.66
1997/10/31 25900.36 22756.66 32172.40 19189.94
1997/11/30 26497.83 23335.02 33661.66 19278.21
1997/12/31 26901.12 23639.65 34239.63 19472.92
1998/01/31 26990.74 23902.76 34618.32 19722.17
1998/02/28 28205.97 24765.89 37114.99 19706.40
1998/03/31 29024.03 25445.34 39015.65 19773.40
1998/04/30 28989.94 25637.71 39408.15 19876.22
1998/05/31 28836.55 25526.32 38730.72 20065.04
1998/06/30 29398.97 26142.35 40303.96 20235.26
1998/07/31 29211.50 26036.83 39874.73 20278.20
1998/08/31 26552.81 24336.12 34109.64 20608.26
1998/09/30 27439.04 25356.41 36294.70 21090.73
1998/10/31 28632.04 26344.03 39246.91 20979.46
1998/11/30 29722.78 27211.02 41625.67 21098.28
1998/12/31 30949.87 28038.32 44024.14 21161.72
1999/01/31 31682.72 28715.36 45865.23 21312.88
1999/02/28 30957.30 28077.19 44439.74 20940.76
1999/03/31 31233.54 28713.17 46217.77 21056.94
1999/04/30 31933.35 29315.89 48007.79 21123.69
1999/05/31 31472.95 28878.06 46874.32 20937.80
1999/06/30 32577.91 29653.73 49475.85 20870.93
1999/07/31 32025.43 29153.47 47931.21 20783.28
1999/08/31 31970.18 29087.15 47693.95 20772.72
1999/09/30 31601.86 28836.61 46386.66 21013.77
1999/10/31 32559.49 29803.58 49322.01 21091.30
1999/11/30 33001.48 30117.78 50324.73 21089.83
1999/12/31 34382.68 30960.33 53288.85 20988.14
IMATRL PRASUN SHR__CHT 19991231 20000118 144208 R00000000000123
</TABLE>
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Asset Manager
Portfolio on December 31, 1989. By December 31, 1999, the value of the
investment would have grown to $34,383 - a 243.83% increase. With
reinvested dividends and capital gains, if any, a $10,000 investment
in the Standard & Poor's 500 Index would have grown to $53,289 over
the same period - a 432.89% increase on the initial investment. If
$10,000 was invested in the Lehman Brothers Aggregate Bond Index, it
would have grown to $20,988 - a 109.88% increase.
You can also look at how the Asset Manager Composite Index did over
the same period. The composite index combines the cumulative total
returns of three unmanaged indexes - the S&P 500, Lehman Brothers
Aggregate Bond Index, and the Lehman Brothers 3 Month Treasury Bill
Index - according to the fund's neutral mix.* With reinvested
dividends and capital gains, if any, a $10,000 investment in the index
would have grown to $30,960 - a 209.60% increase.
* 50% STOCKS, 40% BONDS AND 10% SHORT-TERM INSTRUMENTS EFFECTIVE
JANUARY 1, 1997.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 2.4
Wal-Mart Stores, Inc. 2.2
General Electric Co. 2.2
Motorola, Inc. 1.8
Cisco Systems, Inc. 1.6
10.2
TOP FIVE BOND ISSUERS AS OF
DECEMBER 31, 1999
(WITH MATURITIES GREATER THAN % OF FUND'S NET ASSETS
ONE YEAR)
Fannie Mae 8.8
U.S. Treasury Obligations 3.6
Government National Mortgage 1.6
Association
Freddie Mac 1.0
Ford Motor Credit Co. 0.4
15.4
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stocks class 57.2%
Bond class 36.2%
Short-Term class 6.6%
* FOREIGN INVESTMENTS 3.6%
Row: 1, Col: 1, Value: 57.2
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 36.2
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 6.6
ASSET ALLOCATION IN THE PIE CHART REFLECTS THE CATEGORIZATION OF
ASSETS AS DEFINED IN THE FUND'S PROSPECTUS. FINANCIAL STATEMENT
CATEGORIZATIONS CONFORM TO ACCOUNTING STANDARDS AND WILL DIFFER FROM
THE PIE CHART.PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO
PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S
INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). The initial offering of Service Class shares
took place on November 3, 1997. Performance for Service Class shares
reflects an asset based distribution fee (12b-1 fee), and returns
prior to November 3, 1997 are those of Initial Class and do not
include the effects of Service Class' 12b-1 fee. Had Service Class
shares' 12b-1 fee been reflected, returns prior to November 3, 1997
would have been lower. If Fidelity had not reimbursed certain fund
expenses, the past 10 years total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY VIP: ASSET MANAGER - 11.01% 15.54% 13.10%
SERVICE CLASS
Asset Manager Composite 10.42% 16.69% 11.96%
S&P 500 21.04% 28.56% 18.21%
LB Aggregate Bond -0.82% 7.73% 7.70%
LB 3 Month T-Bill 4.90% 5.44% 5.19%
Variable Annuity Flexible 12.07% 17.11% 12.94%
Portfolio Funds Average
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to those of the Asset Manager
Composite Index, a hypothetical combination of unmanaged indices. The
composite index combines the total returns of the Standard & Poor's
500 Index, the Lehman Brothers Aggregate Bond Index and the Lehman
Brothers 3 Month Treasury Bill Index weighted according to the fund's
neutral mix.
You can also compare the fund's returns to the variable annuity
flexible portfolio funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
one year average represents a peer group of 84 mutual funds. The
benchmarks listed in the table above include reinvested dividends and
capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF
THESE ADDITIONAL CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER 10 YEARS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
VIP II Asset Manager - SC 50 S&P/40 LBAgg/10 LB 3Mo S&P 500 LB Aggregate Bond
00467 F0001 SP001 LB001
1989/12/31 10000.00 10000.00 10000.00 10000.00
1990/01/31 9779.34 9758.90 9329.00 9881.00
1990/02/28 9879.64 9821.55 9449.34 9912.62
1990/03/31 9959.88 9918.20 9699.75 9919.56
1990/04/30 9829.49 9826.06 9457.26 9828.30
1990/05/31 10330.99 10245.73 10379.34 10119.22
1990/06/30 10411.23 10309.87 10308.76 10282.14
1990/07/31 10391.17 10374.30 10275.77 10424.03
1990/08/31 10050.15 10053.74 9346.84 10284.35
1990/09/30 9839.52 9965.36 8891.65 10369.71
1990/10/31 9889.67 10036.52 8853.42 10501.40
1990/11/30 10371.11 10337.81 9425.35 10727.18
1990/12/31 10672.02 10510.87 9688.32 10894.53
1991/01/31 11182.69 10712.26 10110.73 11029.62
1991/02/28 11620.41 10980.81 10833.64 11123.37
1991/03/31 11808.00 11102.70 11095.82 11200.12
1991/04/30 11985.17 11176.87 11122.45 11321.08
1991/05/31 12256.14 11354.35 11602.94 11386.74
1991/06/30 12037.28 11207.20 11071.52 11381.05
1991/07/31 12339.52 11432.47 11587.46 11539.25
1991/08/31 12589.64 11636.99 11862.08 11788.50
1991/09/30 12662.60 11693.66 11663.98 12027.80
1991/10/31 12745.97 11799.49 11820.28 12161.31
1991/11/30 12537.53 11721.38 11343.92 12273.19
1991/12/31 13079.47 12301.71 12641.67 12637.71
1992/01/31 13246.22 12166.77 12406.53 12465.84
1992/02/29 13503.47 12244.15 12567.82 12546.86
1992/03/31 13470.56 12154.89 12322.74 12476.60
1992/04/30 13668.01 12307.31 12685.03 12566.43
1992/05/31 13810.61 12427.84 12747.19 12803.94
1992/06/30 13799.64 12433.93 12557.26 12980.63
1992/07/31 14030.00 12773.45 13070.85 13245.44
1992/08/31 13986.13 12724.17 12802.90 13379.22
1992/09/30 14073.88 12867.47 12953.97 13538.43
1992/10/31 14095.82 12807.50 12999.31 13358.37
1992/11/30 14402.97 12970.16 13442.58 13361.04
1992/12/31 14611.39 13123.44 13607.93 13573.48
1993/01/31 14874.66 13288.22 13722.24 13834.09
1993/02/28 15014.15 13473.22 13908.86 14076.19
1993/03/31 15439.19 13612.05 14202.33 14135.31
1993/04/30 15531.09 13529.31 13858.64 14234.26
1993/05/31 15795.30 13674.43 14230.05 14252.76
1993/06/30 15921.66 13819.92 14271.32 14510.73
1993/07/31 16116.95 13837.83 14214.23 14593.45
1993/08/31 16587.94 14178.41 14752.95 14848.83
1993/09/30 16599.43 14164.52 14639.35 14888.92
1993/10/31 17047.44 14310.13 14942.39 14944.01
1993/11/30 17024.46 14200.08 14800.44 14816.99
1993/12/31 17713.71 14299.60 14979.52 14897.00
1994/01/31 18276.60 14581.18 15488.82 15098.11
1994/02/28 17696.13 14302.92 15069.08 14835.40
1994/03/31 16864.37 13933.56 14412.07 14468.97
1994/04/30 16876.42 13968.59 14596.54 14353.22
1994/05/31 17021.08 14062.68 14835.92 14351.78
1994/06/30 16695.60 13923.74 14472.44 14320.21
1994/07/31 16984.91 14218.59 14947.14 14605.18
1994/08/31 17382.71 14463.06 15559.97 14622.70
1994/09/30 17177.68 14251.27 15178.75 14407.75
1994/10/31 17262.12 14388.19 15520.27 14394.78
1994/11/30 17008.79 14177.75 14955.03 14363.12
1994/12/31 16634.84 14311.22 15176.81 14462.22
1995/01/31 16526.28 14579.96 15570.34 14748.57
1995/02/28 16793.99 14945.53 16177.12 15099.59
1995/03/31 17015.77 15174.92 16654.51 15191.70
1995/04/30 17286.84 15448.25 17144.98 15404.38
1995/05/31 17508.62 15960.91 17830.27 16000.53
1995/06/30 17656.48 16176.16 18244.46 16117.33
1995/07/31 18284.87 16382.31 18849.45 16081.88
1995/08/31 18506.65 16490.96 18896.76 16276.47
1995/09/30 18740.76 16847.36 19694.21 16434.35
1995/10/31 18494.33 16943.39 19623.90 16647.99
1995/11/30 18974.86 17361.18 20485.39 16897.71
1995/12/31 19455.40 17613.93 20879.93 17134.28
1996/01/31 19874.32 17914.17 21590.69 17247.37
1996/02/29 19820.79 17847.93 21790.83 16947.26
1996/03/31 20031.51 17868.81 22000.68 16828.63
1996/04/30 20242.23 17943.89 22324.97 16734.39
1996/05/31 20400.27 18133.31 22900.73 16700.92
1996/06/30 20584.65 18268.91 22987.98 16924.72
1996/07/31 20242.23 17979.75 21972.37 16970.41
1996/08/31 20281.74 18133.01 22435.77 16941.56
1996/09/30 21019.26 18677.14 23698.46 17236.35
1996/10/31 21559.23 19064.36 24352.06 17618.99
1996/11/30 22626.00 19789.11 26192.83 17920.28
1996/12/31 22296.75 19568.22 25673.95 17753.62
1997/01/31 22968.41 20212.80 27278.06 17808.66
1997/02/28 23166.93 20320.13 27491.92 17853.18
1997/03/31 22285.66 19820.97 26362.28 17655.01
1997/04/30 23047.43 20541.26 27936.10 17919.83
1997/05/31 24152.75 21255.48 29636.85 18090.07
1997/06/30 24795.04 21840.43 30964.59 18305.34
1997/07/31 26228.97 22956.81 33428.44 18799.59
1997/08/31 25512.00 22246.29 31555.78 18639.79
1997/09/30 26333.52 22997.44 33284.09 18915.66
1997/10/31 25900.36 22756.66 32172.40 19189.94
1997/11/30 26482.89 23335.02 33661.66 19278.21
1997/12/31 26871.25 23639.65 34239.63 19472.92
1998/01/31 26960.87 23902.76 34618.32 19722.17
1998/02/28 28159.15 24765.89 37114.99 19706.40
1998/03/31 28943.24 25445.34 39015.65 19773.40
1998/04/30 28926.19 25637.71 39408.15 19876.22
1998/05/31 28772.79 25526.32 38730.72 20065.04
1998/06/30 29318.24 26142.35 40303.96 20235.26
1998/07/31 29130.74 26036.83 39874.73 20278.20
1998/08/31 26471.64 24336.12 34109.64 20608.26
1998/09/30 27358.01 25356.41 36294.70 21090.73
1998/10/31 28551.19 26344.03 39246.91 20979.46
1998/11/30 29642.11 27211.02 41625.67 21098.28
1998/12/31 30852.33 28038.32 44024.14 21161.72
1999/01/31 31568.25 28715.36 45865.23 21312.88
1999/02/28 30841.31 28077.19 44439.74 20940.76
1999/03/31 31117.66 28713.17 46217.77 21056.94
1999/04/30 31836.19 29315.89 48007.79 21123.69
1999/05/31 31357.17 28878.06 46874.32 20937.80
1999/06/30 32462.60 29653.73 49475.85 20870.93
1999/07/31 31909.88 29153.47 47931.21 20783.28
1999/08/31 31836.19 29087.15 47693.95 20772.72
1999/09/30 31467.72 28836.61 46386.66 21013.77
1999/10/31 32425.75 29803.58 49322.01 21091.30
1999/11/30 32867.92 30117.78 50324.73 21089.83
1999/12/31 34249.70 30960.33 53288.85 20988.14
IMATRL PRASUN SHR__CHT 19991231 20000118 144205 R00000000000123
</TABLE>
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Asset Manager
Portfolio - Service Class on December 31, 1989. By December 31, 1999,
the value of the investment would have grown to $34,250 - a 242.50%
increase. With reinvested dividends and capital gains, if any, a
$10,000 investment in the Standard & Poor's 500 Index would have grown
to $53,289 over the same period - a 432.89% increase on the initial
investment. If $10,000 was invested in the Lehman Brothers Aggregate
Bond Index, it would have grown to $20,988 - a 109.88% increase. You
can also look at how the Asset Manager Composite Index did over the
same period. The composite index combines the cumulative total returns
of three unmanaged indexes - the S&P 500, Lehman Brothers Aggregate
Bond Index, and the Lehman Brothers 3 Month Treasury Bill Index -
according to the fund's neutral mix.* With reinvested dividends and
capital gains, if any, a $10,000 investment in the index would have
grown to $30,960 - a 209.60% increase.
* 50% STOCKS, 40% BONDS AND 10% SHORT-TERM INSTRUMENTS EFFECTIVE
JANUARY 1, 1997.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 2.4
Wal-Mart Stores, Inc. 2.2
General Electric Co. 2.2
Motorola, Inc. 1.8
Cisco Systems, Inc. 1.6
10.2
TOP FIVE BOND ISSUERS AS OF
DECEMBER 31, 1999
(WITH MATURITIES GREATER THAN % OF FUND'S NET ASSETS
ONE YEAR)
Fannie Mae 8.8
U.S. Treasury Obligations 3.6
Government National Mortgage 1.6
Association
Freddie Mac 1.0
Ford Motor Credit Co. 0.4
15.4
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stocks class 57.2%
Bond class 36.2%
Short-Term class 6.6%
* FOREIGN INVESTMENTS 3.5%
Row: 1, Col: 1, Value: 57.2
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 36.2
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 6.6
ASSET ALLOCATION IN THE PIE CHART REFLECTS THE CATEGORIZATION OF
ASSETS AS DEFINED IN THE FUND'S PROSPECTUS. FINANCIAL STATEMENT
CATEGORIZATIONS CONFORM TO ACCOUNTING STANDARDS AND WILL DIFFER FROM
THE PIE CHART.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with
Richard Habermann, Portfolio Manager of Asset Manager Portfolio
Q. HOW DID THE FUND PERFORM COMPARED TO ITS
BENCHMARK, DICK?
A. For the 12 months that ended December 31, 1999, the fund topped the
10.42% return of the Asset Manager Composite Index.
Q. WHAT ASSET ALLOCATION STRATEGIES DID YOU FOLLOW DURING
THE PERIOD?
A. The fund's neutral allocation mix calls for 50% of its assets to be
invested in stocks, 40% in bonds and 10% in short-term and money
market instruments. With stocks performing well through much of the
period, I kept the fund's average equity exposure at around 54%, and
this emphasis boosted the fund's performance. On the bond side, 1999
was not a good year for the bond market as a whole. However, the fund
had significant exposure to both the corporate and mortgage-backed
sectors, which performed fairly well relative to Treasury bonds. The
fund also benefited from its investments in high-yield securities,
which performed well relative to investment-grade bonds.
Q. HOW DID THE FUND'S EQUITY SUBPORTFOLIO PERFORM DURING THE PERIOD?
A. The fund's equities performed slightly better than the S&P 500
index, quite an accomplishment considering the narrowness of the
overall market in 1999. By that, I mean that 10 of the major stocks
within the index generated around 60% of its advance. Conversely, the
bottom 450 stocks within the S&P produced a negative aggregate return.
The technology sector led the market, and Steve Snider - who manages
the fund's stocks - was able to find enough good names to keep pace
with the tech stocks within the index. Industry leaders Cisco Systems
and Microsoft continued to perform well, as did Lexmark International.
The fund also benefited from the huge demand for wireless
communications by owning positions in Qualcomm and Motorola. Retail
stocks also performed well, with Wal-Mart being the fund's top overall
contributor during the period. Disappointments included pharmaceutical
firm Schering-Plough, as well as Fannie Mae and Freddie Mac, both of
which struggled due to less-than-favorable interest-rate conditions.
The fund no longer held equity stakes in Fannie Mae or Freddie Mac at
the end of the period.
Q. HOW DID YOU ALLOCATE INVESTMENTS WITHIN THE FUND'S BOND
SUBPORTFOLIO?
A. As far as the fund's investment-grade bond positions, rising
interest rates pressured returns through much of the period. Despite
this general move in rates, the fund was heavily weighted in corporate
and mortgage-backed securities, which performed relatively well during
the period. This subportfolio, managed by Charlie Morrison, benefited
from its investments in Seagram, Cable & Wireless and Capital One
Financial, as well as from its exposure to lower-quality, commercial
mortgage-backed securities. The fund's high-yield positions - managed
by Fred Hoff - performed nicely against the backdrop of a strong U.S.
economy and a favorable corporate earnings outlook. The best
individual high-yield performers included telecommunications names
Nextel Communications, WinStar and Teligent.
Q. HOW DID YOU POSITION THE FUND'S SHORT-TERM/MONEY MARKET
INVESTMENTS?
A. With interest rates spiking upward, John Todd - who manages this
portion of the fund - focused mainly on repurchase agreements. These
securities - commonly called repos - are short-term investments that
the seller agrees to buy back at a specified price and time. Repos
offered the fund an effective sanctuary in which to invest assets on a
temporary basis during the period. They also provided an adequate
level of liquidity, which was desirable given the rate scenario.
Q. WHAT'S YOUR OUTLOOK?
A. Despite the global economic growth we've seen recently, inflation
remains subdued. Corporate earnings appear to be on solid ground for
2000, which means there may be more market segments that are
reasonably valued. From an allocation standpoint, the direction of
interest rates will have some influence on whether I take more of a
defensive or equity-oriented approach.
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FUND FACTS
GOAL: high total return with reduced risk over the long term by
allocating assets among stocks, bonds and short-term instruments
anywhere in the world
START DATE: September 6, 1989
SIZE: as of December 31, 1999, more than
$4.9 billion
MANAGER: Richard Habermann, since 1999; joined
Fidelity in 1968
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 55.8%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 2.4%
AEROSPACE & DEFENSE - 2.3%
Boeing Co. 309,600 $ 12,867,750
Honeywell International, Inc. 598,388 34,519,479
Northrop Grumman Corp. 43,300 2,340,906
Rockwell International Corp. 159,300 7,626,488
Textron, Inc. 64,900 4,977,019
United Technologies Corp. 782,406 50,856,390
113,188,032
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 108,300 5,712,825
TOTAL AEROSPACE & DEFENSE 118,900,857
BASIC INDUSTRIES - 2.0%
CHEMICALS & PLASTICS - 0.5%
Dow Chemical Co. 143,100 19,121,738
Engelhard Corp. 125,900 2,376,363
Praxair, Inc. 123,900 6,233,719
27,731,820
IRON & STEEL - 0.2%
Mueller Industries, Inc. (a) 51,200 1,856,000
Nucor Corp. 127,800 7,005,038
8,861,038
METALS & MINING - 1.0%
Alcoa, Inc. 594,100 49,310,300
PAPER & FOREST PRODUCTS - 0.3%
Georgia-Pacific Corp. 78,700 3,994,025
Weyerhaeuser Co. 130,100 9,342,806
13,336,831
TOTAL BASIC INDUSTRIES 99,239,989
CONSTRUCTION & REAL ESTATE -
0.2%
BUILDING MATERIALS - 0.2%
Fortune Brands, Inc. 246,300 8,143,294
DURABLES - 1.4%
AUTOS, TIRES, & ACCESSORIES -
0.7%
Ford Motor Co. 660,100 35,274,094
CONSUMER DURABLES - 0.6%
Minnesota Mining & 281,200 27,522,450
Manufacturing Co.
CONSUMER ELECTRONICS - 0.0%
Whirlpool Corp. 21,000 1,366,313
TEXTILES & APPAREL - 0.1%
Arena Brands Holdings Corp. 8,445 211,125
Class B
NIKE, Inc. Class B 86,500 4,287,156
4,498,281
TOTAL DURABLES 68,661,138
SHARES VALUE (NOTE 1)
ENERGY - 3.2%
ENERGY SERVICES - 0.2%
BJ Services Co. (a) 173,000 $ 7,233,563
OIL & GAS - 3.0%
Amerada Hess Corp. 55,000 3,121,250
Apache Corp. 151,900 5,610,806
Atlantic Richfield Co. 631,600 54,633,400
Chevron Corp. 448,200 38,825,325
Exxon Mobil Corp. 559,875 45,104,930
Tosco Corp. 129,800 3,528,938
150,824,649
TOTAL ENERGY 158,058,212
FINANCE - 7.8%
BANKS - 3.3%
Chase Manhattan Corp. 798,700 62,049,006
Comerica, Inc. 71,400 3,333,488
FleetBoston Financial Corp. 624,305 21,733,618
J. P. Morgan & Co., Inc. 351,000 44,445,375
PNC Financial Corp. 547,300 24,354,850
SouthTrust Corp. 272,300 10,296,344
166,212,681
CREDIT & OTHER FINANCE - 1.3%
American Express Co. 97,500 16,209,375
Citigroup, Inc. 715,800 39,771,638
Providian Financial Corp. 85,950 7,826,822
63,807,835
INSURANCE - 0.8%
Allmerica Financial Corp. 87,300 4,856,063
American General Corp. 60,800 4,613,200
CIGNA Corp. 60,600 4,882,088
Financial Security Assurance 37,300 1,944,263
Holdings Ltd.
Marsh & McLennan Companies, 173,600 16,611,350
Inc.
MGIC Investment Corp. 95,800 5,765,963
38,672,927
SAVINGS & LOANS - 0.3%
Golden West Financial Corp. 428,700 14,361,450
SECURITIES INDUSTRY - 2.1%
AXA Financial, Inc. 335,000 11,348,125
Kansas City Southern 293,200 21,880,050
Industries, Inc.
Lehman Brothers Holdings, 441,600 37,398,000
Inc.
Merrill Lynch & Co., Inc. 129,800 10,838,300
Morgan Stanley Dean Witter & 173,400 24,752,850
Co.
106,217,325
TOTAL FINANCE 389,272,218
HEALTH - 5.0%
DRUGS & PHARMACEUTICALS - 3.5%
Amgen, Inc. (a) 813,600 48,866,850
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS -
CONTINUED
Biogen, Inc. (a) 77,900 $ 6,582,550
Bristol-Myers Squibb Co. 783,000 50,258,813
Merck & Co., Inc. 346,000 23,203,625
Pfizer, Inc. 346,100 11,226,619
Schering-Plough Corp. 806,700 34,032,656
174,171,113
MEDICAL EQUIPMENT & SUPPLIES
- - 1.2%
Johnson & Johnson 650,300 60,559,188
Millipore Corp. 34,700 1,340,288
61,899,476
MEDICAL FACILITIES MANAGEMENT
- - 0.3%
United HealthCare Corp. 86,800 4,611,250
Wellpoint Health Networks, 129,900 8,565,281
Inc. (a)
13,176,531
TOTAL HEALTH 249,247,120
INDUSTRIAL MACHINERY &
EQUIPMENT - 3.2%
ELECTRICAL EQUIPMENT - 2.5%
Emerson Electric Co. 23,800 1,365,525
General Electric Co. 682,700 105,647,825
General Instrument Corp. (a) 188,900 16,056,500
123,069,850
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Ingersoll-Rand Co. 404,800 22,289,300
Parker-Hannifin Corp. 69,200 3,550,825
Tyco International Ltd. 220,600 8,575,825
34,415,950
TOTAL INDUSTRIAL MACHINERY & 157,485,800
EQUIPMENT
MEDIA & LEISURE - 1.7%
BROADCASTING - 0.0%
NTL, Inc. warrants 10/14/08 3,742 187,100
(a)
ENTERTAINMENT - 0.0%
Alliance Gaming Corp. (a)(k) 865 2,433
PUBLISHING - 1.6%
Central Newspapers, Inc. 58,000 2,283,750
Class A
Dow Jones & Co., Inc. 77,100 5,242,800
Gannet Co., Inc. 324,500 26,467,031
Knight-Ridder, Inc. 128,700 7,657,650
McGraw-Hill Companies, Inc. 56,000 3,451,000
The New York Times Co. Class A 219,200 10,768,200
Tribune Co. 441,800 24,326,613
80,197,044
SHARES VALUE (NOTE 1)
RESTAURANTS - 0.1%
Brinker International, Inc. 93,800 $ 2,251,200
(a)
Darden Restaurants, Inc. 151,600 2,747,750
4,998,950
TOTAL MEDIA & LEISURE 85,385,527
NONDURABLES - 2.7%
BEVERAGES - 1.2%
Adolph Coors Co. Class B 96,800 5,082,000
Anheuser-Busch Companies, 564,200 39,987,675
Inc.
Pepsi Bottling Group, Inc. 389,800 6,456,063
PepsiCo, Inc. 138,400 4,878,600
56,404,338
FOODS - 1.1%
Campbell Soup Co. 129,800 5,021,638
H. J. Heinz Co. 129,800 5,167,663
Kellogg Co. 303,900 9,363,919
Quaker Oats Co. 284,000 18,637,500
Ralston Purina Co. 173,000 4,822,375
Sara Lee Corp. 486,500 10,733,406
53,746,501
HOUSEHOLD PRODUCTS - 0.3%
Procter & Gamble Co. 147,200 16,127,600
TOBACCO - 0.1%
Philip Morris Companies, Inc. 291,600 6,761,475
TOTAL NONDURABLES 133,039,914
PRECIOUS METALS - 0.0%
Homestake Mining Co. 173,200 1,353,125
RETAIL & WHOLESALE - 4.4%
APPAREL STORES - 0.2%
Gap, Inc. 258,525 11,892,150
GENERAL MERCHANDISE STORES -
2.5%
Dayton Hudson Corp. 147,500 10,832,031
Sears, Roebuck & Co. 34,600 1,053,138
Wal-Mart Stores, Inc. 1,586,600 109,673,725
121,558,894
RETAIL & WHOLESALE,
MISCELLANEOUS - 1.7%
Best Buy Co., Inc. (a) 249,700 12,531,819
Circuit City Stores, Inc. - 129,900 5,853,619
Circuit City Group
Home Depot, Inc. 624,300 42,803,569
Lowe's Companies, Inc. 358,400 21,414,400
82,603,407
TOTAL RETAIL & WHOLESALE 216,054,451
SERVICES - 0.3%
LEASING & RENTAL - 0.1%
Hertz Corp. Class A 115,700 5,799,463
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - CONTINUED
PRINTING - 0.2%
Valassis Communications, Inc. 210,700 $ 8,902,075
(a)
TOTAL SERVICES 14,701,538
TECHNOLOGY - 16.3%
COMMUNICATIONS EQUIPMENT - 3.5%
ADC Telecommunications, Inc. 216,500 15,709,781
(a)
Cisco Systems, Inc. (a) 744,900 79,797,413
Globalstar Telecommunications 1,410 303,150
Ltd. warrants 2/15/04 (a)(f)
Lucent Technologies, Inc. 1,011,400 75,665,363
171,475,707
COMPUTER SERVICES & SOFTWARE
- - 4.7%
Adobe Systems, Inc. 390,400 26,254,400
Computer Associates 208,300 14,567,981
International, Inc.
Electronics for Imaging, Inc. 221,800 12,892,125
(a)
First Data Corp. 627,800 30,958,388
Microsoft Corp. (a) 1,037,700 121,151,475
NetScout Systems, Inc. 130,200 4,036,200
Oracle Corp. (a) 207,700 23,275,381
233,135,950
COMPUTERS & OFFICE EQUIPMENT
- - 3.5%
Adaptec, Inc. (a) 433,900 21,640,763
Comverse Technology, Inc. (a) 156,200 22,609,950
International Business 519,400 56,095,200
Machines Corp.
Lexmark International Group, 467,500 42,308,750
Inc. Class A (a)
Sun Microsystems, Inc. (a) 406,100 31,447,369
174,102,032
ELECTRONIC INSTRUMENTS - 0.6%
Agilent Technologies, Inc. 15,300 1,182,881
Applied Materials, Inc. (a) 86,800 10,996,475
Teradyne, Inc. (a) 233,800 15,430,800
27,610,156
ELECTRONICS - 4.0%
Analog Devices, Inc. (a) 4,600 427,800
Intel Corp. 173,200 14,256,525
LSI Logic Corp. (a) 151,800 10,246,500
Motorola, Inc. 605,700 89,189,325
National Semiconductor Corp. 173,000 7,406,563
(a)
Texas Instruments, Inc. 780,000 75,562,500
Vishay Intertechnology, Inc. 129,800 4,104,925
(a)
201,194,138
TOTAL TECHNOLOGY 807,517,983
TRANSPORTATION - 0.0%
TRUCKING & FREIGHT - 0.0%
United Parcel Service, Inc. 34,600 2,387,400
Class B
SHARES VALUE (NOTE 1)
UTILITIES - 5.2%
CELLULAR - 1.2%
McCaw International Ltd. 8,150 $ 18,338
warrants 4/16/07 (a)(f)
QUALCOMM, Inc. (a) 346,400 61,009,700
61,028,038
ELECTRIC UTILITY - 1.0%
DTE Energy Co. 210,000 6,588,750
Edison International 270,500 7,083,719
Energy East Corp. 654,000 13,611,375
GPU, Inc. 212,300 6,355,731
PECO Energy Co. 116,800 4,058,800
PP&L Resources, Inc. 128,500 2,939,438
Public Service Enterprise 170,100 5,921,606
Group, Inc.
Unicom Corp. 130,100 4,358,350
50,917,769
GAS - 0.3%
Enron Corp. 319,800 14,191,125
TELEPHONE SERVICES - 2.7%
AT&T Corp. 674,240 34,217,680
BellSouth Corp. 762,300 35,685,169
MCI WorldCom, Inc. (a) 324,450 17,216,128
Ono Finance PLC rights 1,740 174,000
5/31/09 (a)(f)
Pathnet, Inc. warrants 4,970 49,700
4/15/08 (a)(f)
SBC Communications, Inc. 593,794 28,947,458
Sprint Corp. - FON Group 224,900 15,138,581
131,428,716
TOTAL UTILITIES 257,565,648
TOTAL COMMON STOCKS 2,767,014,214
(Cost $1,993,683,117)
NONCONVERTIBLE PREFERRED
STOCKS - 1.5%
CONSTRUCTION & REAL ESTATE -
0.1%
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
California Federal Preferred 231,349 5,263,190
Capital Corp. $2.2812
Walden Residential 8,600 133,838
Properties, Inc. $2.30
5,397,028
FINANCE - 0.0%
INSURANCE - 0.0%
American Annuity Group 1,490 1,334,232
Capital Trust II 8.875%
SIG Capital Trust I 9.5% (a) 2,174 556,877
1,891,109
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Fresenius Medical Care 1,053 997,027
Capital Trust II 7.875%
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.3%
Adelphia Communications Corp. 15,763 $ 1,781,219
$13.00
CSC Holdings, Inc. 11.125% 100,968 11,030,754
pay-in-kind
Granite Broadcasting Corp. 374 381,480
12.75% pay-in-kind
Sinclair Capital 11.625% 28,380 2,845,095
16,038,548
PUBLISHING - 0.2%
PRIMEDIA, Inc.:
$9.20 32,995 3,101,530
8.625% 738 65,313
Series D, $10.00 31,050 3,073,950
6,240,793
TOTAL MEDIA & LEISURE 22,279,341
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings 17,231 86,155
Corp. $3.52 pay-in-kind
SERVICES - 0.1%
LEASING & RENTAL - 0.1%
Crown Castle International 1,953 2,021,355
Corp. 12.75% pay-in-kind
UTILITIES - 0.8%
CELLULAR - 0.3%
Nextel Communications, Inc.:
11.125% pay-in-kind 15,119 15,194,595
Series D, 13% pay-in-kind 276 296,700
15,491,295
TELEPHONE SERVICES - 0.5%
Adelphia Business Solution, 4,959 4,835,025
Inc. 12.875% pay-in-kind
Intermedia Communications, 4,952 4,828,200
Inc. 13.5% pay-in-kind
IXC Communications, Inc. 1,884 2,062,980
12.5% pay-in-kind
NEXTLINK Communications, Inc. 173,603 9,374,562
14% pay-in-kind
WinStar Communications, Inc. 2,981 2,951,190
14.25% (a)
24,051,957
TOTAL UTILITIES 39,543,252
TOTAL NONCONVERTIBLE 72,215,267
PREFERRED STOCKS
(Cost $72,915,380)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 18.4%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
CONVERTIBLE BONDS - 0.2%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Tenet Healthcare Corp. 6% B1 $ 7,210,000 $ 5,876,150
12/1/05
Total Renal Care Holdings, B1 2,940,000 1,844,850
Inc. 7% 5/15/09 (f)
7,721,000
MEDIA & LEISURE - 0.0%
LODGING & GAMING - 0.0%
Hilton Hotels Corp. 5% Ba2 210,000 160,125
5/15/06
NONDURABLES - 0.0%
FOODS - 0.0%
Chiquita Brands B3 2,330,000 1,654,300
International, Inc. 7%
3/28/01
TOTAL CONVERTIBLE BONDS 9,535,425
NONCONVERTIBLE BONDS - 18.2%
AEROSPACE & DEFENSE - 0.2%
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. 5.95% 3/15/01 Baa2 4,500,000 4,426,785
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, B1 3,830,000 3,820,425
Inc. 9.25% 12/1/06
TOTAL AEROSPACE & DEFENSE 8,247,210
BASIC INDUSTRIES - 0.5%
CHEMICALS & PLASTICS - 0.3%
Huntsman Corp. 9.5% 7/1/07 B2 2,440,000 2,305,800
(f)
Huntsman ICI Chemicals LLC B2 1,380,000 1,417,950
10.125% 7/1/09 (f)
Lyondell Chemical Co.:
9.875% 5/1/07 Ba3 5,050,000 5,151,000
10.875% 5/1/09 B2 1,500,000 1,552,500
Rohm & Haas Co. 7.4% 7/15/09 A3 1,400,000 1,384,978
Sterling Chemicals, Inc. Caa3 1,760,000 1,311,200
11.75% 8/15/06
13,123,428
IRON & STEEL - 0.0%
The LTV Corp. 11.75% Ba3 860,000 898,700
11/15/09 (f)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
METALS & MINING - 0.0%
Kaiser Aluminum & Chemical B3 $ 1,210,000 $ 1,210,000
Corp. 12.75% 2/1/03
Metals USA, Inc. 8.625% B2 350,000 328,125
2/15/08
1,538,125
PACKAGING & CONTAINERS - 0.1%
Corning, Inc. 6.85% 3/1/29 A3 2,350,000 2,064,475
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 2,825,000 2,627,250
9.75% 6/15/07 Caa1 1,770,000 1,681,500
6,373,225
PAPER & FOREST PRODUCTS - 0.1%
Potlatch Corp. 6.25% 3/15/02 Baa1 3,320,000 3,239,756
TOTAL BASIC INDUSTRIES 25,173,234
CONSTRUCTION & REAL ESTATE -
0.4%
BUILDING MATERIALS - 0.0%
American Standard Companies, Ba3 1,810,000 1,701,400
Inc. 7.375% 4/15/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% B1 2,330,000 2,114,475
2/15/09
ENGINEERING - 0.0%
Anteon Corp. 12% 5/15/09 B3 1,530,000 1,430,550
REAL ESTATE - 0.1%
Duke-Weeks Realty LP 6.875% Baa2 2,950,000 2,803,503
3/15/05
LNR Property Corp.:
9.375% 3/15/08 B1 2,680,000 2,512,500
10.5% 1/15/09 B1 1,440,000 1,422,000
6,738,003
REAL ESTATE INVESTMENT TRUSTS
- - 0.2%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 1,590,000 1,465,280
7.125% 3/15/04 Baa2 4,200,000 3,958,038
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 3,600,000 3,470,904
6.75% 2/15/08 Baa1 1,590,000 1,462,307
10,356,529
TOTAL CONSTRUCTION & REAL 22,340,957
ESTATE
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES -
0.2%
Oshkosh Truck Co. 8.75% B2 $ 1,500,000 $ 1,455,000
3/1/08
Tenneco, Inc. 11.625% B2 1,300,000 1,319,500
10/15/09 (f)
TRW, Inc. 6.5% 6/1/02 Baa1 4,520,000 4,433,352
7,207,852
TEXTILES & APPAREL - 0.1%
Jones Apparel Group, Inc. Baa2 5,070,000 4,976,205
7.875% 6/15/06
Worldtex, Inc. 9.625% B1 2,000,000 1,620,000
12/15/07
6,596,205
TOTAL DURABLES 13,804,057
ENERGY - 0.8%
COAL - 0.1%
P&L Coal Holdings Corp. B2 1,870,000 1,823,250
9.625% 5/15/08
ENERGY SERVICES - 0.2%
Baker Hughes, Inc. 5.8% A2 3,980,000 3,825,576
2/15/03
R&B Falcon Corp. 6.5% 4/15/03 Ba3 1,785,000 1,628,813
RBF Finance Co.:
11% 3/15/06 Ba3 3,590,000 3,841,300
11.375% 3/15/09 Ba3 1,120,000 1,204,000
10,499,689
OIL & GAS - 0.5%
Apache Corp. 7.625% 7/1/19 Baa1 2,970,000 2,863,080
Chesapeake Energy Corp. B3 4,450,000 4,205,250
9.625% 5/1/05
Gulf Canada Resources Ltd. Ba1 800,000 786,000
8.375% 11/15/05
Occidental Petroleum Corp.:
6.39% 11/9/00 Baa3 1,000,000 995,710
10.94% 5/17/00 Baa3 2,700,000 2,740,851
Ocean Energy, Inc. 8.875% Ba3 2,010,000 2,004,975
7/15/07
Oryx Energy Co.:
8% 10/15/03 Baa1 3,055,000 3,057,750
8.125% 10/15/05 Baa1 4,935,000 5,014,454
8.375% 7/15/04 Baa1 2,335,000 2,394,823
Petro-Canada 7% 11/15/28 A3 1,980,000 1,745,152
25,808,045
TOTAL ENERGY 38,130,984
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - 4.5%
BANKS - 1.3%
BankBoston Corp. 6.625% A3 $ 1,700,000 $ 1,651,669
2/1/04
BanPonce Corp. 6.665% 3/5/01 A3 4,450,000 4,427,528
Barclays Bank PLC yankee A1 9,250,000 9,085,165
5.95% 7/15/01
Capital One Bank:
6.26% 5/7/01 Baa2 3,160,000 3,107,260
6.375% 2/15/03 Baa2 3,570,000 3,424,701
6.48% 6/28/02 Baa2 1,740,000 1,689,035
6.65% 3/15/04 Baa3 2,320,000 2,220,240
Capital One Financial Corp. Baa3 5,040,000 4,598,042
7.125% 8/1/08
Den Danske Bank AS 6.375% A1 8,340,000 7,745,775
6/15/08 (f)(i)
Fleet Boston Corp. 7.375% A3 1,400,000 1,370,250
12/1/09
Korea Development Bank:
6.625% 11/21/03 Baa2 4,165,000 3,996,109
7.375% 9/17/04 Baa2 615,000 602,700
yankee 6.5% 11/15/02 Baa2 665,000 641,725
National Westminster Bancorp Aa3 2,725,000 2,895,994
9.375% 11/15/03
National Westminster Bank PLC Aa3 1,975,000 1,928,588
7.375% 10/1/09
NB Capital Trust IV 8.25% Aa2 2,650,000 2,540,661
4/15/27
Popular, Inc. 6.2% 4/30/01 A3 1,840,000 1,813,633
Provident Bank 6.125% A3 1,740,000 1,724,427
12/15/00
Providian National Bank 6.7% Baa3 3,060,000 2,931,205
3/15/03
Summit Bancorp 8.625% BBB+ 1,730,000 1,781,156
12/10/02
Union Planters National Bank A3 3,500,000 3,515,470
6.81% 8/20/01
63,691,333
CREDIT & OTHER FINANCE - 2.3%
Ahmanson Capital Trust I A3 4,250,000 4,039,880
8.36% 12/1/26 (f)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 2,730,000 1,815,450
10% 3/15/04 Caa3 1,980,000 1,287,000
AT&T Capital Corp.:
6.25% 5/15/01 A1 5,200,000 5,150,236
7.5% 11/15/00 A1 3,435,000 3,459,698
BanPonce Trust I 8.327% A3 3,925,000 3,586,901
2/1/27
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Countrywide Funding Corp. A3 $ 3,950,000 $ 3,848,130
6.45% 2/27/03
Daimler-Chrysler NA Holding A1 12,500,000 12,445,000
Corp. 6.63% 9/21/01
ERP Operating LP:
6.55% 11/15/01 A3 1,500,000 1,475,970
7.1% 6/23/04 A3 3,980,000 3,888,977
Farmers Insurance Exchange A2 2,740,000 2,330,589
Capital 7.05% 7/15/28 (f)
Finova Capital Corp.:
6.11% 2/18/03 Baa1 4,320,000 4,156,229
6.12% 5/28/02 Baa1 2,000,000 1,945,860
First Security Capital I A3 1,690,000 1,574,303
8.41% 12/15/26
Ford Motor Credit Co.:
6.3563% 7/16/01 (i) A1 13,000,000 13,011,934
6.5% 2/28/02 A1 3,380,000 3,344,510
GS Escrow Corp.:
7% 8/1/03 Ba1 2,140,000 1,977,553
7.125% 8/1/05 Ba1 7,600,000 6,805,724
Heller Financial, Inc. 6% A3 5,050,000 4,795,127
3/19/04
KeyCorp Institutional Capital A1 3,600,000 3,259,368
A 7.826% 12/1/26
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 2,240,000 1,344,000
7.6% 8/1/07 Ba2 4,190,000 2,304,500
7.875% 8/1/03 Ba2 690,000 393,300
Mellon Capital I 7.72% A2 2,000,000 1,827,180
12/1/26
Newcourt Credit Group, Inc. A1 2,015,000 1,966,297
6.875% 2/16/05
PNC Funding Corp. 6.875% A3 2,020,000 1,992,084
3/1/03
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 1,830,000 1,740,751
5.875% 5/1/04 Baa1 3,975,000 3,765,677
The Money Store, Inc. 7.3% A2 2,550,000 2,540,438
12/1/02
TXU Eastern Funding:
6.15% 5/15/02 Baa1 2,510,000 2,444,489
6.75% 5/15/09 Baa1 2,945,000 2,706,985
U.S. Bancorp 8.09% 11/15/26 A1 2,980,000 2,778,969
U.S. West Capital Funding, Baa1 5,180,000 5,158,244
Inc. 6.875% 8/15/01 (f)
UNICCO Service Co./UNICCO B3 2,170,000 1,996,400
Finance Corp. 9.875% 10/15/07
117,157,753
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
SAVINGS & LOANS - 0.4%
Chevy Chase Savings Bank FSB B1 $ 1,420,000 $ 1,334,800
9.25% 12/1/08
Great Western Finance Trust A3 3,780,000 3,533,090
II 8.206% 2/1/27
Home Savings of America FSB A3 2,830,000 2,684,142
6.5% 8/15/04
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 3,770,000 3,721,179
7% 6/13/02 Baa3 3,400,000 3,354,848
Sovereign Bancorp, Inc. Ba3 4,300,000 4,149,113
6.625% 3/15/01
18,777,172
SECURITIES INDUSTRY - 0.5%
Amvescap PLC yankee:
6.375% 5/15/03 A3 2,200,000 2,110,526
6.6% 5/15/05 A3 4,410,000 4,164,407
Goldman Sachs Group L.P. A1 12,900,000 12,920,898
6.5025% 7/27/00 (i)(k)
Morgan Stanley Dean Witter & Aa3 4,760,000 4,754,954
Co. 7.125% 1/15/03
23,950,785
TOTAL FINANCE 223,577,043
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Concentra Operating Corp. 13% B3 325,000 290,875
8/15/09 (f)
Fountain View, Inc. 11.25% Caa1 2,330,000 1,770,800
4/15/08
Tenet Healthcare Corp. 8.625% Ba3 1,090,000 1,057,300
1/15/07
3,118,975
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.6%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
Bucyrus International, Inc. B1 1,060,000 784,400
9.75% 9/15/07
Dunlop Standard Aero Holdings B3 2,490,000 2,564,700
PLC 11.875% 5/15/09
Roller Bearing Holding, Inc. - 3,550,000 1,881,500
0% 6/15/09 (d)(f)
Thermadyne Manufacturing LLC B3 335,000 278,050
9.875% 6/1/08
Tokheim Corp. 11.375% 8/1/08 B3 1,360,000 795,600
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Tyco International Group SA:
7% 6/15/28 Baa1 $ 2,540,000 $ 2,198,014
yankee:
6.125% 6/15/01 Baa1 6,860,000 6,743,929
6.375% 6/15/05 Baa1 830,000 777,527
16,023,720
POLLUTION CONTROL - 0.3%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba3 1,290,000 1,173,900
10% 8/1/09 (f) B2 4,310,000 3,835,900
Browning-Ferris Industries, Ba3 1,220,000 976,000
Inc. 6.375% 1/15/08
Envirosource, Inc. Series B, Caa3 650,000 409,500
9.75% 6/15/03
WMX Technologies, Inc.:
6.25% 10/15/00 Ba1 2,100,000 2,057,181
7.1% 8/1/26 Ba1 4,610,000 4,271,857
12,724,338
TOTAL INDUSTRIAL MACHINERY & 28,748,058
EQUIPMENT
MEDIA & LEISURE - 4.3%
BROADCASTING - 2.9%
ACME Television LLC/ACME B3 870,000 783,000
Financial Corp. 0% 9/30/04
(d)
Adelphia Communications Corp.:
7.75% 1/15/09 B1 1,970,000 1,758,225
8.375% 2/1/08 B1 820,000 766,700
9.875% 3/1/07 B1 6,350,000 6,413,500
AMFM Operating, Inc. 12.625% - 1,523,800 1,733,323
10/31/06 pay-in-kind
Ascent Entertainment Group, B3 1,990,000 1,482,550
Inc. 0% 12/15/04 (d)
Avalon Cable Michigan, B2 1,680,000 1,696,800
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08
Benedek Communications Corp. B3 630,000 567,000
0% 5/15/06 (d)
Century Communications Corp.:
Series B, 0% 1/15/08 B1 2,520,000 1,102,500
8.75% 10/1/07 B1 800,000 768,000
Chancellor Media Corp. 9% B1 3,185,000 3,312,400
10/1/08
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (d) B2 1,960,000 1,146,600
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.: - continued
8.625% 4/1/09 B2 $ 2,650,000 $ 2,451,250
Citadel Broadcasting Co. B3 840,000 886,200
10.25% 7/1/07
Clear Channel Communications,
Inc.:
6.875% 6/15/18 Baa3 3,450,000 3,065,463
7.25% 10/15/27 Baa3 4,550,000 4,104,100
Comcast UK Cable Partners B2 3,360,000 3,175,200
Ltd. 0% 11/15/07 (d)
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa2 9,225,000 9,534,683
8.625% 8/15/03 Baa2 2,790,000 2,886,813
9% 9/1/08 Baa2 1,690,000 1,838,669
Cox Communications, Inc.:
6.875% 6/15/05 Baa2 2,580,000 2,518,493
7.75% 8/15/06 Baa2 1,925,000 1,943,711
CSC Holdings, Inc.:
9.25% 11/1/05 B1 1,370,000 1,404,250
9.875% 5/15/06 B1 1,600,000 1,672,000
10.5% 5/15/16 B1 1,850,000 2,044,250
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 5,860,000 4,790,550
yankee 0% 12/15/05 (d) B3 2,460,000 2,312,400
Earthwatch, Inc. 0% 7/15/07 - 2,530,000 1,771,000
unit (d)(f)
EchoStar DBS Corp.:
9.25% 2/1/06 B2 1,150,000 1,150,000
9.375% 2/1/09 B2 1,250,000 1,253,125
Falcon Holding Group B2 11,520,000 8,409,600
LP/Falcon Funding Corp. 0%
4/15/10 (d)
FrontierVision Holdings B1 4,130,000 3,634,400
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
FrontierVision Operating B1 1,910,000 2,043,700
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Golden Sky DBS, Inc. 0% Caa1 4,950,000 2,994,750
3/1/07 (d)
Golden Sky Systems, Inc. B3 950,000 1,011,750
12.375% 8/1/06
Hearst-Argyle Television, Baa3 3,260,000 3,012,859
Inc. 7.5% 11/15/27
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
International Cabletel, Inc. B3 $ 1,850,000 $ 1,669,625
0% 2/1/06 (d)
Knology Holding, Inc. 0% - 4,450,000 2,959,250
10/15/07 (d)
Lenfest Communications, Inc. B1 430,000 425,700
8.25% 2/15/08
LIN Holdings Corp. 0% 3/1/08 B3 290,000 195,750
(d)
Nielsen Media Research, Inc. Baa2 2,395,000 2,334,377
7.6% 6/15/09
NTL Communications Corp. B3 4,660,000 5,044,450
11.5% 10/1/08
NTL, Inc. 10% 2/15/07 B3 2,310,000 2,379,300
Olympus Communications B1 1,160,000 1,212,200
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp. B3 1,115,000 1,126,150
9.625% 10/15/05
TCI Communications, Inc.:
8.75% 8/1/15 A2 1,970,000 2,149,211
9.25% 4/15/02 A2 3,000,000 3,148,890
9.8% 2/1/12 A2 4,550,000 5,315,947
Telewest PLC:
yankee 9.625% 10/1/06 B1 680,000 693,600
0% 10/1/07 (d) B1 9,405,000 8,699,625
Time Warner, Inc. 9.125% Baa3 5,355,000 5,864,582
1/15/13
United International B3 8,120,000 5,075,000
Holdings, Inc. 0% 2/15/08
(d)
United Pan-Europe B2 4,020,000 4,080,300
Communications NV 10.875%
8/1/09
143,813,771
ENTERTAINMENT - 0.5%
AMC Entertainment, Inc. 9.5% B3 470,000 410,075
2/1/11
Bally Total Fitness Holding B3 3,630,000 3,512,025
Corp. 9.875% 10/15/07
Capitol Records, Inc. 8.375% Baa1 5,220,000 5,180,328
8/15/09 (f)
Cinemark USA, Inc. 8.5% B2 3,255,000 2,848,125
8/1/08
Paramount Communications, Baa3 1,785,000 1,788,873
Inc. 7.5% 1/15/02
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa1 3,530,000 2,638,675
9.5% 6/1/08 Caa1 3,430,000 2,709,700
United Artists Theatre Co. Caa3 1,060,000 169,600
9.75% 4/15/08
Viacom, Inc.:
6.75% 1/15/03 Baa3 4,430,000 4,358,500
7.75% 6/1/05 Baa3 2,137,000 2,150,955
25,766,856
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 0.3%
Circus Circus Enterprises, Ba2 $ 660,000 $ 565,125
Inc. 7.625% 7/15/13
Coast Hotels & Casinos, Inc. B3 1,150,000 1,112,625
9.5% 4/1/09
Courtyard by Marriott II B- 2,590,000 2,544,675
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc.:
7.875% 8/1/05 Ba2 2,090,000 1,933,250
7.875% 8/1/08 Ba2 3,280,000 2,935,600
Hollywood Casino Corp. 11.25% B3 450,000 469,125
5/1/07
Host Marriott LP 8.375% Ba2 3,740,000 3,534,300
2/15/06
Signature Resorts, Inc. 9.75% B3 1,590,000 1,367,400
10/1/07
14,462,100
PUBLISHING - 0.3%
Garden State Newspapers, Inc. B1 4,670,000 4,401,475
Series B, 8.75% 10/1/09
News America Holdings, Inc.:
7.7% 10/30/25 Baa3 4,300,000 4,029,057
8.5% 2/15/05 Baa3 1,280,000 1,319,821
Time Warner Entertainment
Co. LP:
7.25% 9/1/08 Baa2 1,455,000 1,416,734
8.375% 3/15/23 Baa2 2,500,000 2,599,325
13,766,412
RESTAURANTS - 0.3%
CKE Restaurants, Inc. 9.125% B2 2,915,000 2,186,250
5/1/09
Domino's, Inc. 10.375% B3 5,210,000 5,014,625
1/15/09
Host Marriott Travel Plazas, Ba3 5,040,000 5,090,400
Inc. 9.5% 5/15/05
NE Restaurant, Inc. 10.75% B3 2,760,000 2,449,500
7/15/08
14,740,775
TOTAL MEDIA & LEISURE 212,549,914
NONDURABLES - 0.6%
BEVERAGES - 0.3%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 4,595,000 4,515,001
6.4% 12/15/03 Baa3 5,840,000 5,591,800
6.625% 12/15/05 Baa3 2,940,000 2,801,820
12,908,621
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
FOODS - 0.1%
ConAgra, Inc. 7.125% 10/1/26 Baa1 $ 3,200,000 $ 3,032,864
HOUSEHOLD PRODUCTS - 0.0%
Revlon Consumer Products B3 2,160,000 1,641,600
Corp. 9% 11/1/06
TOBACCO - 0.2%
Philip Morris Companies, Inc.:
6.95% 6/1/06 A2 4,420,000 4,354,142
7% 7/15/05 A2 3,710,000 3,517,414
7.25% 9/15/01 A2 1,450,000 1,439,865
RJ Reynolds Tobacco Holdings, Baa2 3,500,000 3,270,645
Inc. 7.375% 5/15/03
12,582,066
TOTAL NONDURABLES 30,165,151
RETAIL & WHOLESALE - 0.7%
DRUG STORES - 0.1%
Rite Aid Corp.:
6% 12/15/00 (f) B1 935,000 813,450
6.5% 12/15/05 (f) B1 5,775,000 4,158,000
7.125% 1/15/07 B1 1,595,000 1,196,250
6,167,700
GENERAL MERCHANDISE STORES -
0.2%
Dayton Hudson Corp. 7.5% A3 3,500,000 3,510,395
7/15/06
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa1 3,000,000 2,911,710
8.5% 6/15/03 Baa1 2,580,000 2,651,440
Kmart Corp. 12.5% 3/1/05 Ba1 2,510,000 2,836,300
11,909,845
GROCERY STORES - 0.3%
Kroger Co. 6% 7/1/00 Baa3 4,480,000 4,450,701
Pathmark Stores, Inc. 9.625% Caa3 9,150,000 6,862,500
5/1/03
Pueblo Xtra International,
Inc.:
Series C, 9.5% 8/1/03 B3 820,000 492,000
9.5% 8/1/03 B3 2,370,000 1,422,000
13,227,201
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.1%
USA Networks, Inc./USANi LLC Baa3 3,350,000 3,198,647
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 34,503,393
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
SERVICES - 0.1%
PRINTING - 0.0%
Sullivan Graphics, Inc. Caa1 $ 1,430,000 $ 1,490,775
12.75% 8/1/05
SERVICES - 0.1%
La Petite Academy, Inc./La B3 2,880,000 2,116,800
Petite Academy Holding Co.
10% 5/15/08
Medaphis Corp. 9.5% 2/15/05 Caa1 1,770,000 1,362,900
3,479,700
TOTAL SERVICES 4,970,475
TECHNOLOGY - 0.7%
COMPUTER SERVICES & SOFTWARE
- - 0.3%
Concentric Network Corp. B- 595,000 624,750
12.75% 12/15/07
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 2,370,000 1,487,175
12.5% 2/15/09 B3 1,091,000 1,129,185
Exodus Communications, Inc.:
10.75% 12/15/09 (f) B- 1,660,000 1,689,050
11.25% 7/1/08 B- 350,000 362,250
Federal Data Corp. 10.125% B3 3,720,000 2,697,000
8/1/05
PSINet, Inc.:
10.5% 12/1/06 (f) B3 5,170,000 5,234,625
11% 8/1/09 B3 2,140,000 2,198,850
Verio, Inc. 10.625% 11/15/09 B3 1,120,000 1,142,400
(f)
16,565,285
COMPUTERS & OFFICE EQUIPMENT
- - 0.2%
Comdisco, Inc. 6.375% Baa1 8,300,000 8,139,229
11/30/01
Sun Microsystems, Inc. 7% Baa1 1,380,000 1,375,170
8/15/02
9,514,399
ELECTRONICS - 0.2%
ChipPAC International Ltd. B3 3,280,000 3,444,000
12.75% 8/1/09 (f)
Details, Inc. 10% 11/15/05 B3 120,000 110,400
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 1,415,000 1,429,150
10.375% 10/1/07 B3 1,950,000 1,989,000
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Micron Technology, Inc. 6.5% B3 $ 2,000,000 $ 1,595,000
9/30/05 (k)
SCG Holding B2 2,065,000 2,194,063
Corp./Semiconductor
Components Industries LLC
12% 8/1/09 (f)
10,761,613
TOTAL TECHNOLOGY 36,841,297
TRANSPORTATION - 1.0%
AIR TRANSPORTATION - 0.4%
Atlas Air, Inc. 9.25% 4/15/08 B2 4,520,000 4,305,300
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 1,110,000 1,083,804
7.73% 9/15/12 Baa1 725,000 706,875
Delta Air Lines, Inc.:
8.3% 12/15/29 (f) Baa3 4,000,000 3,880,000
9.875% 5/15/00 Baa3 1,500,000 1,515,570
Kitty Hawk, Inc. 9.95% B1 3,095,000 3,056,313
11/15/04
Qantas Airways Ltd. 7.75% Baa1 4,370,000 4,203,066
6/15/09 (f)
US Airways Group, Inc. Ba3 2,480,000 2,349,800
10.375% 3/1/13
21,100,728
RAILROADS - 0.6%
Burlington Northern Santa Fe
Corp.:
6.125% 3/15/09 Baa2 6,450,000 5,804,549
7.29% 6/1/36 Baa2 3,000,000 2,917,560
Canadian National Railway Co. Baa2 3,390,000 2,992,624
6.9% 7/15/28
CSX Corp.:
6.25% 10/15/08 Baa2 2,385,000 2,158,163
6.46% 6/22/05 Baa2 5,120,000 4,873,574
Norfolk Southern Corp. 7.05% Baa1 6,610,000 6,552,427
5/1/37
Wisconsin Central Baa2 1,810,000 1,657,146
Transportation Corp. 6.625%
4/15/08
26,956,043
SHIPPING - 0.0%
Holt Group, Inc. 9.75% Caa1 580,000 377,000
1/15/06
TOTAL TRANSPORTATION 48,433,771
UTILITIES - 3.5%
CELLULAR - 0.9%
Cable & Wireless Baa1 7,995,000 7,898,181
Communications PLC 6.375%
3/6/03
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
McCaw International Ltd. 0% Caa1 $ 7,160,000 $ 5,012,000
4/15/07 (d)
Millicom International Caa1 5,170,000 4,278,175
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 10/31/07 (d) B1 18,830,000 13,651,750
12% 11/1/08 B1 1,370,000 1,530,975
Nextel International, Inc. Caa1 4,350,000 2,588,250
0% 4/15/08 (d)
Nuevo Grupo Iusacell SA de CV B1 722,000 750,880
14.25% 12/1/06 (f)
Rogers Cantel, Inc. 8.8% B2 1,200,000 1,200,000
10/1/07
Rogers Communications, Inc. B2 4,630,000 4,664,725
8.875% 7/15/07
Telesystem International Caa1 725,000 398,750
Wireless, Inc. 0% 11/1/07 (d)
Voicestream Wireless B2 4,490,000 4,624,700
Corp./Voicestream Wireless
Holding Co. 10.375% 11/15/09
(f)
46,598,386
ELECTRIC UTILITY - 0.4%
Avon Energy Partners Holdings:
6.46% 3/4/08 (f) Baa2 3,960,000 3,531,409
6.73% 12/11/02 (f) Baa2 4,910,000 4,788,281
Hydro-Quebec yankee 7.4% A2 2,620,000 2,743,926
3/28/25 (e)
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (f) A3 3,920,000 3,376,374
yankee 7.875% 12/15/26 (f) A3 1,960,000 1,720,449
Texas Utilities Co. 6.375% Baa3 1,370,000 1,241,206
1/1/08
17,401,645
GAS - 0.1%
CMS Panhandle Holding Co. Baa3 2,550,000 2,416,635
6.125% 3/15/04
TELEPHONE SERVICES - 2.1%
Allegiance Telecom, Inc. 0% B3 840,000 604,800
2/15/08 (d)
e.spire Communications, Inc. - 1,550,000 1,085,000
13.75% 7/15/07
GST Network Funding, Inc. 0% - 8,900,000 4,361,000
5/1/08 (d)
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
GST Equipment Funding, Inc. - $ 1,685,000 $ 1,626,025
13.25% 5/1/07
GST Telecommunications, Inc. - 930,000 874,200
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (d) - 335,000 249,575
GTE Corp. 6.155% 6/12/00 (i) - 7,650,000 7,647,720
Hyperion Telecommunications, Caa1 950,000 1,007,000
Inc. 12% 11/1/07
ICG Services, Inc. 0% 5/1/08 B3 5,075,000 2,600,938
(d)
Intermedia Communications,
Inc.:
0% 3/1/09 (d) B3 1,410,000 842,475
8.6% 6/1/08 B2 4,140,000 3,819,150
IXC Communications, Inc. 9% B1 2,360,000 2,383,600
4/15/08
KMC Telecom Holdings, Inc. Caa2 2,690,000 2,663,100
13.5% 5/15/09
Logix Communications - 4,730,000 3,311,000
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% A3 3,139,000 3,294,600
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (d) B1 1,845,000 1,494,450
9.5% 11/1/08 B1 3,140,000 3,171,400
Metromedia Fiber Network,
Inc.:
10% 11/15/08 B2 900,000 918,000
10% 12/15/09 B2 1,590,000 1,621,800
NEXTLINK Communications, Inc.:
9.625% 10/1/07 B2 4,870,000 4,760,425
10.5% 12/1/09 (f) B2 2,350,000 2,391,125
Ono Finance PLC 13% 5/1/09 Caa1 1,740,000 1,800,900
Pathnet, Inc. 12.25% 4/15/08 - 4,970,000 3,180,800
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 7,740,000 4,179,600
12.75% 4/15/09 B3 4,480,000 4,345,600
Telecomunicaciones de Puerto Baa2 5,540,000 5,224,220
Rico, Inc. 6.65% 5/15/06
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 6,886,000 6,468,158
7.7% 7/20/29 Baa1 8,610,000 7,879,872
Teligent, Inc.:
0% 3/1/08 (d) Caa1 8,295,000 4,873,313
11.5% 12/1/07 Caa1 5,040,000 4,914,000
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 $ 2,410,000 $ 2,961,400
0% 3/15/08 (d) CCC 7,500,000 7,650,000
15% 3/1/07 CCC 1,200,000 1,704,000
105,909,246
TOTAL UTILITIES 172,325,912
TOTAL NONCONVERTIBLE BONDS 902,930,431
TOTAL CORPORATE BONDS 912,465,856
(Cost $953,137,023)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 5.2%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 1.6%
Fannie Mae:
5.625% 5/14/04 Aaa 13,840,000 13,225,781
6% 5/15/08 Aaa 12,000,000 11,235,000
6.25% 5/15/29 Aaa 14,705,000 13,087,450
6.5% 4/29/09 Aaa 6,820,000 6,382,020
Farm Credit Systems Financial Aaa 2,000,000 2,165,000
Assistance Corp. 8.8% 6/10/05
Federal Home Loan Bank:
5.195% 9/11/01 Aaa 4,500,000 4,402,980
7.59% 3/10/05 Aaa 3,850,000 3,955,259
Freddie Mac:
6.25% 7/15/04 Aaa 2,500,000 2,444,150
6.75% 8/1/05 Aaa 2,500,000 2,476,950
7.625% 9/9/09 Aaa 14,850,000 14,666,751
U.S. Department of Housing Aaa 2,825,000 2,862,629
and Urban Development
government guaranteed
participation certificates
Series 1996-A, 7.63% 8/1/14
TOTAL U.S. GOVERNMENT AGENCY 76,903,970
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
3.6%
U.S. Treasury Bonds:
5.25% 2/15/29 Aaa 750,000 620,153
6.875% 8/15/25 Aaa 53,625,000 54,621,889
7.625% 2/15/25 Aaa 17,790,000 19,716,301
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
8.875% 8/15/17 Aaa $ 4,027,000 $ 4,866,992
11.75% 2/15/10 (callable) Aaa 15,045,000 18,289,003
12% 8/15/13 Aaa 3,740,000 4,994,059
13.875% 5/15/11 (callable) Aaa 21,150,000 28,899,572
U.S. Treasury Notes:
5.875% 11/15/04 Aaa 3,855,000 3,779,712
6% 8/15/09 Aaa 26,140,000 25,323,125
6.25% 10/31/01 Aaa 820,000 820,131
6.625% 6/30/01 Aaa 15,700,000 15,788,234
7.25% 8/15/04 Aaa 1,404,000 1,447,875
TOTAL U.S. TREASURY 179,167,046
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 256,071,016
GOVERNMENT AGENCY OBLIGATIONS
(Cost $271,370,711)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 10.0%
FANNIE MAE - 7.8%
6% 1/1/11 to 1/1/29 Aaa 58,934,066 55,130,174
6.5% 5/1/14 to 3/1/29 Aaa 104,437,117 98,703,785
6.5% 1/1/15 (g) Aaa 8,700,000 8,439,000
7% 8/1/13 to 12/1/29 Aaa 189,145,428 183,137,015
7.5% 7/1/16 to 9/1/29 Aaa 29,582,975 29,255,217
8% 9/1/26 to 12/1/29 Aaa 10,601,059 10,687,146
TOTAL FANNIE MAE 385,352,337
FREDDIE MAC - 0.6%
7.5% 5/1/17 to 7/1/29 Aaa 4,274,679 4,238,563
8% 7/1/17 to 12/1/29 Aaa 28,001,715 28,273,296
8.5% 7/1/21 to 6/1/23 Aaa 50,768 52,281
TOTAL FREDDIE MAC 32,564,140
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.6%
6% 12/15/08 to 6/15/09 Aaa 2,531,370 2,429,524
6.5% 6/15/08 to 3/15/29 Aaa 41,330,515 39,249,754
7% 7/15/28 Aaa 18,338,165 17,707,699
7.5% 9/15/22 to 9/15/29 Aaa 20,148,937 19,947,958
8% 5/15/25 Aaa 85,363 86,324
8.5% 12/15/16 Aaa 26,058 27,004
TOTAL GOVERNMENT NATIONAL 79,448,263
MORTGAGE ASSOCIATION
TOTAL U.S. GOVERNMENT AGENCY 497,364,740
- - MORTGAGE SECURITIES
(Cost $511,043,569)
ASSET-BACKED SECURITIES - 1.2%
MOODY'S RATINGS (UNAUDITED)(B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Airplanes pass through trust Ba2 $ 3,160,000 $ 2,591,200
10.875% 3/15/19
ARG Funding Corp. 5.88% Aaa 5,830,000 5,686,072
5/20/03 (f)
BankAmerica Manufacturing Aaa 3,730,000 3,642,578
Housing Contract 6.2%
4/10/09
Capita Equipment Receivables Baa2 2,950,000 2,832,384
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 1,347,469 1,333,785
Trust 5.91% 12/15/04
CIT Marine Trust 5.8% 4/15/10 Aaa 5,920,000 5,690,600
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 1,896,713 1,902,344
6.55% 8/15/02 Aaa 899,278 897,030
CPS Auto Receivables Trust 6% Aaa 3,013,848 2,969,583
8/15/03
CSXT Trade Receivables Master Aaa 4,600,000 4,405,938
Trust 6% 7/25/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 2,680,000 2,620,370
6.4% 12/15/02 Baa2 1,480,000 1,460,760
6.87% 11/15/04 A2 2,650,000 2,628,055
Green Tree Financial Corp.:
6.68% 1/15/29 AAA 6,680,000 6,627,762
6.8% 6/15/27 Aaa 823,337 823,593
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 4,790,000 4,679,980
6.3% 10/15/03 A2 1,470,373 1,460,265
Olympic Automobile Aaa 718,515 718,505
Receivables Trust 6.7%
3/15/02
Petroleum Enhanced Trust Baa2 2,030,633 2,023,019
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (f)(i)
UAF Auto Grantor Trust 6.1% Aaa 2,769,379 2,748,609
1/15/03 (f)
WFS Financial Owner Trust Aaa 4,430,000 4,403,005
6.55% 10/20/04
TOTAL ASSET-BACKED SECURITIES 62,145,437
(Cost $63,930,865)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.1%
PRIVATE SPONSOR - 0.0%
Credit-Based Asset Servicing Ba3 1,058,734 503,892
and Securitization LLC
Series 1997-2 Class 2B,
7.1864% 12/29/25 (f)(h)(i)
MOODY'S RATINGS (UNAUDITED)(B) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY - 0.1%
Fannie Mae planned
amortization class:
Series 1999-54 Class PH, 6.5% Aaa $ 3,300,000 $ 2,934,938
11/18/29
Series 1999-57 Class PH, 6.5% Aaa 2,600,000 2,308,313
12/25/29
TOTAL U.S. GOVERNMENT AGENCY 5,243,251
TOTAL COLLATERALIZED 5,747,143
MORTGAGE OBLIGATIONS
(Cost $5,862,608)
COMMERCIAL MORTGAGE
SECURITIES - 2.0%
Bankers Trust REMIC Trust Baa3 1,000,000 925,000
1988-1 Series 1998-S1A Class
G, 8.3161% 11/28/02 (f)(i)
Berkeley Federal Bank & Trust - 1,900,000 1,278,938
FSB Series 1994 Class 1B
7.3368% 8/1/24 (f)(i)
BKB Commercial Mortgage Trust BBB 1,785,263 1,768,178
Series 1997-C1 Class D,
7.83% 2/25/43 (f)(i)
CBM Funding Corp.:
sequential pay Series 1996-1 AA 3,000,000 2,940,469
Class A-3PI, 7.08% 11/1/07
sequential pay Series 1996-1 A 2,320,000 2,251,306
Class B, 7.48% 2/1/08
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 5,730,000 5,199,975
1/17/35
Series 1998 C1 Class D, 7.17% BBB 5,050,000 4,469,250
1/17/12
Series 1998-FL1 Class E, Baa2 5,490,000 5,407,650
6.26% 1/10/13 (f)(i)
Deutsche Mortgage & Asset Baa2 4,260,000 3,724,838
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Equitable Life Assurance
Society of the United States:
sequential pay Series 174 Aaa 7,680,000 7,639,680
Class A1, 7.24% 5/15/06 (f)
Series 174:
Class B1, 7.33% 5/15/06 (f) Aa2 3,500,000 3,455,655
Class C-1, 7.52% 5/15/06 (f) A2 2,300,000 2,264,833
Class D1, 7.77% 5/15/06 (f) Baa2 2,200,000 2,148,080
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED)(B) PRINCIPAL AMOUNT VALUE (NOTE 1)
First Chicago/Lennar Trust I
Series 1997-CHL1:
Class D, 8.1256% 4/13/39 (i) - $ 1,100,000 $ 875,875
Class E, 8.1256% 4/1/39 (i) - 1,600,000 1,125,000
First Union-Lehman Brothers Aa2 8,640,000 8,070,300
Commercial Mortgage Trust
sequential pay Series
1997-C2 Class B, 6.79%
11/18/29
FMAC Loan Receivables Trust:
Series 1997-A Class E, - 500,000 335,938
8.1096% 4/15/19 (f)(i)
Series 1997-B Class E, - 750,000 437,578
7.8912% 9/15/19 (f)(i)
GAFCO Franchisee Loan Trust - 1,300,000 1,040,813
Series 1998-1 Class D, 14%
6/1/16 (f)(i)
General Motors Acceptance Ba3 750,000 586,890
Corp. Commercial Mortgage
Securities, Inc. Series
1996-C1 Class F, 7.86%
10/15/28 (f)
GS Mortgage Securities Corp.
II Series 1998-GLII:
Class D, 7.1905% 4/13/31 Baa2 1,470,000 1,313,353
(f)(i)
Class E, 7.1905% 4/13/31 Baa3 4,930,000 4,164,309
(f)(i)
Host Marriot Pool Trust 6.98% Aaa 4,084,991 3,996,271
8/1/15
LTC Commercial Mortgage pass AAA 3,032,284 2,799,283
through certificates Series
1998-1 Class A, 6.029%
5/30/30 (f)
Morgan Stanley Capital I,
Inc.:
Series 1996-MBL1 Class E, - 1,741,949 1,741,949
8.5243% 5/25/21 (f)(i)
Series 1998-HF1 Class D, 7.1% BBB 5,790,000 5,379,272
2/15/30 (i)
Nomura Asset Securities Corp. Baa2 4,260,000 3,696,881
Series 1998-D6 Class A-4,
7.597% 3/17/28 (i)
Nomura Depositor Trust - 800,000 728,188
floater Series 1998-ST1A
Class B2, 9.6938% 1/15/03
(f)(i)
Penn Mutual Life Insurance
Co. (The)/Penn Insurance &
Annuity Co. Series 1996-PML:
Class K, 7.9% 11/15/26 (f) - 1,473,000 959,468
Class L, 7.9% 11/15/26 (f) - 1,133,000 600,490
MOODY'S RATINGS (UNAUDITED)(B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Resolution Trust Corp. Baa3 $ 318,186 $ 257,731
Series 1991-M2 Class A3,
6.9066% 9/25/20 (i)
Structured Asset Securities
Corp.:
Series 1995-C1 Class E, BB 1,200,000 1,060,125
7.375% 9/25/24 (f)
Series 1996 CFL Class E, BBB 2,390,000 2,345,654
7.75% 2/25/28
Series 1996-CFL Class G, B+ 1,000,000 836,563
7.75% 2/25/28 (f)
Thirteen Affiliates of
General Growth Properties,
Inc.:
sequential pay Series 1 Class Aaa 4,200,000 3,991,764
A2, 6.602% 12/15/10 (f)
Series D-2, 6.992% 12/15/10 Baa2 4,120,000 3,788,752
(f)
Series E-2, 7.224% 12/15/10 Baa3 2,450,000 2,187,391
(f)
Wells Fargo Capital Markets Aaa 2,676,825 2,633,729
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (f)
TOTAL COMMERCIAL MORTGAGE 98,427,419
SECURITIES
(Cost $105,234,455)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 0.2% (J)
Israeli State euro 6.375% A3 3,350,000 3,302,062
12/19/01
Korean Republic yankee:
8.75% 4/15/03 Baa2 1,340,000 1,379,570
8.875% 4/15/08 Baa2 1,868,000 1,957,533
Province of Newfoundland Baa1 2,000,000 2,466,000
yankee 11.625% 10/15/07
TOTAL FOREIGN GOVERNMENT AND 9,105,165
GOVERNMENT AGENCY OBLIGATIONS
(Cost $9,313,592)
SUPRANATIONAL OBLIGATIONS -
0.1%
Inter-American Development Aaa 4,750,000 4,518,058
Bank yankee 6.29% 7/16/27
(Cost $4,720,123)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 1.4%
Bayerische Hypo-und 13,000,000 12,938,468
Vereinsbank AG yankee
6.3825% 5/15/00 (i)
Canadian Imperial Bank of 11,000,000 10,995,999
Commerce yankee 5.63%
4/13/00 (i)
Commerzbank AG yankee 5.58% 11,600,000 11,569,621
6/12/00
CERTIFICATES OF DEPOSIT -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
Deutsche Bank AG yankee 5.1% $ 12,000,000 $ 11,987,891
2/11/00
Fleet National Bank 6.305% 12,000,000 12,003,702
5/5/00 (i)
Societe Generale, France 12,500,000 12,484,950
yankee 5.16% 2/22/00
TOTAL CERTIFICATES OF DEPOSIT 71,980,631
(Cost $72,073,221)
COMMERCIAL PAPER - 1.8%
Asset Securitization Coop. 11,250,000 11,146,934
Corp. 5.96% 3/2/00
Citibank Credit Card Master 11,000,000 10,886,663
Trust I (Dakota Certificate
Program) 5.96% 3/9/00
Corporate Receivables Corp. 11,000,000 10,929,031
6.15% 2/14/00
CXC, Inc. 6.03% 2/18/00 11,250,000 11,169,644
Enterprise Funding Corp. 11,250,000 11,209,500
yankee 6.15% 1/27/00
Finova Capital Corp. 6.4225% 13,000,000 12,989,015
4/10/00 (i)
New Center Asset Trust 6.05% 11,000,000 10,866,056
3/21/00
Windmill Funding Corp. yankee 11,000,000 10,962,260
6.15% 1/26/00
TOTAL COMMERCIAL PAPER 90,159,103
(Cost $90,081,486)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 2.2%
MATURITY AMOUNT
Investments in repurchase $ 30,295,212 30,286,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 3.65%,
dated 12/31/99 due 1/3/00
SHARES
Taxable Central Cash Fund, 77,158,125 77,158,125
5.12% (c)
TOTAL CASH EQUIVALENTS 107,444,125
(Cost $107,444,125)
TOTAL INVESTMENT PORTFOLIO - 4,954,658,174
99.9%
(Cost $4,260,810,275)
NET OTHER ASSETS - 0.1% 5,944,708
NET ASSETS - 100% $ 4,960,602,882
</TABLE>
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(f) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $153,564,140 or 3.1% of net assets.
(g) Security purchased on a delayed delivery or when-issued basis.
(h) Partial interest payment received on the last interest payment
date.
(i) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(j) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(k) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Alliance Gaming Corp. 7/28/98 $ 259,200
Goldman Sachs Group L.P. 1/25/99 $ 12,900,000
6.5025% 7/27/00
Micron Technology, Inc. 6.5% 7/15/99 - 11/1/99 $ 1,597,500
9/30/05
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 20.8% AAA, AA, A 19.2%
Baa 6.8% BBB 6.7%
Ba 1.3% BB 1.9%
B 5.3% B 5.1%
Caa 1.2% CCC 1.1%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.8%. FMR has
determined that unrated debt securities that are lower quality account
for 0.8% of the total value of investment in securities.
Purchases and sales of securities, other than short-term securities,
aggregated $4,271,160,399 and $4,294,454,579, respectively, of which
long-term U.S. government and government agency obligations aggregated
$1,401,412,857 and $1,127,467,271, respectively.
The market value of futures contracts opened and closed during the
period amounted to $287,734,098 and $363,516,685, 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 $93,901 for the
period.
The fund invested in securities that are not registered under the
Securities Act of 1933. These securities are subject to legal or
contractual restrictions on resale. At the end of the period,
restricted securities (excluding Rule 144A issues) amounted to
$14,518,331 and 0.3% of net assets.
The fund participated in the bank borrowing program. The average daily
loan balance during the period for which loans were outstanding
amounted to $11,430,000. The weighted average interest rate was 5.1%.
The fund participated in the security lending program. At period end
there were no loans outstanding.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $4,262,446,958. Net unrealized appreciation
aggregated $692,211,216, of which $841,455,570 related to appreciated
investment securities and $149,244,354 related to depreciated
investment securities.
The fund hereby designates approximately $204,447,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 4,954,658,174
value (including repurchase
agreements of $30,286,000)
(cost $4,260,810,275) - See
accompanying schedule
Cash 16,177
Receivable for fund shares 2,613,621
sold
Dividends receivable 2,246,724
Interest receivable 27,327,397
Other receivables 124,585
TOTAL ASSETS 4,986,986,678
LIABILITIES
Payable for investments $ 9,085,898
purchased Regular delivery
Delayed delivery 8,564,848
Payable for fund shares 6,113,364
redeemed
Accrued management fee 2,143,126
Distribution fees payable 1,898
Other payables and accrued 474,662
expenses
TOTAL LIABILITIES 26,383,796
NET ASSETS $ 4,960,602,882
Net Assets consist of:
Paid in capital $ 3,744,400,943
Undistributed net investment 163,666,159
income
Accumulated undistributed net 358,686,209
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 693,849,571
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 4,960,602,882
INITIAL CLASS: NET ASSET $18.67
VALUE, offering price and
redemption price per share
($4,936,925,664 (divided
by) 264,372,263 shares)
SERVICE CLASS: NET ASSET $18.59
VALUE, offering price and
redemption price per share
($23,677,218 (divided by)
1,273,914 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 37,717,264
Dividends
Interest 156,178,124
Security lending 1,300
TOTAL INCOME 193,896,688
EXPENSES
Management fee $ 25,926,306
Transfer agent fees 3,226,198
Distribution fees - Service 14,423
Class
Accounting and security 938,579
lending fees
Non-interested trustees' 21,216
compensation
Custodian fees and expenses 108,798
Registration fees 19,156
Audit 46,405
Legal 32,889
Interest 1,619
Miscellaneous 272,231
Total expenses before 30,607,820
reductions
Expense reductions (377,290) 30,230,530
NET INVESTMENT INCOME 163,666,158
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 362,588,171
Foreign currency transactions (3,601)
Futures contracts 2,722,629 365,307,199
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (11,464,827)
Assets and liabilities in 21
foreign currencies
Futures contracts (3,226,917) (14,691,723)
NET GAIN (LOSS) 350,615,476
NET INCREASE (DECREASE) IN $ 514,281,634
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 355,082
Expense reductions Directed
brokerage arrangements
Custodian credits 22,208
$ 377,290
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 163,666,158 $ 160,471,734
income
Net realized gain (loss) 365,307,199 201,707,185
Change in net unrealized (14,691,723) 287,626,860
appreciation (depreciation)
NET INCREASE (DECREASE) IN 514,281,634 649,805,779
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (161,497,855) (139,636,837)
From net investment income
From net realized gain (204,563,949) (418,910,515)
TOTAL DISTRIBUTIONS (366,061,804) (558,547,352)
Share transactions - net (98,885,126) 420,062,178
increase (decrease)
TOTAL INCREASE (DECREASE) 49,334,704 511,320,605
IN NET ASSETS
NET ASSETS
Beginning of period 4,911,268,178 4,399,947,573
End of period (including $ 4,960,602,882 $ 4,911,268,178
undistributed net investment
income of $163,666,159 and
$159,730,084, respectively)
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 18,326,496 $ 320,298,483 23,406,455 $ 397,953,748
Class Sold
Reinvested 21,655,706 365,548,318 34,542,119 558,546,057
Redeemed (45,749,338) (801,281,286) (32,078,907) (541,870,122)
Net increase (decrease) (5,767,136) $ (115,434,485) 25,869,667 $ 414,629,683
Service Class Sold 1,054,578 $ 18,334,058 330,869 $ 5,609,677
Reinvestment 30,528 513,486 80 1,295
Redeemed (131,705) (2,298,185) (11,004) (178,477)
Net increase (decrease) 953,401 $ 16,549,359 319,945 $ 5,432,495
Distributions From net $ 161,271,317 $ 139,636,513
investment income Initial
Class
Service Class 226,538 324
Total $ 161,497,855 $ 139,636,837
From net realized gain $ 204,277,001 $ 418,909,543
Initial Class
Service Class 286,948 972
Total $ 204,563,949 $ 418,910,515
$ 366,061,804 $ 558,547,352
</TABLE>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 18.16 $ 18.01 $ 16.93 $ 15.79 $ 13.79
period
Income from Investment
Operations
Net investment income .59 D .59 D .57 D .63 .30
Net realized and unrealized 1.28 1.84 2.58 1.55 1.99
gain (loss)
Total from investment 1.87 2.43 3.15 2.18 2.29
operations
Less Distributions
From net investment income (.60) (.57) (.59) (.57) (.29)
From net realized gain (.76) (1.71) (1.48) (.47) -
Total distributions (1.36) (2.28) (2.07) (1.04) (.29)
Net asset value, end of period $ 18.67 $ 18.16 $ 18.01 $ 16.93 $ 15.79
TOTAL RETURN B, C 11.09% 15.05% 20.65% 14.60% 16.96%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 4,936,926 $ 4,905,468 $ 4,399,937 $ 3,641,194 $ 3,332,844
(000 omitted)
Ratio of expenses to average .63% .64% .65% .74% .81%
net assets
Ratio of expenses to average .62% F .63% F .64% F .73% F .79% F
net assets after expense
reductions
Ratio of net investment 3.36% 3.46% 3.43% 3.60% 3.54%
income to average net assets
Portfolio turnover 94% 113% 101% 168% 256%
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 18.10 $ 17.99 $ 17.60
period
Income from Investment
Operations
Net investment income D .56 .57 .10
Net realized and unrealized 1.29 1.82 .29
gain (loss)
Total from investment 1.85 2.39 .39
operations
Less Distributions
From net investment income (.60) (.57) -
From net realized gain (.76) (1.71) -
Total distributions (1.36) (2.28) -
Net asset value, end of period $ 18.59 $ 18.10 $ 17.99
TOTAL RETURN B, C 11.01% 14.82% 2.22%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 23,677 $ 5,801 $ 10
(000 omitted)
Ratio of expenses to average .74% .78% .75% A
net assets
Ratio of expenses to average .73% F .77% F .75% A
net assets after expense
reductions
Ratio of net investment 3.25% 3.49% 3.52% A
income to average net assets
Portfolio turnover 94% 113% 101%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
D NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
F FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
FIDELITY VARIABLE INSURANCE PRODUCTS: HIGH INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the past 10 year total returns would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY VIP: HIGH INCOME - 8.25% 10.90% 12.44%
"INITIAL CLASS"
ML High Yield Master II 2.51% 9.89% 11.21%
ML High Yield Master 1.57% 9.61% 10.79%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Merrill
Lynch High Yield Master II Index - a market value-weighted index of
all domestic and yankee high-yield bonds, including deferred interest
bonds and payment-in-kind securities. You can also compare the fund's
returns to the performance of the Merrill Lynch High Yield Master
Index - a market value-weighted index of all domestic and yankee
high-yield bonds. Issues included in both benchmarks have maturities
of one year or more and have a credit rating lower than BBB-/Baa3, but
are not in default. These benchmarks reflect the reinvestment of
dividends and capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, generally move in the opposite direction
of interest rates. In turn, the share price, return and
yield of a fund that invests in bonds will vary.
That means if you sell your shares during a
market downturn, you might lose money. But if
you can ride out the market's ups and downs,
you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown.
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 Income ML High Yield Master II
00152 ML012
1989/12/31 10000.00 10000.00
1990/01/31 9778.95 9729.76
1990/02/28 9628.38 9582.73
1990/03/31 9526.79 9756.91
1990/04/30 9555.01 9824.08
1990/05/31 9751.34 9988.09
1990/06/30 9904.94 10241.74
1990/07/31 10057.94 10496.10
1990/08/31 9889.68 10016.04
1990/09/30 9655.18 9597.18
1990/10/31 9420.89 9322.82
1990/11/30 9641.86 9420.70
1990/12/31 9776.69 9563.84
1991/01/31 9984.11 9759.61
1991/02/28 10537.25 10606.29
1991/03/31 10910.62 11121.60
1991/04/30 11297.81 11515.92
1991/05/31 11463.75 11560.78
1991/06/30 11712.67 11816.17
1991/07/31 12155.18 12140.47
1991/08/31 12321.12 12416.66
1991/09/30 12597.68 12595.60
1991/10/31 13026.37 13023.03
1991/11/30 13136.99 13160.21
1991/12/31 13206.13 13310.10
1992/01/31 13911.38 13759.68
1992/02/29 14416.48 14103.59
1992/03/31 14882.50 14305.95
1992/04/30 14987.73 14380.10
1992/05/31 15168.12 14584.44
1992/06/30 15333.48 14760.84
1992/07/31 15634.14 15047.75
1992/08/31 15964.86 15239.40
1992/09/30 16130.22 15400.95
1992/10/31 15889.69 15198.59
1992/11/30 16085.12 15435.41
1992/12/31 16265.52 15631.89
1993/01/31 16701.47 15995.57
1993/02/28 16986.36 16281.69
1993/03/31 17378.35 16567.40
1993/04/30 17492.68 16681.09
1993/05/31 17754.01 16884.56
1993/06/30 18211.34 17213.15
1993/07/31 18391.00 17381.37
1993/08/31 18587.00 17544.91
1993/09/30 18652.33 17622.79
1993/10/31 19093.32 17949.08
1993/11/30 19272.99 18051.73
1993/12/31 19583.31 18241.55
1994/01/31 20236.63 18635.87
1994/02/28 20212.37 18506.39
1994/03/31 19531.46 17908.27
1994/04/30 19334.35 17685.51
1994/05/31 19370.19 17646.85
1994/06/30 19298.52 17727.51
1994/07/31 19370.19 17834.52
1994/08/31 19370.19 17975.91
1994/09/30 19513.54 17972.34
1994/10/31 19334.35 18019.74
1994/11/30 19173.08 17864.69
1994/12/31 19262.68 18052.92
1995/01/31 19477.70 18306.41
1995/02/28 20146.21 18893.17
1995/03/31 20397.07 19148.48
1995/04/30 20995.29 19633.62
1995/05/31 21535.61 20249.91
1995/06/30 21593.50 20386.07
1995/07/31 22114.52 20651.54
1995/08/31 22288.19 20759.91
1995/09/30 22654.84 21001.17
1995/10/31 22867.11 21178.68
1995/11/30 22982.89 21388.58
1995/12/31 23253.05 21746.94
1996/01/31 23793.37 22110.22
1996/02/29 24186.36 22177.78
1996/03/31 24122.82 22087.12
1996/04/30 24482.87 22118.08
1996/05/31 24821.73 22277.49
1996/06/30 24948.80 22366.25
1996/07/31 24864.09 22513.28
1996/08/31 25224.13 22787.88
1996/09/30 25965.39 23323.52
1996/10/31 25880.68 23525.96
1996/11/30 26156.00 23998.40
1996/12/31 26516.05 24197.90
1997/01/31 26876.09 24379.70
1997/02/28 27363.58 24754.49
1997/03/31 26513.50 24413.99
1997/04/30 26927.05 24727.02
1997/05/31 28052.84 25247.65
1997/06/30 28558.30 25637.85
1997/07/31 29592.19 26317.41
1997/08/31 29844.91 26285.73
1997/09/30 30901.78 26758.57
1997/10/31 30626.07 26895.20
1997/11/30 30855.83 27134.79
1997/12/31 31200.46 27408.05
1998/01/31 31912.69 27844.84
1998/02/28 32154.10 27957.65
1998/03/31 32827.21 28223.21
1998/04/30 32956.66 28344.43
1998/05/31 32723.66 28514.88
1998/06/30 32697.77 28662.15
1998/07/31 32878.99 28844.82
1998/08/31 28814.42 27388.76
1998/09/30 28529.64 27460.05
1998/10/31 27752.97 26867.49
1998/11/30 30031.20 28267.98
1998/12/31 29849.98 28217.33
1999/01/31 30730.20 28592.84
1999/02/28 30600.09 28403.58
1999/03/31 31370.80 28733.52
1999/04/30 32940.77 29259.23
1999/05/31 32055.88 28990.81
1999/06/30 32198.60 28918.97
1999/07/31 32084.42 28957.87
1999/08/31 31542.07 28651.91
1999/09/30 31056.81 28537.03
1999/10/31 30914.08 28382.14
1999/11/30 31570.62 28752.25
1999/12/31 32312.78 28925.80
IMATRL PRASUN SHR__CHT 19991231 20000126 132142 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: High Income
Portfolio on December 31, 1989. As the chart shows, by December 31,
1999, the value of the investment would have grown to $32,313 - a
223.13% increase on the initial investment. For comparison, look at
how the Merrill Lynch High Yield Master II Index did over the same
period. With dividends and capital gains, if any, reinvested, the same
$10,000 investment would have grown to $28,926 - a 189.26% increase.
Going forward, the fund will compare its performance to that of the
Merrill Lynch High Yield Master II Index, rather than the Merrill
Lynch High Yield Master Index. The Merrill Lynch High Yield Master II
Index contains deferred interest bonds and payment-in-kind securities
and is therefore a better representation of the high yield bond
universe.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF
DECEMBER 31, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS
EQUIVALENTS)
WinStar Communications, Inc. 4.2
Nextel Communications, Inc. 4.0
NEXTLINK Communications, Inc. 2.8
Allied Waste North America, 2.4
Inc.
CSC Holdings, Inc. 2.1
15.5
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
UTILITIES 32.2
MEDIA & LEISURE 22.3
TECHNOLOGY 7.9
BASIC INDUSTRIES 7.5
INDUSTRIAL MACHINERY & 4.6
EQUIPMENT
QUALITY DIVERSIFICATION AS OF
DECEMBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.2
Ba 2.7
B 50.1
Caa, Ca, C 19.7
Not Rated 6.6
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT DECEMBER 31, 1999 ACCOUNT FOR 6.6% OF
THE FUND'S INVESTMENTS.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: HIGH INCOME PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). The initial offering of Service Class shares
took place on November 3, 1997. Performance for Service Class shares
reflects an asset based distribution fee (12b-1 fee), and returns
prior to November 3, 1997 are those of Initial Class and do not
include the effects of Service Class' 12b-1 fee. Had Service Class
shares' 12b-1 fee been reflected, returns prior to November 3, 1997
would have been lower. If Fidelity had not reimbursed certain fund
expenses, the past 10 year total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY VIP: HIGH INCOME - 8.08% 10.84% 12.42%
SERVICE CLASS
ML High Yield Master II 2.51% 9.89% 11.21%
ML High Yield Master 1.57% 9.61% 10.79%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Merrill
Lynch High Yield Master II Index - a market value-weighted index of
all domestic and yankee high-yield bonds, including deferred interest
bonds and payment-in-kind securities. You can also compare the fund's
returns to the performance of the Merrill Lynch High Yield Master
Index - a market value-weighted index of all domestic and yankee
high-yield bonds. Issues included in both benchmarks have maturities
of one year or more and have a credit rating lower than BBB-/Baa3, but
are not in default. These benchmarks reflect the reinvestment of
dividends and capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of
how it will do tomorrow. Bond prices, for
example, generally move in the opposite direction
of interest rates. In turn, the share price, return and
yield of a fund that invests in bonds will vary.
That means if you sell your shares during a
market downturn, you might lose money. But if
you can ride out the market's ups and downs,
you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown.
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 Income - SC ML High Yield Master II
00492 ML012
1989/12/31 10000.00 10000.00
1990/01/31 9778.95 9729.76
1990/02/28 9628.38 9582.73
1990/03/31 9526.79 9756.91
1990/04/30 9555.01 9824.08
1990/05/31 9751.34 9988.09
1990/06/30 9904.94 10241.74
1990/07/31 10057.94 10496.10
1990/08/31 9889.68 10016.04
1990/09/30 9655.18 9597.18
1990/10/31 9420.89 9322.82
1990/11/30 9641.86 9420.70
1990/12/31 9776.69 9563.84
1991/01/31 9984.11 9759.61
1991/02/28 10537.25 10606.29
1991/03/31 10910.62 11121.60
1991/04/30 11297.81 11515.92
1991/05/31 11463.75 11560.78
1991/06/30 11712.67 11816.17
1991/07/31 12155.18 12140.47
1991/08/31 12321.12 12416.66
1991/09/30 12597.68 12595.60
1991/10/31 13026.37 13023.03
1991/11/30 13136.99 13160.21
1991/12/31 13206.13 13310.10
1992/01/31 13911.38 13759.68
1992/02/29 14416.48 14103.59
1992/03/31 14882.50 14305.95
1992/04/30 14987.73 14380.10
1992/05/31 15168.12 14584.44
1992/06/30 15333.48 14760.84
1992/07/31 15634.14 15047.75
1992/08/31 15964.86 15239.40
1992/09/30 16130.22 15400.95
1992/10/31 15889.69 15198.59
1992/11/30 16085.12 15435.41
1992/12/31 16265.52 15631.89
1993/01/31 16701.47 15995.57
1993/02/28 16986.36 16281.69
1993/03/31 17378.35 16567.40
1993/04/30 17492.68 16681.09
1993/05/31 17754.01 16884.56
1993/06/30 18211.34 17213.15
1993/07/31 18391.00 17381.37
1993/08/31 18587.00 17544.91
1993/09/30 18652.33 17622.79
1993/10/31 19093.32 17949.08
1993/11/30 19272.99 18051.73
1993/12/31 19583.31 18241.55
1994/01/31 20236.63 18635.87
1994/02/28 20212.37 18506.39
1994/03/31 19531.46 17908.27
1994/04/30 19334.35 17685.51
1994/05/31 19370.19 17646.85
1994/06/30 19298.52 17727.51
1994/07/31 19370.19 17834.52
1994/08/31 19370.19 17975.91
1994/09/30 19513.54 17972.34
1994/10/31 19334.35 18019.74
1994/11/30 19173.08 17864.69
1994/12/31 19262.68 18052.92
1995/01/31 19477.70 18306.41
1995/02/28 20146.21 18893.17
1995/03/31 20397.07 19148.48
1995/04/30 20995.29 19633.62
1995/05/31 21535.61 20249.91
1995/06/30 21593.50 20386.07
1995/07/31 22114.52 20651.54
1995/08/31 22288.19 20759.91
1995/09/30 22654.84 21001.17
1995/10/31 22867.11 21178.68
1995/11/30 22982.89 21388.58
1995/12/31 23253.05 21746.94
1996/01/31 23793.37 22110.22
1996/02/29 24186.36 22177.78
1996/03/31 24122.82 22087.12
1996/04/30 24482.87 22118.08
1996/05/31 24821.73 22277.49
1996/06/30 24948.80 22366.25
1996/07/31 24864.09 22513.28
1996/08/31 25224.13 22787.88
1996/09/30 25965.39 23323.52
1996/10/31 25880.68 23525.96
1996/11/30 26156.00 23998.40
1996/12/31 26516.05 24197.90
1997/01/31 26876.09 24379.70
1997/02/28 27363.58 24754.49
1997/03/31 26513.50 24413.99
1997/04/30 26927.05 24727.02
1997/05/31 28052.84 25247.65
1997/06/30 28558.30 25637.85
1997/07/31 29592.19 26317.41
1997/08/31 29844.91 26285.73
1997/09/30 30901.78 26758.57
1997/10/31 30626.07 26895.20
1997/11/30 30832.85 27134.79
1997/12/31 31177.48 27408.05
1998/01/31 31912.69 27844.84
1998/02/28 32128.21 27957.65
1998/03/31 32827.21 28223.21
1998/04/30 32956.66 28344.43
1998/05/31 32697.77 28514.88
1998/06/30 32671.88 28662.15
1998/07/31 32853.10 28844.82
1998/08/31 28788.53 27388.76
1998/09/30 28503.75 27460.05
1998/10/31 27727.08 26867.49
1998/11/30 29979.42 28267.98
1998/12/31 29824.09 28217.33
1999/01/31 30652.54 28592.84
1999/02/28 30548.26 28403.58
1999/03/31 31319.11 28733.52
1999/04/30 32860.80 29259.23
1999/05/31 31975.75 28990.81
1999/06/30 32147.05 28918.97
1999/07/31 32004.30 28957.87
1999/08/31 31490.41 28651.91
1999/09/30 31005.06 28537.03
1999/10/31 30833.76 28382.14
1999/11/30 31490.41 28752.25
1999/12/31 32232.70 28925.80
IMATRL PRASUN SHR__CHT 19991231 20000203 121512 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: High Income
Portfolio - Service Class on December 31, 1989. As the chart shows, by
December 31, 1999, the value of the investment would have grown to
$32,233 - a 222.33% increase on the initial investment. For
comparison, look at how the Merrill Lynch High Yield Master II Index
did over the same period. With dividends and capital gains, if any,
reinvested, the same $10,000 investment would have grown to $28,926 -
a 189.26% increase. Going forward, the fund will compare its
performance to that of the Merrill Lynch High Yield Master II Index,
rather than the Merrill Lynch High Yield Master Index. The Merrill
Lynch High Yield Master II Index contains deferred interest bonds and
payment-in-kind securities and is therefore a better representation of
the high yield bond universe.
INVESTMENT SUMMARY
TOP FIVE HOLDINGS AS OF
DECEMBER 31, 1999
(BY ISSUER, EXCLUDING CASH % OF FUND'S NET ASSETS
EQUIVALENTS)
WinStar Communications, Inc. 4.2
Nextel Communications, Inc. 4.0
NEXTLINK Communications, Inc. 2.8
Allied Waste North America, 2.4
Inc.
CSC Holdings, Inc. 2.1
15.5
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
UTILITIES 32.2
MEDIA & LEISURE 22.3
TECHNOLOGY 7.9
BASIC INDUSTRIES 7.5
INDUSTRIAL MACHINERY & 4.6
EQUIPMENT
QUALITY DIVERSIFICATION AS OF
DECEMBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS
Aaa, Aa, A 0.0
Baa 0.2
Ba 2.7
B 50.1
Caa, Ca, C 19.7
Not Rated 6.6
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS. UNRATED DEBT SECURITIES THAT ARE
EQUIVALENT TO BA AND BELOW AT DECEMBER 31, 1999 ACCOUNT FOR 6.6% OF
THE FUND'S INVESTMENTS.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: HIGH INCOME PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Barry Coffman)
An interview with
Barry Coffman,
Portfolio Manager
of High Income Portfolio
Q. HOW DID THE FUND PERFORM, BARRY?
A. For the 12-month period that ended December 31, 1999, the fund
significantly outpaced the 2.51% return of the Merrill Lynch High
Yield Master II Index.
Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE DURING 1999?
A. Rising interest rates put pressure on nearly all bonds, although
high-yield securities held up reasonably well. The comparatively high
levels of income they provided helped cushion high-yield bonds against
price declines. In addition, the ongoing strength of the stock market
helped many companies with significant capital needs attract equity to
finance growth and/or de-leverage their balance sheets. That said,
this was the second year in a row that the high-yield market failed to
earn its coupon, which is unusual given how strong the economy has
been. In addition, the market was fairly volatile throughout the year,
resulting in a wide disparity of returns between the best and worst
performers. Companies that disappointed investors with
worse-than-expected results got severely punished.
Q. WHAT HELPED THE FUND TO OUTPACE THE MERRILL LYNCH HIGH YIELD MASTER
II INDEX DURING THE PAST 12 MONTHS?
A. The fund's large weighting - compared to the Merrill Lynch index -
in telecommunications companies was a major reason for its
outperformance. It was a particularly good year for companies that
provide wireless communications, including Nextel and Millicom. Nextel
continued to enjoy strong subscriber growth, raised a significant
amount of equity and received an upgrade from the rating agencies.
Millicom posted significant growth in its customer base despite
increased competition in some of the foreign markets it serves.
Elsewhere in the telecommunications industry, NEXTLINK, WinStar and
Intermedia also were strong performers. These competitive local
exchange carriers (CLECs) consistently demonstrated their ability to
add new customers at the expense of regional Bell operating companies
(RBOCs). Furthermore, NEXTLINK and WinStar attracted significant
private and public equity, which helped improve their respective
balance sheets and provided sufficient liquidity for the completion of
the build out of their networks.
Q. ASIDE FROM THE TELECOMMUNICATIONS SECTOR, WHICH OF THE FUND'S
HOLDINGS WERE STANDOUTS DURING THE PAST SIX MONTHS?
A. A wave of merger and acquisition activity helped boost the cable
sector, particularly the fund's holdings in U.K.-based companies NTL
and Telewest. As virtually the only two remaining players in the
British cable industry, both companies have added new customers by
offering an attractive combination of cable, telephony and Internet
service products.
Q. WHAT MADE NEXTEL AND WINSTAR - WHICH WERE THE FUND'S TWO LARGEST
HOLDINGS AT THE END OF THE PERIOD - SO ATTRACTIVE?
A. Nextel has a truly differentiated mobile wireless product combining
dispatch (walkie-talkie), conventional cellular and now Internet
access all in one sleek handset. In 1999, Nextel made substantial
gains in adding new subscribers. Furthermore, the company began to
generate meaningful cash flow and its credit rating was upgraded
twice. In another positive development, Nextel raised a significant
amount of capital in order to fund its growth plans. WinStar provides
voice and high-speed data services primarily to small- and mid-sized
businesses. The company received a significant investment from
Microsoft, which helped validate WinStar's business plan in the minds
of many investors.
Q. WHERE WERE THE DISAPPOINTMENTS DURING THE PAST 12 MONTHS?
A. CellNet Data, which provides wireless reading of utility meters,
was probably the biggest disappointment when the company was
unsuccessful in raising additional capital to fund its growth plans.
Another disappointment was supermarket chain Jitney-Jungle, which
filed for bankruptcy protection when it experienced increased
competitive and other pressures.
Q. WHAT FACTORS WILL SHAPE THE HIGH-YIELD MARKET'S PERFORMANCE IN
2000?
A. The strength of the economy and direction of interest rates will be
major factors in determining high-yield bond returns. I don't foresee
a U.S. recession over the near term. The future of interest rates is
less certain, although I take comfort from the fact that inflation has
remained in check so far. With an increasing percentage of the
high-yield market made up of high-growth companies, the strength of
the equity market also will be a significant factor. The default rate
- - which measures the amount of high-yield companies that are unwilling
or unable to honor their debt - rose to its highest level since the
recessionary period of 1989-90. In my view, the default rate should
decline in 2000, but the market is likely to remain volatile. As
frustrating as that may be, I believe that type of environment plays
to Fidelity's credit research strengths, providing many attractive
investment opportunities.
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FUND FACTS
GOAL: to seek high current income by investing primarily in all types
of income-producing debt securities with an emphasis on lower-quality
securities
START DATE: September 19, 1985
SIZE: as of December 31, 1999, more than
$2.5 billion
MANAGER: Barry Coffman, since 1990; joined
Fidelity in 1986
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: HIGH INCOME PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 76.5%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
CONVERTIBLE BONDS - 0.8%
HEALTH - 0.4%
MEDICAL FACILITIES MANAGEMENT
- - 0.4%
Total Renal Care Holdings, B1 $ 14,680,000 $ 9,211,700
Inc. 7% 5/15/09 (f)
MEDIA & LEISURE - 0.4%
LODGING & GAMING - 0.4%
Signature Resorts, Inc. 5.75% Caa1 17,105,000 10,220,238
1/15/07
UTILITIES - 0.0%
TELEPHONE SERVICES - 0.0%
GST Telecommunications, Inc. - 630,000 567,000
0% 12/15/05 (d)(f)
TOTAL CONVERTIBLE BONDS 19,998,938
NONCONVERTIBLE BONDS - 75.7%
AEROSPACE & DEFENSE - 0.3%
SHIP BUILDING & REPAIR - 0.3%
Newport News Shipbuilding, B1 6,050,000 6,034,875
Inc. 9.25% 12/1/06
BASIC INDUSTRIES - 7.0%
CHEMICALS & PLASTICS - 3.9%
Acetex Corp. yankee 9.75% B3 2,000,000 1,810,000
10/1/03
General Chemical Industrial B3 5,350,000 5,296,500
Products, Inc. 10.625% 5/1/09
Huntsman Corp.:
9.5% 7/1/07 (f) B2 8,330,000 7,871,850
9.5% 7/1/07 (f) B2 34,830,000 32,914,350
Huntsman ICI Chemicals LLC B2 10,040,000 10,316,100
10.125% 7/1/09 (f)
Huntsman ICI Holdings LLC 0% B3 22,000,000 6,627,500
12/31/09 (f)
Lyondell Chemical Co.:
9.625% 5/1/07 Ba3 4,260,000 4,345,200
9.875% 5/1/07 Ba3 11,890,000 12,127,800
10.875% 5/1/09 B2 11,360,000 11,757,600
Zeneca Specialty Chemicals B2 5,260,000 5,444,100
PLC 11% 7/1/09 (f)
98,511,000
IRON & STEEL - 0.2%
Republic Tech International B3 8,370,000 5,524,200
LLC/RTI Capital Corp. 13.75%
7/15/09 unit (f)
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
METALS & MINING - 0.5%
Kaiser Aluminum & Chemical
Corp.:
9.875% 2/15/02 B1 $ 1,860,000 $ 1,836,750
12.75% 2/1/03 B3 6,398,000 6,398,000
Metals USA, Inc. 8.625% B2 4,305,000 4,035,938
2/15/08
12,270,688
PACKAGING & CONTAINERS - 1.1%
Gaylord Container Corp. Caa1 10,340,000 9,616,200
9.375% 6/15/07
Packaging Corp. of America B3 17,320,000 17,688,050
9.625% 4/1/09
27,304,250
PAPER & FOREST PRODUCTS - 1.3%
APP Finance II Mauritius Ltd. B3 10,205,000 6,735,300
12% 3/15/04
Container Corp. of America B2 1,690,000 1,740,700
gtd. 9.75% 4/1/03
Indah Kiat International Caa1 1,700,000 1,394,000
Finance Co. BV 12.5% 6/15/06
Millar Western Forest B3 13,115,000 13,115,000
Products Ltd. 9.875% 5/15/08
Repap New Brunswick, Inc. Caa1 8,970,000 8,274,825
yankee 10.625% 4/15/05
Stone Container Corp. 12.58% B2 1,150,000 1,224,750
8/1/16 (g)
32,484,575
TOTAL BASIC INDUSTRIES 176,094,713
CONSTRUCTION & REAL ESTATE -
1.7%
BUILDING MATERIALS - 0.4%
International Utility Caa1 9,200,000 7,544,000
Structures, Inc. 10.75%
2/1/08
Schuff Steel Co. 10.5% 6/1/08 B3 1,850,000 1,507,750
9,051,750
CONSTRUCTION - 0.2%
Del Webb Corp. 10.25% 2/15/10 B2 4,920,000 4,698,600
Great Lakes Dredge & Dock B3 240,000 250,800
Corp. 11.25% 8/15/08
4,949,400
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE - 0.8%
LNR Property Corp.:
9.375% 3/15/08 B1 $ 14,395,000 $ 13,495,313
10.5% 1/15/09 B1 7,040,000 6,952,000
20,447,313
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
Ocwen Asset Investment Corp. - 9,880,000 8,398,000
11.5% 7/1/05
TOTAL CONSTRUCTION & REAL 42,846,463
ESTATE
DURABLES - 0.5%
AUTOS, TIRES, & ACCESSORIES -
0.4%
Tenneco, Inc. 11.625% B2 8,540,000 8,668,100
10/15/09 (f)
TEXTILES & APPAREL - 0.1%
Pillowtex Corp.:
9% 12/15/07 Ca 2,350,000 1,045,750
10% 11/15/06 Ca 1,370,000 609,650
Worldtex, Inc. 9.625% 12/15/07 B1 2,315,000 1,875,150
3,530,550
TOTAL DURABLES 12,198,650
ENERGY - 2.3%
COAL - 0.4%
P&L Coal Holdings Corp. B2 10,210,000 9,954,750
9.625% 5/15/08
ENERGY SERVICES - 0.1%
RBF Finance Co. 11.375% Ba3 3,120,000 3,354,000
3/15/09
OIL & GAS - 1.8%
Belden & Blake Corp. 9.875% Caa3 2,155,000 1,055,950
6/15/07
Chesapeake Energy Corp.:
7.875% 3/15/04 B3 1,610,000 1,420,825
8.5% 3/15/12 B3 840,000 701,400
9.125% 4/15/06 B3 2,250,000 2,047,500
9.625% 5/1/05 B3 13,256,000 12,526,920
Great Lakes Carbon Corp.:
0% 5/15/09 (d) Caa1 15,215,000 8,063,950
10.25% 5/15/08 pay-in-kind B3 10,330,000 9,710,200
Plains Resources, Inc.:
Series B 10.25% 3/15/06 B2 5,860,000 5,713,500
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Series D, 10.25% 3/15/06 B2 $ 2,770,000 $ 2,700,750
Seven Seas Petroleum, Inc. Caa1 2,130,000 852,000
12.5% 5/15/05
44,792,995
TOTAL ENERGY 58,101,745
FINANCE - 2.7%
CREDIT & OTHER FINANCE - 2.7%
Ameriserve Finance B2 15,390,000 12,619,800
Trust/Ameriserve Capital
Corp. 12% 9/15/06 (f)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 10,130,000 6,736,450
10% 3/15/04 Caa3 1,824,000 1,185,600
Arcadia Financial Ltd. 11.5% B3 2,340,000 2,433,600
3/15/07
Dobson/Sygnet Communications - 4,170,000 4,587,000
Co. 12.25% 12/15/08
Imperial Credit Capital Trust B2 4,870,000 3,798,600
I 10.25% 6/14/02
Imperial Credit Industries B3 17,470,000 12,927,800
9.875% 1/15/07
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 2,720,000 1,632,000
7.6% 8/1/07 Ba2 3,892,000 2,140,600
7.875% 8/1/03 Ba2 6,900,000 3,933,000
Metris Companies, Inc. 10% Ba3 100,000 95,000
11/1/04
MFN Financial Corp. 10% - 10,000,000 9,400,000
3/23/01
PX Escrow Corp. 0% 2/1/06 (d) B3 3,190,000 1,531,200
WinStar Equipment II Corp. CCC+ 3,370,000 3,538,500
12.5% 3/15/04
66,559,150
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP 14% 6/10/02 (f) - 16,948 16,609
TOTAL FINANCE 66,575,759
HEALTH - 2.8%
DRUGS & PHARMACEUTICALS - 0.2%
Global Health Sciences, Inc. Caa1 10,080,000 6,048,000
11% 5/1/08
MEDICAL EQUIPMENT & SUPPLIES
- - 0.8%
Wright Medical Technology, Caa3 18,650,000 20,794,750
Inc. 11.75% 7/1/00 (c)(g)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
HEALTH - CONTINUED
MEDICAL FACILITIES MANAGEMENT
- - 1.8%
Fountain View, Inc. 11.25% Caa1 $ 7,330,000 $ 5,570,800
4/15/08
Harborside Healthcare Corp. B3 10,250,000 3,280,000
0% 8/1/08 (d)
Mariner Post-Acute Network, B3 11,630,000 697,800
Inc. 9.5% 11/1/07 (c)
Oxford Health Plans, Inc. 11% Caa1 14,465,000 14,031,050
5/15/05
Tenet Healthcare Corp.:
7.875% 1/15/03 Ba1 5,040,000 4,939,200
8.125% 12/1/08 Ba3 10,710,000 9,987,075
Unilab Corp. 12.75% 10/1/09 B3 5,410,000 5,599,350
(f)
44,105,275
TOTAL HEALTH 70,948,025
INDUSTRIAL MACHINERY &
EQUIPMENT - 3.9%
ELECTRICAL EQUIPMENT - 0.5%
Motors & Gears, Inc. 10.75% B3 9,170,000 8,894,900
11/15/06
Telex Communications, Inc. B2 7,490,000 4,643,800
10.5% 5/1/07
13,538,700
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Dunlop Standard Aero Holdings B3 1,450,000 1,493,500
PLC 11.875% 5/15/09
Thermadyne Holdings Corp. 0% Caa1 11,470,000 5,218,850
6/1/08 (d)
Thermadyne Manufacturing LLC B3 4,470,000 3,710,100
9.875% 6/1/08
Tokheim Corp. 11.375% 8/1/08 B3 10,350,000 6,054,750
16,477,200
POLLUTION CONTROL - 2.7%
Allied Waste North America, B2 67,180,000 59,790,193
Inc. 10% 8/1/09 (f)
Envirosource, Inc.:
Series B, 9.75% 6/15/03 Caa3 4,900,000 3,087,000
9.75% 6/15/03 Caa3 9,496,000 5,982,480
68,859,673
TOTAL INDUSTRIAL MACHINERY & 98,875,573
EQUIPMENT
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
MEDIA & LEISURE - 18.4%
BROADCASTING - 12.9%
Adelphia Communications Corp.:
7.75% 1/15/09 B1 $ 7,000,000 $ 6,247,500
9.875% 3/1/05 B1 5,000,000 5,087,500
Ascent Entertainment Group, B3 12,445,000 9,271,525
Inc. 0% 12/15/04 (d)
Benedek Communications Corp. B3 5,000,000 4,500,000
0% 5/15/06 (d)
Century Communications Corp. B1 7,380,000 7,140,150
8.875% 1/15/07
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (d) B2 8,780,000 5,136,300
8.625% 4/1/09 B2 23,250,000 21,506,250
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 11,561,000 9,451,118
yankee 0% 12/15/05 (d) B3 9,875,000 9,282,500
Earthwatch, Inc. 0% 7/15/07 - 16,560,000 11,592,000
unit (d)(f)
EchoStar DBS Corp. 9.375% B2 15,700,000 15,739,250
2/1/09
FrontierVision Holdings B1 210,000 184,800
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
Golden Sky DBS, Inc. 0% Caa1 10,640,000 6,437,200
3/1/07 (d)
International Cabletel, Inc. B3 40,484,000 36,536,810
0% 2/1/06 (d)
LIN Holdings Corp. 0% 3/1/08 B3 11,678,000 7,882,650
(d)
NTL Communications Corp. B3 14,080,000 15,241,600
11.5% 10/1/08
NTL, Inc. 0% 4/1/08 (d) B3 12,185,000 8,407,650
Olympus Communications B1 7,585,000 7,926,325
LP/Olympus Capital Corp.
10.625% 11/15/06
Satelites Mexicanos SA de CV:
0% 6/30/04 (f)(g) B1 13,229,000 12,170,680
10.125% 11/1/04 B3 25,420,000 17,794,000
Spectrasite Holdings, Inc. 0% - 8,670,000 4,595,100
4/15/09 (d)
Telemundo Holdings, Inc. 0% Caa1 2,190,000 1,324,950
8/15/08 (d)
Telewest PLC 0% 10/1/07 (d) B1 31,492,000 29,130,100
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
UIH Australia/Pacific, Inc.:
Series B 0% 5/15/06 (d) B2 $ 34,210,000 $ 28,736,400
Series D 0% 5/15/06 (d) B2 5,520,000 4,636,800
United International B3 45,375,000 28,359,375
Holdings, Inc. 0% 2/15/08
(d)
United Pan-Europe B2 9,710,000 9,855,650
Communications NV 10.875%
8/1/09
324,174,183
ENTERTAINMENT - 2.1%
AMC Entertainment, Inc.:
9.5% 3/15/09 B3 4,910,000 4,333,075
9.5% 2/1/11 B3 690,000 602,025
Cinemark USA, Inc.:
8.5% 8/1/08 B2 2,000,000 1,750,000
9.625% 8/1/08 B2 7,360,000 6,771,200
Hollywood Entertainment Corp. B3 10,690,000 9,888,250
10.625% 8/15/04
Premier Parks, Inc. 0% B3 15,440,000 10,499,200
4/1/08 (d)
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa1 2,660,000 1,988,350
9.5% 6/1/08 Caa1 22,040,000 17,411,600
53,243,700
LEISURE DURABLES & TOYS - 0.3%
Marvel Enterprises, Inc. 12% - 8,750,000 8,137,500
6/15/09
LODGING & GAMING - 2.3%
Florida Panthers Holdings, B2 8,750,000 8,487,500
Inc. 9.875% 4/15/09
Hollywood Casino Corp. 11.25% B3 1,210,000 1,261,425
5/1/07
Horseshoe Gaming LLC 8.625% B2 7,300,000 7,026,250
5/15/09
KSL Recreation Group, Inc. B3 8,280,000 8,114,400
10.25% 5/1/07
Signature Resorts, Inc.:
9.25% 5/15/06 B2 12,280,000 11,481,800
9.75% 10/1/07 B3 23,950,000 20,597,000
56,968,375
PUBLISHING - 0.2%
Garden State Newspapers, Inc. B1 4,000,000 3,770,000
Series B, 8.75% 10/1/09
RESTAURANTS - 0.6%
AFC Enterprises, Inc. 10.25% B3 9,890,000 9,939,450
5/15/07
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
CKE Restaurants, Inc. 9.125% B2 $ 4,250,000 $ 3,187,500
5/1/09
NE Restaurant, Inc. 10.75% B3 3,120,000 2,769,000
7/15/08
15,895,950
TOTAL MEDIA & LEISURE 462,189,708
NONDURABLES - 0.7%
FOODS - 0.3%
International Home Foods, B2 7,150,000 7,418,125
Inc. 10.375% 11/1/06
HOUSEHOLD PRODUCTS - 0.4%
AKI Holding Corp. 0% 7/1/09 Caa1 9,120,000 4,240,800
(d)
AKI, Inc. 10.5% 7/1/08 B2 6,960,000 6,264,000
10,504,800
TOTAL NONDURABLES 17,922,925
RETAIL & WHOLESALE - 1.9%
APPAREL STORES - 1.1%
Mothers Work, Inc. 12.625% B3 7,440,000 7,495,800
8/1/05
Specialty Retailers, Inc.:
8.5% 7/15/05 B1 18,870,000 13,963,800
9% 7/15/07 B3 9,850,000 5,614,500
27,074,100
GROCERY STORES - 0.8%
Ameriserve Food Distribution,
Inc.:
8.875% 10/15/06 B3 8,005,000 4,482,800
10.125% 7/15/07 Caa1 8,920,000 2,943,600
Jitney-Jungle Stores of
America, Inc.:
10.375% 9/15/07 (c) C 9,685,000 48,425
12% 3/1/06 (c) Caa3 2,590,000 621,600
Pathmark Stores, Inc. 9.625% Caa3 7,305,000 5,478,750
5/1/03
Pueblo Xtra International,
Inc.:
Series C, 9.5% 8/1/03 B3 4,590,000 2,754,000
9.5% 8/1/03 B3 6,260,000 3,756,000
20,085,175
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
Finlay Enterprises, Inc. 9% B2 1,000,000 920,000
5/1/08
TOTAL RETAIL & WHOLESALE 48,079,275
SERVICES - 2.5%
LEASING & RENTAL - 0.2%
Rent-A-Center, Inc. 11% B2 6,230,000 6,401,325
8/15/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
SERVICES - CONTINUED
PRINTING - 1.1%
Sullivan Graphics, Inc. Caa1 $ 21,340,000 $ 22,246,950
12.75% 8/1/05
World Color Press, Inc. 7.75% Baa3 5,090,000 4,848,225
2/15/09
27,095,175
SERVICES - 1.2%
AP Holdings, Inc. 0% 3/15/08 Caa2 2,470,000 988,000
(d)
Apcoa, Inc. 9.25% 3/15/08 Caa1 15,140,000 10,598,000
Medaphis Corp. 9.5% 2/15/05 Caa1 13,713,000 10,559,010
SITEL Corp. 9.25% 3/15/06 B3 2,890,000 2,716,600
Spin Cycle, Inc. 0% 5/1/05 - 25,335,000 5,067,000
(d)
29,928,610
TOTAL SERVICES 63,425,110
TECHNOLOGY - 6.9%
COMPUTER SERVICES & SOFTWARE
- - 3.2%
Concentric Network Corp. B- 12,760,000 13,398,000
12.75% 12/15/07
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 14,660,000 9,199,150
12.5% 2/15/09 B3 10,734,000 11,109,690
DecisionOne Corp. 9.75% B3 7,220,000 27,075
8/1/07 (c)
Exodus Communications, Inc. B- 12,510,000 12,728,925
10.75% 12/15/09 (f)
PSINet, Inc.:
10% 2/15/05 B3 5,215,000 5,169,369
10.5% 12/1/06 (f) B3 6,010,000 6,085,125
11% 8/1/09 B3 9,400,000 9,658,500
11.5% 11/1/08 B3 5,500,000 5,775,000
Verio, Inc.:
10.625% 11/15/09 (f) B3 5,880,000 5,997,600
11.25% 12/1/08 B3 1,840,000 1,922,800
81,071,234
ELECTRONIC INSTRUMENTS - 0.7%
Telecommunications Techniques B3 19,385,000 17,640,350
Co. LLC 9.75% 5/15/08
ELECTRONICS - 3.0%
ChipPAC International Ltd. B3 5,670,000 5,953,500
12.75% 8/1/09 (f)
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Communications Instruments, B3 $ 3,910,000 $ 3,245,300
Inc. 10% 9/15/04
Details, Inc. 10% 11/15/05 B3 530,000 487,600
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 1,370,000 1,383,700
10.375% 10/1/07 B3 13,050,000 13,311,000
Hadco Corp. 9.5% 6/15/08 B2 12,835,000 12,449,950
Insilco Corp. 12% 8/15/07 B3 7,380,000 7,232,400
Intersil Corp. 13.25% B3 9,470,000 10,322,300
8/15/09 (f)
Micron Technology, Inc. 6.5% B3 10,000,000 7,975,000
9/30/05 (h)
SCG Holding B2 10,590,000 11,251,875
Corp./Semiconductor
Components Industries LLC
12% 8/1/09 (f)
73,612,625
TOTAL TECHNOLOGY 172,324,209
TRANSPORTATION - 0.7%
AIR TRANSPORTATION - 0.6%
Atlas Air, Inc. 10.75% 8/1/05 B2 7,000,000 7,105,000
Kitty Hawk, Inc. 9.95% B1 8,459,000 8,353,263
11/15/04
15,458,263
SHIPPING - 0.1%
Holt Group, Inc. 9.75% 1/15/06 Caa1 3,610,000 2,346,500
TOTAL TRANSPORTATION 17,804,763
UTILITIES - 23.4%
CELLULAR - 9.3%
Cellnet Data Systems, Inc.:
0% 10/1/07 (d) - 69,670,000 7,663,700
15% 1/7/00 (h) - 2,854,000 2,854,000
Clearnet Communications, Inc. B3 2,140,000 2,102,550
yankee 0% 12/15/05 (d)
McCaw International Ltd. 0% Caa1 45,885,000 32,119,500
4/15/07 (d)
Metrocall, Inc.:
10.375% 10/1/07 B3 6,790,000 4,040,050
11% 9/15/08 B3 3,410,000 2,080,100
Millicom International Caa1 52,300,000 43,278,250
Cellular SA 0% 6/1/06 (d)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
Nextel Communications, Inc. B1 $ 18,390,000 $ 18,091,163
9.375% 11/15/09 (f)
Nextel International, Inc. 0% Caa1 28,900,000 17,195,500
4/15/08 (d)
Orbital Imaging Corp.:
11.625% 3/1/05 CCC+ 14,975,000 10,108,125
Orion Network Systems, Inc.:
0% 1/15/07 (d) B2 12,460,000 5,793,900
11.25% 1/15/07 B2 5,350,000 4,012,500
PageMart Nationwide, Inc. 0% B3 17,880,000 15,913,200
2/1/05 (d)
PageMart Wireless, Inc. 0% Caa2 23,020,000 8,287,200
2/1/08 (d)
TeleCorp PCS, Inc. 0% B3 8,980,000 5,657,400
4/15/09 (d)
Telesystem International
Wireless, Inc.:
0% 6/30/07 (d) Caa1 18,940,000 12,121,600
0% 11/1/07 (d) Caa1 23,800,000 13,090,000
Triton PCS, Inc. 0% 5/1/08 B3 9,730,000 6,883,975
(d)
US Unwired, Inc. 0% 11/1/09 Caa1 11,400,000 6,669,000
(d)(f)
Voicestream Wireless B2 14,720,000 15,161,600
Corp./Voicestream Wireless
Holding Co. 10.375% 11/15/09
(f)
233,123,313
TELEPHONE SERVICES - 14.1%
Allegiance Telecom, Inc. 0% B3 3,030,000 2,181,600
2/15/08 (d)
Call-Net Enterprises, Inc. B2 5,000,000 4,100,000
9.375% 5/15/09
e.spire Communications, Inc.:
0% 11/1/05 (d) - 4,750,000 2,588,750
0% 4/1/06 (d) - 7,070,000 2,545,200
0% 7/1/08 (d) - 13,880,000 4,858,000
13.75% 7/15/07 - 1,420,000 994,000
Global Crossing Holdings Ltd. Ba2 10,000,000 9,887,500
9.5% 11/15/09 (f)
GST Network Funding, Inc. 0% - 15,570,000 7,629,300
5/1/08 (d)
GST Equipment Funding, Inc. - 4,300,000 4,149,500
13.25% 5/1/07
GST Telecommunications, Inc. - 18,870,000 17,737,800
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (d) - 11,680,000 8,701,600
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
ICG Holdings, Inc. 0% B3 $ 24,020,000 $ 20,957,450
9/15/05 (d)
ICG Services, Inc.:
0% 2/15/08 (d) B3 37,500,000 19,593,750
0% 5/1/08 (d) B3 2,950,000 1,511,875
Intermedia Communications,
Inc.:
0% 3/1/09 (d) B3 24,640,000 14,722,400
8.875% 11/1/07 B2 7,255,000 6,765,288
KMC Telecom Holdings, Inc.:
0% 2/15/08 (d) Caa2 19,400,000 10,476,000
13.5% 5/15/09 Caa2 7,200,000 7,128,000
Logix Communications - 10,910,000 7,637,000
Enterprises, Inc. 12.25%
6/15/08
Metromedia Fiber Network, Inc.:
10% 11/15/08 B2 15,280,000 15,585,600
10% 12/15/09 B2 5,640,000 5,752,800
NEXTLINK Communications, Inc.:
0% 12/1/09 (d)(f) B2 3,010,000 1,760,850
10.75% 11/15/08 B3 340,000 350,200
10.75% 6/1/09 B2 10,690,000 11,010,700
Optel Communications Corp. - 13,867,500 13,000,781
15% 12/29/04 (h)
Pathnet, Inc. 12.25% 4/15/08 - 18,040,000 11,545,600
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 23,485,000 12,681,900
12.75% 4/15/09 B3 7,480,000 7,255,600
Teligent, Inc.:
0% 3/1/08 (d) Caa1 15,950,000 9,370,625
11.5% 12/1/07 Caa1 7,825,000 7,629,375
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 19,660,000 18,480,400
0% 10/15/05 (d) Caa1 30,160,000 45,843,200
0% 3/15/08 (d) CCC 17,585,000 17,936,700
10% 3/15/08 CCC 14,750,000 14,160,000
15% 3/1/07 CCC 2,790,000 3,961,800
WinStar Equipment Corp. 12.5% B3 4,255,000 4,552,850
3/15/04
355,043,994
TOTAL UTILITIES 588,167,307
TOTAL NONCONVERTIBLE BONDS 1,901,589,100
TOTAL CORPORATE BONDS 1,921,588,038
(Cost $2,097,920,713)
ASSET-BACKED SECURITIES - 0.1%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Airplanes pass through trust Ba2 $ 2,920,000 $ 2,394,400
10.875% 3/15/19 (Cost
$3,231,600)
COMMERCIAL MORTGAGE
SECURITIES - 0.9%
Commercial Mortgage BB+ 4,500,000 2,680,313
Acceptance Corp. pass
through certificates Series
1998-C2 Class F, 5.44%
5/15/13 (f)(g)
Commercial Mortgage Asset Ba1 4,750,000 2,849,258
Trust pass through
certificates Series 1999-C1
Class F, 6.25% 11/17/13 (f)
LB Multifamily Mortgage Trust Caa1 2,661,665 2,129,333
Series 1991-4 Class A1,
7.1377% 4/25/21 (g)
Meritor Mortgage Security - 1,350,000 116,505
Corp. Series 1987 1 Class B,
9.4% 2/1/00 (f)(i)
Mortgage Capital Funding, Ba1 4,500,000 3,507,795
Inc. Series 1998-MC3 Class
F, 7.5008% 11/18/31 (f)(g)
Nationslink Funding Corp. BB 4,500,000 3,231,563
Commercial Mortgage pass
through certificates Series
1998-2 Class F, 7.105%
8/20/30
Nomura Depositor Trust Series - 4,000,000 3,666,250
1998-ST1A Class B1A,
8.1938% 1/15/03 (f)(g)
Structured Asset Securities
Corp.:
Series 1994-C1 Class F, 6.87% B 2,600,000 2,056,742
8/25/26
Series 1995-C1 Class F, - 2,000,000 1,546,641
7.375% 9/25/24 (f)
TOTAL COMMERCIAL MORTGAGE 21,784,400
SECURITIES
(Cost $22,131,174)
</TABLE>
COMMON STOCKS - 3.9%
SHARES
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.0%
Sterling Chemicals Holdings, 340 5,100
Inc. warrants 8/15/08 (a)
SHARES VALUE (NOTE 1)
IRON & STEEL - 0.2%
AK Steel Holding Corp. 205,500 $ 3,878,813
TOTAL BASIC INDUSTRIES 3,883,913
CONSTRUCTION & REAL ESTATE -
0.3%
BUILDING MATERIALS - 0.1%
International Utility 2,500 1,925,000
Structures, Inc. unit
REAL ESTATE - 0.2%
LNR Property Corp. 287,100 5,706,113
REAL ESTATE INVESTMENT TRUSTS
- - 0.0%
Swerdlow Real Estate Group,
Inc.:
Class A (h) 79,800 11,132
Class B (h) 19,817 2,760
13,892
TOTAL CONSTRUCTION & REAL 7,645,005
ESTATE
DURABLES - 0.6%
TEXTILES & APPAREL - 0.6%
Arena Brands Holdings Corp. 48,889 1,222,225
Class B
Polymer Group, Inc. 426,300 7,779,975
WestPoint Stevens, Inc. Class 300,000 5,250,000
A
14,252,200
ENERGY - 0.4%
OIL & GAS - 0.4%
Chesapeake Energy Corp. (a) 185,400 440,325
Plains Resources, Inc. (a) 811,500 10,143,750
10,584,075
FINANCE - 0.0%
CREDIT & OTHER FINANCE - 0.0%
Arcadia Financial Ltd. 498 5
warrants 3/15/07 (a)
SECURITIES INDUSTRY - 0.0%
ECM Corp. LP (f) 3,000 264,000
TOTAL FINANCE 264,005
HEALTH - 0.3%
MEDICAL EQUIPMENT & SUPPLIES
- - 0.0%
Wright Medical Technology, 3,212 32
Inc. warrants 6/30/03 (a)
MEDICAL FACILITIES MANAGEMENT
- - 0.3%
Express Scripts, Inc. Class A 80,800 5,171,200
(a)
Oxford Health Plans, Inc. (a) 200,000 2,537,500
7,708,700
TOTAL HEALTH 7,708,732
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.0%
Tenneco Automotive, Inc. 100,000 931,250
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
POLLUTION CONTROL - 0.7%
Allied Waste Industries, Inc. 2,015,000 $ 17,757,188
(a)
TOTAL INDUSTRIAL MACHINERY & 18,688,438
EQUIPMENT
MEDIA & LEISURE - 0.8%
BROADCASTING - 0.1%
Benedek Communications Corp. 57,600 115,200
warrants 7/1/07 (a)
CS Wireless Systems, Inc. 1,024 10
(a)(f)
NTL, Inc. warrants 10/14/08 23,146 1,157,300
(a)
Teletrac Holdings, Inc. 3,940 4
warrants 8/1/07 (a)
UIH Australia/Pacific, Inc. 26,805 804,150
warrants 5/15/06 (a)
2,076,664
ENTERTAINMENT - 0.0%
Alliance Gaming Corp. (a)(h) 2,028 5,704
LODGING & GAMING - 0.7%
Motels of America, Inc. (a) 3,000 54,000
Sunterra Corp. (a) 1,497,400 17,220,100
17,274,100
TOTAL MEDIA & LEISURE 19,356,468
RETAIL & WHOLESALE - 0.1%
APPAREL STORES - 0.1%
Mothers Work, Inc. (a)(e) 299,100 3,477,038
Mothers Work, Inc. (a)(h) 2,952 34,317
3,511,355
SERVICES - 0.0%
Spin Cycle, Inc. warrants 25,335 253
5/1/05 (a)(f)
TECHNOLOGY - 0.1%
COMPUTERS & OFFICE EQUIPMENT
- - 0.0%
Ampex Corp. Class A (a) 11,930 64,869
ELECTRONICS - 0.1%
Insilco Corp. warrants 7,380 74
8/15/07 (a)
Intersil Holding Corp. 9,470 1,330,535
warrants 8/15/09 (a)(f)
1,330,609
TOTAL TECHNOLOGY 1,395,478
TRANSPORTATION - 0.1%
AIR TRANSPORTATION - 0.1%
Kitty Hawk, Inc. (a) 341,900 2,350,563
SHARES VALUE (NOTE 1)
UTILITIES - 0.3%
CELLULAR - 0.0%
Cellnet Data Systems, Inc. 18,000 $ 4,500
warrants 10/1/07 (a)(f)
Loral Orion Network Systems,
Inc.:
warrants 1/15/07 (CV ratio 45,930 321,510
.47) (a)
warrants 1/15/07 (CV ratio 5,585 50,265
.6) (a)
McCaw International Ltd. 42,305 95,186
warrants 4/16/07 (a)(f)
Orbital Imaging Corp. 3,685 55,275
warrants 3/1/05 (a)(f)
526,736
TELEPHONE SERVICES - 0.3%
KMC Telecom Holdings, Inc. 12,650 31,625
warrants 4/15/08 (a)(f)
Optel Communications Corp. 2,559,515 6,718,727
warrants 12/29/04 (a)(h)
Pathnet, Inc. warrants 18,040 180,400
4/15/08 (a)(f)
6,930,752
TOTAL UTILITIES 7,457,488
TOTAL COMMON STOCKS 97,097,973
(Cost $110,534,475)
PREFERRED STOCKS - 14.2%
CONVERTIBLE PREFERRED STOCKS
- - 0.4%
BASIC INDUSTRIES - 0.2%
CHEMICALS & PLASTICS - 0.2%
Sealed Air Corp. Series A, 64,000 3,232,000
$2.00
ENERGY - 0.2%
OIL & GAS - 0.2%
Chesapeake Energy Corp. $3.50 212,500 5,498,438
TOTAL CONVERTIBLE PREFERRED 8,730,438
STOCKS
NONCONVERTIBLE PREFERRED
STOCKS - 13.8%
BASIC INDUSTRIES - 0.1%
PACKAGING & CONTAINERS - 0.1%
Packaging Corp. of America 21,384 2,341,548
12.375% pay-in-kind
CONSTRUCTION & REAL ESTATE -
0.3%
BUILDING MATERIALS - 0.0%
International Utility 517 403,260
Structures, Inc. 13%
pay-in-kind (f)
REAL ESTATE INVESTMENT TRUSTS
- - 0.3%
Swerdlow Real Estate Group,
Inc.:
junior (h) 19,817 2,760
PREFERRED STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
CONSTRUCTION & REAL ESTATE -
CONTINUED
REAL ESTATE INVESTMENT TRUSTS
- - CONTINUED
Swerdlow Real Estate Group,
Inc.: - continued
mezzanine (h) 79,800 $ 78,520
senior (h) 79,800 7,618,828
7,700,108
TOTAL CONSTRUCTION & REAL 8,103,368
ESTATE
ENERGY - 0.5%
ENERGY SERVICES - 0.5%
R&B Falcon Corp. 13.875% 12,749 13,450,195
FINANCE - 0.3%
INSURANCE - 0.3%
American Annuity Group 8,910 7,978,528
Capital Trust II 8.875%
HEALTH - 0.5%
MEDICAL FACILITIES MANAGEMENT
- - 0.5%
Fresenius Medical Care 10,524 9,964,586
Capital Trust II 7.875%
Harborside Healthcare Corp. 4,724 1,275,480
13.50% pay-in-kind
11,240,066
MEDIA & LEISURE - 2.7%
BROADCASTING - 2.7%
Citadel Broadcasting Co. 50,962 5,682,263
Series B, 13.25% pay-in-kind
CSC Holdings, Inc.:
11.125% pay-in-kind 288,141 31,479,404
Series H, 11.75% pay-in-kind 188,805 20,768,550
Granite Broadcasting Corp. 9,902 10,100,040
12.75% pay-in-kind
68,030,257
TECHNOLOGY - 0.9%
COMPUTER SERVICES & SOFTWARE
- - 0.9%
Concentric Network Corp. 22,684 22,684,000
13.5% pay-in-kind
COMPUTERS & OFFICE EQUIPMENT
- - 0.0%
Ampex Corp. 8% non-cumulative 446 695,760
TOTAL TECHNOLOGY 23,379,760
UTILITIES - 8.5%
CELLULAR - 3.3%
Nextel Communications, Inc.:
11.125% pay-in-kind 44,665 44,888,325
Series D, 13% pay-in-kind 35,258 37,902,350
82,790,675
SHARES VALUE (NOTE 1)
TELEPHONE SERVICES - 5.2%
e.spire Communications, Inc.:
$127.50 pay-in-kind 18,043 $ 3,157,525
14.75% pay-in-kind 4,208 799,520
ICG Holdings, Inc. 14.25% 25,073 22,816,430
pay-in-kind
Intermedia Communications, 29,355 28,621,125
Inc. 13.5% pay-in-kind
IXC Communications, Inc. 9,157 10,026,915
12.5% pay-in-kind
NEXTLINK Communications, Inc. 1,050,656 56,735,424
14% pay-in-kind
WinStar Communications, Inc. 7,810 7,731,900
14.25% (a)
129,888,839
TOTAL UTILITIES 212,679,514
TOTAL NONCONVERTIBLE 347,203,236
PREFERRED STOCKS
TOTAL PREFERRED STOCKS 355,933,674
(Cost $372,357,336)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PURCHASED BANK DEBT - 0.8%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT
Lyondell Chemical Co. sr. - $ 10,905,062 11,109,533
secured Tranche E term loan
9.9788% 5/17/06 (g)
Oxford Health Plans, Inc. sr. B3 7,000,000 7,000,000
secured term loan 9.335%
5/13/03 (g)
Synthetic Industries, Inc. - 3,600,000 3,564,000
term loan 13% 12/13/00 (g)
TOTAL PURCHASED BANK DEBT 21,673,533
(Cost $21,489,519)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 2.3%
MATURITY AMOUNT
Investments in repurchase $ 59,195,669 59,179,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 3.38%,
dated 12/31/99 due 1/3/00
(Cost $59,179,000)
TOTAL INVESTMENT PORTFOLIO - 2,479,651,018
98.7%
(Cost $2,686,843,817)
NET OTHER ASSETS - 1.3% 31,930,482
NET ASSETS - 100% $ 2,511,581,500
</TABLE>
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) Non-income producing - issuer filed for protection under the
Federal Bankruptcy Code or is in default of interest payment.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Transactions during the period with companies which are or were
affiliates are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE
Hat Brands, Inc. $ - $ 340,000 $ - $ -
Mothers Work, Inc. - 347,350 - 3,477,038
TOTALS $ - $ 687,350 $ - $ 3,477,038
</TABLE>
(f) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $309,574,776 or 12.3% of net assets.
(g) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(h) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Alliance Gaming Corp. 7/28/98 $ 0
Cellnet Data Systems, Inc. 11/10/99 - 12/2/99 $ 2,854,000
15% 1/7/00
Micron Technology, Inc. 6.5% 3/3/99 - 10/7/99 $ 7,794,500
9/30/05
Mothers Work, Inc. 6/18/98 $ 26,172
Optel Communications Corp. 12/31/97 $ 759,408
warrants 12/29/04
Optel Communications Corp. 12/31/97 - 6/30/99 $ 13,108,140
15% 12/29/04
Swerdlow Real Estate Group, 1/15/99 $ 11,132
Inc. Class A
Swerdlow Real Estate Group, 1/15/99 $ 2,760
Inc. Class B
Swerdlow Real Estate Group, 1/15/99 $ 2,760
Inc. junior
Swerdlow Real Estate Group, 1/15/99 $ 78,520
Inc. mezzanine
Swerdlow Real Estate Group, 1/15/99 $ 7,618,828
Inc. senior
(i) Partial interest payment received on the last interest payment
date.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $2,007,871,143 and $1,980,933,572, 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 $7,978 for the
period.
The fund invested in securities that are not registered under the
Securities Act of 1933. These securities are subject to legal or
contractual restrictions on resale. At the end of the period,
restricted securities (excluding Rule 144A issues) amounted to
$38,302,529 or 1.5% of net assets.
The fund participated in the interfund lending program as a borrower.
The average daily loan balance during the period for which loans were
outstanding amounted to $22,684,750. The weighted average interest
rate was 4.87%. Interest expense includes $12,264 paid under the
interfund lending program.
The fund participated in the interfund lending program as a lender.
The average daily loan balance during the period for which loans were
outstanding amounted to $8,702,600. The weighted average interest rate
was 5.34%. Interest earned from the interfund lending program amounted
to $12,899 and is included in interest income on the Statement of
Operations.
The fund participated in the bank borrowing program. The average daily
loan balance during the period for which loans were outstanding
amounted to $15,284,000. The weighted average interest rate was 5.23%.
Interest expense includes $13,318 paid under the bank borrowing
program.
The composition of long-term debt holdings as a percentage of total
value of investments 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 0.2% BBB 0.2%
Ba 2.5% BB 3.5%
B 49.0% B 54.2%
Caa 17.6% CCC 12.1%
Ca, C 0.1% CC, C 0.1%
D 0.1%
The percentage not rated by Moody's or S&P amounted to 6.6%. 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, 1999, the aggregate cost of investment securities for
income tax purposes was $2,689,510,301. Net unrealized depreciation
aggregated $209,859,283, of which $76,367,804 related to appreciated
investment securities and $286,227,087 related to depreciated
investment securities.
The fund hereby designates approximately $7,536,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At December 31, 1999, the fund had a capital loss carryforward of
approximately $78,395,000 all of which will expire on December 31,
2007, respectively.
FIDELITY VARIABLE INSURANCE PRODUCTS: HIGH INCOME PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 2,479,651,018
value (including repurchase
agreements of $59,179,000)
(cost $2,686,843,817) - See
accompanying schedule
Cash 1,240,115
Receivable for investments 551,690
sold
Receivable for fund shares 888,171
sold
Dividends receivable 395,381
Interest receivable 37,844,297
Other receivables 396,681
TOTAL ASSETS 2,520,967,353
LIABILITIES
Payable for investments $ 1,211,750
purchased
Payable for fund shares 6,643,732
redeemed
Accrued management fee 1,221,211
Distribution fees payable 20,832
Other payables and accrued 288,328
expenses
TOTAL LIABILITIES 9,385,853
NET ASSETS $ 2,511,581,500
Net Assets consist of:
Paid in capital $ 2,570,977,193
Undistributed net investment 245,962,442
income
Accumulated undistributed net (98,165,336)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (207,192,799)
(depreciation) on investments
NET ASSETS $ 2,511,581,500
INITIAL CLASS: NET ASSET $11.32
VALUE, offering price and
redemption price per share
($2,257,609,664 (divided by)
199,419,721 shares)
SERVICE CLASS: NET ASSET $11.29
VALUE, offering price and
redemption price per share
($253,971,836 (divided by)
22,497,605 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 39,413,129
Dividends
Interest 225,409,823
TOTAL INCOME 264,822,952
EXPENSES
Management fee $ 14,638,965
Transfer agent fees 1,677,045
Distribution fees - Service 187,615
Class
Accounting and security 799,993
lending fees
Non-interested trustees' 7,430
compensation
Custodian fees and expenses 73,962
Registration fees 9,574
Audit 39,501
Legal 19,039
Interest 25,582
Miscellaneous 147,169
Total expenses before 17,625,875
reductions
Expense reductions (62,519) 17,563,356
NET INVESTMENT INCOME 247,259,596
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (96,179,036)
(including realized loss of
$478,294 on sales of
investments in affiliated
issuers)
Foreign currency transactions (588) (96,179,624)
Change in net unrealized 55,361,896
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (40,817,728)
NET INCREASE (DECREASE) IN $ 206,441,868
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 43,092
Directed brokerage
arrangements
Custodian credits 19,427
$ 62,519
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 247,259,596 $ 230,104,995
income
Net realized gain (loss) (96,179,624) 6,911,145
Change in net unrealized 55,361,896 (342,139,590)
appreciation (depreciation)
NET INCREASE (DECREASE) IN 206,441,868 (105,123,450)
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (232,085,602) (174,513,221)
From net investment income
From net realized gain (6,657,693) (109,261,101)
In excess of net realized (877,958) -
gain
TOTAL DISTRIBUTIONS (239,621,253) (283,774,322)
Share transactions - net 66,219,533 535,004,180
increase (decrease)
TOTAL INCREASE (DECREASE) 33,040,148 146,106,408
IN NET ASSETS
NET ASSETS
Beginning of period 2,478,541,352 2,332,434,944
End of period (including $ 2,511,581,500 $ 2,478,541,352
undistributed net investment
income of $245,962,442 and
$228,599,042, respectively)
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 101,971,137 $ 1,140,554,728 105,294,967 $ 1,274,568,026
Class Sold
Reinvested 20,936,841 226,536,621 22,841,432 282,776,922
Redeemed (127,141,526) (1,424,987,101) (96,026,533) (1,157,142,331)
Net increase (decrease) (4,233,548) $ (57,895,752) 32,109,866 $ 400,202,617
Service Class Sold 15,936,772 $ 177,176,136 11,710,091 $ 142,335,404
Reinvested 1,211,540 13,084,632 80,565 997,399
Redeemed (5,904,384) (66,145,483) (752,013) (8,531,240)
Net increase (decrease) 11,243,928 $ 124,115,285 11,038,643 $ 134,801,563
Distributions
From net investment income $ 219,412,458 $ 173,899,848
Initial Class
Service Class 12,673,144 613,373
Total $ 232,085,602 $ 174,513,221
From net realized gain $ 6,294,147 $ 108,877,075
Initial Class
Service Class 363,546 384,026
Total $ 6,657,693 $ 109,261,101
In excess of net realized $ 830,017 $ -
gain Initial Class
Service Class 47,941 -
Total $ 877,958 $ -
$ 239,621,253 $ 283,774,322
</TABLE>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.530 $ 13.580 $ 12.520 $ 12.050 $ 10.750
period
Income from Investment
Operations
Net investment income 1.095 D 1.111 D 1.124 D .927 .856
Net realized and unrealized (.195) (1.591) .936 .643 1.224
gain (loss)
Total from investment .900 (.480) 2.060 1.570 2.080
operations
Less Distributions
From net investment income (1.075) F (.970) F (.890) (.920) (.780)
From net realized gain (.030) F (.600) F (.110) (.180) -
In excess of net realized gain (.005) F - - - -
Total distributions (1.110) (1.570) (1.000) (1.100) (.780)
Net asset value, end of period $ 11.320 $ 11.530 $ 13.580 $ 12.520 $ 12.050
TOTAL RETURN B, C 8.25% (4.33)% 17.67% 14.03% 20.72%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 2,257,610 $ 2,348,954 $ 2,329,516 $ 1,588,822 $ 1,040,000
(000 omitted)
Ratio of expenses to average .69% .70% .71% .71% .71%
net assets
Ratio of net investment 9.80% 9.14% 8.88% 9.09% 9.32%
income to average net assets
Portfolio turnover rate 82% 92% 118% 123% 132%
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 11.520 $ 13.570 $ 13.380
period
Income from Investment
Operations
Net investment income D 1.074 1.082 .203
Net realized and unrealized (.194) (1.562) (.013)
gain (loss)
Total from investment .880 (.480) .190
operations
Less Distributions
From net investment income (1.075) F (.970) F -
From net realized gain (.030) F (.600) F -
In excess of net realized gain (.005) F - -
Total distributions (1.110) (1.570) -
Net asset value, end of period $ 11.290 $ 11.520 $ 13.570
TOTAL RETURN B, C 8.08% (4.34)% 1.42%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 253,972 $ 129,587 $ 2,919
(000 omitted)
Ratio of expenses to average .79% .82% .81% A
net assets
Ratio of expenses to average .79% .82% .80% A, G
net assets after expense
reductions
Ratio of net investment 9.69% 9.51% 10.75% A
income to average net assets
Portfolio turnover rate 82% 92% 118%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
D NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
F THE AMOUNTS SHOWN REFLECT
CERTAIN RECLASSIFICATIONS
RELATED TO BOOK TO TAX
DIFFERENCES.
G FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
FIDELITY VARIABLE INSURANCE PRODUCTS: INVESTMENT GRADE BOND PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the past 10 year total returns would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDEDDECEMBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY VIP: INVESTMENT -1.05% 7.30% 7.19%
GRADE BOND
LB Aggregate Bond -0.82% 7.73% 7.70%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare these figures to the Lehman Brothers Aggregate Bond
Index - a market value-weighted index of investment-grade fixed-rate
debt issues, including government, corporate, asset-backed, and
mortgage-backed securities, with maturities of one year or more. 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.
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.
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)
$10,000 OVER 10 YEARS
VIP II Investment Grade LB Aggregate Bond
00155 LB001
1989/12/31 10000.00 10000.00
1990/01/31 9977.24 9881.00
1990/02/28 10033.83 9912.62
1990/03/31 10064.30 9919.56
1990/04/30 10068.57 9828.30
1990/05/31 10226.64 10119.22
1990/06/30 10306.42 10282.14
1990/07/31 10408.73 10424.03
1990/08/31 10407.74 10284.35
1990/09/30 10448.43 10369.71
1990/10/31 10449.08 10501.40
1990/11/30 10512.02 10727.18
1990/12/31 10621.44 10894.53
1991/01/31 10642.86 11029.62
1991/02/28 10749.93 11123.37
1991/03/31 10931.95 11200.12
1991/04/30 11092.56 11321.08
1991/05/31 11178.21 11386.74
1991/06/30 11199.63 11381.05
1991/07/31 11295.99 11539.25
1991/08/31 11531.55 11788.50
1991/09/30 11745.69 12027.80
1991/10/31 11874.17 12161.31
1991/11/30 12002.66 12273.19
1991/12/31 12360.93 12637.71
1992/01/31 12238.22 12465.84
1992/02/29 12305.19 12546.86
1992/03/31 12282.80 12476.60
1992/04/30 12372.37 12566.43
1992/05/31 12562.72 12803.94
1992/06/30 12708.27 12980.63
1992/07/31 12965.80 13245.44
1992/08/31 13044.18 13379.22
1992/09/30 13200.93 13538.43
1992/10/31 13032.98 13358.37
1992/11/30 12999.39 13361.04
1992/12/31 13183.46 13573.48
1993/01/31 13459.87 13834.09
1993/02/28 13688.36 14076.19
1993/03/31 13748.50 14135.31
1993/04/30 13832.70 14234.26
1993/05/31 13856.76 14252.76
1993/06/30 14121.38 14510.73
1993/07/31 14217.61 14593.45
1993/08/31 14470.21 14848.83
1993/09/30 14542.38 14888.92
1993/10/31 14614.55 14944.01
1993/11/30 14542.38 14816.99
1993/12/31 14628.72 14897.00
1994/01/31 14794.37 15098.11
1994/02/28 14551.86 14835.40
1994/03/31 14219.69 14468.97
1994/04/30 14091.93 14353.22
1994/05/31 14053.60 14351.78
1994/06/30 14015.27 14320.21
1994/07/31 14245.24 14605.18
1994/08/31 14258.02 14622.70
1994/09/30 14104.70 14407.75
1994/10/31 14117.48 14394.78
1994/11/30 14143.03 14363.12
1994/12/31 14079.15 14462.22
1995/01/31 14283.57 14748.57
1995/02/28 14559.22 15099.59
1995/03/31 14651.87 15191.70
1995/04/30 14850.40 15404.38
1995/05/31 15446.01 16000.53
1995/06/30 15565.13 16117.33
1995/07/31 15512.18 16081.88
1995/08/31 15697.48 16276.47
1995/09/30 15843.08 16434.35
1995/10/31 16054.85 16647.99
1995/11/30 16293.09 16897.71
1995/12/31 16518.09 17134.28
1996/01/31 16623.98 17247.37
1996/02/29 16320.38 16947.26
1996/03/31 16195.06 16828.63
1996/04/30 16097.58 16734.39
1996/05/31 16069.73 16700.92
1996/06/30 16264.68 16924.72
1996/07/31 16306.46 16970.41
1996/08/31 16292.53 16941.56
1996/09/30 16557.11 17236.35
1996/10/31 16919.17 17618.99
1996/11/30 17197.67 17920.28
1996/12/31 17044.50 17753.62
1997/01/31 17086.27 17808.66
1997/02/28 17108.87 17853.18
1997/03/31 16931.27 17655.01
1997/04/30 17182.87 17919.83
1997/05/31 17316.07 18090.07
1997/06/30 17523.27 18305.34
1997/07/31 17996.88 18799.59
1997/08/31 17834.08 18639.79
1997/09/30 18100.48 18915.66
1997/10/31 18337.28 19189.94
1997/11/30 18381.68 19278.21
1997/12/31 18588.88 19472.92
1998/01/31 18825.68 19722.17
1998/02/28 18812.50 19706.40
1998/03/31 18890.56 19773.40
1998/04/30 18984.24 19876.22
1998/05/31 19155.97 20065.04
1998/06/30 19312.09 20235.26
1998/07/31 19358.92 20278.20
1998/08/31 19593.11 20608.26
1998/09/30 20077.08 21090.73
1998/10/31 19967.79 20979.46
1998/11/30 20139.53 21098.28
1998/12/31 20233.20 21161.72
1999/01/31 20404.93 21312.88
1999/02/28 20053.79 20940.76
1999/03/31 20185.51 21056.94
1999/04/30 20251.37 21123.69
1999/05/31 19987.94 20937.80
1999/06/30 19889.15 20870.93
1999/07/31 19806.83 20783.28
1999/08/31 19773.90 20772.72
1999/09/30 20037.33 21013.77
1999/10/31 20070.26 21091.30
1999/11/30 20103.19 21089.83
1999/12/31 20020.87 20991.00
IMATRL PRASUN SHR__CHT 19991231 20000201 161131 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Investment Grade
Bond Portfolio on December 31, 1989. By December 31, 1999, the value
of the investment would have grown to $20,021 - a 100.21% increase on
the initial investment. For comparison, look at how the Lehman
Brothers Aggregate Bond Index did over the same period. With dividends
and capital gains, if any, reinvested, the same $10,000 investment
would have grown to $20,991 - a 109.91% increase.
INVESTMENT SUMMARY
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
FINANCE 14.3
UTILITIES 4.9
MEDIA & LEISURE 3.5
CONSTRUCTION & REAL ESTATE 2.5
NONDURABLES 1.9
AVERAGE YEARS TO MATURITY AS
OF DECEMBER 31, 1999
Years 8.8
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
QUALITY DIVERSIFICATION AS OF
DECEMBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS
Aaa 57.7
Aa 1.5
A 12.9
Baa 21.9
Ba and Below 1.9
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: INVESTMENT GRADE BOND PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Kevin Grant)
An interview with Kevin Grant, Portfolio Manager of Investment Grade
Bond Portfolio
Q. HOW DID THE FUND PERFORM COMPARED TO ITS BENCHMARK, KEVIN?
A. For the 12-month period that ended December 31, 1999, the fund
performed in line with the Lehman Brothers Aggregate Bond Index, which
returned -0.82 during the same period.
Q. HOW WOULD YOU RECAP THE PERIOD FOR BONDS?
A. It was an uphill battle for bonds, as interest rates ascended
sharply during the first six months of 1999, sending Treasury prices
plummeting and marking the rebound from 1998's flight to safety in
response to financial crises in the Far East. As you know, it's quite
a challenge to get any bond fund to post positive returns in a rising
interest-rate environment. So, given the circumstances, I'd say we
fared reasonably well overall. Sector allocation allowed us to reap
the rewards of a strong recovery in the spread sectors, namely
corporate bonds and mortgage securities, which benefited from
investors seeking higher-yielding alternatives to Treasuries. All
spread sectors outperformed comparable duration Treasuries during this
time frame; thus, the fund benefited from its overexposure to
corporates and mortgages relative to the index. In the past six
months, we saw a more moderate rise in interest rates, based on fears
of inflation and the threat of the Federal Reserve Board further
tightening monetary policy. During the summer, widespread concern
about supply pressures related to the millennium changeover created
waves in the corporate bond market. Those fears proved unfounded in
the fall, with rising rates having a lot to do with keeping supply
contained. Similarly, mortgages lost some ground in the summer but,
like corporates, they bounced back strongly in the fourth quarter -
spurred by declining interest-rate volatility and favorable prepayment
levels - and widening their performance lead over Treasuries.
Q. HOW DID THE FUND'S POSITIONING IN CORPORATE BONDS AFFECT
PERFORMANCE?
A. We really didn't believe the supply scare to begin with, so, when
yield spreads widened relative to Treasuries, we viewed it as an
opportunity to add securities that we liked. We did, however, give up
some returns at this time as a result of our overweighting in
corporates. Our positioning within certain areas of the sector, such
as media and telecommunications, were particularly beneficial to the
fund. We also got a lift from avoiding many of the commodity
industrials, such as chemicals, that struggled during the period.
Additionally, our energy-related positions - many of which we acquired
early in the period as oil prices bottomed - appreciated nicely,
adding to fund returns.
Q. WHAT ABOUT THE FUND'S MORTGAGE SECURITIES HOLDINGS?
A. Mortgage securities helped fend off the negative sentiment that
pervaded the period, adding appreciably to performance. Our stake in
premium mortgages - those issues priced above face value, or par -
helped, as these bonds benefited from a sharp falloff in prepayment
activity influenced by higher interest rates. Discount mortgages also
worked out well for the fund due to positive technical factors.
Refinancing activity slowed considerably, yet housing turnover
remained high as homeowners continued to trade up to bigger homes -
fueled in large part by the strong economy. Prepayments on discount
mortgages, thus, ran faster than normal, which was a big positive
since the bonds get prepaid at par. Toward the end of the period, with
housing turnover heading into a seasonal slowdown, I lightened up a
bit on discount issues and moved to more current-coupon bonds for the
additional yield and potential for price performance.
Q. WHAT OTHER FACTORS INFLUENCED PERFORMANCE?
A. Holdings in government agencies - specifically higher-yielding
callable issues - took on a more meaningful role in the fund as I
began to substitute them for high-grade corporates. Agencies over the
past year cheapened considerably - due in large part to supply reasons
- - and added value by offering returns competitive with high-quality
corporate bonds but with less risk.
Q. WHAT'S YOUR OUTLOOK?
A. I'm still positive on the spread sectors. In general, mortgages
remain relatively cheap and, given that interest rates have risen and
the housing market has cooled, supply pressures and concerns over
prepayments have eased considerably. With respect to corporates,
earnings and cash flows are still quite good, so companies should
continue to do well from a bondholder's perspective. There's also
growing sentiment shared among corporate treasurers these days to
carry less debt on their balance sheets. Then, there's the boundless
value added from the Internet. Collectively, these factors paint a
fairly decent picture going forward.
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FUND FACTS
GOAL: seeks to provide a high rate of income consistent with
reasonable risk by investing in a broad range of investment-grade
fixed-income securities; in addition, the fund seeks to protect
capital
START DATE: December 5, 1988
SIZE: as of December 31, 1999, more than
$658 million
MANAGER: Kevin Grant, since 1997; joined
Fidelity in 1993
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: INVESTMENT GRADE BOND PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 35.3%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. 6.45% 8/15/02 Baa2 $ 830,000 $ 807,432
BASIC INDUSTRIES - 0.7%
CHEMICALS & PLASTICS - 0.7%
Monsanto Co. 6% 12/1/05 (b) A2 5,000,000 4,666,550
PAPER & FOREST PRODUCTS - 0.0%
Fort James Corp. 6.625% Baa2 350,000 337,442
9/15/04
TOTAL BASIC INDUSTRIES 5,003,992
CONSTRUCTION & REAL ESTATE -
2.5%
REAL ESTATE - 0.4%
Cabot Industrial Property LP Baa2 1,325,000 1,272,398
7.125% 5/1/04
Duke Realty LP 7.3% 6/30/03 Baa1 1,500,000 1,477,725
2,750,123
REAL ESTATE INVESTMENT TRUSTS
- - 2.1%
CenterPoint Properties Trust Baa2 510,000 469,996
6.75% 4/1/05
Equity Office Properties Trust:
6.5% 1/15/04 Baa1 5,000,000 4,768,400
6.625% 2/15/05 Baa1 4,500,000 4,244,400
6.75% 2/15/08 Baa1 4,020,000 3,697,154
ProLogis Trust 6.7% 4/15/04 Baa1 565,000 533,925
13,713,875
TOTAL CONSTRUCTION & REAL 16,463,998
ESTATE
ENERGY - 1.7%
OIL & GAS - 1.7%
Anadarko Petroleum Corp. 7.2% Baa1 2,490,000 2,249,317
3/15/29
Apache Corp.:
7.625% 7/1/19 Baa1 210,000 202,440
7.7% 3/15/26 Baa1 550,000 520,762
Apache Finance Property Ltd. Baa1 940,000 864,988
6.5% 12/15/07
Conoco, Inc. 5.9% 4/15/04 A3 850,000 809,540
Petro-Canada 7% 11/15/28 A3 2,115,000 1,864,140
Ras Laffan Liquid Natural Gas Baa3 4,000,000 3,770,400
Co. Ltd. yankee 8.294%
3/15/14 (b)
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
YPF Sociedad Anonima:
7.75% 8/27/07 B1 $ 190,000 $ 182,630
8% 2/15/04 B1 380,000 376,246
10,840,463
FINANCE - 14.3%
BANKS - 5.9%
ABN-Amro Bank NV, Chicago A1 1,000,000 989,700
6.625% 10/31/01
Banc One Corp. 7.25% 8/1/02 A1 1,000,000 1,003,690
Bank of Montreal 6.1% 9/15/05 A1 3,000,000 2,782,800
Barclays Bank PLC yankee A1 2,700,000 2,651,886
5.95% 7/15/01
Capital One Bank 6.375% Baa2 1,130,000 1,084,009
2/15/03
Capital One Financial Corp. Baa3 1,290,000 1,176,880
7.125% 8/1/08
Citicorp 7.2% 6/15/07 A1 7,600,000 7,454,764
Fleet Boston Corp. 7.375% A3 6,000,000 5,872,500
12/1/09
Kansallis-Osake-Pankki (NY A2 260,000 274,537
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa2 1,635,000 1,568,701
7.375% 9/17/04 Baa2 1,320,000 1,293,600
yankee 6.5% 11/15/02 Baa2 240,000 231,600
MBNA Corp.:
6.34% 6/2/03 Baa2 350,000 335,020
6.875% 11/15/02 Baa2 1,750,000 1,722,245
NB Capital Trust IV 8.25% Aa2 1,990,000 1,907,893
4/15/27
Providian National Bank 6.75% Baa3 3,000,000 2,920,380
3/15/02
Sanwa Finance Aruba AEC 8.35% Baa1 4,700,000 4,717,531
7/15/09
Union Planters Corp. 6.75% Baa2 400,000 376,228
11/1/05
Union Planters National Bank A3 500,000 502,210
6.81% 8/20/01
38,866,174
CREDIT & OTHER FINANCE - 7.6%
Ahmanson Capital Trust I A3 1,125,000 1,069,380
8.36% 12/1/26 (b)
Associates Corp. of North
America:
6% 4/15/03 Aa3 1,150,000 1,113,637
6% 7/15/05 Aa3 5,000,000 4,712,200
AT&T Capital Corp. 7.5% A1 2,530,000 2,548,191
11/15/00
Bank of New York Co., Inc. A1 1,000,000 934,860
Capital I 7.97% 12/31/26
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
BankBoston Capital Trust II A2 $ 580,000 $ 520,591
7.75% 12/15/26
BanPonce Trust I 8.327% 2/1/27 A3 750,000 685,395
Chase Capital I 7.67% 12/1/26 Aa3 1,000,000 903,540
Chrysler Financial Corp. A1 4,400,000 4,308,964
5.69% 11/15/01
ERP Operating LP:
6.55% 11/15/01 A3 1,150,000 1,131,577
7.1% 6/23/04 A3 1,000,000 977,130
Finova Capital Corp. 6.27% Baa1 400,000 397,588
9/29/00
First Security Capital I A3 510,000 475,085
8.41% 12/15/26
Fleet Capital Trust II 7.92% A2 400,000 367,956
12/11/26
Ford Motor Credit Co. 6.5% A1 7,000,000 6,926,500
2/28/02
GS Escrow Corp. 7.125% 8/1/05 Ba1 6,250,000 5,596,813
KeyCorp Institutional Capital A1 800,000 724,304
A 7.826% 12/1/26
Newcourt Credit Group, Inc. A1 1,490,000 1,453,987
6.875% 2/16/05
PNC Institutional Capital A2 1,000,000 956,620
Trust 8.315% 5/15/27 (b)
Sears Credit Account Master Aaa 333,333 334,060
Trust II 7% 1/15/04
Spieker Properties LP:
6.75% 1/15/08 Baa2 7,000,000 6,392,470
6.8% 5/1/04 Baa2 705,000 678,083
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 1,480,000 1,407,820
5.875% 5/1/04 Baa1 3,080,000 2,917,807
6.875% 11/15/28 Baa1 1,590,000 1,412,715
Trizec Finance Ltd. yankee Baa3 810,000 805,950
10.875% 10/15/05
TXU Eastern Funding 6.75% Baa1 290,000 266,562
5/15/09
50,019,785
INSURANCE - 0.1%
Executive Risk Capital Trust Baa3 750,000 719,790
8.675% 2/1/27
SAVINGS & LOANS - 0.3%
Great Western Finance Trust A3 1,000,000 934,680
II 8.206% 2/1/27
Long Island Savings Bank FSB Baa3 750,000 740,288
6.2% 4/2/01
1,674,968
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
SECURITIES INDUSTRY - 0.4%
Amvescap PLC yankee 6.6% A3 $ 2,900,000 $ 2,738,499
5/15/05
TOTAL FINANCE 94,019,216
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.1%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Tyco International Group SA
yankee:
6.875% 1/15/29 Baa1 4,000,000 3,399,480
6.125% 6/15/01 Baa1 1,000,000 983,080
4,382,560
POLLUTION CONTROL - 0.4%
WMX Technologies, Inc. 7.1% Ba1 3,000,000 2,779,950
8/1/26
TOTAL INDUSTRIAL MACHINERY & 7,162,510
EQUIPMENT
MEDIA & LEISURE - 3.5%
BROADCASTING - 2.0%
Clear Channel Communications, Baa3 3,000,000 2,706,000
Inc. 7.25% 10/15/27
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa2 1,260,000 1,302,298
9% 9/1/08 Baa2 910,000 990,053
Cox Communications, Inc. Baa2 960,000 969,331
7.75% 8/15/06
Nielsen Media Research, Inc. Baa2 1,190,000 1,159,878
7.6% 6/15/09
TCI Communications, Inc.:
8.25% 1/15/03 A2 90,000 93,131
8.75% 8/1/15 A2 1,230,000 1,341,893
9.8% 2/1/12 A2 1,255,000 1,466,267
TCI Communications Financing A3 1,500,000 1,649,070
III 9.65% 3/31/27
Time Warner, Inc. 8.18% Baa3 1,240,000 1,274,422
8/15/07
12,952,343
PUBLISHING - 1.5%
News America Holdings, Inc. Baa3 640,000 659,910
8.5% 2/15/05
News America, Inc. 6.625% Baa3 210,000 195,145
1/9/08
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 760,000 740,012
8.375% 3/15/23 Baa2 6,920,000 7,194,932
8.375% 7/15/33 Baa2 1,200,000 1,244,388
10,034,387
TOTAL MEDIA & LEISURE 22,986,730
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONDURABLES - 1.9%
BEVERAGES - 1.0%
Seagram JE & Sons, Inc. Baa3 $ 7,250,000 $ 6,909,250
6.625% 12/15/05
FOODS - 0.2%
ConAgra, Inc. 7.125% 10/1/26 Baa1 1,270,000 1,203,668
TOBACCO - 0.7%
Philip Morris Companies, Inc. A2 3,000,000 2,955,300
6.95% 6/1/06
RJ Reynolds Tobacco Holdings, Baa2 1,800,000 1,682,046
Inc. 7.375% 5/15/03
4,637,346
TOTAL NONDURABLES 12,750,264
RETAIL & WHOLESALE - 1.7%
DRUG STORES - 0.6%
Rite Aid Corp.:
6% 12/15/00 (b) B1 465,000 404,550
6.5% 12/15/05 (b) B1 4,215,000 3,034,800
7.125% 1/15/07 B1 790,000 592,500
4,031,850
GENERAL MERCHANDISE STORES -
0.6%
Dayton Hudson Corp. 6.4% A3 500,000 489,260
2/15/03
Federated Department Stores, Baa1 3,000,000 3,083,070
Inc. 8.5% 6/15/03
3,572,330
GROCERY STORES - 0.1%
Kroger Co. 6% 7/1/00 Baa3 530,000 526,534
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.4%
USA Networks, Inc./ USANi LLC Baa3 3,000,000 2,864,460
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 10,995,174
TECHNOLOGY - 1.5%
COMPUTERS & OFFICE EQUIPMENT
- - 1.5%
Comdisco, Inc.:
5.95% 4/30/02 Baa1 3,000,000 2,889,270
6.375% 11/30/01 Baa1 3,200,000 3,138,016
6.45% 11/13/00 Baa1 3,000,000 2,988,300
7.25% 9/1/02 Baa1 1,000,000 988,540
10,004,126
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
TRANSPORTATION - 1.4%
AIR TRANSPORTATION - 0.7%
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 $ 550,000 $ 537,020
7.73% 9/15/12 Baa1 355,000 346,125
Delta Air Lines, Inc.:
equipment trust certificate Baa1 375,392 374,274
8.54% 1/2/07
7.7% 12/15/05 (b) Baa3 2,300,000 2,263,200
United Air Lines, Inc. 9% Baa3 1,100,000 1,134,034
12/15/03
4,654,653
RAILROADS - 0.7%
Burlington Northern Santa Fe Baa2 3,000,000 2,922,960
Corp. 6.53% 7/15/37
Norfolk Southern Corp. 7.05% Baa1 1,700,000 1,685,193
5/1/37
4,608,153
TOTAL TRANSPORTATION 9,262,806
UTILITIES - 4.9%
CELLULAR - 1.2%
Cable & Wireless Baa1 7,825,000 7,730,239
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 1.2%
Avon Energy Partners Holdings:
6.46% 3/4/08 (b) Baa2 1,500,000 1,337,655
7.05% 12/11/07 (b) Baa2 3,000,000 2,786,640
DR Investments UK PLC yankee A2 1,500,000 1,489,905
7.1% 5/15/02 (b)
Israel Electric Corp. Ltd. A3 1,900,000 1,636,508
7.75% 12/15/27 (b)
Texas Utilities Co. 6.375% Baa3 700,000 634,193
1/1/08
7,884,901
GAS - 0.5%
CMS Panhandle Holding Co.:
6.125% 3/15/04 Baa3 1,350,000 1,279,395
7% 7/15/29 Baa3 1,000,000 868,240
Southwest Gas Corp. 9.75% Baa2 1,000,000 1,046,130
6/15/02
3,193,765
TELEPHONE SERVICES - 2.0%
Cable & Wireless Optus Ltd. Baa2 3,000,000 2,977,470
8.125% 6/15/09 (b)
MCI WorldCom, Inc. 6.4% A3 2,500,000 2,394,575
8/15/05
Telecomunicaciones de Puerto Baa2 1,730,000 1,631,390
Rico, Inc. 6.65% 5/15/06
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 $ 3,273,000 $ 3,074,394
7.7% 7/20/29 Baa1 3,526,000 3,226,995
13,304,824
TOTAL UTILITIES 32,113,729
TOTAL NONCONVERTIBLE BONDS 232,410,440
(Cost $244,819,481)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 18.2%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 3.4%
Fannie Mae:
6.15% 1/13/00 Aaa 525,000 525,000
6.5% 4/29/09 Aaa 7,160,000 6,700,185
Federal Agricultural Mortgage Aaa 10,000 10,025
Corp. 7.01% 2/10/05
Federal Home Loan Bank:
6.46% 12/15/04 Aaa 1,745,000 1,714,742
7.59% 3/10/05 Aaa 10,000 10,273
Freddie Mac:
6.25% 7/15/04 Aaa 7,765,000 7,591,530
6.77% 9/15/02 Aaa 150,000 150,281
8% 1/26/05 Aaa 520,000 542,911
8.115% 1/31/05 Aaa 1,140,000 1,195,928
Government Loan Trusts Aaa 1,564,538 1,629,718
(assets of Trust guaranteed
by U.S. Government through
Agency for International
Development) 8.5% 4/1/06
Government Trust Certificates
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency):
Class 1-C, 9.25% 11/15/01 Aaa 504,595 518,215
Class 2-E, 9.4% 5/15/02 Aaa 401,682 412,367
Class T-3, 9.625% 5/15/02 Aaa 23,725 24,426
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Guaranteed Export Trust Aaa $ 4,444 $ 4,276
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank): Series
1993-C, 5.2% 10/15/04
Series 1993-D, 5.23% 5/15/05 Aaa 9,361 8,950
Series 1994-A, 7.12% 4/15/06 Aaa 6,440 6,439
Guaranteed Trade Trust Aaa 6,472 6,569
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994-B, 7.5% 1/26/06
Israel Export Trust Aaa 8,235 8,249
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994-1, 6.88% 1/26/03
Overseas Private Investment Aaa 106,925 105,845
Corp. U.S. Government
guaranteed participation
certificate Series
1994-195, 6.08% 8/15/04
(callable)
Private Export Funding Corp.
secured:
5.65% 3/15/03 Aaa 141,750 139,519
6.86% 4/30/04 Aaa 1,031,324 1,028,723
TOTAL U.S. GOVERNMENT AGENCY 22,334,171
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
14.8%
U.S. Treasury Bonds:
6.125% 8/15/29 Aaa 9,100,000 8,674,848
6.375% 8/15/27 Aaa 2,000,000 1,920,940
6.875% 8/15/25 Aaa 735,000 748,664
8.875% 8/15/17 Aaa 13,940,000 16,847,745
9.875% 11/15/15 Aaa 3,810,000 4,928,006
14% 11/15/11 Aaa 1,465,000 2,043,675
U.S. Treasury Notes:
4% 10/31/00 Aaa 22,000,000 21,632,160
5.875% 11/15/04 Aaa 19,080,000 18,707,368
6% 8/15/09 Aaa 3,900,000 3,778,125
6.5% 5/31/02 Aaa 6,265,000 6,295,323
U.S. Treasury Notes - coupon Aaa 26,700,000 11,951,988
STRIPS 0% 11/15/11
TOTAL U.S. TREASURY 97,528,842
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 119,863,013
GOVERNMENT AGENCY OBLIGATIONS
(Cost $124,794,941)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 38.4%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 32.8%
6% 2/1/11 to 2/1/29 Aaa $ 19,127,299 $ 17,842,194
6.5% 2/1/10 to 7/1/29 Aaa 124,955,574 117,895,087
7% 12/1/24 to 9/1/29 Aaa 32,950,474 31,916,005
7.5% 7/1/07 to 9/1/29 Aaa 40,317,899 39,892,898
7.5% 1/1/30 (c) Aaa 1,620,000 1,602,788
8% 3/1/24 to 9/1/29 Aaa 3,852,255 3,888,033
8.5% 3/1/25 to 12/1/26 Aaa 3,270,456 3,355,787
216,392,792
FREDDIE MAC - 0.4%
8.5% 3/1/20 to 1/1/28 Aaa 2,368,363 2,435,636
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 5.2%
6% 8/15/08 to 5/15/09 Aaa 2,985,206 2,865,003
6.5% 2/15/28 to 4/15/29 Aaa 22,471,620 21,088,043
7.5% 3/15/06 to 9/15/29 Aaa 9,305,795 9,222,039
8% 2/15/17 Aaa 128,937 131,274
10% 7/15/13 to 11/15/24 Aaa 662,545 713,726
34,020,085
TOTAL U.S. GOVERNMENT AGENCY 252,848,513
- - MORTGAGE SECURITIES
(Cost $263,483,389)
ASSET-BACKED SECURITIES - 3.8%
American Express Credit A1 1,500,000 1,430,742
Account Master Trust 6.1%
12/15/06
Capita Equipment Receivables Baa2 880,000 844,914
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 387,907 383,968
Trust 5.91% 12/15/04
Discover Card Master Trust I A2 4,000,000 3,878,125
5.85% 11/16/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 830,000 811,533
6.4% 12/15/02 Baa2 480,000 473,760
6.87% 11/15/04 A2 1,300,000 1,289,234
JCPenney Master Credit Card Aaa 7,000,000 6,647,813
Trust 5.5% 6/15/07
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Key Auto Finance Trust:
6.3% 10/15/03 A2 $ 437,564 $ 434,556
6.65% 10/15/03 Baa3 126,144 125,928
PNC Student Loan Trust I Aaa 2,259,900 2,262,612
6.314% 1/25/01
Premier Auto Trust 5.59% Aaa 6,000,000 5,808,720
2/9/04
Railcar Trust 7.75% 6/1/04 Aaa 544,850 552,576
TOTAL ASSET-BACKED SECURITIES 24,944,481
(Cost $25,692,595)
COMMERCIAL MORTGAGE
SECURITIES - 1.5%
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 1,080,000 980,100
1/17/35
Series 1998-FL1:
Class D, 5.91% 12/10/00 (b)(d) A2 2,100,000 2,088,188
Class E, 6.26% 1/10/13 (b)(d) Baa2 2,650,000 2,610,250
Equitable Life Assurance
Society of the United States
Series 174:
Class B1, 7.33% 5/15/06 (b) Aa2 500,000 493,665
Class C-1, 7.52% 5/15/06 (b) A2 500,000 492,355
Fannie Mae ACES REMIC Aaa 143,718 142,551
sequential pay Series 1996
M5 Class A1, 7.141% 7/25/10
GS Mortgage Securities Corp. Baa3 1,000,000 844,688
II Series 1998-GLII Class E,
7.1905% 4/13/31 (b)(d)
Thirteen Affiliates of Aaa 1,500,000 1,425,630
General Growth Properties,
Inc. sequential pay Series 1
Class A2, 6.602% 12/15/10 (b)
Wells Fargo Capital Markets Aaa 1,122,539 1,104,467
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (b)
TOTAL COMMERCIAL MORTGAGE 10,181,894
SECURITIES
(Cost $10,560,331)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (E) - 1.9%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
British Columbia Province Aa2 $ 500,000 $ 500,265
yankee 7% 1/15/03
Korean Republic yankee:
8.75% 4/15/03 Baa2 775,000 797,886
8.875% 4/15/08 Baa2 1,194,000 1,251,228
Manitoba Province yankee Aa3 500,000 497,860
6.75% 3/1/03
Quebec Province:
yankee:
7.125% 2/9/24 A2 250,000 232,170
7.5% 7/15/23 A2 8,550,000 8,336,678
7% 1/30/07 A2 1,000,000 978,100
TOTAL FOREIGN GOVERNMENT AND 12,594,187
GOVERNMENT AGENCY OBLIGATIONS
(Cost $13,869,956)
SUPRANATIONAL OBLIGATIONS -
0.6%
Inter-American Development Aaa 4,000,000 3,804,680
Bank yankee 6.29% 7/16/27
(Cost $3,974,840)
</TABLE>
CASH EQUIVALENTS - 4.2%
MATURITY AMOUNT
Investments in repurchase $ 27,794,650 27,784,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.6%,
dated 12/31/99 due 1/3/00
(Cost $27,784,000)
TOTAL INVESTMENT PORTFOLIO - 684,431,208
103.9%
(Cost $714,979,533)
NET OTHER ASSETS - (3.9)% (25,579,441)
NET ASSETS - 100% $ 658,851,767
LEGEND
(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(b) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
At the period end, the value of these securities amounted to
$35,452,921 or 5.4% of net assets.
(c) Security purchased on a delayed delivery or when-issued basis.
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned 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
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 72.1% AAA, AA, A 69.7%
Baa 21.9% BBB 20.4%
Ba 1.2% BB 1.9%
B 0.7% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
Purchases and sales of securities, other than short-term securities,
aggregated $688,840,784 and $577,106,750, respectively, of which
long-term U.S. government and government agency obligations aggregated
$506,885,550 and $424,240,874, respectively.
The fund participated in the security lending program. At period end,
the value of securities loaned amounted to $27,602,310. The fund
received cash collateral of $28,358,703 which was invested in cash
equivalents and U.S. Treasury Obligations valued at $575,063.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $715,574,123. Net unrealized depreciation
aggregated $31,142,915, of which $327,649 related to appreciated
investment securities and $31,470,564 related to depreciated
investment securities.
The fund hereby designates approximately $1,123,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At December 31, 1999, the fund had a capital loss carryforward of
approximately $11,444,000 all of which will expire on December 31,
2007.
A total of 14.29% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax. The fund will notify
shareholders in January 2000 of the applicable percentage for use in
preparing 1999 income tax returns.
FIDELITY VARIABLE INSURANCE PRODUCTS: INVESTMENT GRADE BOND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 684,431,208
value (including repurchase
agreements of $27,784,000)
(cost $714,979,533) - See
accompanying schedule
Receivable for fund shares 1,002,740
sold
Interest receivable 7,965,986
TOTAL ASSETS 693,399,934
LIABILITIES
Payable for investments $ 1,624,050
purchased on a delayed
delivery basis
Payable for fund shares 4,225,556
redeemed
Accrued management fee 240,141
Other payables and accrued 99,717
expenses
Collateral on securities 28,358,703
loaned, at value
TOTAL LIABILITIES 34,548,167
NET ASSETS $ 658,851,767
Net Assets consist of:
Paid in capital $ 658,425,511
Undistributed net investment 42,809,963
income
Accumulated undistributed net (11,835,382)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (30,548,325)
(depreciation) on investments
NET ASSETS, for 54,166,135 $ 658,851,767
shares outstanding
NET ASSET VALUE, offering $12.16
price and redemption price
per share ($658,851,767
(divided by) 54,166,135
shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 46,971,073
Interest
Security lending 53,093
TOTAL INCOME 47,024,166
EXPENSES
Management fee $ 3,054,862
Transfer agent fees 489,020
Accounting and security 182,740
lending fees
Non-interested trustees' 2,093
compensation
Custodian fees and expenses 46,309
Registration fees 1,374
Audit 31,804
Legal 7,492
Miscellaneous 35,286
Total expenses before 3,850,980
reductions
Expense reductions (9,885) 3,841,095
NET INVESTMENT INCOME 43,183,071
REALIZED AND UNREALIZED GAIN (11,737,244)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (38,771,648)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (50,508,892)
NET INCREASE (DECREASE) IN $ (7,325,821)
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION
Expense reductions
Custodian credits $ 9,885
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 43,183,071 $ 27,981,821
income
Net realized gain (loss) (11,737,244) 9,192,419
Change in net unrealized (38,771,648) 2,632,039
appreciation (depreciation)
NET INCREASE (DECREASE) IN (7,325,821) 39,806,279
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (28,513,399) (16,958,571)
From net investment income
From net realized gain (8,945,380) (2,012,034)
TOTAL DISTRIBUTIONS (37,458,779) (18,970,605)
Share transactions Net 258,967,451 501,565,840
proceeds from sales of shares
Reinvestment of distributions 37,458,779 18,970,605
Cost of shares redeemed (267,602,641) (191,084,324)
NET INCREASE (DECREASE) IN 28,823,589 329,452,121
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) (15,961,011) 350,287,795
IN NET ASSETS
NET ASSETS
Beginning of period 674,812,778 324,524,983
End of period (including $ 658,851,767 $ 674,812,778
undistributed net investment
income of $42,809,963 and
$27,875,128, respectively)
OTHER INFORMATION
Shares
Sold 20,833,388 39,825,938
Issued in reinvestment of 3,052,875 1,576,941
distributions
Redeemed (21,798,580) (15,158,174)
Net increase (decrease) 2,087,683 26,244,705
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.960 $ 12.560 $ 12.240 $ 12.480 $ 11.020
period
Income from Investment .743 B .725 B .759 B .670 .320
Operations Net investment
income
Net realized and unrealized (.873) .335 .291 (.290) 1.530
gain (loss)
Total from investment (.130) 1.060 1.050 .380 1.850
operations
Less Distributions
From net investment income (.510) (.590) (.730) (.620) (.390)
From net realized gain (.160) (.070) - - -
Total distributions (.670) (.660) (.730) (.620) (.390)
Net asset value, end of period $ 12.160 $ 12.960 $ 12.560 $ 12.240 $ 12.480
TOTAL RETURN A (1.05)% 8.85% 9.06% 3.19% 17.32%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 658,852 $ 674,813 $ 324,525 $ 228,594 $ 181,546
(000 omitted)
Ratio of expenses to average .54% .57% .58% .58% .59%
net assets
Ratio of net investment 6.07% 5.85% 6.34% 6.49% 6.53%
income to average net assets
Portfolio turnover rate 87% 239% 191% 81% 182%
</TABLE>
A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
FIDELITY VARIABLE INSURANCE PRODUCTS: MONEY MARKET PORTFOLIO
PERFORMANCE
To measure a money market fund's performance, you can look at either
total return or yield. Total return reflects the change in value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). 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 DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY VIP: MONEY MARKET 5.17% 5.48% 5.28%
AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and
show you what would have happened if the fund had achieved that return
by performing at a constant rate each year.
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF
THESE ADDITIONAL CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
A money market fund's total returns and yields will vary, and reflect
past results rather than predict future performance.
YIELD
Row: 1, Col: 1, Value: 5.72
Row: 1, Col: 2, Value: 2.07
Row: 2, Col: 1, Value: 5.2
Row: 2, Col: 2, Value: 2.08
Row: 3, Col: 1, Value: 4.85
Row: 3, Col: 2, Value: 2.03
Row: 4, Col: 1, Value: 4.8
Row: 4, Col: 2, Value: 2.1
Row: 5, Col: 1, Value: 5.08
Row: 5, Col: 2, Value: 2.23
Money Market
MMDA
6% -
5% -
4% -
3% -
2% -
1% -
0%
12/29/99 9/29/99 6/30/99 3/31/99 12/30/98
FIDELITY VIP:
MONEY MARKET 5.72% 5.20% 4.85% 4.80% 5.08%
MMDA 2.07% 2.08% 2.03% 2.10% 2.23%
YIELD refers to the income paid by the fund over a given period.
Yields for money market funds are usually for seven-day periods,
expressed as annual percentage rates. A yield that assumes income
earned is reinvested or compounded is called an effective yield. The
chart above shows the fund's current seven-day yield at quarterly
intervals over the past year. You can compare these yields to the bank
money market deposit account (MMDA) average. 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)
FIDELITY VARIABLE INSURANCE PRODUCTS: MONEY MARKET PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Robert Duby)
An interview with Robert Duby, Portfolio Manager of Money Market
Portfolio
Q. BOB, WHAT WAS THE INVESTING ENVIRONMENT LIKE DURING 1999?
A. Strong economic growth and the Federal Reserve Board's decision to
raise short-term interest rates pushed the general level of interest
rates higher during 1999. The Fed raised the rate banks charge each
other for overnight loans - known as the fed funds rate - three times
during the year - in June, August and November - so that it stood at
5.50% at the end of the period. By doing so, the Fed took back the
three rate cuts it implemented in late 1998 to stave off a global
credit crunch that was crippling the markets at that time. The overall
increase in interest rates was linked to strong domestic economic
growth as evidenced by the lowest unemployment rate in nearly 30
years.
Q. WHY WAS U.S. ECONOMIC GROWTH SO STRONG?
A. Growth was spurred by personal consumption, business investment and
the housing market. Rising stock and real estate prices created a
wealth effect that spurred consumer spending - a significant component
of the gross domestic product (GDP) - to the point where it exceeded
personal income and resulted in a negative savings rate. While
commodity prices increased on the heels of a global economic recovery,
there were no significant increases in producer or consumer prices;
gains in productivity kept inflation in check.
Q. THEN WHY DID THE FED RAISE RATES?
A. Continued strong GDP growth, coupled with concerns about the impact
of wage pressures in already-firm labor markets, helped convince the
Fed to raise rates in June. Fed Chairman Alan Greenspan went on to
warn in his semiannual Humphrey-Hawkins testimony before Congress that
productivity could slip, leading to inflation in the form of higher
unit labor costs. In the third quarter, stronger-than-expected job
growth and higher-than-expected average hourly earnings encouraged the
Fed to implement a rate hike in August. Third-quarter real GDP - gross
domestic product adjusted for inflation - significantly exceeded
expectations. A rise in the price deflator - a measure of inflation's
effect on prices - and an upward trend in oil prices further increased
fears that inflation would emerge. In response, the Fed once again
raised short-term interest rates in November. As we closed out 1999,
positive holiday retail sales reports raised concerns that excessive
consumer demand could prompt the Fed to raise rates again in early
2000.
Q. WHAT STRATEGY DID YOU PURSUE WITH THE FUND?
A. During the period, worries over the potential impact of unforeseen
Y2K computer bug problems caused yields on securities maturing shortly
after the turn of the year to trade at a premium. As the money market
yield curve - a representation of the yield difference between short-
and long-term money market securities - steepened and yields on
longer-maturity securities priced in the possibility of higher rates,
I added to the fund's longer-term positions. For much of the period,
anticipated changes in Fed monetary policy caused Treasury and
mortgage repurchase agreements to become relatively expensive. As a
result, I increased the fund's exposure to short-term deposits. In the
second half of the year - keeping with expectations for higher
short-term interest rates - I let the fund's average maturity decline
to take advantage of higher rates as they emerged. In order to do so,
I increased the fund's investments in variable-rate securities, whose
yields are reset in response to changes in market yields.
Q. WHAT IS YOUR OUTLOOK?
A. I'm positioning the fund for potentially higher interest rates in
2000. Market consensus, as quantified by the futures market, currently
calls for a 0.25% increase in the fed funds rate when the Fed meets at
the beginning of February. It's also possible we might see the Fed
bump up rates again at its subsequent meetings, including the one in
March. Reflecting my expectation for higher rates, I'll likely keep
the fund's average maturity relatively short in order to maximize
investment flexibility. At the same time, should longer-term money
market securities offer attractive risk-adjusted returns, I may look
to opportunistically add positions in securities with longer-term
maturities.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO
MANAGER ONLY THROUGH THE END OF THE PERIOD AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR
OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3.
FUND FACTS
GOAL: income and share-price stability by investing in high-quality,
short-term investments
START DATE: April 1, 1982
SIZE: as of December 31, 1999, more than
$1.9 billion
MANAGER: Robert Duby, since 1997; joined
Fidelity in 1982
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: MONEY MARKET PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 32.4%
DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1)
PURCHASE
DOMESTIC CERTIFICATES OF
DEPOSIT - 3.0%
First Union National Bank,
North Carolina
2/20/00 6.17% (b) $ 25,000,000 $ 25,000,000
Morgan Guaranty Trust Co., NY
2/22/00 6.10 25,000,000 25,000,000
U.S. Bank NA, Minnesota
3/20/00 5.95 8,000,000 8,000,000
58,000,000
LONDON BRANCH, EURODOLLAR,
FOREIGN BANKS - 5.3%
Abbey National Treasury
Services PLC
2/24/00 5.93 15,000,000 15,000,000
ABN-AMRO Bank NV
2/22/00 5.95 25,000,000 25,000,000
Barclays Bank PLC
7/28/00 5.80 9,000,000 9,000,000
Bayerische Hypo-und
Vereinsbank AG
3/8/00 6.00 10,000,000 10,000,000
Halifax PLC
1/18/00 6.00 10,000,000 10,000,000
3/7/00 6.02 35,000,000 35,000,000
104,000,000
NEW YORK BRANCH, YANKEE
DOLLAR, FOREIGN BANKS - 24.1%
Bank of Scotland Treasury
Services
1/3/00 6.40 (b) 5,000,000 4,999,583
Banque Nationale de Paris
2/29/00 6.00 50,000,000 49,998,305
8/2/00 5.85 10,000,000 9,997,195
Barclays Bank PLC
1/3/00 5.63 (b) 5,000,000 4,999,170
3/1/00 5.30 10,000,000 9,999,051
6/14/00 5.66 10,000,000 9,997,833
Bayerische Hypo-und
Vereinsbank AG
1/25/00 6.39 (b) 10,000,000 9,995,556
Canadian Imperial Bank of
Commerce
1/24/00 5.75 25,000,000 25,010,528
Commerzbank AG
1/10/00 5.78 2,000,000 1,999,543
Credit Agricole Indosuez
1/3/00 6.47 (b) 25,000,000 24,977,520
Credit Communale de Belgique
3/7/00 6.00 25,000,000 25,000,000
Deutsche Bank AG
1/3/00 5.64 (b) 25,000,000 24,994,590
2/16/00 5.12 15,000,000 14,999,089
3/2/00 6.00 20,000,000 20,000,000
Dresdner Bank AG
1/24/00 6.44 (b) 20,000,000 19,995,634
Norddeutsche Landesbank
Girozentrale
7/12/00 5.76 10,000,000 9,997,468
DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1)
PURCHASE
Royal Bank of Canada
6/5/00 5.55% $ 15,000,000 $ 14,997,540
Royal Bank of Scotland PLC
1/31/00 6.04 50,000,000 50,000,000
Societe Generale, France
1/10/00 6.45 (b) 15,000,000 14,989,515
1/31/00 6.48 (b) 7,000,000 6,993,452
3/31/00 5.95 25,000,000 25,000,000
Svenska Handelsbanken AB
1/17/00 6.57 (b) 6,000,000 6,000,027
Toronto Dominion Bank
2/18/00 5.15 12,000,000 11,999,468
UBS AG
5/18/00 5.35 10,000,000 9,997,819
6/2/00 5.52 20,000,000 19,996,781
6/5/00 5.55 25,000,000 24,995,899
Westdeutsche Landesbank
Girozentrale
2/28/00 5.95 15,000,000 15,000,000
466,931,566
TOTAL CERTIFICATES OF DEPOSIT 628,931,566
COMMERCIAL PAPER - 46.4%
Aspen Funding Corp.
1/26/00 6.16 12,000,000 11,949,583
Asset Securitization Coop.
Corp.
1/3/00 6.59 (b) 10,000,000 10,000,000
1/10/00 6.52 (b) 20,000,000 19,999,797
2/24/00 6.00 14,000,000 13,876,940
3/14/00 6.17 (b) 10,000,000 10,000,000
CBA Finance, Inc.
3/1/00 6.00 25,000,000 24,753,750
3/3/00 6.02 10,000,000 9,897,872
Centric Capital Corp.
2/1/00 6.16 5,700,000 5,670,059
3/31/00 6.12 12,000,000 11,821,500
Citibank Credit Card Master
Trust I (Dakota Certificate
Program)
1/13/00 6.08 5,000,000 4,989,967
2/4/00 5.99 5,000,000 4,972,044
2/9/00 5.98 10,000,000 9,936,083
3/8/00 6.04 10,279,000 10,165,366
3/9/00 6.04 5,000,000 4,943,806
Citicorp
2/15/00 6.36 10,000,000 9,921,250
ConAgra, Inc.
1/28/00 6.46 5,000,000 4,976,000
Corporate Receivables Corp.
1/26/00 6.11 5,000,000 4,979,167
COMMERCIAL PAPER - CONTINUED
DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1)
PURCHASE
CXC, Inc.
1/20/00 6.54% (b) $ 12,000,000 $ 11,999,626
2/17/00 6.05 10,000,000 9,922,058
2/24/00 6.07 15,000,000 14,866,350
2/25/00 6.08 25,000,000 24,773,125
3/16/00 6.09 10,000,000 9,875,000
Daimler-Chrysler North
America Holding Corp.
2/16/00 5.86 5,000,000 4,963,711
2/22/00 6.10 5,000,000 4,956,883
2/23/00 6.10 4,000,000 3,964,843
3/6/00 6.05 5,000,000 4,946,736
3/7/00 5.95 5,000,000 4,947,017
Delaware Funding Corp.
1/25/00 6.02 6,000,000 5,976,400
2/17/00 6.12 7,000,000 6,945,167
2/24/00 5.96 6,256,000 6,201,385
Den Danske Corp., Inc.
2/22/00 5.95 50,000,000 49,576,778
Edison Asset Securitization LLC
2/7/00 5.97 16,000,000 15,903,964
2/8/00 5.92 3,000,000 2,981,792
2/28/00 6.00 5,000,000 4,952,472
3/6/00 5.96 2,000,000 1,979,056
3/8/00 6.04 20,000,000 19,778,900
3/10/00 5.96 4,000,000 3,955,533
3/13/00 5.96 6,000,000 5,930,520
3/31/00 5.96 5,000,000 4,927,125
Enterprise Funding Corp.
1/27/00 6.20 4,219,000 4,200,261
1/28/00 6.60 7,055,000 7,020,342
2/15/00 6.01 6,542,000 6,493,998
Falcon Asset Securitization
Corp.
1/27/00 6.17 9,405,000 9,363,430
1/31/00 6.03 6,000,000 5,970,500
2/3/00 6.01 4,000,000 3,978,440
2/4/00 6.02 3,000,000 2,983,340
2/8/00 6.02 2,583,000 2,566,968
2/10/00 6.02 4,000,000 3,973,867
Finova Capital Corp.
1/10/00 6.67 (b) 5,000,000 5,000,000
Fleet Funding Corp.
2/16/00 6.18 4,000,000 3,969,078
Ford Motor Credit Co.
2/10/00 5.57 25,000,000 24,846,389
3/6/00 6.05 20,000,000 19,784,778
GE Capital International
Funding, Inc.
2/22/00 6.09 10,000,000 9,913,911
General Electric Capital Corp.
2/22/00 5.60 25,000,000 24,804,639
3/2/00 6.04 10,000,000 9,900,197
3/7/00 5.91 40,000,000 39,578,333
DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1)
PURCHASE
General Electric Capital
Services, Inc.
2/17/00 6.06% $ 23,000,000 $ 22,821,935
General Motors Acceptance Corp.
2/14/00 5.96 10,000,000 9,928,256
3/6/00 5.90 35,000,000 34,638,528
Goldman Sachs Group, Inc.
2/9/00 5.80 25,000,000 24,847,656
3/22/00 6.25 15,000,000 14,792,438
3/27/00 6.23 10,000,000 9,853,681
J. P. Morgan & Co., Inc.
2/2/00 5.75 20,000,000 19,900,622
Lehman Brothers Holdings, Inc.
2/2/00 6.30 14,000,000 13,923,280
Lower Colorado River Auth. Rev.
3/8/00 6.19 10,000,000 10,000,000
MCI WorldCom, Inc.
1/17/00 6.42 (b) 10,000,000 10,000,000
1/28/00 6.85 5,000,000 4,974,500
Morgan Stanley Dean Witter &
Co.
1/19/00 6.03 25,000,000 24,926,000
2/29/00 6.32 10,000,000 9,897,569
Newport Funding Corp.
1/17/00 6.51 (b) 10,000,000 10,000,000
1/26/00 6.16 12,000,000 11,949,583
2/1/00 6.17 8,000,000 7,958,322
Park Avenue Receivables Corp.
1/31/00 6.56 15,000,000 14,918,750
Preferred Receivables Funding
Corp.
1/25/00 6.14 5,000,000 4,979,900
2/2/00 6.00 8,000,000 7,958,258
2/4/00 6.00 6,000,000 5,966,737
2/9/00 6.00 6,000,000 5,961,910
2/16/00 6.20 15,000,000 14,882,508
Rohm & Haas Co.
3/8/00 6.35 3,000,000 2,965,663
Salomon Smith Barney
Holdings, Inc.
2/14/00 5.85 5,000,000 4,965,289
The Bear Stearns Companies,
Inc.
2/23/00 5.72 5,000,000 4,959,256
Tyco International Group SA
3/8/00 6.72 5,000,000 4,938,583
3/9/00 6.72 5,000,000 4,937,667
TOTAL COMMERCIAL PAPER 899,372,987
BANK NOTES - 4.8%
American Express Centurion Bank
1/10/00 6.43 (b) 10,000,000 10,000,000
Bank of America NA
2/28/00 6.14 25,000,000 25,000,000
BANK NOTES - CONTINUED
DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1)
PURCHASE
First National Bank, Chicago
7/12/00 5.75% $ 10,000,000 $ 9,997,467
Fleet National Bank
1/3/00 5.71 (b) 25,000,000 24,993,639
Key Bank NA
1/17/00 6.58 (b) 10,000,000 10,000,000
Mellon Bank NA, Pittsburgh
1/3/00 5.63 (b) 4,000,000 3,999,222
NationsBank NA
1/3/00 5.65 10,000,000 9,998,793
TOTAL BANK NOTES 93,989,121
MASTER NOTES - 0.8%
J. P. Morgan Securities, Inc.
1/7/00 6.44 (b) 15,000,000 15,000,000
MEDIUM-TERM NOTES - 7.0%
American Telephone & Telegraph
1/6/00 6.53 (b) 25,000,000 25,000,000
CIESCO LP
1/17/00 6.44 (b) 10,000,000 9,998,933
CIT Group, Inc.
1/3/00 5.70 (b) 10,000,000 9,997,470
1/3/00 5.80 (b) 15,000,000 14,989,681
Ford Motor Credit Co.
2/23/00 6.08 (b) 25,000,000 24,988,970
General Electric Capital Corp.
1/12/00 6.13 (b) 4,000,000 4,000,000
2/3/00 6.11 (b) 10,000,000 10,000,000
General Motors Acceptance
Corp. Mortgage Credit
1/4/00 6.55 25,000,000 24,986,434
Goldman Sachs Group L.P.
1/7/00 6.33 (b)(c) 7,000,000 7,000,000
2/10/00 6.12 (a)(b) 4,000,000 4,000,000
TOTAL MEDIUM-TERM NOTES 134,961,488
SHORT-TERM NOTES - 3.7%
DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1)
PURCHASE
GE Life & Annuity Assurance Co.
1/3/00 6.58% (b)(c) $ 14,000,000 $ 14,000,000
Jackson National Life
Insurance Co.
1/1/00 6.23 (b)(c) 7,000,000 7,000,000
Monumental Life Insurance Co.
1/3/00 6.62 (b)(c) 5,000,000 5,000,000
1/3/00 6.65 (b)(c) 5,000,000 5,000,000
New York Life Insurance Co.
3/1/00 6.23 (b)(c) 5,000,000 5,000,000
4/1/00 6.28 (b)(c) 4,000,000 4,000,000
RACERS Series 1999 16MM,
1/3/00 6.50 (a)(b) 9,000,000 9,000,000
SMM Trust Series 1999 E,
1/5/00 6.11 (a)(b) 3,000,000 3,000,000
SMM Trust Series 1999 I,
2/26/00 6.10 (a)(b) 3,000,000 3,000,000
Strategic Money Market Trust
Series 1999 A6,
1/13/00 6.30 (a)(b) 17,000,000 17,000,000
TOTAL SHORT-TERM NOTES 72,000,000
TIME DEPOSITS - 4.9%
Bayerische Hypo-und
Vereinsbank AG
1/3/00 5.50 70,000,000 70,000,000
Chase Manhattan Bank
1/3/00 4.50 25,000,000 25,000,000
TOTAL TIME DEPOSITS 95,000,000
</TABLE>
REPURCHASE AGREEMENTS - 0.0%
MATURITY AMOUNT
In a joint trading account $ 426,118 426,000
(U.S. Treasury Obligations)
dated 12/31/99 due 1/3/00 At
3.32%
TOTAL INVESTMENT PORTFOLIO 1,939,681,162
- - 100.0%
NET OTHER ASSETS - (0.0)% (190,493)
NET ASSETS - 100% $ 1,939,490,669
Total Cost for Income Tax Purposes $ 1,939,681,162
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
LEGEND
(a) 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
$36,000,000 or 1.9% of net assets.
(b) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end. The due dates on these types of
securities reflects the next interest rate reset date or, when
applicable, the final maturity date.
(c) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE COST
GE Life & Annuity Assurance 4/8/99 $ 14,000,000
Co. 6.58%, 1/3/00
Goldman Sachs Group L.P. 12/7/98 $ 7,000,000
6.33%, 1/7/00
Jackson National Life 7/6/99 $ 7,000,000
Insurance Co. 6.23%, 1/1/00
Monumental Life Insurance 9/17/98 $ 5,000,000
Co.: 6.62%, 1/3/00
6.65%, 1/3/00 3/12/99 $ 5,000,000
New York Life Insurance Co.: 8/13/99 $ 5,000,000
6.23%, 3/1/00
6.28%, 4/1/00 12/20/99 $ 4,000,000
The fund invested in securities that are not registered under the
Securities Act of 1933. These securities are subject to legal or
contractual restrictions on resale. At the end of the period,
restricted securities (excluding Rule 144A issues) amounted to
$47,000,000 or 2.4% of net assets.
INCOME TAX INFORMATION
At December 31, 1999, the fund had a capital loss carryforward of
approximately $102,000 of which $1,000, $28,000 and $73,000 will
expire on December 31, 2002, 2005 and 2007, respectively.
FIDELITY VARIABLE INSURANCE PRODUCTS: MONEY MARKET PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 1,939,681,162
value - See accompanying
schedule
Receivable for fund shares 4,330,190
sold
Interest receivable 11,149,659
Prepaid expenses 81,961
TOTAL ASSETS 1,955,242,972
LIABILITIES
Payable to custodian bank $ 12,209
Payable for fund shares 15,253,629
purchased
Accrued management fee 334,788
Other payables and accrued 151,677
expenses
TOTAL LIABILITIES 15,752,303
NET ASSETS $ 1,939,490,669
Net Assets consist of:
Paid in capital $ 1,939,592,816
Accumulated net realized gain (102,147)
(loss) on investments
NET ASSETS, for 1,939,577,760 $ 1,939,490,669
shares outstanding
NET ASSET VALUE, offering $1.00
price and redemption price
per share ($1,939,490,669
(divided by) 1,939,577,760
shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INTEREST INCOME $ 94,459,131
EXPENSES
Management fee $ 3,168,788
Transfer agent fees 1,208,526
Accounting fees and expenses 175,672
Non-interested trustees' 5,317
compensation
Custodian fees and expenses 39,691
Registration fees 912
Audit 27,623
Legal 16,488
Miscellaneous 131,770
Total expenses before 4,774,787
reductions
Expense reductions (957) 4,773,830
NET INTEREST INCOME 89,685,301
NET REALIZED GAIN (LOSS) ON (73,427)
INVESTMENTS
NET INCREASE IN NET ASSETS $ 89,611,874
RESULTING FROM OPERATIONS
OTHER INFORMATION $ 957
Expense reductions Custodian
credits
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net interest income $ 89,685,301 $ 73,329,985
Net realized gain (loss) (73,427) 30,030
NET INCREASE (DECREASE) IN 89,611,874 73,360,015
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (89,685,301) (73,329,985)
from net interest income
Share transactions at net 3,933,097,969 2,992,850,183
asset value of $1.00 per
share Proceeds from sales of
shares
Reinvestment of 88,893,196 73,314,040
distributions from net
interest income
Cost of shares redeemed (3,589,916,485) (2,579,498,939)
NET INCREASE (DECREASE) IN 432,074,680 486,665,284
NET ASSETS AND SHARES
RESULTING FROM SHARE
TRANSACTIONS
TOTAL INCREASE (DECREASE) 432,001,253 486,695,314
IN NET ASSETS
NET ASSETS
Beginning of period 1,507,489,416 1,020,794,102
End of period $ 1,939,490,669 $ 1,507,489,416
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
period
Income from Investment .050 .053 .053 .052 .057
Operations Net interest
income
Less Distributions
From net interest income (.050) (.053) (.053) (.052) (.057)
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
TOTAL RETURN A 5.17% 5.46% 5.51% 5.41% 5.87%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 1,939,491 $ 1,507,489 $ 1,020,794 $ 1,126,155 $ 808,874
(000 omitted)
Ratio of expenses to average .27% .30% .31% .30% .33%
net assets
Ratio of net interest income 5.06% 5.33% 5.32% 5.28% 5.72%
to average net assets
</TABLE>
A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1999
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. Investment Grade Bond
Portfolio, Asset Manager Portfolio, Asset Manager: Growth Portfolio,
Index 500 Portfolio, and Contrafund Portfolio (the funds) are funds of
Variable Insurance Products Fund II. Balanced Portfolio, Growth &
Income Portfolio, Growth Opportunities Portfolio and Mid Cap Portfolio
(the funds) are funds of Variable Insurance Products Fund III. The
Variable Insurance Products Fund, Variable Insurance Products Fund II
and Variable Insurance Products Fund III (the trusts) (referred to in
this report as Fidelity Variable Insurance Products) are registered
under the Investment Company Act of 1940, as amended (the 1940 Act),
as open-end management investment companies organized as Massachusetts
business trusts. 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. Each fund except the Money Market Portfolio,
Index 500 Portfolio and Investment Grade Portfolio offers two classes
of shares: the funds' original class of shares (Initial Class shares)
and Service Class shares. Both classes have equal rights and voting
privileges, except for matters affecting a single class. Investment
income, realized and unrealized capital gains and losses, the common
expenses of the fund, and certain fund-level expense reductions, if
any, are allocated on a pro rata basis to each class based on the
relative net assets of each class to the total net assets of the fund.
Each class of shares differs in its respective distribution plan. On
October 14, 1999, the Board of Trustees approved the creation of
Service Class 2, a new class of shares of each fund. The Service Class
2 shares of each fund will be subject to an annual distribution and
service fee of .25% of each class' average net assets. Service Class 2
shares of each fund are expected to be available on or about January
12, 2000.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the funds:
SECURITY VALUATION:
MONEY MARKET PORTFOLIO. As permitted under Rule 2a-7 of the 1940 Act,
and certain conditions therein, securities are valued initially at
cost and thereafter assume a constant amortization to maturity of any
discount or premium.
INVESTMENT GRADE BOND PORTFOLIO. Securities are valued based upon a
computerized matrix system and/or appraisals by a pricing service,
both of which consider market transactions and dealer-supplied
valuations. Securities (including restricted securities) for which
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
HIGH INCOME, ASSET MANAGER AND BALANCED PORTFOLIOS. 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. Foreign equity
securities are valued based on quotations from the principal market in
which such securities are normally traded. If trading or events
occurring in other markets after the close of the principal market in
which foreign securities are traded, and before the close of the
business of the fund, are expected to materially affect the value of
those securities, then they are valued at their fair value taking this
trading or these events into account. Fair value is determined in good
faith under consistently applied procedures under the general
supervision of the Board of Trustees. 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. Securities
(including restricted securities) for which market quotations are not
readily available are valued at their fair value. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
ASSET MANAGER: GROWTH, EQUITY-INCOME, GROWTH & INCOME, INDEX 500,
GROWTH OPPORTUNITIES, CONTRAFUND, GROWTH AND MID CAP 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. Foreign securities are valued based on quotations from the
principal market in which such securities are normally traded. If
trading or events occurring in other markets after the close of the
principal market in which foreign securities are traded, and before
the close of the business of the fund, are expected to materially
affect the value of those securities, then they are valued at their
fair value taking this trading or these events into account. Fair
value is determined in good faith under consistently applied
procedures under the general supervision of the Board of Trustees.
Securities (including restricted securities) for which exchange
quotations are not readily available (and in certain cases debt
securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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. If trading or events occurring in other markets
after the close of the principal market in which securities are traded
are expected to materially affect the value of those securities, then
they are valued at their fair value taking this trading or these
events into account. Fair value is determined in good faith under
consistently applied procedures under the general supervision of the
Board of Trustees. Securities (including restricted securities) for
which quotations are not readily available are valued primarily using
dealer-supplied valuations or at their fair value. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
Net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, each fund is not subject to
U.S. federal income taxes to the extent that it distributes
substantially all of its taxable income for its fiscal year. Each fund
may be subject to foreign taxes on income and gains on investments
which are accrued based upon each fund's understanding of the tax
rules and regulations that exist in the markets in which they invest.
Foreign governments may also impose taxes on other payments or
transactions with respect to foreign securities. Each fund accrues
such taxes as applicable. 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.
INVESTMENT GRADE BOND, HIGH INCOME, ASSET MANAGER, BALANCED, ASSET
MANAGER: GROWTH, EQUITY-INCOME, GROWTH & INCOME, INDEX 500, GROWTH
OPPORTUNITIES, CONTRAFUND, GROWTH, MID CAP 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. Non-cash dividends included in dividend income, if
any, are recorded at the fair market value of the securities received.
Interest income, which includes accretion of original issue discount,
is accrued as earned. Certain funds may place a debt obligation on
non-accrual status and reduce related interest income by ceasing
current accruals and writing off interest receivables when the
collection of all or a portion of interest has become doubtful based
on consistently applied procedures, under the general supervision of
the Board of Trustees of the fund. A debt obligation is removed from
non-accrual status when the issuer resumes interest payments or when
collectibility of interest is reasonably assured. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of each trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in a cross-section of other Fidelity funds.
Deferred amounts remain in the funds until distributed in accordance
with the Plan.
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 dividends and capital gain distributions are declared
separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, paydown gains/losses on certain
securities, futures transactions, foreign currency transactions,
passive foreign investment companies (PFIC), market discount,
partnerships, non-taxable dividends, net operating losses, capital
loss carryforwards and losses deferred due to wash sales. Certain
funds also utilized earnings and profits distributed to shareholders
on redemption of shares as a part of the dividends paid deduction for
income tax purposes.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. Certain funds use foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), certain 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 for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the funds, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the funds' investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
CENTRAL CASH FUNDS. Pursuant to an Exemptive Order issued by the SEC,
the funds may invest in the Taxable Central Cash Fund and the Central
Cash Collateral Fund (the Cash Funds) managed by Fidelity Investments
Money Management, Inc., an affiliate of FMR. The Cash Funds are
open-end money market funds available only to investment companies and
other accounts managed by FMR and its affiliates. The Cash Funds seek
preservation of capital, liquidity, and current income. Income
distributions from the Cash Funds are declared daily and paid monthly
from net interest income. Income distributions earned by the funds are
recorded as either interest income or security lending income in the
accompanying financial statements.
INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by
the SEC, the funds, along with other registered investment companies
having management contracts with FMR, may participate in an interfund
lending program. This program provides an alternative credit facility
allowing the funds to borrow from, or lend money to, other
participating funds. Information regarding each fund's participation
in the program is included under the caption "Other Information" at
the end of each applicable fund's schedule of investments.
DELAYED DELIVERY TRANSACTIONS. Each fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. 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 values of the securities purchased on a
delayed delivery basis are identified as such in each applicable
fund's schedule of investments. Each fund may receive compensation for
interest forgone in the purchase of a delayed delivery security. With
respect to purchase commitments, each fund identifies securities as
segregated in its records with a value at least equal to the amount of
the commitment. Losses may arise due to changes in the market value of
the underlying securities or if the counterparty does not perform
under the contract.
FUTURES CONTRACTS. Certain funds may use futures contracts to manage
their exposure to the stock market and to fluctuations in currency
values. Buying futures tends to increase a fund's exposure to the
underlying instrument, while selling futures tends to decrease a
fund's exposure to the underlying instrument or hedge other fund
investments. Futures contracts involve, to varying degrees, risk of
loss in excess of the futures variation margin reflected in each
applicable fund's Statement of Assets and Liabilities. The underlying
face amount at value of any open futures contracts at period end is
shown in each applicable fund's schedule of investments under the
caption "Futures Contracts." This amount reflects each contract's
exposure to the underlying instrument at period end. Losses may arise
from changes in the value of the underlying instruments or if the
counterparties do not perform under the contracts' terms. Gains
(losses) are realized upon the expiration or closing of the futures
contracts. Futures contracts are valued at the settlement price
established each day by the board of trade or exchange on which they
are traded.
RESTRICTED SECURITIES. Certain 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. Information regarding restricted securities is included
at the end of each applicable fund's schedule of investments.
2. OPERATING POLICIES - CONTINUED
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. Certain funds are permitted
to invest in loans and loan participations, trade claims or other
receivables. These investments may include standby financing
commitments that obligate the fund to supply additional cash to the
borrower on demand. Loan participations involve a risk of insolvency
of the lending bank or other financial intermediary. At the end of the
period, these investments for High Income Portfolio amounted to
$21,673,533 or 0.8% of net assets.
3. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities) and the market value of future contracts opened
and closed, is included under the caption "Other Information" at the
end of each applicable fund's schedule of investments.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As each fund's investment adviser, FMR receives a
monthly fee.
For the Money Market Portfolio, FMR receives a monthly fee that is
calculated on the basis of a group fee rate plus a fixed individual
fund fee rate applied to the average net assets of the fund and an
income-based fee. The group fee rate is the weighted average of a
series of rates and is based on the monthly average net assets of all
the mutual funds advised by FMR. The rates ranged from .0920% to
.3700% for the period. The annual individual fund fee rate is .03%. In
the event that these rates were lower than the contractual rates in
effect during the period, FMR voluntarily implemented the above rates,
as they resulted in the same or a lower management fee. The
income-based fee is added only when the fund's gross yield exceeds 5%.
At that time the income-based fee would equal 6% of that portion of
the fund's gross income that represents a gross yield of more than 5%
per year. The maximum income-based component is .24% of average net
assets. For the period, the total management fee was equivalent to an
annual rate of .18%. The income-based portion of this fee was equal to
$347,858, or an annual rate of .02% of the fund's average net assets.
For the Index 500 Portfolio, FMR receives a fee that is computed daily
at an annual rate of .24% of the fund's 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 each 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 .0920% to .3700% for the period for the Investment Grade
Bond and High Income Portfolios and .2167% to .5200% for the period
for the Asset Manager, Balanced, Asset Manager: Growth, Equity-Income,
Growth & Income, Growth Opportunities, Contrafund, Growth, Mid Cap and
Overseas Portfolios for the period. The annual individual fund fee
rate is .30% for Investment Grade Bond, Asset Manager: Growth, Growth
Opportunities, Contrafund, Growth and Mid Cap, .45% for High Income
and Overseas, .25% for Asset Manager, .15% for Balanced, and .20% for
Equity-Income and Growth & Income Portfolios. 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.
For the period, each fund's management fee was equivalent to the
following annual rates expressed as a percentage of average net
assets:
Money Market .18%
Investment Grade Bond .43%
High Income .58%
Asset Manager .53%
Balanced .43%
Asset Manager: Growth .58%
Equity-Income .48%
Growth & Income .48%
Index 500 .24%
Growth Opportunities .58%
Contrafund .58%
Growth .58%
Mid Cap .57%
Overseas .73%
SUB-ADVISER FEE. As the Money Market and Investment Grade Bond
(effective January 1, 1999) Portfolios' investment sub-adviser,
Fidelity Investments Money Management, 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 Overseas Portfolio, entered into sub-advisory
agreements with Fidelity Management & Research (U.K.) Inc., Fidelity
Management & Research (Far East) Inc., and Fidelity International
Investment Advisors (FIIA). In addition, FIIA entered into a
sub-advisory agreement with its subsidiary, Fidelity International
Investment Advisors (U.K.) Limited (FIIA(U.K.)L). 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 FIIA(U.K.)L a fee based on costs incurred
for either service.
FMR and Index 500 Portfolio entered into a sub-advisory agreement with
Bankers Trust Company (Bankers Trust). Bankers Trust receives a
sub-advisory fee for providing investment management and custodial
services to the fund. For these services, FMR pays Bankers Trust fees
at an annual rate of 0.006% of the fund's average net assets. Prior to
October 1, 1999, the sub-advisory fee included
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
SUB-ADVISER FEE - CONTINUED
fees for securities lending. Under this arrangement the fund paid
Bankers Trust fees equal to 40% of net income from the fund's
securities lending program. For the period, the fund paid Bankers
Trust $125,216 under this arrangement.
Effective October 1, 1999 Index 500 Portfolio entered into a separate
securities lending agreement with Bankers Trust. Under the new
securities lending agreement the fund receives at least 70% of net
income from the securities lending program. Bankers Trust will retain
no more than 30% of net income under this agreement. For the period,
Bankers Trust retained $79,914. In addition, shareholders approved a
"manager-of-managers" arrangement, which will allow FMR, with the
approval of the Board of Trustees to hire, terminate, or replace
sub-advisers, and to modify material terms and conditions of the
sub-advisory agreement (including the fees payable thereunder) for the
fund without shareholders approval. The implementation of this
"manager-of-managers" structure, however, is pending an exemptive
order from the SEC.
On March 11, 1999, Bankers Trust announced that it had reached an
agreement with the United States Attorney's Office in the Southern
District of New York to resolve an investigation concerning
inappropriate transfers of unclaimed funds and related recordkeeping
problems that occurred between 1994 and early 1996. Pursuant to its
agreement with the U.S. Attorney's Office, Bankers Trust pleaded
guilty to misstating entries in the bank's books and records and
agreed to pay a $60 million fine to federal authorities. On July 26,
1999, Bankers Trust was formally sentenced in United States District
Court to pay the $60 million fine. Separately, Bankers Trust has
agreed to pay a $3.5 million fine to the State of New York. The events
leading up to the guilty plea and formal sentence did not arise out of
the investment advisory or mutual fund management activities of
Bankers Trust or its affiliates.
As a result of the plea and subsequent sentence, absent an order from
the Securities and Exchange Commission (SEC), Bankers Trust would not
be able to continue to provide investment advisory services to the
funds. The SEC has granted a temporary order to permit Bankers Trust
and its affiliates to continue to provide investment advisory services
to registered investment companies. There is no assurance that the SEC
will grant a permanent order.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of Trustees has adopted a Distribution and Service
Plan for the Service Class of shares (the Plan). Under the Plan, the
class pays Fidelity Distributors Corporation (FDC), an affiliate of
FMR, a 12b-1 fee. This fee is based on an annual rate of .10% of
Service Class average net assets. Initial Class shares are not subject
to a 12b-1 fee.
For the period, Service Class paid FDC the following amounts, all of
which were reallowed to insurance companies, for the distribution of
shares and providing shareholder support services:
HIGH INCOME $ 187,615
ASSET MANAGER 14,423
BALANCED 18,312
ASSET MANAGER: GROWTH 6,803
EQUITY-INCOME 335,256
GROWTH & INCOME 41,594
GROWTH OPPORTUNITIES 244,429
CONTRAFUND 353,057
GROWTH 403,810
MID CAP 3,806
OVERSEAS 66,278
TRANSFER AGENT FEES. Fidelity Investment 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 a portion of the expenses related to the
typesetting, printing and mailing of shareholder reports, except proxy
statements.
For the period, each fund's transfer agent fees were equivalent to the
following annual rates expressed as a percentage of average net
assets:
Money Market, Investment Grade Bond, High Income,
Asset Manager, Balanced, Asset Manager: Growth,
Equity-Income, Growth & Income, Index 500,
Growth Opportunities, Contrafund, Growth and
Overseas .07%
Mid Cap .09%
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Company, Inc.
(FSC), an affiliate of FMR, maintains each fund's accounting records
and administers the security lending program. The security lending fee
is based on the number and duration of lending transactions. The
accounting fee is based on the level of average net assets for the
month plus out-of-pocket expenses.
MONEY MARKET INSURANCE. Pursuant to an Exemptive Order issued by the
SEC, the Money Market Portfolio, along with other money market funds
advised by FMR or its affiliates, has entered into insurance
agreements with FIDFUNDS Mutual Limited (FIDFUNDS), an affiliated
mutual insurance company, effective January 1, 1999. FIDFUNDS provides
limited coverage for certain loss events including issuer default as
to payment of principal or interest and bankruptcy or insolvency of a
credit enhancement provider. The insurance does not cover losses
resulting from changes in interest rates, ratings downgrades or other
market conditions. The fund may be subject to a special assessment of
up to approximately 2.5 times the fund's annual gross premium if
covered losses exceed certain levels. During the period, the fund paid
premiums of $71,105 to FIDFUNDS, which are being amortized over one
year.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
BROKERAGE COMMISSIONS. Certain funds placed a portion of their
portfolio transactions with brokerage firms which are affiliates of
FMR. The Index 500 Portfolio also placed a portion of its portfolio
transactions with brokerage firms which are affiliates of Bankers
Trust. The commissions paid to these affiliated firms are shown under
the caption "Other Information" at the end of each applicable fund's
schedule of investments.
5. SECURITY LENDING.
Certain funds lend portfolio securities from time to time in order to
earn additional income. Each applicable fund receives collateral in
the form of U.S. Treasury obligations, letters of credit and/or cash
against the loaned securities and maintains collateral in an amount
not less than 100% of the market value of the loaned securities during
the period of the loan. The market value of the loaned securities is
determined at the close of business of the funds and any additional
required collateral is delivered to the funds on the next business
day. If the borrower defaults on its obligation to return the
securities loaned because of insolvency or other reasons, a fund could
experience delays and costs in recovering the securities loaned or in
gaining access to the collateral. Information regarding the value of
securities loaned and the value of collateral at period end is
included under the caption "Other Information" at the end of each
applicable fund's schedule of investments.
6. BANK BORROWINGS.
Each fund is permitted to have bank borrowings for temporary or
emergency purposes to fund shareholder redemptions. Each fund has
established borrowing arrangements with certain banks. The interest
rate on the borrowings is the bank's base rate, as revised from time
to time. Information regarding a fund's participation in the program
is included under the caption "Other Information" at the end of each
applicable fund's schedule of investments.
7. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse Index 500 Portfolio's operating
expenses (excluding interest, taxes, brokerage commissions,
extraordinary expenses and sub-advisory fees paid by the fund
associated with securities lending) above an annual rate of .28% of
average net assets.
FMR voluntarily agreed to reimburse Mid Cap Portfolio's operating
expenses (excluding interest, taxes, securities lending fees,
brokerage commissions and extraordinary expenses, if any) above the
annual rates of 1.00% and 1.10% of the average net assets for the
Initial Class and Service Class, respectively.
FMR has directed certain portfolio trades to brokers who paid a
portion of certain funds' expenses.
In addition, through arrangements with certain funds' custodians,
credits realized as a result of uninvested cash balances were used to
reduce a portion of each applicable fund's expenses. For the period,
the reductions under these arrangements are shown under the caption
"Other Information" on each applicable fund's Statement of Operations.
8. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI) and its subsidiaries, affiliates of FMR, were the record owners
of more than 5% of the outstanding shares, and certain unaffiliated
insurance companies were record owners of 10% or more of the total
outstanding shares of the following funds:
FILI UNAFFILIATED INSURANCE COMPANIES
FUND % OF OWNERSHIP # OF % OF OWNERSHIP
MONEY MARKET 53% 0 0%
Investment Grade Bond 30% 2 20%
High Income 11% 2 61%
Asset Manager 18% 1 23%
Balanced 38% 1 51%
Asset Manager: Growth 65% 1 10%
Equity-Income 13% 1 29%
Growth & Income 48% 1 21%
Index 500 26% 1 10%
Growth Opportunities 19% 1 66%
Contrafund 22% 2 35%
Growth 13% 1 29%
Mid Cap 6% 3 85%
Overseas 14% 1 35%
9. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company which the fund has ownership of at
least 5% of the voting securities. Information regarding transactions
with affiliated companies is included under "Legend" 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:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Money Market Portfolio, High Income Portfolio, Equity-Income
Portfolio, Growth Portfolio and Overseas Portfolio (funds of Variable
Insurance Products Fund) at December 31, 1999, and the results of
their operations, the changes in their net assets and the financial
highlights for the periods indicated, in conformity with accounting
principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Variable
Insurance Products Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of securities at December 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion
expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 10, 2000
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Variable Insurance Products Fund III and the
Shareholders of Mid Cap Portfolio:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Mid Cap Portfolio (a fund of Variable Insurance Products Fund III) at
December 31, 1999, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated,
in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of Mid Cap Portfolio's management; our responsibility
is to express an opinion on these financial statements based on our
audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United
States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at December 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 10, 2000
INDEPENDENT AUDITORS' REPORT
To the Trustees of Variable Insurance Products Fund II and
Shareholders of Investment Grade Bond Portfolio, Asset Manager
Portfolio, Index 500 Portfolio, Asset Manager: Growth Portfolio and
Contrafund Portfolio:
We have audited the accompanying statements of assets and liabilities
of Investment Grade Bond Portfolio, Asset Manager Portfolio, Index 500
Portfolio, Asset Manager: Growth Portfolio and Contrafund Portfolio,
including portfolios of investments, as of December 31, 1999, and the
related statements of operations, changes in net assets, and financial
highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Funds' management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The
statements of changes in net assets for the year ended December 31,
1998, and the financial highlights for each of the four years in the
period then ended were audited by other auditors whose report, dated
February 12, 1999, expressed an unqualified opinion on those
statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audits 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, 1999, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. 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 Investment Grade Bond Portfolio, Asset Manager
Portfolio, Index 500 Portfolio, Asset Manager: Growth Portfolio and
Contrafund Portfolio as of December 31, 1999, the results of their
operations, the changes in their net assets, and the financial
highlights for the year then ended, in conformity with generally
accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 11, 2000
INDEPENDENT AUDITORS' REPORT
To the Trustees of Variable Insurance Products Fund III and
Shareholders of Balanced Portfolio, Growth Opportunities Portfolio and
Growth & Income Portfolio:
We have audited the accompanying statements of assets and liabilities
of Balanced Portfolio, Growth Opportunities Portfolio and Growth &
Income Portfolio, including the portfolios of investments, as of
December 31, 1999, and the related statements of operations, changes
in net assets, and financial highlights for the year then ended. These
financial statements and financial highlights are the responsibility
of the Funds' management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our
audits. The statements of changes in net assets for the year ended
December 31, 1998, and the financial highlights for each of the four
years in the period then ended were audited by other auditors whose
report, dated February 12, 1999, expressed an unqualified opinion on
those statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
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, 1999, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. 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
provides 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 Balanced Portfolio, Growth Opportunities
Portfolio and Growth & Income Portfolio as of December 31, 1999, the
results of their operations, the changes in their net assets, and the
financial highlights for the year then ended, in conformity with
generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 11, 2000
DISTRIBUTIONS
The Board of Trustees of each fund voted to pay to shareholders of
record at the opening of business on record date, the following
distributions derived from capital gains realized from sales of
portfolio securities, and dividends derived from net investment
income:
FUND PAY DATE RECORD DATE DIVIDENDS CAPITAL GAINS
Investment Grade Bond:
Initial Class 2/4/00 2/4/00 $.84 $-
Service Class 2 2/4/00 2/4/00 $.84 $-
Asset Manager:
Initial Class 2/4/00 2/4/00 $.59 $1.39
Service Class 2/4/00 2/4/00 $.58 $1.39
Service Class 2 2/4/00 2/4/00 $.58 $1.39
Balanced:
Initial Class 2/4/00 2/4/00 $.48 $.40
Service Class 2/4/00 2/4/00 $.47 $.40
Service Class 2 2/4/00 2/4/00 $.47 $.40
Asset Manager: Growth:
Initial Class 2/4/00 2/4/00 $.37 $1.50
Service Class 2/4/00 2/4/00 $.36 $1.50
Service Class 2 2/4/00 2/4/00 $.36 $1.50
Equity-Income:
Initial Class 2/4/00 2/4/00 $.43 $1.62
Service Class 2/4/00 2/4/00 $.42 $1.62
Service Class 2 2/4/00 2/4/00 $.42 $1.62
Growth & Income:
Initial Class 2/4/00 2/4/00 $.19 $1.24
Service Class 2/4/00 2/4/00 $.19 $1.24
Service Class 2 2/4/00 2/4/00 $.19 $1.24
Index 500:
Initial Class 2/11/00 2/11/00 $1.67 $0.73
Service Class 2 2/11/00 2/11/00 $1.67 $0.73
Growth Opportunities:
Initial Class 2/4/00 2/4/00 $.28 $1.42
Service Class 2/4/00 2/4/00 $.27 $1.42
Service Class 2 2/4/00 2/4/00 $.27 $1.42
Contrafund:
Initial Class 2/4/00 2/4/00 $.10 $3.63
Service Class 2/4/00 2/4/00 $.10 $3.63
Service Class 2 2/4/00 2/4/00 $.10 $3.63
Growth:
Initial Class 2/4/00 2/4/00 $.06 $5.97
Service Class 2/4/00 2/4/00 $.05 $5.97
Service Class 2 2/4/00 2/4/00 $.05 $5.97
Mid Cap:
Initial Class 2/4/00 2/4/00 $- $.05
Service Class 2/4/00 2/4/00 $- $.05
Service Class 2 2/4/00 2/4/00 $- $.05
Overseas:
Initial Class 2/4/00 2/4/00 $.37 $2.33
Service Class 2/4/00 2/4/00 $.36 $2.33
Service Class 2 2/4/00 2/4/00 $.36 $2.33
Each fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
A percentage of the dividends distributed during the fiscal year for
the following funds was derived from interest on U.S. Government
securities which is generally exempt from state income tax:
Asset Manager 10.77%
Balanced 8.39%
Asset Manager: Growth 5.60%
Index 500 11.21%
Growth Opportunities 37.66%
Contrafund 32.14%
Overseas 6.76%
A percentage of the dividends distributed during the fiscal year for
the Initial Class and Service Class of the following funds qualifies
for the dividends-received deduction for corporate shareholders:
High Income 4%
Asset Manager 23%
Balanced 30%
Asset Manager: Growth 43%
Equity-Income 99%
Growth & Income 77%
Contrafund 59%
Growth 13%
Mid Cap 10%
For the Growth Opportunities Portfolio, a total of 72% and 76% of the
dividends distributed by the Initial Class and Service Class,
respectively, during the fiscal year qualifies for the
dividends-received deduction for corporate shareholders.
For the Index 500 Portfolio, a total of 87% of the dividends
distributed by the Initial Class during the fiscal year qualifies for
the dividends-received deduction for corporate shareholders.
For Overseas Portfolio, the amounts per share which represent income
derived from sources within, and taxes paid to, foreign countries or
possessions of the United States are as follows:
Income Taxes
Initial Class $.352 $.042
Service Class $.352 $.042
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Investments Money Management, Inc. (FIMM),
Merrimack, NH
MONEY MARKET, ASSET MANAGER, BALANCED, INVESTMENT
GRADE BOND AND ASSET MANAGER: GROWTH PORTFOLIOS
Fidelity Management & Research (U.K.) Inc.,
London, England
HIGH INCOME, MID CAP, ASSET MANAGER, ASSET MANAGER:
GROWTH, CONTRAFUND, BALANCED, GROWTH OPPORTUNITIES,
GROWTH & INCOME, AND OVERSEAS PORTFOLIOS
Fidelity Management & Research (Far East) Inc.,
Tokyo, Japan
HIGH INCOME, MID CAP, ASSET MANAGER, ASSET MANAGER:
GROWTH, CONTRAFUND, BALANCED, GROWTH OPPORTUNITIES,
GROWTH & INCOME, AND OVERSEAS PORTFOLIOS
Fidelity International Investment Advisors
Pembroke, Bermuda
OVERSEAS PORTFOLIO
Fidelity International Investment Advisors (U.K.) Limited
Kent, England
OVERSEAS PORTFOLIO
Bankers Trust, New York, NY
INDEX 500 PORTFOLIO
OFFICERS
Edward C. Johnson 3d, PRESIDENT
Robert C. Pozen, SENIOR VICE PRESIDENT
Abigail P. Johnson, VICE PRESIDENT - GROWTH, MID CAP
AND GROWTH OPPORTUNITIES PORTFOLIOS
Richard A. Spillane, Jr., VICE PRESIDENT - EQUITY-INCOME,
OVERSEAS, BALANCED AND GROWTH & INCOME PORTFOLIOS
Fred L. Henning, Jr., VICE PRESIDENT - MONEY MARKET
AND INVESTMENT GRADE BOND PORTFOLIOS
Dwight D. Churchill, VICE PRESIDENT -
INVESTMENT GRADE BOND PORTFOLIO
Boyce I. Greer, VICE PRESIDENT - MONEY MARKET PORTFOLIO
Robert A. Lawrence, VICE PRESIDENT - INDEX 500, ASSET MANAGER, AND
ASSET MANAGER: GROWTH PORTFOLIOS
Bart A. Grenier, VICE PRESIDENT - HIGH INCOME
AND CONTRAFUND PORTFOLIOs
John Avery, VICE PRESIDENT - BALANCED PORTFOLIO
Barry J. Coffman, VICE PRESIDENT - HIGH INCOME PORTFOLIO
William Danoff, VICE PRESIDENT - CONTRAFUND PORTFOLIO
Robert K. Duby, VICE PRESIDENT - MONEY MARKET PORTFOLIO
David Felman, VICE PRESIDENT - MID CAP PORTFOLIO
Kevin E. Grant, VICE PRESIDENT - INVESTMENT GRADE BOND
AND BALANCED PORTFOLIOS
Richard C. Habermann, VICE PRESIDENT - ASSET MANAGER
AND ASSET MANAGER: GROWTH PORTFOLIOS
Richard R. Mace, Jr., VICE PRESIDENT - OVERSEAS PORTFOLIO
Charles S. Morrison II, VICE PRESIDENT - ASSET MANAGER
AND ASSET MANAGER: GROWTH PORTFOLIOS
Stephen R. Petersen, VICE PRESIDENT - EQUITY-INCOME PORTFOLIO
John J. Todd, VICE PRESIDENT - ASSET MANAGER
AND ASSET MANAGER: GROWTH PORTFOLIOS
Jennifer Uhrig, VICE PRESIDENT - GROWTH PORTFOLIO
George A. Vanderheiden, VICE PRESIDENT -
GROWTH OPPORTUNITIES PORTFOLIO
Steven J. Snider, VICE PRESIDENT - ASSET MANAGER
AND ASSET MANAGER: GROWTH PORTFOLIOS
Eric D. Roiter, SECRETARY
Richard A. Silver, TREASURER
Matthew N. Karstetter, DEPUTY TREASURER
Stanley N. Griffith, ASSISTANT VICE PRESIDENT - MONEY MARKET AND
INVESTMENT GRADE BOND PORTFOLIOS
John H. Costello, ASSISTANT TREASURER
Thomas J. Simpson, ASSISTANT TREASURER - MONEY MARKET
AND INVESTMENT GRADE BOND PORTFOLIOS
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Ned C. Lautenbach
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Co., Inc.
Boston, MA
CUSTODIAN
The Bank of New York, New York, NY
MONEY MARKET, INVESTMENT GRADE BOND AND
HIGH INCOME PORTFOLIOS
The Chase Manhattan Bank, New York, NY
EQUITY-INCOME, ASSET MANAGER, ASSET MANAGER: GROWTH,
GROWTH & INCOME, BALANCED AND OVERSEAS PORTFOLIOS
Brown Brothers Harriman & Co., Boston, MA
GROWTH, GROWTH OPPORTUNITIES, MID CAP
AND CONTRAFUND PORTFOLIOS
Bankers Trust, New York, NY
INDEX 500 PORTFOLIO
* INDEPENDENT TRUSTEES
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK)
VARIABLE INSURANCE PRODUCTS:
ASSET MANAGER: GROWTH SM PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1999
CONTENTS
MARKET ENVIRONMENT 3 A review of what happened in
world markets during the
past 12 months.
PERFORMANCE AND INVESTMENT 4 How the fund has done over
SUMMARY time, and an overview of the
fund's investments at the
end of the period.
FUND TALK 5 The manager's review of fund
performance, strategy and
outlook.
INVESTMENTS 6 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 21 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 24 Notes to the financial
statements.
INDEPENDENT AUDITORS' REPORT 27 The auditors' opinion.
DISTRIBUTIONS 28
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND.
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE FUND'S
PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS
STATED ON THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF
FIDELITY OR ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER
CONDITIONS AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH
VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND,
BECAUSE INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
Entering the final year of the 20th century, popular U.S. equity
market indexes had just posted an unprecedented four consecutive years
of double-digit annual returns, while domestic bonds also enjoyed
relatively strong increases. The international story entering 1999,
however, was less positive. In general - with the exception of
European issues - international equities and bonds were greatly
disappointing. Asian and Russian economies had fallen into disarray,
Japan was struggling to implement banking reforms, and emerging
markets were plagued by a host of currency devaluations, loan defaults
and dismal credit outlooks. So who would have thought, just one year
later, that Japan, Russia and emerging markets would be three of
1999's best-performing investments? U.S. equities also continued to
chug along in 1999, extending their indexes' streak of consecutive
double-digit annual increases to five. The stock market was not
without its problems, however. Extremely narrow market breadth,
soaring valuations and rising interest rates - not to mention Y2K -
left many investors unsettled about the prospects for equities
entering the new millennium. Domestic fixed-income alternatives,
meanwhile, fared poorly in 1999 relative to the year prior.
U.S. STOCK MARKETS
In a word, technology was the primary driver of equity market
performance in 1999. While telecommunications, particularly the
wireless segment of the industry, also performed well, nothing
dominated like technology. This incredibly narrow market breadth was
illustrated by the technology-laden NASDAQ Index. Its return of 86.12%
for the one-year period ending December 31, 1999, was the all-time
highest annual return for any major U.S. stock index. Broader indexes,
such as the Standard & Poor's 500 SM, generated much lower returns,
but were still significantly affected by tech's presence. For example,
technology was responsible for approximately 70% of the S&P 500's
12-month return of 21.04%, the index's fifth consecutive annual gain
above 20%. The top 50 stocks in the S&P 500 - the so-called "Nifty
50," many of which were technology shares - accounted for 115% of its
total return. Meanwhile, the remaining 450 stocks fell 3.13%. The Dow
Jones Industrial Average - an index of 30 blue-chip stocks - posted a
27.13% return during the period, its fifth consecutive double-digit
annual return. Despite the strong numbers of these indexes, more
stocks fell than rose in 1999. Growth stocks continued to hammer their
value-oriented peers. But in a turnaround from previous years, mid-
and small-cap growth stocks performed better than their large-cap
brethren did. Conversely, mid-and small-cap value issues posted
negative overall returns in 1999.
FOREIGN STOCK MARKETS
Similar to the domestic equity markets, technology and - perhaps to an
even greater degree than in the U.S. - telecommunications led the
charge in the vastly improved international equity markets. The
recovery of the Japanese stock market in 1999 was nothing short of
remarkable. A renewed emphasis on corporate restructuring and
shareholder value - combined with the Japanese government's
willingness to create more of a free-enterprise market system - proved
wildly successful. For the period, the Morgan Stanley Capital
International Japan Index returned 61.53% and Japan's TOPIX Index was
up 75.89%. While Canadian equity markets didn't get nearly the
attention of their U.S. neighbors, their performance was a great deal
better than the broader American indexes, as the Toronto Stock
Exchange (TSE) 300 returned 39.34% for the 12-month period ending
December 31, 1999. Despite a strong surge in December, European
markets offered mixed results over the past 12 months. In that time,
the Morgan Stanley Capital International Europe Index posted a
relatively tame - at least, in comparison to other developed nations'
stock markets - one-year return of 16.16%.
U.S. BOND MARKETS
Fueled by robust economic growth and a tighter monetary policy,
interest rates moved sharply higher, causing most domestic bonds to
struggle throughout the 12-month period ending December 31, 1999. The
Lehman Brothers Aggregate Bond Index, a popular measure of
taxable-bond performance, fell 0.82% during the period. Treasury
prices had the toughest time of it, falling in response to three
quarter-point interest-rate hikes levied by the Federal Reserve Board,
which erased all of 1998's rate cuts. The Lehman Brothers Long-Term
Treasury Index plunged 8.74% in 1999. Nor were corporate bonds, as
measured by the Lehman Brothers Corporate Bond Index, immune from the
fixed-income fade during the year, falling 1.96%. Government agency
securities also fell into negative territory for the year, as the
Lehman Brothers U.S. Agency Index fell 0.94%. There were a few bright
spots, however. The high-yield market, as measured by the Merrill
Lynch High Yield Master II Index, returned 2.51% during the 12-month
period, while the Lehman Brothers Mortgage-Backed Securities Index was
up 1.86%.
FOREIGN BOND MARKETS
Emerging markets stood as one of the best-performing asset classes in
1999. For the 12-month period ending December 31, 1999, the JP Morgan
Emerging Markets Bond Index Plus was up 25.97%. A year ago, that same
index closed 1998 with a negative 14.35% annual return. A variety of
factors sparked their recovery, including rising commodity prices,
particularly oil; the continuation of a strong U.S. economy;
stable-to-lower interest rates; tame inflation; and greater political
stability. Russia was perhaps the year's biggest comeback story.
Devastated by its devaluation of the ruble and loan defaults in 1998,
Russia steadily demonstrated strong technical improvements that made
it the best-performing country in the index in 1999. Both Brazil and
Mexico enjoyed relatively low inflation and improved economies. Turkey
was the best-performing emerging-market country in December, as the
government's reform plans, IMF financial support, and the announcement
that it would be accepted in the European Union all boosted the
country's prospects. Elsewhere, outside of positive performing
Canadian and Japanese issues - beneficiaries of strong local
currencies - higher rates proved insurmountable for most non-U.S.
developed markets, which produced negative returns in local currency
terms. A markedly weak euro, coupled with firming supply pressures,
felled bond prices in Germany, France and Italy. The Salomon Brothers
Non-U.S. World Government Bond Index fell 5.07% in 1999.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER: GROWTH PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the life of fund total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
FIDELITY VIP: ASSET MGR: 15.26% 20.16%
GROWTH - "INITIAL CLASS"
Asset Manager: Growth Composite 14.55% n/a
S&P 500 (registered trademark) 21.04% 28.59%
LB Aggregate Bond -0.82% 7.77%
LB 3 Month T-Bill 4.90% n/a
Variable Annuity Flexible 12.07% n/a
Portfolio Funds Average
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to those of the Asset Manager:
Growth Composite Index - a hypothetical combination of unmanaged
indices. The composite index combines the total returns of the
Standard & Poor's 500 SM Index, the Lehman Brothers Aggregate Bond
Index and the Lehman Brothers 3 Month Treasury Bill Index weighted
according to the fund's neutral mix.
You can also compare the fund's returns to the variable annuity
flexible portfolio funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
one year average represents a peer group of 84 mutual funds. The
benchmarks listed in the table above include 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 3, 1995.
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 RETURN 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.
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 long-term growth and short-term
volatility. 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)
$10,000 OVER LIFE OF FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
VIP II Asset Mgr Growth 70 S&P/25 LBAgg/5 LB 3Mo S&P 500 LB Aggregate Bond
00159 F0022 SP001 LB001
1995/01/31 10000.00 10000.00 10000.00 10000.00
1995/02/28 10149.70 10319.62 10389.70 10238.00
1995/03/31 10289.42 10539.71 10696.30 10300.45
1995/04/30 10558.88 10785.50 11011.31 10444.66
1995/05/31 10708.58 11199.23 11451.43 10848.87
1995/06/30 11137.72 11397.77 11717.44 10928.06
1995/07/31 11546.91 11633.53 12106.00 10904.02
1995/08/31 12065.87 11695.86 12136.38 11035.96
1995/09/30 12245.51 12052.97 12648.54 11143.01
1995/10/31 11776.45 12083.85 12603.38 11287.87
1995/11/30 11986.03 12487.56 13156.67 11457.19
1995/12/31 12277.71 12701.01 13410.07 11617.59
1996/01/31 12569.78 13008.92 13866.55 11694.26
1996/02/29 12613.39 13009.89 13995.09 11490.78
1996/03/31 12840.37 13059.96 14129.86 11410.35
1996/04/30 13143.01 13162.84 14338.14 11346.45
1996/05/31 13348.36 13380.07 14707.92 11323.76
1996/06/30 13402.41 13467.11 14763.95 11475.49
1996/07/31 13067.35 13093.05 14111.68 11506.48
1996/08/31 13164.62 13267.32 14409.30 11486.92
1996/09/30 13705.04 13821.05 15220.25 11686.79
1996/10/31 14104.95 14163.15 15640.03 11946.24
1996/11/30 15023.67 14935.59 16822.26 12150.52
1996/12/31 14737.79 14700.41 16489.01 12037.52
1997/01/31 15367.80 15358.12 17519.24 12074.83
1997/02/28 15514.22 15455.00 17656.59 12105.02
1997/03/31 14781.88 14970.83 16931.08 11970.65
1997/04/30 15401.55 15656.26 17941.87 12150.21
1997/05/31 16336.68 16364.80 19034.17 12265.64
1997/06/30 16821.15 16929.64 19886.90 12411.60
1997/07/31 17959.09 17991.36 21469.30 12746.72
1997/08/31 17395.75 17251.75 20266.59 12638.37
1997/09/30 18037.95 17980.97 21376.59 12825.42
1997/10/31 17609.82 17629.62 20662.61 13011.39
1997/11/30 18116.82 18224.94 21619.09 13071.24
1997/12/31 18432.29 18493.92 21990.29 13203.26
1998/01/31 18432.29 18700.72 22233.50 13372.26
1998/02/28 19558.44 19644.52 23836.98 13361.56
1998/03/31 20283.77 20370.04 25057.67 13406.99
1998/04/30 20220.15 20544.55 25309.75 13476.71
1998/05/31 20016.54 20350.75 24874.67 13604.74
1998/06/30 20487.37 20976.94 25885.08 13720.15
1998/07/31 20309.22 20836.30 25609.41 13749.26
1998/08/31 17751.48 18817.12 21906.80 13973.05
1998/09/30 18413.18 19776.04 23310.15 14300.19
1998/10/31 19583.89 20879.82 25206.20 14224.74
1998/11/30 20563.72 21798.80 26733.94 14305.30
1998/12/31 21670.80 22698.67 28274.35 14348.32
1999/01/31 22307.06 23408.00 29456.79 14450.81
1999/02/28 21729.24 22800.07 28541.27 14198.50
1999/03/31 21946.67 23475.12 29683.21 14277.27
1999/04/30 22598.96 24134.36 30832.84 14322.53
1999/05/31 22204.87 23687.10 30104.87 14196.49
1999/06/30 23305.60 24593.03 31775.69 14151.15
1999/07/31 22829.97 24034.91 30783.66 14091.72
1999/08/31 22775.62 23953.42 30631.28 14084.56
1999/09/30 22313.58 23568.71 29791.68 14248.00
1999/10/31 23224.06 24639.36 31676.89 14300.57
1999/11/30 23631.74 24994.57 32320.88 14299.58
1999/12/31 24977.08 26000.64 34224.58 14230.63
IMATRL PRASUN SHR__CHT 19991231 20000118 144608 R00000000000062
</TABLE>
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Asset Manager:
Growth Portfolio on January 31, 1995, shortly after the fund started.
As the chart shows, by December 31, 1999, the value of the investment
would have grown to $24,977 - a 149.77% increase. With reinvested
dividends and capital gains, if any, a $10,000 investment in the
Standard & Poor's 500 Index would have grown to $34,225 - a 242.25%
increase. If $10,000 was invested in the Lehman Brothers Aggregate
Bond Index, it would have grown to $14,231 - a 42.31% increase.
You can also look at how the Asset Manager: Growth Composite Index did
over the same period. The Asset Manager: Growth Composite Index
combines the cumulative total returns of three unmanaged indexes - the
S&P 500, Lehman Brothers Aggregate Bond Index, and the Lehman Brothers
3 Month Treasury Bill Index - according to the fund's neutral mix*.
With reinvested dividends and capital gains, if any, a $10,000
investment in the index would have grown to $26,001 - a 160.01%
increase.
* 70% STOCKS, 25% BONDS AND 5% SHORT-TERM INSTRUMENTS EFFECTIVE
JANUARY 1, 1997.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 3.2
Wal-Mart Stores, Inc. 2.9
General Electric Co. 2.8
Motorola, Inc. 2.4
Cisco Systems, Inc. 2.2
13.5
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
(STOCKS ONLY) % OF FUND'S NET ASSETS
TECHNOLOGY 21.3
FINANCE 10.4
UTILITIES 7.8
HEALTH 6.7
RETAIL & WHOLESALE 5.7
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stock Class 76.5%
Bond Class 20.4%
Short-Term Class 3.1%
* FOREIGN INVESTMENTS 1.2%
ASSET ALLOCATION IN THE PIE CHART REFLECTS THE CATEGORIZATION OF
ASSETS AS DEFINED IN THE FUND'S PROSPECTUS. FINANCIAL STATEMENT
CATEGORIZATIONS CONFORM TO ACCOUNTING STANDARDS AND WILL DIFFER FROM
THE PIE CHART.
PERCENTAGES ARE ADJUSTED FOR THE EFFECT OF OPEN FUTURES CONTRACTS, IF
APPLICABLE.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER: GROWTH PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(PHOTOGRAPH OF RICHARD HABERMANN)
An interview with
Richard Habermann,
Portfolio Manager of
Asset Manager: Growth
Q. HOW DID THE FUND PERFORM, DICK?
A. For the 12 months that ended December 31, 1999, the fund topped the
14.55% return of the Asset Manager: Growth Composite Index.
Q. WHAT ASSET ALLOCATION STRATEGIES DID YOU FOLLOW DURING THE PERIOD?
A. The fund's neutral allocation mix calls for 70% of its assets to be
invested in stocks, 25% in bonds and the rest in short-term and money
market instruments. With stocks performing well through much of the
period, I kept the fund's average equity exposure at around 74%.
Timing, though, is also important, and the fund would have benefited
further from a higher stock exposure during certain periods in the
spring. On the bond side, the fund was somewhat underweighted on
average to accommodate the equity position. My decision to lower the
fund's exposure to investment-grade bonds worked out well, as rising
interest rates detracted from returns. My focus within the bond
subportfolio was instead on high-yield securities, which performed
very well relative to the Treasury market.
Q. HOW DID THE FUND'S EQUITY SUBPORTFOLIO PERFORM DURING THE PERIOD?
A. The fund's equities performed slightly better than the S&P 500
index, quite an accomplishment considering the narrowness of the
overall market in 1999. By that, I mean that 10 of the major stocks
within the index produced around 60% of its advance. Conversely, the
bottom 450 stocks within the S&P produced a negative aggregate return.
The technology sector led the market, and Steve Snider - who manages
the fund's stocks - was able to find enough good names to keep pace
with the tech stocks within the index. Industry leaders Cisco Systems
and Microsoft continued to perform well, as did Lexmark International.
The fund also benefited from the huge demand for wireless
communications by owning positions in Qualcomm and Motorola. Retail
stocks also performed well, with Wal-Mart being the fund's top overall
contributor during the period. Disappointments included pharmaceutical
firm Schering-Plough, as well as Fannie Mae and Freddie Mac, both of
which struggled due to less-than-favorable interest-rate conditions.
The fund no longer held equity stakes in Fannie Mae or Freddie Mac at
the end of the period.
Q. HOW DID YOU ALLOCATE INVESTMENTS WITHIN THE FUND'S BOND
SUBPORTFOLIO?
A. I continued to emphasize high-yield bonds, which clearly turned out
to be a wise move. These positions - managed by Fred Hoff - posted
attractive yields against the backdrop of a strong U.S. economy and a
favorable corporate earnings outlook. The best individual high-yield
performers included telecommunications names Nextel Communications,
WinStar and Teligent. As far as the fund's investment-grade bond
positions, rising interest rates pressured returns through much of the
period. Despite this general move in rates, the fund was heavily
weighted in corporate and mortgage-backed securities, which performed
relatively well during the period. This subportfolio - managed by
Charlie Morrison - benefited from its investments in Seagram, Cable &
Wireless and Capital One, as well as from its exposure to commercial
mortgage-backed securities, particularly in the lower credit tiers.
Q. HOW DID YOU POSITION THE FUND'S SHORT-TERM/MONEY MARKET
INVESTMENTS?
A. With interest rates spiking upward, John Todd - who manages this
portion of the fund - focused mainly on repurchase agreements. These
securities - commonly called repos - are short-term investments that
the seller agrees to buy back at a specified price and time. Repos
offered the fund an effective sanctuary in which to invest assets on a
temporary basis during the period. They also provided an adequate
level of liquidity, which was desirable given the rate scenario.
Q. WHAT'S YOUR OUTLOOK?
A. Despite the global economic growth we've seen recently, inflation
remains subdued. Corporate earnings appear to be on solid ground for
2000, which means there may be more market segments that are
reasonably valued. From an allocation standpoint the direction of
interest rates will have some influence on whether I take more of a
defensive or equity-oriented approach.
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 2.
FUND FACTS
GOAL: maximum total return over the long term
by allocating assets among stocks, bonds and
short-term instruments anywhere in the world
START DATE: January 3, 1995
SIZE: as of December 31, 1999, more than
$591 million
MANAGER: Richard Habermann, since 1996;
joined Fidelity in 1968
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER: GROWTH PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 72.8%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 3.1%
AEROSPACE & DEFENSE - 3.0%
Boeing Co. 47,800 $ 1,986,688
Honeywell International, Inc. 92,225 5,320,230
Northrop Grumman Corp. 6,700 362,219
Rockwell International Corp. 24,100 1,153,788
Textron, Inc. 10,100 774,544
United Technologies Corp. 123,456 8,024,640
17,622,109
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 16,700 880,925
TOTAL AEROSPACE & DEFENSE 18,503,034
BASIC INDUSTRIES - 2.6%
CHEMICALS & PLASTICS - 0.7%
Dow Chemical Co. 21,900 2,926,388
Engelhard Corp. 18,900 356,738
Praxair, Inc. 19,300 971,031
4,254,157
IRON & STEEL - 0.2%
Mueller Industries, Inc. (a) 7,800 282,750
Nucor Corp. 19,700 1,079,806
1,362,556
METALS & MINING - 1.3%
Alcoa, Inc. 93,100 7,727,300
PAPER & FOREST PRODUCTS - 0.4%
Georgia-Pacific Corp. 12,200 619,150
Weyerhaeuser Co. 19,900 1,429,069
2,048,219
TOTAL BASIC INDUSTRIES 15,392,232
CONSTRUCTION & REAL ESTATE -
0.2%
BUILDING MATERIALS - 0.2%
Fortune Brands, Inc. 38,400 1,269,600
DURABLES - 1.8%
AUTOS, TIRES, & ACCESSORIES -
0.9%
Ford Motor Co. 102,000 5,450,625
CONSUMER DURABLES - 0.7%
Minnesota Mining & 43,800 4,286,925
Manufacturing Co.
CONSUMER ELECTRONICS - 0.1%
Whirlpool Corp. 3,200 208,200
TEXTILES & APPAREL - 0.1%
NIKE, Inc. Class B 13,500 669,094
TOTAL DURABLES 10,614,844
ENERGY - 4.2%
ENERGY SERVICES - 0.2%
BJ Services Co. (a) 27,000 1,128,938
SHARES VALUE (NOTE 1)
OIL & GAS - 4.0%
Amerada Hess Corp. 8,600 $ 488,050
Apache Corp. 23,100 853,256
Atlantic Richfield Co. 98,400 8,511,600
Chevron Corp. 71,200 6,167,700
Exxon Mobil Corp. 87,260 7,029,884
Tosco Corp. 20,200 549,188
23,599,678
TOTAL ENERGY 24,728,616
FINANCE - 10.3%
BANKS - 4.4%
Chase Manhattan Corp. 125,100 9,718,706
Comerica, Inc. 10,700 499,556
FleetBoston Financial Corp. 98,220 3,419,284
J. P. Morgan & Co., Inc. 55,700 7,053,013
PNC Financial Corp. 85,500 3,804,750
SouthTrust Corp. 41,300 1,561,656
26,056,965
CREDIT & OTHER FINANCE - 1.7%
American Express Co. 15,100 2,510,375
Citigroup, Inc. 113,200 6,289,675
Providian Financial Corp. 15,500 1,411,469
10,211,519
INSURANCE - 1.0%
Allmerica Financial Corp. 12,400 689,750
American General Corp. 9,200 698,050
CIGNA Corp. 9,400 757,288
Financial Security Assurance 4,700 244,988
Holdings Ltd.
Marsh & McLennan Companies, 26,400 2,526,150
Inc.
MGIC Investment Corp. 14,500 872,719
5,788,945
SAVINGS & LOANS - 0.4%
Golden West Financial Corp. 65,100 2,180,850
SECURITIES INDUSTRY - 2.8%
AXA Financial, Inc. 51,800 1,754,725
Kansas City Southern 44,500 3,320,813
Industries, Inc.
Lehman Brothers Holdings, 70,900 6,004,344
Inc.
Merrill Lynch & Co., Inc. 20,200 1,686,700
Morgan Stanley Dean Witter & 26,600 3,797,150
Co.
16,563,732
TOTAL FINANCE 60,802,011
HEALTH - 6.6%
DRUGS & PHARMACEUTICALS - 4.6%
Amgen, Inc. (a) 126,800 7,615,925
Biogen, Inc. (a) 12,100 1,022,450
Bristol-Myers Squibb Co. 124,500 7,991,344
Merck & Co., Inc. 54,000 3,621,375
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS -
CONTINUED
Pfizer, Inc. 53,900 $ 1,748,381
Schering-Plough Corp. 126,900 5,353,594
27,353,069
MEDICAL EQUIPMENT & SUPPLIES
- - 1.6%
Johnson & Johnson 101,400 9,442,875
Millipore Corp. 5,400 208,575
9,651,450
MEDICAL FACILITIES MANAGEMENT
- - 0.4%
United HealthCare Corp. 13,200 701,250
Wellpoint Health Networks, 20,100 1,325,344
Inc. (a)
2,026,594
TOTAL HEALTH 39,031,113
INDUSTRIAL MACHINERY &
EQUIPMENT - 4.1%
ELECTRICAL EQUIPMENT - 3.2%
Emerson Electric Co. 3,700 212,288
General Electric Co. 107,000 16,558,250
General Instrument Corp. (a) 28,300 2,405,500
19,176,038
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.9%
Ingersoll-Rand Co. 61,400 3,380,838
Parker-Hannifin Corp. 10,800 554,175
Tyco International Ltd. 34,000 1,321,750
5,256,763
TOTAL INDUSTRIAL MACHINERY & 24,432,801
EQUIPMENT
MEDIA & LEISURE - 2.2%
BROADCASTING - 0.0%
NTL, Inc. warrants 10/14/08 427 21,350
(a)
PUBLISHING - 2.1%
Central Newspapers, Inc. 8,700 342,563
Class A
Dow Jones & Co., Inc. 11,700 795,600
Gannet Co., Inc. 50,900 4,151,531
Knight-Ridder, Inc. 18,900 1,124,550
McGraw-Hill Companies, Inc. 8,500 523,813
The New York Times Co. Class A 32,800 1,611,300
Tribune Co. 66,800 3,678,175
12,227,532
RESTAURANTS - 0.1%
Brinker International, Inc. 12,000 288,000
(a)
Darden Restaurants, Inc. 23,400 424,125
712,125
TOTAL MEDIA & LEISURE 12,961,007
SHARES VALUE (NOTE 1)
NONDURABLES - 3.5%
BEVERAGES - 1.5%
Adolph Coors Co. Class B 14,700 $ 771,750
Anheuser-Busch Companies, 89,600 6,350,400
Inc.
Pepsi Bottling Group, Inc. 60,200 997,063
PepsiCo, Inc. 21,600 761,400
8,880,613
FOODS - 1.4%
Campbell Soup Co. 20,200 781,488
H. J. Heinz Co. 20,200 804,213
Kellogg Co. 46,100 1,420,456
Quaker Oats Co. 43,400 2,848,125
Ralston Purina Co. 27,000 752,625
Sara Lee Corp. 75,200 1,659,100
8,266,007
HOUSEHOLD PRODUCTS - 0.4%
Procter & Gamble Co. 22,700 2,487,069
TOBACCO - 0.2%
Philip Morris Companies, Inc. 45,000 1,043,438
TOTAL NONDURABLES 20,677,127
PRECIOUS METALS - 0.0%
Homestake Mining Co. 26,800 209,375
RETAIL & WHOLESALE - 5.7%
APPAREL STORES - 0.3%
Gap, Inc. 43,575 2,004,450
GENERAL MERCHANDISE STORES -
3.2%
Dayton Hudson Corp. 21,100 1,549,531
Sears, Roebuck & Co. 5,400 164,363
Wal-Mart Stores, Inc. 250,000 17,281,250
18,995,144
RETAIL & WHOLESALE,
MISCELLANEOUS - 2.2%
Best Buy Co., Inc. (a) 38,900 1,952,294
Circuit City Stores, Inc. - 20,100 905,756
Circuit City Group
Home Depot, Inc. 98,250 6,736,266
Lowe's Companies, Inc. 54,300 3,244,425
12,838,741
TOTAL RETAIL & WHOLESALE 33,838,335
SERVICES - 0.4%
LEASING & RENTAL - 0.2%
Hertz Corp. Class A 17,500 877,188
PRINTING - 0.2%
Valassis Communications, Inc. 31,650 1,337,213
(a)
TOTAL SERVICES 2,214,401
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - 21.3%
COMMUNICATIONS EQUIPMENT - 4.6%
ADC Telecommunications, Inc. 33,500 $ 2,430,844
(a)
Cisco Systems, Inc. (a) 119,100 12,758,588
Globalstar Telecommunications 180 38,700
Ltd. warrants 2/15/04 (a)(f)
Lucent Technologies, Inc. 157,900 11,812,894
27,041,026
COMPUTER SERVICES & SOFTWARE
- - 6.1%
Adobe Systems, Inc. 59,600 4,008,100
Computer Associates 31,700 2,217,019
International, Inc.
Electronics for Imaging, Inc. 33,600 1,953,000
(a)
First Data Corp. 95,200 4,694,550
Microsoft Corp. (a) 163,300 19,065,244
NetScout Systems, Inc. 19,800 613,800
Oracle Corp. (a) 32,300 3,619,619
36,171,332
COMPUTERS & OFFICE EQUIPMENT
- - 4.5%
Adaptec, Inc. (a) 66,100 3,296,738
Comverse Technology, Inc. (a) 23,800 3,445,050
International Business 80,300 8,672,400
Machines Corp.
Lexmark International Group, 72,200 6,534,100
Inc. Class A (a)
Sun Microsystems, Inc. (a) 63,300 4,901,794
26,850,082
ELECTRONIC INSTRUMENTS - 0.7%
Agilent Technologies, Inc. 2,400 185,550
Applied Materials, Inc. (a) 13,200 1,672,275
Teradyne, Inc. (a) 36,200 2,389,200
4,247,025
ELECTRONICS - 5.4%
Analog Devices, Inc. (a) 700 65,100
Intel Corp. 26,800 2,205,975
LSI Logic Corp. (a) 23,600 1,593,000
Motorola, Inc. 95,800 14,106,550
National Semiconductor Corp. 27,000 1,155,938
(a)
Texas Instruments, Inc. 123,200 11,935,000
Vishay Intertechnology, Inc. 20,200 638,825
(a)
31,700,388
TOTAL TECHNOLOGY 126,009,853
TRANSPORTATION - 0.1%
TRUCKING & FREIGHT - 0.1%
United Parcel Service, Inc. 5,400 372,600
Class B
SHARES VALUE (NOTE 1)
UTILITIES - 6.7%
CELLULAR - 1.6%
McCaw International Ltd. 910 $ 2,048
warrants 4/16/07 (a)(f)
QUALCOMM, Inc. (a) 53,600 9,440,300
9,442,348
ELECTRIC UTILITY - 1.3%
DTE Energy Co. 32,000 1,004,000
Edison International 39,400 1,031,788
Energy East Corp. 99,100 2,062,519
GPU, Inc. 30,700 919,081
PECO Energy Co. 18,000 625,500
PP&L Resources, Inc. 19,500 446,063
Public Service Enterprise 24,200 842,463
Group, Inc.
Unicom Corp. 19,900 666,650
7,598,064
GAS - 0.3%
Enron Corp. 48,600 2,156,625
TELEPHONE SERVICES - 3.5%
AT&T Corp. 104,160 5,286,120
BellSouth Corp. 120,800 5,654,950
MCI WorldCom, Inc. (a) 50,550 2,682,309
Ono Finance PLC rights 310 31,000
5/31/09 (a)(f)
Pathnet, Inc. warrants 890 8,900
4/15/08 (a)(f)
SBC Communications, Inc. 92,514 4,510,058
Sprint Corp. - FON Group 35,100 2,362,669
20,536,006
TOTAL UTILITIES 39,733,043
TOTAL COMMON STOCKS 430,789,992
(Cost $313,591,361)
NONCONVERTIBLE PREFERRED
STOCKS - 2.0%
CONSTRUCTION & REAL ESTATE -
0.1%
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
California Federal Preferred 30,171 686,390
Capital Corp. $2.2812
FINANCE - 0.1%
INSURANCE - 0.1%
American Annuity Group 160 143,273
Capital Trust II 8.875%
SIG Capital Trust I 9.5% (a) 692 177,258
320,531
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Fresenius Medical Care 586 554,851
Capital Trust II 7.875%
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.4%
Adelphia Communications Corp. 2,183 $ 246,679
$13.00
CSC Holdings, Inc. 11.125% 14,372 1,570,141
pay-in-kind
Granite Broadcasting Corp. 3 3,060
12.75% pay-in-kind
Sinclair Capital 11.625% 4,003 401,301
2,221,181
PUBLISHING - 0.1%
PRIMEDIA, Inc.:
$9.20 4,338 407,772
8.625% 125 11,063
Series D, $10.00 6,244 618,156
1,036,991
TOTAL MEDIA & LEISURE 3,258,172
SERVICES - 0.1%
LEASING & RENTAL - 0.1%
Crown Castle International 336 347,760
Corp. 12.75% pay-in-kind
UTILITIES - 1.1%
CELLULAR - 0.4%
Nextel Communications, Inc.:
11.125% pay-in-kind 2,699 2,712,495
Series D, 13% pay-in-kind 52 55,900
2,768,395
TELEPHONE SERVICES - 0.7%
Adelphia Business Solution, 819 798,525
Inc. 12.875% pay-in-kind
Intermedia Communications, 769 749,775
Inc. 13.5% pay-in-kind
IXC Communications, Inc. 263 287,985
12.5% pay-in-kind
NEXTLINK Communications, Inc. 30,889 1,668,006
14% pay-in-kind
WinStar Communications, Inc. 519 513,810
14.25% (a)
4,018,101
TOTAL UTILITIES 6,786,496
TOTAL NONCONVERTIBLE 11,954,200
PREFERRED STOCKS
(Cost $12,332,899)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS - 14.0%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
CONVERTIBLE BONDS - 0.3%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Tenet Healthcare Corp. 6% B1 $ 1,290,000 $ 1,051,350
12/1/05
Total Renal Care Holdings, B1 500,000 313,750
Inc. 7% 5/15/09 (f)
1,365,100
MEDIA & LEISURE - 0.0%
LODGING & GAMING - 0.0%
Hilton Hotels Corp. 5% 5/15/06 Ba2 30,000 22,875
NONDURABLES - 0.1%
FOODS - 0.1%
Chiquita Brands B3 390,000 276,900
International, Inc. 7%
3/28/01
TOTAL CONVERTIBLE BONDS 1,664,875
NONCONVERTIBLE BONDS - 13.7%
AEROSPACE & DEFENSE - 0.1%
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, B1 530,000 528,675
Inc. 9.25% 12/1/06
BASIC INDUSTRIES - 0.5%
CHEMICALS & PLASTICS - 0.3%
Huntsman Corp. 9.5% 7/1/07 (f) B2 330,000 311,850
Huntsman ICI Chemicals LLC B2 220,000 226,050
10.125% 7/1/09 (f)
Lyondell Chemical Co.:
9.875% 5/1/07 Ba3 890,000 907,800
10.875% 5/1/09 B2 130,000 134,550
Sterling Chemicals, Inc. Caa3 440,000 327,800
11.75% 8/15/06
1,908,050
IRON & STEEL - 0.0%
The LTV Corp. 11.75% 11/15/09 Ba3 150,000 156,750
(f)
METALS & MINING - 0.1%
Kaiser Aluminum & Chemical B3 240,000 240,000
Corp. 12.75% 2/1/03
Metals USA, Inc. 8.625% B2 60,000 56,250
2/15/08
296,250
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
PACKAGING & CONTAINERS - 0.1%
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 $ 560,000 $ 520,800
9.75% 6/15/07 Caa1 330,000 313,500
834,300
PAPER & FOREST PRODUCTS - 0.0%
Potlatch Corp. 6.25% 3/15/02 Baa1 80,000 78,066
TOTAL BASIC INDUSTRIES 3,273,416
CONSTRUCTION & REAL ESTATE -
0.3%
BUILDING MATERIALS - 0.0%
American Standard Companies, Ba3 320,000 300,800
Inc. 7.375% 4/15/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% 2/15/09 B1 390,000 353,925
ENGINEERING - 0.0%
Anteon Corp. 12% 5/15/09 B3 260,000 243,100
REAL ESTATE - 0.1%
Duke-Weeks Realty LP 6.875% Baa2 100,000 95,034
3/15/05
LNR Property Corp.:
9.375% 3/15/08 B1 460,000 431,250
10.5% 1/15/09 B1 240,000 237,000
763,284
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 100,000 92,156
7.125% 3/15/04 Baa2 110,000 103,663
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 100,000 96,414
6.75% 2/15/08 Baa1 100,000 91,969
384,202
TOTAL CONSTRUCTION & REAL 2,045,311
ESTATE
DURABLES - 0.2%
AUTOS, TIRES, & ACCESSORIES -
0.1%
Oshkosh Truck Co. 8.75% 3/1/08 B2 300,000 291,000
Tenneco, Inc. 11.625% B2 260,000 263,900
10/15/09 (f)
TRW, Inc. 6.5% 6/1/02 Baa1 120,000 117,700
672,600
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
TEXTILES & APPAREL - 0.1%
Jones Apparel Group, Inc. Baa2 $ 135,000 $ 132,503
7.875% 6/15/06
Worldtex, Inc. 9.625% 12/15/07 B1 410,000 332,100
464,603
TOTAL DURABLES 1,137,203
ENERGY - 0.6%
COAL - 0.1%
P&L Coal Holdings Corp. B2 320,000 312,000
9.625% 5/15/08
ENERGY SERVICES - 0.2%
Baker Hughes, Inc. 5.8% A2 90,000 86,508
2/15/03
R&B Falcon Corp. 6.5% 4/15/03 Ba3 320,000 292,000
RBF Finance Co.:
11% 3/15/06 Ba3 570,000 609,900
11.375% 3/15/09 Ba3 210,000 225,750
1,214,158
OIL & GAS - 0.3%
Apache Corp. 7.625% 7/1/19 Baa1 75,000 72,300
Chesapeake Energy Corp. B3 680,000 642,600
9.625% 5/1/05
Gulf Canada Resources Ltd. Ba1 140,000 137,550
8.375% 11/15/05
Occidental Petroleum Corp. Baa3 100,000 103,355
9.75% 6/15/01
Ocean Energy, Inc. 8.875% Ba3 360,000 359,100
7/15/07
Oryx Energy Co.:
8% 10/15/03 Baa1 95,000 95,086
8.125% 10/15/05 Baa1 140,000 142,254
8.375% 7/15/04 Baa1 195,000 199,996
Petro-Canada 7% 11/15/28 A3 80,000 70,511
1,822,752
TOTAL ENERGY 3,348,910
FINANCE - 1.3%
BANKS - 0.2%
BankBoston Corp.:
6.125% 3/15/02 A2 320,000 317,500
6.625% 2/1/04 A3 60,000 58,294
Capital One Bank:
6.375% 2/15/03 Baa2 130,000 124,709
6.65% 3/15/04 Baa3 260,000 248,820
Capital One Financial Corp. Baa3 100,000 91,231
7.125% 8/1/08
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
BANKS - CONTINUED
Den Danske Bank AS 6.375% A1 $ 170,000 $ 157,888
6/15/08 (f)(i)
Korea Development Bank 6.625% Baa2 95,000 91,148
11/21/03
National Westminster Bank PLC Aa3 50,000 48,825
7.375% 10/1/09
NB Capital Trust IV 8.25% Aa2 100,000 95,874
4/15/27
Providian National Bank 6.7% Baa3 100,000 95,791
3/15/03
1,330,080
CREDIT & OTHER FINANCE - 0.9%
Ahmanson Capital Trust I A3 125,000 118,820
8.36% 12/1/26 (f)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 550,000 365,750
10% 3/15/04 Caa3 370,000 240,500
AT&T Capital Corp. 6.25% A1 250,000 247,608
5/15/01
BanPonce Trust I 8.327% 2/1/27 A3 75,000 68,540
Countrywide Funding Corp. A3 150,000 146,132
6.45% 2/27/03
ERP Operating LP:
6.55% 11/15/01 A3 55,000 54,119
7.1% 6/23/04 A3 100,000 97,713
Farmers Insurance Exchange A2 110,000 93,564
Capital 7.05% 7/15/28 (f)
First Security Capital I A3 110,000 102,469
8.41% 12/15/26
Ford Motor Credit Co.:
6.3563% 7/16/01 (i) A1 400,000 400,367
6.5% 2/28/02 A1 540,000 534,330
GS Escrow Corp.:
7% 8/1/03 Ba1 90,000 83,168
7.125% 8/1/05 Ba1 165,000 147,756
Heller Financial, Inc. 6% A3 180,000 170,915
3/19/04
KeyCorp Institutional Capital A1 130,000 117,699
A 7.826% 12/1/26
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 430,000 258,000
7.6% 8/1/07 Ba2 790,000 434,500
7.875% 8/1/03 Ba2 130,000 74,100
Mellon Capital I 7.72% 12/1/26 A2 70,000 63,951
Newcourt Credit Group, Inc. A1 130,000 126,858
6.875% 2/16/05
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 $ 40,000 $ 38,049
5.875% 5/1/04 Baa1 100,000 94,734
The Money Store, Inc. 7.3% A2 100,000 99,625
12/1/02
TXU Eastern Funding:
6.15% 5/15/02 Baa1 60,000 58,434
6.75% 5/15/09 Baa1 80,000 73,534
U.S. Bancorp 8.09% 11/15/26 A1 100,000 93,254
U.S. West Capital Funding, Baa1 130,000 129,454
Inc. 6.875% 8/15/01 (f)
UNICCO Service Co./UNICCO B3 450,000 414,000
Finance Corp. 9.875% 10/15/07
4,947,943
SAVINGS & LOANS - 0.1%
Chevy Chase Savings Bank FSB B1 160,000 150,400
9.25% 12/1/08
Great Western Finance Trust A3 120,000 112,162
II 8.206% 2/1/27
Home Savings of America FSB A3 90,000 85,361
6.5% 8/15/04
Long Island Savings Bank FSB Baa3 140,000 138,141
7% 6/13/02
Sovereign Bancorp, Inc. Ba3 100,000 96,491
6.625% 3/15/01
582,555
SECURITIES INDUSTRY - 0.1%
Amvescap PLC yankee 6.375% A3 200,000 191,866
5/15/03
Goldman Sachs Group L.P. A1 400,000 400,648
6.5025% 7/27/00 (i)(j)
Morgan Stanley Dean Witter & Aa3 180,000 179,809
Co. 7.125% 1/15/03
772,323
TOTAL FINANCE 7,632,901
HEALTH - 0.1%
MEDICAL FACILITIES MANAGEMENT
- - 0.1%
Concentra Operating Corp. 13% B3 60,000 53,700
8/15/09 (f)
Fountain View, Inc. 11.25% Caa1 460,000 349,600
4/15/08
Tenet Healthcare Corp. 8.625% Ba3 330,000 320,100
1/15/07
723,400
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.5%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.2%
Bucyrus International, Inc. B1 160,000 118,400
9.75% 9/15/07
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
INDUSTRIAL MACHINERY &
EQUIPMENT - CONTINUED
Dunlop Standard Aero Holdings B3 $ 430,000 $ 442,900
PLC 11.875% 5/15/09
Roller Bearing Holding, Inc. - 500,000 265,000
0% 6/15/09 (d)(f)
Thermadyne Manufacturing LLC B3 60,000 49,800
9.875% 6/1/08
Tokheim Corp. 11.375% 8/1/08 B3 240,000 140,400
Tyco International Group SA:
7% 6/15/28 Baa1 100,000 86,536
yankee:
6.125% 6/15/01 Baa1 90,000 88,477
6.375% 6/15/05 Baa1 30,000 28,103
1,219,616
POLLUTION CONTROL - 0.3%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba3 230,000 209,300
10% 8/1/09 (f) B2 930,000 827,700
Browning-Ferris Industries, Ba3 220,000 176,000
Inc. 6.375% 1/15/08
Envirosource, Inc. Series B, Caa3 80,000 50,400
9.75% 6/15/03
WMX Technologies, Inc.:
6.25% 10/15/00 Ba1 100,000 97,961
7.1% 8/1/26 Ba1 140,000 129,731
1,491,092
TOTAL INDUSTRIAL MACHINERY & 2,710,708
EQUIPMENT
MEDIA & LEISURE - 4.4%
BROADCASTING - 3.0%
ACME Television LLC/ACME B3 140,000 126,000
Financial Corp. 0% 9/30/04
(d)
Adelphia Communications Corp.:
7.75% 1/15/09 B1 330,000 294,525
8.375% 2/1/08 B1 130,000 121,550
9.875% 3/1/07 B1 1,230,000 1,242,300
AMFM Operating, Inc. 12.625% - 257,300 292,679
10/31/06 pay-in-kind
Ascent Entertainment Group, B3 320,000 238,400
Inc. 0% 12/15/04 (d)
Avalon Cable Michigan, B2 330,000 333,300
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Benedek Communications Corp. B3 $ 120,000 $ 108,000
0% 5/15/06 (d)
Century Communications Corp.:
Series B, 0% 1/15/08 B1 460,000 201,250
8.75% 10/1/07 B1 120,000 115,200
Chancellor Media Corp. 9% B1 560,000 582,400
10/1/08
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (d) B2 335,000 195,975
8.625% 4/1/09 B2 390,000 360,750
Citadel Broadcasting Co. B3 190,000 200,450
10.25% 7/1/07
Clear Channel Communications,
Inc.:
6.875% 6/15/18 Baa3 150,000 133,281
7.25% 10/15/27 Baa3 105,000 94,710
Comcast UK Cable Partners B2 580,000 548,100
Ltd. 0% 11/15/07 (d)
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa2 10,000 10,336
9% 9/1/08 Baa2 350,000 380,790
Cox Communications, Inc.:
6.875% 6/15/05 Baa2 60,000 58,570
7.75% 8/15/06 Baa2 50,000 50,486
CSC Holdings, Inc.:
9.25% 11/1/05 B1 260,000 266,500
9.875% 5/15/06 B1 240,000 250,800
10.5% 5/15/16 B1 280,000 309,400
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 1,015,000 829,763
yankee 0% 12/15/05 (d) B3 300,000 282,000
Earthwatch, Inc. 0% 7/15/07 - 430,000 301,000
unit (d)(f)
EchoStar DBS Corp.:
9.25% 2/1/06 B2 170,000 170,000
9.375% 2/1/09 B2 160,000 160,400
Falcon Holding Group B2 1,835,000 1,339,550
LP/Falcon Funding Corp. 0%
4/15/10 (d)
FrontierVision Holdings B1 700,000 616,000
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
FrontierVision Operating B1 340,000 363,800
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Golden Sky DBS, Inc. 0% Caa1 590,000 356,950
3/1/07 (d)
Golden Sky Systems, Inc. B3 180,000 191,700
12.375% 8/1/06
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Hearst-Argyle Television, Baa3 $ 200,000 $ 184,838
Inc. 7.5% 11/15/27
International Cabletel, Inc. B3 220,000 198,550
0% 2/1/06 (d)
Knology Holding, Inc. 0% - 760,000 505,400
10/15/07 (d)
Lenfest Communications, Inc. B1 190,000 188,100
8.25% 2/15/08
LIN Holdings Corp. 0% 3/1/08 B3 60,000 40,500
(d)
Nielsen Media Research, Inc. Baa2 60,000 58,481
7.6% 6/15/09
NTL Communications Corp. B3 780,000 844,350
11.5% 10/1/08
NTL, Inc. 10% 2/15/07 B3 270,000 278,100
Olympus Communications B1 160,000 167,200
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp. B3 210,000 212,100
9.625% 10/15/05
TCI Communications, Inc.:
9.25% 4/15/02 A2 100,000 104,963
9.8% 2/1/12 A2 190,000 221,985
Telewest PLC:
yankee 9.625% 10/1/06 B1 110,000 112,200
0% 10/1/07 (d) B1 1,630,000 1,507,750
Time Warner, Inc. 9.125% Baa3 155,000 169,750
1/15/13
United International B3 1,345,000 840,625
Holdings, Inc. 0% 2/15/08 (d)
United Pan-Europe B2 740,000 751,100
Communications NV 10.875%
8/1/09
17,512,907
ENTERTAINMENT - 0.4%
AMC Entertainment, Inc. 9.5% B3 100,000 87,250
2/1/11
Bally Total Fitness Holding B3 608,000 588,240
Corp. 9.875% 10/15/07
Capitol Records, Inc. 8.375% Baa1 130,000 129,012
8/15/09 (f)
Cinemark USA, Inc. 8.5% 8/1/08 B2 510,000 446,250
Paramount Communications, Baa3 110,000 110,239
Inc. 7.5% 1/15/02
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa1 580,000 433,550
9.5% 6/1/08 Caa1 660,000 521,400
United Artists Theatre Co. Caa3 120,000 19,200
9.75% 4/15/08
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Viacom, Inc.:
6.75% 1/15/03 Baa3 $ 110,000 $ 108,225
7.75% 6/1/05 Baa3 115,000 115,751
2,559,117
LODGING & GAMING - 0.5%
Circus Circus Enterprises, Ba2 130,000 111,313
Inc. 7.625% 7/15/13
Coast Hotels & Casinos, Inc. B3 200,000 193,500
9.5% 4/1/09
Courtyard by Marriott II B- 780,000 766,350
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc.:
7.875% 8/1/05 Ba2 350,000 323,750
7.875% 8/1/08 Ba2 545,000 487,775
Hollywood Casino Corp. 11.25% B3 110,000 114,675
5/1/07
Host Marriott LP 8.375% Ba2 630,000 595,350
2/15/06
Signature Resorts, Inc. 9.75% B3 280,000 240,800
10/1/07
2,833,513
PUBLISHING - 0.2%
Garden State Newspapers, Inc. B1 750,000 706,875
Series B, 8.75% 10/1/09
News America Holdings, Inc.:
7.7% 10/30/25 Baa3 110,000 103,069
8.5% 2/15/05 Baa3 35,000 36,089
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 35,000 34,080
8.375% 3/15/23 Baa2 60,000 62,384
942,497
RESTAURANTS - 0.3%
CKE Restaurants, Inc. 9.125% B2 510,000 382,500
5/1/09
Domino's, Inc. 10.375% 1/15/09 B3 680,000 654,500
Host Marriott Travel Plazas, Ba3 450,000 454,500
Inc. 9.5% 5/15/05
NE Restaurant, Inc. 10.75% B3 550,000 488,125
7/15/08
1,979,625
TOTAL MEDIA & LEISURE 25,827,659
NONDURABLES - 0.2%
BEVERAGES - 0.1%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 115,000 112,998
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
NONDURABLES - CONTINUED
BEVERAGES - CONTINUED
Seagram JE & Sons, Inc.: -
continued
6.4% 12/15/03 Baa3 $ 120,000 $ 114,900
6.625% 12/15/05 Baa3 60,000 57,180
285,078
FOODS - 0.0%
ConAgra, Inc. 7.125% 10/1/26 Baa1 115,000 108,994
HOUSEHOLD PRODUCTS - 0.1%
Revlon Consumer Products B3 390,000 296,400
Corp. 9% 11/1/06
TOBACCO - 0.0%
Philip Morris Companies, Inc.:
6.95% 6/1/06 A2 140,000 137,914
7.25% 9/15/01 A2 50,000 49,651
RJ Reynolds Tobacco Holdings, Baa2 100,000 93,447
Inc. 7.375% 5/15/03
281,012
TOTAL NONDURABLES 971,484
RETAIL & WHOLESALE - 0.4%
DRUG STORES - 0.0%
Rite Aid Corp.:
6% 12/15/00 (f) B1 25,000 21,750
6.5% 12/15/05 (f) B1 105,000 75,600
7.125% 1/15/07 B1 40,000 30,000
127,350
GENERAL MERCHANDISE STORES -
0.2%
Dayton Hudson Corp. 7.5% A3 125,000 125,371
7/15/06
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa1 100,000 97,057
8.5% 6/15/03 Baa1 50,000 51,385
Kmart Corp. 12.5% 3/1/05 Ba1 510,000 576,300
850,113
GROCERY STORES - 0.2%
Kroger Co. 6% 7/1/00 Baa3 110,000 109,281
Pathmark Stores, Inc. 9.625% Caa3 1,230,000 922,500
5/1/03
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Pueblo Xtra International,
Inc.:
Series C, 9.5% 8/1/03 B3 $ 220,000 $ 132,000
9.5% 8/1/03 B3 405,000 243,000
1,406,781
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.0%
USA Networks, Inc./USANi LLC Baa3 60,000 57,289
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 2,441,533
SERVICES - 0.1%
PRINTING - 0.0%
Sullivan Graphics, Inc. Caa1 210,000 218,925
12.75% 8/1/05
SERVICES - 0.1%
La Petite Academy, Inc./La B3 530,000 389,550
Petite Academy Holding Co.
10% 5/15/08
Medaphis Corp. 9.5% 2/15/05 Caa1 260,000 200,200
589,750
TOTAL SERVICES 808,675
TECHNOLOGY - 0.9%
COMPUTER SERVICES & SOFTWARE
- - 0.5%
Concentric Network Corp. B- 120,000 126,000
12.75% 12/15/07
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 280,000 175,700
12.5% 2/15/09 B3 201,000 208,035
Exodus Communications, Inc.:
10.75% 12/15/09 (f) B- 320,000 325,600
11.25% 7/1/08 B- 70,000 72,450
Federal Data Corp. 10.125% B3 690,000 500,250
8/1/05
PSINet, Inc.:
10.5% 12/1/06 (f) B3 880,000 891,000
11% 8/1/09 B3 285,000 292,838
Verio, Inc. 10.625% 11/15/09 B3 200,000 204,000
(f)
2,795,873
COMPUTERS & OFFICE EQUIPMENT
- - 0.0%
Comdisco, Inc.:
6.375% 11/30/01 Baa1 150,000 147,095
7.25% 9/1/02 Baa1 125,000 123,568
Sun Microsystems, Inc. 7% Baa1 35,000 34,878
8/15/02
305,541
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
TECHNOLOGY - CONTINUED
ELECTRONICS - 0.4%
ChipPAC International Ltd. B3 $ 575,000 $ 603,750
12.75% 8/1/09 (f)
Details, Inc. 10% 11/15/05 B3 40,000 36,800
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 255,000 257,550
10.375% 10/1/07 B3 360,000 367,200
Micron Technology, Inc. 6.5% B3 1,000,000 797,500
9/30/05 (j)
SCG Holding B2 355,000 377,188
Corp./Semiconductor
Components Industries LLC
12% 8/1/09 (f)
2,439,988
TOTAL TECHNOLOGY 5,541,402
TRANSPORTATION - 0.5%
AIR TRANSPORTATION - 0.4%
Atlas Air, Inc. 9.25% 4/15/08 B2 780,000 742,950
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 30,000 29,292
7.73% 9/15/12 Baa1 20,000 19,500
Delta Air Lines, Inc. 8.3% Baa3 160,000 155,200
12/15/29 (f)
Kitty Hawk, Inc. 9.95% B1 615,000 607,313
11/15/04
Qantas Airways Ltd. 7.75% Baa1 110,000 105,798
6/15/09 (f)
US Airways Group, Inc. Ba3 360,000 341,100
10.375% 3/1/13
2,001,153
RAILROADS - 0.1%
Burlington Northern Santa Fe Baa2 150,000 134,990
Corp. 6.125% 3/15/09
Canadian National Railway Co. Baa2 150,000 132,417
6.9% 7/15/28
CSX Corp.:
6.25% 10/15/08 Baa2 60,000 54,293
6.46% 6/22/05 Baa2 100,000 95,187
Norfolk Southern Corp. 7.05% Baa1 220,000 218,084
5/1/37
Wisconsin Central Baa2 100,000 91,555
Transportation Corp. 6.625%
4/15/08
726,526
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
SHIPPING - 0.0%
Holt Group, Inc. 9.75% 1/15/06 Caa1 $ 80,000 $ 52,000
TOTAL TRANSPORTATION 2,779,679
UTILITIES - 3.6%
CELLULAR - 1.1%
Cable & Wireless Baa1 170,000 167,941
Communications PLC 6.375%
3/6/03
McCaw International Ltd. 0% Caa1 890,000 623,000
4/15/07 (d)
Millicom International Caa1 930,000 769,575
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 10/31/07 (d) B1 3,020,000 2,189,500
12% 11/1/08 B1 220,000 245,850
Nextel International, Inc. 0% Caa1 740,000 440,300
4/15/08 (d)
Nuevo Grupo Iusacell SA de CV B1 127,000 132,080
14.25% 12/1/06 (f)
Rogers Cantel, Inc. 8.8% B2 200,000 200,000
10/1/07
Rogers Communications, Inc. B2 550,000 554,125
8.875% 7/15/07
Telesystem International Caa1 150,000 82,500
Wireless, Inc. 0% 11/1/07 (d)
Voicestream Wireless B2 780,000 803,400
Corp./Voicestream Wireless
Holding Co. 10.375% 11/15/09
(f)
6,208,271
ELECTRIC UTILITY - 0.1%
Avon Energy Partners Holdings Baa2 130,000 115,930
6.46% 3/4/08 (f)
Hydro-Quebec yankee 7.4% A2 90,000 94,257
3/28/25 (e)
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (f) A3 170,000 146,424
yankee 7.875% 12/15/26 (f) A3 80,000 70,222
Texas Utilities Co. 6.375% Baa3 50,000 45,300
1/1/08
472,133
GAS - 0.0%
CMS Panhandle Holding Co. Baa3 50,000 47,385
6.125% 3/15/04
TELEPHONE SERVICES - 2.4%
Allegiance Telecom, Inc. 0% B3 170,000 122,400
2/15/08 (d)
e.spire Communications, Inc. - 290,000 203,000
13.75% 7/15/07
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
GST Network Funding, Inc. 0% - $ 1,620,000 $ 793,800
5/1/08 (d)
GST Equipment Funding, Inc. - 290,000 279,850
13.25% 5/1/07
GST Telecommunications, Inc. - 170,000 159,800
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (d) - 60,000 44,700
GTE Corp. 6.155% 6/12/00 (i) - 350,000 349,896
Hyperion Telecommunications, Caa1 160,000 169,600
Inc. 12% 11/1/07
ICG Services, Inc. 0% 5/1/08 B3 840,000 430,500
(d)
Intermedia Communications,
Inc.:
0% 3/1/09 (d) B3 250,000 149,375
8.6% 6/1/08 B2 780,000 719,550
IXC Communications, Inc. 9% B1 480,000 484,800
4/15/08
KMC Telecom Holdings, Inc. Caa2 550,000 544,500
13.5% 5/15/09
Logix Communications - 785,000 549,500
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% A3 103,000 108,106
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (d) B1 580,000 469,800
9.5% 11/1/08 B1 570,000 575,700
Metromedia Fiber Network, Inc.:
10% 11/15/08 B2 175,000 178,500
10% 12/15/09 B2 290,000 295,800
NEXTLINK Communications, Inc.:
9.625% 10/1/07 B2 540,000 527,850
10.5% 12/1/09 (f) B2 410,000 417,175
Ono Finance PLC 13% 5/1/09 Caa1 310,000 320,850
Pathnet, Inc. 12.25% 4/15/08 - 890,000 569,600
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 1,300,000 702,000
12.75% 4/15/09 B3 770,000 746,900
Telecomunicaciones de Puerto Baa2 140,000 132,020
Rico, Inc. 6.65% 5/15/06
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 183,000 171,896
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
7.7% 7/20/29 Baa1 $ 220,000 $ 201,344
Teligent, Inc.:
0% 3/1/08 (d) Caa1 1,435,000 843,063
11.5% 12/1/07 Caa1 835,000 814,125
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 220,000 206,800
0% 10/15/05 (d) Caa1 220,000 334,400
0% 3/15/08 (d) CCC 1,370,000 1,397,400
15% 3/1/07 CCC 240,000 340,800
14,355,400
TOTAL UTILITIES 21,083,189
TOTAL NONCONVERTIBLE BONDS 80,854,145
TOTAL CORPORATE BONDS 82,519,020
(Cost $86,203,054)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 2.4%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 0.7%
Fannie Mae:
6% 5/15/08 Aaa 1,500,000 1,404,375
6.25% 5/15/29 Aaa 375,000 333,750
6.5% 4/29/09 Aaa 175,000 163,762
Freddie Mac:
5.5% 5/15/02 Aaa 1,500,000 1,463,910
6.25% 7/15/04 Aaa 50,000 48,883
7.625% 9/9/09 Aaa 400,000 395,064
TOTAL U.S. GOVERNMENT AGENCY 3,809,744
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
1.7%
U.S. Treasury Bills, yield at - 550,000 543,142
date of purchase 5.06% to
5.26% 3/30/00 (g)
U.S. Treasury Bonds:
6.875% 8/15/25 Aaa 3,275,000 3,335,882
8.875% 8/15/17 Aaa 219,000 264,681
8.875% 2/15/19 Aaa 259,000 315,252
U.S. Treasury Notes:
5.875% 11/15/04 Aaa 360,000 352,969
6% 8/15/09 Aaa 700,000 678,125
6.625% 6/30/01 Aaa 3,655,000 3,675,541
7.25% 8/15/04 Aaa 20,000 20,625
7.875% 11/15/04 Aaa 830,000 877,592
TOTAL U.S. TREASURY 10,063,809
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 13,873,553
GOVERNMENT AGENCY OBLIGATIONS
(Cost $14,153,239)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 3.3%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 2.6%
6% 3/1/11 to 1/1/29 Aaa $ 1,249,771 $ 1,189,271
6.5% 2/1/26 to 11/1/29 Aaa 5,071,932 4,781,558
7% 8/1/25 to 12/1/29 Aaa 6,845,573 6,624,084
7.5% 5/1/24 to 11/1/29 Aaa 2,627,362 2,598,278
8% 12/1/29 Aaa 300,029 302,466
15,495,657
FREDDIE MAC - 0.2%
7.5% 8/1/28 Aaa 140,275 139,049
8% 11/1/29 to 12/1/29 Aaa 1,000,000 1,009,680
1,148,729
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 0.5%
6.5% 3/15/28 to 5/15/29 Aaa 991,144 930,120
7% 7/15/28 Aaa 870,213 840,296
7.5% 1/15/26 to 8/15/28 Aaa 825,122 815,993
2,586,409
TOTAL U.S. GOVERNMENT AGENCY 19,230,795
- - MORTGAGE SECURITIES
(Cost $19,685,498)
ASSET-BACKED SECURITIES - 0.4%
Airplanes pass through trust Ba2 430,000 352,600
10.875% 3/15/19
BankAmerica Manufacturing Aaa 150,000 146,484
Housing Contract 6.2% 4/10/09
Capita Equipment Receivables Baa2 100,000 96,013
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 51,040 50,522
Trust 5.91% 12/15/04
CIT Marine Trust 5.8% 4/15/10 Aaa 120,000 115,350
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 62,094 62,279
6.55% 8/15/02 Aaa 29,094 29,022
CPS Auto Receivables Trust 6% Aaa 101,305 99,818
8/15/03
CSXT Trade Receivables Master Aaa 180,000 172,406
Trust 6% 7/25/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 90,000 87,998
6.4% 12/15/02 Baa2 50,000 49,350
6.87% 11/15/04 A2 50,000 49,586
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Green Tree Financial Corp.:
6.68% 1/15/29 AAA $ 210,000 $ 208,358
6.8% 6/15/27 Aaa 43,333 43,347
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 150,000 146,555
6.3% 10/15/03 A2 51,246 50,894
Olympic Automobile Aaa 23,393 23,393
Receivables Trust 6.7%
3/15/02
Petroleum Enhanced Trust Baa2 71,545 71,277
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (f)(i)
UAF Auto Grantor Trust 6.1% Aaa 104,900 104,114
1/15/03 (f)
WFS Financial Owner Trust Aaa 140,000 139,147
6.55% 10/20/04
TOTAL ASSET-BACKED SECURITIES 2,098,513
(Cost $2,246,616)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.0%
PRIVATE SPONSOR - 0.0%
Credit-Based Asset Servicing Ba3 176,455 83,982
and Securitization LLC
Series 1997- 2 Class 2B,
7.1864% 12/29/25 (f)(h)(i)
U.S. GOVERNMENT AGENCY - 0.0%
Fannie Mae planned
amortization class:
Series 1999-54 Class PH, 6.5% Aaa 100,000 88,938
11/18/29
Series 1999-57 Class PH, 6.5% Aaa 100,000 88,781
12/25/29
177,719
TOTAL COLLATERALIZED 261,701
MORTGAGE OBLIGATIONS
(Cost $273,430)
COMMERCIAL MORTGAGE
SECURITIES - 0.7%
BKB Commercial Mortgage Trust BBB 59,509 58,940
Series 1997-C1 Class D,
7.83% 2/25/43 (f)(i)
CBM Funding Corp.:
sequential pay Series 1996-1 AA 100,000 98,016
Class A-3PI, 7.08% 11/1/07
sequential pay Series 1996-1 A 80,000 77,631
Class B, 7.48% 2/1/08
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 $ 200,000 $ 181,500
1/17/35
Series 1998 C1 Class D, 7.17% BBB 210,000 185,850
1/17/12
Series 1998-FL1 Class E, Baa2 220,000 216,700
6.26% 1/10/13 (f)(i)
Deutsche Mortgage & Asset Baa2 140,000 122,413
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
First Chicago/Lennar Trust I
Series 1997-CHL1:
Class D, 8.1256% 4/13/39 (i) - 350,000 278,688
Class E, 8.1256% 4/1/39 (i) - 320,000 225,000
FMAC Loan Receivables Trust:
Series 1997-A Class E, - 250,000 167,969
8.1096% 4/15/19 (f)(i)
Series 1997-B Class E, - 100,000 58,344
7.8912% 9/15/19 (f)(i)
General Motors Acceptance Ba3 250,000 195,630
Corp. Commercial Mortgage
Securities, Inc. Series
1996-C1 Class F, 7.86%
10/15/28 (f)
GS Mortgage Securities Corp.
II Series 1998-GLII:
Class D, 7.1905% 4/13/31 Baa2 50,000 44,672
(f)(i)
Class E, 7.1905% 4/13/31 Baa3 180,000 152,044
(f)(i)
Host Marriot Pool Trust 6.98% Aaa 97,727 95,605
8/1/15
LTC Commercial Mortgage pass
through certificates:
Series 1996-1 Class E, 9.16% BB- 500,000 443,750
4/15/28
Series 1998-1 Class A, 6.029% AAA 104,234 96,225
5/30/30 (f)
Morgan Stanley Capital I, - 88,423 88,424
Inc. Series 1996-MBL1 Class
E, 8.5243% 5/25/21 (f)(i)
Nomura Asset Securities Corp. Baa2 140,000 121,494
Series 1998-D6 Class A-4,
7.597% 3/17/28 (i)
Nomura Depositor Trust - 125,000 113,779
floater Series 1998-ST1A
Class B2, 9.6938% 1/15/03
(f)(i)
Resolution Trust Corp. Series Baa3 53,032 42,956
1991-M2 Class A3, 6.9066%
9/25/20 (i)
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Structured Asset Securities
Corp.:
Series 1995-C1 Class E, BB $ 1,000,000 $ 883,438
7.375% 9/25/24 (f)
Series 1996 CFL Class E, BBB 80,000 78,516
7.75% 2/25/28
Thirteen Affiliates of
General Growth Properties,
Inc.:
Series D-2, 6.992% 12/15/10 Baa2 140,000 128,744
(f)
Series E-2, 7.224% 12/15/10 Baa3 100,000 89,281
(f)
TOTAL COMMERCIAL MORTGAGE 4,245,609
SECURITIES
(Cost $4,656,446)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (K) - 0.0%
Korean Republic yankee 8.875% Baa2 46,000 48,205
4/15/08 (Cost $48,520)
SUPRANATIONAL OBLIGATIONS -
0.0%
Inter-American Development Aaa 150,000 142,676
Bank yankee 6.29% 7/16/27
(Cost $149,057)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 0.3%
Canadian Imperial Bank of 400,000 399,855
Commerce yankee 5.63%
4/13/00 (i)
Commerzbank AG yankee 5.58% 400,000 398,952
6/12/00
Deutsche Bank AG yankee 5.1% 400,000 399,596
2/11/00
Fleet National Bank 6.305% 400,000 400,123
5/5/00 (i)
Societe Generale, France 400,000 399,518
yankee 5.16% 2/22/00
TOTAL CERTIFICATES OF DEPOSIT 1,998,044
(Cost $1,999,359)
COMMERCIAL PAPER - 0.5%
Asset Securitization Coop. 350,000 346,794
Corp. 5.96% 3/2/00
Citibank Credit Card Master 350,000 346,394
Trust I (Dakota Certificate
Program) 5.96% 3/9/00
Corporate Receivables Corp. 350,000 347,742
6.15% 2/14/00
CXC, Inc. 6.03% 2/18/00 350,000 347,500
Enterprise Funding Corp. 350,000 348,740
yankee 6.15% 1/27/00
COMMERCIAL PAPER - CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
Finova Capital Corp. 6.4225% $ 400,000 $ 399,662
4/10/00 (i)
New Center Asset Trust 6.05% 350,000 345,738
3/21/00
Windmill Funding Corp. yankee 350,000 348,799
6.15% 1/26/00
TOTAL COMMERCIAL PAPER 2,831,369
(Cost $2,828,912)
</TABLE>
CASH EQUIVALENTS - 3.6%
MATURITY AMOUNT
Investments in repurchase $ 1,130,344 1,130,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 3.65%,
dated 12/31/99 due 1/3/00
SHARES
Taxable Central Cash Fund, 19,972,492 19,972,492
5.12% (c)
TOTAL CASH EQUIVALENTS 21,102,492
(Cost $21,102,492)
TOTAL INVESTMENT PORTFOLIO - 591,096,169
100.0%
(Cost $479,270,883)
NET OTHER ASSETS - 0.0% 284,070
NET ASSETS - 100% $ 591,380,239
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT AT VALUE UNREALIZED GAIN/LOSS
PURCHASED
27 S&P 500 Stock Index March 2000 $ 10,018,350 $ 35,263
Contracts
</TABLE>
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS -
1.7%
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(f) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $10,427,766 or 1.8% of net assets.
(g) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $543,142.
(h) Partial interest payment received on the last interest payment
date.
(i) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(j) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Goldman Sachs Group L.P. 1/25/99 $ 400,000
6.5025% 7/27/00
Micron Technology, Inc. 6.5% 11/1/99 $ 787,500
9/30/05
(k) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment advisor, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 6.7% AAA, AA, A 6.2%
Baa 1.5% BBB 1.6%
Ba 1.4% BB 2.2%
B 7.5% B 7.3%
Caa 1.7% CCC 1.6%
Ca, C 0.0% CC, C 0.0%
D 0.0%
For some foreign government obligations, FMR has assigned the ratings
for the sovereign credit of the issuing government. The percentage not
rated by Moody's or S&P amounted to 0.9%. FMR has determined that
unrated debt securities that are lower quality account for 0.9% of the
total value of investment in securities.
Purchases and sales of securities, other than short-term securities,
aggregated $479,196,521 and $481,422,675, respectively, of which
long-term U.S. government and government agency obligations aggregated
$68,496,267 and $45,153,939, respectively.
The market value of futures contracts opened and closed during the
period amounted to $70,062,255 and $71,432,415, 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 $12,555 for the
period.
The fund participated in the security lending program. At period end
there were no loans outstanding.
The fund invested in securities that are not registered under the
Securities Act of 1933. These securities are subject to legal or
contractual restrictions on resale. At the end of the period,
restricted securities (excluding Rule 144A issues) amounted to
$1,198,148 and 0.2% of net assets.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $479,464,141. Net unrealized appreciation
aggregated $111,632,028, of which $127,990,290 related to appreciated
investment securities and $16,358,262 related to depreciated
investment securities.
The fund hereby designates approximately $21,174,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER: GROWTH PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 591,096,169
value (including repurchase
agreements of $1,130,000)
(cost $479,270,883) - See
accompanying schedule
Cash 3,452
Receivable for investments 11,055
sold
Receivable for fund shares 99,538
sold
Dividends receivable 344,527
Interest receivable 2,052,716
Receivable for daily 22,950
variation on futures
contracts
Other receivables 1,214
TOTAL ASSETS 593,631,621
LIABILITIES
Payable for investments $ 1,446,849
purchased
Payable for fund shares 440,168
redeemed
Accrued management fee 277,040
Distribution fees payable 859
Other payables and accrued 86,466
expenses
TOTAL LIABILITIES 2,251,382
NET ASSETS $ 591,380,239
Net Assets consist of:
Paid in capital $ 419,428,366
Undistributed net investment 13,084,201
income
Accumulated undistributed net 47,007,122
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 111,860,550
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 591,380,239
INITIAL CLASS: NET ASSET $18.38
VALUE, offering price and
redemption price per share
($580,554,889 (divided by)
31,593,631 shares)
SERVICE CLASS: NET ASSET $18.28
VALUE, offering price and
redemption price per share
($10,825,350 (divided by)
592,283 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 5,819,170
Dividends
Interest 11,148,256
Security lending 396
TOTAL INCOME 16,967,822
EXPENSES
Management fee $ 3,196,423
Transfer agent fees 368,065
Distribution fees - Service 6,803
Class
Accounting and security 242,998
lending fees
Non-interested trustees' 1,601
compensation
Custodian fees and expenses 28,125
Registration fees 56
Audit 25,166
Legal 6,421
Miscellaneous 47,001
Total expenses before 3,922,659
reductions
Expense reductions (55,145) 3,867,514
NET INVESTMENT INCOME 13,100,308
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 48,031,486
Foreign currency transactions (152)
Futures contracts 633,577 48,664,911
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 18,274,646
Futures contracts (454,567) 17,820,079
NET GAIN (LOSS) 66,484,990
NET INCREASE (DECREASE) IN $ 79,585,298
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 52,298
Expense reductions Directed
brokerage arrangements
Custodian credits 2,847
$ 55,145
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 13,100,308 $ 12,886,652
income
Net realized gain (loss) 48,664,911 19,750,450
Change in net unrealized 17,820,079 46,973,028
appreciation (depreciation)
NET INCREASE (DECREASE) IN 79,585,298 79,610,130
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (12,766,102) (9,747,110)
From net investment income
From net realized gain (21,173,047) (45,582,074)
TOTAL DISTRIBUTIONS (33,939,149) (55,329,184)
Share transactions - net 13,695,216 24,516,891
increase (decrease)
TOTAL INCREASE (DECREASE) 59,341,365 48,797,837
IN NET ASSETS
NET ASSETS
Beginning of period 532,038,874 483,241,037
End of period (including $ 591,380,239 $ 532,038,874
undistributed net investment
income of $13,084,201 and
$12,651,500, respectively)
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 3,532,899 $ 59,442,839 5,166,840 $ 81,527,781
Class Sold
Reinvested 2,100,108 33,706,735 3,710,796 55,327,974
Redeemed (5,095,721) (86,190,044) (7,361,720) (115,250,981)
Net increase (decrease) 537,286 $ 6,959,530 1,515,916 $ 21,604,774
Service Class Sold 451,433 $ 7,507,627 202,513 $ 3,161,007
Reinvested 14,544 232,414 81 1,210
Redeemed (60,280) (1,004,355) (16,635) (250,100)
Net increase (decrease) 405,697 $ 6,735,686 185,959 $ 2,912,117
Distributions From net $ 12,678,680 $ 9,746,897
investment income Initial
Class
Service Class 87,422 213
Total $ 12,766,102 $ 9,747,110
From net realized gain $ 21,028,055 $ 45,581,077
Initial Class
Service Class 144,992 997
Total $ 21,173,047 $ 45,582,074
$ 33,939,149 $ 55,329,184
</TABLE>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 17.03 $ 16.36 $ 13.10 $ 11.77 $ 10.00
period
Income from Investment
Operations
Net investment income .40 C .41 C .36 C .21 .10
Net realized and unrealized 2.04 2.19 2.92 2.08 2.20
gain (loss)
Total from investment 2.44 2.60 3.28 2.29 2.30
operations
Less Distributions
From net investment income (.41) (.34) - (.21) (.11)
From net realized gain (.68) (1.59) (.02) (.75) (.42)
Total distributions (1.09) (1.93) (.02) (.96) (.53)
Net asset value, end of period $ 18.38 $ 17.03 $ 16.36 $ 13.10 $ 11.77
TOTAL RETURN B, H 15.26% 17.57% 25.07% 20.04% 23.02%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 580,555 $ 528,874 $ 483,231 $ 253,024 $ 68,247
(000 omitted)
Ratio of expenses to average .71% .73% .77% .87% 1.00% F
net assets
Ratio of expenses to average .70% G .72% G .76% G .85% G 1.00%
net assets after expense
reductions
Ratio of net investment 2.38% 2.60% 2.44% 2.63% 1.69%
income to average net assets
Portfolio turnover 92% 98% 90% 120% 343%
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 16.96 $ 16.35 $ 15.94
period
Income from Investment
Operations
Net investment income C .38 .40 .07
Net realized and unrealized 2.03 2.14 .34
gain (loss)
Total from investment 2.41 2.54 .41
operations
Less Distributions
From net investment income (.41) (.34) -
From net realized gain (.68) (1.59) -
Total distributions (1.09) (1.93) -
Net asset value, end of period $ 18.28 $ 16.96 $ 16.35
TOTAL RETURN B, H 15.13% 17.18% 2.57%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 10,825 $ 3,165 $ 10
(000 omitted)
Ratio of expenses to average .82% .89% .87% A
net assets
Ratio of expenses to average .81% G .88% G .87% A
net assets after expense
reductions
Ratio of net investment 2.27% 2.65% 2.70% A
income to average net assets
Portfolio turnover 92% 98% 90%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
D FOR THE PERIOD JANUARY 5,
1995 (COMMENCEMENT OF
OPERATIONS OF INITIAL CLASS
SHARES) TO DECEMBER 31, 1995.
E FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
F FMR AGREED TO REIMBURSE A
PORTION OF THE CLASS'
EXPENSES DURING THE PERIOD.
WITHOUT THIS REIMBURSEMENT,
THE CLASS' EXPENSE RATIO
WOULD HAVE BEEN HIGHER.
G FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
H TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Asset Manager: Growth Portfolio (the fund) is a fund of Variable
Insurance Products Fund II (the trust) (referred to in this report as
Fidelity Variable Insurance Products: Asset Manager: Growth Portfolio)
and is authorized to issue an unlimited number of shares. The trust is
registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a
Massachusetts business trust. Shares of the fund may only be purchased
by insurance companies for the purpose of funding variable annuity or
variable life insurance contracts. The fund offers two classes of
shares: the fund's original class of shares (Initial Class shares) and
Service Class shares. Both classes have equal rights and voting
privileges, except for matters affecting a single class. Investment
income, realized and unrealized capital gains and losses, the common
expenses of the fund, and certain fund-level expense reductions, if
any, are allocated on a pro rata basis to each class based on the
relative net assets of each class to the total net assets of the fund.
Each class of shares differs in its respective distribution plan. On
October 14, 1999, the Board of Trustees approved the creation of
Service Class 2, a new class of shares of the fund. The Service Class
2 shares will be subject to an annual distribution and service fee of
.25% of the class' average net assets. These shares are expected to be
available on or about January 12, 2000.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Foreign securities are valued based
on quotations from the principal market in which such securities are
normally traded. If trading or events occurring in other markets after
the close of the principal market in which foreign securities are
traded, and before the close of the business of the fund, are expected
to materially affect the value of those securities, then they are
valued at their fair value taking this trading or these events into
account. Fair value is determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. Securities (including restricted securities) for which
exchange quotations are not readily available (and in certain cases
debt securities which trade on an exchange) are valued primarily using
dealer-supplied valuations or at their fair value. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. 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 foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. Income dividends and capital gain distributions are
declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, futures
transactions, foreign currency transactions, non-taxable dividends,
market discount and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
CENTRAL CASH FUNDS. Pursuant to an Exemptive Order issued by the SEC,
the fund may invest in the Taxable Central Cash Fund and the Central
Cash Collateral Fund (the Cash Funds) managed by Fidelity Investments
Money Management, Inc., an affiliate of FMR. The Cash Funds are
open-end money market funds available only to investment companies and
other accounts managed by FMR and its affiliates. The Cash Funds seek
preservation of capital, liquidity, and current income. Income
distributions from the Cash Funds are declared daily and paid monthly
from net interest income. Income distributions earned by the fund are
recorded as either interest income or security lending income in the
accompanying financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. 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 fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its custodial records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock market. Buying futures tends to increase the
fund's exposure to the underlying instrument, while selling futures
tends to decrease the fund's exposure to the underlying instrument or
hedge other fund investments. Futures contracts involve, to varying
degrees, risk of loss in excess of the futures variation margin
reflected in the Statement of Assets and Liabilities. The underlying
face amount at value of any open futures contracts at period end is
shown in the schedule of investments under the caption "Futures
Contracts." This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in
the value of the underlying instruments or if the counterparties do
not perform under the contracts' terms. Gains (losses) are realized
upon the expiration or closing of the futures contracts. Futures
contracts are valued at the settlement price established each day by
the board of trade or exchange on which they are traded.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
Information regarding restricted securities is included under the
caption "Other Information" at the end of the fund's schedule of
investments.
3. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities), and the market value of future contracts
opened and closed, is included under the caption "Other Information"
at the end of the fund's schedule of investments.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .2167% to .5200% for the
period. The annual individual fund fee rate is .30%. 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. For the period, the management
fee was equivalent to an annual rate of .58% of average net assets.
4. FEES AND OTHER TRANSACTIONS
WITH AFFILIATES - CONTINUED
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of Trustees has adopted a Distribution and Service
Plan for the Service Class (the Plan) of shares. Under the Plan, the
class pays Fidelity Distributors Corporation (FDC), an affiliate of
FMR, a 12b-1 fee. This fee is based on an annual rate of .10% of
Service Class average net assets. Initial Class shares are not subject
to a 12b-1 fee.
For the period, Service Class paid FDC $6,803, all of which was
reallowed to insurance companies, for the distribution of shares and
providing shareholder support services.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc. (FIIOC), an affiliate of FMR, is the fund's transfer,
dividend disbursing and shareholder servicing agent. FIIOC receives
account fees and asset-based fees that vary according to account size
and type of account. FIIOC pays a portion of the expenses related to
the typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees of
the fund were equivalent to an annual rate of .07% of average net
assets.
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Company, Inc.
(FSC) maintains the fund's accounting records and administers the
security lending program. The security lending fee is based on the
number and duration of lending transactions. The accounting fee is
based on the level of average net assets for the month plus
out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms are shown under the caption
"Other Information" at the end of the fund's schedule of investments
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. Information regarding the value of
securities loaned and the value of collateral at period end is
included under the caption "Other Information" at the end of the
fund's schedule of investments.
6. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses.
In addition, through an arrangement with the fund's custodian, credits
realized as a result of uninvested cash balances were used to reduce a
portion of the fund's expenses. For the period, the reductions under
these arrangements are shown under the caption "Other Information" on
the fund's Statement of Operations.
7. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI) and its subsidiaries, affiliates of FMR, were the record owners
of approximately 65% of the outstanding shares of the fund. In
addition, one unaffiliated insurance company was record owner of 10%
of the total outstanding shares of the fund.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Variable Insurance Products Fund II and
Shareholders of Asset Manager: Growth Portfolio:
We have audited the accompanying statement of assets and liabilities
of Asset Manager: Growth Portfolio (the Fund), one of the funds of
Variable Insurance Products Fund II (the Trust), including the
portfolio of investments, as of December 31, 1999, and the related
statements of operations, changes in net assets, and financial
highlights for the year 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 audit. The statement
of changes in net assets for the year ended December 31, 1998, and the
financial highlights for each of the four years in the period then
ended were audited by other auditors whose report, dated February 12,
1999, expressed an unqualified opinion on those statements and
financial highlights.
We conducted our audit 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, 1999, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. 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 audit
provides 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 Asset Manager: Growth Portfolio as of December
31, 1999, and the results of its operations, the changes in its net
assets, and the financial highlights for the year then ended in
conformity with generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 11, 2000
DISTRIBUTIONS
The Board of Trustees of Asset Manager: Growth Portfolio voted to pay
to shareholders of record at the opening of business on record date,
the following distributions derived from capital gains realized from
sales of portfolio securities, and dividends derived from net
investment income:
PAY DATE RECORD DATE DIVIDENDS CAPITAL GAINS
Initial Class 2/4/00 2/4/00 $.37 $1.50
Service Class 2/4/00 2/4/00 $.36 $1.50
Service Class 2 2/4/00 2/4/00 $.36 $1.50
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
A total of 5.6% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
A total of 43% of the dividends distributed by the Initial Class and
Service Class during the fiscal year qualifies for the
dividends-received deduction for corporate shareholders.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.,
London, England
Fidelity Management & Research (Far East) Inc.,
Tokyo, Japan
Fidelity Investments Money Management, Inc. (FIMM),
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, PRESIDENT
Robert C. Pozen, SENIOR VICE PRESIDENT
Robert A. Lawrence, VICE PRESIDENT
Richard C. Habermann, VICE PRESIDENT
Charles S. Morrison II, VICE PRESIDENT
John Todd, VICE PRESIDENT
Steve J. Snider, VICE PRESIDENT
Eric D. Roiter, SECRETARY
Richard A. Silver, TREASURER
Matthew N. Karstetter, DEPUTY TREASURER
John H. Costello, ASSISTANT TREASURER
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Ned C. Lautenbach
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Co., Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
New York, NY
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK)
VARIABLE INSURANCE PRODUCTS:
ASSET MANAGER SM PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1999
CONTENTS
MARKET ENVIRONMENT 3 A review of what happened in
world markets during the
past 12 months.
PERFORMANCE AND INVESTMENT 4 How the fund has done over
SUMMARY time, and an overview of the
fund's investments at the
end of the period.
FUND TALK 5 The manager's review of fund
performance, strategy and
outlook.
INVESTMENTS 6 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 22 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 25 Notes to the financial
statements.
INDEPENDENT AUDITORS' REPORT 28 The auditors' opinion.
DISTRIBUTIONS 29
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND.
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE FUND'S
PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS
STATED ON THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF
FIDELITY OR ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER
CONDITIONS AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH
VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND,
BECAUSE INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
Entering the final year of the 20th century, popular U.S. equity
market indexes had just posted an unprecedented four consecutive years
of double-digit annual returns, while domestic bonds also enjoyed
relatively strong increases. The international story entering 1999,
however, was less positive. In general - with the exception of
European issues - international equities and bonds were greatly
disappointing. Asian and Russian economies had fallen into disarray,
Japan was struggling to implement banking reforms, and emerging
markets were plagued by a host of currency devaluations, loan defaults
and dismal credit outlooks. So who would have thought, just one year
later, that Japan, Russia and emerging markets would be three of
1999's best-performing investments? U.S. equities also continued to
chug along in 1999, extending their indexes' streak of consecutive
double-digit annual increases to five. The stock market was not
without its problems, however. Extremely narrow market breadth,
soaring valuations and rising interest rates - not to mention Y2K -
left many investors unsettled about the prospects for equities
entering the new millennium. Domestic fixed-income alternatives,
meanwhile, fared poorly in 1999 relative to the year prior.
U.S. STOCK MARKETS
In a word, technology was the primary driver of equity market
performance in 1999. While telecommunications, particularly the
wireless segment of the industry, also performed well, nothing
dominated like technology. This incredibly narrow market breadth was
illustrated by the technology-laden NASDAQ Index. Its return of 86.12%
for the one-year period ending December 31, 1999, was the all-time
highest annual return for any major U.S. stock index. Broader indexes,
such as the Standard & Poor's 500 SM, generated much lower returns,
but were still significantly affected by tech's presence. For example,
technology was responsible for approximately 70% of the S&P 500's
12-month return of 21.04%, the index's fifth consecutive annual gain
above 20%. The top 50 stocks in the S&P 500 - the so-called "Nifty
50," many of which were technology shares - accounted for 115% of its
total return. Meanwhile, the remaining 450 stocks fell 3.13%. The Dow
Jones Industrial Average - an index of 30 blue-chip stocks - posted a
27.13% return during the period, its fifth consecutive double-digit
annual return. Despite the strong numbers of these indexes, more
stocks fell than rose in 1999. Growth stocks continued to hammer their
value-oriented peers. But in a turnaround from previous years, mid-
and small-cap growth stocks performed better than their large-cap
brethren did. Conversely, mid-and small-cap value issues posted
negative overall returns in 1999.
FOREIGN STOCK MARKETS
Similar to the domestic equity markets, technology and - perhaps to an
even greater degree than in the U.S. - telecommunications led the
charge in the vastly improved international equity markets. The
recovery of the Japanese stock market in 1999 was nothing short of
remarkable. A renewed emphasis on corporate restructuring and
shareholder value - combined with the Japanese government's
willingness to create more of a free-enterprise market system - proved
wildly successful. For the period, the Morgan Stanley Capital
International Japan Index returned 61.53% and Japan's TOPIX Index was
up 75.89%. While Canadian equity markets didn't get nearly the
attention of their U.S. neighbors, their performance was a great deal
better than the broader American indexes, as the Toronto Stock
Exchange (TSE) 300 returned 39.34% for the 12-month period ending
December 31, 1999. Despite a strong surge in December, European
markets offered mixed results over the past 12 months. In that time,
the Morgan Stanley Capital International Europe Index posted a
relatively tame - at least, in comparison to other developed nations'
stock markets - one-year return of 16.16%.
U.S. BOND MARKETS
Fueled by robust economic growth and a tighter monetary policy,
interest rates moved sharply higher, causing most domestic bonds to
struggle throughout the 12-month period ending December 31, 1999. The
Lehman Brothers Aggregate Bond Index, a popular measure of
taxable-bond performance, fell 0.82% during the period. Treasury
prices had the toughest time of it, falling in response to three
quarter-point interest-rate hikes levied by the Federal Reserve Board,
which erased all of 1998's rate cuts. The Lehman Brothers Long-Term
Treasury Index plunged 8.74% in 1999. Nor were corporate bonds, as
measured by the Lehman Brothers Corporate Bond Index, immune from the
fixed-income fade during the year, falling 1.96%. Government agency
securities also fell into negative territory for the year, as the
Lehman Brothers U.S. Agency Index fell 0.94%. There were a few bright
spots, however. The high-yield market, as measured by the Merrill
Lynch High Yield Master II Index, returned 2.51% during the 12-month
period, while the Lehman Brothers Mortgage-Backed Securities Index was
up 1.86%.
FOREIGN BOND MARKETS
Emerging markets stood as one of the best-performing asset classes in
1999. For the 12-month period ending December 31, 1999, the JP Morgan
Emerging Markets Bond Index Plus was up 25.97%. A year ago, that same
index closed 1998 with a negative 14.35% annual return. A variety of
factors sparked their recovery, including rising commodity prices,
particularly oil; the continuation of a strong U.S. economy;
stable-to-lower interest rates; tame inflation; and greater political
stability. Russia was perhaps the year's biggest comeback story.
Devastated by its devaluation of the ruble and loan defaults in 1998,
Russia steadily demonstrated strong technical improvements that made
it the best-performing country in the index in 1999. Both Brazil and
Mexico enjoyed relatively low inflation and improved economies. Turkey
was the best-performing emerging-market country in December, as the
government's reform plans, IMF financial support, and the announcement
that it would be accepted in the European Union all boosted the
country's prospects. Elsewhere, outside of positive performing
Canadian and Japanese issues - beneficiaries of strong local
currencies - higher rates proved insurmountable for most non-U.S.
developed markets, which produced negative returns in local currency
terms. A markedly weak euro, coupled with firming supply pressures,
felled bond prices in Germany, France and Italy. The Salomon Brothers
Non-U.S. World Government Bond Index fell 5.07% in 1999.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the past 10 years total return would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
1999
FIDELITY VIP: ASSET MANAGER - 11.09% 15.63% 13.14%
"INITIAL CLASS"
Asset Manager Composite 10.42% 16.69% 11.96%
S&P 500 (registered trademark) 21.04% 28.56% 18.21%
LB Aggregate Bond -0.82% 7.73% 7.70%
LB 3 Month T-Bill 4.90% 5.44% 5.19%
Variable Annuity Flexible 12.07% 17.11% 12.94%
Portfolio Funds Average
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to those of the Asset Manager
Composite Index, a hypothetical combination of unmanaged indices. The
composite index combines the total returns of the Standard & Poor's
500 SM Index, the Lehman Brothers Aggregate Bond Index and the Lehman
Brothers 3 Month Treasury Bill Index weighted according to the fund's
neutral mix.
You can also compare the fund's returns to the variable annuity
flexible portfolio funds average, which reflects the performance of
mutual funds with similar objectives tracked by Lipper Inc. The past
one year average represents a peer group of 84 mutual funds. The
benchmarks listed in the table above include reinvested dividends and
capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown.
PERFORMANCE NUMBERS ARE NET OF ALL FUND OPERATING EXPENSES, BUT DO NOT
INCLUDE ANY INSURANCE CHARGES IMPOSED BY YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. IF PERFORMANCE INFORMATION INCLUDED THE EFFECT OF
THESE ADDITIONAL CHARGES, THE TOTAL RETURNS WOULD HAVE BEEN LOWER.
Past performance is no guarantee of future results. Principal and
investment return will vary and you may have a gain or loss when you
withdraw your money.
$10,000 OVER 10 YEARS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
VIP II Asset Manager 50 S&P/40 LBAgg/10 LB 3Mo S&P 500 LB Aggregate Bond
00156 F0001 SP001 LB001
1989/12/31 10000.00 10000.00 10000.00 10000.00
1990/01/31 9779.34 9758.90 9329.00 9881.00
1990/02/28 9879.64 9821.55 9449.34 9912.62
1990/03/31 9959.88 9918.20 9699.75 9919.56
1990/04/30 9829.49 9826.06 9457.26 9828.30
1990/05/31 10330.99 10245.73 10379.34 10119.22
1990/06/30 10411.23 10309.87 10308.76 10282.14
1990/07/31 10391.17 10374.30 10275.77 10424.03
1990/08/31 10050.15 10053.74 9346.84 10284.35
1990/09/30 9839.52 9965.36 8891.65 10369.71
1990/10/31 9889.67 10036.52 8853.42 10501.40
1990/11/30 10371.11 10337.81 9425.35 10727.18
1990/12/31 10672.02 10510.87 9688.32 10894.53
1991/01/31 11182.69 10712.26 10110.73 11029.62
1991/02/28 11620.41 10980.81 10833.64 11123.37
1991/03/31 11808.00 11102.70 11095.82 11200.12
1991/04/30 11985.17 11176.87 11122.45 11321.08
1991/05/31 12256.14 11354.35 11602.94 11386.74
1991/06/30 12037.28 11207.20 11071.52 11381.05
1991/07/31 12339.52 11432.47 11587.46 11539.25
1991/08/31 12589.64 11636.99 11862.08 11788.50
1991/09/30 12662.60 11693.66 11663.98 12027.80
1991/10/31 12745.97 11799.49 11820.28 12161.31
1991/11/30 12537.53 11721.38 11343.92 12273.19
1991/12/31 13079.47 12301.71 12641.67 12637.71
1992/01/31 13246.22 12166.77 12406.53 12465.84
1992/02/29 13503.47 12244.15 12567.82 12546.86
1992/03/31 13470.56 12154.89 12322.74 12476.60
1992/04/30 13668.01 12307.31 12685.03 12566.43
1992/05/31 13810.61 12427.84 12747.19 12803.94
1992/06/30 13799.64 12433.93 12557.26 12980.63
1992/07/31 14030.00 12773.45 13070.85 13245.44
1992/08/31 13986.13 12724.17 12802.90 13379.22
1992/09/30 14073.88 12867.47 12953.97 13538.43
1992/10/31 14095.82 12807.50 12999.31 13358.37
1992/11/30 14402.97 12970.16 13442.58 13361.04
1992/12/31 14611.39 13123.44 13607.93 13573.48
1993/01/31 14874.66 13288.22 13722.24 13834.09
1993/02/28 15014.15 13473.22 13908.86 14076.19
1993/03/31 15439.19 13612.05 14202.33 14135.31
1993/04/30 15531.09 13529.31 13858.64 14234.26
1993/05/31 15795.30 13674.43 14230.05 14252.76
1993/06/30 15921.66 13819.92 14271.32 14510.73
1993/07/31 16116.95 13837.83 14214.23 14593.45
1993/08/31 16587.94 14178.41 14752.95 14848.83
1993/09/30 16599.43 14164.52 14639.35 14888.92
1993/10/31 17047.44 14310.13 14942.39 14944.01
1993/11/30 17024.46 14200.08 14800.44 14816.99
1993/12/31 17713.71 14299.60 14979.52 14897.00
1994/01/31 18276.60 14581.18 15488.82 15098.11
1994/02/28 17696.13 14302.92 15069.08 14835.40
1994/03/31 16864.37 13933.56 14412.07 14468.97
1994/04/30 16876.42 13968.59 14596.54 14353.22
1994/05/31 17021.08 14062.68 14835.92 14351.78
1994/06/30 16695.60 13923.74 14472.44 14320.21
1994/07/31 16984.91 14218.59 14947.14 14605.18
1994/08/31 17382.71 14463.06 15559.97 14622.70
1994/09/30 17177.68 14251.27 15178.75 14407.75
1994/10/31 17262.12 14388.19 15520.27 14394.78
1994/11/30 17008.79 14177.75 14955.03 14363.12
1994/12/31 16634.84 14311.22 15176.81 14462.22
1995/01/31 16526.28 14579.96 15570.34 14748.57
1995/02/28 16793.99 14945.53 16177.12 15099.59
1995/03/31 17015.77 15174.92 16654.51 15191.70
1995/04/30 17286.84 15448.25 17144.98 15404.38
1995/05/31 17508.62 15960.91 17830.27 16000.53
1995/06/30 17656.48 16176.16 18244.46 16117.33
1995/07/31 18284.87 16382.31 18849.45 16081.88
1995/08/31 18506.65 16490.96 18896.76 16276.47
1995/09/30 18740.76 16847.36 19694.21 16434.35
1995/10/31 18494.33 16943.39 19623.90 16647.99
1995/11/30 18974.86 17361.18 20485.39 16897.71
1995/12/31 19455.40 17613.93 20879.93 17134.28
1996/01/31 19874.32 17914.17 21590.69 17247.37
1996/02/29 19820.79 17847.93 21790.83 16947.26
1996/03/31 20031.51 17868.81 22000.68 16828.63
1996/04/30 20242.23 17943.89 22324.97 16734.39
1996/05/31 20400.27 18133.31 22900.73 16700.92
1996/06/30 20584.65 18268.91 22987.98 16924.72
1996/07/31 20242.23 17979.75 21972.37 16970.41
1996/08/31 20281.74 18133.01 22435.77 16941.56
1996/09/30 21019.26 18677.14 23698.46 17236.35
1996/10/31 21559.23 19064.36 24352.06 17618.99
1996/11/30 22626.00 19789.11 26192.83 17920.28
1996/12/31 22296.75 19568.22 25673.95 17753.62
1997/01/31 22968.41 20212.80 27278.06 17808.66
1997/02/28 23166.93 20320.13 27491.92 17853.18
1997/03/31 22285.66 19820.97 26362.28 17655.01
1997/04/30 23047.43 20541.26 27936.10 17919.83
1997/05/31 24152.75 21255.48 29636.85 18090.07
1997/06/30 24795.04 21840.43 30964.59 18305.34
1997/07/31 26228.97 22956.81 33428.44 18799.59
1997/08/31 25512.00 22246.29 31555.78 18639.79
1997/09/30 26333.52 22997.44 33284.09 18915.66
1997/10/31 25900.36 22756.66 32172.40 19189.94
1997/11/30 26497.83 23335.02 33661.66 19278.21
1997/12/31 26901.12 23639.65 34239.63 19472.92
1998/01/31 26990.74 23902.76 34618.32 19722.17
1998/02/28 28205.97 24765.89 37114.99 19706.40
1998/03/31 29024.03 25445.34 39015.65 19773.40
1998/04/30 28989.94 25637.71 39408.15 19876.22
1998/05/31 28836.55 25526.32 38730.72 20065.04
1998/06/30 29398.97 26142.35 40303.96 20235.26
1998/07/31 29211.50 26036.83 39874.73 20278.20
1998/08/31 26552.81 24336.12 34109.64 20608.26
1998/09/30 27439.04 25356.41 36294.70 21090.73
1998/10/31 28632.04 26344.03 39246.91 20979.46
1998/11/30 29722.78 27211.02 41625.67 21098.28
1998/12/31 30949.87 28038.32 44024.14 21161.72
1999/01/31 31682.72 28715.36 45865.23 21312.88
1999/02/28 30957.30 28077.19 44439.74 20940.76
1999/03/31 31233.54 28713.17 46217.77 21056.94
1999/04/30 31933.35 29315.89 48007.79 21123.69
1999/05/31 31472.95 28878.06 46874.32 20937.80
1999/06/30 32577.91 29653.73 49475.85 20870.93
1999/07/31 32025.43 29153.47 47931.21 20783.28
1999/08/31 31970.18 29087.15 47693.95 20772.72
1999/09/30 31601.86 28836.61 46386.66 21013.77
1999/10/31 32559.49 29803.58 49322.01 21091.30
1999/11/30 33001.48 30117.78 50324.73 21089.83
1999/12/31 34382.68 30960.33 53288.85 20988.14
IMATRL PRASUN SHR__CHT 19991231 20000118 144208 R00000000000123
</TABLE>
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Asset Manager
Portfolio on December 31, 1989. By December 31, 1999, the value of the
investment would have grown to $34,383 - a 243.83% increase. With
reinvested dividends and capital gains, if any, a $10,000 investment
in the Standard & Poor's 500 Index would have grown to $53,289 over
the same period - a 432.89% increase on the initial investment. If
$10,000 was invested in the Lehman Brothers Aggregate Bond Index, it
would have grown to $20,988 - a 109.88% increase.
You can also look at how the Asset Manager Composite Index did over
the same period. The composite index combines the cumulative total
returns of three unmanaged indexes - the S&P 500, Lehman Brothers
Aggregate Bond Index, and the Lehman Brothers 3 Month Treasury Bill
Index - according to the fund's neutral mix.* With reinvested
dividends and capital gains, if any, a $10,000 investment in the index
would have grown to $30,960 - a 209.60% increase.
* 50% STOCKS, 40% BONDS AND 10% SHORT-TERM INSTRUMENTS EFFECTIVE
JANUARY 1, 1997.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 2.4
Wal-Mart Stores, Inc. 2.2
General Electric Co. 2.2
Motorola, Inc. 1.8
Cisco Systems, Inc. 1.6
10.2
TOP FIVE BOND ISSUERS AS OF
DECEMBER 31, 1999
(WITH MATURITIES GREATER THAN % OF FUND'S NET ASSETS
ONE YEAR)
Fannie Mae 8.8
U.S. Treasury Obligations 3.6
Government National Mortgage 1.6
Association
Freddie Mac 1.0
Ford Motor Credit Co. 0.4
15.4
ASSET ALLOCATION AS OF
DECEMBER 31, 1999 *
% OF FUND'S NET ASSETS
Stocks class 57.2%
Bond class 36.2%
Short-Term class 6.6%
* FOREIGN INVESTMENTS 3.6%
Row: 1, Col: 1, Value: 57.2
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 36.2
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 6.6
ASSET ALLOCATION IN THE PIE CHART REFLECTS THE CATEGORIZATION OF
ASSETS AS DEFINED IN THE FUND'S PROSPECTUS. FINANCIAL STATEMENT
CATEGORIZATIONS CONFORM TO ACCOUNTING STANDARDS AND WILL DIFFER FROM
THE PIE CHART.PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO
PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S
INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Richard Habermann)
An interview with Richard Habermann, Portfolio Manager of Asset
Manager Portfolio
Q. HOW DID THE FUND PERFORM COMPARED TO ITS
BENCHMARK, DICK?
A. For the 12 months that ended December 31, 1999, the fund topped the
10.42% return of the Asset Manager Composite Index.
Q. WHAT ASSET ALLOCATION STRATEGIES DID YOU FOLLOW DURING
THE PERIOD?
A. The fund's neutral allocation mix calls for 50% of its assets to be
invested in stocks, 40% in bonds and 10% in short-term and money
market instruments. With stocks performing well through much of the
period, I kept the fund's average equity exposure at around 54%, and
this emphasis boosted the fund's performance. On the bond side, 1999
was not a good year for the bond market as a whole. However, the fund
had significant exposure to both the corporate and mortgage-backed
sectors, which performed fairly well relative to Treasury bonds. The
fund also benefited from its investments in high-yield securities,
which performed well relative to investment-grade bonds.
Q. HOW DID THE FUND'S EQUITY SUBPORTFOLIO PERFORM DURING THE PERIOD?
A. The fund's equities performed slightly better than the S&P 500
index, quite an accomplishment considering the narrowness of the
overall market in 1999. By that, I mean that 10 of the major stocks
within the index generated around 60% of its advance. Conversely, the
bottom 450 stocks within the S&P produced a negative aggregate return.
The technology sector led the market, and Steve Snider - who manages
the fund's stocks - was able to find enough good names to keep pace
with the tech stocks within the index. Industry leaders Cisco Systems
and Microsoft continued to perform well, as did Lexmark International.
The fund also benefited from the huge demand for wireless
communications by owning positions in Qualcomm and Motorola. Retail
stocks also performed well, with Wal-Mart being the fund's top overall
contributor during the period. Disappointments included pharmaceutical
firm Schering-Plough, as well as Fannie Mae and Freddie Mac, both of
which struggled due to less-than-favorable interest-rate conditions.
The fund no longer held equity stakes in Fannie Mae or Freddie Mac at
the end of the period.
Q. HOW DID YOU ALLOCATE INVESTMENTS WITHIN THE FUND'S BOND
SUBPORTFOLIO?
A. As far as the fund's investment-grade bond positions, rising
interest rates pressured returns through much of the period. Despite
this general move in rates, the fund was heavily weighted in corporate
and mortgage-backed securities, which performed relatively well during
the period. This subportfolio, managed by Charlie Morrison, benefited
from its investments in Seagram, Cable & Wireless and Capital One
Financial, as well as from its exposure to lower-quality, commercial
mortgage-backed securities. The fund's high-yield positions - managed
by Fred Hoff - performed nicely against the backdrop of a strong U.S.
economy and a favorable corporate earnings outlook. The best
individual high-yield performers included telecommunications names
Nextel Communications, WinStar and Teligent.
Q. HOW DID YOU POSITION THE FUND'S SHORT-TERM/MONEY MARKET
INVESTMENTS?
A. With interest rates spiking upward, John Todd - who manages this
portion of the fund - focused mainly on repurchase agreements. These
securities - commonly called repos - are short-term investments that
the seller agrees to buy back at a specified price and time. Repos
offered the fund an effective sanctuary in which to invest assets on a
temporary basis during the period. They also provided an adequate
level of liquidity, which was desirable given the rate scenario.
Q. WHAT'S YOUR OUTLOOK?
A. Despite the global economic growth we've seen recently, inflation
remains subdued. Corporate earnings appear to be on solid ground for
2000, which means there may be more market segments that are
reasonably valued. From an allocation standpoint, the direction of
interest rates will have some influence on whether I take more of a
defensive or equity-oriented approach.
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 2.
FUND FACTS
GOAL: high total return with reduced risk over
the long term by allocating assets among
stocks, bonds and short-term instruments
anywhere in the world
START DATE: September 6, 1989
SIZE: as of December 31, 1999, more than
$4.9 billion
MANAGER: Richard Habermann, since 1996;
joined Fidelity in 1968
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 55.8%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 2.4%
AEROSPACE & DEFENSE - 2.3%
Boeing Co. 309,600 $ 12,867,750
Honeywell International, Inc. 598,388 34,519,479
Northrop Grumman Corp. 43,300 2,340,906
Rockwell International Corp. 159,300 7,626,488
Textron, Inc. 64,900 4,977,019
United Technologies Corp. 782,406 50,856,390
113,188,032
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 108,300 5,712,825
TOTAL AEROSPACE & DEFENSE 118,900,857
BASIC INDUSTRIES - 2.0%
CHEMICALS & PLASTICS - 0.5%
Dow Chemical Co. 143,100 19,121,738
Engelhard Corp. 125,900 2,376,363
Praxair, Inc. 123,900 6,233,719
27,731,820
IRON & STEEL - 0.2%
Mueller Industries, Inc. (a) 51,200 1,856,000
Nucor Corp. 127,800 7,005,038
8,861,038
METALS & MINING - 1.0%
Alcoa, Inc. 594,100 49,310,300
PAPER & FOREST PRODUCTS - 0.3%
Georgia-Pacific Corp. 78,700 3,994,025
Weyerhaeuser Co. 130,100 9,342,806
13,336,831
TOTAL BASIC INDUSTRIES 99,239,989
CONSTRUCTION & REAL ESTATE -
0.2%
BUILDING MATERIALS - 0.2%
Fortune Brands, Inc. 246,300 8,143,294
DURABLES - 1.4%
AUTOS, TIRES, & ACCESSORIES -
0.7%
Ford Motor Co. 660,100 35,274,094
CONSUMER DURABLES - 0.6%
Minnesota Mining & 281,200 27,522,450
Manufacturing Co.
CONSUMER ELECTRONICS - 0.0%
Whirlpool Corp. 21,000 1,366,313
TEXTILES & APPAREL - 0.1%
Arena Brands Holdings Corp. 8,445 211,125
Class B
NIKE, Inc. Class B 86,500 4,287,156
4,498,281
TOTAL DURABLES 68,661,138
SHARES VALUE (NOTE 1)
ENERGY - 3.2%
ENERGY SERVICES - 0.2%
BJ Services Co. (a) 173,000 $ 7,233,563
OIL & GAS - 3.0%
Amerada Hess Corp. 55,000 3,121,250
Apache Corp. 151,900 5,610,806
Atlantic Richfield Co. 631,600 54,633,400
Chevron Corp. 448,200 38,825,325
Exxon Mobil Corp. 559,875 45,104,930
Tosco Corp. 129,800 3,528,938
150,824,649
TOTAL ENERGY 158,058,212
FINANCE - 7.8%
BANKS - 3.3%
Chase Manhattan Corp. 798,700 62,049,006
Comerica, Inc. 71,400 3,333,488
FleetBoston Financial Corp. 624,305 21,733,618
J. P. Morgan & Co., Inc. 351,000 44,445,375
PNC Financial Corp. 547,300 24,354,850
SouthTrust Corp. 272,300 10,296,344
166,212,681
CREDIT & OTHER FINANCE - 1.3%
American Express Co. 97,500 16,209,375
Citigroup, Inc. 715,800 39,771,638
Providian Financial Corp. 85,950 7,826,822
63,807,835
INSURANCE - 0.8%
Allmerica Financial Corp. 87,300 4,856,063
American General Corp. 60,800 4,613,200
CIGNA Corp. 60,600 4,882,088
Financial Security Assurance 37,300 1,944,263
Holdings Ltd.
Marsh & McLennan Companies, 173,600 16,611,350
Inc.
MGIC Investment Corp. 95,800 5,765,963
38,672,927
SAVINGS & LOANS - 0.3%
Golden West Financial Corp. 428,700 14,361,450
SECURITIES INDUSTRY - 2.1%
AXA Financial, Inc. 335,000 11,348,125
Kansas City Southern 293,200 21,880,050
Industries, Inc.
Lehman Brothers Holdings, 441,600 37,398,000
Inc.
Merrill Lynch & Co., Inc. 129,800 10,838,300
Morgan Stanley Dean Witter & 173,400 24,752,850
Co.
106,217,325
TOTAL FINANCE 389,272,218
HEALTH - 5.0%
DRUGS & PHARMACEUTICALS - 3.5%
Amgen, Inc. (a) 813,600 48,866,850
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
DRUGS & PHARMACEUTICALS -
CONTINUED
Biogen, Inc. (a) 77,900 $ 6,582,550
Bristol-Myers Squibb Co. 783,000 50,258,813
Merck & Co., Inc. 346,000 23,203,625
Pfizer, Inc. 346,100 11,226,619
Schering-Plough Corp. 806,700 34,032,656
174,171,113
MEDICAL EQUIPMENT & SUPPLIES
- - 1.2%
Johnson & Johnson 650,300 60,559,188
Millipore Corp. 34,700 1,340,288
61,899,476
MEDICAL FACILITIES MANAGEMENT
- - 0.3%
United HealthCare Corp. 86,800 4,611,250
Wellpoint Health Networks, 129,900 8,565,281
Inc. (a)
13,176,531
TOTAL HEALTH 249,247,120
INDUSTRIAL MACHINERY &
EQUIPMENT - 3.2%
ELECTRICAL EQUIPMENT - 2.5%
Emerson Electric Co. 23,800 1,365,525
General Electric Co. 682,700 105,647,825
General Instrument Corp. (a) 188,900 16,056,500
123,069,850
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Ingersoll-Rand Co. 404,800 22,289,300
Parker-Hannifin Corp. 69,200 3,550,825
Tyco International Ltd. 220,600 8,575,825
34,415,950
TOTAL INDUSTRIAL MACHINERY & 157,485,800
EQUIPMENT
MEDIA & LEISURE - 1.7%
BROADCASTING - 0.0%
NTL, Inc. warrants 10/14/08 3,742 187,100
(a)
ENTERTAINMENT - 0.0%
Alliance Gaming Corp. (a)(k) 865 2,433
PUBLISHING - 1.6%
Central Newspapers, Inc. 58,000 2,283,750
Class A
Dow Jones & Co., Inc. 77,100 5,242,800
Gannet Co., Inc. 324,500 26,467,031
Knight-Ridder, Inc. 128,700 7,657,650
McGraw-Hill Companies, Inc. 56,000 3,451,000
The New York Times Co. Class A 219,200 10,768,200
Tribune Co. 441,800 24,326,613
80,197,044
SHARES VALUE (NOTE 1)
RESTAURANTS - 0.1%
Brinker International, Inc. 93,800 $ 2,251,200
(a)
Darden Restaurants, Inc. 151,600 2,747,750
4,998,950
TOTAL MEDIA & LEISURE 85,385,527
NONDURABLES - 2.7%
BEVERAGES - 1.2%
Adolph Coors Co. Class B 96,800 5,082,000
Anheuser-Busch Companies, 564,200 39,987,675
Inc.
Pepsi Bottling Group, Inc. 389,800 6,456,063
PepsiCo, Inc. 138,400 4,878,600
56,404,338
FOODS - 1.1%
Campbell Soup Co. 129,800 5,021,638
H. J. Heinz Co. 129,800 5,167,663
Kellogg Co. 303,900 9,363,919
Quaker Oats Co. 284,000 18,637,500
Ralston Purina Co. 173,000 4,822,375
Sara Lee Corp. 486,500 10,733,406
53,746,501
HOUSEHOLD PRODUCTS - 0.3%
Procter & Gamble Co. 147,200 16,127,600
TOBACCO - 0.1%
Philip Morris Companies, Inc. 291,600 6,761,475
TOTAL NONDURABLES 133,039,914
PRECIOUS METALS - 0.0%
Homestake Mining Co. 173,200 1,353,125
RETAIL & WHOLESALE - 4.4%
APPAREL STORES - 0.2%
Gap, Inc. 258,525 11,892,150
GENERAL MERCHANDISE STORES -
2.5%
Dayton Hudson Corp. 147,500 10,832,031
Sears, Roebuck & Co. 34,600 1,053,138
Wal-Mart Stores, Inc. 1,586,600 109,673,725
121,558,894
RETAIL & WHOLESALE,
MISCELLANEOUS - 1.7%
Best Buy Co., Inc. (a) 249,700 12,531,819
Circuit City Stores, Inc. - 129,900 5,853,619
Circuit City Group
Home Depot, Inc. 624,300 42,803,569
Lowe's Companies, Inc. 358,400 21,414,400
82,603,407
TOTAL RETAIL & WHOLESALE 216,054,451
SERVICES - 0.3%
LEASING & RENTAL - 0.1%
Hertz Corp. Class A 115,700 5,799,463
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - CONTINUED
PRINTING - 0.2%
Valassis Communications, Inc. 210,700 $ 8,902,075
(a)
TOTAL SERVICES 14,701,538
TECHNOLOGY - 16.3%
COMMUNICATIONS EQUIPMENT - 3.5%
ADC Telecommunications, Inc. 216,500 15,709,781
(a)
Cisco Systems, Inc. (a) 744,900 79,797,413
Globalstar Telecommunications 1,410 303,150
Ltd. warrants 2/15/04 (a)(f)
Lucent Technologies, Inc. 1,011,400 75,665,363
171,475,707
COMPUTER SERVICES & SOFTWARE
- - 4.7%
Adobe Systems, Inc. 390,400 26,254,400
Computer Associates 208,300 14,567,981
International, Inc.
Electronics for Imaging, Inc. 221,800 12,892,125
(a)
First Data Corp. 627,800 30,958,388
Microsoft Corp. (a) 1,037,700 121,151,475
NetScout Systems, Inc. 130,200 4,036,200
Oracle Corp. (a) 207,700 23,275,381
233,135,950
COMPUTERS & OFFICE EQUIPMENT
- - 3.5%
Adaptec, Inc. (a) 433,900 21,640,763
Comverse Technology, Inc. (a) 156,200 22,609,950
International Business 519,400 56,095,200
Machines Corp.
Lexmark International Group, 467,500 42,308,750
Inc. Class A (a)
Sun Microsystems, Inc. (a) 406,100 31,447,369
174,102,032
ELECTRONIC INSTRUMENTS - 0.6%
Agilent Technologies, Inc. 15,300 1,182,881
Applied Materials, Inc. (a) 86,800 10,996,475
Teradyne, Inc. (a) 233,800 15,430,800
27,610,156
ELECTRONICS - 4.0%
Analog Devices, Inc. (a) 4,600 427,800
Intel Corp. 173,200 14,256,525
LSI Logic Corp. (a) 151,800 10,246,500
Motorola, Inc. 605,700 89,189,325
National Semiconductor Corp. 173,000 7,406,563
(a)
Texas Instruments, Inc. 780,000 75,562,500
Vishay Intertechnology, Inc. 129,800 4,104,925
(a)
201,194,138
TOTAL TECHNOLOGY 807,517,983
TRANSPORTATION - 0.0%
TRUCKING & FREIGHT - 0.0%
United Parcel Service, Inc. 34,600 2,387,400
Class B
SHARES VALUE (NOTE 1)
UTILITIES - 5.2%
CELLULAR - 1.2%
McCaw International Ltd. 8,150 $ 18,338
warrants 4/16/07 (a)(f)
QUALCOMM, Inc. (a) 346,400 61,009,700
61,028,038
ELECTRIC UTILITY - 1.0%
DTE Energy Co. 210,000 6,588,750
Edison International 270,500 7,083,719
Energy East Corp. 654,000 13,611,375
GPU, Inc. 212,300 6,355,731
PECO Energy Co. 116,800 4,058,800
PP&L Resources, Inc. 128,500 2,939,438
Public Service Enterprise 170,100 5,921,606
Group, Inc.
Unicom Corp. 130,100 4,358,350
50,917,769
GAS - 0.3%
Enron Corp. 319,800 14,191,125
TELEPHONE SERVICES - 2.7%
AT&T Corp. 674,240 34,217,680
BellSouth Corp. 762,300 35,685,169
MCI WorldCom, Inc. (a) 324,450 17,216,128
Ono Finance PLC rights 1,740 174,000
5/31/09 (a)(f)
Pathnet, Inc. warrants 4,970 49,700
4/15/08 (a)(f)
SBC Communications, Inc. 593,794 28,947,458
Sprint Corp. - FON Group 224,900 15,138,581
131,428,716
TOTAL UTILITIES 257,565,648
TOTAL COMMON STOCKS 2,767,014,214
(Cost $1,993,683,117)
NONCONVERTIBLE PREFERRED
STOCKS - 1.5%
CONSTRUCTION & REAL ESTATE -
0.1%
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
California Federal Preferred 231,349 5,263,190
Capital Corp. $2.2812
Walden Residential 8,600 133,838
Properties, Inc. $2.30
5,397,028
FINANCE - 0.0%
INSURANCE - 0.0%
American Annuity Group 1,490 1,334,232
Capital Trust II 8.875%
SIG Capital Trust I 9.5% (a) 2,174 556,877
1,891,109
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Fresenius Medical Care 1,053 997,027
Capital Trust II 7.875%
NONCONVERTIBLE PREFERRED
STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 0.5%
BROADCASTING - 0.3%
Adelphia Communications Corp. 15,763 $ 1,781,219
$13.00
CSC Holdings, Inc. 11.125% 100,968 11,030,754
pay-in-kind
Granite Broadcasting Corp. 374 381,480
12.75% pay-in-kind
Sinclair Capital 11.625% 28,380 2,845,095
16,038,548
PUBLISHING - 0.2%
PRIMEDIA, Inc.:
$9.20 32,995 3,101,530
8.625% 738 65,313
Series D, $10.00 31,050 3,073,950
6,240,793
TOTAL MEDIA & LEISURE 22,279,341
RETAIL & WHOLESALE - 0.0%
GROCERY STORES - 0.0%
Supermarkets General Holdings 17,231 86,155
Corp. $3.52 pay-in-kind
SERVICES - 0.1%
LEASING & RENTAL - 0.1%
Crown Castle International 1,953 2,021,355
Corp. 12.75% pay-in-kind
UTILITIES - 0.8%
CELLULAR - 0.3%
Nextel Communications, Inc.:
11.125% pay-in-kind 15,119 15,194,595
Series D, 13% pay-in-kind 276 296,700
15,491,295
TELEPHONE SERVICES - 0.5%
Adelphia Business Solution, 4,959 4,835,025
Inc. 12.875% pay-in-kind
Intermedia Communications, 4,952 4,828,200
Inc. 13.5% pay-in-kind
IXC Communications, Inc. 1,884 2,062,980
12.5% pay-in-kind
NEXTLINK Communications, Inc. 173,603 9,374,562
14% pay-in-kind
WinStar Communications, Inc. 2,981 2,951,190
14.25% (a)
24,051,957
TOTAL UTILITIES 39,543,252
TOTAL NONCONVERTIBLE 72,215,267
PREFERRED STOCKS
(Cost $72,915,380)
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CORPORATE BONDS - 18.4%
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
CONVERTIBLE BONDS - 0.2%
HEALTH - 0.2%
MEDICAL FACILITIES MANAGEMENT
- - 0.2%
Tenet Healthcare Corp. 6% B1 $ 7,210,000 $ 5,876,150
12/1/05
Total Renal Care Holdings, B1 2,940,000 1,844,850
Inc. 7% 5/15/09 (f)
7,721,000
MEDIA & LEISURE - 0.0%
LODGING & GAMING - 0.0%
Hilton Hotels Corp. 5% Ba2 210,000 160,125
5/15/06
NONDURABLES - 0.0%
FOODS - 0.0%
Chiquita Brands B3 2,330,000 1,654,300
International, Inc. 7%
3/28/01
TOTAL CONVERTIBLE BONDS 9,535,425
NONCONVERTIBLE BONDS - 18.2%
AEROSPACE & DEFENSE - 0.2%
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. 5.95% 3/15/01 Baa2 4,500,000 4,426,785
SHIP BUILDING & REPAIR - 0.1%
Newport News Shipbuilding, B1 3,830,000 3,820,425
Inc. 9.25% 12/1/06
TOTAL AEROSPACE & DEFENSE 8,247,210
BASIC INDUSTRIES - 0.5%
CHEMICALS & PLASTICS - 0.3%
Huntsman Corp. 9.5% 7/1/07 B2 2,440,000 2,305,800
(f)
Huntsman ICI Chemicals LLC B2 1,380,000 1,417,950
10.125% 7/1/09 (f)
Lyondell Chemical Co.:
9.875% 5/1/07 Ba3 5,050,000 5,151,000
10.875% 5/1/09 B2 1,500,000 1,552,500
Rohm & Haas Co. 7.4% 7/15/09 A3 1,400,000 1,384,978
Sterling Chemicals, Inc. Caa3 1,760,000 1,311,200
11.75% 8/15/06
13,123,428
IRON & STEEL - 0.0%
The LTV Corp. 11.75% Ba3 860,000 898,700
11/15/09 (f)
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
BASIC INDUSTRIES - CONTINUED
METALS & MINING - 0.0%
Kaiser Aluminum & Chemical B3 $ 1,210,000 $ 1,210,000
Corp. 12.75% 2/1/03
Metals USA, Inc. 8.625% B2 350,000 328,125
2/15/08
1,538,125
PACKAGING & CONTAINERS - 0.1%
Corning, Inc. 6.85% 3/1/29 A3 2,350,000 2,064,475
Gaylord Container Corp.:
9.375% 6/15/07 Caa1 2,825,000 2,627,250
9.75% 6/15/07 Caa1 1,770,000 1,681,500
6,373,225
PAPER & FOREST PRODUCTS - 0.1%
Potlatch Corp. 6.25% 3/15/02 Baa1 3,320,000 3,239,756
TOTAL BASIC INDUSTRIES 25,173,234
CONSTRUCTION & REAL ESTATE -
0.4%
BUILDING MATERIALS - 0.0%
American Standard Companies, Ba3 1,810,000 1,701,400
Inc. 7.375% 4/15/05
CONSTRUCTION - 0.1%
U.S. Home Corp. 8.875% B1 2,330,000 2,114,475
2/15/09
ENGINEERING - 0.0%
Anteon Corp. 12% 5/15/09 B3 1,530,000 1,430,550
REAL ESTATE - 0.1%
Duke-Weeks Realty LP 6.875% Baa2 2,950,000 2,803,503
3/15/05
LNR Property Corp.:
9.375% 3/15/08 B1 2,680,000 2,512,500
10.5% 1/15/09 B1 1,440,000 1,422,000
6,738,003
REAL ESTATE INVESTMENT TRUSTS
- - 0.2%
CenterPoint Properties Trust:
6.75% 4/1/05 Baa2 1,590,000 1,465,280
7.125% 3/15/04 Baa2 4,200,000 3,958,038
Equity Office Properties Trust:
6.375% 2/15/03 Baa1 3,600,000 3,470,904
6.75% 2/15/08 Baa1 1,590,000 1,462,307
10,356,529
TOTAL CONSTRUCTION & REAL 22,340,957
ESTATE
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
DURABLES - 0.3%
AUTOS, TIRES, & ACCESSORIES -
0.2%
Oshkosh Truck Co. 8.75% B2 $ 1,500,000 $ 1,455,000
3/1/08
Tenneco, Inc. 11.625% B2 1,300,000 1,319,500
10/15/09 (f)
TRW, Inc. 6.5% 6/1/02 Baa1 4,520,000 4,433,352
7,207,852
TEXTILES & APPAREL - 0.1%
Jones Apparel Group, Inc. Baa2 5,070,000 4,976,205
7.875% 6/15/06
Worldtex, Inc. 9.625% B1 2,000,000 1,620,000
12/15/07
6,596,205
TOTAL DURABLES 13,804,057
ENERGY - 0.8%
COAL - 0.1%
P&L Coal Holdings Corp. B2 1,870,000 1,823,250
9.625% 5/15/08
ENERGY SERVICES - 0.2%
Baker Hughes, Inc. 5.8% A2 3,980,000 3,825,576
2/15/03
R&B Falcon Corp. 6.5% 4/15/03 Ba3 1,785,000 1,628,813
RBF Finance Co.:
11% 3/15/06 Ba3 3,590,000 3,841,300
11.375% 3/15/09 Ba3 1,120,000 1,204,000
10,499,689
OIL & GAS - 0.5%
Apache Corp. 7.625% 7/1/19 Baa1 2,970,000 2,863,080
Chesapeake Energy Corp. B3 4,450,000 4,205,250
9.625% 5/1/05
Gulf Canada Resources Ltd. Ba1 800,000 786,000
8.375% 11/15/05
Occidental Petroleum Corp.:
6.39% 11/9/00 Baa3 1,000,000 995,710
10.94% 5/17/00 Baa3 2,700,000 2,740,851
Ocean Energy, Inc. 8.875% Ba3 2,010,000 2,004,975
7/15/07
Oryx Energy Co.:
8% 10/15/03 Baa1 3,055,000 3,057,750
8.125% 10/15/05 Baa1 4,935,000 5,014,454
8.375% 7/15/04 Baa1 2,335,000 2,394,823
Petro-Canada 7% 11/15/28 A3 1,980,000 1,745,152
25,808,045
TOTAL ENERGY 38,130,984
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - 4.5%
BANKS - 1.3%
BankBoston Corp. 6.625% A3 $ 1,700,000 $ 1,651,669
2/1/04
BanPonce Corp. 6.665% 3/5/01 A3 4,450,000 4,427,528
Barclays Bank PLC yankee A1 9,250,000 9,085,165
5.95% 7/15/01
Capital One Bank:
6.26% 5/7/01 Baa2 3,160,000 3,107,260
6.375% 2/15/03 Baa2 3,570,000 3,424,701
6.48% 6/28/02 Baa2 1,740,000 1,689,035
6.65% 3/15/04 Baa3 2,320,000 2,220,240
Capital One Financial Corp. Baa3 5,040,000 4,598,042
7.125% 8/1/08
Den Danske Bank AS 6.375% A1 8,340,000 7,745,775
6/15/08 (f)(i)
Fleet Boston Corp. 7.375% A3 1,400,000 1,370,250
12/1/09
Korea Development Bank:
6.625% 11/21/03 Baa2 4,165,000 3,996,109
7.375% 9/17/04 Baa2 615,000 602,700
yankee 6.5% 11/15/02 Baa2 665,000 641,725
National Westminster Bancorp Aa3 2,725,000 2,895,994
9.375% 11/15/03
National Westminster Bank PLC Aa3 1,975,000 1,928,588
7.375% 10/1/09
NB Capital Trust IV 8.25% Aa2 2,650,000 2,540,661
4/15/27
Popular, Inc. 6.2% 4/30/01 A3 1,840,000 1,813,633
Provident Bank 6.125% A3 1,740,000 1,724,427
12/15/00
Providian National Bank 6.7% Baa3 3,060,000 2,931,205
3/15/03
Summit Bancorp 8.625% BBB+ 1,730,000 1,781,156
12/10/02
Union Planters National Bank A3 3,500,000 3,515,470
6.81% 8/20/01
63,691,333
CREDIT & OTHER FINANCE - 2.3%
Ahmanson Capital Trust I A3 4,250,000 4,039,880
8.36% 12/1/26 (f)
AMRESCO, Inc.:
9.875% 3/15/05 Caa3 2,730,000 1,815,450
10% 3/15/04 Caa3 1,980,000 1,287,000
AT&T Capital Corp.:
6.25% 5/15/01 A1 5,200,000 5,150,236
7.5% 11/15/00 A1 3,435,000 3,459,698
BanPonce Trust I 8.327% A3 3,925,000 3,586,901
2/1/27
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Countrywide Funding Corp. A3 $ 3,950,000 $ 3,848,130
6.45% 2/27/03
Daimler-Chrysler NA Holding A1 12,500,000 12,445,000
Corp. 6.63% 9/21/01
ERP Operating LP:
6.55% 11/15/01 A3 1,500,000 1,475,970
7.1% 6/23/04 A3 3,980,000 3,888,977
Farmers Insurance Exchange A2 2,740,000 2,330,589
Capital 7.05% 7/15/28 (f)
Finova Capital Corp.:
6.11% 2/18/03 Baa1 4,320,000 4,156,229
6.12% 5/28/02 Baa1 2,000,000 1,945,860
First Security Capital I A3 1,690,000 1,574,303
8.41% 12/15/26
Ford Motor Credit Co.:
6.3563% 7/16/01 (i) A1 13,000,000 13,011,934
6.5% 2/28/02 A1 3,380,000 3,344,510
GS Escrow Corp.:
7% 8/1/03 Ba1 2,140,000 1,977,553
7.125% 8/1/05 Ba1 7,600,000 6,805,724
Heller Financial, Inc. 6% A3 5,050,000 4,795,127
3/19/04
KeyCorp Institutional Capital A1 3,600,000 3,259,368
A 7.826% 12/1/26
Macsaver Financial Services,
Inc.:
7.4% 2/15/02 Ba2 2,240,000 1,344,000
7.6% 8/1/07 Ba2 4,190,000 2,304,500
7.875% 8/1/03 Ba2 690,000 393,300
Mellon Capital I 7.72% A2 2,000,000 1,827,180
12/1/26
Newcourt Credit Group, Inc. A1 2,015,000 1,966,297
6.875% 2/16/05
PNC Funding Corp. 6.875% A3 2,020,000 1,992,084
3/1/03
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 1,830,000 1,740,751
5.875% 5/1/04 Baa1 3,975,000 3,765,677
The Money Store, Inc. 7.3% A2 2,550,000 2,540,438
12/1/02
TXU Eastern Funding:
6.15% 5/15/02 Baa1 2,510,000 2,444,489
6.75% 5/15/09 Baa1 2,945,000 2,706,985
U.S. Bancorp 8.09% 11/15/26 A1 2,980,000 2,778,969
U.S. West Capital Funding, Baa1 5,180,000 5,158,244
Inc. 6.875% 8/15/01 (f)
UNICCO Service Co./UNICCO B3 2,170,000 1,996,400
Finance Corp. 9.875% 10/15/07
117,157,753
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
FINANCE - CONTINUED
SAVINGS & LOANS - 0.4%
Chevy Chase Savings Bank FSB B1 $ 1,420,000 $ 1,334,800
9.25% 12/1/08
Great Western Finance Trust A3 3,780,000 3,533,090
II 8.206% 2/1/27
Home Savings of America FSB A3 2,830,000 2,684,142
6.5% 8/15/04
Long Island Savings Bank FSB:
6.2% 4/2/01 Baa3 3,770,000 3,721,179
7% 6/13/02 Baa3 3,400,000 3,354,848
Sovereign Bancorp, Inc. Ba3 4,300,000 4,149,113
6.625% 3/15/01
18,777,172
SECURITIES INDUSTRY - 0.5%
Amvescap PLC yankee:
6.375% 5/15/03 A3 2,200,000 2,110,526
6.6% 5/15/05 A3 4,410,000 4,164,407
Goldman Sachs Group L.P. A1 12,900,000 12,920,898
6.5025% 7/27/00 (i)(k)
Morgan Stanley Dean Witter & Aa3 4,760,000 4,754,954
Co. 7.125% 1/15/03
23,950,785
TOTAL FINANCE 223,577,043
HEALTH - 0.0%
MEDICAL FACILITIES MANAGEMENT
- - 0.0%
Concentra Operating Corp. 13% B3 325,000 290,875
8/15/09 (f)
Fountain View, Inc. 11.25% Caa1 2,330,000 1,770,800
4/15/08
Tenet Healthcare Corp. 8.625% Ba3 1,090,000 1,057,300
1/15/07
3,118,975
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.6%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
Bucyrus International, Inc. B1 1,060,000 784,400
9.75% 9/15/07
Dunlop Standard Aero Holdings B3 2,490,000 2,564,700
PLC 11.875% 5/15/09
Roller Bearing Holding, Inc. - 3,550,000 1,881,500
0% 6/15/09 (d)(f)
Thermadyne Manufacturing LLC B3 335,000 278,050
9.875% 6/1/08
Tokheim Corp. 11.375% 8/1/08 B3 1,360,000 795,600
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Tyco International Group SA:
7% 6/15/28 Baa1 $ 2,540,000 $ 2,198,014
yankee:
6.125% 6/15/01 Baa1 6,860,000 6,743,929
6.375% 6/15/05 Baa1 830,000 777,527
16,023,720
POLLUTION CONTROL - 0.3%
Allied Waste North America,
Inc.:
7.375% 1/1/04 Ba3 1,290,000 1,173,900
10% 8/1/09 (f) B2 4,310,000 3,835,900
Browning-Ferris Industries, Ba3 1,220,000 976,000
Inc. 6.375% 1/15/08
Envirosource, Inc. Series B, Caa3 650,000 409,500
9.75% 6/15/03
WMX Technologies, Inc.:
6.25% 10/15/00 Ba1 2,100,000 2,057,181
7.1% 8/1/26 Ba1 4,610,000 4,271,857
12,724,338
TOTAL INDUSTRIAL MACHINERY & 28,748,058
EQUIPMENT
MEDIA & LEISURE - 4.3%
BROADCASTING - 2.9%
ACME Television LLC/ACME B3 870,000 783,000
Financial Corp. 0% 9/30/04
(d)
Adelphia Communications Corp.:
7.75% 1/15/09 B1 1,970,000 1,758,225
8.375% 2/1/08 B1 820,000 766,700
9.875% 3/1/07 B1 6,350,000 6,413,500
AMFM Operating, Inc. 12.625% - 1,523,800 1,733,323
10/31/06 pay-in-kind
Ascent Entertainment Group, B3 1,990,000 1,482,550
Inc. 0% 12/15/04 (d)
Avalon Cable Michigan, B2 1,680,000 1,696,800
Inc./Avalon Cable New
England/Avalon Cable Finance
9.375% 12/1/08
Benedek Communications Corp. B3 630,000 567,000
0% 5/15/06 (d)
Century Communications Corp.:
Series B, 0% 1/15/08 B1 2,520,000 1,102,500
8.75% 10/1/07 B1 800,000 768,000
Chancellor Media Corp. 9% B1 3,185,000 3,312,400
10/1/08
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.:
0% 4/1/11 (d) B2 1,960,000 1,146,600
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
BROADCASTING - CONTINUED
Charter Communications
Holdings LLC/Charter
Communications Holdings
Capital Corp.: - continued
8.625% 4/1/09 B2 $ 2,650,000 $ 2,451,250
Citadel Broadcasting Co. B3 840,000 886,200
10.25% 7/1/07
Clear Channel Communications,
Inc.:
6.875% 6/15/18 Baa3 3,450,000 3,065,463
7.25% 10/15/27 Baa3 4,550,000 4,104,100
Comcast UK Cable Partners B2 3,360,000 3,175,200
Ltd. 0% 11/15/07 (d)
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa2 9,225,000 9,534,683
8.625% 8/15/03 Baa2 2,790,000 2,886,813
9% 9/1/08 Baa2 1,690,000 1,838,669
Cox Communications, Inc.:
6.875% 6/15/05 Baa2 2,580,000 2,518,493
7.75% 8/15/06 Baa2 1,925,000 1,943,711
CSC Holdings, Inc.:
9.25% 11/1/05 B1 1,370,000 1,404,250
9.875% 5/15/06 B1 1,600,000 1,672,000
10.5% 5/15/16 B1 1,850,000 2,044,250
Diamond Cable Communications
PLC:
0% 2/15/07 (d) B3 5,860,000 4,790,550
yankee 0% 12/15/05 (d) B3 2,460,000 2,312,400
Earthwatch, Inc. 0% 7/15/07 - 2,530,000 1,771,000
unit (d)(f)
EchoStar DBS Corp.:
9.25% 2/1/06 B2 1,150,000 1,150,000
9.375% 2/1/09 B2 1,250,000 1,253,125
Falcon Holding Group B2 11,520,000 8,409,600
LP/Falcon Funding Corp. 0%
4/15/10 (d)
FrontierVision Holdings B1 4,130,000 3,634,400
LP/FrontierVision Holdings
Capital Corp. 0% 9/15/07 (d)
FrontierVision Operating B1 1,910,000 2,043,700
Partners LP/ FrontierVision
Capital Corp. 11% 10/15/06
Golden Sky DBS, Inc. 0% Caa1 4,950,000 2,994,750
3/1/07 (d)
Golden Sky Systems, Inc. B3 950,000 1,011,750
12.375% 8/1/06
Hearst-Argyle Television, Baa3 3,260,000 3,012,859
Inc. 7.5% 11/15/27
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
International Cabletel, Inc. B3 $ 1,850,000 $ 1,669,625
0% 2/1/06 (d)
Knology Holding, Inc. 0% - 4,450,000 2,959,250
10/15/07 (d)
Lenfest Communications, Inc. B1 430,000 425,700
8.25% 2/15/08
LIN Holdings Corp. 0% 3/1/08 B3 290,000 195,750
(d)
Nielsen Media Research, Inc. Baa2 2,395,000 2,334,377
7.6% 6/15/09
NTL Communications Corp. B3 4,660,000 5,044,450
11.5% 10/1/08
NTL, Inc. 10% 2/15/07 B3 2,310,000 2,379,300
Olympus Communications B1 1,160,000 1,212,200
LP/Olympus Capital Corp.
10.625% 11/15/06
Pegasus Communications Corp. B3 1,115,000 1,126,150
9.625% 10/15/05
TCI Communications, Inc.:
8.75% 8/1/15 A2 1,970,000 2,149,211
9.25% 4/15/02 A2 3,000,000 3,148,890
9.8% 2/1/12 A2 4,550,000 5,315,947
Telewest PLC:
yankee 9.625% 10/1/06 B1 680,000 693,600
0% 10/1/07 (d) B1 9,405,000 8,699,625
Time Warner, Inc. 9.125% Baa3 5,355,000 5,864,582
1/15/13
United International B3 8,120,000 5,075,000
Holdings, Inc. 0% 2/15/08
(d)
United Pan-Europe B2 4,020,000 4,080,300
Communications NV 10.875%
8/1/09
143,813,771
ENTERTAINMENT - 0.5%
AMC Entertainment, Inc. 9.5% B3 470,000 410,075
2/1/11
Bally Total Fitness Holding B3 3,630,000 3,512,025
Corp. 9.875% 10/15/07
Capitol Records, Inc. 8.375% Baa1 5,220,000 5,180,328
8/15/09 (f)
Cinemark USA, Inc. 8.5% B2 3,255,000 2,848,125
8/1/08
Paramount Communications, Baa3 1,785,000 1,788,873
Inc. 7.5% 1/15/02
Regal Cinemas, Inc.:
8.875% 12/15/10 Caa1 3,530,000 2,638,675
9.5% 6/1/08 Caa1 3,430,000 2,709,700
United Artists Theatre Co. Caa3 1,060,000 169,600
9.75% 4/15/08
Viacom, Inc.:
6.75% 1/15/03 Baa3 4,430,000 4,358,500
7.75% 6/1/05 Baa3 2,137,000 2,150,955
25,766,856
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 0.3%
Circus Circus Enterprises, Ba2 $ 660,000 $ 565,125
Inc. 7.625% 7/15/13
Coast Hotels & Casinos, Inc. B3 1,150,000 1,112,625
9.5% 4/1/09
Courtyard by Marriott II B- 2,590,000 2,544,675
LP/Courtyard II Finance Co.
10.75% 2/1/08
HMH Properties, Inc.:
7.875% 8/1/05 Ba2 2,090,000 1,933,250
7.875% 8/1/08 Ba2 3,280,000 2,935,600
Hollywood Casino Corp. 11.25% B3 450,000 469,125
5/1/07
Host Marriott LP 8.375% Ba2 3,740,000 3,534,300
2/15/06
Signature Resorts, Inc. 9.75% B3 1,590,000 1,367,400
10/1/07
14,462,100
PUBLISHING - 0.3%
Garden State Newspapers, Inc. B1 4,670,000 4,401,475
Series B, 8.75% 10/1/09
News America Holdings, Inc.:
7.7% 10/30/25 Baa3 4,300,000 4,029,057
8.5% 2/15/05 Baa3 1,280,000 1,319,821
Time Warner Entertainment
Co. LP:
7.25% 9/1/08 Baa2 1,455,000 1,416,734
8.375% 3/15/23 Baa2 2,500,000 2,599,325
13,766,412
RESTAURANTS - 0.3%
CKE Restaurants, Inc. 9.125% B2 2,915,000 2,186,250
5/1/09
Domino's, Inc. 10.375% B3 5,210,000 5,014,625
1/15/09
Host Marriott Travel Plazas, Ba3 5,040,000 5,090,400
Inc. 9.5% 5/15/05
NE Restaurant, Inc. 10.75% B3 2,760,000 2,449,500
7/15/08
14,740,775
TOTAL MEDIA & LEISURE 212,549,914
NONDURABLES - 0.6%
BEVERAGES - 0.3%
Seagram JE & Sons, Inc.:
5.79% 4/15/01 Baa3 4,595,000 4,515,001
6.4% 12/15/03 Baa3 5,840,000 5,591,800
6.625% 12/15/05 Baa3 2,940,000 2,801,820
12,908,621
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
FOODS - 0.1%
ConAgra, Inc. 7.125% 10/1/26 Baa1 $ 3,200,000 $ 3,032,864
HOUSEHOLD PRODUCTS - 0.0%
Revlon Consumer Products B3 2,160,000 1,641,600
Corp. 9% 11/1/06
TOBACCO - 0.2%
Philip Morris Companies, Inc.:
6.95% 6/1/06 A2 4,420,000 4,354,142
7% 7/15/05 A2 3,710,000 3,517,414
7.25% 9/15/01 A2 1,450,000 1,439,865
RJ Reynolds Tobacco Holdings, Baa2 3,500,000 3,270,645
Inc. 7.375% 5/15/03
12,582,066
TOTAL NONDURABLES 30,165,151
RETAIL & WHOLESALE - 0.7%
DRUG STORES - 0.1%
Rite Aid Corp.:
6% 12/15/00 (f) B1 935,000 813,450
6.5% 12/15/05 (f) B1 5,775,000 4,158,000
7.125% 1/15/07 B1 1,595,000 1,196,250
6,167,700
GENERAL MERCHANDISE STORES -
0.2%
Dayton Hudson Corp. 7.5% A3 3,500,000 3,510,395
7/15/06
Federated Department Stores,
Inc.:
6.79% 7/15/27 Baa1 3,000,000 2,911,710
8.5% 6/15/03 Baa1 2,580,000 2,651,440
Kmart Corp. 12.5% 3/1/05 Ba1 2,510,000 2,836,300
11,909,845
GROCERY STORES - 0.3%
Kroger Co. 6% 7/1/00 Baa3 4,480,000 4,450,701
Pathmark Stores, Inc. 9.625% Caa3 9,150,000 6,862,500
5/1/03
Pueblo Xtra International,
Inc.:
Series C, 9.5% 8/1/03 B3 820,000 492,000
9.5% 8/1/03 B3 2,370,000 1,422,000
13,227,201
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.1%
USA Networks, Inc./USANi LLC Baa3 3,350,000 3,198,647
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 34,503,393
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
SERVICES - 0.1%
PRINTING - 0.0%
Sullivan Graphics, Inc. Caa1 $ 1,430,000 $ 1,490,775
12.75% 8/1/05
SERVICES - 0.1%
La Petite Academy, Inc./La B3 2,880,000 2,116,800
Petite Academy Holding Co.
10% 5/15/08
Medaphis Corp. 9.5% 2/15/05 Caa1 1,770,000 1,362,900
3,479,700
TOTAL SERVICES 4,970,475
TECHNOLOGY - 0.7%
COMPUTER SERVICES & SOFTWARE
- - 0.3%
Concentric Network Corp. B- 595,000 624,750
12.75% 12/15/07
Covad Communications Group,
Inc.:
0% 3/15/08 (d) B3 2,370,000 1,487,175
12.5% 2/15/09 B3 1,091,000 1,129,185
Exodus Communications, Inc.:
10.75% 12/15/09 (f) B- 1,660,000 1,689,050
11.25% 7/1/08 B- 350,000 362,250
Federal Data Corp. 10.125% B3 3,720,000 2,697,000
8/1/05
PSINet, Inc.:
10.5% 12/1/06 (f) B3 5,170,000 5,234,625
11% 8/1/09 B3 2,140,000 2,198,850
Verio, Inc. 10.625% 11/15/09 B3 1,120,000 1,142,400
(f)
16,565,285
COMPUTERS & OFFICE EQUIPMENT
- - 0.2%
Comdisco, Inc. 6.375% Baa1 8,300,000 8,139,229
11/30/01
Sun Microsystems, Inc. 7% Baa1 1,380,000 1,375,170
8/15/02
9,514,399
ELECTRONICS - 0.2%
ChipPAC International Ltd. B3 3,280,000 3,444,000
12.75% 8/1/09 (f)
Details, Inc. 10% 11/15/05 B3 120,000 110,400
Fairchild Semiconductor Corp.:
10.125% 3/15/07 B3 1,415,000 1,429,150
10.375% 10/1/07 B3 1,950,000 1,989,000
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Micron Technology, Inc. 6.5% B3 $ 2,000,000 $ 1,595,000
9/30/05 (k)
SCG Holding B2 2,065,000 2,194,063
Corp./Semiconductor
Components Industries LLC
12% 8/1/09 (f)
10,761,613
TOTAL TECHNOLOGY 36,841,297
TRANSPORTATION - 1.0%
AIR TRANSPORTATION - 0.4%
Atlas Air, Inc. 9.25% 4/15/08 B2 4,520,000 4,305,300
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 1,110,000 1,083,804
7.73% 9/15/12 Baa1 725,000 706,875
Delta Air Lines, Inc.:
8.3% 12/15/29 (f) Baa3 4,000,000 3,880,000
9.875% 5/15/00 Baa3 1,500,000 1,515,570
Kitty Hawk, Inc. 9.95% B1 3,095,000 3,056,313
11/15/04
Qantas Airways Ltd. 7.75% Baa1 4,370,000 4,203,066
6/15/09 (f)
US Airways Group, Inc. Ba3 2,480,000 2,349,800
10.375% 3/1/13
21,100,728
RAILROADS - 0.6%
Burlington Northern Santa Fe
Corp.:
6.125% 3/15/09 Baa2 6,450,000 5,804,549
7.29% 6/1/36 Baa2 3,000,000 2,917,560
Canadian National Railway Co. Baa2 3,390,000 2,992,624
6.9% 7/15/28
CSX Corp.:
6.25% 10/15/08 Baa2 2,385,000 2,158,163
6.46% 6/22/05 Baa2 5,120,000 4,873,574
Norfolk Southern Corp. 7.05% Baa1 6,610,000 6,552,427
5/1/37
Wisconsin Central Baa2 1,810,000 1,657,146
Transportation Corp. 6.625%
4/15/08
26,956,043
SHIPPING - 0.0%
Holt Group, Inc. 9.75% Caa1 580,000 377,000
1/15/06
TOTAL TRANSPORTATION 48,433,771
UTILITIES - 3.5%
CELLULAR - 0.9%
Cable & Wireless Baa1 7,995,000 7,898,181
Communications PLC 6.375%
3/6/03
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
CELLULAR - CONTINUED
McCaw International Ltd. 0% Caa1 $ 7,160,000 $ 5,012,000
4/15/07 (d)
Millicom International Caa1 5,170,000 4,278,175
Cellular SA 0% 6/1/06 (d)
Nextel Communications, Inc.:
0% 10/31/07 (d) B1 18,830,000 13,651,750
12% 11/1/08 B1 1,370,000 1,530,975
Nextel International, Inc. Caa1 4,350,000 2,588,250
0% 4/15/08 (d)
Nuevo Grupo Iusacell SA de CV B1 722,000 750,880
14.25% 12/1/06 (f)
Rogers Cantel, Inc. 8.8% B2 1,200,000 1,200,000
10/1/07
Rogers Communications, Inc. B2 4,630,000 4,664,725
8.875% 7/15/07
Telesystem International Caa1 725,000 398,750
Wireless, Inc. 0% 11/1/07 (d)
Voicestream Wireless B2 4,490,000 4,624,700
Corp./Voicestream Wireless
Holding Co. 10.375% 11/15/09
(f)
46,598,386
ELECTRIC UTILITY - 0.4%
Avon Energy Partners Holdings:
6.46% 3/4/08 (f) Baa2 3,960,000 3,531,409
6.73% 12/11/02 (f) Baa2 4,910,000 4,788,281
Hydro-Quebec yankee 7.4% A2 2,620,000 2,743,926
3/28/25 (e)
Israel Electric Corp. Ltd.:
7.75% 12/15/27 (f) A3 3,920,000 3,376,374
yankee 7.875% 12/15/26 (f) A3 1,960,000 1,720,449
Texas Utilities Co. 6.375% Baa3 1,370,000 1,241,206
1/1/08
17,401,645
GAS - 0.1%
CMS Panhandle Holding Co. Baa3 2,550,000 2,416,635
6.125% 3/15/04
TELEPHONE SERVICES - 2.1%
Allegiance Telecom, Inc. 0% B3 840,000 604,800
2/15/08 (d)
e.spire Communications, Inc. - 1,550,000 1,085,000
13.75% 7/15/07
GST Network Funding, Inc. 0% - 8,900,000 4,361,000
5/1/08 (d)
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
GST Equipment Funding, Inc. - $ 1,685,000 $ 1,626,025
13.25% 5/1/07
GST Telecommunications, Inc. - 930,000 874,200
12.75% 11/15/07
GST USA, Inc. 0% 12/15/05 (d) - 335,000 249,575
GTE Corp. 6.155% 6/12/00 (i) - 7,650,000 7,647,720
Hyperion Telecommunications, Caa1 950,000 1,007,000
Inc. 12% 11/1/07
ICG Services, Inc. 0% 5/1/08 B3 5,075,000 2,600,938
(d)
Intermedia Communications,
Inc.:
0% 3/1/09 (d) B3 1,410,000 842,475
8.6% 6/1/08 B2 4,140,000 3,819,150
IXC Communications, Inc. 9% B1 2,360,000 2,383,600
4/15/08
KMC Telecom Holdings, Inc. Caa2 2,690,000 2,663,100
13.5% 5/15/09
Logix Communications - 4,730,000 3,311,000
Enterprises, Inc. 12.25%
6/15/08
MCI WorldCom, Inc. 8.875% A3 3,139,000 3,294,600
1/15/06
McLeodUSA, Inc.:
0% 3/1/07 (d) B1 1,845,000 1,494,450
9.5% 11/1/08 B1 3,140,000 3,171,400
Metromedia Fiber Network,
Inc.:
10% 11/15/08 B2 900,000 918,000
10% 12/15/09 B2 1,590,000 1,621,800
NEXTLINK Communications, Inc.:
9.625% 10/1/07 B2 4,870,000 4,760,425
10.5% 12/1/09 (f) B2 2,350,000 2,391,125
Ono Finance PLC 13% 5/1/09 Caa1 1,740,000 1,800,900
Pathnet, Inc. 12.25% 4/15/08 - 4,970,000 3,180,800
Rhythms NetConnections, Inc.:
0% 5/15/08 (d) B3 7,740,000 4,179,600
12.75% 4/15/09 B3 4,480,000 4,345,600
Telecomunicaciones de Puerto Baa2 5,540,000 5,224,220
Rico, Inc. 6.65% 5/15/06
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 6,886,000 6,468,158
7.7% 7/20/29 Baa1 8,610,000 7,879,872
Teligent, Inc.:
0% 3/1/08 (d) Caa1 8,295,000 4,873,313
11.5% 12/1/07 Caa1 5,040,000 4,914,000
CORPORATE BONDS - CONTINUED
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONCONVERTIBLE BONDS -
CONTINUED
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
WinStar Communications, Inc.:
0% 10/15/05 (d) Caa1 $ 2,410,000 $ 2,961,400
0% 3/15/08 (d) CCC 7,500,000 7,650,000
15% 3/1/07 CCC 1,200,000 1,704,000
105,909,246
TOTAL UTILITIES 172,325,912
TOTAL NONCONVERTIBLE BONDS 902,930,431
TOTAL CORPORATE BONDS 912,465,856
(Cost $953,137,023)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 5.2%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 1.6%
Fannie Mae:
5.625% 5/14/04 Aaa 13,840,000 13,225,781
6% 5/15/08 Aaa 12,000,000 11,235,000
6.25% 5/15/29 Aaa 14,705,000 13,087,450
6.5% 4/29/09 Aaa 6,820,000 6,382,020
Farm Credit Systems Financial Aaa 2,000,000 2,165,000
Assistance Corp. 8.8% 6/10/05
Federal Home Loan Bank:
5.195% 9/11/01 Aaa 4,500,000 4,402,980
7.59% 3/10/05 Aaa 3,850,000 3,955,259
Freddie Mac:
6.25% 7/15/04 Aaa 2,500,000 2,444,150
6.75% 8/1/05 Aaa 2,500,000 2,476,950
7.625% 9/9/09 Aaa 14,850,000 14,666,751
U.S. Department of Housing Aaa 2,825,000 2,862,629
and Urban Development
government guaranteed
participation certificates
Series 1996-A, 7.63% 8/1/14
TOTAL U.S. GOVERNMENT AGENCY 76,903,970
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
3.6%
U.S. Treasury Bonds:
5.25% 2/15/29 Aaa 750,000 620,153
6.875% 8/15/25 Aaa 53,625,000 54,621,889
7.625% 2/15/25 Aaa 17,790,000 19,716,301
MOODY'S RATINGS (UNAUDITED) (B) PRINCIPAL AMOUNT VALUE (NOTE 1)
8.875% 8/15/17 Aaa $ 4,027,000 $ 4,866,992
11.75% 2/15/10 (callable) Aaa 15,045,000 18,289,003
12% 8/15/13 Aaa 3,740,000 4,994,059
13.875% 5/15/11 (callable) Aaa 21,150,000 28,899,572
U.S. Treasury Notes:
5.875% 11/15/04 Aaa 3,855,000 3,779,712
6% 8/15/09 Aaa 26,140,000 25,323,125
6.25% 10/31/01 Aaa 820,000 820,131
6.625% 6/30/01 Aaa 15,700,000 15,788,234
7.25% 8/15/04 Aaa 1,404,000 1,447,875
TOTAL U.S. TREASURY 179,167,046
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 256,071,016
GOVERNMENT AGENCY OBLIGATIONS
(Cost $271,370,711)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 10.0%
FANNIE MAE - 7.8%
6% 1/1/11 to 1/1/29 Aaa 58,934,066 55,130,174
6.5% 5/1/14 to 3/1/29 Aaa 104,437,117 98,703,785
6.5% 1/1/15 (g) Aaa 8,700,000 8,439,000
7% 8/1/13 to 12/1/29 Aaa 189,145,428 183,137,015
7.5% 7/1/16 to 9/1/29 Aaa 29,582,975 29,255,217
8% 9/1/26 to 12/1/29 Aaa 10,601,059 10,687,146
TOTAL FANNIE MAE 385,352,337
FREDDIE MAC - 0.6%
7.5% 5/1/17 to 7/1/29 Aaa 4,274,679 4,238,563
8% 7/1/17 to 12/1/29 Aaa 28,001,715 28,273,296
8.5% 7/1/21 to 6/1/23 Aaa 50,768 52,281
TOTAL FREDDIE MAC 32,564,140
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.6%
6% 12/15/08 to 6/15/09 Aaa 2,531,370 2,429,524
6.5% 6/15/08 to 3/15/29 Aaa 41,330,515 39,249,754
7% 7/15/28 Aaa 18,338,165 17,707,699
7.5% 9/15/22 to 9/15/29 Aaa 20,148,937 19,947,958
8% 5/15/25 Aaa 85,363 86,324
8.5% 12/15/16 Aaa 26,058 27,004
TOTAL GOVERNMENT NATIONAL 79,448,263
MORTGAGE ASSOCIATION
TOTAL U.S. GOVERNMENT AGENCY 497,364,740
- - MORTGAGE SECURITIES
(Cost $511,043,569)
ASSET-BACKED SECURITIES - 1.2%
MOODY'S RATINGS (UNAUDITED)(B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Airplanes pass through trust Ba2 $ 3,160,000 $ 2,591,200
10.875% 3/15/19
ARG Funding Corp. 5.88% Aaa 5,830,000 5,686,072
5/20/03 (f)
BankAmerica Manufacturing Aaa 3,730,000 3,642,578
Housing Contract 6.2%
4/10/09
Capita Equipment Receivables Baa2 2,950,000 2,832,384
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 1,347,469 1,333,785
Trust 5.91% 12/15/04
CIT Marine Trust 5.8% 4/15/10 Aaa 5,920,000 5,690,600
CPS Auto Grantor Trust:
6.09% 11/15/03 Aaa 1,896,713 1,902,344
6.55% 8/15/02 Aaa 899,278 897,030
CPS Auto Receivables Trust 6% Aaa 3,013,848 2,969,583
8/15/03
CSXT Trade Receivables Master Aaa 4,600,000 4,405,938
Trust 6% 7/25/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 2,680,000 2,620,370
6.4% 12/15/02 Baa2 1,480,000 1,460,760
6.87% 11/15/04 A2 2,650,000 2,628,055
Green Tree Financial Corp.:
6.68% 1/15/29 AAA 6,680,000 6,627,762
6.8% 6/15/27 Aaa 823,337 823,593
Key Auto Finance Trust:
5.83% 1/15/07 Aaa 4,790,000 4,679,980
6.3% 10/15/03 A2 1,470,373 1,460,265
Olympic Automobile Aaa 718,515 718,505
Receivables Trust 6.7%
3/15/02
Petroleum Enhanced Trust Baa2 2,030,633 2,023,019
Receivables Offering
Petroleum Trust 6.125%
2/5/03 (f)(i)
UAF Auto Grantor Trust 6.1% Aaa 2,769,379 2,748,609
1/15/03 (f)
WFS Financial Owner Trust Aaa 4,430,000 4,403,005
6.55% 10/20/04
TOTAL ASSET-BACKED SECURITIES 62,145,437
(Cost $63,930,865)
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.1%
PRIVATE SPONSOR - 0.0%
Credit-Based Asset Servicing Ba3 1,058,734 503,892
and Securitization LLC
Series 1997-2 Class 2B,
7.1864% 12/29/25 (f)(h)(i)
MOODY'S RATINGS (UNAUDITED)(B) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. GOVERNMENT AGENCY - 0.1%
Fannie Mae planned
amortization class:
Series 1999-54 Class PH, 6.5% Aaa $ 3,300,000 $ 2,934,938
11/18/29
Series 1999-57 Class PH, 6.5% Aaa 2,600,000 2,308,313
12/25/29
TOTAL U.S. GOVERNMENT AGENCY 5,243,251
TOTAL COLLATERALIZED 5,747,143
MORTGAGE OBLIGATIONS
(Cost $5,862,608)
COMMERCIAL MORTGAGE
SECURITIES - 2.0%
Bankers Trust REMIC Trust Baa3 1,000,000 925,000
1988-1 Series 1998-S1A Class
G, 8.3161% 11/28/02 (f)(i)
Berkeley Federal Bank & Trust - 1,900,000 1,278,938
FSB Series 1994 Class 1B
7.3368% 8/1/24 (f)(i)
BKB Commercial Mortgage Trust BBB 1,785,263 1,768,178
Series 1997-C1 Class D,
7.83% 2/25/43 (f)(i)
CBM Funding Corp.:
sequential pay Series 1996-1 AA 3,000,000 2,940,469
Class A-3PI, 7.08% 11/1/07
sequential pay Series 1996-1 A 2,320,000 2,251,306
Class B, 7.48% 2/1/08
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 5,730,000 5,199,975
1/17/35
Series 1998 C1 Class D, 7.17% BBB 5,050,000 4,469,250
1/17/12
Series 1998-FL1 Class E, Baa2 5,490,000 5,407,650
6.26% 1/10/13 (f)(i)
Deutsche Mortgage & Asset Baa2 4,260,000 3,724,838
Receiving Corp. Series
1998-C1 Class D, 7.231%
7/15/12
Equitable Life Assurance
Society of the United States:
sequential pay Series 174 Aaa 7,680,000 7,639,680
Class A1, 7.24% 5/15/06 (f)
Series 174:
Class B1, 7.33% 5/15/06 (f) Aa2 3,500,000 3,455,655
Class C-1, 7.52% 5/15/06 (f) A2 2,300,000 2,264,833
Class D1, 7.77% 5/15/06 (f) Baa2 2,200,000 2,148,080
COMMERCIAL MORTGAGE
SECURITIES - CONTINUED
MOODY'S RATINGS (UNAUDITED)(B) PRINCIPAL AMOUNT VALUE (NOTE 1)
First Chicago/Lennar Trust I
Series 1997-CHL1:
Class D, 8.1256% 4/13/39 (i) - $ 1,100,000 $ 875,875
Class E, 8.1256% 4/1/39 (i) - 1,600,000 1,125,000
First Union-Lehman Brothers Aa2 8,640,000 8,070,300
Commercial Mortgage Trust
sequential pay Series
1997-C2 Class B, 6.79%
11/18/29
FMAC Loan Receivables Trust:
Series 1997-A Class E, - 500,000 335,938
8.1096% 4/15/19 (f)(i)
Series 1997-B Class E, - 750,000 437,578
7.8912% 9/15/19 (f)(i)
GAFCO Franchisee Loan Trust - 1,300,000 1,040,813
Series 1998-1 Class D, 14%
6/1/16 (f)(i)
General Motors Acceptance Ba3 750,000 586,890
Corp. Commercial Mortgage
Securities, Inc. Series
1996-C1 Class F, 7.86%
10/15/28 (f)
GS Mortgage Securities Corp.
II Series 1998-GLII:
Class D, 7.1905% 4/13/31 Baa2 1,470,000 1,313,353
(f)(i)
Class E, 7.1905% 4/13/31 Baa3 4,930,000 4,164,309
(f)(i)
Host Marriot Pool Trust 6.98% Aaa 4,084,991 3,996,271
8/1/15
LTC Commercial Mortgage pass AAA 3,032,284 2,799,283
through certificates Series
1998-1 Class A, 6.029%
5/30/30 (f)
Morgan Stanley Capital I,
Inc.:
Series 1996-MBL1 Class E, - 1,741,949 1,741,949
8.5243% 5/25/21 (f)(i)
Series 1998-HF1 Class D, 7.1% BBB 5,790,000 5,379,272
2/15/30 (i)
Nomura Asset Securities Corp. Baa2 4,260,000 3,696,881
Series 1998-D6 Class A-4,
7.597% 3/17/28 (i)
Nomura Depositor Trust - 800,000 728,188
floater Series 1998-ST1A
Class B2, 9.6938% 1/15/03
(f)(i)
Penn Mutual Life Insurance
Co. (The)/Penn Insurance &
Annuity Co. Series 1996-PML:
Class K, 7.9% 11/15/26 (f) - 1,473,000 959,468
Class L, 7.9% 11/15/26 (f) - 1,133,000 600,490
MOODY'S RATINGS (UNAUDITED)(B) PRINCIPAL AMOUNT VALUE (NOTE 1)
Resolution Trust Corp. Baa3 $ 318,186 $ 257,731
Series 1991-M2 Class A3,
6.9066% 9/25/20 (i)
Structured Asset Securities
Corp.:
Series 1995-C1 Class E, BB 1,200,000 1,060,125
7.375% 9/25/24 (f)
Series 1996 CFL Class E, BBB 2,390,000 2,345,654
7.75% 2/25/28
Series 1996-CFL Class G, B+ 1,000,000 836,563
7.75% 2/25/28 (f)
Thirteen Affiliates of
General Growth Properties,
Inc.:
sequential pay Series 1 Class Aaa 4,200,000 3,991,764
A2, 6.602% 12/15/10 (f)
Series D-2, 6.992% 12/15/10 Baa2 4,120,000 3,788,752
(f)
Series E-2, 7.224% 12/15/10 Baa3 2,450,000 2,187,391
(f)
Wells Fargo Capital Markets Aaa 2,676,825 2,633,729
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (f)
TOTAL COMMERCIAL MORTGAGE 98,427,419
SECURITIES
(Cost $105,234,455)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 0.2% (J)
Israeli State euro 6.375% A3 3,350,000 3,302,062
12/19/01
Korean Republic yankee:
8.75% 4/15/03 Baa2 1,340,000 1,379,570
8.875% 4/15/08 Baa2 1,868,000 1,957,533
Province of Newfoundland Baa1 2,000,000 2,466,000
yankee 11.625% 10/15/07
TOTAL FOREIGN GOVERNMENT AND 9,105,165
GOVERNMENT AGENCY OBLIGATIONS
(Cost $9,313,592)
SUPRANATIONAL OBLIGATIONS -
0.1%
Inter-American Development Aaa 4,750,000 4,518,058
Bank yankee 6.29% 7/16/27
(Cost $4,720,123)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 1.4%
Bayerische Hypo-und 13,000,000 12,938,468
Vereinsbank AG yankee
6.3825% 5/15/00 (i)
Canadian Imperial Bank of 11,000,000 10,995,999
Commerce yankee 5.63%
4/13/00 (i)
Commerzbank AG yankee 5.58% 11,600,000 11,569,621
6/12/00
CERTIFICATES OF DEPOSIT -
CONTINUED
PRINCIPAL AMOUNT VALUE (NOTE 1)
Deutsche Bank AG yankee 5.1% $ 12,000,000 $ 11,987,891
2/11/00
Fleet National Bank 6.305% 12,000,000 12,003,702
5/5/00 (i)
Societe Generale, France 12,500,000 12,484,950
yankee 5.16% 2/22/00
TOTAL CERTIFICATES OF DEPOSIT 71,980,631
(Cost $72,073,221)
COMMERCIAL PAPER - 1.8%
Asset Securitization Coop. 11,250,000 11,146,934
Corp. 5.96% 3/2/00
Citibank Credit Card Master 11,000,000 10,886,663
Trust I (Dakota Certificate
Program) 5.96% 3/9/00
Corporate Receivables Corp. 11,000,000 10,929,031
6.15% 2/14/00
CXC, Inc. 6.03% 2/18/00 11,250,000 11,169,644
Enterprise Funding Corp. 11,250,000 11,209,500
yankee 6.15% 1/27/00
Finova Capital Corp. 6.4225% 13,000,000 12,989,015
4/10/00 (i)
New Center Asset Trust 6.05% 11,000,000 10,866,056
3/21/00
Windmill Funding Corp. yankee 11,000,000 10,962,260
6.15% 1/26/00
TOTAL COMMERCIAL PAPER 90,159,103
(Cost $90,081,486)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CASH EQUIVALENTS - 2.2%
MATURITY AMOUNT
Investments in repurchase $ 30,295,212 30,286,000
agreements (U.S. Treasury
obligations), in a joint
trading account at 3.65%,
dated 12/31/99 due 1/3/00
SHARES
Taxable Central Cash Fund, 77,158,125 77,158,125
5.12% (c)
TOTAL CASH EQUIVALENTS 107,444,125
(Cost $107,444,125)
TOTAL INVESTMENT PORTFOLIO - 4,954,658,174
99.9%
(Cost $4,260,810,275)
NET OTHER ASSETS - 0.1% 5,944,708
NET ASSETS - 100% $ 4,960,602,882
</TABLE>
LEGEND
(a) Non-income producing
(b) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date. The rate shown
is the rate at period end.
(e) Debt obligation initially issued at one coupon which converts to a
higher coupon at a specified date. The rate shown is the rate at
period end.
(f) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At the period end, the value of these securities
amounted to $153,564,140 or 3.1% of net assets.
(g) Security purchased on a delayed delivery or when-issued basis.
(h) Partial interest payment received on the last interest payment
date.
(i) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(j) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned by FMR, the fund's
investment adviser, based principally on S&P and Moody's ratings of
the sovereign credit of the issuing government.
(k) Restricted securities - Investment in securities not registered
under the Securities Act of 1933.
Additional information on each holding is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Alliance Gaming Corp. 7/28/98 $ 259,200
Goldman Sachs Group L.P. 1/25/99 $ 12,900,000
6.5025% 7/27/00
Micron Technology, Inc. 6.5% 7/15/99 - 11/1/99 $ 1,597,500
9/30/05
OTHER INFORMATION
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 20.8% AAA, AA, A 19.2%
Baa 6.8% BBB 6.7%
Ba 1.3% BB 1.9%
B 5.3% B 5.1%
Caa 1.2% CCC 1.1%
Ca, C 0.0% CC, C 0.0%
D 0.0%
The percentage not rated by Moody's or S&P amounted to 0.8%. FMR has
determined that unrated debt securities that are lower quality account
for 0.8% of the total value of investment in securities.
Purchases and sales of securities, other than short-term securities,
aggregated $4,271,160,399 and $4,294,454,579, respectively, of which
long-term U.S. government and government agency obligations aggregated
$1,401,412,857 and $1,127,467,271, respectively.
The market value of futures contracts opened and closed during the
period amounted to $287,734,098 and $363,516,685, 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 $93,901 for the
period.
The fund invested in securities that are not registered under the
Securities Act of 1933. These securities are subject to legal or
contractual restrictions on resale. At the end of the period,
restricted securities (excluding Rule 144A issues) amounted to
$14,518,331 and 0.3% of net assets.
The fund participated in the bank borrowing program. The average daily
loan balance during the period for which loans were outstanding
amounted to $11,430,000. The weighted average interest rate was 5.1%.
The fund participated in the security lending program. At period end
there were no loans outstanding.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $4,262,446,958. Net unrealized appreciation
aggregated $692,211,216, of which $841,455,570 related to appreciated
investment securities and $149,244,354 related to depreciated
investment securities.
The fund hereby designates approximately $204,447,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: ASSET MANAGER PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 4,954,658,174
value (including repurchase
agreements of $30,286,000)
(cost $4,260,810,275) - See
accompanying schedule
Cash 16,177
Receivable for fund shares 2,613,621
sold
Dividends receivable 2,246,724
Interest receivable 27,327,397
Other receivables 124,585
TOTAL ASSETS 4,986,986,678
LIABILITIES
Payable for investments $ 9,085,898
purchased Regular delivery
Delayed delivery 8,564,848
Payable for fund shares 6,113,364
redeemed
Accrued management fee 2,143,126
Distribution fees payable 1,898
Other payables and accrued 474,662
expenses
TOTAL LIABILITIES 26,383,796
NET ASSETS $ 4,960,602,882
Net Assets consist of:
Paid in capital $ 3,744,400,943
Undistributed net investment 163,666,159
income
Accumulated undistributed net 358,686,209
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 693,849,571
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 4,960,602,882
INITIAL CLASS: NET ASSET $18.67
VALUE, offering price and
redemption price per share
($4,936,925,664 (divided
by) 264,372,263 shares)
SERVICE CLASS: NET ASSET $18.59
VALUE, offering price and
redemption price per share
($23,677,218 (divided by)
1,273,914 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 37,717,264
Dividends
Interest 156,178,124
Security lending 1,300
TOTAL INCOME 193,896,688
EXPENSES
Management fee $ 25,926,306
Transfer agent fees 3,226,198
Distribution fees - Service 14,423
Class
Accounting and security 938,579
lending fees
Non-interested trustees' 21,216
compensation
Custodian fees and expenses 108,798
Registration fees 19,156
Audit 46,405
Legal 32,889
Interest 1,619
Miscellaneous 272,231
Total expenses before 30,607,820
reductions
Expense reductions (377,290) 30,230,530
NET INVESTMENT INCOME 163,666,158
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 362,588,171
Foreign currency transactions (3,601)
Futures contracts 2,722,629 365,307,199
Change in net unrealized
appreciation (depreciation)
on:
Investment securities (11,464,827)
Assets and liabilities in 21
foreign currencies
Futures contracts (3,226,917) (14,691,723)
NET GAIN (LOSS) 350,615,476
NET INCREASE (DECREASE) IN $ 514,281,634
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 355,082
Expense reductions Directed
brokerage arrangements
Custodian credits 22,208
$ 377,290
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 163,666,158 $ 160,471,734
income
Net realized gain (loss) 365,307,199 201,707,185
Change in net unrealized (14,691,723) 287,626,860
appreciation (depreciation)
NET INCREASE (DECREASE) IN 514,281,634 649,805,779
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (161,497,855) (139,636,837)
From net investment income
From net realized gain (204,563,949) (418,910,515)
TOTAL DISTRIBUTIONS (366,061,804) (558,547,352)
Share transactions - net (98,885,126) 420,062,178
increase (decrease)
TOTAL INCREASE (DECREASE) 49,334,704 511,320,605
IN NET ASSETS
NET ASSETS
Beginning of period 4,911,268,178 4,399,947,573
End of period (including $ 4,960,602,882 $ 4,911,268,178
undistributed net investment
income of $163,666,159 and
$159,730,084, respectively)
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 18,326,496 $ 320,298,483 23,406,455 $ 397,953,748
Class Sold
Reinvested 21,655,706 365,548,318 34,542,119 558,546,057
Redeemed (45,749,338) (801,281,286) (32,078,907) (541,870,122)
Net increase (decrease) (5,767,136) $ (115,434,485) 25,869,667 $ 414,629,683
Service Class Sold 1,054,578 $ 18,334,058 330,869 $ 5,609,677
Reinvestment 30,528 513,486 80 1,295
Redeemed (131,705) (2,298,185) (11,004) (178,477)
Net increase (decrease) 953,401 $ 16,549,359 319,945 $ 5,432,495
Distributions From net $ 161,271,317 $ 139,636,513
investment income Initial
Class
Service Class 226,538 324
Total $ 161,497,855 $ 139,636,837
From net realized gain $ 204,277,001 $ 418,909,543
Initial Class
Service Class 286,948 972
Total $ 204,563,949 $ 418,910,515
$ 366,061,804 $ 558,547,352
</TABLE>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 18.16 $ 18.01 $ 16.93 $ 15.79 $ 13.79
period
Income from Investment
Operations
Net investment income .59 D .59 D .57 D .63 .30
Net realized and unrealized 1.28 1.84 2.58 1.55 1.99
gain (loss)
Total from investment 1.87 2.43 3.15 2.18 2.29
operations
Less Distributions
From net investment income (.60) (.57) (.59) (.57) (.29)
From net realized gain (.76) (1.71) (1.48) (.47) -
Total distributions (1.36) (2.28) (2.07) (1.04) (.29)
Net asset value, end of period $ 18.67 $ 18.16 $ 18.01 $ 16.93 $ 15.79
TOTAL RETURN B, C 11.09% 15.05% 20.65% 14.60% 16.96%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 4,936,926 $ 4,905,468 $ 4,399,937 $ 3,641,194 $ 3,332,844
(000 omitted)
Ratio of expenses to average .63% .64% .65% .74% .81%
net assets
Ratio of expenses to average .62% F .63% F .64% F .73% F .79% F
net assets after expense
reductions
Ratio of net investment 3.36% 3.46% 3.43% 3.60% 3.54%
income to average net assets
Portfolio turnover 94% 113% 101% 168% 256%
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 18.10 $ 17.99 $ 17.60
period
Income from Investment
Operations
Net investment income D .56 .57 .10
Net realized and unrealized 1.29 1.82 .29
gain (loss)
Total from investment 1.85 2.39 .39
operations
Less Distributions
From net investment income (.60) (.57) -
From net realized gain (.76) (1.71) -
Total distributions (1.36) (2.28) -
Net asset value, end of period $ 18.59 $ 18.10 $ 17.99
TOTAL RETURN B, C 11.01% 14.82% 2.22%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 23,677 $ 5,801 $ 10
(000 omitted)
Ratio of expenses to average .74% .78% .75% A
net assets
Ratio of expenses to average .73% F .77% F .75% A
net assets after expense
reductions
Ratio of net investment 3.25% 3.49% 3.52% A
income to average net assets
Portfolio turnover 94% 113% 101%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
D NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
E FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
F FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Asset Manager Portfolio (the fund) is a fund of Variable Insurance
Products Fund II (the trust) (referred to in this report as Fidelity
Variable Insurance Products: Asset Manager Portfolio) and is
authorized to issue an unlimited number of shares. The trust is
registered under the Investment Company Act of 1940, as amended (the
1940 Act), as an open-end management investment company organized as a
Massachusetts business trust. Shares of the fund may only be purchased
by insurance companies for the purpose of funding variable annuity or
variable life insurance contracts. The fund offers two classes of
shares: the fund's original class of shares (Initial Class shares) and
Service Class shares. Both classes have equal rights and voting
privileges, except for matters affecting a single class. Investment
income, realized and unrealized capital gains and losses, the common
expenses of the fund, and certain fund-level expense reductions, if
any, are allocated on a pro rata basis to each class based on the
relative net assets of each class to the total net assets of the fund.
Each class of shares differs in its respective distribution plan. On
October 14, 1999, the Board of Trustees approved the creation of
Service Class 2, a new class of shares of the fund. The Service Class
2 shares will be subject to an annual distribution and service fee of
.25% of the class' average net assets. These shares are expected to be
available on or about January 12, 2000.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. 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. Foreign equity securities are valued based on
quotations from the principal market in which such securities are
normally traded. If trading or events occurring in other markets after
the close of the principal market in which foreign securities are
traded, and before the close of the business of the fund, are expected
to materially affect the value of those securities, then they are
valued at their fair value taking this trading or these events into
account. Fair value is determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. 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. Securities (including restricted securities) for
which market quotations are not readily available are valued at their
fair value. Short-term securities with remaining maturities of sixty
days or less for which quotations are not readily available are valued
at amortized cost or original cost plus accrued interest, both of
which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. 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 foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the
Plan) non-interested Trustees must defer receipt of a portion of, and
may elect to defer receipt of an additional portion of, their annual
compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in a cross-section of other Fidelity funds.
Deferred amounts remain in the fund until distributed in accordance
with the Plan.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. Income dividends and capital gain distributions are
declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED
may result in distribution reclassifications, are primarily due to
differing treatments for litigation proceeds, paydown gains/losses on
certain securities, futures contracts, foreign currency transactions,
non-taxable dividends, market discount and losses deferred due to wash
sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
CENTRAL CASH FUNDS. Pursuant to an Exemptive Order issued by the SEC,
the fund may invest in the Taxable Central Cash Fund and the Central
Cash Collateral Fund (the Cash Funds) managed by Fidelity Investments
Money Management, Inc., an affiliate of FMR. The Cash Funds are
open-end money market funds available only to investment companies and
other accounts managed by FMR and its affiliates. The Cash Funds seek
preservation of capital, liquidity, and current income. Income
distributions from the Cash Funds are declared daily and paid monthly
from net interest income. Income distributions earned by the fund are
recorded as either interest income or security lending income in the
accompanying financial statements.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. 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 values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its custodial records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock market. Buying futures tends to increase the
fund's exposure to the underlying instrument, while selling futures
tends to decrease the fund's exposure to the underlying instrument or
hedge other fund investments. Losses may arise from changes in the
value of the underlying instruments or if the counterparties do not
perform under the contracts' terms. Gains (losses) are realized upon
the expiration or closing of the futures contracts. Futures contracts
are valued at the settlement price established each day by the board
of trade or exchange on which they are traded.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
Information regarding restricted securities is included under the
caption "Other Information" at the end of the funds schedule of
investments.
3. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities), and the market value of futures contracts
opened and closed, is included under the caption "Other Information"
at the end of the fund's schedule of investments.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .2167% to .5200% for the
period. The annual individual fund fee rate is .25%. 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. For the period, the management
fee was equivalent to an annual rate of .53% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of Trustees has adopted a Distribution and Service
Plan for the Service Class (the Plan) of shares. Under the Plan, the
class pays Fidelity Distributors Corporation (FDC), an affiliate of
FMR, a 12b-1 fee. This fee is based on an annual rate of .10% of
Service Class average net assets. Initial Class shares are not subject
to a 12b-1 fee.
For the period, Service Class paid FDC $14,423, all of which was
reallowed to insurance companies, for the distribution of shares and
providing shareholder support services.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc. (FIIOC), an affiliate of FMR, is the fund's transfer,
dividend disbursing and shareholder servicing agent. FIIOC receives
account fees and asset-based fees that vary according to account size
and type of account. FIIOC pays a portion of the expenses related to
the typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees of
the fund were equivalent to an annual rate of .07% of average net
assets.
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Company, Inc.
(FSC), an affiliate of FMR, maintains the fund's accounting records
and administers the security lending program. The security lending fee
is based on the number and duration of lending transactions. The
accounting fee is based on the level of average net assets for the
month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms are shown under the caption
"Other Information" at the end of the fund's schedule of investments.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit and/or cash against the loaned
securities and maintains collateral in an amount not less than 100% of
the market value of the loaned securities during the period of the
loan. The market value of the loaned securities is determined at the
close of business of the fund and any additional required collateral
is delivered to the fund on the next business day. If the borrower
defaults on its obligation to return the securities loaned because of
insolvency or other reasons, the fund could experience delays and
costs in recovering the securities loaned or in gaining access to the
collateral. Information regarding the value of securities loaned and
the value of collateral at period end is included under the caption
"Other Information" at the end of the fund's schedule of investments.
6. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or
emergency purposes to fund shareholder redemptions. The fund has
established borrowing arrangements with certain banks. The interest
rate on the borrowings is the bank's base rate, as revised from time
to time. Information regarding the fund's participation in the program
is included under the caption "Other Information" at the end of the
fund's schedule of investments.
7. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses.
In addition, through an arrangement with the fund's custodian, credits
realized as a result of uninvested cash balances were used to reduce a
portion of the fund's expenses. For the period, the reductions under
these arrangements are shown under the caption "Other Information" on
the fund's Statement of Operations.
8. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI) and its subsidiaries, affiliates of FMR, were the record owners
of approximately 18% of the outstanding shares of the fund. In
addition, one unaffiliated insurance companies were each record owners
of 23% of the total outstanding shares of the fund.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Variable Insurance Products Fund II and
Shareholders of Asset Manager Portfolio:
We have audited the accompanying statement of assets and liabilities
of Asset Manager Portfolio (the Fund), one of the funds of the
Variable Insurance Products II (the Trust) including the portfolio of
investments, as of December 31, 1999, and the related statements of
operations, changes in net assets, and financial highlights for the
year 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 audit. The statement of changes in net assets
for the year ended December 31, 1998, and the financial highlights for
each of the four years in the period then ended were audited by other
auditors whose report, dated February 12, 1999, expressed an
unqualified opinion on those statements and financial highlights.
We conducted our audit 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, 1999, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. 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 audit
provides 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 Asset Manager Portfolio as of December 31, 1999,
the results of its operations, the changes in its net assets, and the
financial highlights for the year then ended, in conformity with
generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 11, 2000
DISTRIBUTIONS
The Board of Trustees of Asset Manager Portfolio voted to pay to
shareholders of record at the opening of business on record date, the
following distributions per share derived from capital gains realized
from sales of portfolio securities, and dividends derived from net
investment income:
PAY DATE RECORD DATE DIVIDENDS CAPITAL GAINS
Initial Class 2/4/00 2/4/00 $0.59 $1.39
Service Class 2/4/00 2/4/00 $0.58 $1.39
Service Class 2 2/4/00 2/4/00 $0.58 $1.39
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
A total of 10.77% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
A total of 23% of the dividends distributed by the Initial Class and
Service Class during the fiscal year qualifies for the
dividends-received deduction for corporate shareholders.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.,
London, England
Fidelity Management & Research (Far East) Inc.,
Tokyo, Japan
Fidelity Investments Money Management, Inc.,
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, PRESIDENT
Robert C. Pozen, SENIOR VICE PRESIDENT
Robert A. Lawrence, VICE PRESIDENT
Richard C. Habermann, VICE PRESIDENT
Charles S. Morrison II, VICE PRESIDENT
John Todd, VICE PRESIDENT
Steven J. Snider, VICE PRESIDENT
Eric D. Roiter, SECRETARY
Richard A. Silver, TREASURER
Matthew N. Karstetter, DEPUTY TREASURER
John H. Costello, ASSISTANT TREASURER
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Ned C. Lautenbach
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Co., Inc.
Boston, MA
CUSTODIAN
The Chase Manhattan Bank
New York, NY
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(registered trademark)
VARIABLE INSURANCE PRODUCTS:
CONTRAFUND (registered trademark)
PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1999
CONTENTS
MARKET ENVIRONMENT 3 A review of what happened in
world markets during the
past 12 months.
PERFORMANCE AND INVESTMENT 4 How the fund has done over
SUMMARY time, and an overview of the
fund's investments at the
end of the period.
FUND TALK 5 The manager's review of fund
performance, strategy and
outlook.
INVESTMENTS 6 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 14 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 17 Notes to the financial
statements.
INDEPENDENT AUDITORS' REPORT 20 The auditors' opinion.
DISTRIBUTIONS 21
Standard & Poor's, S&P and S&P 500 are registered service marks of The
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THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE FUND'S
PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS
STATED ON THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF
FIDELITY OR ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER
CONDITIONS AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH
VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND,
BECAUSE INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND.
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
Entering the final year of the 20th century, popular U.S. equity
market indexes had just posted an unprecedented four consecutive years
of double-digit annual returns, while domestic bonds also enjoyed
relatively strong increases. The international story entering 1999,
however, was less positive. In general - with the exception of
European issues - international equities and bonds were greatly
disappointing. Asian and Russian economies had fallen into disarray,
Japan was struggling to implement banking reforms, and emerging
markets were plagued by a host of currency devaluations, loan defaults
and dismal credit outlooks. So who would have thought, just one year
later, that Japan, Russia and emerging markets would be three of
1999's best-performing investments? U.S. equities also continued to
chug along in 1999, extending their indexes' streak of consecutive
double-digit annual increases to five. The stock market was not
without its problems, however. Extremely narrow market breadth,
soaring valuations and rising interest rates - not to mention Y2K -
left many investors unsettled about the prospects for equities
entering the new millennium. Domestic fixed-income alternatives,
meanwhile, fared poorly in 1999 relative to the year prior.
U.S. STOCK MARKETS
In a word, technology was the primary driver of equity market
performance in 1999. While telecommunications, particularly the
wireless segment of the industry, also performed well, nothing
dominated like technology. This incredibly narrow market breadth was
illustrated by the technology-laden NASDAQ Index. Its return of 86.12%
for the one-year period ending December 31, 1999, was the all-time
highest annual return for any major U.S. stock index. Broader indexes,
such as the Standard & Poor's 500 SM, generated much lower returns,
but were still significantly affected by tech's presence. For example,
technology was responsible for approximately 70% of the S&P 500's
12-month return of 21.04%, the index's fifth consecutive annual gain
above 20%. The top 50 stocks in the S&P 500 - the so-called "Nifty
50," many of which were technology shares - accounted for 115% of its
total return. Meanwhile, the remaining 450 stocks fell 3.13%. The Dow
Jones Industrial Average - an index of 30 blue-chip stocks - posted a
27.13% return during the period, its fifth consecutive double-digit
annual return. Despite the strong numbers of these indexes, more
stocks fell than rose in 1999. Growth stocks continued to hammer their
value-oriented peers. But in a turnaround from previous years, mid-
and small-cap growth stocks performed better than their large-cap
brethren did. Conversely, mid-and small-cap value issues posted
negative overall returns in 1999.
FOREIGN STOCK MARKETS
Similar to the domestic equity markets, technology and - perhaps to an
even greater degree than in the U.S. - telecommunications led the
charge in the vastly improved international equity markets. The
recovery of the Japanese stock market in 1999 was nothing short of
remarkable. A renewed emphasis on corporate restructuring and
shareholder value - combined with the Japanese government's
willingness to create more of a free-enterprise market system - proved
wildly successful. For the period, the Morgan Stanley Capital
International Japan Index returned 61.53% and Japan's TOPIX Index was
up 75.89%. While Canadian equity markets didn't get nearly the
attention of their U.S. neighbors, their performance was a great deal
better than the broader American indexes, as the Toronto Stock
Exchange (TSE) 300 returned 39.34% for the 12-month period ending
December 31, 1999. Despite a strong surge in December, European
markets offered mixed results over the past 12 months. In that time,
the Morgan Stanley Capital International Europe Index posted a
relatively tame - at least, in comparison to other developed nations'
stock markets - one-year return of 16.16%.
U.S. BOND MARKETS
Fueled by robust economic growth and a tighter monetary policy,
interest rates moved sharply higher, causing most domestic bonds to
struggle throughout the 12-month period ending December 31, 1999. The
Lehman Brothers Aggregate Bond Index, a popular measure of
taxable-bond performance, fell 0.82% during the period. Treasury
prices had the toughest time of it, falling in response to three
quarter-point interest-rate hikes levied by the Federal Reserve Board,
which erased all of 1998's rate cuts. The Lehman Brothers Long-Term
Treasury Index plunged 8.74% in 1999. Nor were corporate bonds, as
measured by the Lehman Brothers Corporate Bond Index, immune from the
fixed-income fade during the year, falling 1.96%. Government agency
securities also fell into negative territory for the year, as the
Lehman Brothers U.S. Agency Index fell 0.94%. There were a few bright
spots, however. The high-yield market, as measured by the Merrill
Lynch High Yield Master II Index, returned 2.51% during the 12-month
period, while the Lehman Brothers Mortgage-Backed Securities Index was
up 1.86%.
FOREIGN BOND MARKETS
Emerging markets stood as one of the best-performing asset classes in
1999. For the 12-month period ending December 31, 1999, the JP Morgan
Emerging Markets Bond Index Plus was up 25.97%. A year ago, that same
index closed 1998 with a negative 14.35% annual return. A variety of
factors sparked their recovery, including rising commodity prices,
particularly oil; the continuation of a strong U.S. economy;
stable-to-lower interest rates; tame inflation; and greater political
stability. Russia was perhaps the year's biggest comeback story.
Devastated by its devaluation of the ruble and loan defaults in 1998,
Russia steadily demonstrated strong technical improvements that made
it the best-performing country in the index in 1999. Both Brazil and
Mexico enjoyed relatively low inflation and improved economies. Turkey
was the best-performing emerging-market country in December, as the
government's reform plans, IMF financial support, and the announcement
that it would be accepted in the European Union all boosted the
country's prospects. Elsewhere, outside of positive performing
Canadian and Japanese issues - beneficiaries of strong local
currencies - higher rates proved insurmountable for most non-U.S.
developed markets, which produced negative returns in local currency
terms. A markedly weak euro, coupled with firming supply pressures,
felled bond prices in Germany, France and Italy. The Salomon Brothers
Non-U.S. World Government Bond Index fell 5.07% in 1999.
FIDELITY VARIABLE INSURANCE PRODUCTS: CONTRAFUND PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value).
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR LIFE OF FUND
1999
Fidelity VIP: Contrafund - 24.25% 27.73%
"initial class"
S&P 500 (registered trademark) 21.04% 28.59%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's return to the performance of the Standard &
Poor's 500 SM Index - a market capitalization-weighted index of common
stocks. This benchmark reflects the reinvestment of dividends and
capital gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown. The life of the fund figures are from
commencement of operations, January 3, 1995.
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 RETURN WOULD BE 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 II Contrafund S&P 500
00158 SP001
1995/01/03 10000.00 10000.00
1995/01/31 9870.00 10261.28
1995/02/28 10370.00 10661.16
1995/03/31 10890.00 10975.77
1995/04/30 11480.00 11299.00
1995/05/31 11730.00 11750.63
1995/06/30 12490.00 12023.59
1995/07/31 13470.00 12422.30
1995/08/31 13640.00 12453.48
1995/09/30 13940.00 12979.01
1995/10/31 13650.00 12932.68
1995/11/30 13900.00 13500.42
1995/12/31 13971.98 13760.44
1996/01/31 14073.30 14228.85
1996/02/29 14124.25 14360.75
1996/03/31 14584.49 14499.04
1996/04/30 15065.18 14712.76
1996/05/31 15239.05 15092.20
1996/06/30 15116.32 15149.70
1996/07/31 14410.62 14480.39
1996/08/31 14962.90 14785.78
1996/09/30 15597.01 15617.92
1996/10/31 16077.71 16048.66
1996/11/30 17039.10 17261.78
1996/12/31 16936.82 16919.83
1997/01/31 17591.38 17976.98
1997/02/28 17103.08 18117.92
1997/03/31 16660.22 17373.45
1997/04/30 17060.91 18410.65
1997/05/31 18115.35 19531.49
1997/06/30 18906.18 20406.50
1997/07/31 20530.03 22030.24
1997/08/31 19950.08 20796.11
1997/09/30 21299.77 21935.11
1997/10/31 20656.56 21202.48
1997/11/30 20646.02 22183.94
1997/12/31 21025.62 22564.84
1998/01/31 21004.53 22814.41
1998/02/28 22531.76 24459.78
1998/03/31 23627.59 25712.37
1998/04/30 23851.23 25971.03
1998/05/31 23292.13 25524.59
1998/06/30 24544.52 26561.40
1998/07/31 24578.06 26278.52
1998/08/31 20899.18 22479.17
1998/09/30 22118.02 23919.19
1998/10/31 22844.85 25864.77
1998/11/30 24365.61 27432.44
1998/12/31 27328.84 29013.09
1999/01/31 28894.32 30226.42
1999/02/28 27829.69 29286.98
1999/03/31 28819.87 30458.76
1999/04/30 29437.27 31638.42
1999/05/31 28843.17 30891.44
1999/06/30 30404.14 32605.92
1999/07/31 29903.23 31587.96
1999/08/31 29029.55 31431.60
1999/09/30 28936.36 30570.06
1999/10/31 29996.43 32504.53
1999/11/30 31184.63 33165.35
1999/12/31 33957.12 35118.79
IMATRL PRASUN SHR__CHT 19991231 20000114 110425 R00000000000063
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Contrafund Portfolio
on January 3, 1995, when the fund started. As the chart shows, by
December 31, 1999, the value of the investment would have grown to
$33,957 - a 239.57% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $35,119 - a 251.19%
increase.
INVESTMENT SUMMARY
TOP FIVE STOCKS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
McDonald's Corp. 3.6
Time Warner, Inc. 2.9
Microsoft Corp. 2.5
Cisco Systems, Inc. 2.5
Vodafone AirTouch PLC 2.0
sponsored ADR
13.5
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 24.5
MEDIA & LEISURE 15.5
UTILITIES 13.9
FINANCE 9.6
HEALTH 5.7
ASSET ALLOCATION AS OF
DECEMBER 31, 1999*
% OF FUND'S NET ASSETS
Stocks and equity futures
94.9%
Bonds 2.3%
Short-Term Investments and
Net Other Assets 2.8%
Row: 1, Col: 1, Value: 94.90000000000001
Row: 1, Col: 2, Value: 0.0
Row: 1, Col: 3, Value: 0.0
Row: 1, Col: 4, Value: 2.3
Row: 1, Col: 5, Value: 0.0
Row: 1, Col: 6, Value: 0.0
Row: 1, Col: 7, Value: 0.0
Row: 1, Col: 8, Value: 2.8
* FOREIGN INVESTMENTS 16.7%
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: CONTRAFUND PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Will Danoff)
An interview with
Will Danoff,
Portfolio Manager
of Contrafund Portfolio
Q. HOW DID THE FUND PERFORM, WILL?
A. The fund performed well for the 12 months that ended December 31,
1999, posting a higher return than the Standard & Poor's 500 Index,
which returned 21.04%.
Q. WHAT FACTORS HELPED THE FUND BEAT ITS BENCHMARK?
A. The fund was able to participate in the technology rally during
1999, and also received strong returns from its holdings in the media
and leisure and the telecommunications groups. A de-emphasis on health
and finance stocks also helped performance, as those groups endured a
very challenging year.
Q. WHAT WAS YOUR STRATEGY WITHIN THE TECHNOLOGY SECTOR DURING THE
PERIOD?
A. The sector exploded during the second half of the year, as global
Internet traffic and wireless phone usage surged, and the global
economy strengthened. Technology earnings growth accelerated to 28% in
1999, up from less than 10% in 1998 and 1997, and vastly better than
the rest of the market's 7% growth rate. I chose to emphasize global
networking and software leaders such as Cisco Systems and Microsoft,
both of which were very profitable and continued to grow by more than
30% annually. Both companies were top-5 positions at the end of the
period and helped performance significantly in 1999.
Q. HOW ABOUT MEDIA AND LEISURE AND TELECOMMUNICATIONS STOCKS?
A. The immense popularity of the Internet filtered into these sectors
as well. As the Web grows and enables faster and more convenient
distribution of content, traditional media companies should become
more valuable. As such, the fund held considerable stakes in leading
media companies such as Time Warner, CBS and Viacom, and each
performed well. The telecommunications group, meanwhile, benefited
from the continued growth in wireless usage, as well as from the huge
increase in data traffic - primarily Internet-related - throughout the
global telephony network. Worldwide wireless subscribers grew 50% in
1999, and are expected to sustain that growth rate going forward. Data
traffic accounts for more than 50% of global traffic already, and is
doubling every year. The fund benefited from its investments in Nokia,
Motorola and Ericsson, the leading cell phone and wireless
infrastructure manufacturers in the world.
Q. DID YOU FOLLOW ANY "OUT OF FAVOR" THEMES DURING THE PERIOD?
A. I increased the fund's Japanese holdings. Entering 1999, Japan had
endured a very challenging economic environment. The Nikkei 225 Index
peaked at 38,900 in December 1989, and was below 15,000 at the
beginning of the period as an ongoing recession crushed corporate
profits throughout the 1990s. But by last summer, Japanese companies
were trading at half the cash-flow valuations of their U.S.
counterparts, Japan's central bank had shifted toward easier monetary
policies and Japanese firms were cutting costs aggressively and taking
other shareholder-friendly actions. As a result, earnings rebounded
throughout 1999 and share prices followed. The fund's positions in
Japanese brokers and selected technology companies performed well as a
result.
Q. WHERE DID THE FUND'S DISAPPOINTMENTS LIE?
A. The global economy, and particularly the U.S. economy, were much
stronger than expected in 1999. I had anticipated faster economic
growth, and should have positioned the fund more aggressively with a
higher weighting in technology and even lower weightings in defensive
areas such as drug, grocery-store and financial stocks. The fund's
positions in such steady "defensive" growers as CVS, Safeway and
Associates First Capital detracted from performance as the market paid
virtually any price in 1999 for accelerating earnings growth, and
discarded these steady growers regardless of their low share prices.
Q. WHAT'S YOUR OUTLOOK?
A. I'm concerned about the recent interest-rate tightenings by the
U.S. Federal Reserve. With unemployment levels at 30-year lows, the
risk of accelerating wage inflation is rising. Higher interest rates
should slow the economy and could squeeze corporate profit growth,
particularly in the second half of 2000. I expect earnings growth to
slow in 2000, and am worried that profits could disappoint even with
those expectations. Thus, the fund is positioned more cautiously on
economically sensitive sectors than it was a year ago. The fund
remains underweighted in technology relative to the S&P 500, and I
believe I will find better buying opportunities in the future.
FUND FACTS
GOAL: to increase the value of the fund's shares
over the long term by investing in companies
whose value is not fully recognized by the public
START DATE: January 3, 1995
SIZE: as of December 31, 1999, more than
$9.7 billion
MANAGER: Will Danoff, since inception;
joined Fidelity in 1986
(checkmark)
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 2.
FIDELITY VARIABLE INSURANCE PRODUCTS: CONTRAFUND PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 94.7%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.6%
Alliant Techsystems, Inc. (a) 83,100 $ 5,178,169
Boeing Co. 660,330 27,444,966
Bombardier, Inc. Class B 366,900 7,519,586
United Technologies Corp. 241,001 15,665,065
55,807,786
BASIC INDUSTRIES - 2.6%
CHEMICALS & PLASTICS - 0.7%
Aventis SA (Germany) 260,982 15,230,449
Avery Dennison Corp. 122,600 8,934,475
Geon Co. 232,700 7,562,750
H. B. Fuller Co. 86,463 4,836,524
Spartech Corp. 115,600 3,728,100
Union Carbide Corp. 187,200 12,495,600
Valspar Corp. 281,800 11,800,375
64,588,273
IRON & STEEL - 0.0%
Cordant Technologies, Inc. 53,800 1,775,400
METALS & MINING - 0.8%
Alcoa, Inc. 390,600 32,419,800
Inco Ltd. 85,400 1,983,438
Inco Ltd. Class VBN Shares 45,500 404,144
Rio Tinto PLC (Reg.) 1,049,608 25,365,535
The Broken Hill Proprietary 1,664,538 21,873,123
Co. Ltd.
82,046,040
PACKAGING & CONTAINERS - 0.2%
Corning, Inc. 115,100 14,840,706
PAPER & FOREST PRODUCTS - 0.9%
Bowater, Inc. 186,300 10,118,419
Champion International Corp. 523,200 32,405,700
Georgia-Pacific Corp. 187,200 9,500,400
Kimberly-Clark Corp. 101,300 6,609,825
Temple-Inland, Inc. 35,000 2,307,813
Weyerhaeuser Co. 365,000 26,211,563
Willamette Industries, Inc. 12,200 566,538
87,720,258
TOTAL BASIC INDUSTRIES 250,970,677
CONSTRUCTION & REAL ESTATE -
0.5%
BUILDING MATERIALS - 0.2%
Fortune Brands, Inc. 417,100 13,790,369
Masco Corp. 170,900 4,336,588
18,126,957
CONSTRUCTION - 0.1%
Ashtead Group PLC 24,700 67,078
Jacobs Engineering Group, 214,030 6,955,975
Inc. (a)
7,023,053
ENGINEERING - 0.1%
PerkinElmer, Inc. 315,200 13,139,900
SHARES VALUE (NOTE 1)
REAL ESTATE - 0.0%
ResortQuest International, 192,100 $ 804,419
Inc. (a)
REAL ESTATE INVESTMENT TRUSTS
- - 0.1%
Equity Office Properties Trust 373,500 9,197,438
Equity Residential Properties 35,400 1,511,138
Trust (SBI)
Glenborough Realty Trust, 213,600 2,856,900
Inc.
13,565,476
TOTAL CONSTRUCTION & REAL 52,659,805
ESTATE
DURABLES - 3.1%
AUTOS, TIRES, & ACCESSORIES -
1.6%
Danaher Corp. 734,022 35,416,562
Gentex Corp. (a) 176,600 4,900,650
Midas, Inc. 333,300 7,290,938
PACCAR, Inc. 39,900 1,768,069
SPX Corp. (a) 1,051,341 84,961,495
Toyota Motor Corp. 184,000 8,911,938
TRW, Inc. 289,900 15,056,681
158,306,333
CONSUMER DURABLES - 0.1%
Blyth Industries, Inc. (a) 69,000 1,694,813
Boyds Collection, Ltd. 451,600 3,132,975
Minnesota Mining & 25,100 2,456,663
Manufacturing Co.
7,284,451
CONSUMER ELECTRONICS - 0.8%
Harman International 256,200 14,379,225
Industries, Inc.
Matsushita Electric 99,000 2,762,100
Industrial Co. Ltd.
Sony Corp. 221,700 63,129,076
80,270,401
HOME FURNISHINGS - 0.2%
Linens'n Things, Inc. (a) 582,100 17,244,713
Restoration Hardware, Inc. (a) 102,200 696,238
The Bombay Company, Inc. (a) 602,500 2,711,250
20,652,201
TEXTILES & APPAREL - 0.4%
Delta Woodside Industries 88,700 166,313
Jones Apparel Group, Inc. (a) 375,126 10,175,293
Pacific Sunwear of 214,900 6,849,938
California, Inc. (a)
Quiksilver, Inc. (a) 187,100 2,900,050
Tommy Hilfiger (a) 725,000 16,901,563
Warnaco Group, Inc. Class A 355,300 4,374,631
41,367,788
TOTAL DURABLES 307,881,174
ENERGY - 5.0%
ENERGY SERVICES - 0.2%
BJ Services Co. (a) 42,200 1,764,488
ENSCO International, Inc. 14,600 333,975
Global Marine, Inc. (a) 196,900 3,273,463
Halliburton Co. 12,800 515,200
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
ENERGY - CONTINUED
ENERGY SERVICES - CONTINUED
Hanover Compressor Co. (a) 53,500 $ 2,019,625
Schlumberger Ltd. 64,000 3,600,000
Smith International, Inc. (a) 7,900 392,531
Tidewater, Inc. 30,700 1,105,200
Transocean Sedco Forex, Inc. 12,390 417,388
13,421,870
OIL & GAS - 4.8%
Amerada Hess Corp. 141,200 8,013,100
Anadarko Petroleum Corp. 135,300 4,617,113
Atlantic Richfield Co. 252,600 21,849,900
BP Amoco PLC sponsored ADR 2,593,932 153,852,592
Canadian Natural Resources 69,170 1,685,382
Ltd. (a)
Exxon Mobil Corp. 2,244,571 180,828,251
Rio Alto Exploration Ltd. (a) 113,900 1,606,110
Royal Dutch Petroleum Co. (NY 840,700 50,809,806
Registry Gilder 1.25)
Suncor Energy, Inc. 162,200 6,771,881
Total Fina SA sponsored ADR 437,223 30,277,693
Vastar Resources, Inc. 181,200 10,690,800
471,002,628
TOTAL ENERGY 484,424,498
FINANCE - 9.6%
BANKS - 2.2%
Bank of New York Co., Inc. 1,345,000 53,800,000
Chase Manhattan Corp. 411,300 31,952,869
Fifth Third Bancorp 50,200 3,683,425
First Security Corp. 63,600 1,623,788
FleetBoston Financial Corp. 262,228 9,128,812
HSBC Holdings PLC (United K 1,576,509 22,504,673
(Reg.)
Lloyds TSB Group PLC 963,600 12,064,072
M&T Bank Corp. 7,690 3,185,583
Marshall & Ilsley Corp. 94,200 5,916,938
Mellon Financial Corp. 319,900 10,896,594
Northern Trust Corp. 147,700 7,828,100
Toronto Dominion Bank 350,500 9,388,177
Wells Fargo & Co. 1,083,900 43,830,206
Zions Bancorp 64,800 3,835,350
219,638,587
CREDIT & OTHER FINANCE - 2.6%
American Express Co. 487,500 81,046,875
Associates First Capital 3,566,304 97,850,466
Corp. Class A
Citigroup, Inc. 1,262,100 70,125,431
Household International, Inc. 283,500 10,560,375
259,583,147
FEDERAL SPONSORED CREDIT - 1.2%
Fannie Mae 1,379,900 86,157,506
SHARES VALUE (NOTE 1)
Freddie Mac 396,200 $ 18,646,163
SLM Holding Corp. 210,700 8,902,075
113,705,744
INSURANCE - 1.9%
AFLAC, Inc. 309,600 14,609,250
Allstate Corp. 185,200 4,444,800
Ambac Financial Group, Inc. 55,500 2,896,406
American General Corp. 220,100 16,700,088
American International Group, 732,056 79,153,555
Inc.
Berkshire Hathaway, Inc. 584 32,762,400
Class A (a)
Canada Life Financial Corp. 169,200 2,613,963
(a)
CIGNA Corp. 43,900 3,536,694
Marsh & McLennan Companies, 138,400 13,243,150
Inc.
Mutual Risk Management Ltd. 462,000 7,767,375
RenaissanceRe Holdings Ltd. 112,000 4,578,000
Zenith National Insurance 127,700 2,633,813
Corp.
184,939,494
SAVINGS & LOANS - 0.4%
Golden West Financial Corp. 1,049,100 35,144,850
SECURITIES INDUSTRY - 1.3%
Daiwa Securities Co. Ltd. 4,107,000 64,257,271
Nikko Securities Co. Ltd. 2,916,000 36,892,251
Nomura Securities Co. Ltd. 1,268,000 22,890,998
124,040,520
TOTAL FINANCE 937,052,342
HEALTH - 5.7%
DRUGS & PHARMACEUTICALS - 4.5%
Allergan, Inc. 923,100 45,924,225
Amgen, Inc. (a) 611,400 36,722,213
AstraZeneca Group PLC 85,300 3,561,274
(United Kingdom)
Biogen, Inc. (a) 268,500 22,688,250
Biovail Corp. International 23,700 2,211,585
(a)
Bristol-Myers Squibb Co. 393,500 25,257,781
Cephalon, Inc. (a) 49,200 1,700,475
Chiron Corp. (a) 16,900 716,138
Eli Lilly & Co. 480,900 31,979,850
Genentech, Inc. 286,460 38,528,870
Human Genome Sciences, Inc. 36,600 5,586,075
(a)
IDEC Pharmaceuticals Corp. (a) 92,300 9,068,475
Immunex Corp. (a) 838,790 91,847,505
Jones Pharma, Inc. 19,300 838,344
Medimmune, Inc. (a) 169,680 28,145,670
Merck & Co., Inc. 309,300 20,742,431
Pfizer, Inc. 74,500 2,416,594
QLT PhotoTherapeutics, Inc. 142,800 8,390,129
(a)
Schering-Plough Corp. 612,100 25,822,969
Warner-Lambert Co. 497,545 40,767,593
442,916,446
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - 0.9%
Baxter International, Inc. 52,900 $ 3,322,781
Becton, Dickinson & Co. 251,200 6,719,600
Biomet, Inc. 166,900 6,676,000
Boston Scientific Corp. (a) 26,600 581,875
C. R. Bard, Inc. 161,700 8,570,100
Cardinal Health, Inc. 64,455 3,085,783
Guidant Corp. 235,900 11,087,300
Haemonetics Corp. (a) 47,500 1,131,094
Medtronic, Inc. 335,800 12,235,713
Patterson Dental Co. (a) 255,400 10,886,425
Perrigo Co. (a) 249,100 1,992,800
Smith & Nephew PLC 1,482,522 4,984,713
Stryker Corp. 89,900 6,259,288
Sybron International, Inc. (a) 256,100 6,322,469
Varian Medical Systems, Inc. 254,600 7,590,263
91,446,204
MEDICAL FACILITIES MANAGEMENT
- - 0.3%
Columbia/HCA Healthcare Corp. 573,600 16,813,650
Health Management Associates, 187,900 2,513,163
Inc. Class A (a)
United HealthCare Corp. 98,000 5,206,250
24,533,063
TOTAL HEALTH 558,895,713
HOLDING COMPANIES - 0.0%
PartnerRe Ltd. 42,600 1,381,838
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.8%
ELECTRICAL EQUIPMENT - 1.5%
Adtran, Inc. (a) 114,700 5,899,881
Allen Telecom, Inc. (a) 519,500 6,006,719
Anixter International, Inc. 159,100 3,281,438
(a)
C&D Technologies, Inc. 3,900 165,750
Cymer, Inc. (a) 17,100 786,600
General Instrument Corp. (a) 154,400 13,124,000
Hutchison Whampoa Ltd. 1,615,000 23,493,177
L-3 Communications Holdings, 77,800 3,238,425
Inc. (a)
Loral Space & Communications 1,207,833 29,365,440
Ltd. (a)
Mitsubishi Electric Corp. 335,000 2,163,405
Rayovac Corp. (a) 555,250 10,480,344
Roper Industries, Inc. 176,000 6,655,000
Siemens AG 339,800 43,428,632
148,088,811
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.3%
Exide Corp. 100 831
ITT Industries, Inc. 314,000 10,499,375
Kennametal, Inc. 36,100 1,213,863
Mettler-Toledo International, 164,000 6,262,750
Inc. (a)
MSC Industrial Direct, Inc. 228,000 3,021,000
(a)
SHARES VALUE (NOTE 1)
Sandvik AB Series B 156,900 $ 5,037,127
Terex Corp. (a) 127,400 3,535,350
29,570,296
TOTAL INDUSTRIAL MACHINERY & 177,659,107
EQUIPMENT
MEDIA & LEISURE - 15.5%
BROADCASTING - 8.4%
American Tower Corp. Class A 1,436,950 43,916,784
(a)
Asia Satellite 300 10,500
Telecommunications Holdings
Ltd. sponsored ADR
AT&T Corp.:
( Liberty Media Group Class A 1,089,908 61,852,279
(a))
( Liberty Media Group Class B 1,700 116,875
(a))
Capital Radio PLC 213,884 5,186,152
CBS Corp. (a) 2,612,412 167,031,092
Charter Communications, Inc. 355,000 7,765,625
Citadel Communications Corp. 100,500 6,519,938
(a)
Comcast Corp.:
Class A 48,500 2,321,938
Class A (special) 1,432,700 72,440,894
Cox Communications, Inc. 408,800 21,053,200
Class A (a)
EchoStar Communications Corp. 57,100 5,567,250
Class A (a)
Entercom Communications Corp. 28,600 1,887,600
Grupo Televisa SA de CV 35,300 2,409,225
sponsored ADR (a)
Infinity Broadcasting Corp. 2,192,160 79,328,790
Class A
NTL, Inc. (a) 44,000 5,489,000
Primacom AG 54,476 3,508,603
SBS Broadcasting SA (a) 247,000 12,025,813
TCI Satellite Entertainment, 34,400 550,400
Inc. Class A (a)
Television Francaise 1 SA 16,105 8,427,779
Time Warner, Inc. 3,885,303 281,441,636
TV Azteca SA de CV sponsored 43,100 387,900
ADR
United Pan-Europe 221,800 28,347,471
Communications NV
UnitedGlobalCom, Inc. (a) 35,400 2,500,125
Univision Communications, 10,500 1,072,969
Inc. Class A (a)
821,159,838
ENTERTAINMENT - 2.2%
Park Place Entertainment 246,800 3,085,000
Corp.
Premier Parks, Inc. (a) 1,029,300 29,721,038
SFX Entertainment, Inc. Class 56,800 2,055,450
A (a)
Viacom, Inc.:
Class A (a) 671,400 40,577,738
Class B (non-vtg.) (a) 2,268,900 137,126,644
212,565,870
LEISURE DURABLES & TOYS - 0.2%
Callaway Golf Co. 200,600 3,548,113
Harley-Davidson, Inc. 321,700 20,608,906
24,157,019
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - CONTINUED
LODGING & GAMING - 0.0%
Dover Downs Entertainment, 133,200 $ 2,497,500
Inc.
PUBLISHING - 0.6%
Harte Hanks Communications, 411,600 8,952,300
Inc.
McGraw-Hill Companies, Inc. 89,200 5,496,950
Meredith Corp. 50,600 2,109,388
Reader's Digest Association, 820,940 24,012,495
Inc. Class A (non-vtg.)
Scholastic Corp. (a) 72,700 4,521,031
The New York Times Co. Class A 31,500 1,547,438
Tribune Co. 302,243 16,642,255
63,281,857
RESTAURANTS - 4.1%
Brinker International, Inc. 313,500 7,524,000
(a)
CEC Entertainment, Inc. (a) 232,400 6,594,350
McDonald's Corp. 8,849,500 356,745,433
Outback Steakhouse, Inc. (a) 254,550 6,602,391
Papa John's International, 189,600 4,941,450
Inc. (a)
Pizzaexpress PLC 316,100 3,742,897
PJ America, Inc. (a)(c) 581,700 9,016,350
Ryan's Family Steak Houses, 188,500 1,602,250
Inc. (a)
396,769,121
TOTAL MEDIA & LEISURE 1,520,431,205
NONDURABLES - 2.0%
BEVERAGES - 0.1%
Allied Domecq PLC 1,190,876 5,890,656
FOODS - 1.2%
American Italian Pasta Co. 31,500 968,625
Class A (a)
Ben & Jerry's Homemade, Inc. 239,400 5,955,075
Class A (a)
Booker PLC 1,866,889 3,530,856
Earthgrains Co. 742,600 11,974,425
General Mills, Inc. 294,800 10,539,100
H. J. Heinz Co. 7,500 298,594
Keebler Foods Co. (a) 768,900 21,625,313
Kellogg Co. 334,900 10,319,106
Quaker Oats Co. 494,300 32,438,438
Sysco Corp. 382,500 15,132,656
112,782,188
HOUSEHOLD PRODUCTS - 0.7%
Avon Products, Inc. 563,200 18,585,600
Colgate-Palmolive Co. 603,000 39,195,000
Dial Corp. 382,700 9,304,394
SHARES VALUE (NOTE 1)
Playtex Products, Inc. (a) 323,000 $ 4,966,125
Yankee Candle Co., Inc. 84,800 1,383,300
73,434,419
TOTAL NONDURABLES 192,107,263
PRECIOUS METALS - 0.8%
Anglogold Ltd. 36,400 1,874,622
Barrick Gold Corp. 1,874,260 33,360,196
Franco Nevada Mining Corp. 921,964 14,115,921
Ltd.
Newmont Mining Corp. 25,900 634,550
Placer Dome, Inc. 1,490,045 16,015,898
Stillwater Mining Co. (a) 348,900 11,121,188
77,122,375
RETAIL & WHOLESALE - 5.4%
APPAREL STORES - 0.6%
Abercrombie & Fitch Co. Class 12,500 333,594
A (a)
AnnTaylor Stores Corp. (a) 73,200 2,520,825
Charlotte Russe Holding, Inc. 6,800 142,800
Charming Shoppes, Inc. (a) 1,479,600 9,802,350
Claire's Stores, Inc. 356,500 7,976,688
Gap, Inc. 132,287 6,085,202
Talbots, Inc. 158,800 7,086,450
The Limited, Inc. 164,500 7,124,906
TJX Companies, Inc. 763,900 15,612,206
Urban Outfitters, Inc. (a) 48,200 1,403,825
58,088,846
DRUG STORES - 1.5%
CVS Corp. 3,663,002 146,291,142
Walgreen Co. 195,200 5,709,600
152,000,742
GENERAL MERCHANDISE STORES -
0.5%
99 Cents Only Stores (a) 23,100 883,575
Costco Wholesale Corp. (a) 313,800 28,634,250
Dollar Tree Stores, Inc. (a) 42,800 2,073,125
Hot Topic, Inc. (a) 46,000 1,069,500
Ito-Yokado Co. Ltd. 128,000 13,902,153
Tuesday Morning Corp. (a) 188,600 3,477,313
Wal-Mart Stores, Inc. 5,900 407,838
50,447,754
GROCERY STORES - 0.5%
Fleming Companies, Inc. 477,959 4,899,080
Loblaw Companies Ltd. 61,900 1,501,825
Safeway, Inc. (a) 786,450 27,968,128
U.S. Foodservice (a) 788,600 13,209,050
47,578,083
RETAIL & WHOLESALE,
MISCELLANEOUS - 2.3%
Bed Bath & Beyond, Inc. (a) 814,700 28,310,825
Best Buy Co., Inc. (a) 17,200 863,225
Boots Co. PLC 344,155 3,349,086
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
RETAIL & WHOLESALE - CONTINUED
RETAIL & WHOLESALE,
MISCELLANEOUS - CONTINUED
Circuit City Stores, Inc. - 155,000 $ 6,984,688
Circuit City Group
Good Guys, Inc. (a) 266,700 2,483,644
Guitar Center, Inc. (a) 147,400 1,483,213
Home Depot, Inc. 2,185,990 149,876,939
Intimate Brands, Inc. Class A 3,600 155,250
Office Depot, Inc. (a) 1,437,000 15,717,188
Staples, Inc. (a) 220,550 4,576,413
Sunglass Hut International, 802,800 9,031,500
Inc. (a)
222,831,971
TOTAL RETAIL & WHOLESALE 530,947,396
SERVICES - 2.8%
ADVERTISING - 1.9%
DoubleClick, Inc. (a) 99,400 25,154,413
Interpublic Group of 947,700 54,670,444
Companies, Inc.
Lamar Advertising Co. Class A 465,800 28,210,013
(a)
Omnicom Group, Inc. 5,100 510,000
TMP Worldwide, Inc. (a) 107,000 15,194,000
WPP Group PLC 815,840 12,937,481
Young & Rubicam, Inc. 670,400 47,430,800
184,107,151
LEASING & RENTAL - 0.0%
Blockbuster, Inc. Class A 251,900 3,369,163
PRINTING - 0.0%
Reynolds & Reynolds Co. Class 92,600 2,083,500
A
SERVICES - 0.9%
ACNielsen Corp. (a) 375,400 9,244,225
Carlisle Holdings Ltd. (a) 205,500 2,466,000
Catalina Marketing Corp. (a) 75,900 8,785,425
Cendant Corp. (a) 119,500 3,174,219
CheckFree Holdings Corp. (a) 49,000 5,120,500
Convergys Corp. (a) 8,500 261,375
FYI, Inc. (a) 63,800 2,169,200
Gartner Group, Inc. Class B 441,543 6,098,813
(a)
H&R Block, Inc. 234,800 10,272,500
NOVA Corp. (a) 153,700 4,851,156
Professional Detailing, Inc. 9,500 284,406
(a)
Robert Half International, 126,300 3,607,444
Inc. (a)
Teletech Holdings, Inc. (a) 43,000 1,449,234
Viad Corp. 885,612 24,686,435
82,470,932
TOTAL SERVICES 272,030,746
TECHNOLOGY - 24.5%
COMMUNICATIONS EQUIPMENT - 5.1%
ADC Telecommunications, Inc. 530,200 38,472,638
(a)
Advanced Fibre 110,000 4,915,625
Communications, Inc. (a)
AudioCodes Ltd. 51,100 4,701,200
SHARES VALUE (NOTE 1)
Cisco Systems, Inc. (a) 2,263,100 $ 242,434,588
Ditech Communications Corp. 7,400 691,900
Efficient Networks, Inc. 3,287 223,516
Globalstar Telecommunications 149,600 6,582,400
Ltd. (a)
InterVoice, Inc. (a) 18,500 430,125
Lucent Technologies, Inc. 695,700 52,047,056
Marconi PLC 620,300 10,984,742
Metricom, Inc. (a) 56,400 4,434,450
NEC Corp. 180,000 4,288,650
Nokia AB sponsored ADR 250,500 47,595,000
Nortel Networks Corp. 229,080 23,094,849
Telefonaktiebolaget LM 278,900 18,320,244
Ericsson sponsored ADR
Tellabs, Inc. (a) 520,700 33,422,431
Terayon Communication 10,300 646,969
Systems, Inc. (a)
Xircom, Inc. (a) 78,400 5,880,000
499,166,383
COMPUTER SERVICES & SOFTWARE
- - 10.4%
24/7 Media, Inc. (a) 64,200 3,611,250
Adobe Systems, Inc. 329,700 22,172,325
Affymetrix, Inc. (a) 28,700 4,870,031
Akamai Technologies, Inc. 9,400 3,079,675
Amdocs Ltd. (a) 449,700 15,514,650
America Online, Inc. (a) 789,600 59,565,450
Ariba, Inc. 2,600 461,175
Automatic Data Processing, 1,564,700 84,298,213
Inc.
AVT Corp. (a) 8,000 376,000
BEA Systems, Inc. (a) 87,900 6,147,506
Bell & Howell Co. (a) 85,800 2,729,513
Black Box Corp. (a) 14,500 971,500
BMC Software, Inc. (a) 46,000 3,677,125
BroadVision, Inc. (a) 43,500 7,397,719
Cambridge Technology 260,800 6,846,000
Partners, Inc. (a)
Ceridian Corp. (a) 1,431,920 30,875,775
Computer Sciences Corp. (a) 531,800 50,321,575
Covad Communications Group, 135,650 7,587,922
Inc.
Dendrite International, Inc. 47,950 1,624,306
(a)
DSET Corp. (a) 53,700 2,007,038
DST Systems, Inc. (a) 71,000 5,418,188
Electronic Data Systems Corp. 534,700 35,791,481
Equant NV (Reg.) (a) 175,600 19,667,200
Fair, Isaac & Co., Inc. 4,500 238,500
Forsoft Ltd. (a)(c) 831,800 10,605,450
Foundry Networks, Inc. 4,800 1,448,100
Go2Net, Inc. (a) 41,200 3,584,400
HotJobs.com Ltd. 46,800 2,044,575
IMS Health, Inc. 385,247 10,473,903
Infonet Services Corp. Class B 207,300 5,441,625
Informix Corp. (a) 523,200 5,951,400
InfoSpace.com, Inc. 1,700 363,800
Intuit, Inc. (a) 1,125,400 67,453,663
ISS Group, Inc. (a) 71,100 5,056,988
J. D. Edwards & Co. (a) 67,700 2,022,538
Lycos, Inc. (a) 113,900 9,062,169
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
COMPUTER SERVICES & SOFTWARE
- - CONTINUED
Micromuse, Inc. (a) 80,100 $ 13,617,000
Microsoft Corp. (a) 2,080,420 242,889,035
National Computer Systems, 228,600 8,601,075
Inc.
National Instrument Corp. (a) 121,700 4,655,025
NCR Corp. (a) 238,450 9,031,294
NetIQ Corp. 87,500 4,555,469
Novell, Inc. (a) 1,700 67,894
Polycom, Inc. (a) 235,600 15,004,775
Proxicom, Inc. 20,800 2,585,700
Rational Software Corp. (a) 391,000 19,207,875
Redback Networks, Inc. 30,600 5,431,500
SalesLogix Corp. 36,000 1,478,250
Software.com, Inc. 18,100 1,737,600
Sykes Enterprises, Inc. (a) 225,600 9,898,200
Symantec Corp. (a) 10,300 603,838
Synopsys, Inc. (a) 36,900 2,463,075
The Bisys Group (a) 92,400 6,029,100
TIBCO Software, Inc. 1,700 260,100
Unisys Corp. (a) 3,444,258 110,000,990
Verio, Inc. (a) 105,300 4,863,544
VeriSign, Inc. (a) 22,000 4,200,625
Viant Corp. 59,800 5,920,200
Vignette Corp. 62,590 10,202,170
Visual Networks, Inc. (a) 76,800 6,086,400
Yahoo!, Inc. (a) 52,400 22,672,825
1,010,822,287
COMPUTERS & OFFICE EQUIPMENT
- - 2.5%
Adaptec, Inc. (a) 49,400 2,463,825
Alteon Websystems, Inc. 15,500 1,360,125
Apple Computer, Inc. (a) 187,600 19,287,625
Canon, Inc. 95,000 3,853,438
Comverse Technology, Inc. (a) 22,200 3,213,450
Dell Computer Corp. (a) 297,800 15,187,800
EMC Corp. (a) 413,100 45,131,175
Hewlett-Packard Co. 577,050 65,747,634
Hitachi Ltd. 173,000 2,800,438
Juniper Networks, Inc. 46,600 15,844,000
RSA Security, Inc. (a) 18,700 1,449,250
SanDisk Corp. (a) 60,800 5,852,000
Seagate Technology, Inc. (a) 342,100 15,929,031
Sun Microsystems, Inc. (a) 158,500 12,273,844
Symbol Technologies, Inc. 581,700 36,974,306
247,367,941
ELECTRONIC INSTRUMENTS - 2.1%
Agilent Technologies, Inc. 271,500 20,990,344
Anadigics, Inc. (a) 21,900 1,033,406
KLA-Tencor Corp. (a) 30,000 3,341,250
Novellus Systems, Inc. (a) 6,800 833,213
PE Corp. - Biosystems Group 793,550 95,473,984
SHARES VALUE (NOTE 1)
Sawtek, Inc. (a) 17,100 $ 1,138,219
Teradyne, Inc. (a) 193,100 12,744,600
Thermo Electron Corp. (a) 1,031,000 15,465,000
Thermo Instrument Systems, 194,500 2,163,813
Inc. (a)
Varian, Inc. (a) 45,800 1,030,500
Waters Corp. (a) 985,900 52,252,700
206,467,029
ELECTRONICS - 4.4%
Analog Devices, Inc. (a) 238,000 22,134,000
Atmel Corp. (a) 327,100 9,669,894
Broadcom Corp. Class A (a) 61,600 16,778,300
Brocade Communications 8,600 1,522,200
Systems, Inc.
Celestica, Inc. (sub. vtg.) 410,400 22,921,352
(a)
Conexant Systems, Inc. (a) 52,200 3,464,775
Dallas Semiconductor Corp. 12,800 824,800
Intel Corp. 399,180 32,857,504
JDS Uniphase Corp. (a) 8,600 1,387,288
KEMET Corp. (a) 98,200 4,425,138
Kyocera Corp. 192,700 49,966,244
Linear Technology Corp. 269,600 19,293,250
Micron Technology, Inc. (a) 8,600 668,650
Motorola, Inc. 745,200 109,730,700
National Semiconductor Corp. 214,900 9,200,406
(a)
PMC-Sierra, Inc. (a) 17,100 2,741,344
QLogic Corp. (a) 39,300 6,283,088
RF Micro Devices, Inc. (a) 12,800 876,000
Sanmina Corp. (a) 46,600 4,654,175
TDK Corp. 59,000 8,145,695
Texas Instruments, Inc. 652,400 63,201,250
Vitesse Semiconductor Corp. 693,300 36,354,919
(a)
Zoran Corp. (a) 109,600 6,110,200
433,211,172
TOTAL TECHNOLOGY 2,397,034,812
TRANSPORTATION - 0.9%
AIR TRANSPORTATION - 0.3%
AHL Services, Inc. (a) 79,300 1,655,388
Continental Airlines, Inc. 89,200 3,958,250
Class B (a)
Ryanair Holdings PLC 55,200 3,042,900
sponsored ADR (a)
Southwest Airlines Co. 1,335,687 21,621,433
30,277,971
RAILROADS - 0.1%
Canadian National Railway Co. 202,500 5,346,997
TRUCKING & FREIGHT - 0.5%
American Freightways Corp. (a) 174,300 2,821,481
C. H. Robinson Worldwide, 470,400 18,698,400
Inc.
Expeditors International of 75,300 3,299,081
Washington, Inc.
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TRANSPORTATION - CONTINUED
TRUCKING & FREIGHT - CONTINUED
Swift Transportation Co., 1,058,500 $ 18,656,062
Inc. (a)
United Parcel Service, Inc. 94,400 6,513,600
Class B
49,988,624
TOTAL TRANSPORTATION 85,613,592
UTILITIES - 13.9%
CELLULAR - 6.4%
Aerial Communications, Inc. 133,200 8,108,550
(a)
AirGate PCS, Inc. 9,200 485,300
ALLTEL Corp. 354,100 29,279,644
Centennial Cellular Corp. (a) 800 66,300
China Telecom (Hong Kong) 1,790,000 11,506,345
Ltd. (a)
Mannesmann AG (Reg.) 220,084 53,598,531
Nextel Communications, Inc. 937,500 96,679,688
Class A (a)
NTT Mobile Communication 433 16,650,587
Network, Inc.
Orange PLC ADR (a) 161,200 26,678,600
Partner Communication Co. 349,000 9,030,375
Ltd. ADR
Sprint Corp. - PCS Group 996,800 102,172,000
Series 1 (a)
Tele Sudeste Celular 144,900 5,623,931
Participacoes SA ADR
TeleCorp PCS, Inc. 3,100 117,800
Telesp Celular Participacoes 249,600 10,576,800
SA ADR
Telesystem International 102,500 3,762,183
Wireless, Inc. (sub. vtg.)
(a)
Triton PCS Holdings, Inc. 390,700 17,776,850
Class A
Vodafone AirTouch PLC 3,952,500 195,648,750
sponsored ADR
VoiceStream Wireless Corp. (a) 246,050 35,015,991
Western Wireless Corp. Class A 21,300 1,421,775
Wireless Facilities, Inc. 101,200 4,414,850
628,614,850
ELECTRIC UTILITY - 0.3%
AES Corp. (a) 150,400 11,242,400
Edison International 29,500 772,531
Illinova Corp. 207,000 7,193,250
Independent Energy Holdings 170,500 5,679,781
PLC sponsored ADR (a)
24,887,962
GAS - 0.1%
Dynegy, Inc. 563,300 13,695,231
TELEPHONE SERVICES - 7.0%
Allegiance Telecom, Inc. (a) 132,000 12,177,000
AT&T Corp. 2,444,022 124,034,117
SHARES VALUE (NOTE 1)
Bell Atlantic Corp. 343,900 $ 21,171,344
BellSouth Corp. 876,000 41,007,750
British Telecommunications PLC 566,446 13,481,417
Cable & Wireless PLC 400,700 21,212,056
sponsored ADR
DDI Corp. 2,217 30,369,864
Deutsche Telekom AG 54,433 3,889,284
Energis PLC (a) 485,135 23,322,724
Esat Telecom Group PLC 75,700 6,926,550
sponsored ADR (a)
Global Crossing Ltd. (a) 235,400 11,770,000
GTE Corp. 295,300 20,837,106
Koninklijke KPN NV 5,600 546,086
MCI WorldCom, Inc. (a) 1,335,091 70,843,266
McLeodUSA, Inc. Class A (a) 674,200 39,693,525
NEXTLINK Communications, Inc. 426,100 35,392,931
Class A (a)
Nippon Telegraph & Telephone 3,359 57,517,124
Corp.
Qwest Communications 152,744 6,567,992
International, Inc. (a)
RCN Corp. (a) 118,600 5,752,100
SBC Communications, Inc. 1,639,606 79,930,793
Telefonica SA sponsored ADR 224,532 17,695,928
Telefonos de Mexico SA de CV 42,700 4,803,750
Series L sponsored ADR
Teligent, Inc. Class A (a) 143,800 8,879,650
Time Warner Telecom, Inc. 47,000 2,347,063
WinStar Communications, Inc. 271,300 20,313,588
(a)
680,483,008
WATER - 0.1%
Vivendi SA (a) 76,484 6,900,331
TOTAL UTILITIES 1,354,581,382
TOTAL COMMON STOCKS 9,256,601,711
(Cost $6,774,814,883)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS -
2.3%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT
U.S. Treasury Bills, yield at - $ 4,100,000 4,048,873
date of purchase 5.21% to
5.21% 3/30/00 (d)
U.S. Treasury Bonds:
5.5% 8/15/28 Aaa 29,500,000 25,157,895
6.125% 11/15/27 Aaa 63,000,000 58,629,060
6.375% 8/15/27 Aaa 66,000,000 63,391,020
6.5% 11/15/26 Aaa 20,000,000 19,500,000
6.75% 8/15/26 Aaa 9,900,000 9,946,431
6.875% 8/15/25 Aaa 36,500,000 37,178,535
7.625% 2/15/25 Aaa 9,500,000 10,528,660
TOTAL U.S. TREASURY OBLIGATIONS 228,380,474
(Cost $244,277,498)
</TABLE>
CASH EQUIVALENTS - 5.1%
SHARES VALUE (NOTE 1)
Central Cash Collateral Fund, 153,522,448 $ 153,522,448
4.97% (b)
Taxable Central Cash Fund, 347,412,077 347,412,077
5.12% (b)
TOTAL CASH EQUIVALENTS 500,934,525
(Cost $500,934,525)
TOTAL INVESTMENT PORTFOLIO - 9,985,916,710
102.1%
(Cost $7,520,026,906)
NET OTHER ASSETS - (2.1)% (205,572,030)
NET ASSETS - 100% $ 9,780,344,680
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT AT VALUE UNREALIZED GAIN/LOSS
PURCHASED
54 S&P 500 Stock Index March 2000 $ 20,036,700 $ 9,477
Contracts
</TABLE>
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS -
0.2%
LEGEND
(a) Non-income producing
(b) The rate quoted is the annualized seven-day yield of the fund at
period end.
(c) Transactions during the period with companies which are or were
affiliates are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE
Forsoft Ltd. $ - $ - $ - $ 10,605,450
PJ America, Inc. 6,620,658 - - 9,016,350
THINK New Ideas, Inc. 4,396,872 4,906,153 - -
TOTALS $ 11,017,530 $ 4,906,153 $ - $ 19,621,800
</TABLE>
(d) Security or a portion of the security was pledged to cover margin
requirements for futures contracts. At the period end, the value of
securities pledged amounted to $570,000.
OTHER INFORMATION
Purchases and sales of securities, other than short-term securities,
aggregated $14,083,874,421 and $12,461,859,475, respectively, of which
long-term U.S. government and government agency obligations aggregated
$215,338,047 and $119,671,688, respectively.
The market value of futures contracts opened and closed during the
period amounted to $1,172,189,323 and $1,169,080,232, 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 $1,037,142 for the
period.
The fund participated in the security lending program. At period end
the value of the securities loaned amounted to $149,787,496. The fund
received cash collateral of $153,522,448 which was invested in cash
equivalents.
Distribution of investments by country of issue, as a percentage of
net assets, is as follows:
United States of America 83.3%
United Kingdom 5.8
Japan 3.9
Canada 1.6
Germany 1.1
Netherlands 1.0
Others (individually less 3.3
than 1%)
100.0%
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $7,608,757,149. Net unrealized appreciation
aggregated $2,377,159,561, of which $2,702,180,417 related to
appreciated investment securities and $325,020,856 related to
depreciated investment securities.
The fund hereby designates approximately $240,382,000 as a capital
gain dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: CONTRAFUND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 9,985,916,710
value (cost $7,520,026,906)
- - See accompanying schedule
Cash 878,201
Foreign currency held at 251,753
value (cost $251,721)
Receivable for investments 38,088,363
sold
Receivable for fund shares 7,542,705
sold
Dividends receivable 3,292,399
Interest receivable 6,853,935
Receivable for daily 40,263
variation on futures
contracts
Other receivables 990,508
TOTAL ASSETS 10,043,854,837
LIABILITIES
Payable for investments $ 103,332,050
purchased
Payable for fund shares 1,809,563
redeemed
Accrued management fee 4,457,922
Distribution fees payable 59,172
Other payables and accrued 329,002
expenses
Collateral on securities 153,522,448
loaned, at value
TOTAL LIABILITIES 263,510,157
NET ASSETS $ 9,780,344,680
Net Assets consist of:
Paid in capital $ 6,122,322,479
Undistributed net investment 34,775,260
income
Accumulated undistributed 1,157,349,006
net realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 2,465,897,935
(depreciation) on
investments and assets and
liabilities in foreign
currencies
NET ASSETS $ 9,780,344,680
INITIAL CLASS: NET ASSET $29.15
VALUE, offering price and
redemption price per share
($9,005,128,880 (divided by)
308,882,521 shares)
SERVICE CLASS : NET ASSET $29.10
VALUE, offering price and
redemption price per share
($775,215,800 (divided by)
26,637,837 shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 43,410,388
Dividends
Interest 44,468,956
Security lending 368,030
TOTAL INCOME 88,247,374
EXPENSES
Management fee $ 45,655,867
Transfer agent fees 5,273,108
Distribution fees - Service 353,057
Class
Accounting and security 957,962
lending fees
Non-interested trustees' 22,556
compensation
Custodian fees and expenses 497,401
Registration fees 121,874
Audit 49,769
Legal 53,322
Miscellaneous 419,654
Total expenses before 53,404,570
reductions
Expense reductions (2,221,270) 51,183,300
NET INVESTMENT INCOME 37,064,074
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities 1,233,779,064
(including realized loss of
$1,671,175 on sales of
investments in affiliated
issuers)
Foreign currency transactions (55,463)
Futures contracts 4,830,650 1,238,554,251
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 533,962,994
Assets and liabilities in (22,455)
foreign currencies
Futures contracts (46,666) 533,893,873
NET GAIN (LOSS) 1,772,448,124
NET INCREASE (DECREASE) IN $ 1,809,512,198
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION Directed $ 2,205,203
brokerage arrangements
Custodian credits 16,067
$ 2,221,270
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 37,064,074 $ 31,078,671
income
Net realized gain (loss) 1,238,554,251 176,892,378
Change in net unrealized 533,893,873 1,158,422,991
appreciation (depreciation)
NET INCREASE (DECREASE) IN 1,809,512,198 1,366,394,040
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (32,779,255) (29,014,734)
From net investment income
From net realized gain (240,381,202) (213,465,544)
TOTAL DISTRIBUTIONS (273,160,457) (242,480,278)
Share transactions - net 1,702,847,259 1,305,641,290
increase (decrease)
TOTAL INCREASE (DECREASE) 3,239,199,000 2,429,555,052
IN NET ASSETS
NET ASSETS
Beginning of period 6,541,145,680 4,111,590,628
End of period (including $ 9,780,344,680 $ 6,541,145,680
undistributed net investment
income of $34,775,260 and
$30,790,900, respectively)
</TABLE>
OTHER INFORMATION:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
Share transactions Initial 75,689,715 $ 1,921,467,155 78,130,341 $ 1,666,803,775
Class Sold
Reinvested 11,119,147 266,192,366 12,506,721 242,005,046
Redeemed (39,357,256) (1,004,869,657) (35,242,800) (730,882,335)
Net increase (decrease) 47,451,606 $ 1,182,789,864 55,394,262 $ 1,177,926,486
Service Class Sold 20,768,738 $ 530,250,534 6,109,863 $ 128,808,187
Reinvested 291,308 6,968,091 24,559 475,234
Redeemed (669,866) (17,161,230) (73,492) (1,568,617)
Net increase (decrease) 20,390,180 $ 520,057,395 6,060,930 $ 127,714,804
Distributions From net $ 31,943,084 $ 28,957,869
investment income Initial
Class
Service Class 836,171 56,865
Total $ 32,779,255 $ 29,014,734
From net realized gain $ 234,249,282 $ 213,047,177
Initial Class
Service Class 6,131,920 418,367
Total $ 240,381,202 $ 213,465,544
$ 273,160,457 $ 242,480,278
</TABLE>
FINANCIAL HIGHLIGHTS - INITIAL CLASS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995 E
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 24.44 $ 19.94 $ 16.56 $ 13.79 $ 10.00
period
Income from Investment
Operations
Net investment income .12 C .13 C .16 C .14 .06
Net realized and unrealized 5.59 5.54 3.73 2.76 3.91
gain (loss)
Total from investment 5.71 5.67 3.89 2.90 3.97
operations
Less Distributions
From net investment income (.12) (.14) (.14) - (.06)
From net realized gain (.88) (1.03) (.37) (.13) (.12)
Total distributions (1.00) (1.17) (.51) (.13) (.18)
Net asset value, end of period $ 29.15 $ 24.44 $ 19.94 $ 16.56 $ 13.79
TOTAL RETURN B, G 24.25% 29.98% 24.14% 21.22% 39.72%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 9,005,129 $ 6,388,592 $ 4,107,868 $ 2,394,103 $ 877,000
(000 omitted)
Ratio of expenses to average .67% .70% .71% .74% .72%
net assets
Ratio of expenses to average .65% F .66% F .68% F .71% F .72%
net assets after expense
reductions
Ratio of net investment .48% .62% .90% 1.33% 1.07%
income to average net assets
Portfolio turnover 172% 201% 142% 178% 132%
</TABLE>
FINANCIAL HIGHLIGHTS - SERVICE CLASS
YEARS ENDED DECEMBER 31, 1999 1998 1997 D
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 24.42 $ 19.93 $ 19.99
period
Income from Investment
Operations
Net investment income C .10 .11 .03
Net realized and unrealized 5.58 5.55 (.09)
gain (loss)
Total from investment 5.68 5.66 (.06)
operations
Less Distributions
From net investment income (.12) (.14) -
From net realized gain (.88) (1.03) -
Total distributions (1.00) (1.17) -
Net asset value, end of period $ 29.10 $ 24.42 $ 19.93
TOTAL RETURN B, G 24.15% 29.94% (0.30)%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 775,216 $ 152,553 $ 3,722
(000 omitted)
Ratio of expenses to average .78% .80% .81% A
net assets
Ratio of expenses to average .75% F .75% F .78% A, F
net assets after expense
reductions
Ratio of net investment .37% .53% 1.14% A
income to average net assets
Portfolio turnover 172% 201% 142%
A ANNUALIZED
B THE TOTAL RETURNS WOULD
HAVE BEEN LOWER HAD CERTAIN
EXPENSES NOT BEEN REDUCED
DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER
SHARE HAS BEEN CALCULATED
BASED ON AVERAGE SHARES
OUTSTANDING DURING THE PERIOD.
D FOR THE PERIOD NOVEMBER 3,
1997 (COMMENCEMENT OF SALE
OF SERVICE CLASS SHARES) TO
DECEMBER 31, 1997.
E FOR THE PERIOD JANUARY 3,
1995 (COMMENCEMENT OF
OPERATIONS OF INITIAL CLASS
SHARES) TO DECEMBER 31, 1995.
F FMR OR THE FUND HAS ENTERED
INTO VARYING ARRANGEMENTS
WITH THIRD PARTIES WHO
EITHER PAID OR REDUCED A
PORTION OF THE CLASS'
EXPENSES.
G TOTAL RETURNS FOR PERIODS
OF LESS THAN ONE YEAR ARE
NOT ANNUALIZED AND DO NOT
REFLECT CHARGES ATTRIBUTABLE
TO YOUR INSURANCE COMPANY'S
SEPARATE ACCOUNT. INCLUSION
OF THESE CHARGES WOULD
REDUCE THE TOTAL RETURNS
SHOWN.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Contrafund Portfolio (the fund) is a fund of Variable Insurance
Products Fund II(the trust) (referred to in this report as Fidelity
Variable Insurance Products: Contrafund Portfolio) and is authorized
to issue an unlimited number of shares. The trust is registered under
the Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust. Shares of the fund may only be purchased by insurance
companies for the purpose of funding variable annuity or variable life
insurance contracts. The fund offers two classes of shares: the fund's
original class of shares (Initial Class shares) and Service Class
shares. Both classes have equal rights and voting privileges, except
for matters affecting a single class. Investment income, realized and
unrealized capital gains and losses, the common expenses of the fund,
and certain fund-level expense reductions, if any, are allocated on a
pro rata basis to each class based on the relative net assets of each
class to the total net assets of the fund. Each class of shares
differs in its respective distribution plan. On October 14, 1999, the
Board of Trustees approved the creation of Service Class 2, a new
class of shares of the fund. The Service Class 2 shares will be
subject to an annual distribution and service fee of .25% of the
class' average net assets. These shares are expected to be available
on or about January 12, 2000.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Foreign securities are valued based
on quotations from the principal market in which such securities are
normally traded. If trading or events occurring in other markets after
the close of the principal market in which foreign securities are
traded, and before the close of the business of the fund, are expected
to materially affect the value of those securities, then they are
valued at their fair value taking this trading or these events into
account. Fair value is determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. 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. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. 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 foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date. Income dividends and capital gain distributions are
declared separately for each class.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, futures transactions, foreign
currency transactions, non-taxable dividends and losses deferred due
to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission (the SEC), the fund, along with
other affiliated entities of Fidelity Management & Research Company
(FMR), may transfer uninvested cash balances into one or more joint
trading accounts. These balances are invested in one or more
repurchase agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
CENTRAL CASH FUNDS. Pursuant to an Exemptive Order issued by the SEC,
the fund may invest in the Taxable Central Cash Fund and the Central
Cash Collateral Fund(the Cash Funds) managed by Fidelity Investments
Money Management, Inc., an affiliate of FMR. The Cash Funds are
open-end money market funds available only to investment companies and
other accounts managed by FMR and its affiliates. The Cash Funds seek
preservation of capital, liquidity, and current income. Income
distributions from the Cash Funds are declared daily and paid monthly
from net interest income. Income distributions earned by the fund are
recorded as either interest income or security lending income in the
accompanying financial statements.
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock market. Buying futures tends to increase the
fund's exposure to the underlying instrument, while selling futures
tends to decrease the fund's exposure to the underlying instrument or
hedge other fund investments. Futures contracts involve, to varying
degrees, risk of loss in excess of the futures variation margin
reflected in the Statement of Assets and Liabilities. The underlying
face amount at value of any open futures contracts at period end is
shown in the schedule of investments under the caption "Futures
Contracts." This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in
the value of the underlying instruments or if the counterparties do
not perform under the contracts' terms. Gains (losses) are realized
upon the expiration or closing of the futures contracts. Futures
contracts are valued at the settlement price established each day by
the board of trade or exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities), and the market value of future contracts
opened and closed, is included under the caption "Other Information"
at the end of the fund's schedule of investments.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .2167% to .5200% for the
period. The annual individual fund fee rate is .30%. 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. For the period, the management
fee was equivalent to an annual rate of .58% of average net assets.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of Trustees has adopted a Distribution and Service
Plan for the Service Class (the Plan) of shares. Under the Plan, the
class pays Fidelity Distributors Corporation (FDC), an affiliate of
FMR, a 12b-1 fee. This fee is based on an annual rate of .10% of
Service Class average net assets. Initial Class shares are not subject
to a 12b-1 fee.
For the period, Service Class paid FDC $353,057, all of which was
reallowed to insurance companies, for the distribution of shares and
providing shareholder support services.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc. (FIIOC), an affiliate of FMR, is the fund's transfer,
dividend disbursing and shareholder servicing agent. FIIOC receives
account fees and asset-based fees that vary according to account size
and type of account. FIIOC pays a portion of the expenses related to
the typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees of
the fund were equivalent to an annual rate of .07% of average net
assets.
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Company, Inc.
(FSC), an affiliate of FMR, maintains the fund's accounting records
and administers the security lending program. The security lending fee
is based on the number and duration of
4. FEES AND OTHER TRANSACTIONS WITH
AFFILIATES - CONTINUED
ACCOUNTING AND SECURITY LENDING FEES - CONTINUED
lending transactions. The accounting fee is based on the level of
average net assets for the month plus out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR. The
commissions paid to these affiliated firms are shown under the caption
"Other Information" at the end of the fund's schedule of investments
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. Information regarding the value of
securities loaned and the value of collateral at period end is
included under the caption "Other Information" at the end of the
fund's schedule of investments.
6. EXPENSE REDUCTIONS.
FMR has directed certain portfolio trades to brokers who paid a
portion of the fund's expenses.
In addition, through an arrangement with the fund's custodian, credits
realized as a result of uninvested cash balances were used to reduce a
portion of the fund's expenses. For the period, the reductions under
these arrangements are shown under the caption "Other Information" on
the fund's Statement of Operations.
7. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI) and its subsidiaries, affiliates of FMR, were the record owners
of approximately 22% of the outstanding shares of the fund. In
addition, two unaffiliated insurance companies were record owners of
35% of the total outstanding shares of the fund.
8. TRANSACTIONS WITH AFFILIATED COMPANIES.
An affiliated company is a company which the fund has ownership of at
least 5% of the voting securities. Information regarding transactions
with affiliated companies is included under "Legend" at the end of the
fund's schedule of investments.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Variable Insurance Products Fund II and
Shareholders of Contrafund Portfolio:
We have audited the accompanying statement of assets and liabilities
of Contrafund Portfolio, (the Fund), one of the funds of Variable
Insurance Products Fund II (the Trust), including the portfolio of
investments, as of December 31, 1999, and the related statements of
operations, changes in net assets, and financial highlights for the
year 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 audit. The statement of changes in net assets
for the year ended December 31, 1998, and the financial highlights for
each of the four years in the period then ended were audited by other
auditors whose report, dated February 12, 1999, expressed an
unqualified opinion on those statements and financial highlights.
We conducted our audit 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, 1999, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. 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 audit
provides 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 Contrafund Portfolio as of December 31, 1999,
and the results of its operations, the changes in its net assets, and
the financial highlights for the year then ended in conformity with
generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 11, 2000
DISTRIBUTIONS
The Board of Trustees of Contrafund Portfolio voted to pay to
shareholders of record at the opening of business on record date, the
following distributions derived from capital gains realized from sales
of portfolio securities, and dividends derived from net investment
income:
PAY DATE RECORD DATE DIVIDENDS CAPITAL GAINS
Initial Class 2/4/00 2/4/00 $.10 $3.63
Service Class 2/4/00 2/4/00 $.10 $3.63
Service Class 2 2/4/00 2/4/00 $.10 $3.63
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
A total of 32.14% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
A total of 59% of the dividends distributed by the Initial Class and
Service Class during the fiscal year qualifies for the
dividends-received deduction for corporate shareholders.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISERS
Fidelity Management & Research (U.K.) Inc.,
London, England
Fidelity Management & Research (Far East) Inc.,
Tokyo, Japan
OFFICERS
Edward C. Johnson 3d, PRESIDENT
Robert C. Pozen, SENIOR VICE PRESIDENT
Bart A. Grenier, VICE PRESIDENT
William Danoff, VICE PRESIDENT
Eric D. Roiter, SECRETARY
Richard A. Silver, TREASURER
Matthew N. Karstetter, DEPUTY TREASURER
John H. Costello, ASSISTANT TREASURER
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Ned C. Lautenbach
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Co.
Boston, MA
CUSTODIAN
Brown Brothers Harriman & Co.
Boston, MA
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK)
VARIABLE INSURANCE PRODUCTS:
INDEX 500 PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1999
CONTENTS
MARKET ENVIRONMENT 3 A review of what happened in
world markets during the
past 12 months.
PERFORMANCE AND INVESTMENT 4 How the fund has done over
SUMMARY time, and an overview of the
fund's investments at the
end of the period.
FUND TALK 5 The manager's review of fund
performance, strategy and
outlook.
INVESTMENTS 6 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 14 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 16 Notes to the financial
statements.
INDEPENDENT AUDITORS' REPORT 19 The auditors' opinion.
DISTRIBUTIONS 20
PROXY VOTING RESULTS 21
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All other marks appearing herein are registered or unregistered
trademarks or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE FUND'S
PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS
STATED ON THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF
FIDELITY OR ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER
CONDITIONS AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH
VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND,
BECAUSE INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND.
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS IN THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
Entering the final year of the 20th century, popular U.S. equity
market indexes had just posted an unprecedented four consecutive years
of double-digit annual returns, while domestic bonds also enjoyed
relatively strong increases. The international story entering 1999,
however, was less positive. In general - with the exception of
European issues - international equities and bonds were greatly
disappointing. Asian and Russian economies had fallen into disarray,
Japan was struggling to implement banking reforms, and emerging
markets were plagued by a host of currency devaluations, loan defaults
and dismal credit outlooks. So who would have thought, just one year
later, that Japan, Russia and emerging markets would be three of
1999's best-performing investments? U.S. equities also continued to
chug along in 1999, extending their indexes' streak of consecutive
double-digit annual increases to five. The stock market was not
without its problems, however. Extremely narrow market breadth,
soaring valuations and rising interest rates - not to mention Y2K -
left many investors unsettled about the prospects for equities
entering the new millennium. Domestic fixed-income alternatives,
meanwhile, fared poorly in 1999 relative to the year prior.
U.S. STOCK MARKETS
In a word, technology was the primary driver of equity market
performance in 1999. While telecommunications, particularly the
wireless segment of the industry, also performed well, nothing
dominated like technology. This incredibly narrow market breadth was
illustrated by the technology-laden NASDAQ Index. Its return of 86.12%
for the one-year period ending December 31, 1999, was the all-time
highest annual return for any major U.S. stock index. Broader indexes,
such as the Standard & Poor's 500 SM, generated much lower returns,
but were still significantly affected by tech's presence. For example,
technology was responsible for approximately 70% of the S&P 500's
12-month return of 21.04%, the index's fifth consecutive annual gain
above 20%. The top 50 stocks in the S&P 500 - the so-called "Nifty
50," many of which were technology shares - accounted for 115% of its
total return. Meanwhile, the remaining 450 stocks fell 3.13%. The Dow
Jones Industrial Average - an index of 30 blue-chip stocks - posted a
27.13% return during the period, its fifth consecutive double-digit
annual return. Despite the strong numbers of these indexes, more
stocks fell than rose in 1999. Growth stocks continued to hammer their
value-oriented peers. But in a turnaround from previous years, mid-
and small-cap growth stocks performed better than their large-cap
brethren did. Conversely, mid-and small-cap value issues posted
negative overall returns in 1999.
FOREIGN STOCK MARKETS
Similar to the domestic equity markets, technology and - perhaps to an
even greater degree than in the U.S. - telecommunications led the
charge in the vastly improved international equity markets. The
recovery of the Japanese stock market in 1999 was nothing short of
remarkable. A renewed emphasis on corporate restructuring and
shareholder value - combined with the Japanese government's
willingness to create more of a free-enterprise market system - proved
wildly successful. For the period, the Morgan Stanley Capital
International Japan Index returned 61.53% and Japan's TOPIX Index was
up 75.89%. While Canadian equity markets didn't get nearly the
attention of their U.S. neighbors, their performance was a great deal
better than the broader American indexes, as the Toronto Stock
Exchange (TSE) 300 returned 39.34% for the 12-month period ending
December 31, 1999. Despite a strong surge in December, European
markets offered mixed results over the past 12 months. In that time,
the Morgan Stanley Capital International Europe Index posted a
relatively tame - at least, in comparison to other developed nations'
stock markets - one-year return of 16.16%.
U.S. BOND MARKETS
Fueled by robust economic growth and a tighter monetary policy,
interest rates moved sharply higher, causing most domestic bonds to
struggle throughout the 12-month period ending December 31, 1999. The
Lehman Brothers Aggregate Bond Index, a popular measure of
taxable-bond performance, fell 0.82% during the period. Treasury
prices had the toughest time of it, falling in response to three
quarter-point interest-rate hikes levied by the Federal Reserve Board,
which erased all of 1998's rate cuts. The Lehman Brothers Long-Term
Treasury Index plunged 8.74% in 1999. Nor were corporate bonds, as
measured by the Lehman Brothers Corporate Bond Index, immune from the
fixed-income fade during the year, falling 1.96%. Government agency
securities also fell into negative territory for the year, as the
Lehman Brothers U.S. Agency Index fell 0.94%. There were a few bright
spots, however. The high-yield market, as measured by the Merrill
Lynch High Yield Master II Index, returned 2.51% during the 12-month
period, while the Lehman Brothers Mortgage-Backed Securities Index was
up 1.86%.
FOREIGN BOND MARKETS
Emerging markets stood as one of the best-performing asset classes in
1999. For the 12-month period ending December 31, 1999, the JP Morgan
Emerging Markets Bond Index Plus was up 25.97%. A year ago, that same
index closed 1998 with a negative 14.35% annual return. A variety of
factors sparked their recovery, including rising commodity prices,
particularly oil; the continuation of a strong U.S. economy;
stable-to-lower interest rates; tame inflation; and greater political
stability. Russia was perhaps the year's biggest comeback story.
Devastated by its devaluation of the ruble and loan defaults in 1998,
Russia steadily demonstrated strong technical improvements that made
it the best-performing country in the index in 1999. Both Brazil and
Mexico enjoyed relatively low inflation and improved economies. Turkey
was the best-performing emerging-market country in December, as the
government's reform plans, IMF financial support, and the announcement
that it would be accepted in the European Union all boosted the
country's prospects. Elsewhere, outside of positive performing
Canadian and Japanese issues - beneficiaries of strong local
currencies - higher rates proved insurmountable for most non-U.S.
developed markets, which produced negative returns in local currency
terms. A markedly weak euro, coupled with firming supply pressures,
felled bond prices in Germany, France and Italy. The Salomon Brothers
Non-U.S. World Government Bond Index fell 5.07% in 1999.
FIDELITY VARIABLE INSURANCE PRODUCTS: INDEX 500 PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the total return figures would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED DECEMBER 31, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
1999
FIDELITY VIP INDEX 500 20.52% 28.16% 21.07%
S&P 500 (registered trademark) 21.04% 28.56% 21.45%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare the fund's returns to the performance of the Standard
& Poor's 500 Index - a market capitalization-weighted index of common
stocks. This benchmark includes reinvested dividends and capital
gains, if any.
UNDERSTANDING PERFORMANCE
How a fund did yesterday is no guarantee of how
it will do tomorrow. The stock market, for example,
has a history of long-term growth and short-term
volatility. In turn, the share price and return of a
fund that invests in stocks will vary. That means if
you sell your shares during a market downturn,
you might lose money. But if you can ride out the
market's ups and downs, you may have a gain.
(checkmark)
Figures for more than one year assume a steady compounded rate of
return and are not the fund's year-by-year results, which fluctuated
over the periods shown. The life of fund figures are from commencement
of operations, August 27, 1992.
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 BE 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 II Index 500 S&P 500
00157 SP001
1992/08/27 10000.00 10000.00
1992/08/31 10014.00 10016.72
1992/09/30 10130.00 10134.92
1992/10/31 10152.00 10170.39
1992/11/30 10498.00 10517.20
1992/12/31 10630.67 10646.56
1993/01/31 10707.47 10735.99
1993/02/28 10856.70 10882.00
1993/03/31 11095.84 11111.61
1993/04/30 10822.25 10842.71
1993/05/31 11103.95 11133.30
1993/06/30 11132.32 11165.58
1993/07/31 11081.66 11120.92
1993/08/31 11501.17 11542.40
1993/09/30 11407.95 11453.53
1993/10/31 11641.01 11690.62
1993/11/30 11527.52 11579.55
1993/12/31 11666.06 11719.67
1994/01/31 12059.53 12118.14
1994/02/28 11732.95 11789.73
1994/03/31 11223.46 11275.70
1994/04/30 11357.65 11420.03
1994/05/31 11533.77 11607.32
1994/06/30 11252.82 11322.94
1994/07/31 11623.93 11694.33
1994/08/31 12087.29 12173.80
1994/09/30 11793.76 11875.54
1994/10/31 12055.84 12142.74
1994/11/30 11617.64 11700.50
1994/12/31 11787.47 11874.02
1995/01/31 12099.87 12181.91
1995/02/28 12563.64 12656.64
1995/03/31 12931.02 13030.14
1995/04/30 13311.22 13413.88
1995/05/31 13834.52 13950.03
1995/06/30 14148.51 14274.09
1995/07/31 14620.55 14747.42
1995/08/31 14656.86 14784.44
1995/09/30 15269.88 15408.34
1995/10/31 15218.62 15353.33
1995/11/30 15880.76 16027.34
1995/12/31 16171.25 16336.03
1996/01/31 16724.46 16892.11
1996/02/29 16880.36 17048.70
1996/03/31 17054.17 17212.88
1996/04/30 17292.62 17466.59
1996/05/31 17733.85 17917.06
1996/06/30 17809.61 17985.32
1996/07/31 17020.75 17190.73
1996/08/31 17370.61 17553.28
1996/09/30 18342.21 18541.18
1996/10/31 18848.06 19052.55
1996/11/30 20260.89 20492.73
1996/12/31 19844.17 20086.77
1997/01/31 21074.26 21341.79
1997/02/28 21231.99 21509.11
1997/03/31 20349.53 20625.30
1997/04/30 21559.17 21856.63
1997/05/31 22870.18 23187.26
1997/06/30 23874.76 24226.05
1997/07/31 25773.31 26153.72
1997/08/31 24330.96 24688.59
1997/09/30 25646.59 26040.78
1997/10/31 24798.69 25171.02
1997/11/30 25920.77 26336.19
1997/12/31 26358.54 26788.38
1998/01/31 26644.25 27084.66
1998/02/28 28537.17 29038.00
1998/03/31 29981.03 30525.04
1998/04/30 30277.94 30832.12
1998/05/31 29736.79 30302.12
1998/06/30 30950.78 31532.99
1998/07/31 30613.17 31197.16
1998/08/31 26183.42 26686.68
1998/09/30 27866.72 28396.22
1998/10/31 30129.49 30705.97
1998/11/30 31944.49 32567.06
1998/12/31 33819.35 34443.58
1999/01/31 35179.40 35884.01
1999/02/28 34072.96 34768.73
1999/03/31 35443.67 36159.83
1999/04/30 36794.90 37560.30
1999/05/31 35911.12 36673.50
1999/06/30 37892.93 38708.88
1999/07/31 36712.12 37500.39
1999/08/31 36517.35 37314.76
1999/09/30 35506.97 36291.96
1999/10/31 37739.55 38588.52
1999/11/30 38494.29 39373.02
1999/12/31 40758.51 41692.10
IMATRL PRASUN SHR__CHT 19991231 20000118 145117 R00000000000092
$10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Index 500 Portfolio
on August 27, 1992, when the fund started. As the chart shows, by
December 31, 1999, the value of the investment would have grown to
$40,759 - a 307.59% increase on the initial investment. For
comparison, look at how the Standard & Poor's 500 Index did over the
same period. With dividends and capital gains, if any, reinvested, the
same $10,000 investment would have grown to $41,692 - a 316.92%
increase.
INVESTMENT SUMMARY
TOP TEN STOCKS AS OF DECEMBER
31, 1999
% OF FUND'S NET ASSETS
Microsoft Corp. 4.8
General Electric Co. 4.1
Cisco Systems, Inc. 2.8
Wal-Mart Stores, Inc. 2.5
Exxon Mobil Corp. 2.2
Intel Corp. 2.2
Lucent Technologies, Inc. 1.9
International Business 1.6
Machines Corp.
Citigroup, Inc. 1.5
America Online, Inc. 1.3
24.9
TOP TEN MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
TECHNOLOGY 28.5
FINANCE 13.1
UTILITIES 11.0
HEALTH 9.1
RETAIL & WHOLESALE 6.6
NONDURABLES 6.1
INDUSTRIAL MACHINERY & 5.8
EQUIPMENT
ENERGY 5.4
MEDIA & LEISURE 4.5
BASIC INDUSTRIES 3.4
FIDELITY VARIABLE INSURANCE PRODUCTS: INDEX 500 PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Dean Barr)
An interview with Dean Barr, who oversees the Index 500 Portfolio's
investment management personnel as Managing Director for Bankers
Trust, sub-adviser of the fund
Q. HOW DID THE FUND PERFORM, DEAN?
A. The fund's performance was in line with the S&P's return of 21.04%
for the 12-month period ending December 31, 1999. This marks the fifth
consecutive year in which the S&P, and hence, the fund, has recorded
an annual return of over 20%.
Q. WITH FIVE STRAIGHT YEARS OF RETURNS EXCEEDING 20%, ONE WOULD THINK
THAT THE STOCK MARKET IS IN GREAT SHAPE. TRUE?
A. Yes and no. Interestingly, the top 50 stocks in the S&P 500, the
so-called "Nifty 50," accounted for 115% of its total return.
Meanwhile, the remaining 450 stocks had a cumulative return of -3.13%.
Also, one single sector - technology - was responsible for
approximately 70% of the S&P's return. This reflects incredibly narrow
market breadth. Overall, more stocks fell than rose in 1999. So are
the double-digit returns masking a hidden bear market? Some believe
so, and that this scenario will lead to more interest rate hikes.
Others believe that this is a natural fallout of the "new economy,"
Internet-centric business and consumer environments. It's too soon to
tell how this will play out in 2000, but it will certainly be
interesting to watch how the dynamics unfold.
Q. LET'S TALK MORE ABOUT TECHNOLOGY, THE FUND'S AND THE
BENCHMARK'S LARGEST SECTOR WEIGHTING . . .
A. In a year in which "dot.com" became part of our everyday lexicon,
technology was paced by the Internet frenzy - from servers to search
engines to semiconductors, and pretty much everything else in between.
In some cases, tech stocks succeeded almost without reason. Excessive
valuations, little to no revenues, questionable fundamentals . . . and
yet, they still managed to produce outstanding returns. Overall,
however, strong current earnings growth in most issues and potential
growth year-over-year is what captured investors' attention and, in
their minds, warranted the lofty valuations. The big winners for the
fund and the index included Microsoft, the largest holding and
single-best performer for each, and other familiar names such as
Cisco, Intel, Oracle and Sun Microsystems.
Q. FINANCE REMAINED THE SECOND-LARGEST SECTOR WEIGHTING.
HOW DID THIS GROUP PERFORM IN 1999?
A. Three interest-rate hikes by the Federal Reserve Board were
especially detrimental to the finance sector, which typically
underperforms in a rising rate environment. Banks were particularly
hard hit, and even companies that beat their earnings estimates and
demonstrated strong fundamentals - such as government-sponsored
mortgage companies Fannie Mae and Freddie Mac - were dragged under.
Some areas of the industry did fare well, however, namely consumer
finance and credit card companies. Among these, American Express was a
true standout. Its credit card business benefited from the vigorous
U.S. economic growth, and it implemented one of the best Internet
strategies of any traditional bricks-and-mortar enterprise.
Q. HEALTH CARE, ONE OF THE HOTTEST SECTORS IN 1998, COOLED
CONSIDERABLY IN 1999. WHAT HAPPENED?
A. Large-cap pharmaceutical stocks, which drove the sector in '98,
were largely responsible for its decline in 1999. Investors became
concerned about weaker sales resulting from the potential loss of
patent protection for many drugs, possible government regulation of
pricing and a poor product pipeline outlook. Names like Pfizer and Eli
Lilly fell greatly from their highs. But again, like the finance
sector, there were some industries within health care that performed
very well - specifically, biotechnology and genomics. These groups
experienced waves of investor interest based on their considerable
growth prospects.
Q. WHAT OTHER SECTORS OF THE MARKET WERE NOTEWORTHY IN 1999?
A. While utilities underperformed as a category, the wireless and
telecommunications subsectors within utilities performed exceptionally
well. Driven by the growth of the Internet and the demand for digital
voice and data communications, wireless and telecom contributed
exceptional returns. One of the most talked-about stocks in 1999,
Qualcomm, resides in this sector. Its stock price increased over
1,800% during the year.
Q. WHAT'S YOUR OUTLOOK FOR THE NEXT FEW MONTHS?
A. I don't see the technology juggernaut slowing to a great degree,
nor do I see the U.S. economy putting on the brakes anytime soon. Of
course, that's fairly dependent upon how hard the Federal Reserve
Board steps on them. But if productivity remains strong, pricing
remains steady and wage pressures don't come to bear, then I foresee a
favorable 2000 for the stock market.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF BANKERS TRUST ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
ANY SUCH VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR
OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 2.
FUND FACTS
GOAL: to provide returns that correspond to
those of the S&P 500 index
START DATE: August 27, 1992
SIZE: as of December 31, 1999, more than
$5.5 billion
MANAGER: Bankers Trust, since 1997
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: INDEX 500 PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
COMMON STOCKS - 98.6%
SHARES VALUE (NOTE 1)
AEROSPACE & DEFENSE - 1.4%
AEROSPACE & DEFENSE - 1.2%
BFGoodrich Co. 50,600 $ 1,391,500
Boeing Co. 416,868 17,326,076
Honeywell International, Inc. 352,462 20,332,652
Lockheed Martin Corp. 182,986 4,002,819
Northrop Grumman Corp. 30,200 1,632,688
Rockwell International Corp. 83,700 4,007,138
Textron, Inc. 65,500 5,023,031
United Technologies Corp. 212,000 13,780,000
67,495,904
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. Class B 149,900 3,981,719
SHIP BUILDING & REPAIR - 0.1%
General Dynamics Corp. 92,900 4,900,475
TOTAL AEROSPACE & DEFENSE 76,378,098
BASIC INDUSTRIES - 3.4%
CHEMICALS & PLASTICS - 1.6%
Air Products & Chemicals, 97,400 3,268,988
Inc.
Ashland, Inc. 31,500 1,037,531
Avery Dennison Corp. 49,400 3,600,025
Dow Chemical Co. 97,100 12,974,988
E. I. du Pont de Nemours and 465,779 30,683,192
Co.
Eastman Chemical Co. 36,375 1,734,633
Engelhard Corp. 55,300 1,043,788
FMC Corp. (a) 13,900 796,644
Great Lakes Chemical Corp. 25,200 962,325
Hercules, Inc. 45,500 1,268,313
Monsanto Co. 286,200 10,195,875
Pactiv Corp. (a) 110,700 1,176,188
PPG Industries, Inc. 74,900 4,685,931
Praxair, Inc. 68,000 3,421,250
Rohm & Haas Co. 92,936 3,781,334
Sealed Air Corp. (a) 44,560 2,308,765
Union Carbide Corp. 61,500 4,105,125
W. R. Grace & Co. (a) 31,300 434,288
87,479,183
IRON & STEEL - 0.1%
Allegheny Technologies, Inc. 40,192 901,808
Bethlehem Steel Corp. (a) 52,600 440,525
Nucor Corp. 48,200 2,641,963
USX - U.S. Steel Group 41,500 1,369,500
Worthington Industries, Inc. 38,050 630,203
5,983,999
METALS & MINING - 0.5%
Alcan Aluminium Ltd. 103,557 4,251,943
Alcoa, Inc. 158,300 13,138,900
Freeport-McMoRan Copper & 65,700 1,387,913
Gold, Inc. Class B (a)
SHARES VALUE (NOTE 1)
Inco Ltd. 81,036 $ 1,882,083
Phelps Dodge Corp. 36,357 2,440,464
Reynolds Metals Co. 28,300 2,168,488
25,269,791
PACKAGING & CONTAINERS - 0.3%
Ball Corp. 12,530 493,369
Bemis Co., Inc. 19,200 669,600
Corning, Inc. 112,300 14,479,681
Crown Cork & Seal Co., Inc. 53,500 1,197,063
Owens-Illinois, Inc. (a) 63,900 1,601,494
Tupperware Corp. 24,400 413,275
18,854,482
PAPER & FOREST PRODUCTS - 0.9%
Boise Cascade Corp. 24,200 980,100
Champion International Corp. 44,900 2,780,994
Fort James Corp. 97,900 2,680,013
Georgia-Pacific Corp. 75,200 3,816,400
International Paper Co. 186,666 10,534,962
Kimberly-Clark Corp. 237,832 15,518,538
Louisiana-Pacific Corp. 52,700 750,975
Mead Corp. 44,200 1,919,938
Potlatch Corp. 17,300 772,013
Temple-Inland, Inc. 24,400 1,608,875
Westvaco Corp. 38,950 1,270,744
Weyerhaeuser Co. 95,000 6,822,188
Willamette Industries, Inc. 45,300 2,103,619
51,559,359
TOTAL BASIC INDUSTRIES 189,146,814
CONSTRUCTION & REAL ESTATE -
0.3%
BUILDING MATERIALS - 0.2%
Armstrong World Industries, 17,800 594,075
Inc.
Crane Co. 27,800 552,525
Fortune Brands, Inc. 80,500 2,661,531
Huttig Building Products, 6,177 30,499
Inc. (a)
Masco Corp. 192,300 4,879,613
Owens Corning 24,400 471,225
Sherwin-Williams Co. 78,700 1,652,700
Vulcan Materials Co. 43,500 1,737,281
Water Pik Technologies, Inc. 4,019 38,432
(a)
12,617,881
CONSTRUCTION - 0.0%
Centex Corp. 26,300 649,281
Fleetwood Enterprises, Inc. 14,800 305,250
Kaufman & Broad Home Corp. 21,700 524,869
Pulte Corp. 16,700 375,750
1,855,150
ENGINEERING - 0.1%
Fluor Corp. 33,300 1,527,638
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
CONSTRUCTION & REAL ESTATE -
CONTINUED
ENGINEERING - CONTINUED
Foster Wheeler Corp. 19,400 $ 172,175
PerkinElmer, Inc. 19,400 808,738
2,508,551
TOTAL CONSTRUCTION & REAL 16,981,582
ESTATE
DURABLES - 2.1%
AUTOS, TIRES, & ACCESSORIES -
1.4%
AutoZone, Inc. (a) 60,850 1,966,216
Cooper Tire & Rubber Co. 35,300 549,356
Cummins Engine Co., Inc. 15,800 763,338
Dana Corp. 72,666 2,175,438
Danaher Corp. 62,100 2,996,325
Delphi Automotive Systems 255,535 4,024,676
Corp.
Eaton Corp. 31,400 2,280,425
Ford Motor Co. 535,000 28,589,063
General Motors Corp. 285,078 20,721,607
Genuine Parts Co. 76,450 1,896,916
Goodyear Tire & Rubber Co. 68,300 1,925,206
Johnson Controls, Inc. 34,200 1,945,125
NACCO Industries, Inc. Class A 2,600 144,463
Navistar International Corp. 28,870 1,367,716
(a)
PACCAR, Inc. 36,090 1,599,238
Pep Boys-Manny, Moe & Jack 22,200 202,575
TRW, Inc. 53,300 2,768,269
75,915,952
CONSUMER DURABLES - 0.3%
Minnesota Mining & 179,800 17,597,925
Manufacturing Co.
Snap-On, Inc. 27,300 725,156
18,323,081
CONSUMER ELECTRONICS - 0.1%
Black & Decker Corp. 48,400 2,528,900
Maytag Corp. 38,600 1,852,800
Whirlpool Corp. 29,800 1,938,863
6,320,563
HOME FURNISHINGS - 0.1%
Leggett & Platt, Inc. 86,300 1,850,056
Newell Rubbermaid, Inc. 120,993 3,508,797
5,358,853
TEXTILES & APPAREL - 0.2%
Liz Claiborne, Inc. 27,500 1,034,688
NIKE, Inc. Class B 128,300 6,358,869
Reebok International Ltd. (a) 24,800 203,050
Russell Corp. 15,200 254,600
Springs Industries, Inc. 7,900 315,506
Class A
VF Corp. 51,900 1,557,000
9,723,713
TOTAL DURABLES 115,642,162
SHARES VALUE (NOTE 1)
ENERGY - 5.4%
ENERGY SERVICES - 0.5%
Baker Hughes, Inc. 141,330 $ 2,976,763
Halliburton Co. 200,800 8,082,200
McDermott International, Inc. 24,200 219,313
Rowan Companies, Inc. (a) 36,200 785,088
Schlumberger Ltd. 242,800 13,657,500
Transocean Sedco Forex, Inc. 92,306 3,109,558
28,830,422
OIL & GAS - 4.9%
Amerada Hess Corp. 41,000 2,326,750
Anadarko Petroleum Corp. 53,900 1,839,338
Apache Corp. 47,000 1,736,063
Atlantic Richfield Co. 143,900 12,447,350
Burlington Resources, Inc. 85,257 2,818,810
Chevron Corp. 290,700 25,181,888
Conoco, Inc. Class B 277,331 6,898,609
Exxon Mobil Corp. 1,529,733 123,239,115
Kerr-McGee Corp. 39,894 2,473,428
Occidental Petroleum Corp. 150,000 3,243,750
Phillips Petroleum Co. 108,000 5,076,000
Royal Dutch Petroleum Co. 949,775 57,402,027
(NY Registry Gilder 1.25)
Sunoco, Inc. 42,000 987,000
Texaco, Inc. 246,200 13,371,738
The Coastal Corp. 93,100 3,299,231
Tosco Corp. 67,200 1,827,000
Union Pacific Resources 107,212 1,366,953
Group, Inc.
Unocal Corp. 104,150 3,495,534
USX - Marathon Group 130,200 3,214,313
272,244,897
TOTAL ENERGY 301,075,319
FINANCE - 13.1%
BANKS - 4.9%
AmSouth Bancorp. 155,500 3,003,094
Bank of America Corp. 756,140 37,948,776
Bank of New York Co., Inc. 323,800 12,952,000
Bank One Corp. 507,999 16,287,718
BB&T Corp. 129,300 3,539,588
Capital One Financial Corp. 90,800 4,375,425
Chase Manhattan Corp. 365,646 28,406,124
Comerica, Inc. 81,900 3,823,706
Fifth Third Bancorp 136,725 10,032,197
First Union Corp. 427,145 14,015,695
Firstar Corp. 439,642 9,287,437
FleetBoston Financial Corp. 411,483 14,324,752
Huntington Bancshares, Inc. 98,104 2,342,233
J. P. Morgan & Co., Inc. 78,400 9,927,400
KeyCorp 198,114 4,383,272
Mellon Financial Corp. 228,300 7,776,469
National City Corp. 279,242 6,614,545
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
FINANCE - CONTINUED
BANKS - CONTINUED
Northern Trust Corp. 98,600 $ 5,225,800
PNC Financial Corp. 133,200 5,927,400
Regions Financial Corp. 91,600 2,301,450
Republic of New York Corp. 46,800 3,369,600
SouthTrust Corp. 79,600 3,009,875
State Street Corp. 67,900 4,960,944
Summit Bancorp 79,700 2,440,813
SunTrust Banks, Inc. 142,800 9,826,425
Synovus Finanical Corp. 105,000 2,086,875
U.S. Bancorp 333,351 7,937,921
Union Planters Corp. 56,700 2,236,106
Wachovia Corp. 88,800 6,038,400
Wells Fargo & Co. 727,400 29,414,238
273,816,278
CREDIT & OTHER FINANCE - 2.7%
American Express Co. 198,279 32,963,884
Associates First Capital 325,148 8,921,248
Corp. Class A
Citigroup, Inc. 1,493,429 82,978,649
Countrywide Credit 49,400 1,247,350
Industries, Inc.
Household International, Inc. 208,182 7,754,780
MBNA Corp. 359,325 9,791,606
Old Kent Financial Corp. 54,600 1,931,475
Providian Financial Corp. 63,300 5,764,256
151,353,248
FEDERAL SPONSORED CREDIT - 0.8%
Fannie Mae 457,700 28,577,644
Freddie Mac 310,400 14,608,200
SLM Holding Corp. 70,100 2,961,725
46,147,569
INSURANCE - 3.0%
Aetna, Inc. 67,200 3,750,600
AFLAC, Inc. 120,200 5,671,938
Allstate Corp. 356,742 8,561,808
American General Corp. 109,452 8,304,670
American International Group, 685,812 74,153,423
Inc.
Aon Corp. 108,025 4,321,000
CIGNA Corp. 83,000 6,686,688
Cincinnati Financial Corp. 68,500 2,136,344
Conseco, Inc. 141,716 2,533,174
Hartford Financial Services 98,500 4,666,438
Group, Inc.
Jefferson-Pilot Corp. 46,400 3,166,800
Lincoln National Corp. 87,300 3,492,000
Loews Corp. 45,700 2,773,419
Marsh & McLennan Companies, 121,050 11,582,972
Inc.
MBIA, Inc. 42,400 2,239,250
MGIC Investment Corp. 46,300 2,786,681
Progressive Corp. 30,800 2,252,250
SAFECO Corp. 57,600 1,432,800
SHARES VALUE (NOTE 1)
St. Paul Companies, Inc. (The) 113,192 $ 3,813,156
The Chubb Corp. 79,900 4,499,369
Torchmark Corp. 56,800 1,650,750
UnumProvident Corp. 100,838 3,233,118
163,708,648
SAVINGS & LOANS - 0.2%
Golden West Financial Corp. 77,400 2,592,900
Washington Mutual, Inc. 258,562 6,722,612
9,315,512
SECURITIES INDUSTRY - 1.5%
Charles Schwab Corp. 367,300 14,095,138
Franklin Resources, Inc. 107,000 3,430,688
Kansas City Southern 46,500 3,470,063
Industries, Inc.
Lehman Brothers Holdings, 52,000 4,403,750
Inc.
Merrill Lynch & Co., Inc. 158,400 13,226,400
Morgan Stanley Dean Witter & 246,656 35,210,144
Co.
PaineWebber Group, Inc. 69,300 2,689,706
T. Rowe Price Associates, 65,300 2,412,019
Inc.
The Bear Stearns Companies, 49,497 2,115,997
Inc.
81,053,905
TOTAL FINANCE 725,395,160
HEALTH - 9.1%
DRUGS & PHARMACEUTICALS - 6.2%
Allergan, Inc. 62,400 3,104,400
ALZA Corp. Class A. (a) 42,300 1,464,638
American Home Products Corp. 583,400 23,007,838
Amgen, Inc. (a) 452,500 27,178,281
Bausch & Lomb, Inc. 23,500 1,608,281
Bristol-Myers Squibb Co. 878,600 56,395,138
Eli Lilly & Co. 482,992 32,118,968
Merck & Co., Inc. 1,035,300 69,429,806
Pfizer, Inc. 1,721,500 55,841,156
Pharmacia & Upjohn, Inc. 226,260 10,181,700
Quintiles Transnational Corp. 51,700 966,144
(a)
Schering-Plough Corp. 655,600 27,658,125
Sigma-Aldrich Corp. 43,400 1,304,713
Warner-Lambert Co. 382,000 31,300,125
Watson Pharmaceuticals, Inc. 39,400 1,411,013
(a)
342,970,326
MEDICAL EQUIPMENT & SUPPLIES
- - 2.5%
Abbott Laboratories 685,600 24,895,850
Baxter International, Inc. 124,500 7,820,156
Becton, Dickinson & Co. 110,900 2,966,575
Biomet, Inc. 60,600 2,424,000
Boston Scientific Corp. (a) 195,000 4,265,625
C. R. Bard, Inc. 29,200 1,547,600
Cardinal Health, Inc. 123,650 5,919,744
Guidant Corp. 137,700 6,471,900
Johnson & Johnson 615,900 57,355,688
Mallinckrodt, Inc. 30,200 960,738
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
HEALTH - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES
- - CONTINUED
McKesson HBOC, Inc. 119,048 $ 2,686,021
Medtronic, Inc. 515,300 18,776,244
Millipore Corp. 18,800 726,150
Pall Corp. 53,300 1,149,281
St. Jude Medical, Inc. (a) 34,229 1,050,402
139,015,974
MEDICAL FACILITIES MANAGEMENT
- - 0.4%
Columbia/HCA Healthcare Corp. 248,912 7,296,233
HEALTHSOUTH Corp. (a) 223,800 1,202,925
Humana, Inc. (a) 70,700 578,856
Manor Care, Inc. (a) 46,200 739,200
Tenet Healthcare Corp. (a) 131,100 3,080,850
United HealthCare Corp. 78,800 4,186,250
Wellpoint Health Networks, 28,500 1,879,219
Inc. (a)
18,963,533
TOTAL HEALTH 500,949,833
INDUSTRIAL MACHINERY &
EQUIPMENT - 5.8%
ELECTRICAL EQUIPMENT - 4.5%
Emerson Electric Co. 192,400 11,038,950
General Electric Co. 1,453,300 224,898,175
General Instrument Corp. (a) 77,400 6,579,000
Scientific-Atlanta, Inc. 34,900 1,941,313
Teledyne Technologies, Inc. 11,483 108,371
(a)
Thomas & Betts Corp. 23,800 758,625
W. W. Grainger, Inc. 40,400 1,931,625
247,256,059
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.2%
Briggs & Stratton Corp. 10,000 536,250
Caterpillar, Inc. 161,900 7,619,419
Cooper Industries, Inc. 40,146 1,623,404
Deere & Co. 101,500 4,402,563
Dover Corp. 91,200 4,138,200
Illinois Tool Works, Inc. 125,800 8,499,363
Ingersoll-Rand Co. 72,400 3,986,525
ITT Industries, Inc. 41,400 1,384,313
Milacron, Inc. 12,800 196,800
Parker-Hannifin Corp. 46,125 2,366,789
The Stanley Works 37,800 1,138,725
Timken Co. 23,784 486,085
Tyco International Ltd. 747,142 29,045,145
65,423,581
POLLUTION CONTROL - 0.1%
Allied Waste Industries, Inc. 75,300 663,581
(a)
Waste Management, Inc. 282,709 4,859,061
5,522,642
TOTAL INDUSTRIAL MACHINERY & 318,202,282
EQUIPMENT
SHARES VALUE (NOTE 1)
MEDIA & LEISURE - 4.5%
BROADCASTING - 2.1%
CBS Corp. (a) 337,608 $ 21,585,812
Clear Channel Communications, 152,600 13,619,550
Inc. (a)
Comcast Corp. Class A 334,600 16,918,213
(special)
MediaOne Group, Inc. (a) 273,700 21,023,581
Time Warner, Inc. 569,840 41,277,785
114,424,941
ENTERTAINMENT - 1.1%
Carnival Corp. 273,900 13,095,844
Viacom, Inc. Class B 307,000 18,554,313
(non-vtg.) (a)
Walt Disney Co. 916,600 26,810,550
58,460,707
LEISURE DURABLES & TOYS - 0.1%
Brunswick Corp. 39,800 885,550
Hasbro, Inc. 85,675 1,633,180
Mattel, Inc. 199,176 2,614,185
5,132,915
LODGING & GAMING - 0.1%
Harrah's Entertainment, Inc. 46,100 1,218,769
(a)
Hilton Hotels Corp. 187,700 1,806,613
Marriott International, Inc. 102,700 3,241,469
Class A
Mirage Resorts, Inc. (a) 88,800 1,359,750
7,626,601
PUBLISHING - 0.6%
American Greetings Corp. 37,600 888,300
Class A
Dow Jones & Co., Inc. 32,300 2,196,400
Gannet Co., Inc. 124,900 10,187,156
Harcourt General, Inc. 26,100 1,050,525
Knight-Ridder, Inc. 40,000 2,380,000
McGraw-Hill Companies, Inc. 86,600 5,336,725
Meredith Corp. 22,400 933,800
The New York Times Co. Class A 77,800 3,821,925
Times Mirror Co. Class A 30,900 2,070,300
Tribune Co. 105,200 5,792,575
34,657,706
RESTAURANTS - 0.5%
Darden Restaurants, Inc. 58,300 1,056,688
McDonald's Corp. 604,900 24,385,031
Tricon Global Restaurants, 68,510 2,646,199
Inc. (a)
Wendy's International, Inc. 52,600 1,084,875
29,172,793
TOTAL MEDIA & LEISURE 249,475,663
NONDURABLES - 6.1%
BEVERAGES - 2.1%
Adolph Coors Co. Class B 15,400 808,500
Anheuser-Busch Companies, 208,500 14,777,438
Inc.
Brown-Forman Corp. Class B 25,300 1,448,425
Coca-Cola Enterprises, Inc. 181,600 3,654,700
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
NONDURABLES - CONTINUED
BEVERAGES - CONTINUED
PepsiCo, Inc. 644,800 $ 22,729,200
Seagram Co. Ltd. 194,100 8,660,507
The Coca-Cola Co. 1,094,000 63,725,500
115,804,270
FOODS - 1.2%
Archer-Daniels-Midland Co. 262,528 3,199,560
Bestfoods 124,600 6,549,288
Campbell Soup Co. 186,700 7,222,956
ConAgra, Inc. 207,700 4,686,231
General Mills, Inc. 135,100 4,829,825
H. J. Heinz Co. 160,050 6,371,991
Hershey Foods Corp. 59,200 2,812,000
Kellogg Co. 172,200 5,305,913
Nabisco Group Holdings Corp. 157,200 1,670,250
Quaker Oats Co. 64,200 4,213,125
Ralston Purina Co. 142,500 3,972,188
Sara Lee Corp. 386,200 8,520,538
Sysco Corp. 147,800 5,847,338
Wm. Wrigley Jr. Co. 58,400 4,843,550
70,044,753
HOUSEHOLD PRODUCTS - 2.3%
Alberto-Culver Co. Class B 16,000 413,000
Avon Products, Inc. 118,300 3,903,900
Clorox Co. 104,700 5,274,263
Colgate-Palmolive Co. 257,500 16,737,500
Gillette Co. 475,100 19,568,181
International Flavors & 43,500 1,642,125
Fragrances, Inc.
Procter & Gamble Co. 582,100 63,776,331
Unilever NV (NY Shares) 268,752 14,630,187
125,945,487
TOBACCO - 0.5%
Philip Morris Companies, Inc. 1,048,000 24,300,500
RJ Reynolds Tobacco Holdings, 1 18
Inc.
UST, Inc. 80,300 2,022,556
26,323,074
TOTAL NONDURABLES 338,117,584
PRECIOUS METALS - 0.1%
Barrick Gold Corp. 170,900 3,041,871
Homestake Mining Co. 100,800 787,500
Newmont Mining Corp. 77,265 1,892,993
Placer Dome, Inc. 152,000 1,633,787
7,356,151
RETAIL & WHOLESALE - 6.6%
APPAREL STORES - 0.5%
Gap, Inc. 382,875 17,612,250
SHARES VALUE (NOTE 1)
The Limited, Inc. 105,740 $ 4,579,864
TJX Companies, Inc. 136,100 2,781,544
24,973,658
DRUG STORES - 0.4%
CVS Corp. 174,900 6,985,069
Longs Drug Stores Corp. 16,500 425,906
Rite Aid Corp. 129,700 1,451,019
Walgreen Co. 449,200 13,139,100
22,001,094
GENERAL MERCHANDISE STORES -
3.4%
Consolidated Stores Corp. (a) 46,300 752,375
Costco Wholesale Corp. (a) 98,539 8,991,684
Dayton Hudson Corp. 193,900 14,239,531
Dillards, Inc. Class A 43,900 886,231
Dollar General Corp. 104,193 2,370,391
Federated Department Stores, 88,800 4,489,950
Inc. (a)
JCPenney Co., Inc. 111,500 2,223,031
Kmart Corp. (a) 208,700 2,100,044
Kohls Corp. (a) 79,500 5,738,906
Nordstrom, Inc. 64,700 1,694,331
Sears, Roebuck & Co. 169,800 5,168,288
The May Department Stores Co. 154,900 4,995,525
Wal-Mart Stores, Inc. 1,971,100 136,252,288
189,902,575
GROCERY STORES - 0.4%
Albertson's, Inc. 193,681 6,246,212
Great Atlantic & Pacific Tea, 16,200 451,575
Inc.
Kroger Co. (a) 364,200 6,874,275
Safeway, Inc. (a) 227,800 8,101,138
SUPERVALU, Inc. 49,600 992,000
Winn-Dixie Stores, Inc. 60,500 1,448,219
24,113,419
RETAIL & WHOLESALE,
MISCELLANEOUS - 1.9%
Bed Bath & Beyond, Inc. (a) 60,300 2,095,425
Best Buy Co., Inc. (a) 92,500 4,642,344
Circuit City Stores, Inc. - 89,700 4,042,106
Circuit City Group
Home Depot, Inc. 1,019,850 69,923,466
IKON Office Solutions, Inc. 57,400 391,038
Lowe's Companies, Inc. 177,400 10,599,650
Office Depot, Inc. (a) 180,400 1,973,125
Staples, Inc. (a) 215,150 4,464,363
Tandy Corp. 83,700 4,116,994
Toys 'R' Us, Inc. (a) 114,700 1,641,644
103,890,155
TOTAL RETAIL & WHOLESALE 364,880,901
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
SERVICES - 0.6%
ADVERTISING - 0.3%
Interpublic Group of 115,800 $ 6,680,213
Companies, Inc.
Omnicom Group, Inc. 79,500 7,950,000
14,630,213
LEASING & RENTAL - 0.0%
Ryder System, Inc. 33,600 821,100
PRINTING - 0.0%
Deluxe Corp. 34,800 954,825
R. R. Donnelley & Sons Co. 57,300 1,421,756
2,376,581
SERVICES - 0.3%
Cendant Corp. (a) 303,941 8,073,433
Dun & Bradstreet Corp. 71,200 2,100,400
Ecolab, Inc. 49,700 1,944,513
H&R Block, Inc. 46,300 2,025,625
Jostens, Inc. 10,300 250,419
National Service Industries, 19,600 578,200
Inc.
Service Corp. International 115,700 802,669
15,775,259
TOTAL SERVICES 33,603,153
TECHNOLOGY - 28.5%
COMMUNICATIONS EQUIPMENT - 6.2%
3Com Corp. (a) 154,000 7,238,000
ADC Telecommunications, Inc. 58,200 4,223,138
(a)
Andrew Corp. (a) 52,212 988,765
Cabletron Systems, Inc. (a) 88,800 2,308,800
Cisco Systems, Inc. (a) 1,448,850 155,208,056
Lucent Technologies, Inc. 1,392,506 104,176,855
Nortel Networks Corp. 592,640 59,747,387
Tellabs, Inc. (a) 174,800 11,219,975
345,110,976
COMPUTER SERVICES & SOFTWARE
- - 10.4%
Adobe Systems, Inc. 54,800 3,685,300
America Online, Inc. (a) 990,200 74,698,213
Autodesk, Inc. 24,500 826,875
Automatic Data Processing, 276,300 14,885,663
Inc.
BMC Software, Inc. (a) 107,000 8,553,313
Ceridian Corp. (a) 57,800 1,246,313
Citrix Systems, Inc. (a) 40,100 4,932,300
Computer Associates 240,012 16,785,839
International, Inc.
Computer Sciences Corp. (a) 71,400 6,756,225
Compuware Corp. (a) 159,300 5,933,925
Electronic Data Systems Corp. 208,500 13,956,469
Equifax, Inc. 61,000 1,437,313
First Data Corp. 187,300 9,236,231
IMS Health, Inc. 144,800 3,936,750
Microsoft Corp. (a) 2,285,600 266,843,749
Novell, Inc. (a) 149,900 5,986,631
SHARES VALUE (NOTE 1)
Oracle Corp. (a) 630,625 $ 70,669,414
Parametric Technology Corp. 120,300 3,255,619
(a)
Paychex, Inc. 109,250 4,370,000
PeopleSoft, Inc. 112,000 2,387,000
Shared Medical Systems Corp. 11,200 570,500
Unisys Corp. (a) 136,600 4,362,663
Yahoo!, Inc. (a) 116,600 50,451,363
575,767,668
COMPUTERS & OFFICE EQUIPMENT
- - 6.7%
Adaptec, Inc. (a) 46,100 2,299,238
Apple Computer, Inc. (a) 66,900 6,878,156
Compaq Computer Corp. 749,062 20,271,490
Comverse Technology, Inc. (a) 32,000 4,632,000
Dell Computer Corp. (a) 1,125,400 57,395,400
EMC Corp. (a) 452,475 49,432,894
Gateway, Inc. (a) 137,600 9,915,800
Hewlett-Packard Co. 452,300 51,533,931
International Business 798,400 86,227,200
Machines Corp.
Lexmark International Group, 57,500 5,203,750
Inc. Class A (a)
Network Appliance, Inc. (a) 67,200 5,581,800
Pitney Bowes, Inc. 117,500 5,676,719
Seagate Technology, Inc. (a) 93,000 4,330,313
Silicon Graphics, Inc. (a) 79,300 778,131
Sun Microsystems, Inc. (a) 691,000 53,509,313
Xerox Corp. 304,600 6,910,613
370,576,748
ELECTRONIC INSTRUMENTS - 0.7%
Applied Materials, Inc. (a) 165,200 20,928,775
KLA-Tencor Corp. (a) 38,600 4,299,075
PE Corp. - Biosystems Group 47,000 5,654,688
Tektronix, Inc. 19,850 771,669
Teradyne, Inc. (a) 76,100 5,022,600
Thermo Electron Corp. (a) 63,800 957,000
37,633,807
ELECTRONICS - 4.3%
Advanced Micro Devices, Inc. 61,400 1,776,763
(a)
Analog Devices, Inc. (a) 76,000 7,068,000
Intel Corp. 1,479,800 121,806,038
LSI Logic Corp. (a) 59,300 4,002,750
Micron Technology, Inc. (a) 105,600 8,210,400
Molex, Inc. 67,200 3,809,400
Motorola, Inc. 268,700 39,566,075
National Semiconductor Corp. 75,000 3,210,938
(a)
Solectron Corp. (a) 122,800 11,681,350
Texas Instruments, Inc. 350,800 33,983,750
Xilinx, Inc. (a) 143,200 6,511,125
241,626,589
COMMON STOCKS - CONTINUED
SHARES VALUE (NOTE 1)
TECHNOLOGY - CONTINUED
PHOTOGRAPHIC EQUIPMENT - 0.2%
Eastman Kodak Co. 139,800 $ 9,261,750
Polaroid Corp. 21,900 411,994
9,673,744
TOTAL TECHNOLOGY 1,580,389,532
TRANSPORTATION - 0.6%
AIR TRANSPORTATION - 0.2%
AMR Corp. (a) 68,400 4,582,800
Delta Air Lines, Inc. 58,800 2,928,975
Southwest Airlines Co. 213,675 3,458,864
US Airways Group, Inc. (a) 33,900 1,086,919
12,057,558
RAILROADS - 0.3%
Burlington Northern Santa Fe 220,054 5,336,310
Corp.
CSX Corp. 95,238 2,988,092
Norfolk Southern Corp. 161,600 3,312,800
Union Pacific Corp. 109,800 4,790,025
16,427,227
TRUCKING & FREIGHT - 0.1%
FDX Corp. (a) 139,540 5,712,419
TOTAL TRANSPORTATION 34,197,204
UTILITIES - 11.0%
CELLULAR - 1.8%
ALLTEL Corp. 136,300 11,270,306
Nextel Communications, Inc. 163,200 16,830,000
Class A (a)
QUALCOMM, Inc. (a) 294,000 51,780,750
Sprint Corp. - PCS Group 190,850 19,562,125
Series 1 (a)
99,443,181
ELECTRIC UTILITY - 1.6%
AES Corp. (a) 93,900 7,019,025
Ameren Corp. 54,400 1,781,600
American Electric Power Co., 88,200 2,833,425
Inc.
Carolina Power & Light Co. 58,800 1,789,725
Central & South West Corp. 89,962 1,799,240
Cinergy Corp. 62,613 1,510,539
CMS Energy Corp. 50,000 1,559,375
Consolidated Edison, Inc. 99,100 3,418,950
Constellation Energy Corp. 59,800 1,734,200
Dominion Resources, Inc. 90,700 3,559,975
DTE Energy Co. 66,600 2,089,575
Duke Energy Corp. 168,407 8,441,401
Edison International 162,600 4,258,088
Entergy Corp. 122,400 3,151,800
SHARES VALUE (NOTE 1)
FirstEnergy Corp. 92,100 $ 2,089,519
Florida Progress Corp. 43,300 1,832,131
FPL Group, Inc. 78,900 3,377,906
GPU, Inc. 47,700 1,428,019
New Century Energies, Inc. 44,100 1,339,538
Niagara Mohawk Holdings, Inc. 99,300 1,383,994
(a)
Northern States Power Co. 54,700 1,066,650
PECO Energy Co. 98,000 3,405,500
PG&E Corp. 168,100 3,446,050
Pinnacle West Capital Corp. 37,800 1,155,263
PP&L Resources, Inc. 59,040 1,350,540
Public Service Enterprise 94,800 3,300,225
Group, Inc.
Reliant Energy, Inc. 119,422 2,731,778
Southern Co. 298,100 7,005,350
Texas Utilities Co. 125,800 4,473,763
Unicom Corp. 99,400 3,329,900
87,663,044
GAS - 0.6%
Columbia Energy Group 36,000 2,277,000
Consolidated Natural Gas Co. 41,100 2,668,931
Eastern Enterprises Co. 12,300 706,481
El Paso Energy Corp. 102,300 3,970,519
Enron Corp. 318,700 14,142,313
NICOR, Inc. 23,900 776,750
ONEOK, Inc. 12,506 314,213
Peoples Energy Corp. 15,300 512,550
Sempra Energy 101,256 1,759,323
Williams Companies, Inc. 181,500 5,547,094
32,675,174
TELEPHONE SERVICES - 7.0%
AT&T Corp. 1,415,305 71,826,729
Bell Atlantic Corp. 687,778 42,341,333
BellSouth Corp. 830,100 38,859,056
CenturyTel, Inc. 61,100 2,894,613
Global Crossing Ltd. (a) 340,925 17,046,250
GTE Corp. 430,400 30,370,100
MCI WorldCom, Inc. (a) 1,254,555 66,569,825
SBC Communications, Inc. 1,510,970 73,659,788
Sprint Corp. - FON Group 387,300 26,070,131
U.S. WEST, Inc. 227,592 16,386,624
386,024,449
TOTAL UTILITIES 605,805,848
TOTAL COMMON STOCKS 5,457,597,286
(Cost $3,569,389,138)
U.S. TREASURY OBLIGATIONS -
1.2%
MOODY'S RATINGS (UNAUDITED) PRINCIPAL AMOUNT VALUE (NOTE 1)
U.S. Treasury Bills, yield at - $ 67,338,000 $ 66,739,941
date of purchase 4.41% to
5.33% 1/6/00 to 3/23/00 (b)
(Cost $66,707,957)
CASH EQUIVALENTS - 3.5%
SHARES
Bankers Trust Institutional 195,553,860 195,553,860
Daily Asset Fund, 5.64% (c)
(Cost $195,553,860)
TOTAL INVESTMENT PORTFOLIO - 5,719,891,087
103.3%
(Cost $3,831,650,955)
NET OTHER ASSETS - (3.3)% (181,156,397)
NET ASSETS - 100% $ 5,538,734,690
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FUTURES CONTRACTS
EXPIRATION DATE UNDERLYING FACE AMOUNT AT VALUE UNREALIZED GAIN/LOSS
PURCHASED
188 S&P 500 Stock Index March 2000 $ 69,757,400 $ 1,171,540
Contracts
</TABLE>
THE FACE VALUE OF FUTURES PURCHASED AS A PERCENTAGE OF NET ASSETS -
1.3%
LEGEND
(a) Non-income producing
(b) Security or portion of the security was pledged to cover margin
requirements for futures contracts. At period end, the value of
securities pledged amounted to $9,500,000.
(c) The rate quoted is the annualized seven-day yield of the fund at
period end.
OTHER INFORMATION
Purchases of securities, other than short-term securities aggregated
$1,335,477,273. Sales of securities, other than short-term securities,
aggregated $352,686,746, of which $189,593,992 represents the value of
securities delivered in redemption of fund shares. The realized gain
(loss) of $(19,766,037) on securities delivered in redemption of fund
shares is not taxable to the fund.
The market value of futures contracts opened and closed during the
period amounted to $1,689,438,572 and $1,744,339,056, respectively.
The fund placed a portion of its portfolio transactions with brokerage
firms which are affiliates of Fidelity Management & Research Company
or Bankers Trust Company. The commissions paid to these affiliated
firms were $0 and $67,430, respectively, for the period.
The fund participated in the security lending program. At period end,
the value of securities loaned amounted to $191,479,679. The fund
received cash collateral of $195,553,860 which was invested in cash
equivalents.
The fund participated in the bank borrowing program. The average daily
loan balance during the period for which loans were outstanding
amounted to $65,685,000. The weighted average interest rate was 5.63%.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $3,840,199,163. Net unrealized appreciation
aggregated $1,879,691,924, of which $2,147,196,458 related to
appreciated investment securities and $267,504,534 related to
depreciated investment securities.
The fund hereby designates approximately $20,392,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
FIDELITY VARIABLE INSURANCE PRODUCTS: INDEX 500 PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 5,719,891,087
value (cost $3,831,650,955)
- - See accompanying schedule
Receivable for investments 939,400
sold
Receivable for fund shares 13,535,853
sold
Dividends receivable 5,192,827
Interest receivable 116,823
Receivable for daily 163,101
variation on futures
contracts
TOTAL ASSETS 5,739,839,091
LIABILITIES
Payable to custodian bank $ 1,066,785
Payable for investments 1,493,996
purchased
Payable for fund shares 1,660,899
redeemed
Accrued management fee and 871,653
sub-advisory fee
Other payables and accrued 457,208
expenses
Collateral on securities 195,553,860
loaned, at value
TOTAL LIABILITIES 201,104,401
NET ASSETS $ 5,538,734,690
Net Assets consist of:
Paid in capital $ 3,581,128,016
Undistributed net investment 51,598,237
income
Accumulated undistributed net 16,596,765
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation 1,889,411,672
(depreciation) on investments
NET ASSETS, for 33,084,429 $ 5,538,734,690
shares outstanding
NET ASSET VALUE, offering $167.41
price and redemption price
per share ($5,538,734,690
(divided by) 33,084,429
shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 59,738,255
Dividends
Interest 4,816,154
Security lending 579,682
TOTAL INCOME 65,134,091
EXPENSES
Management fee and $ 11,596,410
sub-advisory fee
Transfer agent fees 3,177,411
Accounting and security 914,740
lending fees
Non-interested trustees' 13,398
compensation
Registration fees 57,258
Audit 55,052
Legal 54,160
Interest 10,263
Miscellaneous 319,628
Total expenses before 16,198,320
reductions
Expense reductions (2,738,317) 13,460,003
NET INVESTMENT INCOME 51,674,088
REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investment securities (8,978,244)
Foreign currency transactions 9,474
Futures contracts 18,123,881 9,155,111
Change in net unrealized
appreciation (depreciation)
on:
Investment securities 837,600,367
Assets and liabilities in (65)
foreign currencies
Futures contracts (4,938,247) 832,662,055
NET GAIN (LOSS) 841,817,166
NET INCREASE (DECREASE) IN $ 893,491,254
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION $ 2,693,102
Expense reductions FMR
reimbursement
Custodian credits 45,215
$ 2,738,317
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 51,674,088 $ 38,335,034
income
Net realized gain (loss) 9,155,111 16,170,769
Change in net unrealized 832,662,055 661,278,302
appreciation (depreciation)
NET INCREASE (DECREASE) IN 893,491,254 715,784,105
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (39,106,912) (26,060,180)
From net investment income
From net realized gain (26,536,833) (60,359,977)
TOTAL DISTRIBUTIONS (65,643,745) (86,420,157)
Share transactions Net 1,868,929,324 1,653,376,843
proceeds from sales of shares
Reinvestment of distributions 65,643,745 86,420,157
Cost of shares redeemed (995,753,409) (695,135,202)
NET INCREASE (DECREASE) IN 938,819,660 1,044,661,798
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) 1,766,667,169 1,674,025,746
IN NET ASSETS
NET ASSETS
Beginning of period 3,772,067,521 2,098,041,775
End of period (including $ 5,538,734,690 $ 3,772,067,521
undistributed net investment
income of $51,598,237 and
$38,272,966, respectively)
OTHER INFORMATION
Shares
Sold 12,455,112 13,244,133
Issued in reinvestment of 468,884 751,741
distributions
Redeemed (6,545,615) (5,630,148)
Net increase (decrease) 6,378,381 8,365,726
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 141.24 $ 114.40 $ 89.05 $ 75.71 $ 56.22
period
Income from Investment
Operations
Net investment income 1.64 C 1.65 C 1.80 C 1.04 .85
Net realized and unrealized 26.88 29.70 26.67 15.55 19.72
gain (loss)
Total from investment 28.52 31.35 28.47 16.59 20.57
operations
Less Distributions
From net investment income (1.40) (1.36) (1.03) (.91) (.95)
From net realized gain (.95) (3.15) (2.09) (2.34) (.11)
In excess of net realized gain - - - - (.02)
Total distributions (2.35) (4.51) (3.12) (3.25) (1.08)
Net asset value, end of period $ 167.41 $ 141.24 $ 114.40 $ 89.05 $ 75.71
TOTAL RETURN A, B 20.52% 28.31% 32.83% 22.71% 37.19%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 5,538,735 $ 3,772,068 $ 2,098,042 $ 823,243 $ 245,700
(000 omitted)
Ratio of expenses to average .28% D .28% D .28% D .28% D .28% D
net assets
Ratio of net investment 1.09% 1.33% 1.74% 2.26% 2.70%
income to average net assets
Portfolio turnover rate 8% 4% 9% 14% 16%
</TABLE>
A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT
BEEN REDUCED DURING THE PERIODS SHOWN.
C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE
PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD
HAVE BEEN HIGHER.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Index 500 Portfolio (the fund) is a fund of Variable Insurance
Products Fund II (the trust) (referred to in this report as Fidelity
Variable Insurance Products: Index 500 Portfolio) and is authorized to
issue an unlimited number of shares. The trust is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an
open-end management investment company organized as a Massachusetts
business trust. Shares of the fund may only be purchased by insurance
companies for the purpose of funding variable annuity or variable life
insurance contracts. On October 14, 1999, the Board of Trustees
approved the creation of Service Class 2, a new class of shares of the
fund. The Service Class 2 shares will be subject to an annual
distribution and service fee of .25% of the class' average net assets.
These shares are expected to be available on or about January 12,
2000.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities for which exchange quotations are
readily available are valued at the last sale price, or if no sale
price, at the closing bid price. Foreign securities are valued based
on quotations from the principal market in which such securities are
normally traded. If trading or events occurring in other markets after
the close of the principal market in which foreign securities are
traded, and before the close of the business of the fund, are expected
to materially affect the value of those securities, then they are
valued at their fair value taking this trading or these events into
account. Fair value is determined in good faith under consistently
applied procedures under the general supervision of the Board of
Trustees. 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. Short-term securities with remaining maturities of
sixty days or less for which quotations are not readily available are
valued at amortized cost or original cost plus accrued interest, both
of which approximate current value.
FOREIGN CURRENCY TRANSLATION. The accounting records of the fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities denominated in a foreign currency are translated into U.S.
dollars at the prevailing rates of exchange at period end. 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 foreign
currency contracts, disposition of foreign currencies, the difference
between the amount of net investment income accrued and the U.S.
dollar amount actually received, and gains and losses between trade
and settlement date on purchases and sales of securities. The effects
of changes in foreign currency exchange rates on investments in
securities are included with the net realized and unrealized gain or
loss on investment securities.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as the fund is
informed of the ex-dividend date. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the
securities received. Interest income, which includes accretion of
original issue discount, is accrued as earned. Investment income is
recorded net of foreign taxes withheld where recovery of such taxes is
uncertain.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for litigation proceeds, futures transactions, foreign
currency transactions, market discount and losses deferred due to wash
sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments and foreign currency transactions
may include temporary book and tax basis differences which will
reverse in a subsequent period. Any taxable income or gain remaining
at fiscal year end is distributed in the following year.
SECURITY TRANSACTIONS. Security transactions are accounted for as of
trade date. Gains and losses on securities sold are determined on the
basis of identified cost.
2. OPERATING POLICIES.
FOREIGN CURRENCY CONTRACTS. The fund generally uses foreign currency
contracts to facilitate transactions in foreign-denominated
securities. Losses may arise from changes in the value of the foreign
currency or if the counterparties do not perform under the contracts'
terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at
the time of each trade.
2. OPERATING POLICIES - CONTINUED
FUTURES CONTRACTS. The fund may use futures contracts to manage its
exposure to the stock market. Buying futures tends to increase the
fund's exposure to the underlying instrument, while selling futures
tends to decrease the fund's exposure to the underlying instrument or
hedge other fund investments. Futures contracts involve, to varying
degrees, risk of loss in excess of the futures variation margin
reflected in the Statement of Assets and Liabilities. The underlying
face amount at value of any open futures contracts at period end is
shown in the schedule of investments under the caption "Futures
Contracts." This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in
the value of the underlying instruments or if the counterparties do
not perform under the contracts' terms. Gains (losses) are realized
upon the expiration or closing of the futures contracts. Futures
contracts are valued at the settlement price established each day by
the board of trade or exchange on which they are traded.
3. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities), and the market value of future contracts
opened and closed, is included under the caption "Other Information"
at the end of the fund's schedule of investments.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, Fidelity Management
& Research Company (FMR) receives a fee that is computed daily at an
annual rate of .24% of the fund's average net assets.
SUB-ADVISER FEE. FMR and the fund have entered into a sub-advisory
agreement with Bankers Trust Company (Bankers Trust). Bankers Trust
receives a sub-advisory fee for providing investment management and
custodial services to the fund. For these services, FMR pays Bankers
Trust fees at an annual rate of 0.006% of the fund's average net
assets. Prior to October 1, 1999, the sub-advisory fee included fees
for securities lending. Under this arrangement the fund paid Bankers
Trust fees equal to 40% of net income from the fund's securities
lending program. For the period, the fund paid Bankers Trust $125,216
under this arrangement.
Effective October 1, 1999 the fund entered into a separate securities
lending agreement with Bankers Trust. Under the new securities lending
agreement the fund receives at least 70% of net income from the
securities lending program. Bankers Trust will retain no more than 30%
of net income under this agreement. For the period, Bankers Trust
retained $79,914. In addition, shareholders approved a
"manager-of-managers" arrangement, which will allow FMR, with the
approval of the Board of Trustees to hire, terminate, or replace
sub-advisers, and to modify material terms and conditions of the
sub-advisory agreement (including the fees payable thereunder) for the
fund without shareholders approval. The implementation of this
"manager-of-managers" structure, however, is pending an exemptive
order from the SEC.
On March 11, 1999, Bankers Trust announced that it had reached an
agreement with the United States Attorney's Office in the Southern
District of New York to resolve an investigation concerning
inappropriate transfers of unclaimed funds and related recordkeeping
problems that occurred between 1994 and early 1996. Pursuant to its
agreement with the U.S. Attorney's Office, Bankers Trust pleaded
guilty to misstating entries in the bank's books and records and
agreed to pay a $60 million fine to federal authorities. On July 26,
1999, Bankers Trust was formally sentenced in United States District
Court to pay the $60 million fine. Separately, Bankers Trust has
agreed to pay a $3.5 million fine to the State of New York. The events
leading up to the guilty plea and formal sentence did not arise out of
the investment advisory or mutual fund management activities of
Bankers Trust or its affiliates.
As a result of the plea and subsequent sentence, absent an order from
the Securities and Exchange Commission (SEC), Bankers Trust would not
be able to continue to provide investment advisory services to the
funds. The SEC has granted a temporary order to permit Bankers Trust
and its affiliates to continue to provide investment advisory services
to registered investment companies. There is no assurance that the SEC
will grant a permanent order.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc. (FIIOC), an affiliate of FMR, is the fund's transfer,
dividend disbursing and shareholder servicing agent. FIIOC receives
account fees and asset-based fees that vary according to account size
and type of account. FIIOC pays a portion of the expenses related to
the typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees of
the fund were equivalent to an annual rate of .07% of average net
assets.
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Company, Inc.
(FSC) maintains the fund's accounting records and administers the
security lending program. The security lending fee is based on the
number and duration of lending transactions. The accounting fee is
based on the level of average net assets for the month plus
out-of-pocket expenses.
BROKERAGE COMMISSIONS. The fund placed a portion of its portfolio
transactions with brokerage firms which are affiliates of FMR or
Bankers Trust. The commissions paid to these affiliated firms are
shown under the caption "Other Information" at the end of the fund's
schedule of investments.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. Information regarding the value of
securities loaned and the value of collateral at period end is
included under the caption "Other Information" at the end of the
fund's schedule of investments.
6. BANK BORROWINGS.
The fund is permitted to have bank borrowings for temporary or
emergency purposes to fund shareholder redemptions. The fund has
established borrowing arrangements with certain banks. The interest
rate on the borrowings is the bank's base rate, as revised from time
to time. Information regarding the fund's participation in the program
is included under the caption "Other Information" at the end of the
fund's schedule of investments.
7. EXPENSE REDUCTIONS.
FMR voluntarily agreed to reimburse the fund's operating expenses
(excluding interest, taxes, brokerage commissions, extraordinary
expenses and sub-advisory fees paid by the fund associated with
securities lending) above an annual rate of .28% of average net
assets.
In addition, through an arrangement with the fund's custodian, credits
realized as a result of uninvested cash balances were used to reduce a
portion of the fund's expenses. For the period, the reductions under
these arrangements are shown under the caption "Other Information" on
the fund's Statement of Operations.
8. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI) and its subsidiaries, affiliates of FMR, were the record owners
of approximately 26% of the outstanding shares of the fund. In
addition, one unaffiliated insurance company was record owner of 10%
of the total outstanding shares of the fund.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Variable Insurance Products Fund II and
Shareholders of Index 500 Portfolio:
We have audited the accompanying statement of assets and liabilities
of Index 500 Portfolio (the Fund), one of the funds of Variable
Insurance Products Fund II (the Trust), including the portfolio of
investments, as of December 31, 1999, and the related statements of
operations, changes in net assets, and financial highlights for the
year 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 audit. The statement of changes in net assets
for the year ended December 31, 1998, and the financial highlights for
each of the four years in the period then ended were audited by other
auditors whose report, dated February 12, 1999, expressed an
unqualified opinion on those statements and financial highlights.
We conducted our audit 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, 1999, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. 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 audit
provides 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 Index 500 Portfolio as of December 31, 1999, and
the results of its operations, the changes in its net assets, and the
financial highlights for the year then ended in conformity with
generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 11, 2000
DISTRIBUTIONS
The Board of Trustees of Index 500 Portfolio voted to pay to
shareholders of record at the opening of business on record date, the
following distributions derived from capital gains realized from sales
of portfolio securities, and dividends derived from net investment
income:
PAY DATE RECORD DATE DIVIDENDS CAPITAL GAINS
Initial Class 2/11/00 2/11/00 $1.67 $.73
Service Class 2 2/11/00 2/11/00 $1.67 $.73
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20%-rate capital gain
dividends.
A total of 11.21% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax.
A total of 87% of the dividends distributed by the Initial Class
during the fiscal year qualifies for the dividends-received deduction
for corporate shareholders.
PROXY VOTING RESULTS (UNAUDITED)
A special meeting of Index 500 Portfolio's shareholders was held on
September 15, 1999. The results of votes taken among shareholders on
proposals before them are reported below. Each vote reported
represents one dollar of net asset value held on the record date for
the meeting.
PROPOSAL 1(A)
To approve an interim sub-advisory agreement with Bankers Trust
Company for Index 500 Portfolio.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 28,714,620.820 90.257%
Against 888,790.795 2.794%
Abstain 2,210,738.590 6.949%
TOTAL 31,814,150.205 100.000%
PROPOSAL 1(B)
To approve a new sub-advisory agreement with Bankers Trust Company for
Index 500 Portfolio.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 28,644,098.127 90.036%
Against 917,138.304 2.883%
Abstain 2,252,913.774 7.081%
TOTAL 31,814,150.205 100.000%
PROPOSAL 2
To approve a new "manager-of-managers" arrangement for Index 500
Portfolio.
# OF % OF
SHARES VOTED SHARES VOTED
Affirmative 27,934,514.445 87.805%
Against 1,454,672.124 4.573%
Abstain 2,424,963.636 7.622%
TOTAL 31,814,150.205 100.000%
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Bankers Trust Company
New York, NY
OFFICERS
Edward C. Johnson 3d, PRESIDENT
Robert C. Pozen, SENIOR VICE PRESIDENT
Robert Lawrence, VICE PRESIDENT
Eric D. Roiter, SECRETARY
Richard A. Silver, TREASURER
Matthew N. Karstetter, DEPUTY TREASURER
John H. Costello, ASSISTANT TREASURER
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Ned C. Lautenbach
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Co., Inc.
Boston, MA
CUSTODIAN
Bankers Trust Company
New York, NY
(2_FIDELITY_LOGOS)(registered trademark)
FIDELITY(REGISTERED TRADEMARK)
VARIABLE INSURANCE PRODUCTS:
INVESTMENT GRADE BOND PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 1999
CONTENTS
MARKET ENVIRONMENT 3 A review of what happened in
world markets during the
past 12 months.
PERFORMANCE AND INVESTMENT 4 How the fund has done over
SUMMARY time, and an overview of the
fund's investments at the
end of the period.
FUND TALK 5 The manager's review of fund
performance, strategy and
outlook.
INVESTMENTS 6 A complete list of the fund's
investments with their
market values.
FINANCIAL STATEMENTS 12 Statements of assets and
liabilities, operations, and
changes in net assets, as
well as financial highlights.
NOTES 14 Notes to the financial
statements.
INDEPENDENT AUDITORS' REPORT 16 The auditors' opinion.
DISTRIBUTIONS 17
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE
SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND.
THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUND UNLESS PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC,
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
NEITHER THE FUND NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK.
Standard & Poor's, S&P and S&P 500 are registered service marks of The
McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity
Distributors Corporation.
Other third party marks appearing herein are the property of their
respective owners.
All marks appearing herein are registered or unregistered trademarks
or service marks of FMR Corp. or an affiliated company.
This report is printed on recycled paper using soy-based inks.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE FUND'S
PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS
STATED ON THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF
FIDELITY OR ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH
VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER
CONDITIONS AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH
VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND,
BECAUSE INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS
FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON
BEHALF OF ANY FIDELITY FUND.
Entering the final year of the 20th century, popular U.S. equity
market indexes had just posted an unprecedented four consecutive years
of double-digit annual returns, while domestic bonds also enjoyed
relatively strong increases. The international story entering 1999,
however, was less positive. In general - with the exception of
European issues - international equities and bonds were greatly
disappointing. Asian and Russian economies had fallen into disarray,
Japan was struggling to implement banking reforms, and emerging
markets were plagued by a host of currency devaluations, loan defaults
and dismal credit outlooks. So who would have thought, just one year
later, that Japan, Russia and emerging markets would be three of
1999's best-performing investments? U.S. equities also continued to
chug along in 1999, extending their indexes' streak of consecutive
double-digit annual increases to five. The stock market was not
without its problems, however. Extremely narrow market breadth,
soaring valuations and rising interest rates - not to mention Y2K -
left many investors unsettled about the prospects for equities
entering the new millennium. Domestic fixed-income alternatives,
meanwhile, fared poorly in 1999 relative to the year prior.
U.S. STOCK MARKETS
In a word, technology was the primary driver of equity market
performance in 1999. While telecommunications, particularly the
wireless segment of the industry, also performed well, nothing
dominated like technology. This incredibly narrow market breadth was
illustrated by the technology-laden NASDAQ Index. Its return of 86.12%
for the one-year period ending December 31, 1999, was the all-time
highest annual return for any major U.S. stock index. Broader indexes,
such as the Standard & Poor's 500 SM, generated much lower returns,
but were still significantly affected by tech's presence. For example,
technology was responsible for approximately 70% of the S&P 500's
12-month return of 21.04%, the index's fifth consecutive annual gain
above 20%. The top 50 stocks in the S&P 500 - the so-called "Nifty
50," many of which were technology shares - accounted for 115% of its
total return. Meanwhile, the remaining 450 stocks fell 3.13%. The Dow
Jones Industrial Average - an index of 30 blue-chip stocks - posted a
27.13% return during the period, its fifth consecutive double-digit
annual return. Despite the strong numbers of these indexes, more
stocks fell than rose in 1999. Growth stocks continued to hammer their
value-oriented peers. But in a turnaround from previous years, mid-
and small-cap growth stocks performed better than their large-cap
brethren did. Conversely, mid-and small-cap value issues posted
negative overall returns in 1999.
FOREIGN STOCK MARKETS
Similar to the domestic equity markets, technology and - perhaps to an
even greater degree than in the U.S. - telecommunications led the
charge in the vastly improved international equity markets. The
recovery of the Japanese stock market in 1999 was nothing short of
remarkable. A renewed emphasis on corporate restructuring and
shareholder value - combined with the Japanese government's
willingness to create more of a free-enterprise market system - proved
wildly successful. For the period, the Morgan Stanley Capital
International Japan Index returned 61.53% and Japan's TOPIX Index was
up 75.89%. While Canadian equity markets didn't get nearly the
attention of their U.S. neighbors, their performance was a great deal
better than the broader American indexes, as the Toronto Stock
Exchange (TSE) 300 returned 39.34% for the 12-month period ending
December 31, 1999. Despite a strong surge in December, European
markets offered mixed results over the past 12 months. In that time,
the Morgan Stanley Capital International Europe Index posted a
relatively tame - at least, in comparison to other developed nations'
stock markets - one-year return of 16.16%.
U.S. BOND MARKETS
Fueled by robust economic growth and a tighter monetary policy,
interest rates moved sharply higher, causing most domestic bonds to
struggle throughout the 12-month period ending December 31, 1999. The
Lehman Brothers Aggregate Bond Index, a popular measure of
taxable-bond performance, fell 0.82% during the period. Treasury
prices had the toughest time of it, falling in response to three
quarter-point interest-rate hikes levied by the Federal Reserve Board,
which erased all of 1998's rate cuts. The Lehman Brothers Long-Term
Treasury Index plunged 8.74% in 1999. Nor were corporate bonds, as
measured by the Lehman Brothers Corporate Bond Index, immune from the
fixed-income fade during the year, falling 1.96%. Government agency
securities also fell into negative territory for the year, as the
Lehman Brothers U.S. Agency Index fell 0.94%. There were a few bright
spots, however. The high-yield market, as measured by the Merrill
Lynch High Yield Master II Index, returned 2.51% during the 12-month
period, while the Lehman Brothers Mortgage-Backed Securities Index was
up 1.86%.
FOREIGN BOND MARKETS
Emerging markets stood as one of the best-performing asset classes in
1999. For the 12-month period ending December 31, 1999, the JP Morgan
Emerging Markets Bond Index Plus was up 25.97%. A year ago, that same
index closed 1998 with a negative 14.35% annual return. A variety of
factors sparked their recovery, including rising commodity prices,
particularly oil; the continuation of a strong U.S. economy;
stable-to-lower interest rates; tame inflation; and greater political
stability. Russia was perhaps the year's biggest comeback story.
Devastated by its devaluation of the ruble and loan defaults in 1998,
Russia steadily demonstrated strong technical improvements that made
it the best-performing country in the index in 1999. Both Brazil and
Mexico enjoyed relatively low inflation and improved economies. Turkey
was the best-performing emerging-market country in December, as the
government's reform plans, IMF financial support, and the announcement
that it would be accepted in the European Union all boosted the
country's prospects. Elsewhere, outside of positive performing
Canadian and Japanese issues - beneficiaries of strong local
currencies - higher rates proved insurmountable for most non-U.S.
developed markets, which produced negative returns in local currency
terms. A markedly weak euro, coupled with firming supply pressures,
felled bond prices in Germany, France and Italy. The Salomon Brothers
Non-U.S. World Government Bond Index fell 5.07% in 1999.
FIDELITY VARIABLE INSURANCE PRODUCTS: INVESTMENT GRADE BOND PORTFOLIO
PERFORMANCE AND INVESTMENT SUMMARY
PERFORMANCE
There are several ways to evaluate a fund's historical performance.
You can look at the total percentage change in value, the average
annual percentage change or the growth of a hypothetical $10,000
investment. Total return reflects the change in the value of an
investment, assuming reinvestment of the fund's dividend income and
capital gains (the profits earned upon the sale of securities that
have grown in value). If Fidelity had not reimbursed certain fund
expenses, the past 10 year total returns would have been lower.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDEDDECEMBER 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FIDELITY VIP: INVESTMENT -1.05% 7.30% 7.19%
GRADE BOND
LB Aggregate Bond -0.82% 7.73% 7.70%
AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you
what would have happened if the fund had performed at a constant rate
each year.
You can compare these figures to the Lehman Brothers Aggregate Bond
Index - a market value-weighted index of investment-grade fixed-rate
debt issues, including government, corporate, asset-backed, and
mortgage-backed securities, with maturities of one year or more. 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.
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.
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)
$10,000 OVER 10 YEARS
VIP II Investment Grade LB Aggregate Bond
00155 LB001
1989/12/31 10000.00 10000.00
1990/01/31 9977.24 9881.00
1990/02/28 10033.83 9912.62
1990/03/31 10064.30 9919.56
1990/04/30 10068.57 9828.30
1990/05/31 10226.64 10119.22
1990/06/30 10306.42 10282.14
1990/07/31 10408.73 10424.03
1990/08/31 10407.74 10284.35
1990/09/30 10448.43 10369.71
1990/10/31 10449.08 10501.40
1990/11/30 10512.02 10727.18
1990/12/31 10621.44 10894.53
1991/01/31 10642.86 11029.62
1991/02/28 10749.93 11123.37
1991/03/31 10931.95 11200.12
1991/04/30 11092.56 11321.08
1991/05/31 11178.21 11386.74
1991/06/30 11199.63 11381.05
1991/07/31 11295.99 11539.25
1991/08/31 11531.55 11788.50
1991/09/30 11745.69 12027.80
1991/10/31 11874.17 12161.31
1991/11/30 12002.66 12273.19
1991/12/31 12360.93 12637.71
1992/01/31 12238.22 12465.84
1992/02/29 12305.19 12546.86
1992/03/31 12282.80 12476.60
1992/04/30 12372.37 12566.43
1992/05/31 12562.72 12803.94
1992/06/30 12708.27 12980.63
1992/07/31 12965.80 13245.44
1992/08/31 13044.18 13379.22
1992/09/30 13200.93 13538.43
1992/10/31 13032.98 13358.37
1992/11/30 12999.39 13361.04
1992/12/31 13183.46 13573.48
1993/01/31 13459.87 13834.09
1993/02/28 13688.36 14076.19
1993/03/31 13748.50 14135.31
1993/04/30 13832.70 14234.26
1993/05/31 13856.76 14252.76
1993/06/30 14121.38 14510.73
1993/07/31 14217.61 14593.45
1993/08/31 14470.21 14848.83
1993/09/30 14542.38 14888.92
1993/10/31 14614.55 14944.01
1993/11/30 14542.38 14816.99
1993/12/31 14628.72 14897.00
1994/01/31 14794.37 15098.11
1994/02/28 14551.86 14835.40
1994/03/31 14219.69 14468.97
1994/04/30 14091.93 14353.22
1994/05/31 14053.60 14351.78
1994/06/30 14015.27 14320.21
1994/07/31 14245.24 14605.18
1994/08/31 14258.02 14622.70
1994/09/30 14104.70 14407.75
1994/10/31 14117.48 14394.78
1994/11/30 14143.03 14363.12
1994/12/31 14079.15 14462.22
1995/01/31 14283.57 14748.57
1995/02/28 14559.22 15099.59
1995/03/31 14651.87 15191.70
1995/04/30 14850.40 15404.38
1995/05/31 15446.01 16000.53
1995/06/30 15565.13 16117.33
1995/07/31 15512.18 16081.88
1995/08/31 15697.48 16276.47
1995/09/30 15843.08 16434.35
1995/10/31 16054.85 16647.99
1995/11/30 16293.09 16897.71
1995/12/31 16518.09 17134.28
1996/01/31 16623.98 17247.37
1996/02/29 16320.38 16947.26
1996/03/31 16195.06 16828.63
1996/04/30 16097.58 16734.39
1996/05/31 16069.73 16700.92
1996/06/30 16264.68 16924.72
1996/07/31 16306.46 16970.41
1996/08/31 16292.53 16941.56
1996/09/30 16557.11 17236.35
1996/10/31 16919.17 17618.99
1996/11/30 17197.67 17920.28
1996/12/31 17044.50 17753.62
1997/01/31 17086.27 17808.66
1997/02/28 17108.87 17853.18
1997/03/31 16931.27 17655.01
1997/04/30 17182.87 17919.83
1997/05/31 17316.07 18090.07
1997/06/30 17523.27 18305.34
1997/07/31 17996.88 18799.59
1997/08/31 17834.08 18639.79
1997/09/30 18100.48 18915.66
1997/10/31 18337.28 19189.94
1997/11/30 18381.68 19278.21
1997/12/31 18588.88 19472.92
1998/01/31 18825.68 19722.17
1998/02/28 18812.50 19706.40
1998/03/31 18890.56 19773.40
1998/04/30 18984.24 19876.22
1998/05/31 19155.97 20065.04
1998/06/30 19312.09 20235.26
1998/07/31 19358.92 20278.20
1998/08/31 19593.11 20608.26
1998/09/30 20077.08 21090.73
1998/10/31 19967.79 20979.46
1998/11/30 20139.53 21098.28
1998/12/31 20233.20 21161.72
1999/01/31 20404.93 21312.88
1999/02/28 20053.79 20940.76
1999/03/31 20185.51 21056.94
1999/04/30 20251.37 21123.69
1999/05/31 19987.94 20937.80
1999/06/30 19889.15 20870.93
1999/07/31 19806.83 20783.28
1999/08/31 19773.90 20772.72
1999/09/30 20037.33 21013.77
1999/10/31 20070.26 21091.30
1999/11/30 20103.19 21089.83
1999/12/31 20020.87 20991.00
IMATRL PRASUN SHR__CHT 19991231 20000201 161131 R00000000000123
$10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was
invested in Fidelity Variable Insurance Products: Investment Grade
Bond Portfolio on December 31, 1989. By December 31, 1999, the value
of the investment would have grown to $20,021 - a 100.21% increase on
the initial investment. For comparison, look at how the Lehman
Brothers Aggregate Bond Index did over the same period. With dividends
and capital gains, if any, reinvested, the same $10,000 investment
would have grown to $20,991 - a 109.91% increase.
INVESTMENT SUMMARY
TOP FIVE MARKET SECTORS AS OF
DECEMBER 31, 1999
% OF FUND'S NET ASSETS
FINANCE 14.3
UTILITIES 4.9
MEDIA & LEISURE 3.5
CONSTRUCTION & REAL ESTATE 2.5
NONDURABLES 1.9
AVERAGE YEARS TO MATURITY AS
OF DECEMBER 31, 1999
Years 8.8
AVERAGE YEARS TO MATURITY IS BASED ON THE AVERAGE TIME UNTIL PRINCIPAL
PAYMENTS ARE EXPECTED FROM EACH OF THE FUND'S BONDS, WEIGHTED BY
DOLLAR AMOUNT.
QUALITY DIVERSIFICATION AS OF
DECEMBER 31, 1999
(MOODY'S RATINGS) % OF FUND'S INVESTMENTS
Aaa 57.7
Aa 1.5
A 12.9
Baa 21.9
Ba and Below 1.9
TABLE EXCLUDES SHORT-TERM INVESTMENTS. WHERE MOODY'S RATINGS ARE NOT
AVAILABLE, WE HAVE USED S&P RATINGS.
PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO
HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS.
FIDELITY VARIABLE INSURANCE PRODUCTS: INVESTMENT GRADE BOND PORTFOLIO
FUND TALK: THE MANAGER'S OVERVIEW
(photograph of Kevin Grant)
An interview with Kevin Grant, Portfolio Manager of Investment Grade
Bond Portfolio
Q. HOW DID THE FUND PERFORM COMPARED TO ITS BENCHMARK, KEVIN?
A. For the 12-month period that ended December 31, 1999, the fund
performed in line with the Lehman Brothers Aggregate Bond Index, which
returned -0.82 during the same period.
Q. HOW WOULD YOU RECAP THE PERIOD FOR BONDS?
A. It was an uphill battle for bonds, as interest rates ascended
sharply during the first six months of 1999, sending Treasury prices
plummeting and marking the rebound from 1998's flight to safety in
response to financial crises in the Far East. As you know, it's quite
a challenge to get any bond fund to post positive returns in a rising
interest-rate environment. So, given the circumstances, I'd say we
fared reasonably well overall. Sector allocation allowed us to reap
the rewards of a strong recovery in the spread sectors, namely
corporate bonds and mortgage securities, which benefited from
investors seeking higher-yielding alternatives to Treasuries. All
spread sectors outperformed comparable duration Treasuries during this
time frame; thus, the fund benefited from its overexposure to
corporates and mortgages relative to the index. In the past six
months, we saw a more moderate rise in interest rates, based on fears
of inflation and the threat of the Federal Reserve Board further
tightening monetary policy. During the summer, widespread concern
about supply pressures related to the millennium changeover created
waves in the corporate bond market. Those fears proved unfounded in
the fall, with rising rates having a lot to do with keeping supply
contained. Similarly, mortgages lost some ground in the summer but,
like corporates, they bounced back strongly in the fourth quarter -
spurred by declining interest-rate volatility and favorable prepayment
levels - and widening their performance lead over Treasuries.
Q. HOW DID THE FUND'S POSITIONING IN CORPORATE BONDS AFFECT
PERFORMANCE?
A. We really didn't believe the supply scare to begin with, so, when
yield spreads widened relative to Treasuries, we viewed it as an
opportunity to add securities that we liked. We did, however, give up
some returns at this time as a result of our overweighting in
corporates. Our positioning within certain areas of the sector, such
as media and telecommunications, were particularly beneficial to the
fund. We also got a lift from avoiding many of the commodity
industrials, such as chemicals, that struggled during the period.
Additionally, our energy-related positions - many of which we acquired
early in the period as oil prices bottomed - appreciated nicely,
adding to fund returns.
Q. WHAT ABOUT THE FUND'S MORTGAGE SECURITIES HOLDINGS?
A. Mortgage securities helped fend off the negative sentiment that
pervaded the period, adding appreciably to performance. Our stake in
premium mortgages - those issues priced above face value, or par -
helped, as these bonds benefited from a sharp falloff in prepayment
activity influenced by higher interest rates. Discount mortgages also
worked out well for the fund due to positive technical factors.
Refinancing activity slowed considerably, yet housing turnover
remained high as homeowners continued to trade up to bigger homes -
fueled in large part by the strong economy. Prepayments on discount
mortgages, thus, ran faster than normal, which was a big positive
since the bonds get prepaid at par. Toward the end of the period, with
housing turnover heading into a seasonal slowdown, I lightened up a
bit on discount issues and moved to more current-coupon bonds for the
additional yield and potential for price performance.
Q. WHAT OTHER FACTORS INFLUENCED PERFORMANCE?
A. Holdings in government agencies - specifically higher-yielding
callable issues - took on a more meaningful role in the fund as I
began to substitute them for high-grade corporates. Agencies over the
past year cheapened considerably - due in large part to supply reasons
- - and added value by offering returns competitive with high-quality
corporate bonds but with less risk.
Q. WHAT'S YOUR OUTLOOK?
A. I'm still positive on the spread sectors. In general, mortgages
remain relatively cheap and, given that interest rates have risen and
the housing market has cooled, supply pressures and concerns over
prepayments have eased considerably. With respect to corporates,
earnings and cash flows are still quite good, so companies should
continue to do well from a bondholder's perspective. There's also
growing sentiment shared among corporate treasurers these days to
carry less debt on their balance sheets. Then, there's the boundless
value added from the Internet. Collectively, these factors paint a
fairly decent picture going forward.
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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 2.
FUND FACTS
GOAL: seeks to provide a high rate of income
consistent with reasonable risk by investing in a
broad range of investment-grade fixed-income
securities; in addition, the fund seeks to
protect capital
START DATE: December 5, 1988
SIZE: as of December 31, 1999, more than
$658 million
MANAGER: Kevin Grant, since 1997; joined
Fidelity in 1993
(checkmark)
FIDELITY VARIABLE INSURANCE PRODUCTS: INVESTMENT GRADE BOND PORTFOLIO
INVESTMENTS DECEMBER 31, 1999
Showing Percentage of Net Assets
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
NONCONVERTIBLE BONDS - 35.3%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
AEROSPACE & DEFENSE - 0.1%
DEFENSE ELECTRONICS - 0.1%
Raytheon Co. 6.45% 8/15/02 Baa2 $ 830,000 $ 807,432
BASIC INDUSTRIES - 0.7%
CHEMICALS & PLASTICS - 0.7%
Monsanto Co. 6% 12/1/05 (b) A2 5,000,000 4,666,550
PAPER & FOREST PRODUCTS - 0.0%
Fort James Corp. 6.625% Baa2 350,000 337,442
9/15/04
TOTAL BASIC INDUSTRIES 5,003,992
CONSTRUCTION & REAL ESTATE -
2.5%
REAL ESTATE - 0.4%
Cabot Industrial Property LP Baa2 1,325,000 1,272,398
7.125% 5/1/04
Duke Realty LP 7.3% 6/30/03 Baa1 1,500,000 1,477,725
2,750,123
REAL ESTATE INVESTMENT TRUSTS
- - 2.1%
CenterPoint Properties Trust Baa2 510,000 469,996
6.75% 4/1/05
Equity Office Properties Trust:
6.5% 1/15/04 Baa1 5,000,000 4,768,400
6.625% 2/15/05 Baa1 4,500,000 4,244,400
6.75% 2/15/08 Baa1 4,020,000 3,697,154
ProLogis Trust 6.7% 4/15/04 Baa1 565,000 533,925
13,713,875
TOTAL CONSTRUCTION & REAL 16,463,998
ESTATE
ENERGY - 1.7%
OIL & GAS - 1.7%
Anadarko Petroleum Corp. 7.2% Baa1 2,490,000 2,249,317
3/15/29
Apache Corp.:
7.625% 7/1/19 Baa1 210,000 202,440
7.7% 3/15/26 Baa1 550,000 520,762
Apache Finance Property Ltd. Baa1 940,000 864,988
6.5% 12/15/07
Conoco, Inc. 5.9% 4/15/04 A3 850,000 809,540
Petro-Canada 7% 11/15/28 A3 2,115,000 1,864,140
Ras Laffan Liquid Natural Gas Baa3 4,000,000 3,770,400
Co. Ltd. yankee 8.294%
3/15/14 (b)
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
YPF Sociedad Anonima:
7.75% 8/27/07 B1 $ 190,000 $ 182,630
8% 2/15/04 B1 380,000 376,246
10,840,463
FINANCE - 14.3%
BANKS - 5.9%
ABN-Amro Bank NV, Chicago A1 1,000,000 989,700
6.625% 10/31/01
Banc One Corp. 7.25% 8/1/02 A1 1,000,000 1,003,690
Bank of Montreal 6.1% 9/15/05 A1 3,000,000 2,782,800
Barclays Bank PLC yankee A1 2,700,000 2,651,886
5.95% 7/15/01
Capital One Bank 6.375% Baa2 1,130,000 1,084,009
2/15/03
Capital One Financial Corp. Baa3 1,290,000 1,176,880
7.125% 8/1/08
Citicorp 7.2% 6/15/07 A1 7,600,000 7,454,764
Fleet Boston Corp. 7.375% A3 6,000,000 5,872,500
12/1/09
Kansallis-Osake-Pankki (NY A2 260,000 274,537
Branch) yankee 10% 5/1/02
Korea Development Bank:
6.625% 11/21/03 Baa2 1,635,000 1,568,701
7.375% 9/17/04 Baa2 1,320,000 1,293,600
yankee 6.5% 11/15/02 Baa2 240,000 231,600
MBNA Corp.:
6.34% 6/2/03 Baa2 350,000 335,020
6.875% 11/15/02 Baa2 1,750,000 1,722,245
NB Capital Trust IV 8.25% Aa2 1,990,000 1,907,893
4/15/27
Providian National Bank 6.75% Baa3 3,000,000 2,920,380
3/15/02
Sanwa Finance Aruba AEC 8.35% Baa1 4,700,000 4,717,531
7/15/09
Union Planters Corp. 6.75% Baa2 400,000 376,228
11/1/05
Union Planters National Bank A3 500,000 502,210
6.81% 8/20/01
38,866,174
CREDIT & OTHER FINANCE - 7.6%
Ahmanson Capital Trust I A3 1,125,000 1,069,380
8.36% 12/1/26 (b)
Associates Corp. of North
America:
6% 4/15/03 Aa3 1,150,000 1,113,637
6% 7/15/05 Aa3 5,000,000 4,712,200
AT&T Capital Corp. 7.5% A1 2,530,000 2,548,191
11/15/00
Bank of New York Co., Inc. A1 1,000,000 934,860
Capital I 7.97% 12/31/26
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FINANCE - CONTINUED
CREDIT & OTHER FINANCE -
CONTINUED
BankBoston Capital Trust II A2 $ 580,000 $ 520,591
7.75% 12/15/26
BanPonce Trust I 8.327% 2/1/27 A3 750,000 685,395
Chase Capital I 7.67% 12/1/26 Aa3 1,000,000 903,540
Chrysler Financial Corp. A1 4,400,000 4,308,964
5.69% 11/15/01
ERP Operating LP:
6.55% 11/15/01 A3 1,150,000 1,131,577
7.1% 6/23/04 A3 1,000,000 977,130
Finova Capital Corp. 6.27% Baa1 400,000 397,588
9/29/00
First Security Capital I A3 510,000 475,085
8.41% 12/15/26
Fleet Capital Trust II 7.92% A2 400,000 367,956
12/11/26
Ford Motor Credit Co. 6.5% A1 7,000,000 6,926,500
2/28/02
GS Escrow Corp. 7.125% 8/1/05 Ba1 6,250,000 5,596,813
KeyCorp Institutional Capital A1 800,000 724,304
A 7.826% 12/1/26
Newcourt Credit Group, Inc. A1 1,490,000 1,453,987
6.875% 2/16/05
PNC Institutional Capital A2 1,000,000 956,620
Trust 8.315% 5/15/27 (b)
Sears Credit Account Master Aaa 333,333 334,060
Trust II 7% 1/15/04
Spieker Properties LP:
6.75% 1/15/08 Baa2 7,000,000 6,392,470
6.8% 5/1/04 Baa2 705,000 678,083
Sprint Capital Corp.:
5.7% 11/15/03 Baa1 1,480,000 1,407,820
5.875% 5/1/04 Baa1 3,080,000 2,917,807
6.875% 11/15/28 Baa1 1,590,000 1,412,715
Trizec Finance Ltd. yankee Baa3 810,000 805,950
10.875% 10/15/05
TXU Eastern Funding 6.75% Baa1 290,000 266,562
5/15/09
50,019,785
INSURANCE - 0.1%
Executive Risk Capital Trust Baa3 750,000 719,790
8.675% 2/1/27
SAVINGS & LOANS - 0.3%
Great Western Finance Trust A3 1,000,000 934,680
II 8.206% 2/1/27
Long Island Savings Bank FSB Baa3 750,000 740,288
6.2% 4/2/01
1,674,968
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
SECURITIES INDUSTRY - 0.4%
Amvescap PLC yankee 6.6% A3 $ 2,900,000 $ 2,738,499
5/15/05
TOTAL FINANCE 94,019,216
INDUSTRIAL MACHINERY &
EQUIPMENT - 1.1%
INDUSTRIAL MACHINERY &
EQUIPMENT - 0.7%
Tyco International Group SA
yankee:
6.875% 1/15/29 Baa1 4,000,000 3,399,480
6.125% 6/15/01 Baa1 1,000,000 983,080
4,382,560
POLLUTION CONTROL - 0.4%
WMX Technologies, Inc. 7.1% Ba1 3,000,000 2,779,950
8/1/26
TOTAL INDUSTRIAL MACHINERY & 7,162,510
EQUIPMENT
MEDIA & LEISURE - 3.5%
BROADCASTING - 2.0%
Clear Channel Communications, Baa3 3,000,000 2,706,000
Inc. 7.25% 10/15/27
Continental Cablevision, Inc.:
8.3% 5/15/06 Baa2 1,260,000 1,302,298
9% 9/1/08 Baa2 910,000 990,053
Cox Communications, Inc. Baa2 960,000 969,331
7.75% 8/15/06
Nielsen Media Research, Inc. Baa2 1,190,000 1,159,878
7.6% 6/15/09
TCI Communications, Inc.:
8.25% 1/15/03 A2 90,000 93,131
8.75% 8/1/15 A2 1,230,000 1,341,893
9.8% 2/1/12 A2 1,255,000 1,466,267
TCI Communications Financing A3 1,500,000 1,649,070
III 9.65% 3/31/27
Time Warner, Inc. 8.18% Baa3 1,240,000 1,274,422
8/15/07
12,952,343
PUBLISHING - 1.5%
News America Holdings, Inc. Baa3 640,000 659,910
8.5% 2/15/05
News America, Inc. 6.625% Baa3 210,000 195,145
1/9/08
Time Warner Entertainment Co.
LP:
7.25% 9/1/08 Baa2 760,000 740,012
8.375% 3/15/23 Baa2 6,920,000 7,194,932
8.375% 7/15/33 Baa2 1,200,000 1,244,388
10,034,387
TOTAL MEDIA & LEISURE 22,986,730
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
NONDURABLES - 1.9%
BEVERAGES - 1.0%
Seagram JE & Sons, Inc. Baa3 $ 7,250,000 $ 6,909,250
6.625% 12/15/05
FOODS - 0.2%
ConAgra, Inc. 7.125% 10/1/26 Baa1 1,270,000 1,203,668
TOBACCO - 0.7%
Philip Morris Companies, Inc. A2 3,000,000 2,955,300
6.95% 6/1/06
RJ Reynolds Tobacco Holdings, Baa2 1,800,000 1,682,046
Inc. 7.375% 5/15/03
4,637,346
TOTAL NONDURABLES 12,750,264
RETAIL & WHOLESALE - 1.7%
DRUG STORES - 0.6%
Rite Aid Corp.:
6% 12/15/00 (b) B1 465,000 404,550
6.5% 12/15/05 (b) B1 4,215,000 3,034,800
7.125% 1/15/07 B1 790,000 592,500
4,031,850
GENERAL MERCHANDISE STORES -
0.6%
Dayton Hudson Corp. 6.4% A3 500,000 489,260
2/15/03
Federated Department Stores, Baa1 3,000,000 3,083,070
Inc. 8.5% 6/15/03
3,572,330
GROCERY STORES - 0.1%
Kroger Co. 6% 7/1/00 Baa3 530,000 526,534
RETAIL & WHOLESALE,
MISCELLANEOUS - 0.4%
USA Networks, Inc./ USANi LLC Baa3 3,000,000 2,864,460
6.75% 11/15/05
TOTAL RETAIL & WHOLESALE 10,995,174
TECHNOLOGY - 1.5%
COMPUTERS & OFFICE EQUIPMENT
- - 1.5%
Comdisco, Inc.:
5.95% 4/30/02 Baa1 3,000,000 2,889,270
6.375% 11/30/01 Baa1 3,200,000 3,138,016
6.45% 11/13/00 Baa1 3,000,000 2,988,300
7.25% 9/1/02 Baa1 1,000,000 988,540
10,004,126
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
TRANSPORTATION - 1.4%
AIR TRANSPORTATION - 0.7%
Continental Airlines, Inc.
pass thru trust certificates:
7.434% 3/15/06 Baa1 $ 550,000 $ 537,020
7.73% 9/15/12 Baa1 355,000 346,125
Delta Air Lines, Inc.:
equipment trust certificate Baa1 375,392 374,274
8.54% 1/2/07
7.7% 12/15/05 (b) Baa3 2,300,000 2,263,200
United Air Lines, Inc. 9% Baa3 1,100,000 1,134,034
12/15/03
4,654,653
RAILROADS - 0.7%
Burlington Northern Santa Fe Baa2 3,000,000 2,922,960
Corp. 6.53% 7/15/37
Norfolk Southern Corp. 7.05% Baa1 1,700,000 1,685,193
5/1/37
4,608,153
TOTAL TRANSPORTATION 9,262,806
UTILITIES - 4.9%
CELLULAR - 1.2%
Cable & Wireless Baa1 7,825,000 7,730,239
Communications PLC 6.375%
3/6/03
ELECTRIC UTILITY - 1.2%
Avon Energy Partners Holdings:
6.46% 3/4/08 (b) Baa2 1,500,000 1,337,655
7.05% 12/11/07 (b) Baa2 3,000,000 2,786,640
DR Investments UK PLC yankee A2 1,500,000 1,489,905
7.1% 5/15/02 (b)
Israel Electric Corp. Ltd. A3 1,900,000 1,636,508
7.75% 12/15/27 (b)
Texas Utilities Co. 6.375% Baa3 700,000 634,193
1/1/08
7,884,901
GAS - 0.5%
CMS Panhandle Holding Co.:
6.125% 3/15/04 Baa3 1,350,000 1,279,395
7% 7/15/29 Baa3 1,000,000 868,240
Southwest Gas Corp. 9.75% Baa2 1,000,000 1,046,130
6/15/02
3,193,765
TELEPHONE SERVICES - 2.0%
Cable & Wireless Optus Ltd. Baa2 3,000,000 2,977,470
8.125% 6/15/09 (b)
MCI WorldCom, Inc. 6.4% A3 2,500,000 2,394,575
8/15/05
Telecomunicaciones de Puerto Baa2 1,730,000 1,631,390
Rico, Inc. 6.65% 5/15/06
NONCONVERTIBLE BONDS -
CONTINUED
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
UTILITIES - CONTINUED
TELEPHONE SERVICES - CONTINUED
Teleglobe Canada, Inc.:
7.2% 7/20/09 Baa1 $ 3,273,000 $ 3,074,394
7.7% 7/20/29 Baa1 3,526,000 3,226,995
13,304,824
TOTAL UTILITIES 32,113,729
TOTAL NONCONVERTIBLE BONDS 232,410,440
(Cost $244,819,481)
U.S. GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS - 18.2%
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 3.4%
Fannie Mae:
6.15% 1/13/00 Aaa 525,000 525,000
6.5% 4/29/09 Aaa 7,160,000 6,700,185
Federal Agricultural Mortgage Aaa 10,000 10,025
Corp. 7.01% 2/10/05
Federal Home Loan Bank:
6.46% 12/15/04 Aaa 1,745,000 1,714,742
7.59% 3/10/05 Aaa 10,000 10,273
Freddie Mac:
6.25% 7/15/04 Aaa 7,765,000 7,591,530
6.77% 9/15/02 Aaa 150,000 150,281
8% 1/26/05 Aaa 520,000 542,911
8.115% 1/31/05 Aaa 1,140,000 1,195,928
Government Loan Trusts Aaa 1,564,538 1,629,718
(assets of Trust guaranteed
by U.S. Government through
Agency for International
Development) 8.5% 4/1/06
Government Trust Certificates
(assets of Trust guaranteed
by U.S. Government through
Defense Security Assistance
Agency):
Class 1-C, 9.25% 11/15/01 Aaa 504,595 518,215
Class 2-E, 9.4% 5/15/02 Aaa 401,682 412,367
Class T-3, 9.625% 5/15/02 Aaa 23,725 24,426
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Guaranteed Export Trust Aaa $ 4,444 $ 4,276
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank): Series
1993-C, 5.2% 10/15/04
Series 1993-D, 5.23% 5/15/05 Aaa 9,361 8,950
Series 1994-A, 7.12% 4/15/06 Aaa 6,440 6,439
Guaranteed Trade Trust Aaa 6,472 6,569
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994-B, 7.5% 1/26/06
Israel Export Trust Aaa 8,235 8,249
Certificates (assets of
Trust guaranteed by U.S.
Government through
Export-Import Bank) Series
1994-1, 6.88% 1/26/03
Overseas Private Investment Aaa 106,925 105,845
Corp. U.S. Government
guaranteed participation
certificate Series
1994-195, 6.08% 8/15/04
(callable)
Private Export Funding Corp.
secured:
5.65% 3/15/03 Aaa 141,750 139,519
6.86% 4/30/04 Aaa 1,031,324 1,028,723
TOTAL U.S. GOVERNMENT AGENCY 22,334,171
OBLIGATIONS
U.S. TREASURY OBLIGATIONS -
14.8%
U.S. Treasury Bonds:
6.125% 8/15/29 Aaa 9,100,000 8,674,848
6.375% 8/15/27 Aaa 2,000,000 1,920,940
6.875% 8/15/25 Aaa 735,000 748,664
8.875% 8/15/17 Aaa 13,940,000 16,847,745
9.875% 11/15/15 Aaa 3,810,000 4,928,006
14% 11/15/11 Aaa 1,465,000 2,043,675
U.S. Treasury Notes:
4% 10/31/00 Aaa 22,000,000 21,632,160
5.875% 11/15/04 Aaa 19,080,000 18,707,368
6% 8/15/09 Aaa 3,900,000 3,778,125
6.5% 5/31/02 Aaa 6,265,000 6,295,323
U.S. Treasury Notes - coupon Aaa 26,700,000 11,951,988
STRIPS 0% 11/15/11
TOTAL U.S. TREASURY 97,528,842
OBLIGATIONS
TOTAL U.S. GOVERNMENT AND 119,863,013
GOVERNMENT AGENCY OBLIGATIONS
(Cost $124,794,941)
U.S. GOVERNMENT AGENCY -
MORTGAGE SECURITIES - 38.4%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
FANNIE MAE - 32.8%
6% 2/1/11 to 2/1/29 Aaa $ 19,127,299 $ 17,842,194
6.5% 2/1/10 to 7/1/29 Aaa 124,955,574 117,895,087
7% 12/1/24 to 9/1/29 Aaa 32,950,474 31,916,005
7.5% 7/1/07 to 9/1/29 Aaa 40,317,899 39,892,898
7.5% 1/1/30 (c) Aaa 1,620,000 1,602,788
8% 3/1/24 to 9/1/29 Aaa 3,852,255 3,888,033
8.5% 3/1/25 to 12/1/26 Aaa 3,270,456 3,355,787
216,392,792
FREDDIE MAC - 0.4%
8.5% 3/1/20 to 1/1/28 Aaa 2,368,363 2,435,636
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 5.2%
6% 8/15/08 to 5/15/09 Aaa 2,985,206 2,865,003
6.5% 2/15/28 to 4/15/29 Aaa 22,471,620 21,088,043
7.5% 3/15/06 to 9/15/29 Aaa 9,305,795 9,222,039
8% 2/15/17 Aaa 128,937 131,274
10% 7/15/13 to 11/15/24 Aaa 662,545 713,726
34,020,085
TOTAL U.S. GOVERNMENT AGENCY 252,848,513
- - MORTGAGE SECURITIES
(Cost $263,483,389)
ASSET-BACKED SECURITIES - 3.8%
American Express Credit A1 1,500,000 1,430,742
Account Master Trust 6.1%
12/15/06
Capita Equipment Receivables Baa2 880,000 844,914
Trust 6.48% 10/15/06
Chevy Chase Auto Receivables Aaa 387,907 383,968
Trust 5.91% 12/15/04
Discover Card Master Trust I A2 4,000,000 3,878,125
5.85% 11/16/04
Ford Credit Auto Owner Trust:
6.2% 12/15/02 Baa2 830,000 811,533
6.4% 12/15/02 Baa2 480,000 473,760
6.87% 11/15/04 A2 1,300,000 1,289,234
JCPenney Master Credit Card Aaa 7,000,000 6,647,813
Trust 5.5% 6/15/07
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
Key Auto Finance Trust:
6.3% 10/15/03 A2 $ 437,564 $ 434,556
6.65% 10/15/03 Baa3 126,144 125,928
PNC Student Loan Trust I Aaa 2,259,900 2,262,612
6.314% 1/25/01
Premier Auto Trust 5.59% Aaa 6,000,000 5,808,720
2/9/04
Railcar Trust 7.75% 6/1/04 Aaa 544,850 552,576
TOTAL ASSET-BACKED SECURITIES 24,944,481
(Cost $25,692,595)
COMMERCIAL MORTGAGE
SECURITIES - 1.5%
CS First Boston Mortgage
Securities Corp.:
Series 1997-C2 Class D, 7.27% Baa2 1,080,000 980,100
1/17/35
Series 1998-FL1:
Class D, 5.91% 12/10/00 (b)(d) A2 2,100,000 2,088,188
Class E, 6.26% 1/10/13 (b)(d) Baa2 2,650,000 2,610,250
Equitable Life Assurance
Society of the United States
Series 174:
Class B1, 7.33% 5/15/06 (b) Aa2 500,000 493,665
Class C-1, 7.52% 5/15/06 (b) A2 500,000 492,355
Fannie Mae ACES REMIC Aaa 143,718 142,551
sequential pay Series 1996
M5 Class A1, 7.141% 7/25/10
GS Mortgage Securities Corp. Baa3 1,000,000 844,688
II Series 1998-GLII Class E,
7.1905% 4/13/31 (b)(d)
Thirteen Affiliates of Aaa 1,500,000 1,425,630
General Growth Properties,
Inc. sequential pay Series 1
Class A2, 6.602% 12/15/10 (b)
Wells Fargo Capital Markets Aaa 1,122,539 1,104,467
Apartment Financing Trust
Series APT Class 1, 6.56%
12/29/05 (b)
TOTAL COMMERCIAL MORTGAGE 10,181,894
SECURITIES
(Cost $10,560,331)
FOREIGN GOVERNMENT AND
GOVERNMENT AGENCY
OBLIGATIONS (E) - 1.9%
MOODY'S RATINGS (UNAUDITED) (A) PRINCIPAL AMOUNT VALUE (NOTE 1)
British Columbia Province Aa2 $ 500,000 $ 500,265
yankee 7% 1/15/03
Korean Republic yankee:
8.75% 4/15/03 Baa2 775,000 797,886
8.875% 4/15/08 Baa2 1,194,000 1,251,228
Manitoba Province yankee Aa3 500,000 497,860
6.75% 3/1/03
Quebec Province:
yankee:
7.125% 2/9/24 A2 250,000 232,170
7.5% 7/15/23 A2 8,550,000 8,336,678
7% 1/30/07 A2 1,000,000 978,100
TOTAL FOREIGN GOVERNMENT AND 12,594,187
GOVERNMENT AGENCY OBLIGATIONS
(Cost $13,869,956)
SUPRANATIONAL OBLIGATIONS -
0.6%
Inter-American Development Aaa 4,000,000 3,804,680
Bank yankee 6.29% 7/16/27
(Cost $3,974,840)
</TABLE>
CASH EQUIVALENTS - 4.2%
MATURITY AMOUNT
Investments in repurchase $ 27,794,650 27,784,000
agreements (U.S. Government
obligations), in a joint
trading account at 4.6%,
dated 12/31/99 due 1/3/00
(Cost $27,784,000)
TOTAL INVESTMENT PORTFOLIO - 684,431,208
103.9%
(Cost $714,979,533)
NET OTHER ASSETS - (3.9)% (25,579,441)
NET ASSETS - 100% $ 658,851,767
LEGEND
(a) S&P credit ratings are used in the absence of a rating by Moody's
Investors Service, Inc.
(b) Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
At the period end, the value of these securities amounted to
$35,452,921 or 5.4% of net assets.
(c) Security purchased on a delayed delivery or when-issued basis.
(d) The coupon rate shown on floating or adjustable rate securities
represents the rate at period end.
(e) For foreign government obligations not individually rated by S&P
or Moody's, the ratings listed have been assigned 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
The composition of long-term debt holdings as a percentage of total
value of investments in securities, is as follows (ratings are
unaudited):
MOODY'S RATINGS S&P RATINGS
Aaa, Aa, A 72.1% AAA, AA, A 69.7%
Baa 21.9% BBB 20.4%
Ba 1.2% BB 1.9%
B 0.7% B 0.0%
Caa 0.0% CCC 0.0%
Ca, C 0.0% CC, C 0.0%
D 0.0%
Purchases and sales of securities, other than short-term securities,
aggregated $688,840,784 and $577,106,750, respectively, of which
long-term U.S. government and government agency obligations aggregated
$506,885,550 and $424,240,874, respectively.
The fund participated in the security lending program. At period end,
the value of securities loaned amounted to $27,602,310. The fund
received cash collateral of $28,358,703 which was invested in cash
equivalents and U.S. Treasury Obligations valued at $575,063.
INCOME TAX INFORMATION
At December 31, 1999, the aggregate cost of investment securities for
income tax purposes was $715,574,123. Net unrealized depreciation
aggregated $31,142,915, of which $327,649 related to appreciated
investment securities and $31,470,564 related to depreciated
investment securities.
The fund hereby designates approximately $1,123,000 as a capital gain
dividend for the purpose of the dividend paid deduction.
At December 31, 1999, the fund had a capital loss carryforward of
approximately $11,444,000 all of which will expire on December 31,
2007.
A total of 14.29% of the dividends distributed during the fiscal year
was derived from interest on U.S. Government securities which is
generally exempt from state income tax. The fund will notify
shareholders in January 2000 of the applicable percentage for use in
preparing 1999 income tax returns.
FIDELITY VARIABLE INSURANCE PRODUCTS: INVESTMENT GRADE BOND PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS
Investment in securities, at $ 684,431,208
value (including repurchase
agreements of $27,784,000)
(cost $714,979,533) - See
accompanying schedule
Receivable for fund shares 1,002,740
sold
Interest receivable 7,965,986
TOTAL ASSETS 693,399,934
LIABILITIES
Payable for investments $ 1,624,050
purchased on a delayed
delivery basis
Payable for fund shares 4,225,556
redeemed
Accrued management fee 240,141
Other payables and accrued 99,717
expenses
Collateral on securities 28,358,703
loaned, at value
TOTAL LIABILITIES 34,548,167
NET ASSETS $ 658,851,767
Net Assets consist of:
Paid in capital $ 658,425,511
Undistributed net investment 42,809,963
income
Accumulated undistributed net (11,835,382)
realized gain (loss) on
investments and foreign
currency transactions
Net unrealized appreciation (30,548,325)
(depreciation) on investments
NET ASSETS, for 54,166,135 $ 658,851,767
shares outstanding
NET ASSET VALUE, offering $12.16
price and redemption price
per share ($658,851,767
(divided by) 54,166,135
shares)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME $ 46,971,073
Interest
Security lending 53,093
TOTAL INCOME 47,024,166
EXPENSES
Management fee $ 3,054,862
Transfer agent fees 489,020
Accounting and security 182,740
lending fees
Non-interested trustees' 2,093
compensation
Custodian fees and expenses 46,309
Registration fees 1,374
Audit 31,804
Legal 7,492
Miscellaneous 35,286
Total expenses before 3,850,980
reductions
Expense reductions (9,885) 3,841,095
NET INVESTMENT INCOME 43,183,071
REALIZED AND UNREALIZED GAIN (11,737,244)
(LOSS)
Net realized gain (loss) on
investment securities
Change in net unrealized (38,771,648)
appreciation (depreciation)
on investment securities
NET GAIN (LOSS) (50,508,892)
NET INCREASE (DECREASE) IN $ (7,325,821)
NET ASSETS RESULTING FROM
OPERATIONS
OTHER INFORMATION
Expense reductions
Custodian credits $ 9,885
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET YEAR ENDED DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1998
ASSETS
Operations Net investment $ 43,183,071 $ 27,981,821
income
Net realized gain (loss) (11,737,244) 9,192,419
Change in net unrealized (38,771,648) 2,632,039
appreciation (depreciation)
NET INCREASE (DECREASE) IN (7,325,821) 39,806,279
NET ASSETS RESULTING FROM
OPERATIONS
Distributions to shareholders (28,513,399) (16,958,571)
From net investment income
From net realized gain (8,945,380) (2,012,034)
TOTAL DISTRIBUTIONS (37,458,779) (18,970,605)
Share transactions Net 258,967,451 501,565,840
proceeds from sales of shares
Reinvestment of distributions 37,458,779 18,970,605
Cost of shares redeemed (267,602,641) (191,084,324)
NET INCREASE (DECREASE) IN 28,823,589 329,452,121
NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
TOTAL INCREASE (DECREASE) (15,961,011) 350,287,795
IN NET ASSETS
NET ASSETS
Beginning of period 674,812,778 324,524,983
End of period (including $ 658,851,767 $ 674,812,778
undistributed net investment
income of $42,809,963 and
$27,875,128, respectively)
OTHER INFORMATION
Shares
Sold 20,833,388 39,825,938
Issued in reinvestment of 3,052,875 1,576,941
distributions
Redeemed (21,798,580) (15,158,174)
Net increase (decrease) 2,087,683 26,244,705
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
SELECTED PER-SHARE DATA
Net asset value, beginning of $ 12.960 $ 12.560 $ 12.240 $ 12.480 $ 11.020
period
Income from Investment .743 B .725 B .759 B .670 .320
Operations Net investment
income
Net realized and unrealized (.873) .335 .291 (.290) 1.530
gain (loss)
Total from investment (.130) 1.060 1.050 .380 1.850
operations
Less Distributions
From net investment income (.510) (.590) (.730) (.620) (.390)
From net realized gain (.160) (.070) - - -
Total distributions (.670) (.660) (.730) (.620) (.390)
Net asset value, end of period $ 12.160 $ 12.960 $ 12.560 $ 12.240 $ 12.480
TOTAL RETURN A (1.05)% 8.85% 9.06% 3.19% 17.32%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 658,852 $ 674,813 $ 324,525 $ 228,594 $ 181,546
(000 omitted)
Ratio of expenses to average .54% .57% .58% .58% .59%
net assets
Ratio of net investment 6.07% 5.85% 6.34% 6.49% 6.53%
income to average net assets
Portfolio turnover rate 87% 239% 191% 81% 182%
</TABLE>
A TOTAL RETURNS DO NOT REFLECT CHARGES ATTRIBUTABLE TO YOUR INSURANCE
COMPANY'S SEPARATE ACCOUNT. INCLUSION OF THESE CHARGES WOULD REDUCE
THE TOTAL RETURNS SHOWN.
B NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE
SHARES OUTSTANDING DURING THE PERIOD.
NOTES TO FINANCIAL STATEMENTS
For the period ended December 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES.
Investment Grade Bond Portfolio (the fund) is a fund of Variable
Insurance Products Fund II (the trust) (referred to in this report as
Fidelity Variable Insurance Products: Investment Grade Bond Portfolio)
and is authorized to issue an unlimited number of shares. The trust is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company organized as a Massachusetts
business trust. Shares of the fund may only be purchased by insurance
companies for the purpose of funding variable annuity or variable life
insurance contracts. On October 14, 1999, the Board of Trustees
approved the creation of Service Class 2, a new class of shares of the
fund. The Service Class 2 shares will be subject to an annual
distribution and service fee of .25% of the class' average net assets.
These shares are expected to be available on or about January 12,
2000.
The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to
make certain estimates and assumptions at the date of the financial
statements. The following summarizes the significant accounting
policies of the fund:
SECURITY VALUATION. Securities are valued based upon a computerized
matrix system and/or appraisals by a pricing service, both of which
consider market transactions and dealer-supplied valuations.
Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under
the general supervision of the Board of Trustees. Short-term
securities with remaining maturities of sixty days or less for which
quotations are not readily available are valued at amortized cost or
original cost plus accrued interest, both of which approximate current
value.
INCOME TAXES. As a qualified regulated investment company under
Subchapter M of the Internal Revenue Code, the fund is not subject to
income taxes to the extent that it distributes substantially all of
its taxable income for its fiscal year. The schedule of investments
includes information regarding income taxes under the caption "Income
Tax Information."
INVESTMENT INCOME. Interest income, which includes accretion of
original issue discount, is accrued as earned.
EXPENSES. Most expenses of the trust can be directly attributed to a
fund. Expenses which cannot be directly attributed are apportioned
among the funds in the trust.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing
treatments for paydown gains/losses on certain securities, market
discount, capital loss carryforwards and losses deferred due to wash
sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
Undistributed net investment income and accumulated undistributed net
realized gain (loss) on investments 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.
JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the fund, along with other
affiliated entities of Fidelity Management & Research Company (FMR),
may transfer uninvested cash balances into one or more joint trading
accounts. These balances are invested in one or more repurchase
agreements for U.S. Treasury or Federal Agency obligations.
REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency
securities are transferred to an account of the fund, or to the Joint
Trading Account, at a bank custodian. The securities are
marked-to-market daily and maintained at a value at least equal to the
principal amount of the repurchase agreement (including accrued
interest). FMR, the fund's investment adviser, is responsible for
determining that the value of the underlying securities remains in
accordance with the market value requirements stated above.
DELAYED DELIVERY TRANSACTIONS. The fund may purchase or sell
securities on a delayed delivery basis. Payment and delivery may take
place after the customary settlement period for that security. 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 values of the securities purchased on a
delayed delivery basis are identified as such in the fund's schedule
of investments. The fund may receive compensation for interest forgone
in the purchase of a delayed delivery security. With respect to
purchase commitments, the fund identifies securities as segregated in
its records with a value at least equal to the amount of the
commitment. Losses may arise due to changes in the market value of the
underlying securities or if the counterparty does not perform under
the contract.
RESTRICTED SECURITIES. The fund is permitted to invest in securities
that are subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be difficult.
At the end of the period, the fund had no investments in restricted
securities (excluding 144A issues).
3. PURCHASES AND SALES OF INVESTMENTS.
Information regarding purchases and sales of securities (other than
short-term securities), is included under the caption "Other
Information" at the end of the fund's schedule of investments.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
MANAGEMENT FEE. As the fund's investment adviser, FMR receives a
monthly fee that is calculated on the basis of a group fee rate plus a
fixed individual fund fee rate applied to the average net assets of
the fund. The group fee rate is the weighted average of a series of
rates and is based on the monthly average net assets of all the mutual
funds advised by FMR. The rates ranged from .0920% to .3700% for the
period. The annual individual fund fee rate is .30%. 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. For the period, the management
fee was equivalent to an annual rate of .43% of average net assets.
SUB-ADVISER FEE. FMR, on behalf of the fund, has entered into a
sub-advisory agreement with Fidelity Investments Money Management,
Inc. (FIMM), a wholly owned subsidiary of FMR. For its services, FIMM
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.
DISTRIBUTION AND SERVICE PLAN. In accordance with Rule 12b-1 of the
1940 Act, the Board of Trustees have adopted a Distribution and
Service Plan (the Plan) on behalf of the fund. Under the Plan, FMR may
use its resources to pay administrative and promotional expenses
related to the sale of the fund's shares. Subject to the approval of
the Board of Trustees, the Plan also authorizes payments to third
parties that assist in the sale of fund shares or render shareholder
support services.
TRANSFER AGENT FEES. Fidelity Investments Institutional Operations
Company, Inc. (FIIOC), an affiliate of FMR, is the fund's transfer,
dividend disbursing and shareholder servicing agent. FIIOC receives
account fees and asset-based fees that vary according to account size
and type of account. FIIOC pays a portion of the expenses related to
the typesetting, printing and mailing of all shareholder reports,
except proxy statements. For the period, the transfer agent fees of
the fund were equivalent to an annual rate of .07% of average net
assets.
ACCOUNTING AND SECURITY LENDING FEES. Fidelity Service Company, Inc.,
an affiliate of FMR, maintains the fund's accounting records and
administers the security lending program. The security lending fee is
based on the number and duration of lending transactions. The
accounting fee is based on the level of average net assets for the
month plus out-of-pocket expenses.
5. SECURITY LENDING.
The fund lends portfolio securities from time to time in order to earn
additional income. The fund receives collateral in the form of U.S.
Treasury obligations, letters of credit, and/or cash against the
loaned securities, and maintains collateral in an amount not less than
100% of the market value of the loaned securities during the period of
the loan. The market value of the loaned securities is determined at
the close of business of the fund and any additional required
collateral is delivered to the fund on the next business day. If the
borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the fund could experience
delays and costs in recovering the securities loaned or in gaining
access to the collateral. Information regarding the value of
securities loaned and the value of collateral at period end is
included under the caption "Other Information" at the end of each
applicable fund's schedule of investments.
6. EXPENSE REDUCTIONS.
Through arrangements with the fund's custodian, credits realized as a
result of uninvested cash balances were used to reduce a portion of
the fund's expenses. For the period, the reductions under this
arrangement are shown under the caption "Other Information" on the
fund's Statement of Operations.
7. BENEFICIAL INTEREST.
At the end of the period, Fidelity Investments Life Insurance Company
(FILI) and its subsidiaries, affiliates of FMR, were the record owners
of approximately 30% of the outstanding shares of the fund. In
addition, two unaffiliated insurance companies were each record owners
of 10% of the total outstanding shares of the fund.
INDEPENDENT AUDITORS' REPORT
To the Trustees of Variable Insurance Products Fund II and the
Shareholders of Investment Grade Bond Portfolio:
We have audited the accompanying statement of assets and liabilities
of Investment Grade Bond Portfolio (the Fund) one of the funds of
Variable Insurance Products Fund (the Trust), including the portfolio
of investments, as of December 31, 1999, and the related statements of
operations, changes in net assets, and financial highlights for the
year 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 audit. The statement of changes in net assets
for the year ended December 31, 1998, and the financial highlights for
each of the four years in the period then ended were audited by other
auditors whose report, dated February 12, 1999, expressed an
unqualified opinion on those statements and financial highlights.
We conducted our audit 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, 1999, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. 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 audit
provides 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 Investment Grade Bond Portfolio as of December
31, 1999, the results of its operations, the changes in its net
assets, and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 11, 2000
DISTRIBUTIONS
The Board of Trustees of Investment Grade Bond Portfolio voted to pay
on February 4, 2000, to shareholders of record at the opening of
business on February 4, 2000, a dividend of $0.84 per share from net
investment income.
The fund hereby designates 100% of the long-term capital gain
dividends distributed during the fiscal year as 20% rate capital gain
dividends.
INVESTMENT ADVISER
Fidelity Management & Research Company
Boston, MA
INVESTMENT SUB-ADVISER
Fidelity Investments Money Management, Inc. (FIMM)
Merrimack, NH
OFFICERS
Edward C. Johnson 3d, PRESIDENT
Robert C. Pozen, SENIOR VICE PRESIDENT
Fred L. Henning, Jr., VICE PRESIDENT
Dwight D. Churchill, VICE PRESIDENT
Kevin E. Grant, VICE PRESIDENT
Eric D. Roiter, SECRETARY
Richard A. Silver, TREASURER
Matthew N. Karstetter, DEPUTY TREASURER
Stanley N. Griffith, ASSISTANT VICE PRESIDENT
John H. Costello, ASSISTANT TREASURER
Thomas J. Simpson, ASSISTANT TREASURER
BOARD OF TRUSTEES
Ralph F. Cox *
Phyllis Burke Davis *
Robert M. Gates *
Edward C. Johnson 3d
E. Bradley Jones *
Donald J. Kirk *
Peter S. Lynch
Marvin L. Mann *
William O. McCoy *
Gerald C. McDonough *
Robert C. Pozen
Thomas R. Williams *
ADVISORY BOARD
J. Gary Burkhead
Abigail P. Johnson
Ned C. Lautenbach
* INDEPENDENT TRUSTEES
GENERAL DISTRIBUTOR
Fidelity Distributors Corporation
Boston, MA
TRANSFER AND SHAREHOLDER SERVICING AGENT
Fidelity Investments Institutional Operations Co., Inc.
Boston, MA
CUSTODIAN
The Bank of New York
New York, NY
